Pest Turned Problem

John Stuart
The messy loss of accreditation by domain-registrar company RegisterFly — which has resulted in thousands of customer complaints, vicious racial slurs and at least two lawsuits — is a cautionary tale in the Internet domain name arena.

In March, ICANN, the organization charged with ensuring the stability and security of the domain name system, withdrew RegisterFly's accreditation, citing "unusually high numbers of complaints from customers."

"Terminating accreditation is the strongest measure ICANN is able to take against RegisterFly under its powers," said Dr. Paul Twomey, President and CEO of ICANN. "ICANN has been frustrated and distressed by recent management confusion inside RegisterFly. I completely understand the greater frustration and enormous difficulty that this has created for registrants."

RegisterFly, which had been approved by ICANN to sell Internet domain names to the public, had more than 900,000 customers (including the government of Thailand, the Easter Seals charity and singer Michael Jackson), who had registered approximately 2 million domain names with the company.

Trouble Begins
The trouble started for the New Jersey-based registrar when the co-owners, Kevin Medina and John Naruszewicz, began a personal feud that led to a lawsuit, in which Medina accused his partner of becoming "unstable and hostile" after their personal relationship ended. The lawsuit also claimed that Medina misappropriated corporate funds for personal use.

More legal problems surfaced when U.S. District Court Judge William Osteen unsealed a class action lawsuit filed by attorney E. Clarke Dummit against RegisterFly and ICANN on March 16, alleging that the registrar company systematically defrauded its customers who attempted to register or renew Internet domain names.

"A significant number of registrants reported that their domain names had expired against their wishes," said an ICANN report. "Many were also not able to move control of their domains to a different company."

The customers complained that RegisterFly was failing to renew expiring domain names, which are typically registered for one or two years. Failure to renew after the specified registration time resulted in the domain names being released to the wider Internet community. The volume of complaints overwhelmed RegisterFly's customer service staff, and that resulted in even more complaints.

"I don't think RegisterFly is a unique instance," said Paul Twomey. "There are undoubtedly tens of registrars who are marginal players because of where they sit on the cost curve, and it is undoubtedly one of the things that I worry a little about. Any company that's sitting on that edge will have all sorts of financial arrangements in place for how to survive day to day."

The possibility that the RegisterFly imbroglio is only the tip of the iceberg is certainly not news to ICANN. Since its creation in 1998 and the subsequent opening of the domain-name market in March 1999, there have been several registrar failures, and ICANN has removed accreditation from a number of registrars during its brief history. Customer complaints about registrars are common, and ICANN typically receives between 600 and 800 complaints per month concerning domain names. But none of them were as ugly as those made against RegisterFly.

ICANN had tried to rectify the RegisterFly situation for months, holding two face-to-face meetings with the registrar company's executives in June and December 2006. There also were a number of phone calls, in which ICANN explained where RegisterFly was failing and how to rectify their problems. When the feud between RegisterFly's owners degenerated into a lawsuit, ICANN stepped in, asserting its rights under the Registrar Accreditation Agreement, to terminate the company's accreditation. But when two ICANN employees went to RegisterFly's offices to inspect and copy the company's registration data, they were refused entry.

This immediately resulted in ICANN issuing a notice of termination of the RegisterFly accreditation agreement, and filing a lawsuit against the registrar on March 30.

"As the concern about the safety of our information as well as our domain names increases greatly, ICANN intends to file suit seeking escrow of the current registration data," said Justin Kulhawick, who runs the site that is critical of RegisterFly. "[ICANN] also intends to file an ex parte application, seeking a temporary restraining order which will require RegisterFly to turn over to ICANN all of the data that ICANN has requested.

"While this all sounds good, the question is, 'What's going to happen with our names?' Customers right now all over the world are sitting on the edge of their seats with only one thing on their minds: 'Where, when and how am I going to secure my intellectual property?' During these announcements and threats of lawsuits, RegisterFly customers continue to suffer great losses of business, while their domain names are parked and tasted, or lost altogether," Kulhawick said, speaking of the testing period companies sometimes use when purchasing domain names.

Waiting for a Lawsuit
"It's good that ICANN is finally stepping up to the plate, but the fact is they waited a year too long. Had they been more aggressive with the first thousand or so complaints, this debacle probably would be wrapped up about now. Instead, we're waiting on a lawsuit, and the formalities involved," he said.

Kulhawick is using his site to gather a list of affected domain names, and urging their owners to join a class action lawsuit filed against RegisterFly by Anne Martinez, owner of

In the meantime, many customers are getting vicious while waiting for the RegisterFly appeal process against ICANN's accreditation termination to play out.

"I've tried to transfer out of RegisterFly, but cannot get the auth codes," one domain name owner complains on the message board. "I cannot get them on the phone. They don't answer support tickets, and I cannot transfer out."

Another poster complains, "It's terrible. They are taking people's money right now, even offering another special, and not providing services. They are knowingly doing this, and it's called stealing."

Many of the complaints are not so tame, resulting in posts that made racial remarks against Medina on the ICANN blog site. ICANN was forced to shut down its blog thread.

"We are closing this post to comments, as it has descended into aimless abuse, and at times, overt racism," said Kieren McCarthy, general manager of public participation for ICANN. "ICANN is a not-for-profit company that helps with the technical side of the Internet, and this blog will only deal with matters that help improve the technical job that ICANN does. This is not the place for idle chit-chat, and most certainly not the place for racist comments."

In an attempt to put out the many fires in this fiasco, ICANN has published an FAQ guide to aid RegisterFly customers on its blog site. Domain name owners are advised to transfer out of RegisterFly and select a new registrar. The only problem is that customers need to get their auth codes from RegisterFly, and according to posted complaints, the registrar is not responding.

"We've heard from numerous RegisterFly customers that RegisterFly's support tickets go unanswered, and that it is impossible or next to impossible to get them on the telephone," the ICANN blog states.

ICANN provides specific instructions on obtaining this information from RegisterFly in its blog, urging customers to use their control panels. Still, ICANN admits that if this fails, customers will need to contact RegisterFly.

The result of this mess probably will cause ICANN to change its accreditation criteria for domain registrars. ICANN Vice President Paul Levins said that the rules governing domain registrars may be outdated, since they were written at a time when few companies offered this service. In 1999, there was but a single registrar, Network Solutions, and it charged $50 per year for a domain name. Now ICANN estimates there are more than 850 registrars, and the cost of a domain name has fallen to the point where customers can get them for free as part of a bundled service, although the wholesale cost for most domains now is $6.

In the past, when registrars went out of business, their databases were purchased by another registrar, which added them to its existing system. Domain name owners were informed of the change by email. To ensure healthy competition, ICANN devised the Shared Registration System (SRS), which allows registrants to move ownership of their domains to a different registrar, if they are unhappy with the service of their current registrar. Much of this system has become automated, often requiring only a few clicks of a mouse, but the sheer size of the market — nearly 80 million generic top-level domain (gTLD) names today — may lead to significant changes.

One of them could require potential registrar operators to prove a basic level of skill. Another change could require ICANN approval of any changes in ownership of a registrar company.

An aspect certain to attract scrutiny is the recent trend toward anonymous domain registration.

"They [RegisterFly] didn't receive an accreditation through the ICANN accredited process," said Kurt Pritz, an ICANN board member. "In fact, there is an application for accreditation that was never granted, but in fact, obtained an accreditation by acquiring another entity."

RegisterFly managed this trick by acting as a reseller of registrations for other accredited registrars. In 2004, ICANN entered into a Registrar Accreditation Agreement with a company called Top Class Names, Inc., and within a couple of months, that name was changed to ICANN now is looking into ways to stop this "back door accreditation."

ICANN, in its board meeting in Lisbon, Portugal, last March, discussed the possibility of highlighting those registrars with good track records, steering customer traffic toward those companies and away from the marginal players.

But Paul Twomey claims any new rules will not come at the expense of competition in the registration system, and that it will continue to give customers a wide range of choices.

In the meantime, the RegisterFly story will play out in the courts, serving as a powerful warning of the trouble that may lie in the future of the domain name business.

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