The $135 million battle for .web could be won in weeks

Afilias is to get its day in “court” to decide the fate of the .web gTLD just 10 days from now.

The registry is due to face off with ICANN before an Independent Review Process panel in a series of virtual hearings beginning August 3.

The IRP complaint was filed late 2018 as the endgame of Afilias’ attempt to have the results of the July 2016 .web auction overturned.

You’ll recall that Verisign secretly bankrolled the winning bidder, a new gTLD investment vehicle called Nu Dot Co, to the tune of $135 million, causing rival bidders to cry foul.

If that win was vacated, Afilias could take control of .web with its second-place bid.

Afilias claims that ICANN broke its own rules by refusing to thoroughly analyze whether NDC had a secret sugar daddy, something DI first reported on two weeks before the auction.

It has put forward the entirely plausible argument that Verisign splashed out what amounts to about a month’s .com revenue on .web in order to bury it and fortify its .com mindshare monopoly against what could be its most formidable competitor.

In the IRP case to date, ICANN has been acting as transparently as you’d expect when its legal team is involved.

It first redacted all the juiciest details from the Verisign-NDC “Domain Acquisition Agreement” and the presumably damaging testimony of one of its own directors, and more recently has been fighting Afilias’ demands for document discovery.

In March, the IRP panel ruled against ICANN’s protests on almost every count, ordering the org to hand over a mountain of documentation detailing its communications with Verisign and NDC and its internal deliberations around the time of the auction.

But the ace up ICANN’s sleeve may be an allegation made by Verisign that Afilias itself is the one that broke the auction’s rules.

Verisign has produced evidence that an Afilias exec contacted his NDC counterpart five days before the auction, breaking a “blackout period” rule so serious that violators could lose their applications.

While Afilias denies the allegation, the IRP panel ruled in March that Afilias must hand over copies of all communications between itself and rival bidders over the auction period.

We’re not likely to see any of this stuff until the panel issues its final declaration, of course.

In the past, IRP panels have taken as long as six or seven months after the final hearing to deliver their verdicts, but the most-recently decided case, Amazon v ICANN, was decided in just eight or nine weeks.

Nominet wants to kill off the .uk drop-catching market

Nominet has revealed a sweeping set of policy proposals that would totally revamp how expired domains are deleted and could essentially kill off drop-catching in the .uk domains market.

The company is thinking about auctioning off expired domains at the registry level, or charging drop-catchers up to £6,000 ($7,500) a year to carry on more or less as normal.

Currently, expired .uk domains are deleted at an undisclosed time each day, leading drop-catch registrars to spam the registry back-end with availability checks on the best names.

Upon finding a desired domain has dropped, they then attempt to register it immediately by spamming EPP create commands.

About 0.7% of the domains deleted each year, about 12,000 of the 1.76 million names dropped in 2018, are re-registered within a second of release, Nominet says.

The system as it stands bothers the registry due to the technical load it creates and the fact that it means the most desirable names are snapped up by small number of domainers for resale.

It also does not like the fact the current system encourages collusion between Nominet members and the creation of dummy memberships by drop-catchers.

So it’s proposing two main options for rejiggering the economics.

The first and apparently preferred solution would be for Nominet to auction off the names, rather than deleting them. It would look a lot like auctions often seen in newly launching TLDs.

The second option is to charge drop-catchers extra fees for a greater number of simultaneous EPP connections.

Currently, each registrar gets six. Under the proposal, called “Economically controlled access to expiring domains”, they’d be able to buy additional batches of six for £600 a pop, up to a maximum of 10 batches or £6,000.

Regardless of which option is chosen, Nominet also wants to make drop times more predictable, by publishing a daily drop-list available to all.

Nominet knows there’s a pretty good chance it’s going to be accused of profiteering, and says in the paper:

If either of the options proposed are implemented, we envisage that any profits derived from the auction or economically controlled access models will be directed towards public benefit activity and/or ringfenced to provide specific services to registrars e.g. a training fund. However, we are also seeking ideas on how any profits would be best spent to benefit the .UK namespace in this consultation.

The consultation can be found here. Interested parties have until August 14 to submit comments.

1.8 million UK grandfathers die after Nominet deadline hits

The deadline for registering “grandfathered” second-level domains in .uk passed this morning, leaving at many as 1.88 million names unclaimed.
From June 2014 until 0500 UTC this morning, anyone who owned a third-level domain in zones such as .co.uk or .org.uk had rights to register the matching 2LD under .uk.
Those rights have all expired now, and all the unclaimed 2LDs will be returned to the available pool next month.
Four days ago, Nominet said that there were still 1.88 million rights that had not been exercised. That’s from the over 10 million 3LDs whose registrants were initially given rights.
In March, 3.2 million names were still unclaimed. It seems about 1.4 million names have been claimed, or expired, at the eleventh hour, almost all in June.
One way of looking at it is that the owners of almost one in five .co.uk domains either decided they didn’t want the matching 2LD, or were unaware that it was available.
But about half of the original domains with rights have since dropped, so the portion of current 3LD owners now at risk of confusion with their 2LD match could actually be more like four in 10.
At the end of May, 2,439,181 .uk domains had been registered (including non-grandfathered domains) and there were 9,729,224 names registered at the third level.
The 1.8 million unclaimed names will now be the subject of a landrush.
On July 1, Nominet will start releasing the names in batches, alphabetically.
Accredited registrars will start slamming the registry — Nominet has set up a separate set of EPP infrastructure purely for this expected onslaught — with requests to register the most-valuable names.
Some registrars have been taking pre-registrations and will auction any names they successfully claim to the customers who put in pre-orders.
After a week, any names not already claimed by registrars will be released to the public, again in batches, starting from July 8.
The system has been criticized by smaller registrars, many of which believe Nominet is giving its larger registrars a much better chance at winning the good names simply because they have deeper pockets.

After $30 million deal, is a .voice gTLD now inevitable?

Do big second-level domain sales translate into new gTLD success, and does the record-breaking $30 million sale of voice.com this week make a .voice gTLD inevitable?
The answers, I believe, are no and maybe.
Before the 2012 new gTLD application round, one way applicants picked their strings was by combing through the .com zone file to find frequently-occurring words that terminated the second level string.
This is where we get the likes of .site and .online from Radix and much of Donuts’ portfolio.
But applicants also looked at lists of high-priced secondary market sales for inspiration.
This is where we get the likes of .vodka, from MMX.
The latter strategy has seen mixed-to-poor results.
Five of the top domain sales, as compiled by Domain Name Journal, were not eligible for gTLD status are they are too short.
Of the remaining 15 strings, “sex” (which occurs twice), “fund”, “porn”, “toys” and “vodka” were all applied for in 2012 and are currently on sale.
The strings “clothes” and “diamond” do not appear as gTLDs, but Donuts runs both .clothing and .diamonds.
Not delegated in any fashion are “porno” (unless you count it as a derivative of “porn”), “slots”, “tesla”, “whisky” and “california”. A company called IntercontinentalExchange runs .ice as a dot-brand.
As well as .clothing and .diamonds, .fund and .toys are both also Donuts TLDs. None of them are doing spectacularly well.
At the lower end, .diamonds currently has fewer than 3,000 domain under management, but has a relatively high price compared to the the higher-volume TLDs in Donuts’ stable.
At the high-volume end, .fund has just shy of 16,000 names and .clothing has about 12,000.
Judging by their retail prices, and the fact that Donuts benefits from the economies of scale of a 240-strong TLD portfolio, I’m going to guess these domains are profitable, but not hugely so.
If we turn our attention to .vodka, with its roughly 1,500 domains, it seems clear that MMX is barely covering the cost of its annual ICANN fees. Yet vodka.com sold for $3 million.
So will anyone be tempted to apply for .voice in the next gTLD application round? I’d say it’s very possible.
First, “voice” is a nice enough string. It could apply to telephony services, but also to general publishing platforms that give their customers a “voice”. I’d say it could gather up enough registrations to fit profitably into a large portfolio, but would not break any records in terms of volume.
But perhaps the existence of voice.com buyer Block.one as a possible applicant will raise some other applicants out of the woodwork.
Block.one, which uses a new gTLD and an alt-ccTLD (.io) for its primary web sites, is certainly not out-of-touch when it come to alternative domain names.
Could it apply for .voice, and if it does how much would it be willing to spend to pay off rival applicants? It still apparently has billions of dollars from its internet coin offering in the bank.
How much of that would it be prepared to pay for .voice at private auction?
That prospect alone might be enough to stir the interest of some would-be applicants, but it has to be said that it’s by no means certain that the highly gameable application process ICANN deployed in 2012 is going to look the same next time around.

.music update: I’m calling it for Costa

Amazon has pulled out of the fight for the .music gTLD, and I’m ready to call the race.
In full knowledge that this could be my “Dewey Defeats Truman” moment, it seems to me the balance of evidence right now is strongly pointing to a win for DotMusic over sole remaining rival bidder MMX.
The contention set originally had eight applicants, but six — Google, Donuts, Radix, Far Further, Domain Venture Partners and last night Amazon — have withdrawn over the last week or so.
This is a sure sign that the battle is over, and that the rights to .music have been auctioned off.
The two remaining applicants yet to withdraw are DotMusic Ltd, the Cyprus-based company founded and managed by music enthusiast and entrepreneur Constantinos Roussos, and Entertainment Names Inc, a joint venture managed by MMX (aka Minds + Machines).
One of them will withdraw its application soon, and my money’s on MMX.
Neither company will talk to me about the result.
But, as I observed Monday, DotMusic has recently substantially revamped its web site, and appears to be accepting “pre-registrations” for .music domains. These are not the actions of a loser.
MMX, on the other hand, has never shared Roussos’ public enthusiasm for .music and has never been particularly enthusiastic about winning private gTLD auctions, usually preferring instead to enjoy the proceeds of losing.
There are only two wildcard factors at play here that may soon make me look foolish.
First, the joint venture partner for Entertainment Names is an unknown quantity. Its two directors, listed in its .music application, are a pair of Hollywood entertainment lawyers with no previous strong connection to the ICANN ecosystem. I’ve no idea what their agenda is.
Second, MMX did not mention .music once in the “Post Period Highlights” of its recently filed 2018 financial results statement. It did mention the resolution of the .gay and .cpa contention sets, but not .music.
That filing came out April 3, at least a few days after the contention set had been won, but I’m assuming that the tight timing and/or non-disclosure agreements are probably to blame for the lack of a mention for .music.
So, on balance, I’m calling it for Roussos.
With a bit of luck we’ll have confirmation and maybe a bit of detail about potential launch dates before the week is out.

Did Roussos pull off the impossible? Google, Donuts, Radix all drop out of .music race

Google won’t be the registry for the .music gTLD.
The company, along with pure-play registries Donuts and Radix, late last week withdrew their respective applications from the .music contention set, leaving just three possible winners in the running.
Those are Amazon, MMX, and DotMusic, the company run by long-time .music fanboy Constantinos Roussos.
As I blogged last week, applications from Domain Venture Partners and Far Further have also been withdrawn.
I suspect, but do not know for a fact, that the contention was settled with a private deal, likely an auction, recently.
The logical guess for a winner would be Amazon, if only because of the nexus of its business to the music industry and the amount of money it could throw at an auction.
But I’m beginning to suspect that DotMusic might have prevailed.
The company appears to have recently revamped its web site, almost as if it’s gearing up for a launch.
Comparing the current version of music.us to versions in Google’s cache, it appears that the site has been recently given a new look, new copy and even a new logo.
It’s even added a prominent header link inviting prospective resellers to sign up, using a form that also appears to have been added in the last few weeks.
These changes all seem to have been made after the crucial ICANN vote that threw out the last of DotMusic’s appeals, March 14.
Are those the actions of an applicant resigned to defeat, or has Roussos pulled off the apparently impossible, defeating two of the internet’s biggest companies to one of the industry’s most coveted and controversial strings?
Participants in gTLD auctions typically sign NDAs, so we’re going to have to wait a bit longer (probably no more than a few days) to find out which of the remaining three applicants actually won.

How new gTLD auctions could kill gaming for good

Ever heard of a Vickrey auction? Me neither, but there’s a good possibility that it could become the way most new gTLD fights get resolved in future.
It’s one of several methods being proposed to help eliminate gaming in the next new gTLD application round that have received some support in a recently closed round of public comments.
ICANN’s New gTLD Subsequent Procedures working group (SubPro) is the volunteer effort currently writing the high-level rules governing future new gTLD applications.
Two months ago, it published a preliminary report exploring possible ways that contention sets could be resolved.
The current system, from the 2012 round, actively encourages applicants to privately resolve their sets. Usually, this entails a private auction in which the winning bid is shared evenly between the losing applicants.
This has been happening for the last five years, and a lot of money has been made.
Losing auctions can be a big money-spinner. Publicly traded portfolio registry MMX, for example, has so far made a profit of over $50 million losing private auctions, judging by its annual reports. It spent $13.5 million on application fees in 2012.
MMX is actually in the registry business, of course. But there’s a concern that its numbers will encourage gaming in future.
Companies could submit applications for scores of gTLDs they have no intention of actually operating, banking on making many multiples of their investment by losing private auctions.
Pointing no fingers, it’s very probably already happened. But what to do about it?
Who’s this Vickrey chap?
One suggestion that seems to be getting some love from diverse sections of the community is a variation of the “Vickrey auction”.
Named after the Canadian Nobel Prize-winning economist William Vickrey, it’s also called a “second price sealed bid auction”.
Basically, each applicant would secretly submit the maximum price they’d be willing to pay for the contested gTLD, and the applicant with the highest bid would pay the amount of the second-highest bid.
This method has, I believe, been used more than once in private contention resolution during the 2012 round.
But under the system suggested by SubPro, each applicant would make their single, sealed, high bid at time of application, before they know who else is gunning for the same string.
That way, contention sets could be mostly eliminated right at the start of the process, leading to time and cost efficiencies.
There’d be no need for every application in a contention set to go through full evaluation. Only the high bidder would be evaluated. If it failed evaluation, the second-highest bidder would go into evaluation, etc, until a successful applicant was found.
For losing applicants, a possible benefit of this is that they’d get much more of their application fees refunded, because they’d be skipping much of the process.
Neither would they have to bear the ambient running costs of sitting on their hands for potentially years while the ICANN process plays itself out.
It could also substantially speed up the next round. If the round has five, 10, 20 or more times as many applications as the 1,930 received in 2012, resolving contention sets at the very outset could cut literally years off processing times.
The SubPro concept also envisages that the winning bid (which is to say, the second-highest bid) would go directly into ICANN’s coffers, eliminating the incentive to game the system by losing auctions.
I must admit, there’s a lot to love about it. But it has drawbacks, and critics.
Why Vickrey may suck
SubPro itself notes that the Vickrey model it outlines would have to take into account other aspects of the new gTLD program, such as community applications, applicants seeking financial support from ICANN, and objections.
It also highlights concerns that bids submitted at the time of application constitute private business-plan information that applicants may not necessarily want ICANN staff seeing (with the revolving door, this info could quite easily end up at a competitor).
Companies and constituencies responding to the recent public comment period also have concerns.
There’s hesitance among some potential applicants about being asked to submit blind bids. There are clearly cases where an applicant would be prepared to pay more to keep a gTLD out of the hands of a competitor.
One could imagine, for example, that Coca-Cola would be ready to spend a lot more money on .cola if it knew Pepsi was also bidding, and possibly less if it were only up against Wolf Cola.
The Intellectual Property Constituency raised this concern. It said that it was open to the idea of Vickrey auctions, but that it preferred that bids should be submitted after all the applications in the contention set have been revealed, rather than at time of application:

Although there is a potential downside to this in that the parties have not put a “value” on the string in advance, the reality is that many factors come into play in assessing that “value”, certainly for a brand owner applicant and possibly for all applicants, including who the other parties are and how they have indicated they intend to use the TLD.

The Brand Registry Group and Neustar were both also against the Vickrey model outlined by SubPro, but neither explained their thinking.
The Business Constituency, which is often of a mind with the IPC, in this case differed. The BC said it agreed that bids should be submitted alongside applications, only to be unsealed in the event that there is contention. The BC said:

This Vickrey auction would also resolve contention sets very early in the application evaluation process. That saves contending applicants from spending years and significant sums during the contention resolution process, which was very difficult for small applicants.

It’s hard to gauge where current registries, which are of course also likely applicants, stand on Vickrey. The Registries Stakeholder Group is a pretty diverse bunch nowadays and it submitted a set of comments that, unhelpfully, flatly contradict each other.
“Some” RySG members believe that the current evaluation and contention process should stay in place, though they’re open to a Vickrey-style auction replacing the current ascending-clock model at the last-resort stage after all evaluations are complete.
“Other” RySG members, contrarily, wholeheartedly support the idea that bids should be submitted at the time of application and the auction processed, Vickrey-style, before evaluation.
“An application process which requires a thorough evaluation of an applicant who will not later be operating the gTLD is not an efficient process,” these “other” RySG members wrote. They added:

if contention sets are resolved after the evaluation process and not at the beginning of it, like the Vickery model suggestion, it would enable applicants who applied for multiple strings to increase the size of their future bids each time they lost an auction. Each TLD needs to be treated on its own merits with no contingencies allowed for applicants with numerous applications.

It’s not at all clear which registries fall into the “some” category and which into “other”, nor is it clear the respective size of each group.
Given the lack of substantive objections to pre-evaluation Vickrey auctions from the “some” camp, I rather suspect they’re the registries hoping to make money from private settlements in the next round.
Other ideas
Other anti-gaming ideas put forward by SubPro, which did not attract a lot of support, included:

• A lottery. Contention sets would be settled by pulling an applicant’s name out of a hat.
• An RFP process. This would mean comparative, merit-based evaluation, which has never been a popular idea in ICANN circles.
• Graduated fees. Basically, applicants would pay more in application fees for each subsequent application they filed. This would disadvantage portfolio applicants, but could give smaller applicants a better shot at getting the string they want.

All of the comments filed on SubPro’s work has been fed back into the working group, where discussions about the next new gTLD round will soon enter their fourth year…

Sedo’s cunning GDPR workaround

With full Whois records set to disappear from public view for most domain names this Friday, auction house Sedo has had to resort to some technical trickery to enable its users to prove they own the domains they list for sale.
Until now, when listing a domain at Sedo, the company has checked whether the Whois record matches the data it has on file for the customer.
With that no longer possible in many cases, Sedo told users yesterday it instead wants them make updates to their DNS records, which will obviously remain public data post-GDPR.
Sedo will give each customer a personal identification number, which they will have to add to the all-purpose TXT field of their domain’s DNS record.
That’s a fairly straightforward process at most registrars, though volume domainers had better hope their registrar of choice allows DNS changes to be made in bulk.
Sedo’s calling the process “Owner Self-Verification”.
Customers who do not use the system will have to wait three business days before their names are verified. Sedo said it will manually spot-check domains and may ask for other forms of proof of ownership.
UPDATE: Many thanks to all the people on Twitter telling me this system has been in place for years. You’re all very clever. Your cookies/cigars are in the mail.

ICANN mulls $68 million raid on auction war chest

ICANN wants to put away another $68 million for a rainy day and it’s considering raiding its new gTLD auction war chest in order to do so.
It’s also thinking about dipping into the pool of cash still left over from new gTLD application fees in order to bolster is “reserve fund” from its current level of $70 million to its target of $138 million.
But, as a relief to registrants, it appears to have ruled out steep fee increases, which had been floated as an option.
The reserve fund is basically a safety net that ICANN could use to keep the lights on in the event that revenue should suddenly plummet dramatically and unexpectedly.
If, for example, Verisign returned to its old antagonistic ways and refused to pay its .com fees for some reason, ICANN would lose about a third of its annual revenue but would be able to tap its reserve until the legal fisticuffs were resolved.
ICANN said in a discussion document (pdf) this week that it took $36 million from the reserve since 2014 in order to complete the IANA transition. Over the same period, its annual budget has swelled from about $85 million to $138 million and contributions back into the reserve have been minimal.
That’s left it with a meager $70 million squirreled away, $68 million shy of its longstanding target level of one year’s budget.
ICANN is now saying that it wants to replenish the fund in less than five years.
About $15 million of its target would come from cost-cutting its operations budget over the period.
It also wants to take at least $36 million from the new gTLD auction proceeds fund, which currently stands at $104 million (with another $132 million incoming should Verisign successfully obtain .web over the objections of rival bidders).
The remaining $17 million could come from “leftover” new gTLD application fees — that fund is currently about $80 million — or from more cost-cutting or more auction proceeds, or from a combination of the three.
A fourth option — increasing the per-transaction fees registrants are charged via their registries and registrars — appears to have been ruled out.
My back-of-the-envelope maths suggests that an annual per-transaction increase of about $0.07 would have been needed to raise $68 million over five years.
The proposal is open for public comment until April 25.

How ICANN could spend its $240 million war chest

Schools, pHD students and standards groups could be among the beneficiaries of ICANN’s nearly quarter-billion-dollar new gTLD auction war chest.
But new gTLD registries hoping for to dip into the fund for marketing support are probably shit out of luck.
Those are among the preliminary conclusions of a volunteer working group that has been looking at how ICANN should spend its new gTLD program windfall.
Over 17 new gTLD auctions carried out by ICANN under its “last resort” contention resolution system, the total amount raised to date is $240,590,128.
This number could increase substantially, should still-contested strings such as .music and .gay go to last-resort auction rather than being settled privately.
Prices ranged from $1 for .webs to $135 million for .web.
ICANN has always said that the money would be held separate to its regular funding and eventually given to special projects and worthy causes.
Now, the Cross-Community Working Group on New gTLD Auction Proceeds has published its current, close-to-final preliminary thinking about which such causes should be eligible for the money, and which should not.
In a letter to ICANN (pdf), the CCWG lists 18 (currently hypothetical, yet oddly specific) example proposals for the use of auction funds, 17 of which it considers “consistent” with ICANN’s mission.
A 19th example, which would see money used to promote TLD diversity and “smells too much like marketing” according to some CCWG members, is still open for debate.
While the list of projects that could be approved for funding under the proposed regime is too long to republish here, it would for example include giving scholarships to pHD students researching internet infrastructure, funding internet security education in developing-world primary schools and internet-related disaster-recovery efforts in risk-prone regions.
The only area the CCWG appears to be reluctant to endorse funding is the case of commercial enterprises run by women and under-represented communities.
The full list can be downloaded here (pdf).
The CCWG hopes to publish its initial report for public comment not too long after ICANN 61 in March. Comment would then need to be incorporated into a final report and then ICANN would have to approve its recommendations and implement a process for actually distributing the funds.
Don’t expect any money to change hands in 2018, in other words.