VeriSign sidesteps split-up with ICANN agreement

VeriSign apparently will not have to split up its domain-name registration business this spring as previously anticipated, thanks to a tentative agreement with the Internet Corporation for Assigned Names and Numbers that was announced by the two parties on Thursday.

VeriSign was required to spin off either its back-end, domain-name registry business or its customer-facing, domain-name registrar business by May 10, under the terms of its original contract with ICANN. With its acquisition of Network Solutions last year, VeriSign operates the sole registry for .com, .net and .org domains, as well as the top sales channel for names in 350-plus top-level domains and country codes, including .tv and .uk.

With VeriSign facing intense competition in both its registry and registrar businesses, ICANN officials say they no longer believe it is necessary for the company to split up in order to continue operating the popular .com registry. ICANN says the structural barriers that VeriSign has set up between its registry and registrar businesses are working fine to create a competitive, domain-name industry, which now boasts 180 accredited registrars and eight registries.

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"The importance and value of the separation of ownership of VeriSign's registry and registrar businesses to ICANN and the community had diminished quite significantly over the 15 months since the original registry agreement was signed," ICANN said in a statement posted on its Web site for public comment.

Instead, VeriSign has agreed to relinquish control over the .org registry as of Jan. 1, 2003, and to provide a $5 million endowment to fund the operating expenses of a new nonprofit .org registry. VeriSign also agreed to a shorter term for operating the .net registry - until Jan. 1, 2006 - after which time VeriSign must compete against other companies in order to retain that business.

In return for these concessions, VeriSign will continue to operate the .com registry until November 2007. VeriSign promises to invest no less than $200 million to increase the efficiency and stability of the .com registry.

"ICANN management believes that these proposed agreements are, on balance, more favorable to the Internet community than the existing agreement," says Mike Roberts, CEO of ICANN. "This removes any confusion about the three registries and settles any question about what is going to happen this spring."

ICANN's board of directors will discuss the proposed VeriSign agreements at its next meeting, which will be held March 13 in Melbourne, Australia. The board plans to vote on the new agreements before April 1. The Department of Commerce also must approve them.

If approved, the new agreements will be a boon to VeriSign and its shareholders.

"We believe these agreements really set the foundation for a more forward-looking company," says Stratton Sclavos, CEO of VeriSign. "This will allow us to make substantial research and development and capital outlays to improve the quality, performance and stability of the Internet addressing system."

If the agreements are not approved, Sclavos says VeriSign will continue its plans to divest its registrar business.

How the rest of the domain-name industry will react to the proposed agreements remains to be seen. Elliott Noss, CEO of Canadian registrar Tucows, said the deal was a good, pragmatic approach given the fact that VeriSign today holds only 30% to 40% of the registrar business, compared to 100% back in November 1999, when the original contract was signed.

"We think that probably the biggest winner here is ICANN," Noss says. "That is good for the industry because a healthy ICANN makes for a healthier industry. A level playing field and fair fights are always good for business."

The proposed ICANN/VeriSign agreements can be read at: www.icann.org/melbourne/
proposed-verisign-agreements-topic.htm

Contact Senior Editor Carolyn Duffy Marsan

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