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Verisign steps up anti-gTLD campaign with attack on ICANN’s war chest

Verisign wants ICANN to publish a list of all the reasons it might be sued over the new gTLD program, claiming security and stability risks might be one of them.

In the latest salvo fired in its war against new gTLDs, the company now suggests that the $115 million “risk fund” surplus that ICANN has accumulated is for fending off lawsuits when it breaks the internet.

In a letter (pdf) sent Friday, Verisign asks ICANN to justify the existence of this war chest in light of the fact that it has managed to secure legal indemnities from pretty much everyone involved in the program.

It attempts to link the risk fund to the possible security risks of introducing new gTLDs to the internet, which Verisign has been haranguing ICANN about for the last few months.

“We believe ICANN should be forthcoming about the risks it is shifting and the need for the substantial risk reserve fund, in particular,” the letter, signed by general counsel Richard Goshorn, says.

It’s been well known for a few years that $60,000 of each $185,000 new gTLD application fee was to be allocated to a risk fund created to cover unexpected extra program costs.

The reserve was designed to cover things like underestimating the costs or time needed to evaluate applications, but also, crucially, the lawsuits that ICANN expected but has not yet received.

The cash pile is often to referred to, usually with black humor, as the “legal defense fund”.

Now Verisign seems to be saying that the legal risks are not limited to trademark disputes or the usual antitrust nonsense, but to the security risks ICANN is “transferring” to others.

As we’ve been reporting for the last few months, Verisign has suddenly decided that new gTLDs pose a risk to the internet, largely due to the potential for clashes between newly delegated strings and the unnofficial domains that many organizations already use on their intranets.

For a great discussion on the merits of this argument check out this DI article and comment thread.

With the latest letter, Verisign suggests that ICANN knows it might be sued for messing up corporate intranets, but is keeping that fact quiet.

Referring to a report it issued in March, when its security concerns first emerged, it says:

We believe that ICANN may have established and be maintaining the Risk Reserve in such a high amount in anticipation of significant claims relating to one or more risks identified in the Verisign Report.

If ICANN does get sued on these grounds, the defense cost will effectively have been covered by new gTLD applicants (and therefore their customers, assuming the costs are passed on), Verisign says.

It’s therefore asking for ICANN to disclose the reasons why its risk fund is so big, “in particular, the details regarding what ‘possible litigation’ factored into ICANN’s decisions”.

In other words, Verisign is asking ICANN to publish a list of reasons people might sue it, something I can’t imagine its general counsel agreeing to any time soon.

Is this an effort to shame ICANN into taking its security concerns more seriously, or just more FUD designed to disrupt the new gTLD program and protect its .com dominance?

Opinions, no doubt, will be split.

Are some new gTLD evaluations getting screwed up?

At least two new gTLD applicants reckon ICANN has screwed up their Initial Evaluation, flunking their applications due to missing or mishandled communications.

Following Friday’s batch of IE results, which saw four failures, one angry applicant got in touch with DI to complain about discrepancies in how his bids were scored.

Dot Registry has applied for five “corporate identifier” strings — .inc, .corp, .ltd, .llc and .llp — and has made decent progress convincing the powers that be that they will be operated responsibly.

On Friday, its .inc bid passed its Initial Evaluation with flying colors while .llc and .ltd were marked as “Eligible For Extended Evaluation”, a polite code phrase for #fail.

Both of the unsuccessful bids scored 0 on question 50, “Funding Critical Registry Functions”, which is an automatic failure no matter what the overall score on the financial evaluation.

Applicants are scored on question 50 from 0 to 3 by showing that they have a “Continuing Operations Instrument” to cover three years of operations in the event that their registry fails.

Most applicants have been submitting letters of credit supplied by their bank, which promise to pay ICANN these emergency funds should the need arise.

A zero score indicates basically that no COI was provided.

But CEO Shaul Jolles claims that Dot Registry submitted a single letter of credit to cover all five applications, later amended at ICANN’s request so that each string in the portfolio was broken out individually.

“We then received a note that they now have whatever they needed and it’s resolved,” he said.

He noted that .inc, which passed on Friday with maximum score of 3, is covered by exactly the same LOC as the two applications that scored a 0, which doesn’t make much sense.

A second applicant, which does not currently wish to be named, has told DI that it failed its financial evaluation on a question for which it received no Clarifying Questions.

CQs are the handy method by which ICANN gave applicants a second shot at getting their applications right. Hundreds have been issued, the vast majority related to financial questions.

The common complaint to both failing applicants is that at no point did ICANN inform the applicant that its application was deficient.

We understand both applicants are currently in touch with ICANN management in order to try to get their predicaments resolved.

Four failures and 92 passes in latest new gTLD results

ICANN has just released 96 new Initial Evaluation results, a batch which doubles the number of failures the first phase of the new gTLD program has produced.

The following applications failed to receive passing scores and are now “Eligible for Extended Evaluation”:

  • .locus — a strange and ambitious-sounding single-registrant bid filed by Locus Analytics. The company scored 6 out of the necessary 8 points on its financial evaluation with zero scores on the Financial Statements and Funding Critical Registry Functions questions.
  • .llc — This is the bid filed by Dot Registry, the company that seems to have a degree of governmental support for its portfolio of corporate identifier bids. It scored a 0 on its Funding Critical Registry Functions question.
  • .ltd — Another Dot Registry bid. Failed for the same reason.
  • .life — A values-oriented open gTLD application filed by Canadian company CompassRose.Life. Scored a zero on its Financial Statements.

ICANN said last week that it was changing the way it scored the “Funding Critical Registry Functions” question, due to the problems many applicants have been having with Continuing Operations Instruments.

That change only seemed to hit applications with scores of 1, however, so it does not appear to apply in the cases of today’s failed bids.

Applications for the following strings received passing scores.

.legal .sbi .inc .americanfamily .lacaixa .voting .realestate .rest .pfizer .macys .gift .hangout .clinic .blockbuster .lixil .cbre .blog .new .fund .prudential .tab .anquan .group .sale .gay .art .sandvik .security .now .social .shoes .qpon .sohu .fedex .storage .caseih .blog .online .cricket .gal .vip .app .moe .buzz .show .promo .music .cbn .dhl .attorney .sports .legal .football .acer .direct .open .dds .capetown .app .furniture .telefonica .eus .calvinklein .toys .eat .book .axis .casino .ren .crs .baby .ladbrokes .show .call .tech .solar .sanofi .toyota .ubank .canalplus .lexus .immo .moto .hyundai .green .ismaili .health .trading .marketing .llc .xihuan .gratis

We’re now up to 720 passes and 8 failures in the program, with 1,124 results still to be announced.

Get live new gTLD program stats

Kevin Murphy, June 14, 2013, Domain Services

Today DI PRO is launching a new live dashboard for new gTLD program statistics.

The idea is to give users quick and easy access to key program metrics.

Want to know the maximum number of gTLDs that can be delegated in the current round? It’s 1,365.

Want to know how many contention sets remain? It’s 222.

Want to know how many how many applications have failed Initial Evaluation? It’s 4.

Here’s a partial screenshot:

Live gTLD Stats

While almost all of this data has been easily accessible via the DI PRO New gTLD Application Tracker for months, the new Live Stats interface provides a quicker, at-a-glance view.

All the stats are generated live from the DI PRO database, which is updated at least once a day with the current status of all 1,930 new gTLD applications. New IE results are added Fridays at 8pm UTC.

What’s more, users can drill down into detailed search results by clicking the stat they’re interested in.

User previews have been positive, but we’re always open to suggestions if there’s a stat you’d like to see included.

Subscribers can check it out here: Live New gTLD Stats.

Donuts loses five of the first six new gTLD auctions

Kevin Murphy, June 13, 2013, Domain Services

The full results of the first six new gTLD auctions are now known. Donuts lost five of them, raising millions of dollars in the process.

Here are the winners of last week’s auctions, which were managed by Innovative Auctions:

Five of the six were a two-way battles between Donuts, which has applied for 307 gTLDs, and one other applicant. Each of the losing applicants has now withdrawn its application with ICANN.

The exception is .club, a three-way fight that included Merchant Law Group. Neither losing application has been withdrawn with ICANN yet, but the result it well-known.

Innovative revealed last week that the round raised $9.01 million in total. The winning bids for each auction were not disclosed.

Given that Donuts managed to lose five out of the six, it’s a fairly safe assumption that most of that money will have gone into its war chest, which can be used in future auctions.

Of the five applications it has now withdrawn, only .red had already passed its Initial Evaluation, so the company will have also clawed back a $130,000 ICANN refund on each of the other four.

The auctions mean that we now know with a high degree of certainty which companies are going to be running these six gTLDs.

Most of them have not yet passed IE, but with the success rate so high to date I wouldn’t expect to see any failures. None of them are subject to objections or direct GAC Advice.