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Orange sponsors ICANN 42

Kevin Murphy, October 19, 2011, Domain Policy

The telecoms firm Orange has become a platinum sponsor of ICANN’s 42nd public meeting in Dakar, Senegal next week.

It’s a rare example of a company from outside the domain name industry handing over the big bucks to associate itself with ICANN.

While the company says it’s doing it for branding purposes, I’m sure it’s likely to set tongues wagging that Orange is a potential candidate for a .brand top-level domain.

If .apple is the no-brainer that is constantly used in articles to illustrate what a .brand is – and to highlight possible contention/objection issues – then .orange surely falls into the same category.

Platinum sponsorship for the Dakar meeting, which kicks off at the weekend, starts at $75,000. There are no takers for any of the other more-expensive sponsorship tiers this time.

Others paying up at this level are VeriSign, as usual, and the Public Interest Registry, which is publicizing its .ngo (non-governmental organizations) gTLD application.

With 86 days to go, the cost of new gTLDs is still unknown

Kevin Murphy, October 18, 2011, Domain Policy

If you’re planning to apply for a new generic top-level domain or two, wouldn’t it be nice to know how much it’s going to cost you?

It’s less than three months before ICANN opens the floodgates to new gTLD applicants, but you’re probably not going to find out how big your bank account needs to be until the last minute.

With 86 days on the clock until the application window opens, and 177 until it closes, there are still at least two huge pricing policies that have yet to be finalized by ICANN.

The first relates to reduced application fees and/or financial support handouts for worthy applicants from developing nations. I’ll get to that in a separate piece before Dakar.

The second is the controversial Continued Operations Instrument, a cash reserve designed to ensure that new gTLDs continue to operate even if the registry manager goes out of business.

In the current Applicant Guidebook, prospective registries are told to prove that they have enough money – either with a letter of credit or in a cash escrow – to keep their gTLD alive for three years.

To be clear, the COI money doesn’t go into ICANN’s coffers; applicants just need to show that the cash exists, somewhere.

The funds would be used to pay the Emergency Back-End Registry Operator (whichever company that turns out to be) in the event of a catastrophic gTLD business failure.

With hundreds of new gTLDs predicted, many of them likely to be laughably naive, we’re likely to see plenty of such failures.

With that in mind, ICANN wants to make sure that registrants and end users are not impacted by too much downtime if they put their faith in incompetent or unlucky registries.

It is estimated that the COI will amount to a six-figure sum for almost all commercial registries. For generics with a higher projected registration volume it could easily run into the millions.

It’s controversial for a number of reasons.

First, it raises the financial bar to applying considerably.

Forget the $185,000 application fee. Under the COI provision, applicants need to be flush enough to be able to leave millions of dollars dormant in escrow for at least five years.

It’s been sensibly argued that this money would be better devoted to making sure the registry doesn’t fail in the first place.

Second, even though the Guidebook gives .brand applicants the ability to shut down their gTLDs without the risk of another provider taking them over, it also expects them to create a COI.

This appears to be an unnecessary waste of cash. If a single-registrant .brand gTLD fails, the registry itself is the only registrant affected and the COI is essentially redundant.

Third, some applicants are thinking about low-balling their business model projections in order to keep their COI to a manageable amount.

This, as the better new gTLD consultants will tell you, could be a bad idea. When applications are reviewed the evaluators will be looking for discrepancies like this.

If you’re making one set of financial projections to investors and another to ICANN, you risk losing points on and possibly failing the evaluation.

Anyway, with all this in mind (and with apologies for burying the lead) ICANN has just said that it’s thinking about completely revamping the COI policy before applications are accepted.

Seriously.

ICANN’s Registry Stakeholder Group community has made a proposal – which appears to be utterly sensible on the face of it – that would reduce costs by pooling the risk among successful applicants.

The RySG said it that the COI “should not be so burdensome as to actually become a roadblock to the success of new registries by causing capital to be tied up unduly.”

Rather than putting up enough cash to cover its own failure, each successful applicant would pay $50,000 up-front into a Continued Operations Fund that would cover all potential registry failures.

The COF would be administered by ICANN (or possibly a third party), and would be capped at $20 million. In a round of 400 new gTLDs, that target would be reached immediately.

If the COF fell short of $20 million, each registry would have to pay $0.05 per domain name per year into the fund until the cap was reached.

It’s a shared-risk insurance model, essentially.

While ICANN’s COI policy is ultra-cautious, implicitly assuming that ALL new gTLDs could simultaneously fail, the COF proposal assumes that only a small subset will.

Reverse-engineering the RySG’s numbers, the COF appears to cover the risk of failure for registries representing some 10 million domain-years.

ICANN has opened up the proposal to public comments until December 2.

This means we’re unlikely to see any concrete action to approve or reject the COF alternative until, at the earliest, about a month before the first round application window opens.

ICANN likes cutting things fine, doesn’t it?

ICANN to hire conflict of interest experts

Kevin Murphy, October 6, 2011, Domain Policy

ICANN is to bring in ethics experts to advise it on its conflicts of interest policy, addressing the ongoing controversy over its former chairman’s move to the domain industry.

The organization plans to “engage an external firm with expertise in advising on ethical issues”, according to the minutes of a September 15 meeting of its Board Governance Committee.

The consultants will be tasked with helping to “develop an ICANN Ethics Regime or set of Guidelines for the Board, the staff and the community.”

ICANN has been faced recently with calls to impose post-employment restrictions on board members and staff, in order to prevent a “revolving door” between it and the industry it essentially regulates.

This follows former chairman Peter Dengate Thrush’s move to new gTLD applicant Minds + Machines just a few weeks after voting to approve the new gTLD program.

Senator Ron Wyden and the Association of National Advertisers are among those making the call, and the US Department of Commerce, which oversees ICANN, appears to have heard it.

But as I reported earlier in the week, it may actually be illegal for ICANN, as a California corporation, to contractually ban employees from joining domain name companies after they quit.

However, the BGC has other ideas about how to strengthen ethics without imposing these potentially problematic employment restrictions.

It’s now talking about a ethics policy with “disclosure and abstention requirements” for directors “surrounding future interests or potential future interests”.

While the policy has yet to be written, one can imagine a scenario in which an ICANN director would be prevented from voting on a policy that would be likely to enrich them in a future job.

Cherine Chalaby, Bill Graham and Ray Plzak are the BGC members who will be leading the board discussions, which are expected to continue in Dakar later this month.

The ethics issue was first raised publicly by ICANN president Rod Beckstrom during his opening address at the Singapore meeting in June — before the new gTLD vote and before Dengate Thrush’s departure.

Cheap gTLD drive adds to ICANN’s to-do list

Kevin Murphy, September 16, 2011, Domain Policy

ICANN may be given a huge to-do list before it starts accepting new top-level domain applications, in order to help level the playing field between rich and poor countries.

If sweeping new recommendations are approved, ICANN would have just a couple of months to create a new gTLD application review process, to find a panel to police it, and to find the money to cover it.

Since March 2010, a volunteer working group known as JAS has been debating the hows, whos and how muches of a program to provide financial support to gTLD applicants from developing nations.

It’s now come up with its Final Report (pdf), which contains a laundry list of things that JAS says ICANN needs to do before it starts accepting applications from anyone.

JAS has called for a reduction in the application fee from $185,000 to $47,000, as well as a provision allowing qualified applicants to pay the fee on a staggered schedule.

It also asks ICANN to create and partially fund a foundation to provide financial support, in addition to fee reductions, that eligible applicants would be able to draw from and pay back over time.

To qualify for the cheaper fees and other support, applicants would have to come from a developing economy found on certain UN lists. By my count, more than 80 countries would be eligible.

Recognized indigenous peoples – apparently including developed-world groups such as Native American tribes or Aboriginal Australians– would also qualify for assistance.

(I don’t know about you, but I immediately thought about the “Indian casino” model used to evade gambling prohibitions in parts of the US.)

Supported applicants would have to demonstrate that their gTLD would serve an under-served community or language group, and provide “genuine social benefit”.

So-called “.brand” applicants would be specifically excluded, but commercial entities operating in the public interest would be able to apply for the fee reductions and financial support.

The application procedure would be governed by a yet-to-be written Support Evaluation Process, overseen by a not-yet-created Support Application Review Panel, comprised of expert volunteers from inside and outside ICANN’s existing community structures.

The unpaid SARP panelists would have to be knowledgeable about the domain name industry and likely gaming patterns, in order to help prevent applicants exploiting the system.

The JAS says that all of this needs to be in place before the first round of applications:

there is a serious concern that, if support is not available to eligible applicants in the first round, the most obvious and valuable names (ASCII and IDNs) would be taken solely by wealthy investors.

Given the uncertainty regarding further rounds of new gTLD applications following the round planned for January 2012, it is necessary to make support available in the initial January 2012 round.

While I’ve no doubt that the ICANN board of directors will be picking over these proposals during its two-day retreat, which kicked off today, the JAS report now needs to filter through the GNSO and the ALAC – the two ICANN community bodies that commissioned its work.

Realistically, the earliest ICANN can rubber-stamp these recommendations is at its meeting October 28 in Dakar, Senegal, which would give ICANN staff just two months to create and deploy the entire applicant support program and to educate likely users.

ICANN’s new chief financial officer could also have to oversee the recalculation of the new gTLD program budget to reflect the JAS group’s ideas about how the program should be funded.

For example, the JAS report states that the $60,000 component of a single full application fee currently designated to “risks” could be instead be used to cover the shortfall between the $47,000 supported-applicant fee and the $100,000 in anticipated processing costs for such an application.

If ICANN were to adopt the recommendation, it would beg the question of how well the $185,000 “cost recovery” fee was calculated in the first place.

While not unexpected, the JAS proposals are a complex, audacious 11th-hour bump in the wire for ICANN, which already appears to be struggling to get its ducks in a row in time for January 12.

Regardless of whether the program can be rolled out in time, its likely users are already at a disadvantage compared to their wealthier counterparts, which at least have numbers to put in their own budget.

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