ICANN has $400m in the bank

ICANN ended its fiscal 2016 with just shy of $400 million on its balance sheet, according to its just-released financial report.
As of June 30, the organization had assets of $399.6 million, up from $376.5 million a year earlier, the statement (pdf) says.
Its revenue for the year was actually down, at $194.6 million in 2016 compared to $216.8 million in 2015.
That dip was almost entirely due to less money coming in via “last-resort” new gTLD auctions.
The growth of the gTLD business led to $74.5 million coming from registries, up from $59 million in 2015.
Registrar revenue grew from $39.3 million to $48.3 million.
Money from ccTLD registries, whose contributions are entirely voluntary, was down to $1.1 million from $2.1 million.
Expenses were up across the board, from $143 million to $131 million, largely due to $5 million increases in personnel and professional services costs.
The results do not take into account the $135 million Verisign paid for .web, which happened after the end of the fiscal year.
Auction proceeds are earmarked for some yet-unspecified community purpose and sit outside its general working capital pool. Regardless, they’re factored into these audited financial reports.
ICANN has to date taken in almost a quarter of a billion dollars from auctions. Its board recently decided to diversify how the money is invested, so the pot could well grow.

States drop IANA transition block lawsuit

Four US states attorneys general have quietly thrown in the towel in their attempt to have the IANA transition blocked.
The AGs of Texas, Nevada, Arizona and Oklahoma unilaterally dropped their Texas lawsuit against the US government on Friday, court records show.
A filing (pdf) signed by all four reads simply:

Plaintiffs hereby provide notice that they are voluntarily dismissing this action pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i).

That basically means the case is over.
The AGs had sued the US National Telecommunications and Information Administration, seeking an eleventh-hour restraining order preventing the IANA transition going ahead.
The TRO demand was comprehensively rejected, after ICANN and organizations representing numerous big-name technology companies let their support for the transition be known in court.
The plaintiffs had said they were considering their options, but now appear to have abandoned the case.
It was widely believed that the suit was politically motivated, an attempt by four Republican officials to stir up anti-Obama sentiment in the run-up to the US presidential election.

ICANN faces first post-transition test of UN power (for real this time)

The ICANN community and United Nations agencies are heading for a clash, with governments accused this morning of trying to bypass the ICANN policy-making process.
According to the leader of an ICANN volunteer working group, governments and UN-affilated intergovernmental organizations (IGOs) have circumvented the usual ICANN consensus-building process in order to extract the policies they want directly from the ICANN board of directors and staff.
It’s the first time since the IANA transition, which happened less than a week ago, that governments have been accused of exploiting their special access to the board, and it may become a hot topic at next month’s ICANN 57 meeting in India.
Governments and UN agencies now stand accused of “bypassing the ICANN community” in order to achieve their policy goals.
But the policy being debated is not directly linked to the IANA transition, nor to the thoroughly debunked notion that the UN has taken over ICANN.
Indeed, the issue in question — the permanent protection of IGO acronyms in gTLDs — is almost embarrassingly narrow and predates the announcement of the IANA transition by at least three years, going back to at least 2011.
Basically, the policy questions that look set to cause even more conflict between governments and others are: should IGO acronyms be protected, and if so, how?
IGO acronyms are strings such as WIPO, UNESCO and OECD.
The ICANN board punted this question in May 2014, when it received conflicting advice from the Governmental Advisory Committee and Generic Names Supporting Organization.
Since then, a GNSO Policy Development Process working group has been working on recommendations. It has not yet issued its initial findings, but is close.
Simultaneously and separately, members of ICANN’s board and staff have been quietly talking to a handful of GAC members and IGOs about the same issue in what has become known as the “small group”.
Because it’s small. And a group.
Yesterday, ICANN divulged the consensus of the small group in a letter (pdf) to the leaders of the GNSO Council.
Its recommendations conflict in almost every respect with what the GNSO working group intends to recommend.
The small group wants ICANN to create IGOs-acronyms-only versions of the Trademark Clearinghouse database, Trademark Claims service and UDRP and URS dispute resolution mechanisms — basically “functionally equivalent” mirrors of almost all of the rights protection mechanisms currently only available to trademark owners.
They would be administered at least partially by the GAC and at no cost to the IGOs themselves (presumably meaning ICANN would pick up the tab).
It seems like a disproportionate amount of faff considering the problem ICANN is trying to solve is the vanishingly small possibility that somebody attempts to cybersquat the United Nations Entity For Gender Equality And The Empowerment Of Women (UNWOMEN) or the Postal Union Of The Americas Spain And Portugal (PUASP).
A lot of it is also in direct opposition to what the GNSO WG plans to recommend, according to chair Phil Corwin and the current draft of the WG’s recommendations.
The WG currently plans to recommend that IGOs should be allowed to use the existing URS and UDRP mechanisms to take down or take over domains that use their acronyms in bad faith. It does not currently seem to recommend anything related to Trademark Claims.
A foundational disagreement relates to the status of IGOs under the law. While IGOs in the small group seem to think they are in a special category of entity that is not subject to regular trademark law, the WG hired expert legal counsel that determined the contrary.
Corwin, in his initial response to the small group letter, said that the implications of the debate go beyond how IGO acronyms should be protected.
IGOs carried out a “near boycott” of the GNSO PDP discussions, he wrote, preferring instead to talk to the small group “behind closed doors”. He wrote:

we continually urged members of the GAC, and IGOs, to participate in our WG. That participation was so sporadic that it amounted to a near-boycott, and when IGO representatives did provide any input they stressed that they were speaking solely as individuals and were not providing the official views of the organizations that employed them.
Of course, why should they participate in the GNSO policy processes when they are permitted to pursue their goals in extended closed door discussions with the Board, and when the Board seeks no input from the GNSO in the course of those talks?

He directly linked the timing of the small group report to the expiration last Friday of ICANN’s IANA functions contract with the US Department of Commerce, and suggested that the IGO acronym issue could be a litmus test for how ICANN and governments function together under the new oversight regime.

I note that transmission of the letter has been delayed until after the completion of the IANA transition, and that the post-transition role of governments within ICANN was a central controversy surrounding the transition.
…
What is at stake in this matter goes far beyond the relatively rare instance in which a domain registrant infringes upon the name or acronym of an IGO and the IGO seeks relief through a CRP [Curative Rights Protection mechanism]. The larger issue is whether, in a post-transition ICANN, the GAC and the UN agencies that comprise a large portion of IGOs, will participate meaningfully in GNSO policy activities, or will seek their policy aims by bypassing the ICANN community and engaging in direct, closed door discussions with the Board.

The financial effects of this seemingly interminable debate on the gTLD industry are probably pretty minor.
Currently, all new gTLDs have temporarily blocked, from launch, all of the IGO acronyms in question. That’s roughly 200 domains per gTLD that could otherwise be sold.
Many of the strings are three, four and five-letter acronyms that could fetch “premium” prices in the open market (though, in my judgement, not much more than a couple hundreds bucks in most cases).
A small number of the acronyms, such as WHO and IDEA, are potentially more valuable.
Off the top of my head and the back of an envelope, I’d put the cost to the industry as a whole of the IGO acronym blocks probably somewhere in the very low millions.
The harms being prevented are also very minor, in my view. With a small handful of exceptions, the IGOs in question are not attractive cybersquatting targets.
But, as is so often the case in ICANN matters, the arguments in this case boil down to matters of law, principle and process much more than practical impact.

Judge says IANA transition suit unlikely to succeed

A Texas judge refused demands for a temporary restraining order preventing the IANA transition going ahead last weekend because the suing state attorneys general were unlikely to succeed at trial.
That was one of several reasons Judge George Hanks refused the TRO, which had been requested by the Republican AGs of Texas, Arizona, Oklahoma and Nevada.
Hanks’ order on the motion, which was published last night (pdf), said the AGs:

have not shown that there is a substantial likelihood that they will prevail on the merits of this case. Nor have they shown that there is a substantial threat that an irreparable injury will be suffered. Nor have they shown that the threated injury outweighs the threatened harm to the United States. Finally, they have not shown that granting the injunction will not disserve the public interest.

The lawsuit claims that the IANA transition, which involves the US government removing itself from its oversight roles of ICANN and DNS root zone management, represents a threat to free speech and to the stability of the .mil and .gov TLDs.
The eleventh-hour complaint was filed on Thursday, after attempts by Senator Ted Cruz and his allies to block the transition via a Congressional funding bill failed.
But Hanks ruled that the AGs claims about potential future harms amounted to no more than “speculation” and “hearsay”.
He wrote: “counsel’s statements of what ‘might’ or ‘could’ happen are insufficient to support the extraordinary relief sought in this case.”
He also pointed to one significant logical inconsistency in their argument:

Even if the Court were to find that some past harm or bad acts by the Internet Corporation for Assigned Names and Numbers (“ICANN”) impacted the interests of the States in their respective websites and alleged rights at interest, the Court notes that these past harms happened under the exact regulatory and oversight scheme that the States now seek to preserve. This, along with the lack of evidence regarding any predictable or substantially likely events, greatly undermines the States’ request for they relief they seek.

The AGs are reportedly considering their options following the ruling, and may appeal.
But another school of thought holds that the suit was largely a political gesture designed to creating talking points for the Republican party ahead of next month’s presidential election, and could be allowed to fade away.

Breaking: Judge rules ICANN handover will happen!

The IANA transition is set to go ahead after a Texas judge ruled in favor of the US Federal government tonight.
Here’s the judge’s decision (pdf)
Larry Strickling, assistant secretary at the National Telecommunications and Information Administration, released the following brief statement early October 1:

The federal court in Galveston, Texas denied the plaintiffs’ application for declaratory and injunctive relief. As of October 1, 2016, the IANA functions contract has expired.

The US had been sued at the eleventh hour by four state attorneys general, who claimed that allowing ICANN to go independent would, among other things, put free speech at risk.
The judge evidently disagreed, though his full decision has not yet been made available.
ICANN chair Steve Crocker released this statement:

This transition was envisioned 18 years ago, yet it was the tireless work of the global Internet community, which drafted the final proposal, that made this a reality. This community validated the multistakeholder model of Internet governance. It has shown that a governance model defined by the inclusion of all voices, including business, academics, technical experts, civil society, governments and many others is the best way to assure that the Internet of tomorrow remains as free, open and accessible as the Internet of today.

Akram Atallah, president of ICANN’s Global Domains Division, tweeted this:

The sun will still come up in the morning and the internet will continue to function as usual. #ICANN #yestoIANA #IANATransition

— Akram Atallah (@AkramAtallah) September 30, 2016

The transition, in broad terms, means the US no longer holds a special role in managing the DNS root.
Now, instead of having to rely on vague threats from the NTIA to keep ICANN in line, the global internet community will get new powers to challenge ICANN decisions.

ICANN handover in jeopardy as Texas leads lawsuit against US government

The state attorneys general of Texas, Arizona, Nevada and Oklahoma have sued the US Federal government to stop tomorrow’s planned IANA transition.
The 11th-hour suit seeks a court declaration that the transition would be unconstitutional and a temporary restraining order forcing the National Telecommunications and Information Administration to continue its oversight role.
It’s rooted in the conspiracy theories championed by the likes of Texas Senator Ted Cruz, who holds that allowing the NTIA to stop authorizing DNS root modifications is akin to handing broad internet censorship powers to Russia, China and Iran.
“Trusting authoritarian regimes to ensure the continued freedom of the internet is lunacy,” Texas Attorney General Ken Paxton said in a press release, losing about a thousand credibility points.
“The president does not have the authority to simply give away America’s pioneering role in ensuring that the internet remains a place where free expression can flourish,” he said.
The AGs reckon the remaining root zone partners, ICANN and Verisign, which are not bound by the First Amendment, could crack down on free speech.
The complaint states:

NTIA intends to delegate its approval authority over changes to the root zone file to ICANN and Verisign, and give these companies unbridled discretion to make changes to that file, with no substantive constraints on their decisions to grant or deny requests to alter the file that effectively enable or prohibit speech on the Internet.
Without the federal government approval authority, ICANN and Verisign have complete discretion to engage in this type of discrimination, and because these entities are private, citizens and States will not be able to use the democratic process

Citing the Property Clause of the U.S. Constitution, the AGs claim that the government does not have the authority to legally remove itself from oversight of the DNS root zone.
The DNS root is US property that cannot be disposed of without an act of Congress, the complaint alleges:

The Authoritative Root Zone File, the Internet Domain Name System as a whole, the exclusive right to approve changes to the root zone file, and the contracts NTIA administers in exercising control over them are property of the United States

The US Government Accountability Office told Cruz earlier this month that it was “doubtful” that it the transition requires the disposal of any US government property, in this report (pdf).
The AGs also reckon that if the US is no longer involved in root zone management, ICANN could delete .mil and .gov or transfer them to third parties.
The IANA contract between ICANN and NTIA is due to expire tomorrow night, ushering in a new era in which the global internet community becomes the back-stop preventing ICANN abusing its powers for Evil.
Cruz has been fighting against the transition for reasons best known to himself for months.
Most recently, he led an attempt to have a block on the transition included in a US federal funding bill, which wound up being passed yesterday with no such clause attached.
The four-state AG complaint can be read here (pdf).

Squabbling drug peddlers drag .pharmacy into brand bunfight

The .pharmacy new gTLD has been dragged into the ongoing trademark dispute between two pharmaceuticals giants called Merck.
Germany-based Merck KGaA has accused the .pharmacy registry of operating an unfair and “secretive” process to resolve competing sunrise period applications.
The domain merck.pharmacy was awarded to US rival Merck & Co, which was spun off from the German original a hundred years ago, after both Mercks applied for the domain during .pharmacy’s January-March 2015 sunrise.
Now Merck KGaA has become what I believe might be the first company to reveal an attempt to invoke ICANN’s Public Interest Commitments Dispute Resolution Procedure to get the decision reversed.
The National Association of Boards of Pharmacy, a US entity, operates .pharmacy as a tightly controlled gTLD with pre-registration credential validation.
When it launched for trademark owners in last year, it was vague about how contentions between owners of matching trademarks would be handled, according to Merck KGaA.
Merck KGaA claims that NABP awarded merck.pharmacy to Merck & Co and initially refused to disclose how it had arrived at its decision other than to say the German firm “met fewer criteria” than its rival.
After some back-and-forth between their lawyers, Merck KGaA was still not happy with NABP’s response to the dispute, so it decided to start filing compliance reports ICANN.
A year on, it tried to invoke the PICDRP.
Public Interest Commitments are addenda to ICANN Registry Agreements that bind the registries to certain behaviors, such as fighting malware and working with industry-specific regulatory bodies.
The PICDRP, heard by ICANN or an independent standing panel, is a way for third parties to challenge registries’ compliance with their contracts when they believe PICs have been violated.
No PICDRP disputes have actually made it before a panel to date, to my knowledge. Indeed, this is the first time I’ve heard of anyone even attempting to file one, though ICANN Compliance reports indicate about 20 were filed last year.
Merck KGaA claims that by not disclosing how it decided Merck & Co should win merck.pharmacy, NABP is in breach of the PIC that states:

Registry Operator will operate the TLD in a transparent manner consistent with general principles of openness and non-discrimination by establishing, publishing and adhering to clear registration policies.

It suspects that NABP was biased towards Merck & Co because the US firm is a $100,000+ contributor to its coffers.
NABP has denied any wrongdoing, saying it applied “objective criteria” to decide which Merck most deserved the name.
This June, over a year after the domain was awarded, Merck KGaA filed its PICDRP complaint with ICANN. Two weeks ago, ICANN responded saying the complaint had been rejected, saying:

The detailed review criteria used to resolve the contention for the registration of the domain name was part of an operational procedure that the registry operator applied to both applicants’ websites and was consistent with .pharmacy’s community restrictions in Specification 12 of the RA. As the internal operational procedure does not conflict with ICANN’s agreements and policies, it is deemed outside of ICANN’s scope of enforcement.

The decision seems to have been made by ICANN staff. No independent panel was appointed. The PICDRP grants ICANN “sole discretion” as to whether a panel is needed.
The only reason the dispute has come to light is that Merck KGaA has decided to challenge ICANN’s decision with a Request for Reconsideration. The RfR and 600-odd pages of exhibits are published here.
It’s the second concurrent RfR Merck has on the go with ICANN. The Mercks are also simultaneously fighting for the right to run .merck as a dot-brand gTLD.
Both applications for .merck went through the Community Priority Evaluation process, but both failed.
The next stage in resolving the contention said would have been an auction, but Merck KGaA has filed for Reconsideration on its CPE panel’s determination.

People are forgetting .com exists — ICANN survey

Have you ever heard of .com, .net and .org?
That question was posed to 3,349 domain name registrants in 24 countries by market research firm Nielsen this June and guess what — awareness of all three cornerstone gTLDs was down on a comparable 2015 survey.
Unbelievably, only 85% of respondents professed to be aware of .com’s existence, compared to 86% in 2015.
Equally unbelievably, awareness of .net and .org fell from 76% to 69% and from 70% to 65% respectively between 2015 and 2016, the survey found.
Those are just three among many hundreds of findings of the Nielsen survey, which was carried out in order to inform ICANN’s Competition, Consumer Trust & Consumer Choice Review.
The CCT is one of the reviews deemed mandatory before ICANN is able to launch the next round of new gTLD applications.
A great many of the numbers revealed by the survey are seriously open to question — some could even be empirically proven wrong.
But David Dickinson, project lead for Nielsen on the survey, told DI yesterday that the numbers themselves are less important than the trends, or lack thereof, that they might represent.
Nielsen carried out two surveys in 2015 — one of consumers and one of registrants — then repeated both surveys again a year later.
Respondents were selected from a pool of people who have at some point indicated to third-party market research companies that they are available to take surveys online, Dickinson said. They are usually compensated via some kind of redeemable loyalty points scheme.
The registrant surveys were limited to those who said they have registered a domain name. The consumer survey was limited to those who said they spend more than five hours a week online.
While the number of respondents were measured in the low thousands, the idea is that they provide a representative sample of all internet users and domain name registrants.
But there’s a lot of weirdness in the numbers.
Dickinson said that the 85% awareness number for .com could be due partly to random “mechanical errors” — people clicking the wrong buttons on their survey form — but said that lack of awareness was more common among younger respondents who were more likely to be aware of newer, less generic TLDs.
The surveys also highlighted a bizarre split in TLD awareness between consumers and registrants.
Given that registrants are a subset of consumers, and given that they are by definition more familiar with domain names, you’d expect respondents to the registrant surveys to show higher TLD awareness than those responding to the consumer surveys.
But the opposite was true.
The surveys found, for example, that 95% of consumers knew about .com, but only 85% of registrants did. For .net and .org the numbers were 88%/69% and 83%/65% respectively. None of it makes any sense.
Dickinson said that the 2015 consumer/registrant awareness numbers were “almost identical”.
“My only real conclusion here is that [in 2016] there was some systematic difference in the diligence that the registrants selected these names on these awareness questions, and that a large portion of that is just due to random variation,” he said.
“However, when we do look at those people who are registering new gTLDs, they tended to have much lower awareness of those legacy gTLDs than those people who were unaware or had not registered those new gTLDs,” he said.
“The people who said they did not recognize any of those new gTLDs at all the are very very centric on the legacy gTLDs and in particular .com,” he said.
“I think the data is overstated because of the random variation but there is a learning here when we break it down… that those legacy domains are becoming less relevant or less noticed by the younger people and the people who are registering these new gTLDs,” he said.
“I think there is a shift going on, but it’s not as big as what is stated here [in the numbers],” he said.
The surveys also looked at awareness and registration levels for new, 2012-round gTLDs, but again the numbers probably don’t accurately reflect reality.
For example, 39% of registrants claimed to have heard of .email domain names and 15% claimed to have actually registered one.
Again, these numbers don’t seem plausible. There are fewer than 60,000 .email domains in existence today. Even if there were only one million domain registrants in the world, 15% registration rate would mean at least 150,000 names should have been sold.
Dickinson said that this number could have been higher due to selection bias. The survey took about half an hour on average to fill out, so people more personally interested or invested in internet or domain name related stuff might have been more likely to stick around and complete it.
Interestingly, new gTLD awareness rates in North America were substantially lower than awareness elsewhere in the world. For example, only 25% of North Americans professed to have heard of .news, but that grew to 42% in Asia where most languages use a different script.
My sense here is that respondents — which all took the surveys in their native languages — may have just been clicking to confirm English words they recognized, rather than TLDs they had seen in the wild.
Nielsen clearly suspected that there would be an element of “false recall” among respondents because it actually included some fake TLDs among the real ones.
This led to findings such as: 26% of Africans have heard of .cairo, 17% of North Americans have heard of .toronto and 21% of South Americans have heard of .bogota.
None of those city TLDs exist.
Dickinson explained this as “assumed familiarity”.
“What very much seems to happen is that if something has an implied ‘face validity’ — it seems to make sense or seems to be readily interpretable — then those ones will get higher stated awareness than the ones that are just random letters, such as .xyz,” he said.
Indeed, while there are over six million .xyz domains out there today, with high-profile registrants including Google, only 13% of respondents claimed to be aware of it.
“The more implied familiarity or sense of familiarity there is, the more likely people are to feel like they’ve been there or seen it, so it’s definitely a false recall, but the learning from that is that the more interpretable… those things are then they have more easy acceptance by consumers than things that are not interpretable,” Dickinson said.
The surveys did not only cover awareness and registration patterns. There are literally hundreds of data points in there covering different perceptions of TLDs new and old. I’ve just focused here on the ones that made me question whether the survey was worth the time, expense and paper it was written on.
But Dickinson said that the raw numbers are not necessarily what the ICANN review teams should be looking at.
“Maybe the absolute number is not exactly dead-on, but what are the relationships between the numbers?” he said.
“I tend to look at the relationships, so for example one of the objectives of doing this survey was to see if the new gTLD program impacted the perception of the industry in any way, or trustworthiness in the industry,” he said.
“For example, we can say we’re not sure it improved — the numbers didn’t change significantly in that direction to allow us to definitively say it improved — but it certainly did not decline,” he said. “We can rule out that it declined.”
“Overall, we can say that the new gTLD program is emerging with fairly strong awareness, relative,” he said.
“We can also say with certainty that none of those new gTLDs are anywhere approaching the awareness of the legacy gTLDs, and even if there is some erosion in the legacy gTLDs it’s going to take a long time for those to reach parity, if they ever do,” he said.
The Nielsen surveys are one input to the work of the volunteer CCT Review Team, which intends to publish its preliminary report before the end of the year.
CCT-RT chair Jonathan Zuck recently published a blog post on the ICANN web site giving a progress report on recent work.

Barcelona picked for ICANN 63

ICANN will head to Barcelona, Spain for its 63rd public meeting, the organization’s board of directors has decided.
ICANN 63, that year’s Annual General Meeting, is due to take place October 20 to October 26, 2018. The specific venue has not yet been revealed.
That’s quite a way in the future. Venues have not yet been selected for the first two meetings of 2018, which will take place in ICANN’s North America and Latin America and Caribbean regions.
We’re currently up to ICANN 57, which is due to start in about six weeks in Hyderabad, India (start looking into visas today if you haven’t already).
Next year, meetings will be held in Copenhagen in March, Johannesburg in June and Abu Dhabi in October.
Barcelona was selected for 63 at an ICANN board meeting last week.
The city, Spain’s second most populous, is in the Catalonia region of Spain and is home to the .cat sponsored gTLD.

Destroy ICANN! Destroy ICANN with missiles!

The year is 2016. The Kenyan Muslim president of the United States is poised to hand over control of the internet to the United Nations in an attempt to silence lunatic conspiracy theorists Matt Drudge and Alex Jones for good.
But you can help, by engaging in missile warfare with ICANN and the UN.
That’s the deranged premise of ICANN Command, a little browser game that appeared online this week.
It’s a knock-off of the 1980 Atari classic Missile Command. The intro reads:

You will be defending actual Internet domains from UN attack! Launch surface-to-air missiles in time to destroy UN Domain Seeking Missiles. If a UN missile reaches a domain, that domain is lost forever.
Or, call your senator right now!

This related video explains more.

It’s obviously been inspired by the anti-Obama rhetoric of Senator Ted Cruz and Wall Street Journal op-eds of L Gordon Crovitz, which have fed a fringe right-wing conspiracy theory that sees the UN taking control of the internet come October 1.
That’s the date the US government proposes to remove itself from its oversight role in ICANN’s IANA functions.
After that, ICANN will be overseen by a new multistakeholder process in which everybody, not the UN, has a voice.
InfoWars.com and DrudgeReport.com are safe, sadly.
You can check out the game here if you wish. I scanned it for viruses and mind-control rays and it seems safe.