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ICANN drops the bomb – registries can buy registrars

Kevin Murphy, November 10, 2010, Domain Registries

ICANN has just authorized the biggest shake-up of the domain name industry in a decade, lifting all the major cross-ownership restrictions on registrars and registries.

A surprise resolution passed on Friday at the ICANN board’s retreat could enable registries such as VeriSign to acquire registrars such as Go Daddy, and vice-versa.

The new rules will also allow registrars to apply for and run new top-level domains and, subject to additional conditions, may enable existing registries to eventually start selling direct to end users, potentially bypassing the registrar channel.

The implications of these changes could be enormous, and I expect they could be challenged by affected parties.

The board resolved that ICANN “will not restrict cross-ownership between registries and registrars”, subject to certain yet-to-be written Code of Conduct for preventing abuse.

These looser ownership restrictions will be included in the new TLD Applicant Guidebook. Existing registries will be able to transition to the new rules over time through contract changes.

ICANN will develop mechanisms for enforcing anti-abuse rules through contractual compliance programs, and will have the ability to refer cross-ownership deals to competition authorities.

These provisions may be enhanced by additional enforcement mechanisms such as the use of self-auditing requirements, and the use of graduated sanctions up to and including contractual termination and punitive damages.

The decision appears to have been made partly on the grounds that while almost all existing registry contracts include strict cross-ownership restrictions, it has never been a matter of formal policy.

A vertical integration working group which set out to create a bottom-up consensus policy earlier this year managed to find only deadlock.

ICANN chairman Peter Dengate Thrush said:

In the absence of existing policy or new bottom-up policy recommendations, the Board saw no rationale for placing restrictions on cross-ownership. Any possible abuses can be better addressed by properly targeted mechanisms. Co-ownership rules are not an optimal technique in this area.

Most members of the VI working group broadly favored some level of cross-ownership restriction, such as a 15% cap, while a smaller number favored the “free trade” position that ICANN seems to have gone for.

The companies campaigning hardest against cross-ownership being permitted were arguably Afilias and Go Daddy, though the likes of NeuStar and VeriSign also favored some restrictions.

Opponents of integrating registry and registrar functions argued that giving registrars access to registry data would harm consumers; others countered that this was best addressed through compliance programs rather than ownership caps.

The big winners from this announcement are the start-up new TLD registries, which will not be forced to work exclusively within the existing registrar channel in order to sell their domains.

Will the new TLD guidebook provide answers?

Kevin Murphy, November 8, 2010, Domain Registries

ICANN is due to publish an Applicant Guidebook for new top-level domain registries tomorrow, and there are still big question marks over its contents.

Judging from a preliminary report from the ICANN board’s most-recent official meeting, some key decisions may not have yet been taken.

Perhaps the biggest unresolved issue is whether to permit the “vertical integration” of registry and registrar functions.

Which way ICANN swings on this problem will determine which companies are eligible to apply for new TLDs, how their business models will be structured, and how realistic “.brand” TLDs will be.

The ICANN community failed to reach consensus on this issue, largely due to differing business interests and a few consumer protection concerns.

But it looks like the ICANN board did not even discuss the matter at its October 28 meeting. The preliminary report has this to say:

2. Vertical Integration

In the interests of time, the Chair adjourned this item of discussion to a later date.

That “later date” may have been last Thursday and Friday, when the board held its rescheduled “retreat”, which is not designated as an official meeting.

On “Rec6”, previously known as the “morality and public order” objections process, the board passed no resolution October 28, but seems to have endorsed further discussions with the community.

The preliminary report states:

The Board discussed staff presentation and, in conformance with staff recommendation, directed staff to provide a briefing paper to the working group and to coordinate a call with the working group to further discuss the issues.

If the Rec6 working group mailing list and the GNSO calendar are any guides, that meeting has not yet been called (at least not publically).

The report also addresses geographic domains and issues that need to be taken into account given what ICANN’s Affirmation of Commitments with the US government says about new TLDs.

The Board agreed that staff provide a paper on geographic names to the GAC, the Chair of the GAC would check on the scope of issues still requiring discussion, and then the Chairs of the GAC and the Board would discuss the process for resolution to move this issue forward prior to Cartagena.

The Board discussed a paper regarding the adherence to the conditions set out in the Affirmation of Commitments in launching New gTLDs, and the need for identifying objective metrics to measure ICANN’s performance. The Board asked staff to consider what known performance indicators for the New gTLD program may be, what the adequacy scale is for measuring, and try to set that out for future conversation.

With all this in mind, it seems to me that while we may have a timeline for the launch of the new TLD program, there’s still much more to do than merely cross t’s and dot i’s.

Can we expect more placeholder text in tomorrow’s Applicant Guidebook?

ICANN “intervention” needed on TLD ownership rules

Kevin Murphy, October 28, 2010, Domain Registries

ICANN’s board of directors is today likely to step in to create rules on which kinds of companies should be able to apply for new top-level domains.

Chairman Peter Dengate Thrush now says “intervention appears to be required” on the issue of registry-registrar cross-ownership, after a GNSO working group failed to create a consensus policy.

In an email to the vertical integration working group yesterday, Dengate Thrush thanked particpants for their efforts and added:

The board is faced, in the face of absence of a GNSO position, to examine what should be done. This is a matter we are actively considering.

My sense is that, while reluctant to appear to be making policy, the Board is unwilling to allow stalemate in the GNSO policy development process to act as an impediment to implementing other major policy work of the GNSO, which calls for the introduction of new gTLDS. Some kind of Board intervention appears to be required, and we are considering that.

Currently, placeholder text in the new TLD Draft Applicant Guidebook calls for a 2% cross-ownership cap and effectively bans registrars from applying to become registries.

Such a scenario would very likely make single-registrant “.brand” TLDs unworkable. Canon, for example, would be forced to pay a registrar every time it wanted to create a new domain in .canon.

It would also put a serious question mark next to the viability of geographical and cultural TLDs that may be of limited appeal to mass-market registrars.

Many in the VI working group are in favor of more liberal ownership rules, with larger ownership caps and carve-outs for .brands and “orphan” TLDs that are unable to find registrars to partner with.

But others, notably including Go Daddy and Afilias, which arguably stand to gain more economically from the status quo, favor a stricter separation of powers.

This latter bloc believes that allowing the integration of registry and registrar functions would enable abusive practices.

Dengate Thrush’s email has already raised eyebrows. ICANN is, after all, supposed to create policies using a bottom-up process.

Go Daddy’s policy point man, Tim Ruiz, wrote:

I am hopeful that you did not intend to imply that if the bottom up process does not produce the reults that some of the Board and Staff wanted then the Board will just create its own policy top down.

I hope that the Board keeps its word regarding VI as it was given to the GNSO. To not do so would make it difficult to have any confidence in the Board whatsoever.

It’s a tightrope, and no mistake.

New TLDs dominate ICANN board agenda

Kevin Murphy, October 22, 2010, Domain Policy

ICANN has published the agenda for next Thursday’s board meeting and unsurprisingly the new top-level domain process dominates.

The agenda breaks the discussion into several bullet points.

Of interest to absolutely everybody watching the new TLD process is the first bullet – “Update on Timeline”. Everyone wants to know when the Applicant Guidebook will be finalized.

Recently, it became apparent that ICANN seems to view the next draft of the guidebook as a possible candidate for “final” status. As I blogged earlier this week, it could be published in the next two weeks.

The issues of vertical integration of registry and registrar functions, the “Rec 6” objections process, and the Governmental Advisory Committee advice on geographic names are also on the agenda.

The meeting will also discuss the approval of Qatar’s internationalized domain name country-code TLD and the redelegation of the .qa ccTLD to a new entity.

Qatar’s chosen Arabic string was approved back in March, at the same time as other strings that have already been added to the root, so I can only assume that the redelegation issue was what caused the hold-up.

The perennially controversial .xxx application is also due to be wheeled out for another hearing.

Next new TLD guidebook due early November

Kevin Murphy, October 19, 2010, Domain Registries

The next version of ICANN’s Applicant Guidebook for wannabe new top-level domain registries could be published as early as the first week of November, and it could be proposed as the “final” draft.

In a note to the GNSO Council’s mailing list yesterday, ICANN senior vice president Kurt Pritz wrote:

There is a Board meeting on the 28th with new gTLDs as an agenda item, and right around that time, maybe a week later, the work on the Guidebook will be wrapped. Those two events will indicate both a Board and staff intent on whether to propose the Guidebook version as final.

In order for a 30-day public comment period to be completed prior to the start of ICANN’s meeting in Cartagena, Colombia, the Guidebook would have to be published before November 5.

That said, version four of the DAG had a 60-day comment period (and ICANN staff have yet to publish a summary and analysis of those comments three months after it closed).

As I’ve previously blogged, outstanding issues include humdingers such as the cross-ownership of registrar/registry functions, and the objections procedure formerly known as “morality and public order”.