New gTLD risk fund rubbished by .brand advocate

Proposals to change the way new top-level domains are insured against failure will put the whole new gTLD program at risk, according to an intellectual property lawyer.
Speaking at a session at the ICANN meeting in Dakar today, Paul McGrady of the law firm Greenberg Traurig said the changes could even lead to a lawsuit that would delay the January 2012 launch of the program by at least a couple of years.
The debate was sparked by a proposal from the registries to restructure the Continued Operations Instrument, a financial backup designed to fund gTLD operations after their businesses fail.
ICANN currently plans to ask each applicant to submit a COI sufficient to cover the cost of running their own gTLD for three years in the form of cash in escrow or a letter of credit.
But the registry proposal calls instead for a Continued Operations Fund that would pool the risk between applicants, with each applicant paying just $50,000 up-front.
While the COI implicitly assumes that all new gTLDs could crash and burn, the COF assumes that only a small number of businesses will fail, as I reported earlier this month.
But McGrady, apparently speaking for the Intellectual Property Constituency, gave a startlingly different interpretation of the COF, from the “.brand” applicant perspective.
A .brand applicant can secure a letter of credit sufficient to cover the COI for as little as $2,000, he said. A $50,000 payment to the COF would dramatically increase its costs, he said.
“That money is taken from the .brand applicant and given to the shaky start-ups that shouldn’t be applying anyway,” he said. “It’s a redistribution of wealth.”
“If you can’t meet the [Applicant] Guidebook’s current requirements, you are dramatically under-capitalized,” he said. “Don’t apply.”
He said that if ICANN decides to add the $50,000 cost before January, it’s likely that some of those brands that oppose the program anyway will use it as an excuse to sue for delay.
“If the ICANN community would like to tee up for a litigation issue which could bring round one to a halt before it opens, this is it,” he said.
He further said that any back-end registry services providers targeting .brand clients had better distance themselves from the COF proposal if they want to get that business.
“Anyone in the room with a vested interested in this process moving forward, this is not the issue to back,” he said.
While the specific proposal up for debate was drafted by the Public Interest Registry and Afilias, the concept of a COF is has the backing of the ICANN registry stakeholder group.
As far as FUD goes, McGrady’s presentation was pretty blatant stuff, but that does not necessarily mean it’s not true.
His tone seemed to cause some consternation in the room.
Likely applicant Ron Andruff said that McGrady was employing a “scare tactic about how things might get delayed because big corporations don’t want to park money”.
Several others pointed out that smaller community applicants and applicants from certain countries may be unable to secure a letter of credit as easily as a large brand applicant.
Those applicants would have to put cash in escrow, tying it up and making it harder to market their gTLDs… thus leading to a greater chance of failure.
But McGrady stuck to his “redistribution of wealth” line.
“What we’re talking about is a last-minute change to the Guidebook to benefit applicants that don’t have sufficient funds,” he said.
He was not alone speaking out against the COF idea.
Richard Tindal of likely gTLD applicant Donuts said that many projections about new gTLDs are being made by a small number of registries that are making similar assumptions.
If these assumptions turn out to be flawed, the risk of gTLD failures could be bigger than expected.
“If a hurricane hits a house in the street, it’s going to hit all the houses in the street,” he said.
The COF/COI debate is open for public comment until December 2.

Comment Tagged: cof, coi, continued operations instrument, ICANN, ipc, new gTLDs, new TLDs

Top ICANN staff get pay raises

ICANN’s general counsel and chief operating officer were granted pay raises by the board of directors at a meeting last weekend.
A review of market data concluded that John Jeffrey and Akram Atallah both were being paid less than the target 50 to 75 percentile of comparable executives in other companies, the board said in a partially-redacted resolution.
The resolution says that neither man should see an annual raise of more than 15%.
The board’s meeting also set the bonus goals for CEO Rod Beckstrom and ombudsman Chris LaHatte.

Comment Tagged: ICANN, pay

Norid sued over .co.no domains

The registrant of the domain name co.no has sued Norwegian registry Norid over claims that it tried to hold up the launch of .co.no as an alternative namespace.
Elineweb registered the domain back in 2001.
Last October, along with back-end partner CoDNS, the company said it would offer third-level .co.no domains to the public as an alternative to second-level .no names.
The idea was to bring gTLD-style friendliness to the strictly regulated .no ccTLD – where at the time companies were limited to 20 domains each.
Elineweb concluded a sunrise period this February, but subsequently delayed its full launch after Norid started asking it questions about the co.no domain’s ownership.
Norid was evidently not pleased. For the best part of 2011, it’s been conducting an investigation into whether the .co.no project complies with its policies.
In 2009, Norid added co.no and other two-letter domains to a reserved list. Already-registered domains on the list could continue to be used, but could not be transferred between registrants.
Norid has reportedly concluded that co.no has technically changed hands, hence Elineweb’s lawsuit. It wants the court to rule that its proposed service is legal.
“.CO.NO is a common initiative between Elineweb AS the registrant of the domain name and CoDNS BV, the technical back-end provider,” Elineweb said in a press release.
“We never tried to hide the fact that Elineweb is the registrant of the domain name, which is, besides a public information displayed in NORID whois database,” manager Sander Scholten said.
CoDNS, owned by Luxembourg registrar EuroDNS, is already the back-end provider for .co.nl, a pseudo-TLD offered in the Netherlands.
News of the lawsuit comes just a couple of weeks after Norid announced that it would raise the limit on the number of .no domains any given company can register to 100.

Comment Tagged: .co.no, .no, codns, elineweb, eurodns, norid

Domain registrars pressured into huge shakeup

Domain name registrars have agreed to negotiate big changes to their standard contract with ICANN, after getting a verbal kicking from the US and other governments.
While the decision to revamp the Registrar Accreditation Agreement was welcomed by intellectual property interests, it was criticized by non-commercial users worried about diluting privacy rights.
The ICANN registrar constituency said in a statement today that it will enter into talks with ICANN staff in an effort to get a new RAA agreed by March next year.
It’s an ambitious deadline, but registrars have come under fire this week over the perception that they have been using ICANN’s arcane processes to stonewall progress.
So, what’s going to change?
The registrars said that the negotiations will focus on 12 areas, originally put forward by international law enforcement agencies, that have been identified as “high priority”.
They cover items such as an obligation to disclose the names of registrants using privacy services, to work with law enforcement, and to tighten up relationships with resellers.
Here’s a list of all 12, taken from a recent ICANN summary report (pdf).
[table id=1 /]
The changes were first suggested two years ago, and ICANN’s increasingly powerful Governmental Advisory Committee this week expressed impatience with the lack of progress.
There’s a US-EU cybercrime summit coming up next month, and GAC members wanted to be able to report back to their superiors that they’ve got something done.
As I reported earlier in the week, the GAC gave the registrars a hard time at the ICANN meeting in Dakar on Sunday, and it took its concerns to the ICANN board yesterday.
“We are looking for immediate visible and credible action to mitigate criminal activity using the domain name system,” US GAC representative Suzanne Radell told the board.
She won support from Steve Crocker who, in his first meeting as ICANN’s chairman, has shown a less combative style than his predecessor when talking with governments.
He seemed to agree that progress on RAA amendments through the usual channels – namely the Generic Names Supporting Organization – had not met expectations.
“One of the things that is our responsibility at the board level is not only to oversee the process, not only to make sure rules are followed and that everything is fair, but at the end of the day, that it’s effective,” he said.
“If all we have is process, process, process, and it gets gamed or it’s ineffective just because it’s not structured right, then we have failed totally in our duty and our mission,” he said.
An immediate result of the registrars’ decision to get straight into talks was the removal of an Intellectual Property Constituency motion from today’s GNSO Council meeting.
The IPC had proposed that the RAA should be revised in a trilateral way, between the registrars, ICANN, and everyone else via the GNSO.
Yanking the motion, IPC representative Kristina Rosette warned that the IPC would bring it back to the table if the RAA talks do not address the 12 high-priority items.
It would be unlikely to pass – registrars and registries vote against anything that would allow outside interests to meddle in their contracts, and they have the voting power to block such motions.
The ideas in the motion nevertheless stirred some passionate debate.
Tucows CEO Elliot Noss described the GAC’s heavy-handed criticisms as “kabuki theater” and “an attempt to bring politics as usual into the multi-stakeholder process” and said the RAA is not the best way to add protections to the DNS.
“Getting enforcement-type provisions, be they law enforcement or IP protections, into the RAA accomplishes only one thing. It turns the ICANN compliance department into a police department,” he said.
Wendy Seltzer, representing the Non-Commercial Users Constituency, said the changes proposed to the RAA “would reduce the privacy of registrants” and put them at increased risk of domain take-downs.
A broader issue is that even after a new RAA is negotiated registrars will be under no obligation to sign up to it until their current contracts expire.
Because many leading registrars signed their last contract after it was revised in 2009, it could be three or four years before the new RAA has any impact.
I’m not sure it’s going to be enough to fully satisfy the GAC.
Radell, for example, said yesterday that some items – such as the registrar obligation to publish an abuse contact – should be brought in through a voluntary code of conduct in the short term.
She also called for the 20% of registrars deemed to be bad actors (not a scientifically arrived-at number) should be de-accredited by ICANN.
UPDATE (October 27): Mason Cole of the registrars constituency has been in touch to say that the RAA talks will not only look at the 12 “high priority” or law enforcement recommendations.
Rather, he said, “there will be consideration of a broader range of issues.”
This appears to be consistent with the registrars’ original statement, which was linked to in the above post:

The negotiations are in response to the development of a list of recommendations made by law enforcement agencies and the broader Internet community to provide increased protections for registrants and greater security overall.

Comment Tagged: cybercrime, cybersquatting, dakar, gac, ICANN, ncuc, raa

Beckstrom: next ICANN CEO should be an outsider

ICANN CEO Rod Beckstrom has called on the organization to replace him with somebody from outside of the domain name industry.
His remarks, at the opening ceremony of its meeting in Dakar yesterday, came as the organization’s decisions are coming under increasing scrutiny from outside the domain name industry.
“I hope that the person who replaces me will be of the highest integrity and has no recent or current commercial or career interests in the domain industry, because ICANN’s fairness, objectivity and independence are of paramount importance to the future of the internet,” Beckstrom said.
“We are not here in the domain name business,” he said. “We are here to serve the global public interest.”
Beckstrom generally uses his ICANN meeting opening remarks to fire-fight the latest pieces of criticism directed at the organization and yesterday was no exception.
His comments should be read in the light of ongoing claims that the new gTLDs program was approved prematurely due in part to the business interests of former chair Peter Dengate Thrush.
Dengate Thrush left ICANN in June, shortly after helping to approve the program, and promptly took up a position with gTLD applicant Minds + Machines.
Organizations opposed to the program, such as the Association of National Advertisers, have seized on the controversy as a stick to bash ICANN with.
Since June, there have been calls for ICANN to revisit its conflicts of interest and ethics policies, which it seems to be taking very seriously.
Every member of the ICANN board of directors has already been ruled out of the CEO search, for example.
Beckstrom elaborated on his comments at a press conference yesterday.
“My view very strongly is that the organization can and should be led a party who does not have a vested personal business interest or history specifically in the domain name industry,” he said, “lest the efforts of the organization be potentially skewed in such a direction from a policy or operational standpoint, in terms of being more sensitive to the needs of the industry as opposed to the global public interest.”
Chairman of the board Steve Crocker said Beckstrom’s opinions were valuable, but his own, representing only one input into the process of creating CEO search criteria.
“We obviously want to balance two factors,” he said. “We’re very concerned about conflicts of interest and at same time we want the widest and most capable pool of candidates possible.”
There have previously been calls for ICANN to hire somebody already familiar with its operation, in order to reduce the learning curve for Beckstrom’s replacement at a time when the organization is in the midst of the new gTLD evaluation process.

Comment Tagged: conflicts of interest, ethics, ICANN, rod beckstrom

IANA contract only for US companies

The US Department of Commerce has announced the date of its RFP for the IANA contract, stating that only wholly US-based organizations are welcome to apply.
Commerce, via the National Telecommunications and Information Administration, said it intends to accept proposals from potential contractors between November 4 and December 4.
Among other things, the IANA contract is what gives ICANN its powers over the domain name system’s root – its ability to delegate gTLDs and ccTLDs to registries.
It is due to expire at the end of March next year, having been extended from its original expiry date of September 30. ICANN is of course the favorite candidate.
ICANN had asked for a longer-term or more arms-length contract, to dilute the perception that IANA is too US-centric, but NTIA has indicated that it intends to decline that request.
However, the duration of the contract has been changed.
The current IANA contract was a one-year deal, with four one-year renewal options. The next will be for a three-year base period, followed by two two-year renewal options, according to Commerce.
“The current unilateral structure of the IANA functions contract should evolve to meet the needs of the global community,” ICANN CEO Rod Beckstrom said during his opening remarks at ICANN’s 42nd public meeting in Dakar, Senegal yesterday.
He noted that the US government originally said, in a 1998 white paper, that ICANN would ultimately take over the IANA functions entirely, cutting it off from government.
“We hope that progress towards the vision articulated by the US government’s white paper will be made in the next agreement and we hope and we expect to see a roadmap for the realization of this vision in the future,” Beckstrom said.
Now that Commerce has made such a big deal out of the fact that only US-based organizations are welcome to apply to run IANA, that goal seems further away.
It’s also notable that the next IANA contract will be a single document.
The NTIA had previously floated the possibility of splitting it into three functions – protocol management, DNS root management and IP address allocation – but the idea was not well-received.

Comment Tagged: dakar, department of commerce, iana, ICANN, ntia

.xxx sunrise on track for 50,000 domains

ICM Registry has seen over 42,000 sunrise applications since September 7, with “thousands more pouring in each day”, according to the company.
With a last-minute rush possible by porn-scared brand owners before the process closes this Friday, .xxx may well hit 50,000 sunrise applications.
The 42,000 number seems to cover all three sunrise phases – the ‘B’ process for non-porn companies and the AT and AD processes for pornographers.
Sunrise B applications cost $162 at the registry level and over $200 from registrars. ICM’s breakeven point was 10,000 applications, so it will be profitable to the tune of several million dollars.
Because Sunrise B applications incur a one-time fee, ICM has essentially made a windfall now at the expense of recurring revenues from renewals.

Comment Tagged: icm registry, sunrise, xxx

GAC slams registrars over “silly” crime domain moves

ICANN’s Governmental Advisory Committee is seriously annoyed with domain name registrars over what it sees as a failure to take the demands of law enforcement seriously.
The first official day of ICANN’s 42nd public meeting in Dakar, Senegal, was highlighted by a fractious discussion between the GAC and the Generic Names Supporting Organization.
Governments are evidently losing patience with the industry over what they see as incessant foot-dragging and, now, halfhearted bone-throwing.
The US, which is easily the most influential GAC member, was harshly critical of recent efforts by registrars to self-regulate themselves some law enforcement cooperation policies.
US GAC representative Suzanne Radell, saying she was speaking on behalf of the GAC, described a registrar move to start publishing legal service addresses on their web sites at some point in the future as as “paltry”, “mind-boggling” and “silly”.
She heavily implied that if the industry can’t self-regulate, the alternative is governments doing it for them. She was backed up by her counterparts from the UK, Australia and the European Commission.
Registrars have been talking to law enforcement for a few years about how to more effectively work together to prevent crime online.
In October 2009, agencies including the FBI and the UK Serious Organised Crime Agency publish a set of 12 recommendations about how to clean up the industry.
A lot of it was pretty basic stuff like a prohibition on registrar cybersquatting and an obligation to publish an abuse point of contact.
Despite a lot of talking at ICANN meetings, up until a couple of weeks ago there had not been a great deal of tangible progress.
The GNSO passed a resolution, proposed by registrars, to ask for an Issue Report to discuss whether registrars should be forced to post on their sites: a physical address for legal service, the names of key executives, and an abuse contact.
In ICANN’s world, an Issue Report usually precedes a Policy Development Process, which can take a year or more to produce results.
While the GNSO motion passed, it was opposed as inadequate by factions such as the Intellectual Property Constituency, which has close ties to the US government.
As the IPC seemed to correctly predict, the GAC was not amused.
“It is simply impossible for us to write a briefing memo for our political managers to explain why you need a policy to simply put your name on your web site,” Radell told the GNSO Council yesterday. “It is simply mind-boggling that you would require that.”
She pointed out that at a session during the Singapore meeting, registrars had indicated a willingness to address more of the law enforcement demands.
“That’s the context in which we are now coming to you saying this looks pretty paltry and actually it looks a little silly,” she said.
Mason Cole from the registrar constituency denied that they were “roadblocking” law enforcement’s demands, saying that a PDP is the fastest way to create a policy binding on all registrars.
“I think law enforcement was very clear when they made their proposals to us that what they were looking for was binding, enforceable provisions of policy that could be imposed on the registrars,” he said. “A code of conduct or a voluntary method would not arrive at binding, enforceable policy and therefore probably wouldn’t achieve the outcomes that law enforcement representatives were seeking.”
The debate didn’t end yesterday. Radell said she intends to take it up with the ICANN board of directors, presumably at their joint meeting tomorrow.
The implicit threat underlying the GAC’s protest is a legislative one, and Radell and other GAC members made it pretty clear that their governments back home regard domain names as a crucial tool in fighting online crime.

2 Comments Tagged: cybercrime, dakar, gac, governmental advisory committee, ICANN, law enforcement, seizures

New gTLDs: no advantage to applying early

ICANN has confirmed that new top-level domain applications filed early in next year’s application window will not get priority over those filed right at the end.
The subject of “batching” – the way ICANN plans to divide applications into more easily managed chunks of 500 – has seen some debate recently.
Some applicants and consultants have said that filing your application January 12 rather than April 12 would be a wise move, despite the evidence to the contrary.
Now ICANN senior vice president of stakeholder relations Kurt Pritz has busted the myth, during a session on new gTLDs with the Generic Names Supporting Organization in Dakar today.
“There’s no advantage to applying early or later in the process,” he said. “As long as your application is in by the due date it has the same chance of being in any batch.”
It doesn’t come much clearer than that.
ICANN has said that it only plans to process 500 applications at a time. If there are significantly more than 500, then it will process them in batches.
Due to the length of time it is expected to take to process an application, finding yourself in dumped into the second batch could add a few quarters to your go-live runway.
If you’re a commercial gTLD applicant, there could be a significant first-mover advantage to being in the first batch. Revenues from speculative and defensive registrations could be higher, before the novelty of new gTLDs gives way to fatigue.
Applicants in that position are going to use every trick in the book to streamline their process through ICANN and maximize their chances of being in the first batch.
While ICANN has not yet decided how to create the batches, it has ruled out filing time from the criteria. Pritz talked the GNSO through some of its current thinking today.
The preferred option is random selection. The problem with this idea is that it may fall foul of US gambling laws if it fits the definition of a lottery.
It sounds stupid, but it’s happened before: when Neustar introduced a random element to its launch of .biz, it would up having to pay $1.2 million to settle claims that it ran an illegal lottery.
“The issue of random selection is that we just have to make sure it complies with all possible applicable laws,” Pritz said. “Our initial legal research points out that this is real risk… but it is the most attractive form of selection because it is objective and fair.”
The other option under consideration is a “secondary time stamp”, Pritz said. This unhelpful label caused some head-scratching during the GNSO session today.
Pritz explained by analogy: imagine every applicant was asked to send a letter to ICANN, and the order of the batches would be determined by the order in which the letters are received.
The important thing to note is that this secondary time stamp would not be based on the date the application itself was submitted to ICANN.
Pritz said that ICANN had also discussed a “charity auction” batching method, but that this idea has now been ruled out.
Whatever mechanism is decided upon, it seems that applicants will have the opportunity to opt in or opt out of the first batch. Some .brand applicants currently clueless about how to use their gTLD may not be super-interested in getting priority processing, for example.
“We think those numbers are non-negligible,” Pritz said.

1 Comment Tagged: batching, dakar, ICANN, new gTLDs, new TLDs

Will ICANN approve cheap gTLDs for poor applicants?

One of the big questions at ICANN’s 42nd public meeting in Dakar next week is whether the board of directors plans to approve subsidized new gTLD application fees for worthy applicants.
A volunteer working group known as JAS came up with a set of recommendations last month that would lower the $185,000 fee for applicants from developing nations with public benefit missions.
It was a wide-ranging set of proposals that would stretch beyond the scope of the $1 million to $2 million ICANN approved for applicant support initiatives at its last meeting in June.
Chiefly, JAS wants the application fee reduced to $45,000 for qualified developing-world applicants, meaning ICANN would have to find the funds to cover the $140,000 shortfall elsewhere.
In addition, JAS wants ICANN to set up a fund to loan money to these same applicants. It also wants these applicants to be able to pay fees on a staggered schedule.
Whether it was deliberate or not (I suspect it was semi-deliberate), the JAS wish-list seems to me to go above and beyond the support the ICANN board said it was prepared to offer in June.
I don’t think the board will grant those wishes when it meets next Friday, and here’s a few reasons why.
First, CEO Rod Beckstrom has already basically ruled out blanket fee reductions, even for poorer applicants, and he did so after the board had already discussed them.
At an ICANN panel on new gTLDs in London last month, Beckstrom was asked by an audience member if the application fee could be reduced before January.

At roughly 32 minutes into the embedded video, this is what he said:

There’s no plans to reduce the fee and I could not contemplate that happening before the program opens. The fees have been determined and there’s no process to review them, and there would be no basis at the present time because the costing estimates in the program appear to be reasonably accurate.

He went on to say that economies of scale may lead to a reduction in fees in future rounds, but did not mention the JAS recommendations at all.
As I was also on the panel, I called him on the omission later in the discussion, roughly 45 minutes into the video above. He said:

The board of directors did make a directional indication in Singapore to set aside up to a million to two million dollars for financial support for applicants…
However, it’s not a repricing of the fees, it would be some type of support for those applicants. A reduction in the application fee or effectively subsidizing the application fee is one possible concept, but what I can tell you as the CEO and as a board member is that board’s indication is one to two million dollars, not an unlimited number, so can do math and figure out what might be possible and what might not.
We’re not going to change the program fees, it just means there might be some benefit to or some support for some applicants, but it may not come in the form of that subsidy for the fee.

What we have here is JAS asking for a fundamental restructuring of the application fee in certain circumstances, and ICANN’s CEO saying that’s not likely to happen.
At that time, the JAS report had not been formally submitted to the board, but it had nevertheless been seen and discussed by the board at its two-day retreat in mid-September.
The GNSO, which had been frustrated with the cross-constituency structure of the JAS for some time, didn’t even formally approve the report before forwarding it to the board, due to time constraints.
Another indication of the board’s thinking on the JAS recommendations comes from the minutes of its Finance Committee meeting, September 15. Here’s an extract:

Staff has initiated efforts to be ready for implementation if and when approved. Establishment of a fund – a short-term mechanism for earmarking funds for applicant support, and a long-term formal mechanism for several purposes. Meeting community expectations: Board had approved US $2mm, while the JAS/GAC-ALAC recommendations would be more costly. Four tasks: developing criteria based on the JAS report plus practical concerns, developing procedures, entity for considering applications, and mechanism for holding the funds. Discussed the need to stay within the mission and purpose of ICANN and the ability to set-up special funds.

There’s no mention of application fees, but there is an acknowledgment that the JAS recommendations would be more expensive to implement than just the $2 million ICANN has already set aside.
There’s also talk of “practical concerns” and the “need to stay within the mission and purpose of ICANN”, all of which says to me that there’s a worry JAS asked for too much.
We’ll have to wait until next Friday to find out for sure, but my guess is that the board will likely side with ICANN’s bean-counters and that the JAS will not get much of what it asked for.

3 Comments Tagged: dakar, ICANN, jas, new gTLDs