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Can NameCheap reverse .org price cap scrap?

Kevin Murphy, July 25, 2019, Domain Policy

NameCheap has taken it upon itself to fight ICANN’s decision to remove price increase caps on .org. But does it stand a snowball’s chance in hell of winning?

The registrar has filed a Request for Reconsideration with ICANN, appealing the organization’s signing of a Registry Agreement with Public Interest Registry that allows PIR to raise prices by however much it wants, more or less whenever that it wants.

NameCheap, which had over 390,000 .org domains under management at the last count, says it is fighting for 700-odd of its customers whose comments, filed with ICANN, were allegedly not taken into account when the decision was made, along with registrars and everyone else that may be adversely impacted by unfettered .org price increases.

NameCheap thinks its business could be harmed if price increases are uncapped, with customers perhaps letting their domains expire instead of renewing. It’s RfR states:

The decision by ICANN org to unilaterally remove the price caps when renewing legacy TLDs with little (if any) evidence to support the decision goes against ICANN’s Commitments and Core Values, and will result in harm to millions of internet users throughout the world.

Unrestricted price increases for legacy TLDs will stifle internet innovation, harm lesser served regions and groups, and significantly disrupt the internet ecosystem. An incredible variety of public comments was submitted to ICANN from all continents (except Antarctica) imploring ICANN to maintain the legacy TLD price caps — which were completely discounted and ignored by ICANN org.

Before the new contract was signed, PIR was limited to a 10% increase in its .org registry fee every year. It didn’t always exercise that right, and has said twice in recent months that it still has no plans to increase its prices.

The new contract — which has already been signed and is in effect — was subjected to a public comment period that attracted over 3,200 comments, almost all of them expressing support for maintaining the caps.

Despite not-for-profit PIR’s protestations, many commenters came from the position that giving PIR the power to increase its fee without limit would very possibly lead to price gouging.

That ICANN allegedly “ignored” these comments is the key pillar of NameCheap’s RfR case.

The public comment period was a “sham”, the registrar claims.

But is this enough to make ICANN change its mind and (somehow) unsign the .org contract?

There are three ways, under ICANN’s bylaws, to win an RfR.

Requestors can show that the board or staff did something that contradicts “ICANN’s Mission, Commitments, Core Values and/or established ICANN policy(ies)”

They also win if they can show the decision was was taken “without consideration of material information” or with “reliance on false or inaccurate relevant information”.

It’s quite a high bar, and most RfRs are rejected by the Board Accountability Mechanisms Committee, which is the court of first instance for reconsideration requests.

Requestors rarely show up with sufficient new information sufficiently persuasive to kick the legs from under ICANN’s original decision, and the question of something contradicting ICANN’s core principles is usually a matter of interpretation.

For example, in this case, NameCheap is arguing that failing to side with the commenters who disagreed with the removal of price caps amounts to a breach of ICANN’s Core Value to make all decisions in consultation with stakeholders:

The ICANN org will decide whether to accept or reject public comment, and will unilaterally make its own decisions — even if that ignores the public benefit or almost unanimous feedback to the contrary, and is based upon conclusory statements not supported by the evidence. This shows that the public comment process is basically a sham, and that ICANN org will do as it pleases in this and other matters.

But one of ICANN’s stated reasons for approving the contract was to abide by its Core Value to depend “on market mechanisms to promote and sustain a competitive environment in the DNS market”. It doesn’t want to be a price regulator, in other words.

So we have a clash of Core Values here. It will be pretty easy for ICANN’s lawyers — who drafted the contract and will draft the resolutions of the BAMC and the full board — to argue that the Core Values were respected.

I think NameCheap is going to have a hard time here.

Even if it were to win, how on earth does one unsign a contract? As far as I can tell, ICANN has no termination rights that would apply here.

Where the RfR will certainly succeed is to force the ICANN board itself to take ownership, on the record, of the .org contract decision.

As ICANN explained to DI earlier this month, while the board was very much kept in the loop on the state of negotiations, it was senior staff that made all the calls on the new contract.

But an RfR means that the BAMC, which comprises five directors, will first have to raise their hands to confirm the .org decision was kosher.

NameCheap will then get a chance to file a rebuttal before the BAMC decision is handed to the full ICANN board for a confirmatory vote.

While the first two board discussions of the .org contract were not minuted, the bylaws contain an interesting feature related to RfRs that I’d never noticed before today:

If the Requestor so requests, the Board shall post both a recording and a transcript of the substantive Board discussion from the meeting at which the Board considered the Board Accountability Mechanisms Committee’s recommendation.

I sincerely hope NameCheap invokes this right, as I think it’s pretty important that we get some additional clarity on ICANN’s thinking here.

ICANN explains how .org pricing decision was made

ICANN has responded to questions about how its decision to lift price caps on .org, along with .biz and .info, was made.

The buck stops with CEO Göran Marby, it seems, according to an ICANN statement, sent to DI last night.

ICANN confirmed that was no formal vote of the board of directors, though there were two “consultations” between staff and board and the board did not object to the staff’s plans.

The removal of price caps on .org — which had been limited to a 10% increase per year — proved controversial.

ICANN approved the changes to Public Interest Registry’s contract despite receiving over opposing messages from 3,200 people and organizations during its open public comment period.

Given that the board of directors had not voted, it was not at all clear how the decision to disregard these comments had been made and by whom.

The Internet Commerce Association, which coordinated much of the response to the comment period, has since written to ICANN to ask for clarity on this and other points.

ICANN’s response to DI may shed a little light.

ICANN staff first briefed the board about the RA changes at its retreat in Los Angeles from January 25 to 28 this year, according to the statement.

That briefing covered the reasons ICANN thinks it is desirable to migrate legacy gTLD Registry Agreements to the 2012-round’s base RA, which has no pricing controls.

The base RA “provides additional safeguards and security and stability requirements compared to legacy agreements” and “creates efficiencies for ICANN org in administration and compliance enforcement”, ICANN said.

Migrating old gTLDs to the standardized new contract complies with ICANN’s bylaws commitment “to introduce and promote competition in the registration of domain names and, where feasible and appropriate, depend upon market mechanisms to promote and sustain a competitive environment in the DNS market”, ICANN said.

They also contain provisions forcing the registry to give advance notice of price changes and to give registrants the chance to lock-in prices for 10 years by renewing during the notice period, the board was told.

After the January briefing, Marby made the call to continue negotiations. The statement says:

After consultation with the Board at the Los Angeles workshop, and with the Board’s support, the CEO decided to continue the plan to complete the renewal negotiations utilizing the Base RA. The Board has delegated the authority to sign contracts to the CEO or his designee.

A second board briefing took place after the public comment periods, at the board’s workshop in Marrakech last month.

The board was presented with ICANN’s staff summary of the public comments (pdf), along with other briefing documents, then Marby made the call to move forward with signing.

Following the discussion with the Board in Marrakech, and consistent with the Board’s support, the CEO made the decision for ICANN org to continue with renewal agreements as proposed, using the Base gTLD Registry Agreement.

Both LA and Marrakech briefings “were closed sessions and are not minuted”, ICANN said.

But it appears that the board of directors, while not voting, had at least two opportunities to object to the new contracts but chose not to stand in staff’s way.

At the root of the decision appears to be ICANN Org’s unswerving, doctrinal mission to make its life easier and stay out of price regulation to the greatest extent possible.

Reasonable people can disagree, I think, on whether this is a worthy goal. I’m on the fence.

But it does beg the question: what’s going to happen to .com?

Cloudflare “bug” reveals hundreds of secret domain prices

The secret wholesale prices for hundreds of TLDs have been leaked, due to an alleged “bug” at a registrar.

The registry fees for some 259 TLDs, including those managed by Donuts, Verisign and Afilias, are currently publicly available online, after a programmer used what they called a “bug” in Cloudflare’s API to scrape together price lists without actually buying anything.

Cloudflare famously busted into the domain registrar market last September by announcing that it would sell domains at cost, thumbing its nose at other registrars by suggesting that all they’re doing is “pinging an API”.

But because most TLD registries have confidentiality clauses in their Registry-Registrar Agreements, accredited registrars are not actually allowed to reveal the wholesale prices.

That’s kind of a problem if you’re a registrar that has announced that you will never charge a markup, ever.

Cloudflare has tried to get around this by not listing its prices publicly.

Currently, it does not sell new registrations, instead only accepting inbound transfers from other registrars. Registry transaction reports reveal that it has had tens of thousands of names transferred in, but has not created a significant number of new domains.

(As an aside, it’s difficult to see how it could ever sell a new reg without first revealing its price and therefore breaking its NDAs.).

It appears that the only way to manually ascertain the wholesale prices of all of the TLDs it supports would be to buy one of each at a different registrar, then transfer them to Cloudflare, thereby revealing the “at cost” price.

This would cost over $9,500, at Cloudflare’s prices, and it’s difficult to see what the ROI would be.

However, one enterprising individual discovered via the Cloudflare API that the registrar was not actually checking whether they owned a domain before revealing its price.

They were therefore able to compile a list of Cloudflare’s prices and therefore the wholesale prices registries charge.

The list, and the script used to compile it, are both currently available on code repository Github.

The bulk of the list comprises Donuts’ vast portfolio, but most TLDs belonging to Afilias (including the ccTLD .io), XYZ.com and Radix are also on there.

It’s not possible for me to verify that all of the prices are correct, but the ones that are comparable to already public information (such as .com and .net) match, and the rest are all in the ballpark of what I’ve always assumed or have been privately told they were.

The data was last refreshed in April, so without updates its shelf life is likely limited. Donuts, for example, is introducing price increases across most of its portfolio this year.

This latest Chinese bubble could deflate ccTLD growth

With many ccTLD operators recently reporting stagnant growth or shrinkage, one registry has performed stunningly well over the last year. Sadly, it bears the hallmarks of another speculative bubble originating in China.

Verisign’s latest Domain Name Industry Brief reported that ccTLDs, excluding the never-shrinking anomaly that is .tk, increased by 1.4 million domains in the first quarter of the year.

But it turns out about 1.2 million of those net new domains came from just one TLD: Taiwan’s .tw, operated by TWNIC.

Looking at the annual growth numbers, the DNIB reports that ccTLDs globally grew by 7.8 million names between the ends of March 2018 and March 2019.

But it also turns out that quite a lot of that — over five million names — also came from .tw.

Since August 2018, .tw has netted 5.8 million new registrations, ending May with 6.5 million names.

It’s come from basically nowhere to become the fifth-largest ccTLD by volume, or fourth if you exclude .tk, per the DNIB.

History tells us that when TLDs experience such huge, unprecedented growth spurts, it’s usually due to lowering prices or liberalizing registration policies.

In this case, it’s a bit of both. But mostly pricing.

TWNIC has made it much easier to get approved to sell .tw names if you’re already an ICANN-accredited registrar.

But it’s primarily a steep price cut that TWNIC briefly introduced last August that is behind huge uptick in sales.

Registry CEO Kenny Huang confirmed to DI that the pricing promo is behind the growth.

For about a month, registrants could obtain a one-year Latin or Chinese IDN .tw name for NTD 50 (about $1.50), a whopping 95% discount on its usual annual fee (about $30).

As a result, TWNIC added four million names in August and September, according to registry stats. The vast majority were Latin-script names.

According to China domain market experts Allegravita, and confirmed by Archive.org, one Taiwanese registrar was offering free .tw domains for a day whenever a Chinese Taipei athlete won a gold medal during the Asian Games, which ran over August and September. They wound up winning 17 golds.

Huang said that the majority of the regs came from mainland Chinese registrants.

History shows that big growth spurts like this inevitably lead to big declines a year or two later, in the “junk drop”. It’s not unusual for a registry to lose 90%+ of its free or cheap domains after the promotional first year is over.

Huang confirmed that he’s expecting .tw registrations to drop in the fourth quarter.

It seems likely that later this year we’re very likely going to see the impact of the .tw junk drop on ccTLD volumes overall, which are already perilously close to flat.

Speculative bubbles from China have in recent years contributed to wobbly performance from the new gTLD sector and even to .com itself.

Dodgy registrars could be banned from .org promotions

The worse a registrar is at tackling abuse, the more likely it is to be excluded from promotions in the .org space, according to a new policy from Public Interest Registry.

The .org registry said today that it is introducing a new “Quality Performance Index” to rate its registrars according to the quality of their registrations.

They’ll be ranked according to three criteria: abuse takedown, renewal rates, and domain usage.

Those that score above a certain threshold will be pre-qualified for promotions. The others will be encouraged to talk to their PIR rep about things they could do to get their scores up.

This kind of mechanism should in theory make it relatively easy to separate registrars into conscientious corporate citizens on the one hand and fly-by-night spam-friendly jerks on the other.

Keeping the bad guys away from the discounts could go a long way to keeping .org a relatively healthy zone.

But I expect there may be concern from the middle-ground of the registrar space, where we have well-meaning but under-resourced registrars that may find their scores wanting.

An additional concern may be that PIR said it intends to change the score threshold depending on the promotion, which appears to give it the ability to exclude registrars more or less at will.

The QPI initiative also extends to PIR’s newer, lesser-used gTLDs.