Three registrars face the ICANN chop

ICANN has told three registrars they are in breach of their registrar contracts and will lose their accreditation next month unless they rectify the problems.
These registrars, all of which appear to have negligible numbers of gTLD domains under management, are affected:
Mister Name will be shut down if it does not pay its ICANN fees and escrow its Whois data.
Open System Ltd is accused of not having a functioning Whois service.
Best Bulk Domains Inc also doesn’t have a functioning Whois, ICANN said. It also has not been paying its dues and hasn’t maintained accurate contact information for itself.
All three have dates in mid-December to clean up their acts or lose their right to sell gTLD domains.
You can find ICANN’s compliance letters here.

Another reason why Go Daddy might not become a registry

Domain name registries and registrars will soon be able to own each other, but there are plenty of good reasons why many of them, including the largest, may not.
George Kirikos and Mike Berkens are asking very interesting questions today, based on earlier investigative reporting by DomainNameWire, about whether Go Daddy would or should be barred from owning a registry on cybersquatting grounds.
But that’s not the only reason why Go Daddy may have problems applying for a new top-level domain.
I reported back in March, when only my mother was reading this blog, that Go Daddy may have gotten too big to be allowed into the registry market.
If you think Go Daddy wants to apply to ICANN to manage a new TLD registry or two, ask yourself: why did Go Daddy spend most of the year opposing vertical integration?
I have no inside knowledge into this, but I have a theory.
In 2008, CRA International produced an economic study for ICANN that, broadly speaking, recommended the relaxation of the rules separating registries and registrars.
In December that year, less than two years ago, Go Daddy filed its very much pro-VI comments on the study:

Go Daddy has and continues to be an advocate for eliminating the existing limits on registry/registrar cross-ownership.
…
The arguments that have been presented in favor of maintaining the status quo simply do not hold water. Current and past examples of cross-ownership already serve as test cases that demonstrate cross-ownership can and does work, and it can be successfully monitored.

Over the course of the next 12 months, the company’s official position on VI mellowed, and by this year it had made a 180-degree turn on the issue.
Its comments to the VI working group, filed in April 2010, say:

Go Daddy’s position on the vertical integration (VI) issue has changed over time. When VI discussions first began our position was very much to the left (if left is full, unqualified VI), but it has moved steadily to the right (if right is maintaining the so-called status quo). At this point, we are nearly fully on the right.

The company cited concerns about security, stability and consumer protection as the reasons for its shift. While I’ve no doubt that’s part of the story, I doubt it paints a full picture.
The decision may also have something to do with another economic study, produced for ICANN in February this year, this time by economics experts Steven Salop and Joshua Wright. It was published in March.
This study, crucially I think, suggested that where cross-ownership was to take place and the larger of the two companies had market power, that the deal should be referred to government competition regulators. Salop & Wright said:

We recommend that ICANN choose a market share threshold in the 40-60% range (the market share measured would be that of the acquiring company). The lower end is the market share at which U.S. competition authorities begin to be concerned about market power.

Guess which is the only registrar that falls into this market share window?
In January this year, Go Daddy put out a press release, when it registered its 40 millionth domain, which claimed:

Go Daddy now holds a near 50 percent market share of all active new domains registered in the world and is more than three times the size of its closest competitor.

Correlation does not equal causation, of course, so there’s no reason the second economic study and Go Daddy’s policy U-turn are necessarily linked, but I’d be surprised if the market power issue did not play a role.
The newly published Applicant Guidebook appears to have taken on board a key Salop & Wright recommendation, one that may be relevant:

ICANN-accredited registrars are eligible to apply for a gTLD… ICANN reserves the right to refer any application to the appropriate competition authority relative to any cross-ownership issues.

It seems to me that Go Daddy may be one of the few companies such a provision applies to. The company may find it has a harder time applying to become a registry than its competitors.
In the interests of sanity, I should point of that the AGB has been out for less than 48 hours, and that anything written about its possible consequences at this point is pure speculation.

DirectNIC chief tries to dismiss cybersquatting suit

The CEO of DirectNIC is trying to wriggle out of a cybersquatting lawsuit filed by Verizon, seemingly on the grounds that the telco has been unable to track him down.
Sigmund Solares heads up the Grand Cayman-based registrar and lives in Florida, but since suing DirectNIC back in March, Verizon has not been able to find him to serve him notice.
Now, his lawyers are arguing on a technicality that the suit against him should be dismissed (pdf).
Verizon claims that DirectNIC and its directors, via a bunch of shell companies, cybersquatted “nearly every single famous trademark in existence”, including some of Verizon’s.
It filed an amended complaint (pdf) a month ago. Due to its inability to track down Solares, it served the Florida Secretary of State instead, which it’s allowed to do if the defendant evades service.
Verizon has filed a number of declarations from process servers who were unable to serve him, despite staking out his Tampa home on at least 10 occasions over the space of several months.
Solares’ lawyers now want the complaint against him dismissed on the grounds that he’s not been served, and that he was not evading service, he was just away on business and vacation:

no where in the Plaintiffs’ affidavits do the Plaintiffs allege any actions whatsoever on the part of Mr. Solares. The Plaintiffs’ complaint and affidavits merely recount their efforts to serve Mr. Solares. Such allegations cannot clearly show that Mr. Solares is evading process because they allege no actions on his part at all. Plaintiffs’ assertions only show Mr. Solares’ absence from Tampa during the periods when the Plaintiffs attempted to effect service of process.

In response, Solares has filed a fairly detailed account (pdf) of his whereabouts between March and September, which included trips to Milan, Miami, Aruba, Ireland and Boston.
Some of the dates and locations coincide with big domainer conferences.
Verizon’s complaint attacks DirectNIC on essentially two fronts.
It claims that DirectNIC’s practice of parking expiring domains – including those that infringe trademarks – constitutes cybersquatting. This is of course a fairly common industry practice.
It also claims that DirectNIC itself cybersquatted on thousands of domains via a number of shell companies, including NOLDC, Spiral Matrix, Kenyatech, Kentech, Speedy Web, Unused Domains, and Belize Domain WHOIS Service.
There’s a fair bit of circumstantial evidence connecting the firms, and UDRP panelists have previously inferred that they shared ownership, but I don’t think it’s ever been definitively proved.
I reported on this evidence in a bit more depth here.
It’s possible that more evidence could emerge during discovery, but the suit cannot proceed to that stage while the court is still figuring out whether Solares has been served or not.
Dell previously sued DirectNIC on the same grounds. Solares signed an affadavit denying he had anything to do with Kenyatech. That suit was settled.

WordPress.com becomes a domain name registrar

Automattic, the company behind the WordPress.com blogging service, appears to have been granted an ICANN registrar accreditation, which would allow it to start selling domain names direct to its users.
The development seems to put a question mark next to the company’s reseller relationship with Go Daddy subsidiaries Wild West Domains and Domains By Proxy.
Currently, WordPress.com allows users to buy domain names and map them to their wordpress.com blog directly through their blog’s interface. The company charges $17 a year, with optional privacy.
It’s my understanding that the company currently acts as a Wild West Domains reseller, with the privacy protection service offered by Domains By Proxy. Both are Go Daddy companies.
Recently, WordPress.com started offering an Offsite Redirect service, enabling users to bounce visitors to example.wordpress.com to example.com after they’ve switched hosts.
Go Daddy used this as an opportunity to encourage WordPress.com users to migrate to its own hosting service in this blog post.
Automattic showed up on ICANN’s list of accredited registrars IDs yesterday, suggesting that it will not be long before it is also on the official list of accredited registrars.

Go Daddy files for business community patents

Go Daddy has applied for three US patents covering an “Online Business Community” that looks a bit like a social network for small businesses.
The patents describe a web site that enables companies and potential customers to interact through forums, community groups and ratings systems, as well as advertising, buying and selling.
In the applications, Go Daddy says it had noticed that:

presently-existing methods of conducting online business, however, do not permit businesses and potential customers alike to interact in one place to share business-related resources; advertise, buy, and sell goods and services; interact; hold discussions; and network.

The patents, if granted, would cover such a service.
While most or all of the features outlined in the applications can be found individually in other Go Daddy products, I don’t think the company currently has a service that combines them all in the way described by the patents. Go Daddy Marketplace probably comes closest.
The applications appear to cover the creation of ad hoc business communities, for example, as well as the formation of “partnerships” between members such as suppliers and customers.
They also appear to account for communication between members using technologies such as instant messaging or voice over IP, and for members to rate each other for trustworthiness.
The three applications, 20100262686, 20100262629 and 20100262502, were filed in June and published today.

Demand Media to invest up to $75m in content

Demand Media plans to invest between $50 million and $75 million in content in 2011, according to the company’s latest IPO filing.
The company, which owns number two registrar eNom, has also disclosed that it plans to list itself on the New York Stock Exchange under the ticker symbol DMD.
Under “Use of Proceeds” in its latest amended S-1 registration form (huge HTML file), filed today with the Securities and Exchange Commission, Demand says:

We currently anticipate that our aggregate investments in content during the year ending December 31, 2011 will range from $50 million to $75 million.

Demand Media’s main business is the advertising it sells against the thousands of freelance articles it publishes every day. It had about $102 million in current assets on its balance sheet on June 30 this year.
Previous text talking about about using the proceeds of the IPO to “acquire or invest in complementary technologies, solutions or businesses” has been dropped.
The amended S-1 spends quite a lot of time talking about a reverse stock split that it is carrying out prior to its public offering.

4Domains customers transferred to Internet.bs

Customers from the insolvent registrar 4Domains have had their domains transferred to Bahamas-based Internet.bs, only a few days after ICANN told 4Domains it was shutting them down.
In a notice posted last night, ICANN said that 4Domains had nominated Internet.bs as its registrar of choice for refugee customers, which likely speeded up the transaction.
ICANN’s letter telling 4Domains it was losing its accreditation, alleging multiple breaches of its contract, was sent September 30, last Thursday.
A 4Domains customer contacted me earlier this week to say she had received a renewal notice from Internet.bs (which she had never heard of) as early as Sunday, October 3.
That’s possibly the fastest turnaround between a registrar losing its accreditation and the new registrar taking over to date.
ICANN tells former 4Domains customers worried about fraud that any emails they receive from Internet.bs should link only to internet.bs or internetbs.net.
Customers should probably also be aware that their domains are now handled by a registrar subject to Bahamas law. 4Domains was US-based.

ICANN cans broke registrar

4Domains.com has lost its registrar accreditation after ICANN decided it had gone insolvent.
ICANN has alleged numerous other violations of the Registrar Accreditation Agreement, but told the registrar that its insolvency allows it terminate the accreditation with immediate effect.
ICANN’s letter to 4Domains (pdf) describes a company unable not only to pay its roughly $6,110 in due ICANN fees, but also to fund its registry accounts, service its customers and pay its staff.
From this, ICANN has concluded that the registrar is insolvent, and has terminated its accreditation.

4Domains is acting in manner that endangers the stability and operational integrity of the Internet, which is a separate grounds to support ICANN’s termination of the 4Domains RAA.

ICANN said 4Domains was also failing to escrow its registrant data, “due to an inability of the 4Domains programmer to resolve the escrow deposit issues”.
But it has this week supplied ICANN with an electronic copy of its customer database, so it appears that most registrants will be protected should their domains be transferred to another registrar.
The company has been told it may now nominate another registrar to take over its accounts in bulk.
4Domains was accredited in 2000, making it one of the first registrars to go live. According to DotAndCo.net, it has about 25,000 active registrations in five gTLDs.

Is Ella Koon the hottest Go Daddy Girl yet?

Go Daddy has added yet another spokesmodel to its small army of Go Daddy Girls.
Ella Koon is a Hong Kong-based singer/actress/model described by Go Daddy CEO Bob Parsons thus: “She’s smart, she’s talented and she knows how to leverage the Internet.”
Those are the three most important qualities in any woman, as I’m sure you’ll agree.
Koon’s primary responsibilities will be promoting the registrar’s brand specifically to the Asian market by looking pretty and wearing a tight T-shirt.

eNom to crack down on fake pharma sites

Demand Media is to tighten security at its domain registrar arm, eNom, after bad press blighted its recent IPO announcement.
The company has signed a deal with fake pharmacy watchdog LegitScript, following allegations that eNom sometimes turns a blind eye to illegal activity on its customers’ domains.
The news emerged in the company’s amended S-1 registration statement (large HTML file), filed with the US Securities and Exchange Commission yesterday. New text reads:

We recently entered into an agreement with LegitScript, LLC, an Internet pharmacy verification and monitoring service recognized by the National Association of Boards of Pharmacy, to assist us in identifying customers who are violating our terms of service by operating online pharmacies in violation of U.S. state or federal law.

LegitScript will provide eNom with a regularly updated list of domain names selling fake pharma, so the registrar can more efficiently turn them off. The companies have also agreed to work together on research into illegal online pharmacies.
Surrounding text has also been modified to clarify that eNom is not required, under ICANN rules, to turn off domains that are being used to conduct illegal activity.
This is a bit of a PR win for the small security outfits KnuJon and HostExploit, firms which had used the occasion of Demand’s S-1 filing to give eNom a good kicking in the tech and financial press.
HostExploit reported last month that eNom was statistically the “worst” registrar as far as illegal content goes.
ICANN executives are reportedly going to be hauled to Washington DC at the end of the month to explain the problem of fake pharma to the White House.
Registries and registrars have also been invited, and I’d be surprised if eNom is not among them.