Russian firm fined millions over domain land-grab

RU-Center, Russia’s largest domain name registrar, will have to repay 240 million rubles ($8.6 million) for grabbing thousands of domain names and auctioning them during the .РФ landrush.
The company could also be fined up to 75% of its 2009 revenues for breaking competition law, according to a statement from the country’s Federal Antimonopoly Service.
When .РФ was launched by the .ru registry launched last November, it offered domain names on a first-come first-served basis, without the premium landrush period offered by other TLDs.
RU-Center took this opportunity to register 60,000 domains in its own name and sell them off to the highest bidder, essentially bringing the landrush to the registrar level.
Some ccTLD Coordination Center council members, responsible for setting the launch policies, had ownership interests in RU-Center either directly or through family members, according to FAS.
The registrar is currently being acquired by a company called RBC.

Beckstrom gets his bonus again

ICANN president and CEO Rod Beckstrom has been awarded a performance-related bonus for the 12-month period ending today, it has emerged.
The undisclosed amount was approved by the ICANN board of directors during an unannounced meeting last Saturday.
As it is classed as a personal personnel matter, the portion of his “at risk component” approved was not revealed, but it is known that Beckstrom’s annual bonus is capped at $195,000.
His base salary is $750,000.
It’s the second consecutive year that he has received some part of his bonus. For the year ended June 30, 2010, the board voted it through in December.
As Beckstrom enters the third year of his three-year contract, it’s understood that he has already been making overtures to the board to extend his tenure for a second term.

Blacknight warns about new gTLD “false promises”

Domain name registrar Blacknight Solutions has warned domain buyers not to be “duped” by registrars offering preregistration in new top-level domains that have not yet been approved.
“Every time an end user gets duped it hurts our industry and companies like us have to clean up the mess,” managing director Michele Neylon said.
In a press release, Blacknight said:

After receiving several queries from customers, Blacknight discovered that registrants interested in acquiring domains in rumoured new gTLDs had become confused by these offers, as they are not familiar with how the new TLD implementation might work. This sort of speculative offer is the equivalent of taking a down payment on a concept car that has not been approved for production. It is a false promise.

While the company was diplomatic enough to avoid naming names, I strongly suspect the release refers primarily to United Domains, which has been offering preregistration for the last few months.
UD currently offers such services for dozens of non-existent TLDs, such as (without leaving the B’s) .bank .bayern .bcn .berlin .bike and .board.
Given that none of the 50-odd potential gTLD applicants listed have revealed what their registration policies will be, it seems possible that many wannabe registrants will be left disappointed.
Don’t expect to be able to get a .bank domain via preregistration.
UD’s preregistering process looks a lot like a regular shopping cart, albeit with $0 pricing and no requirement to submit credit card details.
There is a FAQ that, if you read it, explains that there can be no guarantee you’ll get the names you ask for.
These services, and others like it, are basically ways to build up mailing lists of interested buyers, in order to contact them when domains actually start becoming available.
The registrar has already been burned by a couple of gTLD applicants.
LACNIC sent UD a nastygram in April, for example, when it discovered the registrar was offering preregistration in .lac.
Bizarrely, UD was at one stage accepting preregistration in .brand gTLDs in which literally no third party will qualify to buy a domain, such as .unicef.
ICANN has not to my recollection publicly stated a position on preregistration since 2000, when it said that “the practice of pre-registration should not be encouraged”.

Neustar prices .brands at $10k

Neustar has unveiled extremely aggressive entry-level pricing for “.brand” applicants looking for a registry services provider – just $10,000 a year.
For the size of company expected to apply for .brands, that’s a rounding error. It may as well be free.
It’s called the Brand Assurance Package.
Applicants should not expect much for the money though – the package seems to be targeted at those that want to grab a .brand TLD in the first round, but may not do much at the second level initially.
It basically looks like a defensive registration package.
It covers application support and the registry infrastructure, but Neustar plans to ask clients to upgrade to more expensive services should they expand their .brand strategy in future.
Prices for those services have not been announced, but it would be a good idea to find out what they are before signing up – migrating a TLD between registries may not be trivial.
The fee does not cover ICANN’s application fees, which start at $185,000, of course.
There’s a market for this kind of thing. You need only read some of the marketing trade press to discover that there are a heck of a lot of brand managers scratching their heads about new gTLDs right now.
Many are taking a “wait and see” approach.
The problem with that strategy is that after April 12 next year we have no idea when – or, frankly, if – companies will next get their chance to apply for a new gTLD.
If Coca-Cola gets .coke in round one and .brands turn out to be a success, that could put Pepsi at a competitive disadvantage if it is left stranded in .com space, for example.
In addition, if you share your brand with a company in another vertical, applying in the first round is a must-have, unless you fancy your chances with ICANN’s untested objections procedures.

US extends ICANN’s IANA contract

ICANN has received a six-month extension to its crucial IANA contract, apparently in order to give the US government more time to take public comments and make amendments.
The contract may have been extended some weeks ago, but I believe the first public acknowledgment from ICANN came in a presentation before the ccNSO at its meeting in Singapore last week.
The IANA contract is what gives ICANN the power to make changes to the DNS root – including adding new top-level domains to the internet.
It is granted by the US National Telecommunications and Information Administration.
The contract is now set to expire March 31, 2012, towards the end of the newly approved first-round new gTLDs application window, which is expected to be open from January 12 until April 12.
It would be helpful, from an applicant confidence perspective, if the contract is renewed on a longer-term basis before January 12, when money will start changing hands.
The NTIA currently has a Further Notice Of Inquiry (pdf) open, soliciting public comments on what terms should and should not be included in the contract.
Quite a few civil liberty types are annoyed about the fact that the NTIA has added a clause that may enable it to block new gTLDs from the root if governments find them disagreeable.

Beware the new gTLD cuckoos

Let’s say that for some reason you’re a big fan of horses.
Ever since ICANN announced it was going to do new top-level domains, in 2008, you’ve been desperate to apply for .horse.
This TLD could not fail, you think to yourself. Everyone likes horses, right? You could have 500,000 registrations in year one, make yourself rich. Maybe buy yourself a new horse.
For the last three years you’ve attended every ICANN meeting, you’ve lobbied for the changes you want to see in the Applicant Guidebook, you’ve spent tens of thousands on hotels and airfare.
You’ve painstakingly built your “.horse” brand, raising money and throwing it into marketing and community building, creating demand among your fellow horse lovers.
The horse community knows about .horse, and they can’t wait for it.
Fast-forward to April 12, 2012.
ICANN has just published the list of first-round gTLD applicants. Your lovingly created .horse bid is in the system, ready for processing.
But wait, what’s that?
Somebody else – some douchebag businessman who doesn’t even like horses – has also applied for .horse, and his bank account is bigger than yours by a long way.
How’s that .horse idea looking now? Did you just spend three years building up somebody else’s brand? Do you think your community will care? Or notice? The other guy is called .horse too, remember.
Oops.
This scenario is very likely to become a reality.
Probably not for .horse, but for many of the new gTLD applicants that we’ve become aware of over the last few years.
If you look at any high-profile application, .gay or .music for examples, we already see multiple applicants, one of which has usually done more to promote the TLD than the others.
Look at Sophia Bekele’s .africa application, which appears to be running into this problem already, despite all of her painstaking outreach.
There will probably be other applicants for these strings that we will know nothing about until April.
You don’t score any points in the Applicant Guidebook for having a loyal fan base, spending oodles of cash on marketing or simply being first to put out a press release.
If you find yourself in a contested string situation, the only way out under ICANN rules is an auction. The applicant with the deepest pockets wins.
Because I’m desperate to one day coin a term and have it stick, I’m going to call these usurpers “cuckoos”. Because, you know… that thing that cuckoos do with their young.
There’s a cuckoo business model, too.
While ICANN has only endorsed auctions as the method of settling contests over non-community strings, that’s there more as a deterrent than as a solution.
ICANN wants competing applicants to come to some kind of agreement between themselves before it reaches that stage and auctions are expected to be rather rare.
What we’re likely to see is a bunch of applicants withdrawing their applications after being paid off, in cash, equity, or some other consideration, by more serious rivals for the same string.
Nobody wants to risk spending millions in an auction if they can make the problem go away earlier with thousands.
Fortunately for the cuckoos, ICANN offers a substantial refund, $130,000, for applicants that drop out before their Initial Evaluation is completed.
This puts the ICANN fee for getting into pay-off talks with a “proper” applicant at a quite reasonable $55,000. If you can score a couple of points of equity in a new registry, it could be a bargain.
Of course, you’d have to hope that your rival does not call your bluff and try to force you to auction. If that happens, it would probably be wisest to admit defeat and cut your losses.
It’s high-risk, sure, but it’s potentially high reward too, and I’m certain it will happen, even if it doesn’t look like it’s happening.
It’s going to be a poker game, and no mistake.

How the US shaped the new ICANN

The US government pushed hard for ICANN to pay more attention to international governments, which caused it to delay .xxx and the new top-level domains program, a new document reveals.
A transcript of a December 2010 meeting between ICANN’s board and National Telecommunications and Information Administration chief Larry Strickling, published following a disclosure request by DomainIncite, outlines America’s “tough love” policy over ICANN.
It reveals that Strickling hauled ICANN over the coals over its opaque decision-making, its failure to adequately address its Affirmation of Commitments obligations, and its apparent lack of respect for its Governmental Advisory Committee.
The era of ICANN engaging maturely and in earnest with governments, witnessed over the last six months, arguably began in that meeting room in Cartagena, the evening of December 7, 2010.
But it did so partly because it fitted with Obama administration policy.
Strickling told the board that the multi-stakeholder model of internet governance was critical to US public policy on other matters, but that he wanted to ensure “the reality fits the model”:

we are cheerleaders for this. But as I’ve said to several of you, there’s a model but then there’s the reality. And it is incumbent on us at this particular point in time, more so than perhaps ever before, to do what we can to ensure the model, that the reality fits the model.
…
what it comes back to at the end of the day is our concern that we want to be able to demonstrate to the rest of the world that the quality of decision-making by this organization is absolutely top drawer.

ICANN was failing to live up to these ideals, he said. This was particularly true in the case of the new gTLD program, which many had expected ICANN to approve in Cartagena.
Strickling said that ICANN had not done enough to evaluate the pros and cons of the program:

I’ve heard expressed the idea that somehow I or the United States is opposed to the expansion of top-level domains. That’s not the case. I don’t have a view one way or the other. Frankly, that’s up to you to decide.
What I do care about is that when you decide that question, that you do it with a quality of decision-making with all of the information in front of you that you ought to have with the experts having given you the opportunity to ask questions and evaluate the pros and cons of decisions as fully as possible.

He later added:

It’s very clear that there are a lot of warning signs, just in the studies that have been done so far, incomplete as they are, to suggest that rushing headlong into this issue, I think, could be a mistake.
But I want to very quickly kind of backtrack from that remark in the sense that I don’t think it’s my place, in my role, to tell you how to make your decisions in terms of what the outcome should be.
And I do think I have a role to play and will play the role of evaluating the quality of decision-making, which largely is processes, but at the end of the day it really comes down to did the board have in front of it the facts it needed to have to make an informed decision, and does their decision, as reflected in their report of that decision, reflect a reasoned, mature, responsible decision.

It’s impossible to tell precisely what the tone of the meeting was from the transcript, but it’s possible to infer from the content that it was likely that of a parent scolding an unruly child.
At one point in the transcript, director Rita Rodin Johnston refers to Strickling as “Dad”, and Strickling says moments later that he does not want to “play schoolteacher” .
Seemingly pushing for it to mature as an organization, he urged ICANN to engage more seriously with the GAC, which had concluded a frustrating public meeting with the board just minutes earlier.

I don’t know what all of the top challenges are to ICANN in the next three to five years, but I absolutely believe that in that top three will be the issue of ICANN’s relations with foreign governments.
…
I think you all are missing a tremendous opportunity to deal with this issue of ICANN and Internet governance and the role of foreign governments, and it’s absolutely incumbent upon you all to find a way to work with the GAC along the lines that Heather [Dryden, GAC chair] and her fellow members expressed to you today.
…
I think that’s important for your ultimate preservation as an independent organization, and I cannot, I guess, emphasize enough the importance of working out these processes with the GAC in terms of receiving their advice, treating it with respect by responding to it promptly and fully, sitting down and mediating with them where it appears there are disagreements.

His words hit home.
Later that week, ICANN deferred a decision on approval of .xxx, pending formal discussions with the GAC, and it arranged to meet with the GAC in Brussels to discuss the new gTLDs program.
Over the last six months we’ve seen numerous changes to the Applicant Guidebook – addressing the concerns of trademark owners, for example – as a result of these consultations.
The structure of this process also appears to been formed during this private Cartagena meeting.
Strickling clashed with then-chairman Peter Dengate Thrush on their respective interpretations of ICANN’s bylaws as they relate to rejecting GAC advice.
Dengate Thrush expressed a view that could be characterized as “vote first, consult later” (my words, not his), which Strickling dismissed as “silliness”.
Strickling evidently won the argument; ICANN this year has started consulting formally with the GAC prior to voting on important issues.
The first beneficiary of this policy was .xxx applicant ICM Registry, which Strickling addressed directly during the Cartagena meeting:

But let me just say I don’t know how — based on, as I understand the facts on both top-level domains and ICM, how you can possibly have a mediation this week, in terms of the fact that information has not been provided to the GAC that they’ve asked for, the fact that they do not feel they understand exactly what the board has disagreed with and why.

This appears to be the reason we’re looking at .xxx domain names hitting the market in September, rather than right now.
Finally, I find it ironic that, given the meeting’s focus on transparency, it was Strickling, rather than ICANN, who asked for a transcription of the talks to be made.

>>PETER DENGATE THRUSH: We are currently scribing this session. But under our rules if you want us not to scribe this, we just turn it off.
>>LAWRENCE STRICKLING: I’m fine to be on the record. I have spoken to some of you individually, and I urged every one of you who I talked to individually to share my views as far as they wished. And I have absolutely no problem with anything I say here being in the public record.

Despite this exchange, the transcript did not become part of the public record until last Friday, 30 days after I filed a request using ICANN’s Documentary Information Disclosure Policy, which is a little like its Freedom Of Information Act.
I wish I’d filed it sooner.
You can download the PDF of the transcript here.

Calls to fix new gTLD “revolving door” at ICANN

ICANN’s CEO has acknowledged calls for a rethink of its ethics policies in light of the approval of the new generic top-level domains program and a recent high-profile staff departure.
Rod Beckstrom, during his opening remarks at ICANN’s international public meeting in Singapore last week, said he expects to lose staff to new gTLD applicants:

we could see a rise in departures as our highly qualified staff are recruited by other organizations, including some in this room, for their unique experience in this emerging area.
This would be a solid endorsement of our staff. Not unexpectedly, the first such resignation has already occurred.
I am pleased to hear the community begin discussions on whether ICANN ethics policies need to be strengthened.

The resignation referred to was that of Craig Schwartz, who has quit his job as ICANN’s chief gTLD registry liaison to head BITS’ application for .bank and other financial TLDs.
There are fears that the sudden influx of new money into the gTLD space could easily attract ICANN’s top talent away from the organization, making it less effective.
This looming problem is particularly troubling given ICANN’s recent staff retention problems.
Adrian Kinderis, CEO of likely applicant and registry services provider AusRegistry, said during a meeting between the ICANN board and the GNSO Council last week:

I need to ramp up some people very very quickly that know about this domain application process, and I’ll pay big dollars because there’s big dollars out there…
If you don’t do something, I will poach all your good people.

A small number of people who know the Applicant Guidebook inside-out – I’ve heard stories of meetings where ICANN executives use a whiteboard to brainstorm all the possible ways to game the program – would make invaluable recruits for registry services providers or consulting firms.
Senior vice president Kurt Pritz, who’s been heading the development of the Guidebook for the last few years, would be a killer hire if and when he decides to leave.
Currently, there’s nothing in these employees’ contracts that would prevent such talent leakage – although many have signed confidentiality agreements – Beckstrom said on Monday.
The GNSO has started talking about a policy that could help prevent a “revolving door” between the industry and ICANN, which is in many ways its regulator.
A very early-stage draft document compiled by Go Daddy’s Tim Ruiz has been circulated to the Council, outlining eight ideas for such a policy.
It could for example require contracted parties to agree not to hire ICANN staff during their employment and for a period thereafter, and vice versa.
It also suggests banning staff joining ICANN from a contracted party working on matters related to that company for two years after being hired.
Governments around the world already have such policies in place, although they vary wildly and are enforced with various degrees of effectiveness.
Perversely, the fact that everyone knows these talks are now underway may in fact accelerate registries’ headhunting of ICANN staff – there presumably can be no revolving door ethics policy violation before a revolving door ethics policy has been created.

VeriSign’s .net contract renewed

VeriSign has been given the nod to continue to run the .net domain registry after a vote by ICANN’s board of directors today.
The vote was 14-0, with director Bertrand De La Chappelle abstaining without explanation.
The renewal is hardly surprising – nobody thought for a second that VeriSign would fail to retain the contract – but the deal was controversial anyway, due to a Boing-Boing misunderstanding.
The contract still allows VeriSign to carry on raising prices, by up to 10% in any given year, and it still calls for ICANN to receive $0.75 per domain, which currently adds up to over $10 million a year.
The money is still ostensibly earmarked for special projects including extending ICANN’s outreach into developing nations and DNS security, and the resolution passed by the board today says:

ICANN commits to provide annual reporting on the use of these funds from .NET transaction fees.

This is presumably designed to address criticisms that it basically ignored its commitment under the 2006 .net agreement to set up two “special restricted funds” to manage .net cash, as I reported on here.

Crocker picked to lead ICANN

Steve Crocker has been elected chairman of ICANN’s board of directors, following the departure of Peter Dengate Thrush, whose term on the board expired today.
Described earlier this week by CEO Rod Beckstrom as “one of the uncles of the internet”, Crocker is the creator of the Request For Comment format for internet standards.
Replacing Crocker as vice-chair is fellow geek Bruce Tonkin, chief strategy officer of Melbourne IT, the Australian domain name registrar.
Both men were selected by secret board poll.
The board revealed the unsuccessful candidates for the first time too: Cherine Chalaby and Sebastien Bachollet stood for chair, while Bachollet and Ray Plzak stood for vice-chair.
Because Crocker’s term on the board ends in October, his long-term future depends now on whether the ICANN Nominating Committee decides to renew his term for another three years.
I expect it will. Last year, NomCom kicked out all three of its appointees whose terms were up, irking some. Declining to re-appoint Crocker this year could look like regicide by committee.
This leaves NomCom with only one pick in 2011. It will almost certainly be a woman from a region currently under-represented on the board. My guess is Russia.
Also joining the board today was .au’s Chris Disspain, who replaces Dengate Thrush as ccNSO appointee, and Canadian consultant Bill Graham, who replaces Rita Rodin Johnston from the GNSO.