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Government anger over two-letter domains

Kevin Murphy, March 16, 2017, Domain Policy

ICANN’s Governmental Advisory Committee has clashed with its board of directors over the lack of protections for two-letter domain names that match country codes.

The board has now formally been urged to reconsider its policy to allow registries to sell these names, after angry comments and threats from some GAC members.

Governments from Brazil, Iran, China and the European Union are among at least 10 angered that the names are either not adequately protected or only available for exorbitant prices,

The debate got very heated at ICANN 58 here in Copenhagen on Wednesday morning, during a public session between the GAC and the board, with Iran’s outspoken GAC rep, Kavous Arasteh, almost yelling at Chris Disspain, the board’s point man on the topic.

Arasteh even threatened to take his concerns, if not addressed, to the International Telecommunications Union when it convenes for a plenipotentiary next year.

“Your position is not acceptable. Rejected categorically,” he said.

“The multistakeholder process was not easily accepted by many countries. Still people have difficulty with that,” he said. “We have a plenipotentiary coming in 2018, and we will raise the issue if the matter is not resolved… It is not always commercial, government also has some powers, and we exercise our powers.”

Invoking the ITU is a way to turn a relatively trivial disagreement into an existential threat to ICANN, a typical negotiating tactic of governments that don’t get what they want from ICANN.

The relatively trivial disagreement in this case is ICANN’s decision to allow gTLD registries to release all previously reserved two-letter strings.

In November, ICANN approved a policy that released all two-letter strings on the proviso that registrants have to assert that they will not pass themselves off as affiliated with the countries concerned.

Registries also were given a duty to investigate — but not necessarily act upon — governmental complaints about confusion.

ICANN thinks that this policy is perfectly compliant with the GAC’s latest official advice, supplied following the Helsinki meeting last June, which asked ICANN to:

urge the relevant Registry or the Registrar to engage with the relevant GAC members when a risk is identified in order to come to an agreement on how to manage it or to have a third-party assessment of the situation if the name is already registered.

Disspain patiently pointed out during Wednesday’s session that governments have no legal rights to their ccTLD strings at the second level, and that most of the complaining governments don’t even protect two-letter strings in their own ccTLDs.

But some GAC reps disagreed.

China stated (via the official interpreter): “We believe the board doesn’t have the right or the mandate to decide whether GAC members have the right over two-character domain names.”

While no government spoke in favor of the ICANN policy on Wednesday, the complaining governments do appear to be in a minority of the GAC.

Despite this, they seem to have been effective in swaying fellow committee members to issue some stern new advice. The Copenhagen communique, published last night (pdf), reads:

a. The GAC advises the ICANN Board to:

I. Take into account the serious concerns expressed by some GAC Members as contained in previous GAC Advice

II. Engage with concerned governments by the next ICANN meeting to resolve those concerns.

III. Immediately explore measures to find a satisfactory solution of the matter to meet the concerns of these countries before being further aggravated.

IV. Provide clarification of the decision-making process and of the rationale for the November 2016 resolution, particularly in regard to consideration of the GAC advice, timing and level of support for this resolution.

ICANN is being compelled to retroactively revisit a policy that was issued in compliance with previous GAC advice, it seems.

The next ICANN meeting is being held in Johannesburg in June, so the clock is ticking.

Two-letter domains are valuable properties even in new gTLDs. With each expected to sell for thousands, two-letter names are likely to be a multimillion dollar windfall for even moderately sized portfolio registries.

CentralNic says revenue more than doubled in 2016

CentralNic’s revenue was up 110% in 2016, according to the company.

The registry today released its unaudited results for last year, showing EBITDA up 65% at £5.5 million ($6.7 million) on revenue of £22.1 million ($26.9 million)

The company, which has expanded into registrar services via acquisition in the last few years, said its recurring revenue — mainly domain registrations — now account for about 80% of revenue.

CentralNic has about a third of the new gTLD back-end market, primarily because it’s the provider for .xyz’s millions of cheapo registrations.

In its statement, it said it hopes to focus on growing more in China, where clients including .xyz were recently licensed.

It also intends to make more acquisitions, where the deals “meet clear strategic criteria including being earnings accretive in the short term with a strong recurring revenues base”.

How .com became a restricted TLD

Verisign has been given approval to start restricting who can and cannot register .com and .net domain names in various countries.

Customers of Chinese registrars are the first to be affected by the change to the registry’s back-end system, which was made last year.

ICANN last week gave Verisign a “free to deploy” notice for a new “Verification Code Extension” system that enables the company to stop domains registered via selected registrars from resolving unless the registrant’s identity has been verified and the name is not on China’s banned list.

It appears to be the system Verisign deployed in order to receive its Chinese government license to operate in China.

Under Verification Code Extension, Verisign uses ICANN records to identify which registrars are based in countries that have governmental restrictions. I believe China is currently the only affected country.

Those registrars are able to register domains normally, but Verisign will prevent the names from resolving (placing them in serverHold status and keeping them out of the zone file) unless the registration is accompanied by a verification code.

These codes are distributed to the affected registrars by at least two verification service providers. Verisign, in response to DI questions, declined to name them.

Under its “free to deploy” agreement with ICANN (pdf), Verisign is unable to offer verification services itself. It must use third parties.

The company added the functionality to its .com and .net registry as an option in February 2016, according to ICANN records. It seems to have been implemented last July.

A Verisign spokesperson said the company “has implemented” the system.

The Verification Code Extension — technically, it’s an extension to the EPP protocol pretty much all registries use — was outlined in a Registry Services Evaluation Process request (pdf) last May, and approved by ICANN not long after.

Verisign was approved to operate in China last August in the first wave of gTLD registries to obtain government licenses.

Under Chinese regulations, domain names registered in TLDs not approved by the government may not resolve. Registrars are obliged to verify the identities of their registrants and names containing certain sensitive terms are not permitted.

Other gTLDs, including .vip, .club, .xyz .site and .shop have been granted approval over the last few months.

Some have chosen to work with registration gateway providers in China to comply with the local rules.

Apart from XYZ.com and Verisign, no registry has sought ICANN approval for their particular implementation of Chinese law.

Because Chinese influence over ICANN is a politically sensitive issue right now, it should be pointed out that the Verification Code Extension is not something that ICANN came up with in response to Chinese demands.

Rather, it’s something Verisign came up with in response to Chinese market realities. ICANN has merely rubber-stamped a service requested by Verisign.

This, in other words, is a case of China flexing market muscle, not political muscle. Verisign, like many other gTLD registries, is over-exposed to the Chinese market.

It should also be pointed out for avoidance of doubt that the Chinese restrictions do not apply to customers of non-Chinese registrars.

However, it appears that Verisign now has a mechanism baked into its .com and .net registries that would make it much easier to implement .com restrictions that other governments might choose to put into their own legislation in future.

Verisign report deletes millions of domains from history

Verisign has dramatically slashed its estimates for the number of domains in existence in its quarterly Domain Name Industry Brief reports, two of which were published this week.

The headline number for the end of the fourth quarter is 329.3 million, a 0.7% increase sequentially and a 6.8% increase annually.

But it’s actually a lower number than Verisign reported in its second-quarter report just five months ago, which was 334.6 million.

The big swinger, as you may have guessed if you track this kind of thing, was .tk, the Freenom ccTLD where names are given away for free and then reclaimed and parked by the registry when they are deleted for abuse expire.

It seems a change in the way .tk is counted (or estimated) is the cause of the dip.

Verisign gets its gTLD data for the report from ICANN-published zone files and its ccTLD data from independent researcher Zooknic.

Problem is, Zook hasn’t had up-to-date data on .tk for a couple of years, so every DNIB published since then has been based on its December 2014 numbers.

But with the Q3 report (pdf), Zook revised its .tk estimates down by about six million names.

In earlier reports, the ccTLD was being reported at about 25 million names (exact numbers were not given), but now that’s been slashed to 18.7 million, relegating it to the second-largest ccTLD after China’s .cn, which has 21.1 million.

I’ve asked Freenom to confirm the latest numbers are correct and will update this post if I get a response.

Verisign does not say what caused the decision to scale down .tk’s numbers, but explains what happened like this:

In Q3 2016, Zooknic reported a significant decline in the .tk zone and restated the estimated zone size of .tk for each quarter from Q4 2014 through Q3 2016 using a proprietary methodology. As a result, for comparative purposes of this DNIB to the Q3 2016 DNIB and the Q4 2015 DNIB, Verisign has applied an updated estimate of the total zone size across all TLDs for Q3 2016 of 327.0 million and Q4 2015 of 307.7 million and an updated estimate of the total ccTLD zone size for Q3 2016 of 140.1 million and Q4 2015 of 138.1 million.

Apples-to-apples comparisons in the Q4 report show the ccTLD universe was up to 142.7 million names, a 1.8% sequential increase and up 3.1% on 2015. Excluding .tk, annual growth was 6.9%.

Verisign’s own .com and .net combined grew 1.7% to 142.2 million names at the end of the year, one percentage point smaller than their 2015 growth.

The full Q4 report can be read here (pdf).

Five more new gTLDs, one in English, get the nod from China

Kevin Murphy, February 14, 2017, Domain Registries

Top Level Design’s .ink has become the sixth new gTLD in the Latin alphabet to be approved for sale in China.

It was one of four new gTLDs given regulatory approval to begin operating properly in the country late last week. The others were all in Chinese script.

From Finnish-founded TLD Registry, .中文网 (“Chinese web site”) and .在线 (“Chinese online”) gained approval.

From local outfit Guangzhou Yuwei Information Technology Co, .集团 (“group”) and .我爱你 (“I love you”) were given the nod.

It’s the third batch of new gTLDs to get Chinese government approval since .vip, .club and .xyz in December. In January, .site and .shop joined their ranks.

Under China’s Draconian domain name regulations, only domains registered via local registries and registrars may be used.

Registries from outside the country have had to set up a local corporate presence and agree to China’s censorship policies in order to be compliant.

MMX billings double even as some volumes slide

Kevin Murphy, January 25, 2017, Domain Registries

MMX has reported a 100% increase in billings for 2016, despite its number of domains under management dropping in some TLDs.

The company, until recently known as Minds + Machines, said billing were $15.8 million in the year to December 31, compared to $7.9 million for in 2015.

Billings is an up-front measure of sales growth that does not take into account the way domain revenue is recognized over the life of the registration.

The company said, in a trading update to the London markets today, that billings and domains under management do not necessarily correlate. The former can be up even if the latter is down:

For example, in 2016 .work generated $392,000 off 81,000 registrations compared to $206,000 off 102,000 registrations in 2015 reflecting the use of a promotional initiative to drive registrations that year.

MMX also disclosed that China now accounts for more than half of its billings: 59%, compared to 24% for the US and 17% for Europe.

That’s largely based on its launch of .vip, which launched last May and has half a million names mainly because of the resonance of the string in China.

The company said it intends to imitate its focus on .vip in 2016 by only launching two TLDs — .boston and one other — in 2017.

MMX’s formal, audited 2016 financial results will be published in April.

NamesCon picks if you’re not a domainer

Kevin Murphy, January 17, 2017, Gossip

I’m not going to NamesCon this year. Scheduling conflicts, personal life, blah blah blah. You don’t need to know.

It’s a shame, as I’ve enjoyed the show in previous years and there’s usually plenty to be learned even if, like me, you’re not a domain investor.

So while I won’t be there, I thought I’d put together a list of sessions that I’d be likely to attend in my capacity as a non-domainer, if I were attending. Which I’m not.

Don’t get me wrong, I usually find the domainer-focused stuff interesting. It’s just less interesting to me because DI is not an investment tip sheet and I personally have no pony in the race.

In agenda order…

The Evolution of Domaining

This is Frank Schilling’s seemingly annual keynote, this year subtitled “A vision for the future of domaining and how we’re going to get there. The next wave of passive income generation for the savvy domainer.”

While it’s certainly got a domainer-leaning theme, the Uniregistry CEO’s speeches are often must-listen events. Schilling is usually a candid and amiable speaker.

Plus, he’s made a shedload of cash out of domains so many people hang on his every word. That’s why he’s been on the Domain Name Wire podcast 86 times.

It’s on at 10am on Monday.

Dominate the Drop: Best Practices for Successfully Acquiring Deleting Domains

Michael White from SnapNames and Jonathan Tenenbaum from Namejet promise to spill the beans about the crazy competitive drop-catching market.

I find this aspect of the industry fascinating, especially given the arms race going on between SnapNames/Namejet and its rivals at the moment.

Over half of all ICANN-accredited registrars are currently shell companies created to bulk up the dropnets of the two aforementioned companies, as well as TurnCommerce and Pheenix.

There’s clearly money in it, so I regret I’ll be missing this session.

It’s on at 11am on Monday.

Domain Monetization for Registries and Registrars

As somebody who writes a blog largely looking at the sell-side of the industry, this session title speaks to me.

It’s being held by Michael Gilmour, CEO of ParkLogic, a company I’m not particularly familiar with.

Even if it just turns out to be a sales pitch for ParkLogic, it might be interesting anyway, due to the promise to “unlock hidden value from data that is readily accessible to you”, which intrigues me as a data nerd.

It’s on at 11am on Monday too, so it clashes with the dropcatching session.

The Most Shocking UDRP Decisions of 2016

This one sounds like fun. There are few things more amusing in the domain industry than listening to domainers moan about crappy UDRP decisions.

In this session, three industry names who are no strangers to UDRP will compete to have a decision of their choice crowned the “most shocking” of the last year.

This is on at noon on Monday.

Investing in New TLDs – Making Money in the Short and Long Term

A panel of experts discuss how to make money out of new gTLDs. I think that is going to be a hard sell to a typically skeptical domainer crowd, so I’d be curious to hear what they have to say at 2pm on Monday.

NamesCon Domain Auction 2017

Live domain auctions are sometimes entertaining, but depending on the auctioneer you may need to bring ear-protectors. It’s on at 3pm.

Uniregistry After Hours Party

If you haven’t fested enough sausage yet, now’s your chance to top up, from 9pm until “late” (which in Vegas could mean midnight, 2am, 6am, or mid-February).

Christian Domainers Breakfast Buffet

I’m slightly flabbergasted that this is a thing. What is a Christian domainer, and how do they differ from non-Christian domainers?

A special prize goes to the first person to send me a photo of themselves at this event reading a hardback copy of “The God Delusion” whilst eating a free Christian pastry.

7am Tuesday.

Building a Business to Last Decades

Despite the dry title, this is Matt Muellenweg, founder of WordPress/Automattic, and I’m interested to hear what he has to say. Plus, it’s the only thing going on at 10am on Tuesday.

China Masterclass

Few things have influenced the domain name industry over the last couple of years than China. In this session, four guys who understand the market over there discuss the trends they’re seeing and expecting.

12pm Tuesday.

Will Branded TLDs Impact the Marketplace in 2017 and Beyond?

Events promising to spill the beans about how big companies plan to use the dot-brands are rarely very informative in my experience — speakers play their cards far too close to their chests — but I keep going to them anyway.

Let’s hope the Microsoft and MarkMonitor speakers have something new to add to the conversation at 2pm.

Dollars and Sense of .net

Verisign’s Pat Kane pitches .net, which has been stagnating since the launch of new gTLDs. 3pm.

DNS Industry SWOT Analysis, 2017 Edition

The “strengths, weaknesses, opportunities and threats” for the industry according to… ICANN?

Global Domains Division head and occasional CEO Akram Atallah is the only big ICANN name speaking at this year’s NamesCon, so it’s worth checking this session out for that reason alone.

It’s on at 9.30am on Wednesday.

A Look Ahead at New TLDs

Three registries and one registrar discuss the future of new gTLDs at 11am on Wednesday.

Bloggers Broadcast: Dispatches from NamesCon 2017

An opportunity to throw things at my competitors at 12pm on Wednesday.

The Pragmatic Rebel: a Fireside Chat with Elliot Noss

Noss is one of the most engaging speakers in the industry in my view, even if the subject matter of this session is not quite up my alley. 1pm Weds.

Privacy and Your Domains

This review of domain privacy developments is right up my alley, but it also clashes with the Noss interview.

Executive Roundtable: Industry Trends Forecast for 2017

A conference roundup from four registry/registrar bigwigs closes down the conference.

GMO and Radix secure Chinese gTLD approval

Kevin Murphy, January 3, 2017, Domain Registries

GMO Registry and Radix have won Chinese government approval for their respective new gTLDs .shop and .site.

It’s the second batch of foreign new gTLDs to get the nod from China’s Ministry of Industry and Information Technology, following .vip, .club and .xyz in early December.

They’re also the first two Asian registries from outside China to get the right to flog their domains in China — GMO is Japanese and Radix is UAE-based with Indian roots.

Their new Chinese government licenses mean Chinese registrars will now be able to allow their customers to actually use .shop and .site domains to host web sites.

The registries in turn have had to agree to enforce China’s rather arbitrary and Draconian censorship policies on their Chinese customers.

The approvals were announced by MIIT December 29.

.site currently has about 570,000 domains in its zone file, making it a top-10 new gTLD by volume, while .shop, which launched much more recently, has over 100,000.

The ability for Chinese customers to develop their domains is no doubt good for the long-term health of TLDs, but it’s not necessarily a harbinger of shorter-term growth in a market where domains are often treated little more than meaningless baseball cards to be traded rather than commodities with intrinsic value.

.xyz, .club and .vip get the nod to sell in China

Kevin Murphy, December 5, 2016, Domain Registries

The Chinese government has granted licenses to operate in the country to its first tranche of new gTLDs — .vip, .club and .xyz.

The agreements mean that Chinese registrars will be able to give their Chinese customers the ability to actually use their domains for web sites.

It also means the companies will be obliged to censor domains the government does not like, but only those domains registered via Chinese registrars.

The Ministry of Industry and Information Technology announced the licenses, given to the Chinese subsidiaries of Minds + Machines, .CLUB Domains and XYZ.com respectively, today.

M+M CEO Toby Hall told DI that it’s “a great moment of support for Chinese registrars”, giving them a “very clear signal about which TLDs they can focus on”.

XYZ.com said in a blog post that some of its Chinese registrars (its biggest channel) are planning on offering discounts to celebrate the approval.

It’s always been possible for Chinese people to register new gTLD domains via Chinese registrars — it’s estimated that 42% of the 27 million new gTLD domains in existence today are Chinese-owned.

However, Chinese citizens need a government license if they want to launch a web site, and the government only issues licenses for domains in approved TLDs.

In addition to .cn and China-based gTLDs, which were the first to be given the nod, Verisign was approved earlier this year for .com.

Hall said that while .vip has been popular with Chinese domainers, the MIIT license means it can start to tap the small business market there too.

Obtaining the license means that the three registries, which are all based in the US or Europe, will have to comply with Chinese regulations when it comes to Chinese customers.

That basically means the Chinese government gets to censor pretty much anything it doesn’t like, up to and including sites that “spread rumors”.

Hall said that there’s no chance of this censorship bleeding out to affect non-Chinese customers.

M+M, along with XYZ and .CLUB, are using Chinese registry gateway ZDNS to act as a proxy between their own back-ends (Nominet for .vip, Neustar for .club and CentralNic for .xyz) and Chinese registrars.

“All of our Chinese web sites go through ZDNS, so only web sites going through ZDNS would be affected,” Hall said, referring to the censorship rules.

Hall added that he was “not aware” of there being a blocklist of politically sensitive strings that Chinese customers are not allowed to register.

Short .at domain auction raises over $1m

Kevin Murphy, November 30, 2016, Domain Sales

Nic.at’s three-stage auction of one and two-character .at domains has raised over $1 million.

Auction house Sedo announced today that over 1,000 .at names were sold, for a combined total of over $1 million.

The biggest-ticket name was c.at, which went for €56,000, according to Sedo.

Bidders were not restricted to Austria or German-speaking nations. Sedo said notable bids came in from China, the US and Canada.

Here’s the top-ten list, priced in euros:

c.at€€56,000
1.at€€26,008
at.at€€20,500
e.at€€12,500
b.at€€11,100
6.at€€11,001
d.at€€10,100
ep.at€€10,099
ch.at€€10,002
f.at€€10,000