Two controversial new gTLDs launching in January

Five years after the first batch of new gTLDs hit the market, registries continue to drip-feed them into the internet.
At least two more are due to launch on January 16 — .dev and .inc.
.dev is the latest of Google’s portfolio to be released, aimed at the software developer market.
It proved controversial briefly when it first was added to the DNS in 2014, causing headaches for some developers who were already using .dev domains on their private networks.
Four years is plenty of time for all of these collisions to have been cleaned up, however, so I can’t imagine many problems emerging when people start buying these names.
.dev starts a one-month sunrise January 16, sells at early access prices from February 19 to 28 before going to regular-price general availability.
Google has already launched one of its own products, web.dev, a testing tool for web developers, on a .dev domain.
Launching with a pretty much identical phased launch plan is .inc, from new market entrant Intercap Holdings, a Caymans-based subsidiary of a Toronto firm founded by .tv founder Jason Chapnik and managed by .xyz alumnus Shayan Rostam.
Intercap bought the .inc contract from Edmon Chong’s GTLD Limited earlier this year for an undisclosed sum. GTLD Ltd is believed to have paid in excess of $15 million for the TLD at auction.
.inc has proved controversial in the past, attracting criticism from states attorneys general in the US, which backed another bidder.
It may prove controversial in future, too. I have a hunch it’s going to attract more than its fair share of cybersquatters and will probably do quite well out of defensive registration fees.

Afilias bought .io for $70 million

Did you know Afilias owns .io? I didn’t, but it paid $70 million for the popular alternative TLD 18 months ago.
A recently published financial statement in Ireland shows that the company spent $70.17 million cash — a 10x revenue multiple — for 100% of Internet Computer Bureau Ltd in April 2017.
ICB runs .io, .ac and .sh, the ccTLDs for the British Indian Ocean Territories (.io), Ascension Island (.ac), and Saint Helena, Ascension and Tristan Da Cunha (.sh).
Afilias has never publicly announced the deal, and I haven’t seen it reported elsewhere, so I thought it was worth blogging up here.
At the time, the deal was characterized to registrars as a back-end contract win.
But it seems that Afilias actually purchased the back-end provider, then migrated (not as smoothly as it usually does) the TLDs over to its own infrastructure.
That would have opened up .io to all the registrars already plugged in to Afilias’ TLDs, potentially greatly increasing its reach.
But it’s probably not just the back-end Afilias has acquired.
Would a registry service provider spend 10 times annual revenue on a ccTLD back-end contractor, unless it had a damn good reason to believe that it would be able to at least recoup its investment, either through a long-term contract or some other mechanism?
It’s quite possible Afilias actually bought the .io ccTLD Manager.
The ccTLD Manager listed by ICANN in the IANA database is “IO Top Level Domain Registry”, but “c/o Sure (Diego Garcia) Limited”. That changed a week or so ago from “IO Top Level Domain Registry, Cable & Wireless”
Sure is the arm of telecommunications firm Cable & Wireless that provides internet access to remote islands in various parts of the world.
I don’t know what “IO Top Level Domain Registry” is.
Afilias tells me confidentiality arrangements are in place.
.io has proven popular as a TLD for technology startup companies that couldn’t get the .com they wanted.
Across its small portfolio, ICB was a $6.9 million business last year, but .io, with a reported 270,000 domains, must account for the large majority of that.
Due to the timing of the deal, ICB contributed $5.3 million to Afilias’ top line and was the main reason its revenue grew last year, its 2017 accounts reveal.
In 2017, Afilias saw revenue grow from $106.7 million to $113.6 million. Profit before tax was down slightly, from $38.6 million to $36 million
Again, that was due largely to ICB, which contributed $1.4 million of red ink to the bottom line.
Afilias is a private company, by the way, which is why these numbers all refer to 2017. It’s the final full year of it being based in Ireland, before its move to the US for tax reasons.
The disclosure also reveals that Afilias took a 45% stake in Dot Global, manager of the .global gTLD registry, in December 2017.
Dot Global had revenue of $1.9 million and a $320,000 loss last year, the report states.
doMEn, the Montenegro ccTLD (.me) operator in which Afilias has a 36.85% share, made a profit of $2.59 million on revenue of $7.39 million, it says. Both of those numbers were down slightly on 2016.
Afilias also says in the filing that it expects revenue to be down in 2018, due to the renegotiation of back-end contracts. I gather the contract with Public Interest Registry, which reportedly could cost about $10 million a year, is the main problem.
Given the accounts were signed off in May this year, it seems that this decline is expected despite the lucrative .au ccTLD contract, which Afilias signed at the end of 2017.

Will ICANN take a bigger slice of the .com pie, or will .domainers get URS?

Will ICANN try to get its paws on some of Verisign’s .com windfall? Or might domainers get a second slap in the face by seeing URS imposed in .com?
With Verisign set to receive hundreds of millions of extra dollars due to the imminent lifting of .com price caps, it’s been suggested that ICANN may also financially benefit from the arrangement.
In a couple of blog posts Friday, filthy domain scalper Andrew Allemann said that ICANN will likely demand higher fees from Verisign in the new .com registry agreement.
Will it though? I guess it’s not impossible, but I wouldn’t say it’s a certainty by any means.
Verisign currently pays ICANN $0.25 per transaction, the same as almost all other gTLDs. Technically, there’s no reason this could not be renegotiated.
Putting aside some of the legacy gTLD contracts, I can only think of two significant cases of ICANN imposing higher fees on a registry.
The first was .xxx, which was signed in 2011. That called for ICM Registry, now part of MMX, to pay $2 per transaction, eight times the norm.
The rationale for this was that ICANN thought (or at least said it thought) that .xxx was going to be a legal and compliance minefield. It said it envisaged higher costs for overseeing the then-controversial TLD.
There was a school of thought that ICANN was just interested in opportunistically boosting its own coffers, given that ICM was due to charge over $60 per domain per year — at the time a ludicrously high amount.
But risk largely failed to materialize, and the two parties last year renegotiated the fees down to $0.25.
The second instance was .sucks, another controversial TLD. In that case, ICANN charged registry Vox Populi a $100,000 upfront fee and per-transaction fees of $1 per domain for the first 900,000 transactions, four times more than the norm.
While some saw this as a repeat of the .xxx legal arse-covering tactic, ICANN said it was actually in place to recoup a bunch of money that Vox Pop owner Momentous still owed when it let a bunch of its drop-catch registrars go out of business a couple years earlier.
While the .sucks example clearly doesn’t apply to Verisign, one could make the case that the .xxx example might.
It’s possible, I guess, that ICANN could make the case that Verisign’s newly regained ability to raise prices opens it up to litigation risk — something I reckon is certainly true — and that it needs to increase its fees to cover that risk.
It might be tempting. ICANN has a bit of a budget crunch at the moment, and a bottomless cash pit like Verisign would be an easy source of funds. A transaction fee increase of four cents would have been enough to cover the $5 million budget shortfall it had to deal with earlier this year.
On the other hand, it could be argued that ICANN demanding more money from Verisign would unlevel the playing field, inviting endless litigation from Verisign itself.
ICANN’s track record with legacy gTLDs has been to reduce, rather than increase, their transaction fees.
Pre-2012 gTLDs such as .mobi, .jobs, .cat and .travel have all seen their fees reduced to the $0.25 baseline in recent years, sometimes from as high as $2.
In each of these cases, the registries concerned had to adopt many provisions of the standard 2012 new gTLD registry agreement including, controversially, the Uniform Rapid Suspension service.
Domainers hate the URS, which gives trademark owners greater powers to take away their domains, and the Internet Commerce Association (under the previous stewardship of general counsel Phil Corwin, since hired by Verisign) unsuccessfully fought against URS being added to .mobi et al over the last several years, on the basis that eventually it could worm its way into .com.
I’m not suggesting for a moment that ICANN might reduce Verisign’s fees, but what if URS is the price the registry has to pay for its massive .com windfall?
It’s not as if Verisign has any love for domainers, despite the substantial contribution they make to its top line.
Since the NTIA deal was announced, it’s already calling them “scalpers” and driving them crazy.
ICA lost the .com price freeze fight last week, could it also be about to lose the URS fight?

Trump gives Verisign almost $1 billion in free money

The Trump administration may have just handed Verisign close to $1 billion in free money.
That’s according to the back of the envelope I’m looking at right now, following the announcement that the National Telecommunications and Information Administration is reinstating Verisign’s right to increase .com registry fees.
As you may have read elsewhere already (I was off sick last week, sorry about that) a new amendment to the Verisign-NTIA Cooperative Agreement restores Verisign’s ability to raise prices by 7% per year in four of the six years of the deal.
The removal of the Obama-era price freeze still needs to be incorporated into Verisign’s ICANN contract, but it’s hard to imagine ICANN, which is generally loathe to get into pricing regulation, declining to take its lead from NTIA.
Verisign would also have to choose to exercise its option to increase prices in each of the four years. I think the probability of this happening is 1 in 1.
Layering this and a bunch of other assumptions into a spreadsheet, I’m coming up with a figure of roughly an extra $920 million that Verisign will get to add to its top line over the next six years.
Again, this isn’t an in-depth study. Just back-of-the-envelope stuff. I’ll talk you through my thinking.
Not counting its occasional promotions, Verisign currently makes $7.85 for every year that a .com domain is added or renewed, and for every inter-registrar transfer.
In 2017, .com saw 40.89 million add-years, 84.64 million renew-years and 3.79 million transfers, according to official registry reports.
This all adds up to 129,334,643 revenue events for Verisign, or just a tad over $1 billion at $7.85 a pop.
Over the four-year period of the price increases transaction fees will go up to $8.40, then $8.99, then $9.62, then $10.29. I’m rounding up to the nearest penny here, it’s possible Verisign may round down.
If we assume zero transaction growth, that’s already an extra $762.2 million into Verisign’s coffers over the period of the contract.
But the number of transactions inevitably grows each year — more new domains are added, and some percentage of them renew.
Between 2016 and 2017, transaction growth was 3.16%.
If we assume the same growth each year for the next six years, the difference between Verisign’s total revenue at $7.85 and at the new pricing comes to $920 million.
Verisign doesn’t have to do anything for this extra cash, it just gets it.
Indeed, the new NTIA deal is actually less restrictive on the company. It allows Verisign to acquire or start up an ICANN-accredited gTLD registrar, something it is currently banned from doing, just as long as that registrar does not sell .com domains.
Verisign’s .net contract also currently bans the company from owning more than 15% of a registrar, so presumably that agreement would also need to be amended in order for Verisign to get into the registrar business.
I say again that my math here is speculative; I’m a blogger, not a financial analyst. There may be some incorrect assumptions — I’ve not accounted for promotions at all, for example, and the 3.16% growth assumption might not be fair — and there are of course many variables that could move the needle.
But the financial markets know a sweetheart deal when they see one, and Verisign’s share price went up 17.2% following the news, reportedly reaching heights not seen since since the dwindling days of the dot-com bubble 18 years ago.
The reason given for the lifting of the price freeze was, for want of a better word, bullshit. From the NTIA’s amendment:

In recognition that ccTLDs, new gTLDs, and the use of social media have created a more dynamic DNS marketplace, the parties agree that the yearly price for the registration and renewal of domain names in the .com registry may be changed

Huh?
This seems to imply that Verisign has somehow been disproportionately harmed by the rise of social media, the appearance of new gTLDs and some unspecified change in the ccTLD marketplace.
While it’s almost certainly true that .net has taken a whack due to competition from new gTLDs, and that the domain marketplace overall may have been diminished by many small businesses spurning domains by choosing to set up shop on, say, Facebook, .com is still a growing money-printing machine with some of the fattest margins seen anywhere in the business world and about a 40% global market share.
If the Trump administration’s goal here is to make some kind of ideological statement about free markets, then why not just lift the price caps altogether? Give Verisign the right to price .com however it pleases?
Or maybe Trump just wants to flip the bird to Obama once more by reversing yet another of his policies?
Who knows? It doesn’t make a lot of sense to me.

Co-founder Nevett leaves Donuts

Donuts executive vice president of corporate affairs Jon Nevett has left the company, Donuts said yesterday.
He’s the last of the four co-founders of the new gTLD portfolio owner to step aside from their original roles over the last couple of years.
There’s no word on whether he’s got a new gig lined up, but given the recent acquisition of Donuts by Abry Partners, which gave the founders the opportunity to dispose of their shares, Nevett presumably will be in no rush.
Donuts said in a statement that Nevett, who led policy at the company, will continue to act as an advisor.
He follows Dan Schindler and Richard Tindal as co-founders who have since left the company.
Founding CEO Paul Stahura stepped into the executive chair role a couple of years ago to make way for Bruce Jaffe, who led the firm through its merger with Rightside and subsequent sale to Abry.
Jaffe himself will leave next month to allow former ICANN bigwig Akram Atallah into the hot seat. Former ICANN CEO Fadi Chehade is one of Abry’s lead overseers of Donuts.

Donuts loses to ICANN in $135 million .web auction appeal

Donuts has lost a legal appeal against ICANN in its fight to prevent Verisign running the .web gTLD.
A California court ruled yesterday that a lower court was correct when it ruled almost two years ago that Donuts had signed away its right to sue ICANN, like all gTLD applicants.
The judges ruled that the lower District Court had “properly dismissed” Donuts’ complaint, and that the covenant not to sue in the Applicant Guidebook is not “unconscionable”.
Key in their thinking was the fact that ICANN has an Independent Review Process in place that Donuts could use to continue its fight against the .web outcome.
The lawsuit was filed by Donuts subsidiary Ruby Glen in July 2016, shortly before .web was due to go to an ICANN-managed last-resort auction.
Donuts and many others believed at the time that one applicant, Nu Dot Co, was being secretly bankrolled by a player with much deeper pockets, and it wanted the auction postponed and ICANN to reveal the identity of this backer.
Donuts lost its request for a restraining order.
The auction went ahead, and NDC won with a bid of $135 million, which subsequently was confirmed to have been covertly funded by Verisign.
Donuts then quickly amended its complaint to include claims of negligence, breach of contract and other violations, as it sought $22.5 million from ICANN.
That’s roughly how much it would have received as a losing bidder had the .web contention set been settled privately and NDC still submitted a $135 million bid.
As it stands, ICANN has the $135 million.
That complaint was also rejected, with the District Court disagreeing with earlier precedent in the .africa case and saying that the covenant not to sue is enforceable.
The Appeals Court has now agreed, so unless Donuts has other legal appeals open to it, the .web fight will be settled using ICANN mechanisms.
The ruling does not mean ICANN can go ahead and delegate .web to Verisign.
The .web contention set is currently “on-hold” because Afilias, the second-place bidder in the auction, has since June been in a so-called Cooperative Engagement Process with ICANN.
CEP is a semi-formal negotiation-phase precursor to a full-blown IRP filing, which now seems much more likely to go ahead following the court’s ruling.
The appeals court ruling has not yet been published by ICANN, but it can be viewed here (pdf).
The court heard arguments from Donuts and ICANN lawyers on October 9, the same day that DI revealed that ICANN Global Domains Division president Akram Atallah had been hired by Donuts as its new CEO.
A recording of the 32-minute hearing can be viewed on YouTube here or embedded below.

Google abandons its .kid gTLD bid

Google has retreated from the interminable three-way battle for the .kids/.kid gTLDs.
The company this week withdrew its application for .kid, leaving the fight for .kids a two-horse race between Amazon and the not-for-profit DotKids Foundation.
Google’s application was intertwined with the two .kids applications due to a String Confusion Objection, which it won, drawing its bid into contention with DotKids and Amazon.
The contention set was, and arguably still is, due to be settled by an ICANN last-resort auction, but has been repeatedly postponed due to appeals to ICANN by DotKids, which doesn’t think it has the financial clout to beat its rivals.
Most recently, the auction was put on ice again after DotKids asked for ICANN money, then filed a Request for Reconsideration when ICANN refused.
Google’s .kid application had proposed an area for “kid-friendly content”. Registrants would have been vetted in advance of their domains going live to ensure they were established providers of such content.

ICANN number two Atallah is new CEO of Donuts

Akram Atallah, head of ICANN’s Global Domains Division, has quit and joined Donuts as its new CEO, DI has learned.
According to multiple sources, Atallah’s last day at ICANN was yesterday.
While neither company has announced the move yet, I gather that ICANN staff were informed by CEO Goran Marby today.
The news comes just a month after private equity firm Abry Partners, which counts former ICANN CEO Fadi Chehade among its partners, acquired Donuts for an undisclosed sum.
While the revolving door between industry and ICANN is pretty much continuous, Atallah is probably the highest-profile example since Kurt Pritz in 2012 and Peter Dengate Thrush in 2011.
As head of ICANN GDD, he was responsible for all things gTLD. Before the creation of the role, he was COO.
He was also interim president and CEO of the organization on two occasions, keeping the seat warm prior to the arrival of Chehade and Marby,
Atallah and Chehade also worked together in their pre-ICANN days in the software industry.
Donuts is of course the largest new gTLD registry in terms of TLDs, with 241 in its stable.
I’ve no word yet on where Bruce Jaffe, Donuts’ current CEO, is going, but I’ll update this post when I do.
Jaffe joined Donuts as chief a little over a year ago, replacing founder Paul Stahura.
Presumably, Jaffe was the turnaround guy and with Donuts’ acquisition secured the new owners figured it was time to hire an ops guy.
UPDATE 2022 UTC: Donuts just issued a press release in which it said that Jaffe will remain a senior adviser during the transition. It also said that Atallah starts in his new job November 12.
UPDATE October 10: ICANN said in a statement overnight that VP of DNS industry engagement Cyrus Namazi will head GDD on an interim basis, with support from CTO David Conrad.

Nominet to donate over $260,000 to Children In Need

UK ccTLD registry Nominet said today that it will donate £1 ($1.31) for every domain registered to the charity Children In Need.
The initiative, which runs from today until November 19, is being backed up with a £200,000 ($261,000) minimum donation commitment.
Every paid-for domain in .co.uk, .uk, .me.uk and .org.uk will count.
The .uk space typically has been doing about 125,000 to 130,000 new regs per month recently, across all subdomains and direct .uk, so we’re looking at a potentially substantial donation here.
The money raised will help fund technology-related youth projects across the UK, Nominet said.
Judging by today’s press release, non-profit Nominet is calling itself a “profit with a purpose” company nowadays.
Children In Need is a charity run by the BBC. It broadcasts a fundraising telethon every year, typically raising tens of millions of pounds.
This year’s show is being broadcast November 16.

CentralNic buys .fans for peanuts

CentralNic has acquired the flailing new gTLD .fans for an undisclosed sum.
The value of the deal was low enough that publicly traded CentralNic was not obliged to disclose the purchase to the market, CEO Ben Crawford confirmed.
The ICANN contract seems to have changed hands — transferred to a CentralNic subsidiary call Fans TLD Ltd — back in August.
We revealed back in May that CentralNic was acting as a caretaker for .fans, and sister TLD .fan, after original registry Asiamix Digital failed to make enough money to keep the business going.
.fan, which Asiamix bought from Donuts but never launched, was sold back to Donuts in June.
Donuts took .fan to sunrise last week and plans to take it to general availability in December.
.fans domains, meanwhile, have been in registrar storefronts since 2015, but the current tally of registered domains is barely above 1,600.
Domains are still selling for around the $100 mark, roughly double the expected retail price of .fan.