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Crackdown looms for new gTLD auction gaming

Kevin Murphy, January 21, 2021, Domain Policy

ICANN will be urged to consider taking a stronger position against companies who apply for new gTLDs simply to lose them at auction or immediately flip them to others.

A community working group, known as SubPro and tasked with developing rules for the next new gTLD round, delivered its final Final Report this week, and the one area that failed to gain a designation of “consensus” or stronger was private auctions.

In the 2012 application round, several companies applied for large portfolios of strings that look — in hindsight at least — like efforts to game the system by forcing rivals to auctions they planned to deliberately use.

Companies such as MMX made millions losing auctions during the round, some of which was reinvested in winning auctions for other TLDs.

Applicant Nu Dot Co was notable for losing every private auction it participated in, then quickly flipping its successful .web application when Verisign stepped up with a $135 million bankroll.

While it’s difficult to know the extent to which this was all planned in advance, it proved the business model — filing spurious applications for new gTLDs you have no intention of launching — could be lucrative in future rounds.

But SubPro has put forward a slew of recommendations that, should they pass the remaining hurdles of the policy development track, could bring in substantial sanctions for those applicants and registries found to be gaming the system.

The SubPro recommendations are heavily buttressed with square parentheses, indicating disputed text, and supplemented by some minority statements from members of the working group who think that private auctions should be banned outright in future application rounds.

But the headline recommendation, numbered 35.3, is this:

Applications must be submitted with a bona fide (“good faith”) intention to operate the gTLD. Applicants must affirmatively attest to a bona fide intention to operate the gTLD clause for all applications that they submit.

Far from merely providing a check-box assertion that they’re legit, which would itself be easily gamed, applicants would also find their applications scrutinized by ICANN and its external evaluators to check for signs of a lack of bona fides.

Factors used to determine shadiness could include how many applications for contested strings are applied for, how many private auctions are lost, whether the successful applicant has not launched its gTLD within two years, and whether contracts are flipped within the first year.

SubPro discussed penalties for gaming could include the loss of registry contracts, a ban from future rounds or straight-up monetary fines. But the group did not put forward any recommendations.

SubPro couldn’t seem to come to agreement on most of this. The recommendations were determined to have “strong support but significant opposition” during the group’s recent consensus call.

One strong objection came from a somewhat diverse group of SubPro participants comprising Alan Greenberg (At-Large), Christopher Wilkinson (At-Large), Elaine Pruis (Verisign), George Sadowsky (Afilias/ISOC), Jessica Hooper (Verisign), Jim Prendergast (consultant), Jorge Cancio (Swiss government, but signed in a personal capacity) and Kathryn Kleiman (non-commercial users). They said:

The recommendations in the final report are a mix of overly complex disclosures and attestations that needlessly complicate the program to allow for private auctions. And they will not work. The only way to prevent a repeat of the activity from the 2012 round is to ban private auctions

They also claimed that allowing private auctions would putter smaller, niche and community applicants at a disadvantage, and that ICANN’s reputation would be harmed if it was seen to be overseeing gaming.

The At-Large Advisory Committee also issued a strong objection to private auctions along the same lines:

We remain concerned about attempts to “game” the application process through use of private auction and share the ICANN Board’s concerns on the consequences of shuffling of funds between private auctions. The ability for a loser to apply proceeds from one private auction to fund their other private auctions only really benefits incumbent registry operators or multiple-string applicants and clearly disadvantages single-TLD/niche applicants. We believe there should be a ban on private auctions, and that by mandating ICANN only auctions, the proceeds of ICANN auction can be directed for uses in public interest

The assumption there of course is that an ICANN “last resort” auction, in which the winning bid is funneled into ICANN’s cash pile, would be spent on stuff genuinely in the public interest, rather than frittered away on secretly settling employee lawsuits or indulging in more expensive, self-important navel-gazing.

Perhaps unsurprisingly, the ICANN board of directors has indicated that it prefers the idea of last resort auctions to private auctions.

But SubPro has also made some recommendations that could potentially keep the price of last-resort bids down, completely redesigning the auction process compared to the 2012 round.

If the recommendations are implemented, applicants would have to submit bids towards the start of the application process, when they don’t even know who they’re bidding against.

After all the applications have been submitted, ICANN evaluators would group them all according to whether they’re identical or confusingly similar to each other, then inform each applicant in a contention set how many bidders — but not their identities — they’re up against.

Applicants would then have to submit a sealed bid stating the maximum price they’d be willing to pay for the gTLD in question. It would be only after “reveal day”, when ICANN publishes the applications themselves, that everyone would learn who they’re bidding against.

They’d then be able to engage in private resolutions (auctions could come into play at this point), but it would only be after contention resolution phases such as objections and Community Priority Evaluations were complete that applicants would find out who’d submitted the highest bid.

The winning bidder would pay the amount of the second-highest bid to ICANN.

The 400-page final report (pdf), along with the minority statements, will now be sent to the GNSO Council for approval, before it makes its way to the ICANN board.

Given how much work remains to be done on private auctions and other issues that I’ll get to in later coverage, it seems that a lot of the mechanics of how contention resolution will work will have to be devised by ICANN and the community during the Implementation Review Team and Operation Design Phase phases, along with at least one round of commentary on at least one edition of the next Applicant Guidebook.

The next round of new gTLDs has moved a step closer, but it’s still going to be well over a decade after the last application window before we see the next one.

Would-be new country wants to share another country’s ccTLD

Kevin Murphy, January 21, 2021, Domain Policy

What do you do if you’re the government of a country without a ccTLD, because the rest of the world does not recognize you as a country?

Perhaps the strangest solution to this predicament is to ask another country with a semantically meaningful ccTLD of its own if you can share that national resource.

And that’s reportedly what the government of Somaliland has done, reaching out to Sierra Leone for permission to use its .sl TLD.

According to the Somaliland Chronicle, its IT minister has written to his counterpart in Sierra Leone to propose “a commercial partnership with your esteemed office regarding the internet Top Level Domain”.

The east African country, which has its own government and a small degree of international recognition, is not currently acknowledged by the United Nations — it’s considered part of neighboring Somalia — and as such does not qualify for a ccTLD under International Standards Organization (and therefore ICANN) policies.

The minister has reportedly forbidden the use of Somalia’s .so domain, and the government itself uses a .org.

Sierra Leone, on the other side of the continent, uses .sl, which would also be the perfect choice for Somaliland if it were not already taken.

It’s not clear to what extent Somaliland wishes to share the ccTLD, but if it were to go as far as full joint ownership that would be unusual indeed.

Of course, the quickest way into the DNS root in its own right could be to apply for a memorable, relevant gTLD in ICANN’s next application round, which is probably not too many years away right now.

In 2012, there were several applications for geo-gTLDs representing regions that want, to a greater or lesser extent, independence.

This trail was over course blazed almost in 2003 by Catalonia’s .cat and now includes the likes of .scot (Scottish), .eus (Basques) and .krd (Kurds).

New gTLD consultants, start your engines.

ICANN axes Cancun again. Apparently there’s a pandemic

Kevin Murphy, January 18, 2021, Domain Policy

ICANN has formally confirmed that its seventieth public meeting will be online-only, disappointing restaurateurs and sex workers in Cancun, Mexico for the second year running.

The meeting will also be mercifully shorter, with two days cut from its running time. The new dates are March 22 to March 25. Thankfully, ICANN actually announced the date change this time around.

ICANN top brass had indicated as far back as October that Cancun was very unlikely to go ahead as an in-person meeting.

It will be the fourth consecutive meeting to be held via Zoom since the coronavirus pandemic began a year ago. My guess is it won’t be the last.

The next meeting this year is slated to take place in The Hague in late June, but I think only an strident optimist or denialist could imagine that actually happening.

It’s pandemic continuity versus gender diversity in ICANN’s board wish-list

Kevin Murphy, January 13, 2021, Domain Policy

ICANN’s Nominating Committee will be asked to pit two fundamentally opposed principles against each other when they pick three members of the organization’s board of directors this year.

Board chair Maarten Botterman has asked NomCom to prioritize continuity — keeping experienced directors in place — while also increasing gender diversity in the male-heavy current line-up.

Botterman this week sent a letter (pdf) to NomCom chair Ole Jacobsen, offering guidance virtually identical to that found in a December 2019 letter (pdf) to his predecessor.

The two most significant changes concern the impact on the board’s work of the coronavirus pandemic.

Noting that it typically takes a year or two for new directors to learn the ropes, and that it’s useful to have a staggered mix of tenures among the board, Botterman goes on to say:

Continuity is particularly important this year given the recent departure of the Board’s longest-serving, term- limited member and the ongoing challenges arising from the pandemic, including uncertainties about when the full Board may be next able to move from its current remote schedule to in-person meetings.

The long-serving member who left was presumably Chris Disspain, certainly one of the most active directors in recent years.

Later, Botterman’s letter contains an entirely new paragraph explaining what a time vampire ICANN directorship can be:

We underscore the significant time commitment required of Board members. Applicants must be able to devote weeks and long hours throughout the year to Board service, and even more because of the challenges caused by the pandemic. Among many other key initiatives, one focus in the upcoming year will be understanding and evaluating the expected recommendations from the policy development process on Subsequent Procedures regarding the next round of new gTLDs (as well as implementation of several Board-approved recommendations from community groups).

That, at least, should provide some comfort to those champing at the bit to get the next round of new gTLDs up and running — ICANN clearly expects it to happen at some point in the next four years.

So there’s a definite, newly emphasized focus on continuity at ICANN.

That’s good news for Lito Ibarra, Danko Jevtović and Tripti Sinha, the three NomCom appointees whose current terms end this coming October. Ibarra is on his second three-year term, the other two on their first. All are eligible for reselection.

The Botterman letter is less encouraging for Ibarra and Jevtović, who are men. ICANN is still seeking to increase gender diversity on its board, which only currently has five female voting members of 16 total directors.

While the wording is slightly different to the 2020 guidance, the essence is the same:

The ICANN community has also expressed strong support for efforts to increase diversity along several axes, especially including gender diversity, across the ICANN eco-system. Without compromising the fundamental requirement to have Board members with the necessary integrity, skills, experience, the Board would find it helpful to have greater gender diversity on the Board.

NomCom may find this pressure is relieved slightly by the fact that current ccNSO representative to the board, Nigel Roberts, is being replaced by Katrina Sataki of the Latvian ccTLD registry this October, following an election last month.

The Address Supporting Organization’s rep, Ron Da Silva, is also ending his current term this year. He’s up for reselection against nine other candidates, three of whom are female.

Here’s why two ICANN directors opposed extending Marby’s CEO contract

Kevin Murphy, January 7, 2021, Domain Policy

ICANN CEO Göran Marby’s personality came into question when the organization’s board of directors voted to prematurely extend his contract last year, it emerged this evening.

Back in October, the board voted to add two years to Marby’s current contract, which had been due to expire May 23, 2022, saying it would help with continuity and provide a “sense of calm” at the org.

But one director voted against the extension, and another abstained. Today, with the publications of the October 7 meeting’s minutes, we found out the whos and and whys.

Ihab Osman was the director who voted against the deal, telling the rest of the board that there should have been a formal review and plan to address Marby’s “communications style”, which has apparently come in for criticism.

He added that there should have been a global search for a CEO after Marby’s first six years (that is, in 2022). The minutes read:

Ihab stated that the decision to extend the President and CEO’s contract was taken without, in his view, a formalized professional performance review process reflecting on the past four years of the CEO’s service. He stated that he believed that not doing so was inconsistent with best practices for an organization of the size and importance as ICANN. Ihab noted that comments had been expressed about the CEO’s communication style and did not believe there was a formal plan to work on this issue. Ihab stated his belief that extending a contract that has two years before it is completed is premature, noting that organizations generally benefit from a global search for a CEO after a six-year tenure.

Osman is a Sudanese businessman who currently lists his employers as Saudi agricultural company NADEC and the US-Sudan Business Council.

The director who abstained from the vote was Mandla Msimang. She had procedural concerns, saying that the decision should have been subject to more input from other stakeholders. The minutes read:

Mandla explained that her abstention is not a reflection on the President and CEO. Mandla indicated that she abstained from voting because she did not agree with the process that has been followed to arrive at the decision. Mandla noted that she believes the process lacked a performance-based approach and lacked a more extensive input from key stakeholders, namely the org staff and the community.

South African Msimang is CEO of Nozala Investments, an investment vehicle focused on female-owned businesses.

Both she and Osman are Nominating Committee appointees whose first three-year terms on the ICANN board end in 2022.

While the minutes do not elaborate on the apparent criticisms of Marby’s “communications style”, it’s probably fair to say he’s a bit more confrontational and abrasive when compared to his predecessors.

Fadi Chehadé sometimes came across like a used-car salesman hiding behind a dubious veil of servile humility; Rod Beckstrom had baffling New Age hippy tendencies and often appeared out of his depth when it came to the minutiae of ICANN’s function.

As for Marby’s style… what do you think? Answers in the comments or privately to the usual address.

Rules for the next new gTLD round near the final straight

Kevin Murphy, January 7, 2021, Domain Policy

The ICANN working group tasked with creating policies for the next round of new gTLDs is wrapping up its work this week, setting up the battle lines for the next phase of the program’s development.

Members of the cross-constituency Subsequent Procedures for new gTLDs group, known as SubPro, have until a minute before midnight UTC Friday night to declare whether they’re not happy with any parts of the 373-page document (pdf).

It’s expected that some groups and individuals will have beef with some of the SubPro recommendations, which will be included in the Final Report as dissenting minority statements before it is sent off to the GNSO Council later this month.

The report, the product of five years of discussions, will largely affirm that the next new gTLD round will proceed along roughly the same lines as the 2012 round, with some of ICANN staff’s historical ad-libs being codified and a few new big concepts introduced.

New additions include the idea of a pre-evaluation process for registry service providers, enabling applicants to pick from a menu of pre-approved back-ends and avoid the cost of having their technical prowess evaluated for every string they apply for.

The price of applying could be kept artificially high, however, to discourage gTLD stockpiling, and the report will also recommend banning the coexistence of single/plural variants of the same word.

One area where there was definitely no consensus was the issue of “closed generics” — a non-brand string reserved for the sole use of the registry — it’s going to be up to the GNSO Council and ICANN to muddle through this one.

While the consensus call marks the end of the working group phase of new gTLD policy development, there are still many substantial hurdles to leap before the next application round opens.

In the last round, the policy was approved by the GNSO Council in 2007, and ICANN didn’t start accepting applications until the start of 2012.

it may not take five years between policy and launch this time, if only because many of the new recommendations are merely affirmations of the status quo, but there are new mechanisms ICANN will have to implement before the next round opens, and we should probably expect more than one comment period on iterations of the next Applicant Guidebook.

The road between now and the next round is still likely measured in years.

Island demands return of its “naked” ccTLD

Kevin Murphy, January 5, 2021, Domain Policy

The Pacific island nation of Niue is loudly demanding that ICANN hand over control of its ccTLD, .nu, after two decades of bitter argument.

The government has taken the highly unusual move of filing a redelegation request with ICANN’s IANA unit publicly, forwarding it to other governments and the media.

The request is backed by UNR, the former Uniregistry, which is being put forward as the proposed back-end provider.

Niue claims, as it has since at least 2000, that the string was misappropriated by an American entrepreneur in the 1990s and has been used to generate tens of millions of dollars in revenue, with almost no benefit to the country.

The word “nu” is Swedish for “now”. It’s also the masculine form of “naked” in French, which enables lazy reporters to write click-baity headlines.

The Swedish meaning was first spotted by Massachusetts-based Bill Semich in 1997. Together with Niue-based Kiwi ex-pat Stafford Guest, he obtained the delegation for .nu from pre-ICANN root zone supremo Jon Postel.

They used the name Internet Users Society Niue (IUSN) and started selling .nu names to Swedes as a meaningful alternative to .se and .com.

As of today, there are about 264,000 registered .nu names, retailing for about $30 a year. Pre-2018 data is not available, but a couple of years ago, it had over 500,000 names under management.

That kind of money would be incredibly useful to Niue, which has a population of under 2,000 and few other natural resources to speak of. The country relies on hand-outs from New Zealand and, historically, dubious offshore banking schemes and the sale of postage stamps to collectors.

The government has said in the past that .nu cash would enable it to boost its internet infrastructure, thereby boosting its attractiveness as a tourist destination.

IUSN and Niue signed a memorandum of understanding in 1999, but a year later the government passed a law decreeing “.nu is a National resource for which the prime
authority is the Government of Niue”.

It’s been trying to get control of .nu ever since, but IUSN has consistently refused to recognize this law, Niue has always claimed, and has always refused to cooperate in a redelegation.

The company made headlines back in 2003 for claiming that it was rolling out free nationwide Wi-Fi in Niue, but there are serious questions about whether that ever actually happened.

Now, Niue claims:

The Wi-Fi has been continuously unstable and exceedingly limited. As of today, the ccTLD.NU administration and local presence of the IUSN in Niue consists of a motel with a PO Box and the Wi-Fi is covering a [n]egligible are[a] surrounding the motel. There is no operational management of the ccTLD.NU by the IUSN present in Niue.

I believe the motel in question is Coral Gardens, north of capital Alofi, which is or was run by Guest.

While IUSN is still the official ccTLD manager for .nu, according to IANA records, the business operations and technical back-end were transferred to Swedish ccTLD manager IIS in 2013.

IIS agreed to pay IUSN a minimum of $14.7 million over 15 years for the license to .nu, but the domain remains delegated to IUSN.

Niue, represented by its Swedish special envoy Pär Brumark (who until recently was also vice-chair of ICANN’s Governmental Advisory Committee, representing Niue) sued IIS in late 2018 in an attempt to gain control of the ccTLD.

The government argues that under Swedish control, profits from .nu can only be earmarked for the development of the Swedish internet, at the expense of Niue.

Brumark tells us the case is currently being delayed due to the coronavirus pandemic.

The problem Niue has now is pretty much the same as it always has been — IANA rules state that the losing party in a redelegation has to consent to the change of control, and IUSN really has no incentive to do so.

Niue’s best chance appears to be either the Swedish lawsuit or the possibility that it can get the GAC on board to support its request.

In-progress redelegation requests are also exempt by convention from ICANN’s transparency rules, so we’re not going to hear anything other than what Niue releases or the GAC can publicly squeeze out of ICANN leadership.

You can read the redelegation request (pdf) here.

US sneaks public Whois demands into pandemic relief bill

Kevin Murphy, December 28, 2020, Domain Policy

Outgoing US president Donald Trump has signed into law a coronavirus relief bill and spending package that contains a surprise instruction for the government to pursue open access to Whois records.

The Consolidated Appropriations Act of 2021 is focused on federal spending for fiscal 2021, with billions set aside for pandemic-related economic stimulus. It’s the bill you may recall Trump refused to sign for several days on the purported basis that it only provided Americans with a piddling $600 check.

An accompanying document contains encouragement for the National Telecommunications and Information Administration to “to require registrars and registries based in the United States to collect and make public accurate domain name registration information”.

It also asks the NTIA to continue to work within ICANN’s Governmental Advisory Committee to help create “a global access model that provides law enforcement, intellectual property rights holders, and third parties with timely access to accurate domain name registration information”.

The text can be found in a joint explanatory statement (pdf) accompanying the act. It’s not on the statute books as such, but it does tell NTIA how to spend the money it’s been allocated.

The full text relevant to the domain name industry reads:

NTIA is directed, through its position within the Governmental Advisory Committee o work with I CANN to expedite the establishment of a global access model that provides law enforcement, intellectual property rights holders, and third parties with timely access to accurate domain name registration information for legitimate purposes. NTIA is encouraged, as appropriate, to require registrars and registries based in the United States to collect and make public accurate domain name registration information.

As ICANN notes in its analysis, the first sentence is not telling NTIA to do anything it hasn’t been doing since the European Union’s General Data Protection Regulation came into effect two and a half years ago.

The NTIA and GAC have been involved in efforts to create a privacy workaround for rights holders and law enforcement, which in September came up with the widely panned SSAD proposals. ICANN is currently pleading with the EU for clarity on whether it would even be legal.

The second sentence is perhaps a bit more worrying, dangling as it does the possibility of American registries and registrars having to either break EU law or implement a much more complex Whois infrastructure.

But, as ICANN notes, the words “encouraged, as appropriate” are doing a lot of heavy lifting in that sentence, saying “encouragement is aspirational; it is not a mandate”.

However, ICANN appears to be treating it as a warning shot, with head of compliance Jamie Hedlund writing:

It appears to hint that if NTIA and the ICANN community can’t develop a robust access model, Congress could entertain more forceful measures that would impose requirements on U.S.-based registries and registrars to collect and publish domain name registration information.

It seems the NTIA has the wink to cause mischief, should ICANN not deliver what intellectual property lobbyists want.

Mixed messages from ICANN on pandemic travel in 2021

Kevin Murphy, December 22, 2020, Domain Policy

ICANN still hasn’t formally cancelled its public meeting in Cancun, Mexico next March, but it appears to be planning for scheduled in-person gatherings to not resume until the fourth quarter of next year.

While nobody in their right mind seems to believe ICANN 70 will go ahead anywhere other than virtually — and ICANN’s top brass acknowledged in October that a face-to-face community forum appeared highly unlikely — the Org has still not announced that it will be the fourth consecutive meeting to be held via Zoom.

But two recently published documents show that ICANN doesn’t see travel getting back to normal any time soon, though its expected timing is ambiguous.

First, the proposed budget for fiscal 2022, which was published on Friday, envisages pandemic-related travel restrictions for only “the first nine months” of its current FY21, which ends June 30 next year.

That means that ICANN, at least in its travel budget, still thinks there’s a chance that international travel may be an option as early as April next year. Its travel budget for this year is $4.7 million, which certainly suggests one normal public meeting.

That would rule out Cancun, but leaves open the possibility that June 14-17 public meeting in The Hague could actually go ahead.

The budget also assumes a normal level of travel spending for the whole of FY22, which would mean ICANN 72 in Seattle — a mere domestic flight for most ICANN staff and a good portion of the domain industry — would also take place in-person next October.

But a resolution passed by the ICANN board of directors last Thursday appears to have a more pessimistic outlook.

The board at that meeting approved the continuation of contingency plans for signing the cryptographic keys at the root of the DNS that would eliminate the need for travel until the fourth quarter of calendar 2021.

Normal, quarterly root Key-Signing Key ceremonies require a small number of trusted “secret key holders” to be flown from around the world into facilities in the US, carrying physical keys, to ensure the integrity of the process.

But those rules were tweaked under coronavirus lockdown last April to allow IANA employees to sub in for these key-holders.

Understanding that the pandemic wasn’t going away any time soon, but perhaps with hindsight on the optimistic side, the KSK ceremony in April generated three quarters’ worth of keys in advance, enabling root DNSSEC until the end of March 2021.

Last Thursday, the ICANN board resolved to again bulk-generate keys during its next ceremony, to be held some time in the first quarter. The plan states:

The coronavirus pandemic is expected to continue to significantly impact operations well into 2021. To limit the impact on the ability to hold quarterly key ceremonies, the plan again provides for generating signatures for an extended nine-month period. This relieves the need to hold a subsequent key signing ceremony until the fourth quarter of 2021.

So, while the proposed budget thinks travel could return to normal by April, the KSK plans are thinking October could be the best-case scenario.

Vaccines appear to be the key, as you might expect:

Staff will continue to monitor the pandemic and prepare for all possible scenarios for this ceremony in accordance with the graduated approach. Should widespread vaccination programs prove to be successful, and international travel limitations be relaxed, it is conceivable a late-2021 ceremony could be conducted in its normal format with international in-person participation.

I’m going to go out on a limb and suggest that the chances of a normal in-person ICANN meeting going ahead before Seattle are pretty slim.

For vaccination programs to be successful, we’re going to need a combination of competent governments capable of handling an unprecedented logistical challenge and a largely sane, rationale populace willing to go under the needle en masse. I’m afraid I don’t have that much faith in humanity.

Even if everything goes smoothly, we’re still looking at the vaccine rollout taking a long time indeed. I live in the UK, the first country to roll out vaccinations at scale, and I don’t anticipate getting the jab for six months or more.

An unofficial calculator tool estimates that a middle-aged Brit with no diagnosed preexisting conditions cannot reasonably expect to get a vaccine until July 2021, assuming the UK manages to quickly ramp up to one million vaccinations per week and 70% of those eligible choose to take the shot.

If that’s true elsewhere in the world, and vaccination becomes a passport to travel, then any hypothetical June face-to-face ICANN meeting could resemble a senior care home or retirement village even more than usual.

Not so much Club Med as a Saga Holiday.

And none of this takes into account the potential impact of the super-spreadable new coronavirus strain discovered to be hugely prevalent in the UK last week.

While it’s early days, it seems there’s a significant possibility that what I’m calling the limeyvirus (because what goes better with Corona than lime?) is going to significantly impact travel worldwide in the coming months.

ICANN predicts rosy post-pandemic domain industry — time to start panicking?

Kevin Murphy, December 21, 2020, Domain Policy

Having totally misjudged the impact of the coronavirus pandemic on the domain name industry and its own budget, ICANN is now forecasting a rosy (post-pandemic?) fiscal 2022.

The Org has just published its proposed budget for the 12 months beginning July 1, 2021, predicting decent growth in transactions for new and legacy gTLDs, along with a modest increase in new registrars.

It’s also predicting that international travel will be back to normal, with three full in-person public meetings going ahead as usual.

ICANN is planning to receive $144.4 million in FY22, up slightly from the $140 million it expects to receive in the current financial year.

The FY22 number is boosted by a $4 million bung from Verisign, negotiated as part of the .com contract renewal, which lifted the price freeze.

It’s predicting a 3% increase in legacy gTLD registry transaction fees to $52.8 million and a 6% increase in legacy gTLD registry transaction fees to $5.1 million.

Registrar transaction fees for legacy gTLDs is expected to be up 4% to $33.4 million, with registrar fees for new gTLDs is predicted to rise 5% to $4.2 million.

Altogether, that’s $3 million extra in transaction fees — paid whenever a domain is registered, renewed or transferred — compared to its expected FY21 performance.

But that’s offset by a $600,000 predicted decline in fixed registry fees, due to an expected loss of 15 new gTLD registries (most likely dormant dot-brands) in the period. It expects to end the year with 1,141 fee-paying registries.

ICANN expects its pool of accredited registrars to bounce back a little, adding 28 in FY22 having lost an expected 121 in FY21. It expects to end FY22 with 2,356 registrars on its books.

The proposed budget also sheds light on how ICANN expects the remainder of coronavirus-afflicted FY21 playing out.

It currently expects its top line for the year to June 30, 2021 to be $140 million, compared to the $129.3 million it predicted in the FY21 budget approved in May this year.

But that budget had been slashed in April by 8% from its original draft, published a year ago. It had planned for $140.4 million, but reduced expectations by $11.1 million due to the coronavirus pandemic.

In April, before the extent of the lockdown bump experienced by many registries and registrars became clear, ICANN said:

ICANN org funding may be impacted because the economic crisis stemming from the pandemic has the potential to impact the funding from domain name registrations and contracted parties through the end of FY20 and into the first months of FY21.

Today, it’s saying the impact from coronavirus was “less than expected” and generally forecasting “stable” and more or less business as usual in FY22.

ICANN had budgeted for $85.5 million in transaction fees from all sources in the current year, but now it expects that to come in at $92.6 million, much closer to its December 2019 estimate of $94.7 million.

It had expected to see transaction fees from new gTLDs at both registry and registrar levels to be down by a third, at $8 million, but that number’s now expected to come in at $8.9 million. Likewise, the budget predicted a legacy gTLDs dip of 2.3% to $77.5 million, rather than the $86.2 million it now thinks is heading its way.

I should probably point out for future reference that the proposed budget for FY22 was published Friday, the day before the new strain of ultra-infectious coronavirus was discovered in the UK. Who knows what the impact of that might be.

The budget is open for public comment for two months here.