First new gTLD contention set settled as Uniregistry and TLDH sign deal

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.

GAC claims its first new gTLD scalps

Two new gTLD portfolio applicants have withdrawn a total of nine applications following advice from ICANN’s Governmental Advisory Committee.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.

Did Uniregistry over-sell the auction antitrust risk?

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.

New hires at Donuts, DomainDiction and 101domain

It’s been a busy week in the industry for executive switcheroos, with Donuts, DomainDiction and 101domain all announcing senior-level hires.
Today it emerged that Elaine Pruis, a long-time key member of the Minds + Machines team, has jumped to rival new gTLD applicant Donuts, where she’s now director of operations.
That’s quite a surprising move, coming so soon before gTLDs start getting delegated and — perhaps more importantly — contention set resolution deadlines start closing in.
DomainDiction, the gTLD-focused PR agency, has meanwhile lost one top expert and gained two others.
Pinky Brand, an alum of .mobi, Verisign and Iron Mountain, has gone solo, launching his own consulting business under the name [ PINKY ] • BRAND.
Former NetNames strategy director Stephane Van Gelder, an occasional DI guest poster, has been brought on as lobbyist and copywriter, while IP lawyer Bart Lieben has been hired for his considerable expertise in sunrise periods.
Neither man is on DomainDiction’s exclusive payroll, and continue to have other projects.
Finally, 101domain yesterday announced that it’s hired Joe Alagna as head of channel development. Alagna until recently worked in the registry world, as CentralNic’s general manager for North America.

Fight over new sports gTLDs gets real ugly

The battle for contested new gTLDs .rugby and .basketball is turning nasty.
Roar Domains, a New Zealand marketing firm whose gTLD applications are backed by the official international bodies for both sports, is promising to pull out all the stops to kill off its competition.
The company, which is partnered with Minds + Machines on both bids, has told rival portfolio applicant Donuts that it will attack its applications for the two TLDs on at least three fronts.
Notably, Roar wants Donuts disqualified from the entire new gTLD program, and plans to lobby to have Donuts fail its background check.
The company told Donuts last month:

while we have no desire to join the chorus of voices speaking out against Donuts, it is incumbent on us to pursue the automatic disqualification of Applicant Guidebook Section 1.2.1, and every opposition and objection process available to us.

Applicant Guidebook section 1.2.1 deals with background checks.
Donuts came under more scrutiny than most on these grounds during the new gTLDs public comment period last year due to its co-founders being involved at the sharp end of domain investment over the last decade.
Demand Media and eNom, where founder Paul Stahura was a senior executive, have lost many UDRP cases over the years.
A mystery lawyer who refuses to disclose his clients started pursuing Donuts last August, saying the company is “unsuited and ineligible to participate in the new gTLD program.”
Separate (pseudonymous?) public comments fingered a former Donuts director for allegedly cybersquatting the Olympics and Disney.
While Roar has not claimed responsibility for these specific previous attacks, it certainly seems to be planning something similar in future.
In addition, Roar and International Rugby Board, which supports Roar’s application for .rugby, say they plan to official objections with ICANN about rival .rugby bids.
The IRB told Donuts, in a letter shortly before Christmas:

As the global representative of the sport and the only applicant vested with the trust and representation of the rugby community, we are unquestionably the rightful steward of .RUGBY.
…
Without the support of the global rugby community your commercialization efforts for .RUGBY will be thwarted. We are also preparing an objection to file against your application in accordance with ICANN rules to which you will be required to dedicate resources to formulate a response.

Roar and the IRB are also both lobbying members of ICANN’s Governmental Advisory Committee, which has the power to file potentially decisive GAC Advice against any application.
Roar told Donuts recently:

Roar serves as the voice and arm for FIBA [the International Basketball Federation] and IRB in the New gTLD area. We are pleased to have obtained four Early Warnings on behalf of our applications, and fully expect the GAC process to be completed to GAC Advice.

The Early Warnings against the two other .rugby applicants were filed by the UK government — the only warnings it filed — while Greece warned the two non-Roar .basketball applicants.
Roar is also involved with the International Basketball Federation (FIBA) on its .basketball bid.
While commercial interests obviously play a huge role, there’s a philosophical disagreement at the heart of these fights that could be encapsulated in the following question:
Should new gTLDs only be delegated to companies and organizations most closely affiliated with those strings?
In response to the UK’s Early Warning, Donut has written to UK GAC representative Mark Carvell asking for face-to-face talks and making the case for a “neutral” registry provider for .rugby.
Donuts told Carvell:

We believe gTLDs should be run safely and securely, and in a manner that is fair to all law-­abiding registrants, not only those predetermined as eligible. A neutral third party, such as Donuts, can be best capable of achieving this outcome.
…
Donuts believes a neutral operator is better able to ensure that the gTLD reflects the full diversity of opinion and content of all Internet users who are interested in the term “rugby.”
As the IRB is a powerful voice in rugby, an IRB‐managed registry might not be neutral in its operations, raising questions about its ability to impartially oversee the gTLD. For example, will IRB/Roar chill free speech by censoring content adversarial to their interests? How would they treat third parties who are interested in rugby but aren’t part of the IRB? What about IRB critics or potential rival leagues?

Despite these questions, no .rugby applicant has said it plans to operate a restricted registry. There are no applications for .basketball or .rugby designated as “Community” bids.
The IRB/Roar application specifically states “anyone can register a .rugby domain name.”
Both .basketball and .rugby are contested by Roar (FIBA/IRB/M+M), Donuts (via subsidiaries) and portfolio applicant Domain Venture Partners (aka Famous Four Media, also via subsidiaries).
Roar is a sports marketing agency that is also involved in bids for .baseball, .soccer, .football and .futbol. The New Zealand national team football captain, Ryan Nelsen, is on its board.
Here are the letters (pdf).

TLDH expects gTLD auctions in second half of 2013

While some new gTLD portfolio applicants are trying to get their contention sets resolved as quickly as possible, Top Level Domain Holdings reckons auctions won’t happen until the second half of 2013.
In a trading update this week, the company also said that it expects to start seeing revenue from its first successful new gTLD applications next year, with contested bids producing revenue in 2014.
TLDH said in a statement:

Provided that the ICANN proposed timetable is broadly adhered to, the Board of TLDH believes that a number of the Group’s 17 uncontested gTLD applications on its own behalf and the 5 uncontested client gTLD applications are likely to be revenue producing in 2013, with the balance becoming so in the first half of 2014. TLDH has commenced discussions with the leading worldwide registrars, premium name specialists, and secondary market platforms for distribution of these gTLD names.
TLDH is also working with other gTLD applicant groups to define formats for private auctions and other name resolution arrangements in respect of the contested names that TLDH has applied for. The Board expects that these auctions are likely to happen in the second half of 2013.

As we reported last week, fellow portfolio applicant Donuts approached competing applicants at the Toronto ICANN meeting last month with a proposal for running private auctions in early 2013.
The idea was not warmly received by many, we hear, and TLDH evidently does not agree.
The company also revealed this week that it plans to move its headquarters to Dublin, Ireland, and expects to start hiring more staff and directors in the near future.
Clark Landry, who has been a non-executive director of TLDH for several years, has left the board, TLDH announced.
Caspar von Veltheim, who has been managing some of TLDH’s geographic gTLD bids in Europe, has joined the board as an executive director, the company added.

Dengate Thrush quits TLDH

Peter Dengate Thrush, executive chairman of new gTLD portfolio applicant Top Level Domain Holdings, has decided to quit not much more than a year into the job.
According to a press release, Dengate Thrush will leave the company in January 2013, to be replaced by original chair Fred Krueger.
No reason for the departure was given.
When he joined TLDH, his share option package envisaged him sticking around until at least July 2014.
Dengate Thrush will continue to advise some of TLDH’s new gTLD applicant clients after he leaves, according to the press release.
His decision to join TLDH in July 2011, just a few weeks after helping to push through approval of the new gTLD program as ICANN’s chairman, was a nodal point in ICANN’s recent evolution.
It led directly to strict conflict of interest rules being put in place on ICANN’s board, which are now being criticized by some contracted parties for removing vital expertise from the board.
It also gave plenty of ammunition to those who criticize ICANN for being too focused on enriching its insiders.
TLDH has applied for 70 gTLDs, and its Minds + Machines subsidiary is the named back-end provider for several more.

More than half of new gTLD apps have comments

Over half of ICANN’s 1,930 new generic top-level domain applications have received comments, two days after the original deadline for having them considered expired.
There are 6,176 comments right now, according to the ICANN web site, and the DI PRO database tells me that they’ve been filed against 1,043 distinct applications covering 649 unique strings.
It looks like .sex is in the lead, with 275 comments — I’m guessing all negative — followed by its ICM Registry stablemates .porn (245) and .adult (254), due to the Morality in Media campaign.
The controversial dot-brand bid for .patagonia, which matches a region of Latin America, has been objected to 205 times.
Some that you might expect to have created more controversy — such as .gay (86) and .islam (21) — are so far not generating as many comments as you might expect.
Donuts has received the most comments out of the portfolio applicants, as you might expect with its 307 applications, with 685 to date.
Famous Four Media’s applications have attracted 416 and Top Level Domain Holdings 399.
Despite applying for .sexy, Uniregistry has a relatively modest 64 comments. That’s largely due to it managing to avoid being whacked by as many duplicate trademark-related comments as its rivals.
There have been 1,385 unique commenters (trusting everybody is being forthright about their identity) with as many as 486 affiliations (including “self” and variants thereof).

Big hotel chains pick a side in .hotel gTLD fight

Many of the world’s major hotel chains say they plan to object to every .hotel new gTLD application but one.
A coalition of many recognizable hotel brands, led by InterContinental, has filed comments against six of the seven .hotel applications, as well as the applications for .hotels, .hoteis and .hoteles.
They say they want the Independent Objector to object to these applications on community grounds. Failing that, they’ll file their own official Community Objections.
The comments (PRO) were filed by the Hotel Consumer Protection Coalition, which appears to be one of those ad hoc organizations that exists purely to send letters to ICANN.

HCPC encourages the Independent Evaluator to submit a formal Community Objection if necessary. (Guidebook, Sec. 3.2.5.) Failing either of these occurrences, HCPC will seriously consider filing a Community Objection of its own – unless, of course, Applicant voluntarily withdraws its application.

The coalition’s members include the Choice Hotels, InterContinental, Hilton, Hyatt, Marriott, Starwood and Wyndham hotel chains. Together, they say they have over 25,000 hotels in over 100 countries.
The lucky recipient of the coalition’s tacit support is HOTEL Top-Level-Domain, the Luxembourg-based applicant managed by Johannes Lenz-Hawliczek and Katrin Ohlmer, which is using Afilias as its back-end.
It’s one of only two .hotel applicants flagged in the DI PRO database as planning to use a “restricted” business model. Only hotels, hotel chains and hotel associations will be able to register.
The other applicant with planned restrictions is a subsidiary of Directi, though its application suggests that any eligibility requirements would only be enforced post-registration.
HOTEL Top-Level Domain is also the only applicant that appears to be pursuing a single gTLD. All but one of the others are portfolio applicants of various ambitions.
Top Level Domain Holdings, Donuts, Famous Four Media and Fegistry all plan “open” business models for .hotel, while Despegar Online is planning a single-registrant space.
The Hotel Consumer Protection Coalition’s support for HOTEL Top-Level Domain is conditional, however. The company has apparently had to agree to explicitly exclude:

“any entity other than a hotel, hotel chain, or organization or association that is not formed or controlled by individual hotels or hotel chains”

It’s also agreed to “immediately suspend” any “clear violations”, such as cases of cybersquatting, when notified by coalition members, and to include its members’ brands on a Globally Protected Hotel Marks List.
The support has apparently been granted extremely reluctantly. InterContinental explicitly does not support the new gTLD program, and Marriott has previously said it thinks .hotel is pointless.
I can’t imagine a .hotel supported by companies that have no plans to use it being particularly successful.

DotGreen lobbies the GAC for support in .green fight

The DotGreen Community has asked ICANN’s Governmental Advisory Committee for backing in the four-way fight for the .green generic top-level domain.
In a letter to the GAC, copied to ICANN’s board and published today, DotGreen does everything but ask outright for the GAC to object to its three competitors’ .green applications.
In it, Annalisa Roger, CEO of the not-for-profit company, makes a passionate case that .green should be operated by a company that has a genuine connection to and affinity with the environmental movement.
She heavily implies that the GAC should object to the other applicants.

Without deliberate decision or intervention, the .green TLD may be won at ICANN Auction to join enmass with a slew of portfolio TLDs, blending into one of the many industry portfolios, a common business model ICANN’s new gTLD program has spawned.
…
Those like you who are in a position to object, evaluate, or delegate should consider the obvious relationship of .GREEN with the Green Community, and the global Green Movement which represents net social benefits to include all people, their natural and synthetic environments, the economic systems they construct (such as Green Business Models), and conditions for future generations of life who stand to be affected by the choices we make, the policies we implement, and the projects we fund and allow to be born today.

The other .green applicants are Top Level Domain Holdings, Afilias, and a Demand Media subsidiary. Unlike DotGreen, they’re all portfolio gTLD applicants.
Roger says these companies are basically out to sell as many domains as possible and don’t have the same commitment to the environmental movement as DotGreen.
Despite the name and a great deal of support from green organizations, DotGreen did not file a “community” application, so the only way it can avoid auction is by persuading the other applicants to drop their bids, or by having them all eliminated by objections.
Asking the GAC to object is probably the cheapest way to do this.
While the GAC has made its interest in gTLDs with obvious regulatory implications — such as .bank — abundantly clear, I understand conversations have also started about strings with more tangential relationships to public policy, such as .food.
It’s not inconceivable that .green could fall into that category, though I don’t think it’s an easy sell.