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Clash over new gTLD risk fund

Kevin Murphy, December 4, 2011, Domain Policy

The ICANN community is split along predictable lines – domain registries versus intellectual property interests – in the latest controversy to hit the new top-level domains policy-making.

ICANN’s board of directors will meet this week to decide the fate of its new gTLD failure risk fund, an expensive buffer designed to protect registrants if new gTLD registries go bust.

The current plan is to ask each new gTLD applicant to front the entire cost of three years’ operation with a Continuing Operations Instrument – either a letter of credit or cash in escrow.

The idea is that if they go out of business, funds will be available to pay an emergency registry operator to, in the worst case scenario, gracefully wind down the gTLD.

Registries and some potential applicants are not happy about this idea. They say that the COI imposes too great a cost on start-up registries, which could lead to more failed businesses.

Since smaller businesses may not be able to secure letters of credit, they’ll have to escrow hundreds of thousands of dollars, rather than using the money to make sure they don’t fail in the first place.

Registries have proposed an alternative – a Continued Operations Fund – which would see all applicants deposit a flat fee of $50,000 into a central risk pool that ICANN would manage.

An ICANN public comment period on the COF that closed on Friday revealed the anticipated level of opposition from business and IP interests.

The main concern is that the COF represents a transfer of wealth from rich companies, which would easily and cheaply qualify for a letter of credit, to less well-funded applicants.

The COF “seeks to subsidize certain registry operators instead of allowing the market itself (via letter of credit based upon applicant viability) to determine the level of risk for each applicant”, Claudio DiGangi of the International Trademark Association wrote.

Steve Metalitz, president of ICANN’s Intellectual Property Constituency, echoed INTA’s concerns, adding the IPC’s suspicions about why the COF has been proposed:

[The COF] allows more underfunded applicants into the application pool which will in turn lead to more registry failures, cost to ICANN, and poor outcomes for registrants. While this may be good in the short term for members of the Registry Stakeholder Group (RySG) who desire to provide backend services to such underfunded applicants, the short term economic gain of members of one SG should not be prioritized over the risks to registrants and ICANN that the COF represents

One member of the IPC has suggested that if ICANN were to introduce a COF now, it would give opponents of the new gTLD program grounds to sue, under California insurance law, to put it to a halt.

On the pro-COF side, .org manger the Public Interest Registry said that the current COI plan discourages companies for applying for new gTLDs, which is at odds with ICANN’s goals of increasing competition in the registry space.

PIR’s director of policy Paul Diaz also points out that letters of credit will be hard to come by for companies in certain countries, which may lead to less geographically diverse applicants.

Somewhat surprisingly, Minds + Machines CEO Antony Van Couvering, perhaps sensing which way the wind is blowing at ICANN, has reluctantly backed the original COI model, but suggests a “simple short-term fix” to reduce the cost to applicants.

When determining the amount of the COI, applicants should be free to base it on their own “worst case scenario” registration volume projections, rather than their “most likely” models, on the basis that registries are unlikely to go out of business if they meet their revenue targets:

Presumably if you’re hitting your numbers you’re in good shape financially. It’s the low numbers you have to worry about. Setting the amount of the COI at this more reasonable and likely threshold will take care of the vast majority of failures.

ICANN only received comments from eight people on the COF proposal, and unsurprisingly they’re all (with one possible exception) looking out for their own financial interests.

Without a crystal ball, deciding which model will be “best” for the new gTLD program is a very tough call, but ICANN’s board of directors is expected to do so on Thursday.

US Senate to hold new gTLDs hearing

Kevin Murphy, December 2, 2011, Domain Policy

A US Senate committee is to hold a hearing into ICANN’s new generic top-level domains program next Thursday.

The Committee on Commerce, Science, and Transportation will “examine the merits and implications of this new program and ICANN’s continuing efforts to address concerns raised by the Internet community.”

It will be webcast on the Committee’s web site.

It is believed to have been scheduled due to lobbying by the Association of National Advertisers, which has an ongoing campaign to put a stop to the new gTLD program.

It will follow a similar hearing by the House Subcommittee on Intellectual Property, Competition and the Internet in May, which was used to vent outrage about the program but ultimately delivered nothing.

(Note: this story has been updated from the originally posted version to reflect information contained in the official announcement.)

DotGreen hires former Neustar exec

Kevin Murphy, December 2, 2011, Domain Registries

New gTLD applicant DotGreen has tapped former Neustar vice president Tim Switzer to be its new chief operating officer and chief financial officer.

Switzer was vice president of registry services at Neustar. It’s the first example I can recall of a senior exec from a registry services provider joining a single-gTLD applicant.

DotGreen, naturally enough, plans to apply to ICANN for the .green top-level domain next year. It’s a not-for-profit company that hopes to channel funds into environment projects.

Sedari hires Fay Howard as COO

Kevin Murphy, December 2, 2011, Domain Services

New gTLDs start-up Sedari has recruited Fay Howard, formerly general manager of CENTR, the Council for European National Top Level Domain Registries, as its new chief operating officer.

Howard has also previously worked at Nominet and Eurid, where she wrote the winning application for the .eu registry contract, according to Sedari.

It’s one of a number of recent senior hires for the company, which came out of stealth mode this summer to provide new gTLD applicants with application and registry management services.

Last month, the company hired Philip Shepard as director of policy.

Bulgaria told to forget about .бг

Kevin Murphy, December 1, 2011, Domain Policy

ICANN CEO Rod Beckstrom has advised Bulgarians to admit defeat in their ongoing campaign to have .бг approved as a local-script top-level domain to match .bg.

The country’s application for the Cyrillic label was rejected by ICANN’s IDN ccTLD Fast Track program last year because it was found to look too similar to Brazil’s .br.

Nevertheless, the local government and domain name groups have continued to press for the right of appeal, and have indicated they may apply again.

But in an interview with Novinite published today, Beckstrom says:

I would advise the Bulgarians to go for something else. The initial application for .бг was unsuccessful.

The job of ICANN, the organization, is to implement the policies that are developed by the global communities. Those communities did not allow the initial application to go through because of potential visual confusion. So I think the Bulgarians can go back and they can choose what they want to apply for.

The Bulgarians can apply for a three-character name, they can apply for .българия in Cyrillic, it’s really up to the local community.

He goes on to say that Bulgarians could wait for a change in policies then apply again, they could change their desired string, or they could abandon their plans altogether.

However, surveys have found little appetite among the Bulgarian public for alternative strings such as .бгр, .българия, .бя or .бъл.

It’s a tricky problem for ICANN, which is first and foremost tasked with ensuring DNS stability and security.

Confusingly similar TLDs lend themselves to security risks such as phishing, and my understanding is that if .бг were to be approved it would face opposition from interests in Brazil.

The Novinite interview also touches on the possibilities of .софия and .Пловдив, to represent the Bulgarian cities of Sofia and Plovdiv.

The .бг issue was the subject of some apparently heated discussion during the recent Domain Forum new gTLDs conference in Sofia, but I understand Beckstrom had left before that part of the agenda.

You can now watch the entire Domain Forum, including Beckstrom’s introductory keynote, for free on YouTube.