The Belgian government is blocking approval of Donuts’ bid for the new gTLD .spa until the company agrees to hand over up to 25% of its .spa profits to the community of the city of Spa.
It emerged in a letter from Spa published by ICANN this weekend that the city is also demanding a role in managing the TLD at the registry operator’s expense.
The gTLD has been applied for by Donuts and the Asia Spa and Wellness Promotion Council.
Not only does the string .spa match the name of the city, but also the English dictionary word “spa” is actually named after Spa, which has been known for centuries for its “healing” springs.
Despite this, Spa is not a capital city — it has roughly 10,000 inhabitants — so it does not qualify as a protected geographic string under the rules of ICANN’s new gTLD program.
Spa nevertheless wants a role in the TLD’s management, in order to protect the interests of itself and its local community, and wants some of the profits to benefit its local businesses.
According to the letter (pdf) from Spa outside attorney Phillippe Laurent, ASWPC has already signed a memorandum of understanding with the city. That MoU, published with the letter, states:
The turnover generated by the exploitation of the .SPA registry will be used in priority to defray reasonable out-of-pocket expenses incurred by the City as a result of its participation in the SPARC or any other of its activity related to the management and governance of the .SPA extension.
Additionally, 25% of the net profit generated by the domain names registered in the .SPA registry by any Belgian, Dutch, Luxembourgish, French or German person or entity will be earmarks to be contributed towards Internet and spa & wellness activities development in and for the City of Spa and its region, especially as related to the scope of the “.SPA” TLD, to be directed by the City of Spa.
The deal would also see ASWPC reserve 200 .spa domain names (included potential premiums such as poker.spa and golf.spa) for the city to do with as it pleases.
Donuts has refused to sign the MoU, saying it’s inconsistent with the Applicant Guidebook and sets a “bad precedent”. Spa has therefore refused to endorse its application.
The city has its national government on its side. In the April 2013 Beijing communique of the ICANN Governmental Advisory Committee, the GAC listed .spa as one of several bids needing “further consideration”.
This was reiterated in its Durban and Buenos communiques, with the GAC noting that “discussions” between “relevant parties” were “ongoing”.
Essentially, the GAC is delaying .spa from approval while Spa tries to get Donuts to agree to hand over part of its of .spa profits.
There was a somewhat testy exchange at the Buenos Aires meeting in November, after an ICANN director asked the GAC if it was appropriate for a governmental entity to try to get a financial benefit from an applicant.
The Belgian GAC representative responded later that “no money will flow to the city of Spa”, conceding that “a very small part of the profits of the registry will go to the community served by .spa”.
That now seems to be not entirely accurate.
The MoU sees Spa getting reimbursed for its self-imposed cost of inserting itself into the management of the registry, so some money will flow to it. But it will presumably be revenue-neutral to the city.
The issue of the 25% profit cut is a bit ambiguous though.
While the money would not flow directly into city coffers, the city would get the ability to direct how it was spent. Presumably, it could be spent on projects that Spa locals would otherwise look to the city to pay for.
With Donuts and Spa apparently at an impasse, ICANN recently told the GAC that it won’t sign contracts with either applicant, yet, but that it wants “a timeline for final consideration of the string”.
It also wants the GAC to “identify the ‘interested parties’ noted in the GAC advice.”
With Laurent’s letter and the MoU seemingly spelling out exactly what Spa wants and why, perhaps ICANN can move the issue closer to resolution at the Singapore meeting next week.
Is it a shakedown? Is it appropriate behavior for the GAC to hold an application hostage while it tries to obtain financial benefit for its local businesses? Or is Donuts unreasonably trying to exploit a city’s centuries-old cultural heritage for its own economic gain?