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It’s open season on ICANN as judge rules new gTLD applicants CAN sue

Kevin Murphy, April 13, 2016, Domain Policy

DotConnectAfrica has won a California court ruling that will allow it to continue suing ICANN over its twice-rejected .africa gTLD application.

District judge Gary Klausner ruled yesterday that the litigation waiver all applicants had to sign when they applied may be unenforceable.

“The Court finds substantial questions as to the Release, weighing toward its unenforceability,” he wrote (pdf).

California law says that such waivers cannot stop people being sued for fraud, and fraud is what DCA is alleging, he explained.

DCA alleges that ICANN intended to deny DCA’s application after the IRP proceeding under any pretext and without a legitimate reason.

The evidence suggests that ICANN intended to deny DCA’s application based on pretext. Defendants have not introduced any controverting facts. As such, the Court finds serious questions regarding the enforceability of the Release due to California Civil Code § 1668.

The judge granted DCA’s request for a preliminary injunction that will prevent it from delegating .africa to successful applicant ZACR.

ZACR has the backing of the African Union Commission and, per ICANN rules, over 60% of the governments in Africa.

DCA applied for .africa with no government support, but with an AUC letter of support than had already been retracted. The company claims that the AUC was not allowed to withdraw its endorsement under ICANN rules.

But it doesn’t seem to matter what the governments of Africa want. Klausner wrote:

On balance, the Court finds it more prejudicial to the African community, and the international community in general, if the delegation of .Africa is made prior to a determination on the fairness of the process by which it was delegated.

Sorry Africa, no gTLD for you yet!

The case continues…

No, .kids isn’t a community either

Kevin Murphy, April 12, 2016, Domain Registries

DotKids Foundation has comprehensively lost is .kids Community Priority Evaluation.

The company’s CPE results came out at the weekend (pdf), showing a score of 6 out of the 16 available points, a long way short of the 14-point passing score.

Like other “community” new gTLD bids before it, .kids failed because the Economist Intelligence Unit panel decided that the application was an attempt to create a community rather than represent an existing one. It wrote:

The Panel determined that this application refers to a “community” construed to obtain a sought-after generic word as a gTLD string, and that the application is attempting to organize the various groups mentioned in the documentation through a gTLD.

The application scored a big fat 0/4 on the question of whether the community exists and, as a knock-on effect, another 0/4 on whether the .kids string represents the community.

It picked up 3/4 for its registration policies and 3/4 on community endorsement.

The CPE failure means DotKids will have to face rival Amazon at auction, where one imagines the not-for-profit foundation will have a hard time winning.

ICANN’s CPE pipeline currently only has one active application, where Merck KGaA is fighting to avoid an auction with rival Merck Registry Holdings, Inc.

The latter .merck, and Vistaprint’s .webs application, have both also been invited to CPE.

Minds + Machines dumps back-end and registrar in Nominet, Uniregistry deals

Minds + Machines is to get out of the registrar and back-end registry services markets in separate deals with Nominet and Uniregistry.

The cost-saving shake-up will lead to about 10 job losses, or about 25% to 30% of its current headcount, CEO Toby Hall told DI this morning.

Under the Nominet deal, M+M will outsource the back-end registry functions for 28 new gTLDs, currently managed in-house, to the .uk ccTLD manager.

The deal covers all the gTLDs for which M+M is the contracted party (such as .law, .cooking and .fashion), as well as the four it runs in partnership (eg .london) and the five where it currently acts as back-end for a third party registry (eg .broadway).

The company also plans to dump its “unprofitable” registrar entirely, migrating its existing customers to Uniregistry’s Uniregistrar business.

About 49,000 domains will be affected by this move, Hall said.

Uniregistry will pay M+M a commission over the lifetime of the accounts.

Focusing on the registry business was the plan from the moment Hall took over M+M, following a shareholder coup that kicked out founding CEO Antony Van Couvering in January.

Hall told DI:

It [previously] had a very ambitious plan. It wanted to be vertically integrated, but the considered view is there are people out there who are far better able to run parts of the exercise than ourselves, both on the RSP piece and likewise the registrar piece. The strategy from day one was to rapidly evolve into becoming a business-to-business marketing-led registry business and radically overhauling our cost structure at the same time.

The company is currently in a financial quiet period and will not yet disclose the amount of savings it expects to reap, Hall said. He added:

Reducing cost isn’t a strategy for growth, and as a business that will be where we will be judged. Growing our portfolio, growing our domains under management, growing our revenue within those domains. That’s what the business has to be focused on. We see within the industry that the highest value is in the [TLD] ownership part.

The job losses are expected to be largely on the technical side of the house.

The RSP outsourcing means that Nominet significantly boosts its stable of managed TLDs. While it’s in the top five back-ends in terms of DUM (due to the 11 million in .uk) its portfolio of clients there is relatively small, largely limited to a handful of dot-brands.

Nominet CEO Russell Haworth said in a statement:

This partnership takes us into the top tier of registry operators globally by volume of TLDs and compliments the brands we currently manage, such as .BBC, .Bentley and .Comcast. It also underlines our long-term strategy to provide a more diversified range of services to gTLDs and registrars.”

With the Uniregistry registrar deal, Hall said that competing with its own channel “was just not right for us”.

It might be worth noting that Uniregistry is actually a vertically integrated triple-play along the lines of M+M, also, managing its own back-end, registry and registrar businesses.

Hall said that the M+M registrar had sold mainly to domain investors with little interest in buying value-added services such as email and hosting, which is often where much of the profit lies.

Both deals are subject to ICANN approvals, and client approval in case of the back-end transition, will be phased in over many months, and are expected to be finalized by the end of the year.

UPDATE: M+M said later this morning that it is changing its official company domain to mmx.co from mindsandmachines.com.

Rightside offers $10 renewals on premium names

Rightside is to run a promotion that will discount renewals on premium names down to .com prices.

From May 16 to June 30, if you buy any of the domains that Rightside has marked as premium — except the super-premium “Platinum” names — the wholesale renewal fee will be just $10.

Registrars will mark this up according to their own pricing models.

Normally, the price you pay at the checkout is the price you pay every year after that.

The deal is overtly targeted at domainers.

Rightside said: “At these reduced prices, you’ll have more time to find the right buyer for any domains you register, and incur lower fees to transfer to them once you do. If you’re looking to add high-quality domains to your portfolio, this will be the time to do it.”

The reduced renewals only apply to names registered during the six-week window, but they do pass on to subsequent registrants if the domain is sold.

Rightside is calling it a “first-of-its-kind” promo, but in reality it’s just a temporary regression to the once-standard industry model.

Remember, prior to the 2012-round gTLDs, only exceptions like .tv charged premium rates for renewals.

Premium renewals are now very commonplace, but are by no means the rule, in the new gTLD industry.

For Rightside, the offer means the company may experience a brief cash windfall as domainers, who generally hate premium renewals, take a chance on the registry’s names.

There’s also a potential marketing benefit to be gained from having more domainers on board as unpaid salespeople.

But it does rather suggest the premiums are not flying off the shelves at the rate Rightside wants.

The company recently disclosed that in the first few months of the year it made revenue of $674,610 selling 1,820 premium names, leading to an average price of $372. Twelve five-figure names had been sold.

Over its portfolio of 39 gTLDs, Rightside has flagged over 964,000 as premium, or about 25,000 per TLD.

China floats domain crackdown plans

Kevin Murphy, March 30, 2016, Domain Policy

The Chinese government is planning a crackdown on internet domains that could see mass censorship of non-Chinese names.

Draft rules floated for public comment this week are being widely reported as potentially blocking any domain that is not registered via a registry or registrar with a government license.

There are more than 50 provisions in the draft, but Article 37 is the one causing the most concern.

A translation published by Quartz yesterday has it reading like this:

Domain names engaging in network access within the borders shall have services provided by domestic domain name registration service bodies, and domestic domain name registration management bodies shall carry out operational management.

For domain names engaging in network access within the borders, but which are not managed by domestic domain name registration service bodies, Internet access service providers may not provide network access services.

At its worst, it suggests that every domain name not registered entirely through China-approved registries and registrars could be blocked from resolving in China.

You’d need a domain in .cn or a licensed gTLD, registered through a Chinese registrar, to access Chinese internet users, in other words.

But even Chinese locals who follow the issue closely are reportedly saying the regulations are vaguely worded, so it’s not clear exactly what would be blocked.

If you can read Chinese, the draft rules can be downloaded from this page. I’d be interested in hearing your take on them.

The rules also demand that domain name companies prevent domains carrying words deemed harmful from being registered.

There are additional controls on content — bans on porn, “rumor” and basically anything the Chinese government does not like — and registrant identity validation requirements.

The rules appear to be designed to replace the existing 2004 regulations that among other things force registrars and registries to obtain government licenses before the names they sell are allowed to resolve.

Those rules have led to several Western new gTLD registries, including Rightside, Famous Four Media and Minds + Machines, opening up corporate entities in China, in order to tap into the thriving market.

Local entities are of course subject to local laws — and ICANN contracts oblige them to abide by all applicable laws — which opens up the risk of Chinese regulations leaking out into the wider internet.

That almost happened with XYZ.com, which announced and then retracted (or clarified) an apparent plan to globally block domains deemed unsuitable by the Chinese censors.

It is inevitable that the proposals, which are open for public comment until April 25, will be used by US Congressional Republicans as a stick to beat ICANN and fight the imminent transition of IANA away from US government oversight.

High profile GOP politicians including presidential hopeful Ted Cruz have pointed to Chinese censorship as a risk of removing the USG from DNS root zone management.

But this isn’t really an ICANN problem as such. It’s a market forces problem.

Some new gTLD registries are seeing huge sales volume from Chinese registrants, who are trading many thousands of short, meaningless domains like baseball cards at the moment.

DI data shows that Chinese registrars accounted for 18.4 million gTLD domains in November 2015, up by 8.8 million domains in 12 months.

That number is likely to be several millions greater now, given the speculative activity of the last few months.

For registries, fully exploiting this market requires some sort of local presence, which in turn means exposing themselves to the already pretty bad Chinese censorship regime.

They’re going to have to be careful if they want to avoid China using the market to achieve the kind of back-door policy control it would never be able to obtain via ICANN.