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Donuts joins fight to delay .web gTLD auction with emergency appeal

Kevin Murphy, July 20, 2016, 10:49:07 (UTC), Domain Registries

Donuts and Radix have filed an “emergency” appeal with ICANN in an attempt to get the forthcoming auction for the .web gTLD delayed.

The companies, both of which have applied for .web, say they have evidence that one of their rival bidders recently changed ownership without telling ICANN, in breach of application rules.

They filed a Request for Reconsideration (pdf) with ICANN (pdf) on Sunday, demanding the delay and an investigation into whether Nu Dot Co LLC is under new control.

The move follows speculation, which we reported last week, that Nu Dot Co is now being controlled by a major legacy gTLD registry player such as Verisign.

The evidence for the the change of ownership comes to light for the first time in the RfR. It’s an email from Nu Dot Co director Jose Ignacio Rasco to Donuts dated June 7. It reads:

Nicolai is at NSR full time and no longer involved with our TLD applications. I’m still running our program and Juan sits on the board with me and several others.

“Nicolai” is Nicolai Bezsonoff, who is listed as an NDC director in its .web application. NSR is presumably Neustar, where Bezsonoff went to work when it acquired .CO Internet.

“Juan” is Juan Calle, the third NDC director, CEO, and former CEO of .CO Internet.

Donuts and Radix believe that Bezsonoff’s departure and the apparent appointment of the unnamed “several others” as NDC directors gave NDC the obligation, under Applicant Guidebook rules, to inform ICANN of the changes.

The Guidebook states:

If at any time during the evaluation process information previously submitted by an applicant becomes untrue or inaccurate, the applicant must promptly notify ICANN via submission of the appropriate forms. This includes applicant-specific information such as changes in financial position and changes in ownership or control of the applicant.

(With that in mind, one wonders whether the acquisition of .blog at auction was strictly legit).

Donuts and Radix now want ICANN to delay the “last resort” auction, which is currently slated for July 27, and “conduct a thorough and transparent investigation into the apparent discrepancies and/or changes in NDC’s .WEB/.WEBS application”.

NDC is believed to be the only one of the eight .web/.webs applicants to be refusing to settle the contention set via a private auction, where the losers get an equal share of the winning bid.

If the set goes to ICANN’s last-resort auction, ICANN gets all the cash.

The final price of .web could easily be in the ball park of $50 million, so each applicant stands to lose several million dollars if the July 27 auction goes ahead as planned.

Radix and fellow .web applicant Schlund had previously written to ICANN to request the delay, but were rebuffed in a letter last week.

The decision outlined in that letter is what the new RfR challenges.

RfRs have a long track record of being dismissed by ICANN’s Board Governance Committee, very often because the requester has not supplied ICANN with any new information with which to change its mind.

That’s a risk here, too, given that ICANN seems to have been in possession of the Rasco email since June 22, before decision to go ahead with the auction was made.

However, that decision seems to have been made by ICANN staff. An RfR makes sure it gets the attention of the ICANN board of directors.

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Comments (4)

  1. VintCerf.com says:

    shows why Icann, operating freely is not a good idea.

    http://vintcerf.com

  2. Kevin,

    My understanding of the Applicant Guidebook (AGB) is that in question 11c applicants must disclose “Name(s) and position(s) of all shareholders holding at least 15% of shares.”

    According to the Nu Dot Co .WEB application (https://gtldresult.icann.org/application-result/applicationstatus/applicationdetails:downloadapplication/1053?t:ac=1053), the major shareholders remain Domain Marketing Holdings LLC and NUCO LP, LLC.

    I cannot see anywhere in the AGB that states that if a company acquires, let’s say, any or both of these two companies that the applicant must file change request. This is because these two companies still remain the primary shareholders (with over 15% equity). It appears that the issue here is whether or not Nicolai Bezsonoff’s name should be removed from the application or not.

    ICANN went forward with the .SHOP auction and collected $41.5m even though a .SHOP applicant Commercial Connect filed a Request for Reconsideration (RR) and an Independent Review Proceeding (IRP) to put the contention set on hold. In that instance ICANN performed a cost-benefit analysis (regardless of the rules) and decided to go ahead with the auction, so it appears that ICANN will repeat this strategy.

    This is a numbers game for ICANN despite the rules. The RR will be rejected (the BGC has rejected 99% of other RRs, the only successful one being .MED and .GAY that was later rejected twice).

    Unfortunately for Donuts and Radix, ICANN tends to hide behind their “in-house” accountability mechanisms in which they are the judge and executioner, an obvious conflict of interest when everyone knows ICANN staff/legal is involved in all these decisions and the BGC in nearly all cases agrees to whatever ICANN legal presents to protect ICANN’s interests.

    As both Donuts and Radix have witnessed in recent IRPs, the ICANN Board rarely acts or does anything on purpose. Even if there are false facts or lack of transparency from ICANN, the IRP/Bylaws were designed primarily by ICANN to have language that does not mandate the Board to act (even if there were gross violations or negligence).

    If one reads the new IRP rules in the new Bylaws (https://www.icann.org/en/system/files/files/adopted-bylaws-27may16-en.pdf), there is nothing that changes this.

    I suggest both Donuts and Radix get more involved with the IRP Oversight Team (IOT) to get language in the new Bylaws that mandates the Board to act. As you know, others (including myself) have been quite vocal on the issue and disappointed in new language to increase ICANN acountability and transparency but it appears ICANN is getting their way again.

    In conclusion, ICANN acts the way it does because the Board does not have to act in such instances according to its Bylaws. That loophole needs to be fixed. This should be an issue that the ICANN community must rally behind.

    The system is broken and there is a simple solution: Mandate that the ICANN Board “must” act as opposed to “may” act in the new IRP/new Bylaws. That way, the Board does not try to hide behind its accountability mechanisms that are stacked in ICANN’s favor and you will see more transparency and accountability from ICANN.

  3. Dot Advice says:

    The last thing all new TLD Registries need is another ICANN auction where the $50M (odd) proceeds disappear and gets frozen in ICANN ‘s coffers (along with the other $100M). This is a lose lose situation for the whole industry. Lets hope ICANN’s BGC sees sense.

    • Rubens Kuhl says:

      Forcing last resort auction is a valid business strategy. I don’t like seeing money going to a void, but it’s a prerogative of any applicant doing it.

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