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Top-level reshuffle as ICANN loses its COO

Kevin Murphy, June 4, 2020, Domain Policy

ICANN today announced a series of organizational changes at the highest level of management after its COO decided to quit.

Susanna Bennett, senior veep and chief operations officer, will leave July 1 for pastures new after seven years on the job, and her role will be split between other senior figures.

ICANN also said today that Theresa Swinehart has been appointed head of the Global Domains Division, a role she’s been filling on an interim basis since Cyrus Namazi quit a few months back.

She’s also senior VP of multistakeholder strategy and strategic initiatives and CEO Göran Marby’s co-deputy. She’ll be keeping both of those jobs too.

In terms of ops, Bennett’s functions will be split between CFO Xavier Calvez, senior VP of HR Gina Villavicencio, and general counsel John Jeffrey. Calvez will also take on some of the MSSI responsibilities previously held by Swinehart.

The fact that Bennett and Namazi, who together were compensated to the tune of $860,000 in ICANN’s fiscal 2019, had functions that can be easily redistributed among other staffers does rather beg the question of whether ICANN has been spending domain registrants’ money as efficiently as possible.

Still, the rejigger will presumably be welcomed by those who believe that ICANN has in recent years become overly bloated and bureaucratic.

ICANN recently slashed its FY21 budget by 8% due to the expected impact of the coronavirus-related recessions.

ICANN whistleblower expects to be fired after alleging budget irregularities, bugged meetings

Kevin Murphy, May 6, 2020, Domain Policy

The chair of ICANN’s highly influential Nominating Committee expects to lose his seat after turning whistleblower to expose what he says are budgetary irregularities and process failures that could have altered the outcome of ICANN’s board-selection process.

In a remarkable March 25 letter, Jay Sudowski even accuses ICANN of secretly recording and transcribing NomCom’s confidential deliberations.

The NomCom is the secretive committee responsible for selecting people to fill major policy-making roles at ICANN, including eight members of its board of directors. It’s made up of people drawn from all areas of the community.

Because its role is essentially to conduct job interviews with board hopefuls, it’s one of the few areas of the ICANN community whose conversations are almost entirely held in private.

But Sudowski is attempting to shine a little light on what’s going on behind the scenes by filing a broad and deep request under the Documentary Information Disclosure Policy, which is ICANN’s equivalent of a freedom of information law.

In it, he accuses ICANN Org of some fairly serious stuff.

First, he claims ICANN is fudging its budget by over-reporting how many full-time equivalent (FTE) staff members are involved in NomCom work, and by denying requests for “trivial” reimbursements of as little as $47 even as NomCom cuts costs by moving to a remote-only working model.

ICANN grants NomCom a FY20 budget of $900,000, of which $600,000 is allocated to “personnel costs” related to three FTEs.

“Nowhere near 3 FTEs are allocated to NomCom. Where is this money going?” Sudowski asks, demanding under the DIDP to see records of how much ICANN actually spent supporting NomCom’s work over the last five years.

He also claims that the NomCom process may have been compromised by allowing non-voting members to participate in decision-making meetings during the 2017 cycle, writing:

ICANN Org potentially allowed the NomCom to violate ICANN Bylaws by allowing nonvoting members of the NomCom to participate in outcome determinate components of the assessment and selection process that may have fundamentally alerted [I believe this is a typo for “altered”] the outcome of the 2017 NomCom process.

The non-voting members of the NomCom are the board-appointed chair and chair-elect, as well as appointees from the Root Server System Advisory Committee, Security and Stability Advisory Committee and Governmental Advisory Committee.

The board members appointed by NomCom in 2017 were Avri Doria and Sarah Deutsch. NomCom also picked members of the GNSO Council, ccNSO Council and At-Large Advisory Committee.

Sudowski, whose day job is running a data center company in Colorado, further claims that the ICANN board has been instructed by the Org to refuse to communicate with NomCom members.

“In recent years, ICANN Org has secretly recorded and transcribed confidential deliberations of the NomCom,” he adds.

He wants evidence of all of this to be released under the DIDP, under a nine-point list of documentation requests.

It’s unfortunate that I am forced to make this request in such a public manner, but when there is controversy over a $47 expense to support a NomCom member, I can only come to the conclusion that ICANN Org is unable and unwilling to provide necessary “administrative and operational support” for the NomCom.

He also expects retribution:

I also expect that the Board, which has been instructed to not communicate with me, will remove me from my role as Chair of the NomCom, given the nature of the concerns noted in this letter. Frankly, if this comes to pass, my removal is a clear and direct attack on the autonomy and authority of the entire NomCom.

So far, his request has not been answered.

Under the DIDP, ICANN has a maximum of 30 days to reply to such requests. In reality, this has always been treated as a minimum, with both request and response typically published on the same day, exactly 30 days after the original filing.

Its responses are typically links to information already in the public record and a list of excuses why no more info will be released.

But so far, neither request nor response has been published in the usual place, 42 days after Sudowski sent his letter. ICANN has missed its deadline by almost two weeks.

The only reason the DIDP (pdf) is in the public domain at all is that Sudowski copied it to the mailing list of the Empowered Community, ICANN’s community-based oversight body. Thanks to George Kirikos for posting the link to Twitter last week.

It is a pretty extensive request for information, that presumably would take some time to collate, so I’d be hesitant to cry “cover-up” just yet.

But the fact that the request exists at all serves to highlight the shocking lack of trust between ICANN and one of its most powerful committees.

UPDATE: Sudowski has said that his request was withdrawn. There’s no particular reason it could not be refiled by somebody else, however, as DIDP is open to all.

Domain industry likely to suffer from coronavirus as ICANN slashes budget by 8%

Kevin Murphy, April 28, 2020, Domain Policy

ICANN is predicting a miserable time for the domain name industry due to the coronavirus pandemic, today announcing that it’s slashing its revenue outlook for the next year by 8%.

The organization expects to receive revenue of $129.3 million for the fiscal year beginning July 1. That’s $11.1 million lower than its previous estimate, which was made in December.

ICANN’s budget is based on projections based on previous industry performance and its accountants’ conversations with registries and registrars, so this is another way of saying that it expects the industry to suffer due to the pandemic.

ICANN said in its newly revised budget:

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. ICANN org also anticipates there may be long-lasting effects of such impacts. At the time this document is published, the impact cannot yet be quantified.

The drill-down is not great, showing that ICANN expects registries and registrars in both legacy and new gTLDs to be hit.

New gTLDs are predicted to be hit hardest, with revenue from registry transaction fees dropping by a full 33% from its FY20 forecast. That’s a drop from $6.7 million to $4.5 million.

Extrapolating from its $0.25 registry fee, that means ICANN thinks there will be 8.8 million fewer billable transactions — registrations, renewals and transfers in new gTLDs with over 50,000 names — for the year ending June 30, 2021.

Expected revenue from registrars selling new gTLDs has also been slashed by a third, down from $5.3 million this year to $3.5 million next year.

Legacy gTLDs are expected to fare a little better.

ICANN predicts transaction revenue from legacy gTLDs to decrease over the period, down to $47.7 million in FY21 from $49 million in FY20. Registrars selling legacy gTLDs are expected to bring in revenue of $29.7 million, down from $33.3 million.

That also represents shrinkage measured in the millions of domains.

It gets worse. ICANN is also expecting the number of registries and registrars to decrease even faster over the course of the next year.

It thinks it will end June with 1,174 fee-paying registries, but for this to decrease by 62 in FY21. It decreased by 29 in FY20. Many of these will probably be unused dot-brands having their contracts cancelled.

On the registrar side, it expects to lose 380 accreditations in FY21, compared to a loss of 104 this fiscal year, to end FY21 with 1,977 registrars.

ICANN does not expect its voluntary contributions from ccTLDs and Regional Internet Registries to decrease, but it does expect to lose a few hundred thousand bucks from the absence of sponsorship of its in-person meetings.

This overall predicted decrease in funding has led to a matching decrease in planned expenditure, with ICANN saying it will operate with “increased prudence, frugality, and with heightened conditions of necessity”.

It’s going to save 20% less on travel — $12.4 million — due to coronavirus-related restrictions, but seems to still be planning to take the industry to Hamburg in October for ICANN 69 (even though Munich has cancelled Oktoberfest this year).

ICANN also plans to delay some projects and to reduce its average headcount by 15 to 395.

The lower budget projections come even as some registries —including CentralNic, which looks after some very large new gTLDs — have said they expect the financial impact of coronavirus to be minimal.

The revised budget is published here and ICANN’s board may approve it as early as next week.

ICANN expects “significant” budget impact from coronavirus

Kevin Murphy, April 7, 2020, Domain Policy

The ongoing coronavirus pandemic is expected to have a “significant” impact on ICANN’s budget, according to an update from the organization.

The organization published its expectations of a $140.4 million budget for the fiscal year that begins this July last December, and opened it up for public comments.

In its summary of those comments (pdf), which had a February 25 deadline and therefore were not focused on the pandemic’s potential impact, ICANN said:

the COVID-19 pandemic is affecting significantly the entire world. ICANN expects that its activities and financial position will be significantly impacted as well. The ICANN org is working with the Board to assess and monitor the potential impact to ICANN’s funding, and planned work such as face-to-face meetings, travel, etc.

Any pandemic-related changes to the budget will be published prior to board approval, ICANN said.

So where is ICANN expecting the impact? It’s not entirely clear. I would expect to see some minor gains from slashing its travel budget in the wake of social distance rules, but it’s less obvious where a “significant” shortfall could occur.

ICANN had operational revenue — the money it gets from billing registries and registrars — of $136.8 million in the fiscal year ending June 30, 2019, its most recently reported year (pdf).

Of that total, roughly $56 million came from the market leaders in both segments, Verisign and GoDaddy, both of which have been given glowing analyst coverage since the outbreak began.

One commentator recently wrote that Verisign is “immune” from coronavirus and GoDaddy’s CFO told analysts just last week that he expects the impact of coronavirus to be “minimal” in the first quarter. That could of course change in future.

Almost half of ICANN’s revenue, some $65.7 million, comes from the top 10 registries and registrars.

So is ICANN expecting to see weakness in the long tail, the few thousand accredited registrars and gTLD registries that account for under $1 million in ICANN contributions per year? Is it expecting reduced voluntary contributions from the ccTLDs and Regional Internet Registries?

Will coronavirus cause huge numbers of small businesses to abandon their domains as they go out of business? Will it inspire large numbers of the recently unemployed and quarantined to start up web-based businesses in an attempt to put food on the table? Will it cause large portfolio owners to downsize to save costs?

All of these outcomes seem possible, but these are unprecedented times, and I couldn’t being to guess how it will play out.

ICANN predicts shrinkage in new gTLD sector

Kevin Murphy, January 3, 2020, Domain Policy

ICANN will make less money from new gTLDs in its fiscal 2021 because fewer domains will be registered and renewed, according to its recently published draft budget.

The budget, released the day ICANN broke up for its Christmas holidays, shows that the organization expects to bring in $140.4 million in FY21, up a modest $300,000 on its FY20.

But it’s expecting the amount of money contributed by registries and registrars in the new gTLD sector to decline.

For FY21, it expects new gTLD registry transaction fees — the $0.25 paid to ICANN whenever a domain is registered, renewed or transferred — to be $5.1 million. That’s down from the $5.5 million currently forecast for FY20.

It expects registrar transaction fees for new gTLD domains to dip from $4.6 million to $4.3 million.

But at the same time, ICANN is predicting growth from its legacy gTLD segments, which of course are primarily driven by .com sales. All the other legacy gTLDs of note, even .org and .net, are currently on downward trajectories in terms of volumes.

For FY21, ICANN is forecasting legacy gTLD registry transaction fees to come in at $52.6 million, versus the $50.5 million it expects to see in the current FY20. In percentage terms, it’s about double the growth it’s predicting for the current FY.

Legacy gTLD registrar transaction fees are estimated to grow, however, from $31.2 million to $32.7 million.

In terms of fixed fees — the $25,000 every new gTLD registry has to pay every year regardless of transaction volume — ICANN is also predicting shrinkage.

It reckons it will lose a net seven registries in FY21, dropping from 1,170 to 1,163 by the end of June 2021. These are most likely dot-brand gTLDs that could follow the path of 69 predecessors and flunk out of the program.

ICANN also expects its base of paying registrars to go down by 100 accreditations, with no new registrar applications, causing fees to drop from $10.7 million this year to $9.6 million in FY21.

In short, it’s not a particularly rosy outlook for the gTLD industry, unless you’re Verisign.

ICANN’s financial year runs from July 1 to June 30 this year, and usually the December release of its draft budget includes some mid-year reevaluations of how it sees the current period playing out. But that’s not the case this time.

ICANN appears to be on-budget, suggesting that it’s getting better at modeling the industry the more years of historical transaction data it has access to.

The budget (pdf) is now open for public comment. I spotted a few errors, maybe you can too.

Time for some more ICANN salary porn

Kevin Murphy, June 3, 2019, Domain Policy

ICANN has filed its tax return for its fiscal 2018, so it’s once again that time of the year in which the community gets to salivate over how much its top staffers get paid.

The latest form 990, covering the 12 months to June 30, 2018, shows that the top 21 ICANN employees were compensated to the tune of $10.3 million, an average of $492,718 each.

That’s up about 4% from $9.9 million in the previous year, an average across the top 21 staffers of $474,396 apiece.

These numbers include base salary, bonuses, and benefits such as pension contributions.

Employee compensation overall increased from $60 million to $73.1 million.

The biggest earner was of course CEO Göran Marby, who is now earning more than his immediate predecessor Fadi Chehadé but a bit less than last-but-one boss Rod Beckstrom.

Marby’s total compensation was $936,585, having received a bonus of almost $200,000 during the year. His base salary was $673,133.

The number of staffers receiving six-figure salaries increased from 159 in fiscal 2017 to 183 — about 44% of its estimated end-of-year headcount.

Towards the end of the reported year, as ICANN faced a budget crunch, many members of the ICANN community had called on the organization to rein in its spending on staff.

ICANN says it targets compensation in the 50th to 75th percentile range for the relevant industry.

The top five outside contractors in the year were:

  • Jones Day, ICANN’s go-to law firm. It received $5.4 million, down from $8.7 million in 2017.
  • Zensar Technologies, the IT consultancy that develops and supports ICANN software. It received $3.7 million.
  • IIS, the Swedish ccTLD registry, which does pre-delegation testing for new gTLDs. It received $1.3 million.
  • Iron Mountain, the data escrow provider. It received $1.1 million.
  • Infovity, which provides Oracle software support. It received $1 million.

The return shows that ICANN made a loss of $23.9 million in the year, on revenue that was down from $302.6 million to $136.7 million.

The primary reason for this massive decrease in revenue was the $135 million Verisign paid for the rights to run .web, at an ICANN last-resort auction, in ICANN’s fiscal 2017.

The tax form for 2018 can be found here (pdf) and 2017’s can be found here (pdf).

ICANN budget predicts small new gTLD recovery and slowing legacy growth

Kevin Murphy, December 18, 2018, Domain Services

The new gTLD market will improve very slightly over the next year or so, according to ICANN’s latest budget predictions.

The organization is now forecasting that it will see $5.2 million of funding from new gTLD registry transaction fees in the fiscal year ending June 30, 2019, up from the $5.1 million it predicted when it past the FY19 budget in May.

That’s based on expected transactions being 24 million, compared to the previous estimate of 23.9 million.

It’s the first time ICANN has revised its new gTLD transaction revenue estimates upwards in a couple years.

ICANN is also now estimating that FY20 transaction fees from new gTLDs will come in at $5.5 million.

That’s still a few hundred grand less than it was predicting for FY17, back in 2016.

Transaction fees, typically $0.25, are paid by registries with over 50,000 names whenever a domain is created, renewed, or transferred.

The FY19 forecast for new gTLD registrar transaction fees has not been changed from the $4.3 million predicted back in May, but ICANN expects it to increase to $4.6 million in FY20.

ICANN’s budget forecasts are based on activity it’s seeing and conversations with the industry.

It’s previously had to revise new gTLD revenue predictions down in May 2018 and January 2018. 

ICANN is also predicting a bounceback in the number of accredited registrars, an increase of 15 per quarter in FY20 to end the year at 2,564. That would see accreditation fees increase from an estimated $9.9 million to $10.7 million.

The budget is also less than optimistic when it comes to legacy, pre-2012 gTLDs, which includes the likes of .com and .net.

ICANN is now predicting FY19 legacy transaction fees of $49.8 million. That’s compared to its May estimate of $48.6 million.

For FY20, it expects that to go up to $50.5 million, reflecting growth of 2.1%, lower than the 2.6% it predicted last year.

Overall, ICANN expects its funding for FY19 to be $137.1 million, $600,000 less than it was predicting in May.

For FY20, it expects funding to increase to $140.1 million. That’s still lower than the $143 million ICANN had in mind for FY18, before its belt-tightening initiatives kicked off a year ago.

The budget documents are published here for public comment until February 8.

ICANN will also hold a public webinar today at 1700 UTC to discuss the plans. Details of the Adobe Connect room can be found here.

After outcry, ICANNWiki to get ICANN funding next year

Kevin Murphy, May 23, 2018, Domain Policy

ICANNWiki will continue to get funding from its namesake, after community members complained about ICANN’s plan to abandon its $100,000 annual grant.

The independent wiki project will get $66,000 instead in the year beginning July 1, which will drop to $33,000 in ICANN’s fiscal 2020.

The funding will then disappear completely.

It’s a slight reprieve for ICANNWiki, which uses the money not only for its 6,000-article web site but also in-person outreach at events around the world.

The organization had complained about the plans to drop funding back in December, and fans of the site later called on ICANN to change its mind.

Supporters say the site fulfills a vital educational service to the ICANN community.

ICANNWiki also receives over $60,000 a year from corporate sponsors.

ICANN has also offered a reprieve to its Fellowship program in the new draft budget, reducing the number of people accepted into the program by fewer than expected.

It said in January it would slash the program in half, from 60 people per meeting to 30. That number will now drop to 45, at a cost of $151,000.

As discussed in this February article, the community has differing opinions about whether the program is an important way to on-board volunteers into ICANN’s esoteric world, or a way for freeloaders to vacation in exotic locations around the globe.

ICANN slashes new gTLD income forecast AGAIN

Kevin Murphy, May 23, 2018, Domain Policy

ICANN has yet again been forced to lower its funding expectations from new gTLDs, as the industry continues to face growth challenges.

In its latest draft fiscal year 2019 budget, likely to be approved at the end of the month, it’s cut $1.7 million from the amount it expects to receive in new gTLD transaction fees.

That’s even after cutting its estimates for fiscal 2018 in half just a few months back.

New gTLD registry transaction fees — the $0.25 collected whenever a new gTLD domain is registered, renewed or transferred, provided that the gTLD has over 50,000 domains under management — are now estimated at $5.1 million for FY19

That’s up just $500,000 from where it expects FY18, which ends June 30 this year, to finish off.

But it’s down $900,000 or 15% from the $6 million in transaction fees it was forecasting just four months ago.

It’s also still a huge way off the $8.7 million ICANN had predicted for FY18 in March 2017.

Registrar new gTLD transaction fees for FY19, paid by registrars regardless of the size of the TLD, are now estimated to come in at $4.3 million, up $400,000 from the expect FY18 year-end sum.

But, again, that number is down $800,000 from the $5.1 million in registrar fees that ICANN was forecasting in its first-draft FY19 budget.

In short, even when it was slashing its FY18 expectations in half, it was still over-confident on FY19.

On the bright side, at least ICANN is predicting some growth in new gTLD transactions.

And the story is almost exactly reversed when it comes to pre-2012 gTLDs.

For legacy gTLD registry transaction fees — the majority of which are paid by Verisign for .com and .net — ICANN has upped its expectations for FY19 to $49.6 million, compared to its January estimate of $48.7 million (another $900,000 difference, but in the opposite direction).

That growth will be offset by lower growth at the registrar level, where transaction fees for legacy gTLDs are now expected to be $30.2 million for FY19, compared to its January estimate of $30.4 million, a $200,000 deficit.

None of ICANN’s estimates for FY18 transaction fees have changed since the previous budget draft.

But ICANN has also slashed its expectation in terms of fixed fees from new gTLD registries — the $25,000 a year they all must pay regardless of volume.

The org now expects to end FY18 with 1,218 registries paying fees and for that to creep up slightly to 1,221 by the end of FY19.

Back in January, it was hoping to have 1,228 and 1,231 at those milestones respectively.

Basically, it’s decided that 10 TLDs it expected to start paying fees this year actually won’t, and that they won’t next year either. These fixed fees kick in when TLDs are delegated and stop when the contract is terminated.

It now expects registry fixed fees (legacy and new) of $30.5 million for FY19, down from expected $30.6 million for FY18 and and down from its January prediction of $31.1 million.

ICANN’s budget documents can be downloaded here.

ICANNWiki fans protest funding cut

Kevin Murphy, March 11, 2018, Domain Policy

ICANN should continue to fund the independent ICANNWiki project, according to high-profile industry supporters.

As I first reported back in December, ICANN plans to stop giving a $100,000 annual grant to ICANNWiki, a repository of about 6,000 community-sourced articles on the people and organizations involved in the ICANN community.

While ICANNWiki does not merit an explicit mention in ICANN’s latest proposed budget, both organizations have confirmed to DI that the funding is for the chop, as ICANN attempts to rein in spending in the face of depressed revenue.

About a quarter of the 41 comments filed on the budget express support for the wiki.

Consultant Kurt Pritz, a 10-year veteran of ICANN and one of the key architects of its new gTLD program, wrote that the wiki “has been an essential part of the ICANN culture for many years… often saving ICANN meetings from terminal ennui.”

Roland LaPlante, chief marketing officer of Afilias (one of about 15 sponsors listed on ICANNWiki’s front page), wrote:

The complete withdrawal of funding from ICANN so abruptly not only threatens the viability of the project, but rather disrespectfully junks the valuable time and resources that the community has invested over the years. Ultimately the loss of ICANNWiki would be a loss to our overall sense of community.

ICANN should continue to support ICANNWiki at a reasonable level in the next fiscal year. At a minimum, please consider giving the team time to find other sources of funding.

Sandeep Ramchandani, CEO of Radix, concurred, writing:

ICANNNWiki benefits the entire ICANN community. Cutting the funding entirely would effectively halt its operations and be a disservice to the community it serves. It is in ICANN and the community’s best interest to continue funding it in an amount that works for ICANN long-term, and provide ICANNWiki sufficient time to develop a more sustainable business plan.

Simon Cousins, CEO of Chinese market localization specialist Allegravita, said:

Before ICANNWiki, there was precious little information on industry fundamentals in China, and since Allegravita has supported the pro-bono translation of ICANNWiki content into Chinese, the vital platform that is ICANNWiki has been acknowledged hundreds of times.

We do not support the immediate and full withdrawal of funding for ICANNWiki. We guardedly support incremental, annual decreases to give ICANNWiki the time necessary to generate new sponsorship income to cover their costs.

Pablo Rodriguez of .pr ccTLD operator PRTLD, host of ICANN 61 and an ICANNWiki sponsor, wrote:

We believe that they should not be cut out from the ICANN’s Budget, instead, they should be supported and embraced to continue their engaging approach and work with ICANN’s Community and as well newcomers, veterans, special programming for beginners and others in order to deliver what is ICANN and what does the organization do and so forth.

Several other commentators on ICANN’s budget asked ICANN to maintain the funding and I was unable to find any comments supporting its withdrawal.

It’s worth noting that ICANN’s $100,000 is not ICANNWiki’s only financial support. It says it receives an additional $61,000 a year from corporate sponsorship, and as a wiki much of its output is produced by volunteers.

It has been in existence for a decade, but ICANN has only been giving it money for three years.

The costs associated with running it appear to be mostly centered not on maintaining the web site but on its outreach and promotional activities, such as attending meetings and the popular caricatures and card decks it distributes.

It could be argued that ICANNWiki is pretty good value for money when compared to cost of a dedicated outreach professional (the average cost of an ICANN staffer has been estimated at $175,000+ in the latest budget).

ICANNWiki will host an “Edit-A-Thon” during the current ICANN 61 public meeting in San Juan, Puerto Rico on Tuesday at 0900 local time.