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Mystery web site proposes new gTLD “string change” system

Kevin Murphy, March 27, 2013, Domain Registries

Somebody out there is bummed that they can’t afford to win their new gTLD contention set.

A new web site, StringChange.org, is planning to petition ICANN to allow new gTLD applicants to change the string they’ve applied for, for an extra $100,000 fee.

It’s not clear who’s behind the proposal, which was sent to every new gTLD applicant via email today. The page is unsigned and the domain is registered behind Whois privacy.

The site states:

We are proposing that ICANN allow the option of a “String Change” to applicants in contention, allowing these applicants, if they so choose, to change their string to another string and rewrite the appropriate parts of their applications. In doing so, these applicants would relinquish the right to their original string that is in contention, and be assessed a reevaluation fee of $100,000.

Many applicants would choose this over going to auction, being outbid, and never having the opportunity to launch a TLD and implement their business models. This also creates fairness for smaller groups to have the opportunity to launch and operate a TLD, especially when they are currently up against corporate giants such as Amazon or Google.

It goes on to say that a special “String Change round” of applications would begin in 2014, restricted to applicants who don’t fancy their chances punching it out with Google at auction in 2013.

The system would enable applicants that do not want to change their strings to get to market earlier, the site reckons.

It’s soliciting email addresses for its ICANN petition.

Good idea? Bad idea? Mediocre satire? Cheap attempt to see which applicants have gotten cold feet?

Did Uniregistry over-sell the auction antitrust risk?

Kevin Murphy, March 20, 2013, Domain Registries

Uniregistry’s revelation that it believes private auctions to resolve new gTLD contention sets may be illegal — based on its talks with the US Department of Justice — has caused widespread angst.

Following yesterday’s news, some commentators — some interested — questioned the company’s motive for revealing that Justice had declined to give private auctions a clean bill of health under antitrust law.

Others wondered whether Justice had been given the full facts, whether it had understood the new gTLD program, and whether Uniregistry had accurately reported Justice’s advice.

Given that yesterday’s piece was straight news, I figured it might be good to delve a little deeper into the situation and, yes, indulge in some quite shameless speculation.

What is it that Uniregistry is saying?

Here’s the argument, as I understand it.

“Bid-rigging” is illegal in many countries, including ICANN’s native US, where the Department of Justice prosecutes it fairly often, securing billions of dollars in damages and sometimes criminal sentences.

More often than not, it seems, the prosecutions are related to government contracts, where agencies are looking for a company to carry out a job of work for the lowest possible price.

Bid-rigging emerges when contractors decide among themselves who is going to win the contract. If two contracts are up for grabs, two companies may agree to submit separate high-ball bids so that they can guarantee getting one contract each.

This, of course, inflates the price the government agency pays for the work. There’s no true competition, so prices are artificially high, harming the tax-payer. That’s why it’s illegal.

The ICANN new gTLD program is a bit different, of course.

First, ICANN isn’t a government agency. While it has quasi-governmental powers, it’s a private corporation. Second, it’s looking for high bids, not low bids. Third, it doesn’t care if it doesn’t see any money.

There can be little doubt that private auctions technically harm ICANN, because the winning bidder’s money would be divided up between applicants rather than flowing into ICANN’s coffers.

Uniregistry seems to believe that a new gTLD applicant signing a private auction agreement — basically, competitors agreeing to pay or be paid to decide who wins a contract — that takes money out of ICANN’s pocket could be considered illegal collusion.

But ICANN has stated regularly that it prefers applicants to work out their contention sets privately, explicitly endorsing private auctions and/or applicant buy-outs.

ICANN, it seems, doesn’t care if it is harmed.

According to Uniregistry, however, that doesn’t matter. Its view, following its conversations with Justice, is that what ICANN says is completely irrelevant: the law’s the law.

As the company said yesterday:

the Department emphasized that no private party, including ICANN, has the authority to grant to any other party exemptions to, or immunity from, the antitrust laws. The decision means that the Department of Justice reserves its right to prosecute and/or seek civil penalties from persons or companies that participate in anti-competitive schemes in violation of applicable antitrust laws.

In other words, just because it’s very unlikely that ICANN would start filing antitrust suits against new gTLD applicants, the DoJ could feasibly decide to do so anyway.

Why would it do so? Well, consider that the thing ICANN is auctioning is a spot in the DNS root server, and the root server is ultimately controlled by the US Department of Commerce…

ICANN may not care about the money, but the thing it is selling off “belongs” to the United States government.

That’s the argument as I understand it, anyway.

Isn’t this all a bit self-serving?

Uniregistry’s press release and DI’s blog post yesterday were met with disappointment (to put it mildly) among some new gTLD applicants, auction providers and others.

They noted that Uniregistry had no documentary evidence to back up information it attributed to Justice. Some accused DI of reporting Uniregistry’s statement without sufficient skepticism.

It seems to be true that the company has not been a big fan of private auctions since the concept was first floated.

Uniregistry has applied for 54 new gTLDs, the majority of which are contested. Its main competitors are Donuts, with 37 contention sets, and Top Level Domain Holdings, with 21.

Who wins these contention sets depends on who has the most money and how much they’re prepared to pay.

Unlike Donuts, Uniregistry hasn’t gone to deep-pocketed venture capital firms. It’s reportedly funded to the tune of $60 million out of CEO Frank Schilling’s own pocket.

And unlike TLDH, which is listed on London’s Alternative Investment Market, Uniregistry doesn’t have access to the public markets to raise money. It seems to be better-funded, however.

Donuts raised $100 million to fund its new gTLD ambitions. It’s more than Schilling claims to have put into Uniregistry, but Donuts has spent much more on application fees.

Donuts is involved in 307 applications, many more than Uniregistry’s 54.

The money remaining for auctions is also spread much thinner with Donuts. It’s also in 158 contention sets, more than three times as many as than Uniregistry’s 45.

Private auctions arguably benefit Donuts because, depending on the auction model, it could reinvest the money it raises by losing an auction into a future auction. Its VC money would last longer.

The same logic applies to all applicants, but it becomes more of a pressing issue if you’re on a tight budget or have a large number of applications.

Uniregistry may have calculated that it stands a better chance of winning more contention sets against Donuts and TLDH if its competitors don’t get the chance to stuff their war chests.

Of course, Uniregistry could have simply refused to participate in private auctions in order to force an ICANN auction in its own contention sets. All new gTLD applicants have that power.

But by publicizing its antitrust concerns too, it may have also torpedoed private auctions for some contention sets that it’s not involved in.

That could limit the amount of money flowing from losing auctions to its competitors.

Another theory that has been put forwards is that Uniregistry went public with its Justice conversations — over-selling the risk, perhaps — in order to give its competitors’ investors jitters.

That might potentially reduce the capital available to them at auction, keeping auction prices down.

So did Uniregistry stand to benefit from playing up the risk of antitrust actions against new gTLD applicants? Probably.

Does it mean that its interpretation of its Department of Justice conversations is not completely accurate? Ask a lawyer.

Anger as ICANN delays key new gTLDs milestone

Kevin Murphy, January 11, 2013, Domain Registries

New gTLD applicants could barely disguise their anger tonight, after learning that ICANN has delayed a key deliverable in the new gTLD program — originally due in October — until March.

On a webinar this evening, program manager Christine Willett told applicants that the string similarity analysis due on all 1,917 remaining bids is not expected to be ready until March 1.

The analysis, which will decide which “contention sets” applications are in — whether .hotel must fight it out with .hotels and .hoteis, for example — had already been delayed four times.

The reasons given for the latest delay were fuzzy, to put it mildly.

Willett said that ICANN has concerns about the “clarity and consistency of the process” being used by the evaluation panel — managed by InterConnect Communications and University College London.

Under some very assertive questioning by applicants — several of which branded the continued delays “unacceptable” — Willett said:

When you don’t have a consistent process, or there are questions about the process that is followed, it invariably would put into question the results that would come out of that process…

I don’t want to publish contention sets and string similarity results that I can’t stand behind, that ICANN cannot explain, and that only frustrate and potentially affect the forward progress of the program.

See? Fuzzy.

It sounded to some applicants rather like ICANN has seen some preliminary string similarity results that it wasn’t happy with, but Willett repeatedly said that this was not the case.

It’s also not clear whether the pricey yet derided Sword algorithm for determining string similarity has had any bearing on the hold-ups.

One of the reasons that applicants are so pissed at the latest delay is that it presents a very real risk of also delaying later stages of the evaluation, and thus time to market.

Willett admitted that the remaining steps of the program — such as objections and contention resolution — are reliant on the publication of string similarity results.

“I am quite confident we will have results on string similarity by March 1,” she said. “We need to publish contention sets — we need to publish string similarity results — by March 1 in order to maintain the timeline for the rest of the program.”

March 1 is worryingly close to the March 13 deadline for filing objections, including the String Confusion Objection, which can be used by applicants to attempt to pull others into their contention sets.

Just 12 days is a pretty tight deadline for drafting and filing an objection, raising the possibility that the objection deadline will be moved again — something intellectual property interests would no doubt welcome.

The IP community is already extremely irked — understandably — by the fact that they’re being asked to file objections before they even know if an application has passed its Initial Evaluation, and will no doubt jump on these latest developments as a reason to further extend the objection window. Some applicants may even agree.