.org back-end deal will come up for re-bid, PIR says as it acquires four new gTLDs

The industry’s most lucrative back-end registry services contract will be rebid, Public Interest Registry said today.

The deal, which sees PIR pay Afilias $18.3 million a year to run .org, according to tax records, will see a request for proposals issued in the back half of 2023, according to PIR.

Given that’s two years away, it’s strange timing for the announcement, which came at the bottom of a press release and blog post announcing that the company is acquiring four new gTLDs, three of which belong to Afilias’ new owner, Donuts.

PIR said Donuts is to transfer control of .charity, .foundation and .gives, which will be “reintroduced” to the market. .foundation currently has about 20,000 registered domains; the other two have a few thousand each.

It’s also acquiring the unlaunched gTLD .giving from a company called Giving Ltd.

All four are on-message for PIR’s not-for-profit portfolio, which also includes the barely-used .ngo and .ong for non-governmental organizations.

Those two gTLDs are getting decoupled, allowing registrants to register one without having to buy the other, PIR also said today.

The last time the PIR back-end contract came up for renewal, in 2015, Afilias was also the incumbent but increased competition — it was up against 20 rivals — meant that its slice of .org revenue was cut in half.

Verisign boss talks .web launch, timing and pricing

Verisign hasn’t fully won .web yet, but it expects to soon and is talking in general terms about what the it might look like live.

CEO Jim Bidzos yesterday told analysts that he expects the Independent Review Process panel currently considering an appeal by rival applicant Afilias to deliver its final verdict before the end of the year. No hearings are scheduled.

Afilias claims Verisign and its secret proxy, Nu Dot Co, cheated, and that ICANN broke its own rules, in the 2016 auction that saw Verisign promise to pay $135 million for .web. Verisign thinks the claims are rubbish.

Bidzos told analysts, wanting to known when they can put .web revenue into the models, that it while it’s a “bit early to speculate” when the company will launch .web, it will likely happen a “couple of quarters from delegation”.

On pricing, he noted that .web does not have the same price controls as .com and .net:

.web is, of course, different from .com and net and that it’s not a price controlled TLD… We do have flexibility with it that we don’t have with other TLDs, and premiums are available. Other sorts of options are available.

But will the company put its marketing muscle behind .web? Many people, myself included, have said that Verisign’s interest in the gTLD is more about keeping it out of its rivals hands. Bidzos said:

There certainly will be some sort of marketing launch that will occur, but I just think it’s too early to really talk about what that would look like and what the expense impact will be. But we certainly intend to market and promote .web. Our plan, our desire, as we’ve stated — and I’ll say again — is to offer our customers more choice and to make .web a very successful TLD.

His comments came as Verisign reported its third-quarter financial results.

The company reported revenue up 5.1% at $334 million and net income of $157 million compared to $171 million a year ago.

It had 172.1 million .com and .net domains in its registry at the end of the quarter, up 1.48 million sequentially and a 5.1% increase on the year-ago number.

Afilias appeals .web ruling, Verisign responds with “rigging” claims

Afilias has filed an unusual and unprecedented appeal against the May ruling that found ICANN broke its bylaws by awarding the .web gTLD to a Verisign affiliate.

The company is arguing that the Independent Review Process panel that decided the .web case shirked its duties, by not actually resolving the major disputes placed before it.

Verisign, in response, has accused Afilias of asking for a “do-over”, which it said is against the rules, and published information it said showed the company had tried to “rig” the .web auction.

The IRP followed the 2015 ICANN last-resort auction, which saw Verisign secretly fund a shell applicant called Nu Dot Co to win with a $135 million bid, on the basis .web would later be transferred to its custody.

Afilias was the runner-up, and argued that ICANN should have voided the NDC bid because Verisign’s involvement was not disclosed.

But the IRP panel merely found that ICANN had breached its bylaws by failing to have the courage to actually rule on the legitimacy of Verisign’s tactics, and threw it back to ICANN to make a decision.

ICANN has yet to make that decision. Instead, Afilias has filed an appeal (pdf) with the in the form of an “application for an additional decision and interpretation”.

IRP cases are handled by the International Center for Dispute Resolution, and Afilias is invoking the ICDR Arbitration Rules that allow a claimant to request an “interpretation” or “additional award” from the original decision:

By failing to resolve all of the claims and issues Afilias presented to the Panel for decision, the Panel has not only failed to satisfy its mandate; it has also undermined the very Purposes of the IRP (as set out in Section 4.3(a) of the Bylaws)—especially, but not exclusively, by its decision to refer Afilias# claim arising from Nu Dot Co’s (“NDC”) violation of the New gTLD Program Rules back to the ICANN Board and Staff to “pronounce” upon “in the first instance.”

The lengthy request is, I believe, an unprecedented attempt at an appeal of an IRP ruling. It’s also heavy on the legal arguments and does not really shed much light on the facts of the case.

The gist of it is that Afilias wants the panel to rule that ICANN breached its bylaws, new gTLD program rules and international law by failing to disqualify NDC and awarding .web to Afilias instead.

Verisign, in response, said in a blog post that Afilas’ application is “not permitted by the arbitration rules – which expressly prohibit such requests for ‘do overs.'”

It also published a letter (pdf) from NDC to ICANN in which it argues that Afilias tried to engage in a “collusive scheme” to “rig” the .web auction.

The letter contains many pages of private correspondence — emails and phone text messages — in which rival .web applicants, before Verisign’s involvement had been confirmed, fruitlessly attempted to persuade NDC to join them in a private auction in which the winning bid would have been shared among the losers rather than all going to ICANN.

While this kind of private settlement was envisaged, and indeed encouraged, by new gTLD program rules, Verisign reckons its smoking gun is messages sent by Afilias during the so-called “blackout period” before the last-resort auction, during which communications between applicants were forbidden.

As far as I can tell, all or almost all of the documents provided by NDC to ICANN had already been submitted to the public record during the IRP.

Note — the “Afilias” referred to throughout this post is the portion of the company, now known as Altanovo Domains, left behind after most of its operating businesses were acquired by Donuts late last year.

DropCatch raises antitrust concerns about Donuts’ Dropzone proposal

TurnCommerce, the company behind DropCatch.com and hundreds of accredited domain name registrars, reckons Donuts’ proposed Dropzone service would be anticompetitive.

Company co-founder Jeff Reberry has written to ICANN to complain that Dropzone would introduce new fees to the dropping domains market, raising the costs involved in the aftermarket.

He also writes that Donuts’ ownership of Name.com, a registrar that DropCatch competes with in the drop market, would have an “unfair competitive advantage” if Dropzone is allowed to go ahead:

Donuts is effectively asking every entity in the ICANN ecosystem to bear the costs of introducing a new service with no benefit outside of a financial benefit to itself, while forcing all registrars to spend more money and resources to register available domain names.

Donuts is proposing Dropzone across its whole portfolio of 200+ gTLDs. It’s a parallel registry infrastructure that would exist just to handle dropping domains in more orderly fashion.

Today, companies such as TurnCommerce own huge collections of shell registrars that are used to ping registries with EPP Create commands around the time valuable domains are going to delete.

Under Dropzone, they’d instead submit create requests with the Dropzone service, and Donuts would give out the rights to register the domains in question on a first-come, first-served basis.

While ICANN had approved a similar request from Afilias before it was acquired by Donuts, the Dropzone proposed by Donuts has one major difference — it proposes a new fee for accessing the system.

No details about this fee have been revealed, which has TurnCommerce nervous.

Donuts is asking for Dropzone via the Registry Services Evaluation Process and ICANN has not yet approved it.

Reberry says ICANN should consult with the relevant governmental competition authorities before it approves the proposal.

You can read Reberry’s letter here (pdf) and our original article about Dropzone here.

Dropping domains might get more expensive at Donuts

Donuts is planning to change the way its registry handles dropping domains and may charge additional fees for access.

According to a service request filed with ICANN, Donuts wants to migrate its hundreds of gTLDs to the “Dropzone” system originally deployed by Afilias, which the company acquired at the end of 2020.

Instead of domains separately dropping according to their expiry time, Dropzone sees them pooled together into daily batches for a more orderly release.

Registrars are still awarded dropping domains on a first-come, first-served basis, according to when they submit their EPP create requests to the Dropzone environment, according to Donuts.

Donuts reckons this system will allow it to better manage traffic load on its registry. Presumably, registrars won’t need to send so many creates, as the drop time is synchronized for all deleting domains.

It also thinks the process will help level the playing field for registrars trying to register expired domains.

But the ICANN request (pdf) also suggests that, unlike Afilias, it might add additional fees for registrars to access Dropzone:

In addition to the standard or premium registration prices of a given domain name, The Dropzone service can support additional application fees to be configured on a per TLD basis. Applications fees where applicable will be charged in addition to the standard registration price of a domain name.

Such charges would presumably be passed on to registrants.

Afilias’ original request for Dropzone approval stated that the fee to catch a drop would be the same as a standard registration fee.

Registrars will have to reconfigure their systems to use Dropzone, which exists on a separate host.

Afilias’ 21 gTLDs have been using Dropzone since ICANN approved the service last year.

“Crimes against humanity” claims against Afilias

Donuts subsidiary Afilias has been accused of participating in “crimes against humanity” and imperialist “apartheid”, due to its management of the contested .io ccTLD.

A London-based lawyer has filed a complaint with the Organization for Economic Cooperation and Development, seeking either the redelegation of .io or a big chunk of its profits.

The complaint was filed on behalf of Crypto Currency Resolution Trust (CCRT), representing people allegedly ripped off by cryptocurrency scams on .io domains, and the Chagos Refugees Group UK (CRG UK).

The latter group represents some of the people forcibly deported from the Chagos Islands in the 1970s, when the British government evicted the entire native population to make way for a US military base on Diego Garcia, the largest island.

The islands were renamed the British Indian Ocean Territory and, in the early days of the DNS, became eligible for the ccTLD .io

The TLD was delegated by IANA to Paul Kane’s London-based outfit Internet Computer Bureau in 1997, in the pre-ICANN days when such decisions were made without very much oversight.

ICB was quietly bought by Afilias for $70 million in 2017, as I broke the following year.

In 2019, the International Court of Justice ruled that the UK’s continued administration of BIOT is unlawful, and that the territory should be returned to the Chagossians, but the current Conservative UK government has shown no indication that it plans to abide by that ruling.

The lawyer for the Chagossians, Jonathan Levy, now claims in his OECD complaint that for Afilias to continue to run .io — which he reckons brings in over €10 million a year — amounts to a human rights abuse in violation of OECD guidelines.

The complaint states:

The British military occupation of the Chagos Archipelago has been severe and resulted in the Chagossians wandering the globe as a displaced people deported from their homeland in a forcible exile reminiscent of British tactics also used on Irish home rule advocates in the 19th Century. It is just simply an outrage that an Irish multinational company is deliberately complicit in crimes against humanity and apartheid on behalf of one of last vestiges of British imperialism and apartheid.

While Levy recognizes on his blog that Afilias has been acquired by US-based Donuts, only Afilias and its subsidiaries in the UK and Ireland are named as respondents.

In a second prong of the attack, Levy claims that Afilias is somehow complicit in cryptocurrency frauds carried out using .io domains.

Blaming a registry for the actions of its registrants is pretty tenuous. Imagine if Verisign got blamed for every nefarious action carried out with a .com domain — there would not be enough lawyers in the world to handle that workload.

But Levy reckons .io is a special case because BIOT lacks law enforcement and because Afilias promotes .io as the best TLD for tech companies “knowing full well” it is often used for crypto fraud. The complaint reads:

Complaina[n]ts submit that while other general purpose domains like GLTD .com may have as much or even more crypto fraud, ccTLD .io is an exception because it represents a political entity with no permanent population and no companies law and no law enforcement. Consequently, unlike ccTLD .com or .net where US authorities may seize websites; .io criminals have little to fear as BIOT has no civil police force nor financial intelligence unit. ICB has promoted ccTLD .io to the tech community knowing full well it will be misused by a significant criminal element specializing in crypto assets.

This still feels pretty tenuous to me. You cannot evade the long arm of the law simply by registering on offshore domain.

Still, Levy’s asking for restitution in the form of a percentage of the ICB acquisition price, ongoing and backdated royalties from the sale of .io domains and, failing that, redelegation of the ccTLD to the Chagossian people.

While I think the notion of Donuts/Afilias actively abusing human rights is pretty weak, there’s no denying it’s the beneficiary of an historical wrong. Imagine how many credibility points it could earn by voluntarily negotiating a profit-share with the displaced Chagossians.

Afilias hints at more legal action over .web

As Verisign does everything but declare outright victory in last week’s Independent Review Process result, .web rival Afilias is now strongly hinting that its lawyers are not quite ready to retire.

John Kane, VP of Afilias (now Altanovo) said in a statement that Afilias is prepared to “take all actions necessary to protect our rights in this matter”.

This matter is of course the contested 2015 auction for the new gTLD .web, which was won by Nu Dot Co with $135 million of Verisign’s money.

Afilias thinks the winning bid should be voided because Verisign’s involvement had been kept a secret. The IRP panel stopped short of doing that, instead forcing ICANN’s board of directors to make a decision.

The earliest they’re likely to do this is at ICANN 71 later this month.

But with one IRP down, Afilias is now reminding ICANN that the board’s ultimate decision will also be “subject to review by an IRP Panel.”

So if ICANN decides to award .web to Verisign, Afilias could challenge it with another IRP, adding another two years to the go-live runway and another couple million dollars to the lawyers’ petty cash jar.

None of which should overly bother Verisign, of course, if one subscribes to the notion that its interest in .web is not in owning it but rather in preventing its competitors from owning it and aggressively marketing it against .com.

But Verisign also put out a statement reviewing the IRP panel’s decision last week, reiterating that it believes Afilias should be banned from the .web contest and banned from making any further complaints about Verisign’s bid.

While Afilias spent its press release focusing on trashing ICANN, Verisign instead focused its blog post on trashing Afilias.

According to Verisign, Afilias is no longer competent to run a registry (having sold those assets to Donuts) and is just looking for a payday by losing a private auction.

“Afilias no longer operates a registry business, and has neither the platform, organization, nor necessary consents from ICANN, to support one,” Verisign claims.

Afilias could of course outsource its would-be .web registry, as is fairly standard industry practice, either to Donuts or any other back-end operator.

Afilias leftovers rebrand as Altanovo

The non-registry bits of Afilias that were not acquired by Donuts in the acquisition deal announced last December have been rebranded as Altanovo Inc.

The new Delaware company owns the registrar 101domain, the mobile device software company DeviceAtlas, and the Irish new gTLD application vehicle Afilias Domains No. 3 Ltd, now renamed Altanovo Domains Ltd.

Altanovo Domains is the entity currently fighting ICANN and Verisign for the right to run the .web gTLD.

Afilias’ registry business, including .info, its portfolio of new gTLDs and its .org-running registry back-end business, joined Donuts earlier this year.

Altanovo means “new height”, the company says on its new web site.

.web ruling hands Afilias a chance, Verisign a problem, and ICANN its own ass on a plate

ICANN has lost yet another Independent Review Process case, and been handed a huge legal bill, after being found to have violated its own rules on transparency and fairness.

The decision in Afilias v ICANN has failed to definitively resolve the issue of whether the auction of the .web gTLD in 2016, won by a shell applicant called Nu Dot Co backed by $135 million of Verisign’s money, was legit.

ICANN’s now urging NDC, Afilias and other members of the .web contention set to resolve their beefs privately, which could lead to big-money pay-days for the losing auction bidders at Verisign’s expense.

For ICANN board and staff, the unanimous, three-person IRP panel decision is pretty damning, with the ruling saying the org “violated its commitment to make decisions by applying documented policies objectively and fairly”.

It finds that ICANN’s board shirked its duty to consider the propriety of the Verisign/NDC bid, allowing ICANN staff to get perilously close to signing a registry contract with an applicant that they knew may well have been in violation of the new gTLD program rules.

Despite being named the prevailing party, it’s not even close to a full win for Afilias.

The company had wanted the IRP panel to void the NDC/Verisign winning bid and award .web to itself, the second-highest bidder. But the panel did not do that, referring the decision instead back to ICANN.

As the loser, ICANN has been hit with a $1,198,493 bill to cover the cost of the case, which includes Afilias’ share of $479,458, along with another $450,000 to cover Afilas’ legal fees connected to an earlier emergency IRP request that ICANN “abusively” forced Afilias into.

The case came about due to a dispute about the .web auction, which was run by ICANN in July 2016.

Six of the seven .web applicants had been keen for the contention set to be settled privately, in an auction that would have seen the winning bid distributed evenly among the losing bidders.

But NDC, an application vehicle not known to be particularly well-funded, held out for a “last resort” auction, in which the winning bid would be deposited directly into ICANN’s coffers.

This raised suspicions that NDC had a secret sugar daddy, likely Verisign, that was covertly bankrolling its bid.

It was not known until after NDC won, with a $135 million bid, that these suspicions were correct. NDC and Verisign had a “Domain Acquisition Agreement” or DAA that would see NDC transfer its .web contract to Verisign in exchange for the money needed to win the auction (and presumably other considerations, though almost all references to the terms of the DAA have been redacted by ICANN throughout the IRP).

Afilias and fellow .web applicant Donuts both approached ICANN before and after the auction, complaining that the NDC/Verisign bid was bogus, in violation of program rules requiring applicants to notify ICANN if there’s any change of control of their applications, including agreements to transfer the gTLD post-contracting.

ICANN has never decided at the board level whether these claims have merit, the IRP panel found.

The board did hold a secret, off-the-books discussion about the complaints at its retreat November 3, 2016, and concluded, without any type of formal vote, that it should just keep its mouth shut, because Afilias and Donuts had already set the ball rolling on the accountability mechanisms that would ultimately lead to the IRP.

More than half the board was in attendance at this meeting, and discussions were led by ICANN’s top two lawyers, but the fact that it had even taken place was not disclosed until June last year, well over three and a half years after the fact.

Despite the fact that the board had made a conscious, if informal, choice not to decide whether the NDC/Verisign bid was legit, ICANN staff nevertheless went ahead and started contracting with NDC in June 2018, taking the .web contention set off its “on-hold” status.

Talks progressed to the point where, on June 14, ICANN had sent the .web contract to NDC, which immediately returned a signed copy, and all that remained was for ICANN to counter-sign the document for it to become binding.

ICANN VP Christine Willett approved the countersigning, but four days later Afilias initiated the Cooperative Engagement Process accountability mechanism, the contract was ripped up, and the contention set was placed back on hold.

“Thus, clearly, a registry agreement with NDC for .WEB could have been executed by ICANN’s Staff and come into force without the Board having pronounced on the propriety of the DAA under the Guidebook and Auction Rules,” the IRP panel wrote.

This disconnect between the board and the legal staff is at the core of the panel’s criticism of ICANN.

The board had decided that Afilias’ claim that NDC had violated new gTLD program rules was worthy of consideration and had informally agreed to defer making a decision, but the staff had nevertheless gone ahead with contracting with a potentially bogus applicant, the panel found.

In the opinion of the Panel, there is an inherent contradiction between proceeding with the delegation of .WEB to NDC, as the Respondent [ICANN] was prepared to do in June 2018, and recognizing that issues raised in connection with NDC’s arrangements with Verisign are serious, deserving of the Respondent’s consideration, and remain to be addressed by the Respondent and its Board, as was determined by the Board in November 2016. A necessary implication of the Respondent’s decision to proceed with the delegation of .WEB to NDC in June 2018 was some implicit finding that NDC was not in breach of the New gTLD Program Rules and, by way of consequence, the implicit rejection of the Claimant’s [Afilias’] allegations of non-compliance with the Guidebook and Auction Rules. This is difficult to reconcile with the submission that “ICANN has taken no position onw hether NDC violated the Guidebook”.

The upshot of the panel’s ruling is to throw the issue back to ICANN, requiring the board to decide once and for all whether Verisign’s auction gambit was kosher.

If you’ll excuse the crude metaphor, ICANN’s board has been told to shit or get off the pot:

The evidence in the present case shows that the Respondent, to this day, while acknowledging that the questions raised as to the propriety of NDC’s and Verisign’s conduct are legitimate, serious, and deserving of its careful attention, has nevertheless failed to address them. Moreover, the Respondent has adopted contradictory positions, including in these proceedings, that at least in appearance undermine the impartiality of its processes.

…

[The panel r]ecommends that the Respondent stay any and all action or decision that would further the delegation of the .WEB gTLD until such time as the Respondent’s Board has considered the opinion of the Panel in this Final Decision, and, in particular (a) considered and pronounced upon the question of whether the DAA complied with the New gTLD Program Rules following the Claimant’s complaints that it violated the Guidebook and Auction Rules and, as the case may be, (b) determined whether by reason of any violation of the Guidebook and Auction Rules, NDC’s application for .WEB should be rejected and its bids at the auction disqualified;

At the same time as the decision was published last night — shortly after midnight UTC and therefore helpfully too late to make it into today’s edition of ICANN’s godawful new email subscriptions feature — ICANN issued a statement on the outcome.

“In its Final Declaration, the IRP panel ruled that the ICANN Board, and not an IRP panel, should decide which applicant should become the registry operator for .WEB,” CEO Göran Marby said.

“The ICANN Board will consider the Final Declaration as soon as feasible, within the timeframe prescribed in the Bylaws, and remains hopeful that the relevant .WEB applicants will continue to seek alternatives to resolve the dispute between them raised during the IRP,” the statement concludes.

That should be of concern to Verisign, as any non-ICANN resolution of the .web battle is inevitably going to involve Verisign money flowing to its competitors.

But my first instinct strikes me that this a is a low-probability outcome.

It seems to me much more likely at first glance that ICANN will rule the NDC/Verisign ploy legitimate and proceed to contracting again.

For it to declare that using a front organization to bid for a gTLD is against the rules would raise questions about other applications that employed more or less the same tactic, such as Automattic’s successful bid, via an intermediary, for .blog, and possibly the 100-ish applications Donuts and Rightside cooperated on.

The ICANN bylaws say the board has to consider the IRP’s findings at its next meeting, for which there’s currently no published date, where feasible.

I should note that, while Donuts acquired Afilias last December, the deal did not include its .web application, which is why both the panel’s decision and this article refer to “Afilias” throughout.

Verisign hopeful after decision reached in .web gTLD case

The fate of .web has been decided, over 20 years after it was first applied for, and Verisign thinks it might emerge triumphant.

The company said last night that the ICANN Independent Review Panel handling the case of Afilias v ICANN reached a decision May 20 and delivered it to Verisign the following day.

Verisign says the panel “dismissed Afilias’ claims for relief seeking to invalidate the .web auction and to award the .web TLD to Afilias, concluding that such issues were beyond its jurisdiction.”

Sounds good for Verisign so far. Afilias wanted its $135 million bid for .web, submitted via an intermediary called Nu Dot Co, thrown out due to claims that ICANN violated its own bylaws by not sufficiently vetting the bidder.

But Verisign goes on to say “the panel’s ruling recommends that ICANN’s Board of Directors consider the objections made about the .web auction and then make a decision on the delegation of .web”.

It adds that the panel found that ICANN violated its fairness and transparency commitments:

With respect to ICANN, the ruling finds that certain actions and/or inaction by ICANN in response to Afilias’ objections violated aspects of ICANN’s bylaws related to transparency and fairness. These findings are particular to ICANN’s actions and not conduct by Verisign. Verisign anticipates that ICANN’s Board will review the panel’s ruling and proceed consistent with the panel’s recommendation to consider the objections and make a decision on the delegation of .web.

Based on Verisign’s statements, it seems that ICANN lost, but Afilias didn’t win.

The revelation was buried in a Securities and Exchange Commission filing on an unrelated financial matter last night. Hat tip to @jintlaw for spotting and tweeting about it.

It’s the most eagerly anticipated IRP ruling since 2011’s .xxx case, but in stark contrast to Rod “let’s draft this tweet” Beckstrom-era ICANN, where the decision was posted in a matter of hours, the 2021 org has not yet posted the panel’s findings or made a public statement acknowledging the ruling.

Verisign says it intends to “vigorously pursue” .web, but “can provide no assurance” as to which way the ICANN board of directors will swing.