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ICANN financial data dump a damp squib?

Kevin Murphy, June 24, 2024, Domain Policy

It was supposed to be a means for ICANN to improve the transparency of its financials, but the latest output of a decade-long accountability project appears to be a damp squib, perhaps not even meeting community requirements.

But a newly published document appears to reveal one vendor that was paid almost $2 million in a single year, that ICANN has mysteriously not previously disclosed a relationship with.

Org has published its first “Annual Disclosure of Payments to Suppliers” (pdf), covering its fiscal 2022, but it weighs in at just one page of rather vague information, most of which was already in the public domain, printed in a font size I didn’t need my glasses to read.

The published data is less granular than what ICANN already reveals on its published tax forms, and it’s arguably less informative as a result.

The document shows that ICANN has at least 10 suppliers that received over $500,000 from the Org in FY22, and that if you aggregate all its insurance providers and landlords together each grouping also crosses that threshold.

There are three line items for payments over $2 million — the aforementioned landlords in aggregate, along with the law firm Jones Day and the software developer Architech Solutions.

Disclosing that these two companies were paid “above $2 million”, rather than the actual dollar value, is odd considering that we already know from ICANN’s 2022 tax form (pdf) that Jones Day was paid $5,164,603 and Architech was paid $2,857,500.

At the next tier down, we discover that ICANN paid IT consulting firm SHI International between $1.5 million and $2 million during the period.

This is arguably the most interesting stat on the page, as SHI doesn’t appear on ICANN’s 2022 tax return or the tax returns for 2021 and 2023, despite apparently meeting the criteria for being one of its “five highest compensated independent contractors”.

It doesn’t appear ICANN has ever publicly mentioned the firm before, but SHI is a large, decades-old IT services provider.

Paid between $1 million and $1.5 million were insurance providers in the aggregate, along with IT firms Outsource Technical and Zensar Technologies, both of which appear on the FY22 tax return with the precise dollar value they were paid.

On the lowest rung of the disclosure, each accounting for between $500,000 and $1 million in the period, are two HR outsourcing companies, two companies providing services for ICANN’s public meetings, and escrow provider NCC.

NCC was paid $800,798 in FY22, the lowest-paid of the top five contractors, according to the tax return, so we can assume the other four firms were paid less than that.

ICANN is making the disclosures in response to one of the over 100 recommendations of Work Stream 2 (WS2) of the Cross-Community Working Group on Enhancing ICANN Accountability, which were issued in 2018 after four years of community discussions, but it’s debatable whether they live up to what the community wanted.

CCWG-Accountability had issued implementation guidance stating:

In the first year of implementation ICANN should publish a register of all suppliers (name of supplier, country or origin and actual annual amount) it pays 500,000$US or more per fiscal year broken down by categories (e.g., computer equipment, software, telecommunication services, contracting etc.).

Note the references to “country or [sic] origin” and “actual annual amount”, two data points that do not seem to appear in the newly published document.

The group also said that the minimum reporting threshold should drop to $250,000 in the second reported year, so the FY23 document could be much larger. ICANN had 130 suppliers receiving six-figure payments in FY22, according to its tax return.

Governments call for new gTLD auctions ban

Kevin Murphy, June 17, 2024, Domain Policy

Governments have upped the stakes in their opposition to new gTLDs being auctioned off privately, now calling for an outright prohibition on the practice.

ICANN’s Governmental Advisory Committee today published its formal advice coming out of last week’s public meeting in Kigali, calling for ICANN to “prohibit the use of private auctions in resolving contention sets in the next round of New gTLDs”.

It’s a strengthening of previous language from last year’s Washington DC meeting which called for ICANN to “ban or strongly disincentivize private monetary means of resolution of contention sets, including private auctions”.

Private auctions were the most-common way that contests between new gTLD applicants with matching strings were resolved in the 2012 application round. Many tens of millions of dollars changed hands, with the losing bidders pocketing the winning bids.

But the practice came in for criticism from groups such as the GAC and the At-Large Advisory Committee, partly because it made it harder for non-commercial or less well-financed developing-world applicants to get a foothold in the gTLD space.

“The 2012 round was basically a game for millionaires,” ALAC chair Johnathon Zuck told the GAC at a meeting between the two groups last week. “There were many things that made the last round kind of a joke… but this was the very big thing that made the community look bad.”

Discussions with the ALAC, which wanted to issue joint advice with the GAC, seems to be at least partly responsible for the GAC aligning around advising a full-on ban on private auctions.

ICANN’s board of directors is broadly in favor of “discincentivizing” private auctions, but has stopped short of advocating for a full prohibition, according to directors’ public statements and board resolutions.

The Org commissioned a study from a New York company called NERA Economic Consulting, published shortly before the Kigali meeting, to look into ways to dissuade applicants from private auctions and encourage them towards ICANN’s “last resort” auctions — where ICANN gets all the money — or into joint ventures.

While it did not come up with any recommendations as such, the study did lay out some possible mechanisms — such as forcing applicants into last-resort auctions, or making them pay an extra fee if they want to resolve their contention sets privately.

Separately, ICANN has told the GAC it intends to reject another piece of its advice related to contention sets. The GAC had told ICANN last year:

To take steps to avoid the use of auctions of last resort in contentions between commercial and non-commercial applications; alternative means for the resolution of such contention sets, such as drawing lots, may be explored

But ICANN reckons a lottery might be illegal under California law. That’s pretty much what it said before it came up with “Digital Archery” during the last application round, and it turned out to not be completely correct.

It also disagrees with the GAC that non-commercial applicants in contention sets should be treated preferentially, with the board wary about having to pick winners and losers in the next round.

The board has therefore triggered the part of its bylaws that require it to hold formal negotiations with the GAC to see if they can come to a compromise before the advice is rejected.

ICANN names new CEO, and it isn’t Costerton

Kevin Murphy, June 10, 2024, Domain Policy

ICANN has picked industry veteran Kurt Erik “Kurtis” Lindqvist to take over as president and CEO.

He will replace interim CEO Sally Costerton, who has been serving since Goran Marby’s resignation in December 2022, but not until December 5 this year.

Since 2019 he’s been CEO of the London Internet Exchange, LINX, and has to served out his notice while a replacement is found. He announced his resignation a few days ago.

ICANN said Lindqvist has also been CEO of .no operator Netnod worked for the Internet Architecture Board, RIPE and the Internet Engineering Task Force.

ICANN received 100 applications for the gig from 20 countries and drew up an interview shortlist of seven — three of whom were female, ICANN noted — and three finalists were interviewed by the full board of directors.

Lindqvist will be based in ICANN’s Geneva, Switzerland regional office but “will spend significant time” in the ICANN Los Angeles HQ.

ICANN: We will NOT police content

Kevin Murphy, June 10, 2024, Domain Policy

ICANN seems to have killed off the idea of content-restricting Registry Voluntary Commitments being included in registry contracts, judging by a conversation today between its board of directors and Governmental Advisory Committee.

Speaking moments ago at a session at ICANN 80 in Rwanda, director Becky Burr said the board took legal advice and decided that the Org’s bylaws do not allow it to enforce contractual commitments that involve content regulation.

“The board was looking at the legal issues there to determine whether under our bylaws we were permitted to accept and enforce Registry Voluntary Commitments related to the restriction of content… on Saturday at our board meeting the board has resolved that we can’t,” Burr said.

“We will not accept into the contracts the new registry commitments that involve the restriction of content,” she said.

The RVC-like Public Interest Commitments found in 2012-round gTLDs are grandfathered in the current bylaws and will not be affected by the RVCs decision, she said.

Registries will be free to make RVC-like commitments outside of their ICANN contracts, but ICANN will not enforce them, she said. She also said the board has ruled out hiring a third party enforcer, citing US case law and the First Amendment to the US constitution.

Burr said that if an Independent Review Process panel struck down a single RVC it would risk invalidating all of the RVCs in all registry contracts.

The board’s resolution will be published later this week, but its legal advice will remain confidential, she said.

The decision is a win for registries and registrars, which earlier this year responded to an ICANN consultation by saying it should not permit RVCs that regulate content. The Non-Commercial Stakeholders Group had even raised the possibility of legal action if ICANN went ahead with RVCs.

The opposing view was put forth by the Business Constituency, the Intellectual Property Constituency, and the At-Large Advisory Committee, all of which are now presumably feeling bummed out by the board’s latest decision.

More sticker shock as new gTLD fees could top $300,000

Kevin Murphy, June 10, 2024, Domain Policy

The base new gTLD application fee could top $300,000, according to an analysis released by ICANN at its meeting in Kigali, Rwanda, this morning.

The per-gTLD fee will likely range between $208,000 and $293,000, according to the latest estimate, but this does not include mandatory fees that have yet to be figured out that as a whole could amount to “tens of millions”.

ICANN is blaming inflation for most of the increase from the 2012 round, where the fee was $185,000. Staff said that if you take into account a 44% rise due to 14 years of inflation, the 2026 application fee could actually be lower in real-money terms.

The reason for the broad range provided is that ICANN still doesn’t have a good guess as to how many applications it will receive. The program is being run on a cost-recovery basis and ICANN has already budgeted for a spend of $70 million before the application window even opens.

If it only receives 500 applications, it could lose tens of millions of dollars even with a high application fee. With a fee of $242,000, ICANN would need 1,000 applications to make its money back, staff said during an ICANN 80 session today.

There were 1,930 applications in 2012, but demand in 2026 will depend a lot on how many desirable strings remain undelegated, particularly in non-English languages and non-Latin scripts, and how enthusiastic brand owners are about the dot-brand concept (or defensively registering their dot-brands).

The main unknown not included in the latest estimate is the cost of implementing the recommendations of the second Name Collision Analysis Project, which in May called for all gTLDs to be tested live in the DNS before being awarded to the applying registry.

Each of the NCAP2 recommendations could cost between “thousands” and “tens of millions” in total, which would be divided between all the applicants, staffers said. Scrawling on the back of an envelope, it looks to me like this could easily push the top end of the range well over $300,000.

The good news is that if ICANN gets a lot of applications and recovers its costs, it already anticipates giving applicants some of their money back. As an example, it said that if the fee is $220,000 and there are 2,000 applications, applicants could each get $35,000 back.

But that ray of sunlight was not enough to temper the concerns of community members in the room in Kigali today, several of whom sparred with CFO Xavier Calvez and new gTLD program lead Marika Konings over their calculations.

Registry services providers are already angry about the large increase in evaluation fees for the RSP program announced last month.

One thing that doesn’t seem to be under any dispute is that high fees will scare off some applicants, meaning the cost burden will be borne by fewer shoulders, meaning the fees did in fact need to be high; a self-fulfilling prophecy.

ICANN slashes staff and domain prices could rise

Kevin Murphy, May 30, 2024, Domain Policy

ICANN has laid off 33 people, about 7% of its 485 staff, and has raised the specter of increased domain name prices, as it struggles to balance its budget.

The job losses are effective today and come “across all functional areas and regions”, acting CEO Sally Costerton wrote.

The Org said this evening that it made the decision to lose the employees as part of a broader cost-cutting effort that it hopes will help close a $10 million hole in its budget. At the end of April, it had said it was looking for $8 million in savings.

Costerton said ICANN will also look at reducing travel expenses and doing more work from its cheaper regional offices, as well as finding other efficiencies.

But it is also “evaluating ICANN’s fee structure to ensure it scales realistically with inflation”, Costeron wrote.

This will be of great interest to domain registrants, particularly those on a tight budget or with large portfolios, as any increases in the transaction fees ICANN charges registries and registrars will inevitably be passed on to their customers.

Registrars currently add a $0.18 per-domain-per-year ICANN fee at their checkouts, and registries pay $0.25 for every add-year, renew-year and transfer. The fees have not changed in at least the 15 years I’ve been writing this blog.

For ICANN community members and the domain name industry, the cuts will selfishly beg the questions of which services ICANN provides could suffer as a result, and whether it means delays to already overdue projects such as the new gTLD program.

The budget shortfall has arisen due to inflation and sluggish domain sales from the likes of Verisign, ICANN’s biggest funding source. Verisign’s outlook for the year is pretty bearish, with a low estimate of a 1.75% decline in domains under management.

I believe it’s the first time ICANN has been forced into a mass layoff, having reliably swollen its ranks almost every year until quite recently.

Outrage over ICANN’s new gTLD fees

Kevin Murphy, May 29, 2024, Domain Policy

Is ICANN stifling competition and pricing out the Global South by setting its new gTLD evaluation fees too high? A great many community volunteers seem to think so, judging by recent conversations.

The Org last week revealed that it plans to charge registry service providers that want to participate in the next application round $92,000 for their technical evaluation, on top of the estimated $250,000 fee that it will charge for each applied-for string.

Critics have pointed out that a roughly equivalent evaluation, used when a 2012-round gTLD switches to an unknown back-end, currently costs about $14,300, and they’re baffled as to why ICANN plans to up its fees so much.

The Registry Service Provider Evaluation Program was intended to cut a lot of waste and duplication from the new gTLD program. Instead of doing a technical evaluation on an RSP for each gTLD application, the RSP is evaluated once and each applicant simply selects an RSP from a list of approved companies.

ICANN says the program will cost $4.1 million overall, with $2 million of that already mostly spent on the design and implementation phase. It’s expecting all of the existing 40-ish back-end providers to submit to evaluation, along with an unknown number of newcomers.

Assuming fewer than 50 participating RSPs, ICANN will charge $92,000 per RSP. The program is designed to be run on a cost-recovery basis. ICANN says it will lower the price and issue refunds if there are significantly more participants.

Despite that caveat, ICANN staffers running the new gTLD program have faced a barrage of criticism over the last week from members of the SubPro Implementation Review Team, the community volunteers tasked with making sure staff implementation sticks to community policy.

The high-end of the fee scale is high enough that it will essentially “kill off” the RSP market in the Global South, according to Rubens Kuhl of Brazilian ccTLD registry Nic.br, which currently runs the back-end for a handful of 2012-round strings.

The term “Global South” refers to less-wealthy countries largely in the southern hemisphere, mainly in Africa, Asia and Latin America, where $92,000 goes a lot further than it does in North America or Europe.

“What ICANN is suggesting right now simply kills off all Global South RSPs,” Kuhl said during a call yesterday. “Those RSPs could have the technical capability to run gTLDs, and they run very large ccTLDs… It simply seems like a system designed to keep the Global South out.”

Gustavo Lozano Ibarra, director of technical services projects at ICANN and former NIC Mexico employee, responded first by saying that gTLD applicants in the next round from the Global South do necessarily have to chose an RSP from their own region.

“I completely understand that there could be some RSPs in the Global South with capabilities for which the fee could be an issue,” he said. “I think that we get that, and I think that maybe the lack of an Applicant Support Program for the RSPs is something that we need to take into consideration for the next round.”

“So, this round, no Global South. Okay, thank you,” said Kuhl.

“I don’t think this proposed US$92,000 RSP pre-evaluation fee is going to encourage diverse participation in the next nTLD round, especially from developing regions,” Neil Dundas of South African RSP DNS Africa said on the IRT’s mailing list.

“It’s a new financial barrier to entry that previously was not there and it will almost certainly hamper participation from developing regions,” he said.

Mailing list chatter suggests that this potential barrier to entry is something that ICANN’s Governmental Advisory Committee may take a dim view of when the community convenes in Rwanda for ICANN 80 next month.

ICANN is also taking flak for how it is calculating the total cost of the RSP program. Consultant and registry operator Jeff Neuman accused the Org of “double-dipping” by charging for staffers’ work on the program, which he said should already be covered by the fees registries, registrars and ultimately registrants pay into ICANN’s budget.

Responding to criticism that ICANN has over-spent, Ibarra pointed out on yesterday’s call that $4.1 million is a fraction of the $22 million he said ICANN spent on technical evaluations in the 2012 application round.

In addition, RSPs that are attached to potentially dozens of gTLD applications will save a lot of money by only paying to be evaluated once, he said.

Barrett gets second term on ICANN board

Kevin Murphy, May 28, 2024, Domain Policy

ICANN’s Address Supporting Organization has elected Alan Barrett to fill one of its two seats on the ICANN board of directors for the second time.

Barrett, an ISP pioneer from South Africa, was first elected in 2021 and will re-take his seat at ICANN’s AGM this November, assuming the Empowered Community gives him the nod.

He fought off four other candidates from Africa, Asia-Pacific and North America for the job. Europeans were barred from standing because the ASO’s other sitting director is from that region.

ICANN to kill auction fund bylaws change

Kevin Murphy, May 22, 2024, Domain Policy

A controversial proposed amendment to ICANN’s bylaws is set to be killed off after the community flexed its muscles over the board of directors.

The amendment, which sought to give ICANN a switch to turn off its accountability mechanisms under certain circumstances, is now likely to be replaced by one that limits accountability only when it comes to ICANN’s $220 million Grant Program.

News of the board’s change of heart came during a Monday call between the GNSO Council and the two GNSO appointees on the board.

“I think it’s pretty clear that the bylaw that was put together and circulated is not going to pass the Empowered Community,” board member Becky Burr told the Council “So we need to go back and and revisit that.”

The community had wanted an amendment that makes the Independent Review Process and Request for Reconsideration mechanisms unavailable to organizations applying for grants and those that oppose them, to avoid splurging money on lawyers rather than good causes, but the board had floated text that would have made it easier to turn these mechanisms off in future scenarios too.

ICANN’s amendment was supported by the At-Large Advisory Committee, but every other community group, in a rare example of across-the-aisles agreement, reckoned it was overly broad and risked weakening ICANN’s accountability.

The board’s decision to revert to what the community originally wanted appears to be a reluctant one. Burr said that the IRP needs to be looked at in future because the way the bylaws are written now invites over-use.

“As they are currently written, a disappointed bidder, an engineering firm in response to an RFP, could use those, could bring an IRP,” she said. “At some point we’re going to have to look at this more holistically.”

The were also calls from the Council to take a look at the RfR process, or at least how RfRs are handled by ICANN’s legal team. RfRs are too often seen as an adversarial exercise where ICANN lawyers are simply try to “win” against the requester rather than solve the problem at hand, they said. This has led to a situation where dozens of RfRs have been filed over the year, almost all of which are dismissed.

ICANN restarts work on controversial Whois privacy rules

Kevin Murphy, May 20, 2024, Domain Policy

ICANN is to bring in new rules for Whois privacy and proxy services, the best part of a decade after they were first proposed to massive controversy.

It’s looking for volunteers to work with Org staff on implementing policy recommendations that in 2015 led to tens of thousands of people expressing outrage about the dangers, as they saw it, of their privacy being breached.

ICANN is putting together an Implementation Review Team to help implement the recommendations of the Privacy and Proxy Services Accreditation Issues Policy Development Process, known as PPSAI, which sought to bring privacy/proxy services under ICANN’s regulatory umbrella.

The recommendations were hugely controversial in their first draft, which in a minority statement expressed the view that people should be banned from using their domains commercially if they were using privacy services.

But the IRT will be tasked with implementing the final draft, which expunged the calls for such a ban.

The policy still calls for ICANN to run an accreditation system for privacy/proxy services in much the same way as it accredits registrars. It also lays out rules for how such services should gather registrant data and how to treat customer interactions.

But the recommendations are undeniably from a different era, thunk up before the EU’s General Data Protection Regulation made privacy-by-default essentially the industry standard for Whois records.

The PPSAI recommendations now interact with policies and practices that have been adopted in the intervening years, such as the recent Registration Data Policy and the Registration Data Request Service.

People willing to donate 10 to 20 hours a month to the new IRT can check out more details here.