When ICANN published a new draft of its basic Registry Agreement for wannabe new gTLD operators last week, much of the focus was on the new Public Interest Commitments mechanism, but a whole bunch of other big changes were also proposed.
ICANN has floated some quite significant amendments that would give it greater powers to approve mergers and acquisitions and more or less unilaterally change registries’ contracts in future.
Here’s my take on the biggest changes.
Regulating M&A activity
When a new gTLD registry business is acquired, ICANN wants to have greater rights to approve the transaction.
Changes to Section 7.5 would enable ICANN to check that the buyer and its ultimate parent company “meets the ICANN-adopted specification or policy on registry operator criteria then in effect”.
That would specifically include fresh background checks on the acquirer and its parent company.
For new gTLD applicants planning to flip their gTLDs in future, it means the buyers would be subject to the same scrutiny as the applicants themselves are today.
But — and it could turn out to be a big but — these checks would not be carried out if the registry’s buyer was already itself a compliant, ICANN-contracted gTLD registry.
In other words, it is going to be much easier for gTLD registries to acquire each other than it will be for outsiders to acquire them.
Had the rules been in place before now they would have complicated, for example, the acquisition of .pro by Hostway (not already a registry), but not its subsequent acquisition by Afilias (which already had .info).
Powers to change the contract
ICANN wants to grant itself the ability to make “Special Amendments” to all gTLD registry agreements in future without the consent of the registries.
Under the current version of the Registry Agreement, such amendments would need the approval of registries representing two-thirds of all registry fees paid to ICANN before they became law.
(It’s possible that this would give Verisign, as .com/.net registry, a de facto veto due to its market share).
But ICANN wants to change this rule to give its own board of directors the ability to impose amendments to the contract on registries, even if the registries vote against them.
The board would need a supermajority vote (66%, which pretty much every board vote receives anyway) and would need to be “justified by a substantial and compelling need”, quite a subjective threshold, in order to ignore the registries’ protests.
Special Amendments could not cover basic things like pricing or the definition of “registry services”.
ICANN, no doubt bruised by 18 months of laborious Registrar Accreditation Agreement renegotiations, says the change is “of fundamental importance and deserves careful attention given the long-term nature of registry agreements”.
But ICANN contracted parties are usually pretty reluctant to give ICANN more powers over their businesses, especially when it comes to sacrificing their right to renegotiate their contracts, so I can’t see these proposed changes to the Registry Agreement being accepted without hot debate.
Section 2 of the agreement has been tweaked to make it a bit clearer under what circumstances registries are able to register names for their own use, or block them, and when they have to pay ICANN fees to do so.
The new language makes it clear that registries will not have to pay ICANN fees, and won’t have to use accredited registrars, for domains that are completely blocked from registration and are not used by the registry or anyone else.
By my reading, this could cover the kind of defensive blocking services that many applicants plan to offer to trademark owners, and other anti-abuse mechanisms, but not domains that registries plans to “reserve” for their own use.
At first glance, this might be seen as something that primarily affects dot-brands (which own all the second-level domains in their gTLDs) but most will probably be protected by the 50,000-domain threshold that must be passed before per-domain ICANN fees kick in.
Names that are held back for the registry to use would still have to be registered through a registrar and would incur ICANN fees, with a handful of named exceptions (nic.tld, www.tld, etc).
The new Registry Agreement also includes the final list of strings related to the Red Cross and International Olympic Committee that need to be reserved at the second level, along with a placeholder for reservations of strings related to other intergovernmental organizations.
I’m wondering, for example, about the possible impact of the changes to Specification 7 that seem to make registries responsible if their registrars do not uphold intellectual property rights protection mechanisms.
Also, do the changes to Spec 4 suggest that ICANN plans to outsource the job of Centralized Zone Data Access Provider? What’s the impact on applicants of the changes to Continuing Operations Instrument?
What have you spotted?