Top Level Domain Holdings is the latest portfolio applicant to slate the Governmental Advisory Committee’s advice on new gTLDs, calling it “troubling in principle” and “terrifying in practice”.
The company, which applied directly for 70 gTLDs and is involved in several others, filed its comments on the “safeguard advice” in the GAC’s Beijing communique with ICANN today.
The comments focus mainly on the overarching issues of governmental power and process, rather than delve into the nitty-gritty implementation problems presented by the advice.
TLDH CEO Antony Van Couvering wrote:
The Communiqué’s prescriptions define the opposite of a well-regulated sector. Instead of a clear process in which all concerns are weighed, the Communiqué sets up an ad-hoc GAC process from which the views of applicants are excluded.
Instead of clear rules to which industry players must adhere, ill-defined categories have been set up that applicants have a hard time even to understand.
Instead of a clear authority on who will determine policy, the ICANN community must now wonder who is in charge.
The comment points to the fact that the GAC’s 2007 principles on new gTLDs state that applicants should have a clear, objective process to follow, and that Beijing undermines that principle.
It also puts forth the view that the GAC appears to be trying to create policy unilaterally, and in a top-down manner that doesn’t give the Generic Names Supporting Organization a role.
The GAC Beijing Communiqué as enunciated in Section IV.1.b [the safeguard advice] unilaterally expands the role of the GAC from an advisory committee, with a remit of providing advice on policy originating in the GNSO, into a policy-making body from which other members of the ICANN community are excluded.
TLDH also notes that some parts of the advice are “not in themselves bad ideas” and that the company has offered to adopt some of them already in the Public Interest Commitments appended to its applications.
It comments follow those from rival Demand Media, which questioned the feasibility of implementing the GAC’s advice, last week.
Separately, over the weekend, Medicus Mundi International Network — an organization of healthcare non-governmental organizations — filed comments saying that the GAC advice does not go far enough.
Rather, it said, ICANN should delay the introduction of .health until a “broad-based consultation of the health community” can be carried out and a “multi-stakeholder” governance model for it created.
Following the news that Uniregistry and Top Level Domain Holdings are to work together on the .country new gTLD, larger portfolio applicant Donuts has said it’s not interested in similar arrangements.
While not entirely ruling out joint ventures along the lines of the .country tie-up, company VP of communications Mason Cole told DI that Donuts’ strategy is to completely own each of the new gTLDs it has applied for.
“We aren’t categorically ruling anything out, but any kind of proposal would have to be very compelling,” he said. “Our strategy from the beginning has been, and still is, to secure the strings we applied for and manage them ourselves.”
While TLDH and Uniregistry seem open to such partnerships, Donuts’ stance appears to reduce the likelihood of three-way joint ventures on the four applications for which the three companies are the only applicants.
Donuts is also in two-horse races on an additional 58 strings.
The company, which is believed to have raised $100 million to $150 million in venture capital funding, is a strong supporter of private auctions to settle contention sets.
It originally brought the auctioneer Cramton Associates, which runs ApplicantAuction.com. into the ICANN process.
Cramton, according to a blog post this week, expects to run a mock auction May 23 and start auctions proper five days later.
ICANN does not expect to finish delivering the results of Initial Evaluation until August, so it seems possible some applicants may participate before they know if they’ve passed.
Top Level Domain Holdings and Uniregistry have inked a deal to go splits on the proposed .country registry, the first publicly announced settlement of a new gTLD contention set.
The two companies are the only applicants for .country, so assuming one or both applications are approved by ICANN no auction will be required to decide who gets to run it.
It’s not yet clear which applicant will drop out of the race; it appears that TLDH and Uniregistry are waiting for their Initial Evaluation results to come out before making that call.
A new 50:50 joint venture will be formed to take over the contract. The companies said in a press release:
Under the conditional heads of terms for the proposed joint venture, either Uniregistry or TLDH will withdraw its application and, once the surviving applications is approved by ICANN, the authority to operate .country will be transferred to the new joint venture. The transfer will require ICANN approval, which the directors of the Company fully expect to be forthcoming.
Uniregistry’s prioritization number is 1232 and TLDH’s is 664. If TLDH passes Initial Evaluation, it would make sense for Uniregistry to pull out at that time to speed up the time to delegation.
TLDH CEO Antony Van Couvering said the deal is “pro-competitive and will result in lower prices for consumers”.
Uniregistry and TLDH are competing on another 20 gTLD strings, but .country is the only two-horse race they’re involved in.
Two new gTLD portfolio applicants have withdrawn a total of nine applications following advice from ICANN’s Governmental Advisory Committee.
Top Level Domain Holdings, owner of Minds + Machines, said it has binned its bids for .free, .sale, .spa and .zulu “as a consequence of these warnings, and after discussion with relevant governments”.
.spa and .zulu are both on the GAC’s shortlist for further consideration on geographical/cultural grounds (Spa is also a town in Belgium) and were due to be discussed at the ICANN meeting in Durban this July.
It’s less clear why TLDH has chosen to scrap .free and .sale, however.
Both were among over 300 bids to receive GAC advice on “consumer protection” grounds, but they were by no means the only TLDH applications to get hit with the same stick.
The company has 21 applications with “consumer protection” advice.
Its bids for .book and .cloud, for example, are listed in exactly the same place in the GAC’s Beijing communique as .free and .sale, and have similar contention profiles, but have not been withdrawn.
TLDH said in a press release that it expects to get a $520,000 from ICANN for withdrawing the bids and another $144,000 from the release of its Continued Operations Instrument risk fund.
Meanwhile, entrepreneur Bekim Veseli has yanked the remaining five of his original seven gTLD bids, all of which had been hit by advice on the basis that they’re “corporate identifiers” such as .inc and .corp.
I understand this withdrawals may not have related directly to the GAC advice, however, and may be also due to the fact that they’re all highly contested strings.
Uniregistry’s revelation that it believes private auctions to resolve new gTLD contention sets may be illegal — based on its talks with the US Department of Justice — has caused widespread angst.
Following yesterday’s news, some commentators — some interested — questioned the company’s motive for revealing that Justice had declined to give private auctions a clean bill of health under antitrust law.
Others wondered whether Justice had been given the full facts, whether it had understood the new gTLD program, and whether Uniregistry had accurately reported Justice’s advice.
Given that yesterday’s piece was straight news, I figured it might be good to delve a little deeper into the situation and, yes, indulge in some quite shameless speculation.
What is it that Uniregistry is saying?
Here’s the argument, as I understand it.
“Bid-rigging” is illegal in many countries, including ICANN’s native US, where the Department of Justice prosecutes it fairly often, securing billions of dollars in damages and sometimes criminal sentences.
More often than not, it seems, the prosecutions are related to government contracts, where agencies are looking for a company to carry out a job of work for the lowest possible price.
Bid-rigging emerges when contractors decide among themselves who is going to win the contract. If two contracts are up for grabs, two companies may agree to submit separate high-ball bids so that they can guarantee getting one contract each.
This, of course, inflates the price the government agency pays for the work. There’s no true competition, so prices are artificially high, harming the tax-payer. That’s why it’s illegal.
The ICANN new gTLD program is a bit different, of course.
First, ICANN isn’t a government agency. While it has quasi-governmental powers, it’s a private corporation. Second, it’s looking for high bids, not low bids. Third, it doesn’t care if it doesn’t see any money.
There can be little doubt that private auctions technically harm ICANN, because the winning bidder’s money would be divided up between applicants rather than flowing into ICANN’s coffers.
Uniregistry seems to believe that a new gTLD applicant signing a private auction agreement — basically, competitors agreeing to pay or be paid to decide who wins a contract — that takes money out of ICANN’s pocket could be considered illegal collusion.
But ICANN has stated regularly that it prefers applicants to work out their contention sets privately, explicitly endorsing private auctions and/or applicant buy-outs.
ICANN, it seems, doesn’t care if it is harmed.
According to Uniregistry, however, that doesn’t matter. Its view, following its conversations with Justice, is that what ICANN says is completely irrelevant: the law’s the law.
As the company said yesterday:
the Department emphasized that no private party, including ICANN, has the authority to grant to any other party exemptions to, or immunity from, the antitrust laws. The decision means that the Department of Justice reserves its right to prosecute and/or seek civil penalties from persons or companies that participate in anti-competitive schemes in violation of applicable antitrust laws.
In other words, just because it’s very unlikely that ICANN would start filing antitrust suits against new gTLD applicants, the DoJ could feasibly decide to do so anyway.
Why would it do so? Well, consider that the thing ICANN is auctioning is a spot in the DNS root server, and the root server is ultimately controlled by the US Department of Commerce…
ICANN may not care about the money, but the thing it is selling off “belongs” to the United States government.
That’s the argument as I understand it, anyway.
Isn’t this all a bit self-serving?
Uniregistry’s press release and DI’s blog post yesterday were met with disappointment (to put it mildly) among some new gTLD applicants, auction providers and others.
They noted that Uniregistry had no documentary evidence to back up information it attributed to Justice. Some accused DI of reporting Uniregistry’s statement without sufficient skepticism.
It seems to be true that the company has not been a big fan of private auctions since the concept was first floated.
Uniregistry has applied for 54 new gTLDs, the majority of which are contested. Its main competitors are Donuts, with 37 contention sets, and Top Level Domain Holdings, with 21.
Who wins these contention sets depends on who has the most money and how much they’re prepared to pay.
Unlike Donuts, Uniregistry hasn’t gone to deep-pocketed venture capital firms. It’s reportedly funded to the tune of $60 million out of CEO Frank Schilling’s own pocket.
And unlike TLDH, which is listed on London’s Alternative Investment Market, Uniregistry doesn’t have access to the public markets to raise money. It seems to be better-funded, however.
Donuts raised $100 million to fund its new gTLD ambitions. It’s more than Schilling claims to have put into Uniregistry, but Donuts has spent much more on application fees.
Donuts is involved in 307 applications, many more than Uniregistry’s 54.
The money remaining for auctions is also spread much thinner with Donuts. It’s also in 158 contention sets, more than three times as many as than Uniregistry’s 45.
Private auctions arguably benefit Donuts because, depending on the auction model, it could reinvest the money it raises by losing an auction into a future auction. Its VC money would last longer.
The same logic applies to all applicants, but it becomes more of a pressing issue if you’re on a tight budget or have a large number of applications.
Uniregistry may have calculated that it stands a better chance of winning more contention sets against Donuts and TLDH if its competitors don’t get the chance to stuff their war chests.
Of course, Uniregistry could have simply refused to participate in private auctions in order to force an ICANN auction in its own contention sets. All new gTLD applicants have that power.
But by publicizing its antitrust concerns too, it may have also torpedoed private auctions for some contention sets that it’s not involved in.
That could limit the amount of money flowing from losing auctions to its competitors.
Another theory that has been put forwards is that Uniregistry went public with its Justice conversations — over-selling the risk, perhaps — in order to give its competitors’ investors jitters.
That might potentially reduce the capital available to them at auction, keeping auction prices down.
So did Uniregistry stand to benefit from playing up the risk of antitrust actions against new gTLD applicants? Probably.
Does it mean that its interpretation of its Department of Justice conversations is not completely accurate? Ask a lawyer.