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Why ICANN dropped registrar ownership rules

Kevin Murphy, February 13, 2011, Domain Registries

ICANN has quietly published a list of 10 reasons explaining why it decided to start allowing domain name registrars and registries to buy each other.

Last November, ICANN’s board of directors voted to drop so-called “vertical integration” rules that previously prevented registries owning more than a small percentage of registrars.

Now, under the forthcoming new top-level domains program, the likes of eNom and Go Daddy will be able to apply to become gTLD registries, and registries like VeriSign and Neustar will be able to apply to run their own registrar businesses.

The decision was unexpected, appeared to be a U-turn, and ICANN’s explanation was not articulated sufficiently to sate critics such as the US Department of Commerce.

So now ICANN has published a “Draft Rationale” (pdf), a 17-page document that outlines some of the thinking that went into the decision.

In a nutshell, ICANN dropped the VI rules to increase competition, to avoid antitrust lawsuits, and because the harms that could arise due to cross-ownership are best addressed by other means.

Here are the rationale’s 10 major bullet points in full:

  • None of the proposals submitted by the GNSO reflect a consensus opinion; as a result, the Board supported a model based on its own factual investigation, expert analysis, and concerns expressed by stakeholders and the community.
  • ICANN’s position and mission must be focused on creating more competition as opposed to having rules that restrict competition and innovation.
  • Rules permitting cross-ownership foster greater diversity in business models and enhance opportunities offered by new TLDs.
  • Rules prohibiting cross-ownership require more enforcement and can easily be circumvented.
  • Rules permitting cross-ownership enhance efficiencies and almost certainly will result in benefits to consumers in the form of lower prices and enhanced services.
  • Preventing cross-ownership would create more exposure to ICANN of lawsuits, including antitrust lawsuits, which are costly to defend even if ICANN believes (as it does) that it has no proper exposure in such litigation.
  • The new Code of Conduct, which is to be part of the base agreement for all new gTLDs, includes adequate protections designed to address behavior the Board wants to discourage, including abuses of data and market power. Data protection is best accomplished by data protection tools, including audits, contractual penalties such as contract termination, punitive damages, and costs of enforcement, as well as strong enforcement of rules. By contrast, market construction rules can be circumvented and cause other harms.
  • Case-by-case re-negotiation of existing contracts to reflect the new crossownership rules will permit ICANN to address the risk of abuse of market power contractually.
  • In the event ICANN has competition concerns, ICANN will have the ability to refer those concerns to relevant antitrust authorities.
  • ICANN can amend contracts to address harms that may arise as a direct or indirect result of the new cross-ownership rules.

The document still needs to be approved by the ICANN board of directors before it can be considered official.

It appeared without fanfare on the ICANN web site a little over a week ago.

Afilias lawyers up for TLD applicants

Kevin Murphy, February 10, 2011, Domain Registries

Registry services provider Afilias has expanded its relationship with the law firm Crowell & Moring to support prospective new top-level domain applicants.

The two companies said this morning that they have entered into a memorandum of understanding under which Crowell will provide legal and business consultation to Afilias’s new TLD clients.

Afilias, along with VeriSign and Neustar, is expected to one of the major beneficiaries of the introduction of new TLDs, due to its experience managing the technical back-end for several existing TLDs.

Here at the .nxt conference in San Francisco this week, one oft-repeated message is that applicants can smooth their TLD application with ICANN by signing up an incumbent to provide the back-end.

Crowell is one of a small number of law firms with a specialist domain name consulting arm. It is affiliated with the IP Clearinghouse, which wants to play a key role in new TLD launches.

Neustar wins .gay contract

Kevin Murphy, February 9, 2011, Domain Registries

Neustrar has signed a deal to provide back-end registry services to DotGay LLC, one of the companies hoping to apply for .gay as a new top-level domain.

There are currently two companies planning to apply for .gay that I’m aware of. The other, the Dot Gay Alliance, has chosen Minds + Machines as its back-end partner.

The positioning is quite interesting. Scott Seitz, CEO of DotGay, played up the need for more security and stability in a TLD that may find itself the target of homophobic cyber-attacks.

In a press release due out tomorrow, Seitz says:

While security is always a concern for any gTLD, the GLBT community is at a higher risk of discrimination, making system integrity a critical component in the selection of a registry partner.

Neustar, which runs .biz and several other TLDs, has more experience running high-traffic registries than M+M. However, this fact will likely not be relevant to which company wins .gay.

Under the ICANN new TLDs program, applicants have to prove themselves capable of running a registry, but contested TLD applicants are not compared against each other based on technical prowess.

It’s much more likely that the two (or more) .gay applications will live or die based on community support or, failing that, how much money they are prepared to pay at auction.

The .gay TLD is likely to also be a flashpoint for controversy due to ongoing debates about governments’ ability to block TLDs based on “morality and public order” objections.

Recent mainstream media coverage has focused on .gay as a likely test case for governmental veto powers.

New TLD rulebook unlikely to get March nod

Kevin Murphy, February 9, 2011, Domain Registries

ICANN’s new top-level domains Applicant Guidebook is unlikely to get its final approval at ICANN’s March meeting, according to the senior staffer responsible for the program.

Senior vice president of stakeholder relations Kurt Pritz, who gave the keynote at today’s .nxt conference, later told me the Guidebook “probably won’t be approved in San Francisco”.

But impatient new TLD applicants may not have to wait too long afterward for the Guidebook to get the nod and the program to launch.

Pritz said that the Guidebook, currently in a “Proposed Final” version, will likely be revised following ICANN’s upcoming talks with its Governmental Advisory Committee.

But whatever emerges from the GAC consultation will not necessarily be opened for public comment, which would add a month or two of delay to the process. That will be for the board to decide.

Pritz indicated that the community needs to understand that one day ICANN will produce a version of the Guidebook that will be for voting, not commenting.

That’s likely to come sooner rather than later.

It seems to me to be quite likely that a version of the Guidebook emerging in the weeks following San Francisco will be submitted straight to the ICANN board of directors for approval.

During his keynote, which he gave following ICANN CEO Rod Beckstrom’s unexpected eleventh-hour cancellation, Pritz said he wanted “to reset expectations and what I think our job is going forward”.

“Public discussion needs to turn to: should we launch the new gTLD process or should we not?” he said during his remarks.

The keynote was upbeat, talking about the Guidebook being a “road map”, not a series of “road blocks”.

Referring to the recently relaunched .me and .co country-code TLDs, which have been successfully marketed as generic TLDs, Pritz said:

To a certain extent new TLDs are already off and running. There’s a first mover advantage there, so the rest of us need to catch up.

ICANN chief cancels .nxt keynote

Kevin Murphy, February 8, 2011, Domain Registries

With the first-ever .nxt conference on new top-level domains just hours away from opening its doors, it looks like star speaker Rod Beckstrom has canceled his appearance.

ICANN’s president and CEO, who was featured prominently on the web site of the San Francisco conference as recently as Sunday, no longer appears on the agenda.

His keynote slot, scheduled for 10am local tomorrow, has been filled by Kurt Pritz, ICANN’s senior vice president of stakeholder relations and point man for the new TLD program.

While Pritz perhaps lacks the name recognition and stage presence of Beckstrom, it could be argued that his more granular insight into the program may actually make him a better-value speaker.

Juan Diego Calle, CEO of .CO Internet, is still scheduled for the second keynote, on Wednesday. Here’s hoping he can provide an update on .co’s post-Super Bowl performance.

UPDATE: Conference organizer Kieren McCarthy has confirmed that Beckstrom was unable to make it to San Francisco in time for the keynote, but said he may still attend later.