After Verisign’s sluggish year, ICANN misses funding goal by $2 million

ICANN’s fiscal 2023 revenue came in $2 million light when compared to its budget, the annual report published today shows.

The Org blamed lower-than-expected transaction fees for the shortfall, suggesting the domain industry wasn’t quite as buoyant as its accountants had hoped.

Funding for the year came in at $150 million against a budgeted target of $152 million.

The period covered is July 1, 2022 to June 30, 2023, a period in which Verisign — ICANN’s biggest contributor by some margin — repeatedly lowered its revenue estimates from .com and .net sales.

This is not a coincidence. The two outfits’ fates are intertwined. Verisign funded ICANN to the tune of $49.7 million from its legacy gTLD business in FY23, up only slightly from $49.5 million in FY22.

Overall, ICANN said that its revenue from registry transactions was $60 million versus its budget estimate of $62 million, and that registrar transactions revenue was $39 million versus its $41 million estimate.

Other registrar fees and registry fixed fees seem to have come in a bit ahead of budget, and rounding accounts for the fact that the numbers don’t make prima facie sense.

ICANN said its expenses for the year came in $10 million lower than expected, at $142 million, due to lower professional services and personnel costs. Its travel expenses were $2 million more than expected, it seems due to the Washington DC meeting being more expensive than planned.

Russia cuts off ICANN funding after pro-Ukraine stance

Russia did not pay its usual annual tribute to ICANN in the Org’s fiscal 2023, newly published funding data reveals.

Coordination Center for TLD RU usually funnels $50,000 a year into ICANN’s budget, but that was reduced to nothing in the year to June 30, 2023, according to ICANN’s FY23 annual report, published today.

While it could of course be a coincidence, I rather suspect it’s retaliation for ICANN’s overt support for Ukraine following Russia’s invasion last year.

ccTLD.ru counts the Russian Ministry of Communications and Mass Media as one of its “founding members”.

ICANN donated $1 million to the Emergency Telecommunications Cluster, a relief organization, to support Ukrainians affected by the war, and gave the Ukrainian government a platform to denounce the war at a public meeting.

Later last year, ICANN also lobbied against the Russian candidate for ITU secretary general.

The .ru registry was not the only ccTLD operator to slash funding in FY23.

Belgium already said it would cut its donation from $75,000 to $25,000 in protest at “mission creep” and perceived failures to deal with privacy regulations, and the annual report shows it made good on its threat.

But it seems to have been joined by the Netherlands and Denmark, which cut their contributions respectively by $45,000 to $180,000 and by $30,800 to $30,000. Slovenia halved its donation to $5,000.

Overall, ccTLD contributions were down $176,535 to $2,214,240.

ICANN’s bean-counters probably won’t be losing any sleep over the decline; the Org’s overall funding was $150 million in the year.

Palage’s epic rant as he asks ICANN to cancel Verisign’s .net contract

ICANN is devolving into a trade association hiding under a thinning veneer of multistakeholderism and the domain industry is becoming a cartel.

Those are two of the conclusions reached by consultant Michael Palage, who’s been involved with ICANN since pretty much the start, in an epic Request for Reconsideration in which he asks the Org to unsign Verisign’s recently renewed .net registry contract.

ICANN’s equally intriguing response — denying, of course, Palage’s request — also raises worrying questions about how much power ICANN’s lawyers have over its board of directors.

The RfR paints a picture of a relationship where Verisign receives special privileges — such as exemptions from certain fees and obligations — in exchange for paying higher fees — contributing $55 million of ICANN’s budget — some of which is accounted for quite opaquely.

Palage claims the domain industry of being “on the precipice of becoming a cartel” due to recent consolidation, and says that is being enabled by ICANN’s failure to conduct an economic study of the market.

Verisign’s .net and .com contracts are the only registry agreements that do not oblige the registry to participate in economic studies, Palage says, reducing ICANN’s ability, per its bylaws, “to promote and sustain a competitive environment in the DNS market.”

Palage writes:

The failure of ICANN to have the contractual authority to undertake a full economic study to ensure a “competitive environment in the DNS market” undermines one of its core values. This failure is resulting in a growing consolidation within the industry which is on the precipice of becoming a cartel. ne needs to look no further than four US-based companies, Verisign, PIR, GoDaddy, and Identity Digital which currently control almost the entirety of the gTLD registry market based on domain names under management. This unchecked consolidation within the industry directly and materially impacts the ability of individual consultants to make a livelihood unless working for one of the dominant market players.

While Palage says he and other registrants are being harmed by increasing .net prices, and that an economic study would help lower them, he also asks ICANN to get Verisign to migrate to the Base Registry Agreement, which would enable Verisign to raise prices at will, without the current 10%-a-year cap.

He’s also concerned that ICANN’s volunteer community is shrinking as the domain industry becomes an increasingly dominant percentage of public meeting attendance.

Figures published by ICANN show that, at the last count, 39% of attendees were from the domain industry. ICANN stopped breaking down attendee allegiance in 2020 during the pandemic and did not resume publication of this data afterwards.

“ICANN has started down the slippery slope of becoming a trade association,” Palage writes.

While his RfR was going through the process of being considered by ICANN and its Board Accountability Mechanisms Committee, Palage separately wrote to ICANN general counsel John Jeffrey to express concerns that ICANN policy-making might be risking falling foul of antitrust law.

It seems a recent meeting of the working group discussing updates to ICANN’s Transfers Policy debated whether to cap the amount registries are allowed to charge registrars for bulk transfers. Dollar amounts were discussed.

Palage suggested ICANN might want to develop a formal antitrust policy statement that could be referred to whenever ICANN policy-makers meet, in much the same way as its Expected Standards of Behavior are deployed.

If the RfR as published by ICANN lacks some coherence, it may be because ICANN’s lawyers have redacted huge chunks of text as “privileged and confidential”. That’s something that hardly ever happens in RfRs.

It seems Palage knows some things about the .net contract and Verisign’s relationship with ICANN from his term on the ICANN board, which ran from April 2003 to April 2006, a time when Verisign and ICANN were basically at war.

Because the information Palage is privy to is still considered privileged by ICANN, it was redacted not only from the published version of the RfR but also it seems from the version supplied to the BAMC for consideration.

ICANN cited this part of its bylaws to justify the redactions:

The Board Accountability Mechanisms Committee shall act on a Reconsideration Request on the basis of the public written record, including information submitted by the Requestor, by the ICANN Staff, and by any third party.

Reading between the lines, it seems most of the redactions likely refer to the Verisign v ICANN lawsuit of 2004-2005.

Fellow greybeards will recall that Verisign sued ICANN for blocking its Site Finder service, which put a wildcard in the .com zone and essentially parked and monetized all unregistered domains while destabilizing software that relied on NXDOMAIN replies.

The October 2005 settlement (pdf) forced Verisign to acknowledge ICANN as king of the internet. In exchange, it got to keep .com forever. The deal gave Verisign financial security and ICANN legitimacy and was probably the most important of ICANN’s foundational documents before the IANA transition.

So what did the board of 2005 know that’s apparently too sensitive for the board of 2023? Dunno. I asked Palage if he’d be willing to share and he politely declined.

In any event, his RfR (pdf), which among other things asked for ICANN to reopen .net contract negotiations, was dismissed summarily (pdf) by BAMC last week on the grounds that he had not sufficiently shown how he was injured by ICANN’s actions.

Papac named interim ICANN Ombudsman

ICANN has appointed Krista Papac as interim Ombudsman, following the resignation of Herb Waye earlier this year.

Papac is currently the Org’s complaints officer, a similar role to that of the Ombudsman.

The move means that an ICANN staffer is taking the structurally independent role for the first time.

ICANN chair Tripti Sinha blogged that Papac will now report directly to the board “to ensure that the confidentiality and independence of the Ombudsman Office are maintained”, but it isn’t clear whether she will also continue to report to the usual staff chain of command in her complaints officer role.

The appointment was evidently made by the board at its September 10 retreat but was not disclosed at the time. Waye resigned in July and his last day is September 30.

The board is looking for a permanent replacement for Waye via a search committee formed two weeks ago. If the hunt is anywhere near as long-winded as the CEO search, now in its ninth month, Papac could be enjoying her new gig for some time.

Single/plural gTLD combos to be UNBANNED

It’s looking like ICANN won’t ban companies from applying for plural versions of existing singular gTLDs, and vice-versa, after all.

Among the pieces of the GNSO’s new gTLD policy advice ICANN’s board of directors rejected at the weekend was a proposal to essentially ban potentially confusing singular/plural combos coexisting in the DNS.

The board threw out the advice because it reckons ICANN would be put in a position where it would have to police internet content, which is outside its mission and something it is very averse to.

The recommendations would have prevented two strings existing in the DNS if one was the plural of the other, but only if they were in the same language and had the same intended usage.

The example the GNSO gave was applications for .spring and .springs — if both were intended for English-language sites related to bouncy metal coils, they would be deemed confusingly similar and only one would be allowed to exist. But if .spring was intended to relate to the season, both would be permitted to coexist.

But ICANN is uncomfortable with this because no matter what an applicant says in its application about intended language and intended use, without some post-delegation policing actual use may vary.

“Though a gTLD applicant can arbitrarily set the language of a TLD during an application round, a registrant and end-user can only see
the script of the TLD string in its practical usage. So the singular/plural determination by the gTLD applicant does not carry
onward to the registrant and end user,” the board wrote.

“Restricting the use and potentially the content of strings registered in TLDs based on the intended use therefore raises concerns for the Board in light of ICANN’s Bylaws Section 1.1 (c),” it said, referring to the part of its bylaws that says it is not allowed to regulate internet content.

So it seems likely that plural/singular clashes are probably going to be permitted in future new gTLD round after all.

This, of course, reopens the business model of a lazy applicant going after the singular/plural of an existing registry’s string and piggybacking on its installed user base or marketing budget.

ICANN rejects a whole bunch of new gTLD policy stuff

ICANN has delivered some bad news for dot-brands, applicants from poorer countries, and others, at the weekend rejecting several items of new gTLD policy advice that the community spent years cooking up.

The board of directors on Sunday approved a scorecard of determinations, including the rejection (or non-adoption) of seven GNSO recommendations that it deems “would not be in the best interests of the ICANN community or ICANN”.

In reality, it’s the latter that seems to have been foremost in the board’s mind; most of the rejections appear to be geared toward reducing ICANN Org’s legal or financial exposure.

Notably, dot-brands are denied some of the relief from cumbersome or expensive requirements that the GNSO had wanted rid of.

The board rejected a recommendation that would exempt them from the Continued Operations Instrument — a financial bond used to pay an Emergency Back-End Registry Operator should the applicant go out of business.

“[T]he Board is concerned that an exemption from an COI for Spec 9 applications would have financial impact on ICANN since there would be no fund to draw from if such a registry went into EBERO,” the board wrote.

It also rejected a request to exempt dot-brands from rules requiring them to contractually ban and monitor abuse in their TLDs. The GNSO had argued that single-registrant TLDs do not suffer abuse, but the board said this could lead to abuse from compromised domains going unaddressed.

“The Board concludes that Recommendation 9.2, if implemented, could lead to DNS abuse for second-level registrations in a single-registrant TLD going unaddressed, unobserved, and unmitigated,” it said.

Applicants hoping to benefit from the Applicant Support Program — which in 2012 offered heavily discounted application fees to poorer applicants — also got some bad news.

The GNSO wants the support to extend to other costs such as application-writing services and lawyers, which naturally enough put the frighteners on the board, which noted “such expansion of support could raise the possibility of inappropriate use of resources (e.g. inflated expenses, private benefit concerns, and other legal or regulatory concerns)”.

The board also rejected a couple of recommendations that could be seen as weakening its role as ultimate authority over all things gTLD.

It rejected a proposal to remove the controversial covenant not to sue (CNTS) from the application process unless other recommendations related to appeals processes are implemented.

ICANN said that because it has not yet approved these other recommendations, it has rejected this recommendation.

The board also rejected a recommendation that would have limited its ability to reject a gTLD application to only when permitted to do so by the rules set out in the Applicant Guidebook.

The idea was to prevent applications being arbitrarily rejected, but the board said this “may unduly limit ICANN’s discretion to reject an application in yet-to-be-identified future circumstance(s)”.

The rejections invoke part of the ICANN bylaws that now requires the GNSO Council to convene and either affirm or amend its recommendations before discussing them with the board. Presumably this could happen at ICANN 78 next month.

The bylaws process essentially gives the board the ultimately authority to throw out the GNSO recommendations if it can muster up a two-thirds supermajority vote, something it rarely has a problem achieving.

Buckridge to replace Shears on ICANN board

Chris Buckridge will replace Matthew Shears on ICANN’s board of directors next month.

The Non-Contracted Parties House of ICANN, their arses burned by an August 18 finger-wagging from ICANN chair Tripti Sinha, somehow managed to narrow down a slate of four candidates to just one by Sinha’s end-of-month deadline, despite seeming to be at a very early stage of the election process just last week.

Buckridge will fill seat 14, reserved for a member of the NCPH and one of two GNSO-picked seats.

He was one of the preferred candidates of the Non-Commercial Stakeholders Group, which along with the Commercial Stakeholders Group makes up the NCPH.

The CSG had rejected the NCSG’s original preference to reappoint Shears, who joined the board in 2017, for a third and final term.

Buckridge comes from the Regional Internet Registry world. He was with RIPE NCC from 2006 until this June in a variety of external relations roles, dealing with European governments and regulators, which seems like a pretty good qualification for an ICANN directorship.

Sinha had written to the NCPH leaders last month to complain that they had failed to pick a director, missing an April deadline, and demanded they name a name before the end of August.

ICANN might be a director light after election stalemate

Months of internecine bickering have led to ICANN facing the possibility that it might enter its 25th anniversary meeting this October without a properly elected director in one seat of the board.

Chair Tripti Sinha has written to (pdf) the heads of the Non-Commercial Stakeholder Group and Commercial Stakeholder Group — and then published the letter, no doubt to light a fire under their arses — to demand they name their candidate for Seat 14 on the board.

The name was due under ICANN’s bylaws by April 26, which is six months before the Hamburg AGM, she said.

Without an appointment, any newly picked director won’t be able to participate in training and meetings to help them hit the ground running at the conclusion of ICANN 78’s AGM, she said.

Seat 14 is selected by the Non-Contracted Parties House. That’s every participant in the GNSO that is not a registry or registrar. It comprises the NCSG and CSG. The incumbent director is Matthew Shears, first picked in 2017.

The CSG has made it clear that it does not want Shears, the NCSG’s initially preferred candidate, reappointed for a third term. It seems the group is unhappy with his performance. It has also rejected alternate Rafik Dammak.

The NCSG meanwhile rejected CSG preference Mark Datysgeld, saying he lacks ICANN experience.

The problem seems to be election rules (pdf) agreed to by the two SGs in 2018 that requires them to reach a “consensus” on a candidate, which can be difficult when by definition they have two fundamentally opposing policy goals.

There may also be confusion about whose “turn” it is to pick a candidate. As the names of the SGs suggests, the two groups represent diametrically opposed interests, so there’s been an informal agreement to rotate nominations between the SGs. The question is whether NCSG/Shears’ turn has ended, or whether he gets the full nine years.

Eight months after the NCPH leaders started to discuss Seat 14, there appears to be four candidates currently under consideration, albeit only at the very early interview phase of the process.

The CSG has put forward Khaled Koubaa and Ihab Osman as candidates. The names are notable as they’re both previous ICANN directors who each served a single term as Nominating Committee appointees (until 2019 and 2022 respectively).

The NCSG has picked “ICANN Policy Ninja” Amr Elsadr and Chris Buckridge, a policy guy from the Regional Internet Registry world, as its two nominees.

With three Africans in the mix, there’s a possibility that next year’s NomCom may have more freedom than usual when trying to fill its geographic diversity quota. None of the slate are female.

Right now, with voting not yet underway, it seems the chances of the two SGs settling on a consensus candidate before Sinha’s end-of-August deadline are close to zero.

ICANN’s general counsel John Jeffrey wrote to (pdf) the NCPH heads back in May to remind them that their nomination was a month late and that any failure to pick a new director before the AGM would lead to Shears retaining the role while his successor is picked (assuming he wants the gig).

There seems to be some concern among ICANN’s top brass that the deadlock within the NCPH — caused, as so many ICANN conflicts are, by a failure to compromise — might reflect badly on ICANN and the multistakeholder model in general.

Yup.

ICANN turns down money from blockchain alt-root

It seems ICANN is turning down free money from blockchain alt-root providers, apparently as a matter of principle.

We hear one such alt-root, Freename.io, tried to sponsor the upcoming ICANN 78 meeting in Hamburg, but was rebuffed.

“At this time, ICANN is not interested in having Freename serve as a sponsor and will not be moving forward with a sponsorship agreement,” the Org told the company in an unsigned email.

Freename had offered to be a general sponsor, and not at the cheapest tier, I’m told.

ICANN sponsorship offers typically start in the low thousands but can get up to six figures at the higher tiers. Sponsorship is overall a very small part of ICANN’s revenue.

Org has become increasingly rattled in recent years with the proliferation of alt-roots, which have been gradually gaining market acceptance while ICANN’s own efforts to expand the domain universe languish in interminable policy knots.

ICANN delayed the sale of the UNR portfolio of gTLDs until buyers renounced their ownership rights to blockchain versions of their authoritative root strings.

Clearly, splashing an alt-root’s branding all over an ICANN stage would be seen as problematic.

Freename.io plans to attend the Hamburg meeting anyway.

CentralNic chief calls on industry to tackle climate change

CentralNic CEO Michael Riedl is calling on his counterparts at other large domain name registries and registrars to meet up to coordinate the industry’s response to climate change.

During a broad keynote at the London Domain Summit this morning, Riedl said that each domain company is too small to make an impact on the industry’s carbon footprint individually, and that coordination is needed.

He said the industry’s carbon footprint is currently “relatively reasonable” but said “we need to get it down to zero… together I’m pretty sure we can make an impact”.

Speaking to DI shortly after his speech, Riedl said he will soon invite industry leaders to a climate change “summit” in Hamburg, Germany, to coincide with ICANN’s 78th public meeting.

He said the domain industry needs to coordinate and standardize its approach to emissions, following the leads of other industries such as automotive.

He said he hoped he could get the CEOs of the big domain companies — he named Verisign and GoDaddy, who rarely send their CEOs to ICANN meetings — to show up.

Planning for the meeting is in the very early stages and Riedl said he has not spoken publicly about the initiative until today’s speech.