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Closed gTLD debate threatens Google and Amazon

Kevin Murphy, February 8, 2013, 11:44:29 (UTC), Domain Policy

Howls of criticism about Google, Amazon and others’ plans to grab huge swathes of new gTLD real estate and keep it to themselves seem to have spurred ICANN into action.
A public comment period opened this week seeks community feedback (indirectly) on applications such as Amazon’s .music, L’Oreal’s .beauty and Google’s .blog, among many others.
These gTLDs have all been proposed with “single-registrant” business models, in which the registry controls all second-level domains and regular registrars cannot sell them to anyone else.
It’s the “dot-brand” model, but applied to generic dictionary words for which the applicants have no trademark rights.
Scores of such applications have been made, notably by Google and Amazon, but they have drawn criticism from many in the ICANN community, such as a small group of registrars and others led by Blacknight Solutions.
Members of the Governmental Advisory Committee, most vocally Australia, have also expressed serious concerns about the model, saying it could be anti-competitive.
ICANN’s board of directors is currently mulling over these complaints, and has thrown the issue open to public comment to aid in its deliberations.
What it wants from you is:

proposed objective criteria for:

  • classifying certain applications as “closed generic” TLDs, i.e., how to determine whether a string is generic, and
  • determining the circumstances under which a particular TLD operator should be permitted to adopt “open” or “closed” registration policies.

The way the public comment request is phrased should be quite worrying to applicants for closed generic gTLDs.
It seem to assume that ICANN should be classifying gTLDs, something it has steadfastly refused to do for all of the years these kinds of debates have been raging.
What is a “closed generic” anyway?
The DI PRO New gTLD Application Tracker classifies gTLD applications into three buckets: Open, Restricted and Single-Registrant.
We made no attempt to segregate dot-brands from other Single Registrant bids, precisely because there’s currently no such thing as a dot-brand under ICANN’s rules.
There doesn’t seem to be much community concern about the apps we have classified as “Restricted” — applications for .lawyer that propose to vet registrants for their lawyerly credentials, for example.
The concern is all directed at Single Registrant bids. We have 912 of these in our database.
Many of these are dot-brands, where the applied-for string is an exact match with a famous trademark, but many are for dictionary words for which the applicant has no preexisting rights.
In order to sanely operate a dot-brand, applicants must request an exemption to the ICANN rules that oblige them to offer their gTLDs via accredited registrars on a non-discriminatory basis.
This Code of Conduct is a part of the base Registry Agreement for new gTLDs, but it contains a carve-out for single-registrant applicants:

Registry Operator may request an exemption to this Code of Conduct, and such exemption may be granted by ICANN in ICANN’s reasonable discretion, if Registry Operator demonstrates to ICANN’s reasonable satisfaction that (i) all domain name registrations in the TLD are registered to, and maintained by, Registry Operator for its own exclusive use, (ii) Registry Operator does not sell, distribute or transfer control or use of any registrations in the TLD to any third party that is not an Affiliate of Registry Operator, and (iii) application of this Code of Conduct to the TLD is not necessary to protect the public interest.

This provision was added specifically in order to enable “dot-brands” to exist.
It would be pretty weird if, for example, L’Oreal was forced to make .loreal domains available via hundreds of registrars. By requesting an exception, L’Oreal has the chance to keep .loreal in-house.
However, because ICANN deliberately has made no distinction between commonly used words and brands (.amazon could be both), L’Oreal was also able to apply for .beauty as a single-registrant gTLD.
It’s not really a loophole — the possibility of companies applying for closed generics was envisaged by ICANN and the policy-making community long before the application window even opened.
Make no mistake, this is well-trodden ground. ICANN had plenty of opportunities to address the issue before the new gTLD application window opened a year ago and it quite consciously decided not to.
The feeling over the last couple of years has been that objection mechanisms such as the Community Objection, as well as GAC Advice, would be sufficient to close down these problematic gTLDs bids.
During the year-long community discussion about registry-registrar vertical integration, the possibility of closed generics was acknowledged and heavily debated.
The GNSO’s Vertical Integration Working Group failed to reach consensus on almost everything, but most of the recommendations emerging from it included some Code of Conduct exemptions for dot-brands.
Some in the WG suggested that the exemptions should only apply to true dot-brands (ie, those back up by a trademark) but ICANN decided against referring to trademarks when it wrote the Code of Conduct due to the very real possibility that it would encourage gaming by speculators.
That problem has not disappeared. While there’s no such gaming in the current batch of applications, there will be second and third and fourth application rounds that the rules being hastily debated at the last minute right now will also (presumably) apply to.
What do closed generic applicants want?
Some ICANN community members assumed that it would be the big domainer-backed companies (later emerging as Donuts, Uniregistry et al) that would attempt these kinds of land-grabs.
But that (so far) hasn’t turned out to be the case. The domainers have generally proposed registration policies that are super, super liberal in comparison to Google, Amazon and other closed-generic applicants.
I believe it’s partly because it’s these massively powerful e-commerce companies that are the ones making the land-grabs, and the scale of the grabs, that the issue of closed generics has reemerged now.
There are two broad use cases of concern here.
First, the .beauty scenario: L’Oreal keeps all the second-level .beauty domains to itself, essentially converting the word “beauty” into a brand name as far as the DNS is concerned.
Second, the .blog scenario: Google implements a policy that all .blog domains must use its Blogger service, potentially to the detriment of competitors such as WordPress or Tumblr.
In both scenarios, the bids could be rejected in their entirety as a result of formal objections, ICANN board action or Governmental Advisory Committee advice.
If the applications were approved, ICANN could also subjectively apply the ill-defined “public interest” test outlined above to force compliance with the Code of Conduct.
But that would merely lead to the bizarre scenario where 1,700 accredited registrars all qualify to sell .music domain names, but the only potential customer is Amazon.com’s intellectual property management department (which wants to run .music as a single-registrant gTLD).
As ICANN points out in its public comments request, the Code of Conduct regulates who can sell domain names in new gTLDs, not who they can sell them to.
The .blog scenario is a little different.
This is what Google, which has applied via its Charleston Road Registry subsidiary, has proposed (with my emphasis):

Should ICANN grant Charleston Road Registry’s exemption to the Code of Conduct, and the proposed gTLD operate with Google as the sole registrar and registrant, members of the public will not be able to directly register domain names in this new gTLD. Users will, however, be given the opportunity to make use of a vanity second-level domain as a memorable identifier linked to content in Blogger.

In other words, Google will “own” all the second-level .blog domains, but will allow Blogger customers to “use” them.
It looks like what it is: a transparently bogus attempted workaround of the Code of Conduct, designed to let Google exclude rival blogging services and independent, self-managed bloggers from .blog.
(Disclosure: DI is an independent, self-managed blog.)
However, I can’t see how what Google has proposed could possibly qualify for an exemption, which is only supposed to be granted provided the registry does not “transfer control or use of any registrations in the TLD to any third party”.
If sanity prevails, Google probably won’t qualify for an exemption.
But that won’t stop it tying .blog to Blogger.
The Code of Conduct, remember, is only concerned with equal, non-discriminatory access for accredited registrars. It does not speak to registry services or registry policies.
Google could possibly still have a registry policy stating that all .blog domains must point to Blogger.
In addition, Google could make the registration fee $0, making it unattractive for most registrars to carry (though I guess registrars could use it as a loss-leader, they wouldn’t be able to up-sell hosting and other services if all .blog domains have to use Blogger).
In conclusion
Applicants for closed generics paid millions of dollars to apply, using the rules set down in the Applicant Guidebook at the time, and I can’t see them being too happy about this eleventh hour surprise.
However, there can be little doubt that ICANN, if its role is to protect the public interest and consumer trust, has to seriously tackle the issue of closed generics.
But it has to address it in 2011.

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Comments (10)

  1. Mikey O'Connor says:
    February 8, 2013 at 2:31 pm

    As one of the co-chairs of the vertical integration working group, which got pretty badly manhandled by the Board, I’d like to propose an alternate headline for your article:
    Decide in haste, repent at leisure.
    One of the problems the Board created for itself by cutting the VI working group short was that it lost the very deep pool of knowledge that had been building during the discussion.
    VI couldn’t reach consensus. But another way to phrase that would be VI couldn’t reach consensus on the schedule imposed by the Board. And thus an opportunity for more-nuanced Guidebook language was lost.
    You’re also right in pointing out that categorizing TLDs is likely to open up huge kettle of issues.
    T’will be interesting to see how this plays out. Thanks for the summary. Nicely done.

    Reply
  2. Tom G says:
    February 8, 2013 at 5:47 pm

    They are cutting them a deal, giving the closed applicants a break here. All of this is just being done so those applicants can stay in the game. Otherwise they would go down to GAC Advice.
    Early Warning means problematic if not amended. This means you’re going to be subject to the strongest GAC advice possible, presumed rejected unless rationale provided by the Board. Which, is not likely to happen.
    They’re not getting screwed, they’re catching a break.
    Just like the applicants who can now add “Public Interest Commitments” to their applications. It’s giving them a huge break and keeping them in the game. Many of these are potential GAC issues.
    How would you feel if you were an applicant that already included those commitments, in the original application?
    So, applications will be amended, allowing deep pockets to stay in contention sets.
    But not likely any closed model .book, or .app, or .shop.
    Which is pretty much what I predicted months ago.
    I’m just trying to make sure all those potential .app, .book, .shop users can buy websites.
    But that’s probably obvious
    Thanks for the shout out.
    Cheers

    Reply
  3. Tom G says:
    February 8, 2013 at 6:03 pm

    Aside from the fact that it’s really just the right thing to do.

    Reply
  4. Eric Brunner-Williams says:
    February 8, 2013 at 6:09 pm

    Kevin,
    I think you could do better than this:
    “During the year-long community discussion about registry-registrar vertical integration, the possibility of closed generics was acknowledged and heavily debated.”
    These were snuck in very late in the game, piggybacked on the notion that small community registries would benefit if offered what the 2000 round sTLD applicants sought, the right to register their community members.
    You should acknowledge the skill of Kristina slipping the “.brand” exemption into the attempt to find agreement between the proposals advanced by James (one conditional cross ownership cap) and by Johnathan (another conditional cross ownership cap), and the no-cap proposal advanced by milton, and the other no-cap proposal advanced by Volker.
    You are correct pointing out that “currently no such thing as a dot-brand [exists] under ICANN’s rules”. Of course, had you done so with any persistence as a member of the Vertical Integration Working Group you might have the subject of a censure note by the co-chairs for … pointing that out.
    The present issue then is whether a “public comment period” in 2013 immunizes the department and its agent, the corporation, for rule making made in 2011 for which no notice and comment exists in the public record.
    I participated in the VI WG.

    Reply
    • Michael Palage says:
      February 9, 2013 at 1:52 pm

      Eric,
      Let me begin by disclosing that I worked on several “closed generic” applications in connection with the over 150+ applications I worked on.
      I also participated in the VI Working and I would respectfully disagree with your assessment that “closed generics” were slipped in late in the game. Please refer to the following email including a list of hypotheticals predicting many of the very type of gTLD business models we currently have in the 1900+ applications, see http://forum.icann.org/lists/gnso-vi-feb10/msg00560.html That list of hypotheticals was posted in March 2010, approximately one month after the WG was formed.
      Google, Amazon and others merely filed applications which conformed with the much maligned/debated Applicant Guidebook and are now being vilified, and no I did not work on Google or Amazon’s application. Google and Amazon just chose to keep their intentions private not unlike other large portfolio applicants.
      While I hope/trust ICANN will do the right thing, I just want to make sure that the facts are on the table that “closed generics” did not just happen out of thin air, they were well known.

      Reply
      • Eric Brunner-Williams says:
        February 9, 2013 at 5:05 pm

        Michael,
        First mention(1) may qualify as “acknowledged”, but not as “heavily debated”. I suppose the thing to do is to write to the participants at the Bruxelles VI meeting — particularly those committed to the no-cap positions — the one lead by Volker and the one lead by Milton — and ask if they thought before that meeting that they were proposing policy for {.brand/single-registrant/…} registry-registrar integration.
        It is my impression, having been part of the Bruxelles and subsequent attempts to find a common position among the pro-cap proposals (James and Johnathan lead, resp.), that the only exception to the separation rule then contemplated, at least by those in favor of the 15% cross ownership cap, was for community-based proposals.
        It is also my impression, having corresponded at some length with Volker and others, that many opposed to any cap were not motivated by a preference for a type of application that did not then, and does not now, exist in the published rules, but were positing the application of a competition authority or internal separation to prevent self-dealing where two or more registrars, only one of which is owned or controlled by the registry, offered competitive registration services to an unrestricted, or community registration eligibility restricted, pool of third-party registrants.
        You will have made the case that I’ve substantially misrepresented the sub-issue in the course of the VI WG policy development process if you can show that substantive debate on a proposal for {.brand/single-registrant/…} took place earlier than I wrote above, better still, in the instructions from the Board, post-Nairobi, to the Community, to address cross ownership policy, explicitly including the novelty of registries for single registrants, and the better informed world will of course thank you for your careful effort to “make sure that the facts are on the table”.
        You can do that, can’t you?
        (1) The hypo came up during Working Group C, circa 1999.

        Reply
  5. Aaron Pace says:
    February 8, 2013 at 7:41 pm

    Google and Amazon are going to do well with new TLD’s. However you have to ask yourself, what would people actually “want” to name their website? Do you think the TLD’s that they applied for are going to be big sellers? Example: MyWebsite.GOOGLE . I would not put that on my business card, would you?
    If ICANN wants to make this TLD expansion into a “great success” they should talk to me about my intellectual property, brand name and help me figure out a way to get it into the marketplace. My development is really what the world wants, plus it would be a huge seller. Read my technology investor page for more info.

    Reply
  6. Dave Tyrer says:
    February 9, 2013 at 1:11 am

    An excellent article, thanks for the info about the public comment period.
    —————————————-
    ICANN could consider enforcing the claims already made in some of the applications:
    “Charleston Road Registry intends to operate the proposed gTLD as a closed registry with Google as the sole registrar and registrant… This will promote competition in the gTLD space by inciting competitors to respond with improved gTLD operations, greater range and higher quality products and services, and/or the creation of their own respective gTLDs, to the benefit of all Internet users.”
    (Edited excerpt, Google application for the .SEARCH string)
    Google should simply be required to demonstrate on an annual basis precisely how being given a monopoly over all .SEARCH domains promotes competition. For example, they could provide ICANN with testimonials from Bing and Yahoo describing how this incitement assisted them to compete and increase market share.
    —————————————-
    @DI: “First, the .beauty scenario: L’Oreal keeps all the second-level .beauty domains to itself, essentially converting the word “beauty” into a brand name as far as the DNS is concerned.”
    L’Oréal’s application for .BEAUTY has been beautifully expressed by Parminder Jeet Singh in TheHindu.com:
    “How L’Oréal will leverage this privileged association with a key symbolic term of our culture will be an interesting exercise to follow. But the goldmine is there for anyone to see. It can certainly begin by propagating the term “.beauty” in all its communications and expressions. With time, demonstrating the long association, it could also seek trademark rights on “.beauty,” and so will go on the saga of how L’Oréal became beauty, and beauty, L’Oréal!”
    http://www.thehindu.com/opinion/op-ed/beauty-lies-in-the-domain-of-the-highest-bidder/article3929612.ece
    —————————————-
    I’ve built a big resource about the proposed closed registries at SuperMonopolies.com
    —————————————-
    Tom Gilles has organized an important petition at Change.org about this issue:
    http://www.change.org/petitions/icann-stop-corporate-takeover-of-new-internet-names

    Reply
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