Could vertical integration kill registrar parking?

Will ICANN’s decision to allow registrars and registries to own each other help reduce the practice of registrars parking unused or expiring domain names?
A reading of the new top-level domain Applicant Guidebook in light of the recent “vertical integration” ruling it incorporates certainly raises this kind of question.
The AGB includes a policy called the Trademark Post-Delegation Dispute Resolution Procedure, or PDDRP, which allows trademark owners to seek remedies against cybersquatting registries.
The policy is quite clear that registries cannot be held accountable for cybersquatting by third parties in their TLD, unless they have, for example, actively encouraged the squatters.
But another example of infringement is given thus:

where a registry operator has a pattern or practice of acting as the registrant or beneficial user of infringing registrations, to monetize and profit in bad faith.

Now, this wouldn’t be a cause for concern in the current vertically separated market.
Most registries are only generally able to register domain names in their own TLD by going through an accredited registrar. Proving bad faith intent in that situation would be trivial.
But what of an integrated registry/registrar that also automatically parks recently registered or expiring domains in order to profit from pay-per-click advertising?
This is common practice nowadays. It’s been used to prove a registrant’s bad faith during many recent UDRP proceedings and one registrar is even being sued by Verizon for doing it.
Would a registrar parking an expired, trademark-infringing domain constitute it acting as a “beneficial user” of the domain “to monetize and profit in bad faith”?
Text added to the PDDRP section of the AGB in its most recent revision strongly suggests that “the registrar did it” would not be a defence for a vertically integrated company:

For purposes of these standards, “registry operator” shall include entities directly or indirectly controlling, controlled by or under common control with a registry operator

The PDDRP allows complainants to seek remedies such as injunctions, as well as the suspension of new registrations in a TLD and, exceptionally, the full revocation of their registry contract.
With that in mind, would an integrated registry/registrar want to risk any practice that puts their TLD at risk?

What does ICANN say about terrorism?

While it’s true that ICANN has excised specific references to terrorism from its new top-level domain Applicant Guidebook, don’t expect any such groups to be awarded TLDs.
As I reported in September, the AGB no longer contains the explicit mention of “terrorism”, which had caused complaints to be filed by a few members of the community.
But it does contain text that makes it abundantly clear that any group or nation the US considers a supporter of terrorism will have an extremely hard time finding approval.
Under a new section entitled “Legal Compliance”, ICANN notes that it “must comply with all U.S. Laws, rules, and regulations” including the sanctions program overseen by the US Office of Foreign Assets Control.
OFAC administers a List of Specially Designated Nationals and Blocked Persons. If you’re on the SDN list, American companies cannot do business with you without a license.
While ICANN has applied for exemption licenses in the past, in order to be able to deal with organizations in US-unfriendly nations (on ccTLD matters, presumably), the AGB now states:

ICANN generally will not seek a license to provide goods or services to an individual or entity on the SDN List. In the past, when ICANN has been requested to provide services to individuals or entities that are not SDNs, but are residents of sanctioned countries, ICANN has sought and been granted licenses as required. In any given case, however, OFAC could decide not to issue a requested license.

If you’ve never seen this list before, it can be downloaded here. It’s currently 475 pages long, and while it’s certainly a globally inclusive document, parts of it do read like the Baghdad phone book.
(Interestingly, many of the listed a.k.a’s are actually domain names)
Anybody who wanted ICANN to replace the amorphous term “terrorism” with something a little more specific have had their wishes granted.
No more hypothetical debate is required about whether Hamas, for example, is a terrorist group or a movement of freedom fighters. It’s in the book, so it’s probably not getting a TLD.

ICANN’s new TLD rulebook is out

ICANN posted its proposed final Applicant Guidebook for new top-level domains a couple hours ago.
The document is now subject to public comment until noon UTC, December 10, just before the ICANN board convenes in Cartagena.
As I speculated earlier in the week, ICANN has reduced the length of the feedback window from 30 days in order to hit its launch deadlines.
Here’s a review of some changes, based on a quick scan of the 360-page redlined document (pdf).
One change that will certainly be of interest of applicants:

If the volume of applications received significantly exceeds 500, applications will be processed in batches and the 5-month timeline will not be met. The first batch will be limited to 500 applications and subsequent batches will be limited to 400 to account for capacity limitations due to managing extended evaluation, string contention, and other processes associated with each previous batch.
A process external to the application submission process will be employed to establish evaluation priority. This process will be based on an online ticketing system or other objective criteria.

Does this mean “get your applications in early” is a winning strategy? I’ll try to find out.
One of the most sensitive outstanding issues, the right of governments to object to TLDs on “morality and public order” grounds, is now called a “Limited Public Interest Objection”:

Governments may provide a notification using the public comment forum to communicate concerns relating to national laws. However, a government’s notification of concern will not in itself be deemed to be a formal objection. A notification by a government does not constitute grounds for rejection of a gTLD application.

The AGB now specifies that such objections must be based on principles of international law, as codified in various international agreements. The string, and the proposed usage, will be subject to these objections.
The section on applicant background checks has also been overhauled. It now makes reference to child sex offenses, and focuses more on intellectual property infringements, but eschews references to terrorism.
However, if any group considered Evil by the United States applies for a TLD, they may be out of luck. The new AGB points out that ICANN has to abide by sanctions imposed by the US Office of Foreign Assets Control.
There are a couple of little oddities in the AGB too. For example, strings relating to the contested geographic term “Macedonia” are singled out as verboten.
Intergovernmental organizations that meet the criteria to register a .int are now also granted special objection privileges.
Contested geographical terms will no longer be subject to the auction process — applicants will have to fight it out between themselves.
The vertical integration issue, resolved by the ICANN board last week, also makes an appearance. Registrars are now able to apply for new TLDs, but ICANN reserves the right to refer such applications to governmental competition authorities.
More later.

Insurance TLD draws interest

An initiative to create a top-level domain for the insurance industry appears to be attracting support in German-speaking countries.
dotVersicherung plans to apply for .versicherung (.insurance) in the first round of new TLD applications next summer, according to its web site.
The domain would be reserved for insurance companies in Germany, Austria and Switzerland.
Judging by its web site, which is one of the more comprehensive I’ve seen from a new TLD initiative, it has picked up a fair bit of interest from insurance companies already.
The organization reckons it will cost about 2 million euros to launch the TLD, and it currently appears to be inviting investors to get involved.
It disputes the idea that .versicherung is too long for a TLD, saying that there are already 25,000 domains in .de that contain the term at the second level and that most visitors will use search engines, rather than type-in, to find web sites.
It looks like the organization has been around several months, and is currently doing a publicity tour of its target nations. It also looks like Dirk Krischenowski, CEO of dotBERLIN, is involved in an advisory capacity.
I’m getting this information via Google Translate, by the way, so it may not be 100% reliable.
Hat tip to Jean Guillon, who’s been turning the ability to spot new TLD initiatives into a fine art recently.

New Russian TLD is a smash hit

Russia’s new Cyrillic top-level domain, .РФ, has gone down a storm, beating even the recent launch of .co in terms of the speed of first-day registrations.
The Russian registry is reporting that it broke through the 200,000 domains mark within the first six hours, after it opened its doors at noon local time today.
By my calculations, that’s less than half the time it took .co to hit the same benchmark, despite the fact that .co did not have the same residency requirements as .РФ.
Andrei Kolesnikov, director of the CCTLD Coordination Center, which runs the domain, told the GNSO Council mailing list:

This clearly demonstrates a great demand for domains in national languages and proves Russia’s position as a leader in terms of the dynamic of TLD launch.

There were already 18,000 .РФ domains before the floodgates opened this afternoon, following a sunrise period for trademark owners.
The TLD transliterates as .rf, for Russian Federation. The country has 142 million citizens and is believed to have almost 60 million internet users. The .ru namespace has about three million domains.

.jobs opponents get to the point

The .JOBS Charter Compliance Coalition has sent off another ream of text to ICANN, spelling out more clearly its objections to Employ Media’s plan to open up the .jobs namespace.
The Coalition wants ICANN to reject the registry’s plan to allocate thousands of premium .jobs domain names to partners including the DirectEmployers Association.
While previous filings danced around the issue, the latest Coalition missive makes it a little clearer what its beef is: it thinks DirectEmployers’ universe.jobs plan is bogus and should be blocked.
The documents were filed as part of an ongoing Reconsideration Request. The Coalition wants ICANN to reverse its decision to approve the .jobs “Phased Allocation Program”.
The program allows Employ Media to allocate “non-companyname” .jobs domains via an RFP process and, later, auctions and regular sales.
But the Coalition thinks it is a smokescreen designed to enable universe.jobs, a planned free jobs board that would be fed traffic from possibly thousands of premium generic domains.
Its objection boils down to the fact that Employ Media seems to be planning to register these premium domains to itself and allow DirectEmployers, which probably would not be a qualified HR registrant under the .Jobs Charter, to “use” them.
As the Coalition puts it:

Employ Media states that it intends to solicit plans under the Program “which may create a self managed class of domains registered in Employ Media’s name.” Presumably, in this “self-managed” scenario, Employ Media would register the domain names itself, and permit third parties to “use” the domains even if those third parties could not register them consistent with the Charter.

What we seem to have here is a case of a registry planning to monetize its premium domains by running them itself, in order to compete with companies that are barred from becoming registrants themselves.
This bothers the Coalition’s members, which all run jobs sites but would not qualify to register premium domains under the .Jobs Charter.
For Reconsideration Requests to be successful, the requester has to show that ICANN’s board did not have all the facts at its disposal, or failed to consider them, when it made its decision.
Having read through the recently published minutes and board briefing materials from the meeting at which the program was approved, the Coalition thinks it now has a stronger case.
Its latest filing accuses ICANN of failing to adequately investigate Employ Media’s claims about its program and of brushing off critics as “a bunch of sore losers that were afraid of a little competition”.
Referring to the universe.jobs plan and the “self-managed” domains, the Coalition wrote:

There is no indication that the ICANN Staff provided the Board with any analysis of this critical issue, or that the Board considered this material issue

It also wonders aloud whether the Board was even aware of the universe.jobs plan when the allocation program was approved back in August.
I may be reading it incorrectly, but it appears that ICANN’s board governance committee, which handles Reconsideration Requests, may be coming around to the Coalition’s way of thinking.
The BGC recently sent Employ Media’s sponsor, the Society For Human Resource Management, a list of questions about the program, including this one:

Did the SHRM PD Council intend to enable the Registry (Employ Media) to register domain names in the .JOBS sTLD for the purpose of allowing third-party job postings on those sites? If so, please explain how this consistent with the .JOBS Charter.

I’ll be interested in reading its response.

First reactions to ICANN’s VI bombshell

Shortly before 8am UTC today, ICANN announced that it plans to blur the lines between domain name registries and registrars by eliminating cross-ownership restrictions and enabling vertical integration of the two functions.
The shock move is likely to have profound repercussions on the domain industry for years to come.
I’ve spent the last ten hours collating a bunch of early reaction from Twitter and the blogosphere.
Like blind men groping an elephant, everyone had their own take on the news, which perhaps indicates how broad-reaching its effects will be.
Linkfest coming up.
Apparently the first to notice the news, which came just before midnight in California, was AusRegistry, the Australian registry services company, with this pithy tweet:

Any Registrars wanting Registry software can enquire within…

The company later followed up with a blog post:

The positives of this resolution is that it is highly likely that we will see the adoption and growth of smaller more boutique TLDs being championed to market by their Registrar owners and for many industry participants, anything that promotes the success of the new gTLD program and the reduced risk of Registry failure can only be seen as a good thing.

As Europe woke up to the news, Michele Neylon of Irish registrar Blacknight decided to eschew diplomacy, and pondered the possible fallout from ICANN’s decision:

Now the next question is – what next?
How will people react?
Are we going to see a flood of nastygrams from Afilias and PIR being sent to the ICANN board demanding them to backtrack?

Across the pond, Minds + Machines CEO Antony Van Couvering quickly rattled off a typically eloquent blog post that focussed on what he seems to see as ICANN’s sudden spine growth:

This is the only principled decision the ICANN Board could have come to, and they deserve a lot of credit for doing it. By “principled,” I mean taking ICANN’s stated institutional principles and following them to their logical conclusion.
…
The new landscape will require everyone in the domain name business to re-examine their business, their partners, their strategy. It will have consequences between those I enumerated above. It will re-invigorate the industry, and it will help establish the respect that ICANN has lacked for so long.

Another new TLD applicant, Constanine Roussos of .music tweeted:

ICANN allows Vertical Integration for new top-level domains. .MUSIC is thrilled. #ICANN makes history. The lobbying effort was well worth it

Over in Japan, Jacob Williams of new TLD consultants UrbanBrain reflected some of the industry’s shock that ICANN went against many observers’ expectations.

This announcement is a full 180 degree turn from the verbiage in DAG 4 and the resolutions passed at the public meeting in Nairobi earlier this year. This decision comes huge surprise, but surely a relief to many New gTLD applicants.

On the policy side of things, veteran ICANN commentator Danny Younger expressed surprise of a different kind on his new ICANNology blog:

I’ve been wondering how an ICANN Board session that is “not designated as an Official Board Meeting” can result in official Board Resolutions.
…
If the meeting is specifically not designated as “special”, but rather as a board “retreat”, should official board resolutions be promulgated at the conclusion of such sessions?

Fellow policy wonk George Kirikos tweeted:

“It is better to remain silent and be thought a fool than to open one’s mouth and remove all doubt.” applies to #ICANN’s latest moves.

Former ICANN staffer Kieren McCarthy tweeted, less ambiguously:

Good call #ICANN Board. Recognizing the realities of new top-level domains and standing up for principles over pressure

Finally, EnCirca, a US-based registrar, tried to pick winners and losers and concluded that it is the “.brand” TLDs that will gain the most, and that it is the registrars that are in for a shake-up.

the real winners will be the major brands on the internet: Apple, Yahoo, Google, Facebook, Microsoft. Any one of these could launch their own TLD to rival dot-com.
Who are the biggest losers? The Registrar channel. Registrars will no longer be assured of being able to offer new TLD’s to their customers. Registries will start to bypass their registrar partners and deal directly with end-users.
Registries and registrars will need to start innovating to remain relevant. It is time to start competing.

As you might expect, there has been not much reaction yet from those, such as Go Daddy, which opposed full vertical integration.
But Warren Adelman, Go Daddy’s president, tweeted within the last hour:

Let the games begin

Quite.

Vertical integration – bad news for domainers?

ICANN’s decision to allow domain name registrars to operate registries is a game changer on many fronts, but what impact could it have on domain investors?
For the first time, registrars will be able apply for and run new top-level domains, giving them unprecedented insight into registry-level data.
If they also act as registries, registrars will, for example, be able to see what non-existent domains in their TLD get the most type-in traffic.
They will also be able to see how much traffic expiring domains get, even if the registrant does not use the registrar’s own name servers.
As claimed by some participants in ICANN’s vertical integration working group, this data could be used to “harm” registrants; harms that could be especially noticeable to domainers.
There was a concern from some in the WG that combined registry-registrar entities (we’re going to need a name for these) could use registry data to, for example, identify and withhold high-value names, increasing prices to potential registrants.
The possibility of an increase in “domain tasting” and “front-running” – practices generally frowned upon nowadays – was also raised.
However, some registrars are already owned by companies that register large numbers of traffic domains for themselves, even without access to registry data.
Demand Media subsidiary eNom, the second-largest gTLD registrar, is a good example.
As DomainNameWire reported in August, the company already uses domain name lookups to decide what names to register for itself (though it told DNW it does not “front-run”), saying in SEC filings:

These queries and look-ups provide insight into what consumers may be seeking online and represent a proprietary and valuable source of relevant information for our platform’s title generation algorithms and the algorithms we use to acquire undeveloped websites for our portfolio.

Demand also said that it acquires eNom customers’ expiring domains if they are attractive enough:

Domain names not renewed by their prior registrants that meet certain of our criteria are acquired by us to augment our portfolio of undeveloped owned and operated websites.

Access to registry data could prove invaluable in refining this model, and eNom has, unsurprisingly. long indicated its desire to apply for and operate new TLDs.
But will registries be allowed to exploit this data to line their own pockets?
ICANN indicated today that it plans to introduce a code of conduct for registries, to prevent “misuse of data”, and will likely step up its compliance activities as a result.
What this code of conduct will look like remains to be seen, but I expect we’re looking at “Chinese wall” provisions similar to those self-imposed by VeriSign when it still owned Network Solutions.
It should be pointed out, of course, that standalone registries already have the ability to register domains to themselves, based on their own registry data, and I’m not aware of a great many incidents where this has been abused to the harm of registrants.

Is the new TLD program already delayed?

ICANN has missed the first target date on its recently approved new top-level domains launch timetable.
The organization was due to publish its proposed final Applicant Guidebook for public comment yesterday, but has failed to do so.
Rumor has it that it could be tomorrow or Friday before the AGB is published.
Could there be a knock-on effect? Does this mean that the process as a whole, scheduled to see the first round of new TLD applications open May 30, 2011, is already delayed?
Be warned, I’m just thinking aloud here. This is pure, idle speculation.
Two thoughts occur to me.
First, does this delay mean that ICANN will not be able to vote on the AGB at its December 10 meeting, as planned?
Second, does this delay create a scenario in which the program’s opponents will be able to lobby for further delays?
The original, quite tight timetable called for a November 9 AGB publication date and the immediate launch of a 30-day public comment period.
Doors would have closed to feedback on December 9, the day before the next ICANN board meeting.
With the AGB publication deadline now missed, and if ICANN otherwise sticks to its plan, a 30-day comment window would still be open when the board convenes in Cartagena.
Since ICANN is not in the habit of voting on issues that are still subject to open comment periods, my guess is that its best bet now will be to tighten the schedule.
While the board has seemingly okayed 30 days for community input, I’m not sure how binding that is, and my reading of ICANN’s bylaws suggests that it could be quite easily be reduced to anything as short as 21 days.
A comment period that lasted beyond December 10 would enable an organization opposed to the new TLD program to submit comments after the vote has been cast, allowing no time for the board to consider them.
This seemingly counter-intuitive move would however create grounds for a subsequent Reconsideration Request if the AGB is approved in Colombia, potentially delaying the process.
Would this be a clever strategy? I doubt it. Reconsideration Requests rarely work, and are hardly the most effective way to have your views heard within ICANN.
Still, these are strange times, and anything seems possible.
One thing is certain, given the enthusiastic reception the recent publication of the timetable received, it will be dispiriting to many today to see that ICANN has already missed its first deliverable date.

ICANN drops the bomb – registries can buy registrars

ICANN has just authorized the biggest shake-up of the domain name industry in a decade, lifting all the major cross-ownership restrictions on registrars and registries.
A surprise resolution passed on Friday at the ICANN board’s retreat could enable registries such as VeriSign to acquire registrars such as Go Daddy, and vice-versa.
The new rules will also allow registrars to apply for and run new top-level domains and, subject to additional conditions, may enable existing registries to eventually start selling direct to end users, potentially bypassing the registrar channel.
The implications of these changes could be enormous, and I expect they could be challenged by affected parties.
The board resolved that ICANN “will not restrict cross-ownership between registries and registrars”, subject to certain yet-to-be written Code of Conduct for preventing abuse.
These looser ownership restrictions will be included in the new TLD Applicant Guidebook. Existing registries will be able to transition to the new rules over time through contract changes.
ICANN will develop mechanisms for enforcing anti-abuse rules through contractual compliance programs, and will have the ability to refer cross-ownership deals to competition authorities.

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

The decision appears to have been made partly on the grounds that while almost all existing registry contracts include strict cross-ownership restrictions, it has never been a matter of formal policy.
A vertical integration working group which set out to create a bottom-up consensus policy earlier this year managed to find only deadlock.
ICANN chairman Peter Dengate Thrush said:

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

Most members of the VI working group broadly favored some level of cross-ownership restriction, such as a 15% cap, while a smaller number favored the “free trade” position that ICANN seems to have gone for.
The companies campaigning hardest against cross-ownership being permitted were arguably Afilias and Go Daddy, though the likes of NeuStar and VeriSign also favored some restrictions.
Opponents of integrating registry and registrar functions argued that giving registrars access to registry data would harm consumers; others countered that this was best addressed through compliance programs rather than ownership caps.
The big winners from this announcement are the start-up new TLD registries, which will not be forced to work exclusively within the existing registrar channel in order to sell their domains.