Many gTLDs are performing more poorly than expected and their registries want some money back from ICANN to compensate.
The Registries Stakeholder Group this week asked ICANN for a 75% credit on their quarterly fees, which they estimate would cost $16.875 million per year.
The money would come from leftover new gTLD application fee money, currently stashed in an ICANN war chest valued at nearly $100 million.
The RySG, in a letter to ICANN (pdf), also asked for $3 million from the fund to be used to pay for advertising the availability of new gTLDs.
“These measures combined would support ICANN’s mission to promote competition for the public interest and operational interoperability of the internet,” the proposal states.
Currently, all gTLDs on the 2012-round contract have to pay ICANN $25,000 per year, split into quarterly payments, in fixed fees.
Transaction volume over 50,000 transactions per year is taxed at $0.25 per add, renewal or transfer.
The RySG wants the $6,250 quarterly fee reduced by $4,687.50 for a year, with the possibility of the discount being renewed in subsequent years.
In its letter, it cites an example of 900 delegated gTLDs being affected, which would cost $16.875 million per year.
However, that’s only three quarters of the total number of new gTLDs in the root. That currently stands at over 1,200 string, so the actual cost would presumably be closer to £23 million.
Because the new gTLD program, with its $185,000 application fees, was never meant to turn a profit, the RySG thinks it’s fair that the excess money comes back to the companies that originally paid it.
The rationale for the discount is that many new gTLDs (not all, as the RySG is quick to point out) are struggling under poor sales volumes, meaning a 5,000-name TLD, of which there are many, is in effect costing the registry $5 per name per year in fixed ICANN fees.
But that rationale does not of course apply to all new gTLDs. There are currently almost 470 dot-brand gTLDs in the root, which have business models oriented on harder-to-quantify ROI rather than sales volumes and profits.
It’s not clear from the RySG letter whether the discount would apply to all gTLDs or only those with a straightforward old-school profit motive.
ICANN has slapped .feedback operator Top Level Spectrum with a contract breach notice after a huge complaint about alleged fraud filed by a gang of big brands.
The company becomes the third new gTLD to be hit by a breach notice, and the first to receive one as a result of losing a Public Interest Commitments Dispute Resolution Process case.
While TLS dodged the “fraud” charges on a technicality, the breach is arguably the most serious found by ICANN in a new gTLD registry to date.
The three-person PICDRP panel found TLS was in violation of the following commitment from its registry agreement:
Registry Operator will operate the TLD in a transparent manner consistent with general principles of openness and non-discrimination by establishing, publishing and adhering to clear registration policies.
But TLS dodged the more serious charges of “fraudulent” behavior, which it denied, largely on the technicality that its PICs only require it to bar its registrants from such behavior.
There’s nothing in the PICs preventing the registry from behaving fraudulently, so the PICDRP panel declined to rule on those allegations, saying only that they “may be actionable in another forum”.
The complainants, which filed their 1,800-page complaint in October, were MarkMonitor and a bunch of its clients, including Adobe, American Apparel, Best Buy, Facebook, Levi and Verizon.
They’d claimed among other things that 70% of .feedback domains were trademarked names actually registered by the registry, and that TLS had stuffed each site with reviews either paid for or scraped from services such as Yelp!.
They claimed that Free.Feedback, a free domains service hosted by an affiliated entity, had been set up to auto-populate Whois records with the names of brand owners (or whoever owned the matching .com domain) even when the registrant was not the brand owner.
This resulted in brand owners receiving “phishing” emails related to domains they’d never registered, the complainants stated.
TLS denied all all the allegations of fraud, but the PICDRP panel wound up not ruling on many of them anyway, stating:
the Panel finds that Respondent’s Registry Operator Agreement contains no covenant by the Respondent to not engage in fraudulent and deceptive practices.
The only violations it found related to the transparency of .feedback’s launch policies.
The panel found that TLS had not given 90 days notice of policy changes and had not made its unusual pricing model (which included an extra fee for domains that did not resolve to live sites) transparent.
The registry had a number of unusual launch programs, which I outlined in December 2015 but which were apparently not adequately communicated to registrars and registrants.
The panel also found that Free.Feedback had failed to verify the email addresses of registrants and had failed to make it easy for trademark owners to cancel domains registered in their names without their consent.
Finally, it also found that TLS had registered a bunch of trademark-match domain names to itself during the .feedback sunrise period:
self-allocating or reserving domains that correspond to the trademark owners’ marks during the Sunrise period constitutes a failure by the Respondent to adhere to Clause 6 of its Registration and Launch policies, versions 1 and 2. According to the policies, Sunrise period is exclusively reserved for trademark owners
TLS, in its defense, denied that it had self-allocated these names and told the panel it had “accidentally” released them into the zone file temporarily.
As a result of the PIC breaches found by the panel, ICANN Compliance has issued a breach notice (pdf) against the company.
To cure the breach, and avoid having its Registry Agreement taken away, TLD has to, by April 15:
Provide ICANN with corrective and preventative action(s), including implementation dates and milestones, to ensure that Top Level Spectrum will operate the TLD feedback in a transparent manner consistent with general principles of openness and nondiscrimination by establishing, publishing and adhering to clear registration policies;
That seems to me like it’s probably vague enough to go either way, but I’d be surprised if TLS doesn’t manage to comply.
ICANN’s Governmental Advisory Committee has clashed with its board of directors over the lack of protections for two-letter domain names that match country codes.
The board has now formally been urged to reconsider its policy to allow registries to sell these names, after angry comments and threats from some GAC members.
Governments from Brazil, Iran, China and the European Union are among at least 10 angered that the names are either not adequately protected or only available for exorbitant prices,
The debate got very heated at ICANN 58 here in Copenhagen on Wednesday morning, during a public session between the GAC and the board, with Iran’s outspoken GAC rep, Kavous Arasteh, almost yelling at Chris Disspain, the board’s point man on the topic.
Arasteh even threatened to take his concerns, if not addressed, to the International Telecommunications Union when it convenes for a plenipotentiary next year.
“Your position is not acceptable. Rejected categorically,” he said.
“The multistakeholder process was not easily accepted by many countries. Still people have difficulty with that,” he said. “We have a plenipotentiary coming in 2018, and we will raise the issue if the matter is not resolved… It is not always commercial, government also has some powers, and we exercise our powers.”
Invoking the ITU is a way to turn a relatively trivial disagreement into an existential threat to ICANN, a typical negotiating tactic of governments that don’t get what they want from ICANN.
The relatively trivial disagreement in this case is ICANN’s decision to allow gTLD registries to release all previously reserved two-letter strings.
In November, ICANN approved a policy that released all two-letter strings on the proviso that registrants have to assert that they will not pass themselves off as affiliated with the countries concerned.
Registries also were given a duty to investigate — but not necessarily act upon — governmental complaints about confusion.
ICANN thinks that this policy is perfectly compliant with the GAC’s latest official advice, supplied following the Helsinki meeting last June, which asked ICANN to:
urge the relevant Registry or the Registrar to engage with the relevant GAC members when a risk is identified in order to come to an agreement on how to manage it or to have a third-party assessment of the situation if the name is already registered.
Disspain patiently pointed out during Wednesday’s session that governments have no legal rights to their ccTLD strings at the second level, and that most of the complaining governments don’t even protect two-letter strings in their own ccTLDs.
But some GAC reps disagreed.
China stated (via the official interpreter): “We believe the board doesn’t have the right or the mandate to decide whether GAC members have the right over two-character domain names.”
While no government spoke in favor of the ICANN policy on Wednesday, the complaining governments do appear to be in a minority of the GAC.
Despite this, they seem to have been effective in swaying fellow committee members to issue some stern new advice. The Copenhagen communique, published last night (pdf), reads:
a. The GAC advises the ICANN Board to:
I. Take into account the serious concerns expressed by some GAC Members as contained in previous GAC Advice
II. Engage with concerned governments by the next ICANN meeting to resolve those concerns.
III. Immediately explore measures to find a satisfactory solution of the matter to meet the concerns of these countries before being further aggravated.
IV. Provide clarification of the decision-making process and of the rationale for the November 2016 resolution, particularly in regard to consideration of the GAC advice, timing and level of support for this resolution.
ICANN is being compelled to retroactively revisit a policy that was issued in compliance with previous GAC advice, it seems.
The next ICANN meeting is being held in Johannesburg in June, so the clock is ticking.
Two-letter domains are valuable properties even in new gTLDs. With each expected to sell for thousands, two-letter names are likely to be a multimillion dollar windfall for even moderately sized portfolio registries.
Uniregistry CEO Frank Schilling has expressed his “surprise” that GoDaddy has decided to stop selling his company’s gTLDs, but said he expects the registrar to return in future.
GoDaddy’s decision to stop new registrations and inbound transfers for Uniregistry’s portfolio of gTLDs came after the registry revealed price increases for 16 strings that ranged from nominal to over 3,000%.
The registrar told Domain Name Wire yesterday that Uniregistry’s move presented “an extremely poor customer experience” and “does not reflect well on the domain name industry”.
Registrars are of course the customer-facing end of the domain name industry, and the burden of explaining renewal price increases of 5x falls on their shoulders.
But Schilling seems to expect the ban to be temporary.
“We are extremely surprised by GoDaddy’s reaction but are pleased that our extensions are available at many other registrars who support our approach. We remain ready to support GoDaddy when they decide on a path which works for their customers,” he told DI today.
“We expect them to return,” he added.
It’s a plausible prediction. GoDaddy’s statement to DNW said Uniregistry had been cut off “until we can assess the impact on our current and potential customers”, which suggests it’s not necessarily permanent.
GoDaddy is Uniregistry’s first or second-largest registrar in most of the affected gTLDs.
But because the gTLDs in question have so few domains in them, the number of GoDaddy-sponsored domains is typically under 1,000 per gTLD.
Even in the much larger zones of .click and .link (which are receiving small price increases and will still wholesale for under $10), GoDaddy’s exposure is just a few thousand domains and it’s nowhere near the market leader.
I wonder how much of GoDaddy’s decision to drop Uniregistry has to do with the reaction from domain investors.
Ever since DI broke the news of the price increases a week ago, there’s been a stream of angry domainer blog and forum posts, condemning Schilling and Uniregistry for the decision and using the move as a stick to batter the whole new gTLD program.
For registrars, it doesn’t necessarily strike me a terrible deal.
While they will have to deal with customer fallout, over the longer term higher wholesale prices means bigger margins.
Registrars are already adding about a hundred bucks to the $300 cost of a .game domain, and the price increase from $10 to $300 of the Spanish equivalent, .juegos, likely means similar margins there too.
Uniregistry is to massively increase the price of some of its under-performing new gTLDs in an effort to keep them afloat.
Sixteen TLDs from the company’s portfolio of 27 will see price increases of up to 3,000% starting September 8, CEO Frank Schilling confirmed to DI today.
“We need more revenue from these strings, especially the low volume ones, without question,” he said. “We can’t push on a string and stoke demand overnight. So in order for that string to survive as a standalone it has to be profitable.”
While domainers have taken to new gTLDs in greater numbers than Schilling anticipated, demand among worldwide consumers has been slower than expected, Schilling said.
“If you have a space with only 5,000 registrations, you need to have a higher price point to justify its existence, just because running a TLD isn’t free,” he said.
The alternative to repricing would be to sell the TLD in question to a competitor, which in turn would then be forced to reprice anyway, he said.
The TLDs seeing the biggest price hikes are .hosting and .juegos (Spanish for “games”) which are going up from about $20 retail and about $10 retail respectively to about $300 apiece.
Schilling said he believed that true web hosts could afford the new pricing. The .juegos increase is modeled on what Uniregistry has been doing with .game, which currently retails for closer to $400.
At the budget, sub-$10 end of the portfolio, .click and .link are to see fees rise by a buck or two per year.
Names in .audio, .blackfriday, .diet, .flowers, hiphop .guitars and .property, currently priced in the $10 to $25 range, will all start retailing for about $100 per year.
The other affected TLDs are .christmas, .help, .sexy and .tattoo, which will all see big increases but stay in the sub-$100 range.
The TLDs seeing the biggest price increases are among the ones with the fewest registrations — .juegos has about 1,000 names in its zone, while .hosting has fewer than 6,000. Most of the 16 TLDs have fewer than 10,000 names in their zones.
Uniregistry is no stranger to highly-priced domains. It runs .cars, .car and .auto, where it sells every domain at $2,888 a year retail (with no reserved premiums) but has fewer than 500 names in each zone.
Schilling said that in some ways he prefers this model to the more standard model of low-price base fees with high-price premiums.
The higher prices will likely lead in the short term to lower registration numbers (as speculators flee) but will give Uniregistry more cash to invest in marketing.
“That metering effect of high prices, we like that, in terms of trying to grow the namespace, and it gives us money we can use to try to market the strings to prosperity,” Schilling said.
“At a higher price point, the marketing can scale, but we just can’t do it on base registrations of ten bucks or twenty bucks,” he said.
He added that the higher base fee gives Uniregistry more flexibility to provide periodic discounts.
ICANN rules make it much easier to have a high base fee and keep it regularly discounted than to periodically increase fees, which requires six months notice.
“Between renewals promotions and pricing promotions, a lot of the effects of the price increases will be moot,” Schilling said.
Because the new prices don’t kick in until September, registrants are able to lock in pricing at current levels by renewing for up to 10 years.
While the price increases and Schilling’s relatively gloomy commentary will certainly fuel opponents of new gTLDs, whom are legion, Schilling is still bullish on the market, which he continues to characterize as a marathon rather than a sprint.
“Within ten years, will it be bigger? Absolutely. It’ll be quintuple what it is today,” he said. “But we need to get to 10 years, and to keep the lights on between here and there we need higher prices, without question.”