Beware the new gTLD cuckoos

Let’s say that for some reason you’re a big fan of horses.
Ever since ICANN announced it was going to do new top-level domains, in 2008, you’ve been desperate to apply for .horse.
This TLD could not fail, you think to yourself. Everyone likes horses, right? You could have 500,000 registrations in year one, make yourself rich. Maybe buy yourself a new horse.
For the last three years you’ve attended every ICANN meeting, you’ve lobbied for the changes you want to see in the Applicant Guidebook, you’ve spent tens of thousands on hotels and airfare.
You’ve painstakingly built your “.horse” brand, raising money and throwing it into marketing and community building, creating demand among your fellow horse lovers.
The horse community knows about .horse, and they can’t wait for it.
Fast-forward to April 12, 2012.
ICANN has just published the list of first-round gTLD applicants. Your lovingly created .horse bid is in the system, ready for processing.
But wait, what’s that?
Somebody else – some douchebag businessman who doesn’t even like horses – has also applied for .horse, and his bank account is bigger than yours by a long way.
How’s that .horse idea looking now? Did you just spend three years building up somebody else’s brand? Do you think your community will care? Or notice? The other guy is called .horse too, remember.
Oops.
This scenario is very likely to become a reality.
Probably not for .horse, but for many of the new gTLD applicants that we’ve become aware of over the last few years.
If you look at any high-profile application, .gay or .music for examples, we already see multiple applicants, one of which has usually done more to promote the TLD than the others.
Look at Sophia Bekele’s .africa application, which appears to be running into this problem already, despite all of her painstaking outreach.
There will probably be other applicants for these strings that we will know nothing about until April.
You don’t score any points in the Applicant Guidebook for having a loyal fan base, spending oodles of cash on marketing or simply being first to put out a press release.
If you find yourself in a contested string situation, the only way out under ICANN rules is an auction. The applicant with the deepest pockets wins.
Because I’m desperate to one day coin a term and have it stick, I’m going to call these usurpers “cuckoos”. Because, you know… that thing that cuckoos do with their young.
There’s a cuckoo business model, too.
While ICANN has only endorsed auctions as the method of settling contests over non-community strings, that’s there more as a deterrent than as a solution.
ICANN wants competing applicants to come to some kind of agreement between themselves before it reaches that stage and auctions are expected to be rather rare.
What we’re likely to see is a bunch of applicants withdrawing their applications after being paid off, in cash, equity, or some other consideration, by more serious rivals for the same string.
Nobody wants to risk spending millions in an auction if they can make the problem go away earlier with thousands.
Fortunately for the cuckoos, ICANN offers a substantial refund, $130,000, for applicants that drop out before their Initial Evaluation is completed.
This puts the ICANN fee for getting into pay-off talks with a “proper” applicant at a quite reasonable $55,000. If you can score a couple of points of equity in a new registry, it could be a bargain.
Of course, you’d have to hope that your rival does not call your bluff and try to force you to auction. If that happens, it would probably be wisest to admit defeat and cut your losses.
It’s high-risk, sure, but it’s potentially high reward too, and I’m certain it will happen, even if it doesn’t look like it’s happening.
It’s going to be a poker game, and no mistake.

How the US shaped the new ICANN

The US government pushed hard for ICANN to pay more attention to international governments, which caused it to delay .xxx and the new top-level domains program, a new document reveals.
A transcript of a December 2010 meeting between ICANN’s board and National Telecommunications and Information Administration chief Larry Strickling, published following a disclosure request by DomainIncite, outlines America’s “tough love” policy over ICANN.
It reveals that Strickling hauled ICANN over the coals over its opaque decision-making, its failure to adequately address its Affirmation of Commitments obligations, and its apparent lack of respect for its Governmental Advisory Committee.
The era of ICANN engaging maturely and in earnest with governments, witnessed over the last six months, arguably began in that meeting room in Cartagena, the evening of December 7, 2010.
But it did so partly because it fitted with Obama administration policy.
Strickling told the board that the multi-stakeholder model of internet governance was critical to US public policy on other matters, but that he wanted to ensure “the reality fits the model”:

we are cheerleaders for this. But as I’ve said to several of you, there’s a model but then there’s the reality. And it is incumbent on us at this particular point in time, more so than perhaps ever before, to do what we can to ensure the model, that the reality fits the model.
…
what it comes back to at the end of the day is our concern that we want to be able to demonstrate to the rest of the world that the quality of decision-making by this organization is absolutely top drawer.

ICANN was failing to live up to these ideals, he said. This was particularly true in the case of the new gTLD program, which many had expected ICANN to approve in Cartagena.
Strickling said that ICANN had not done enough to evaluate the pros and cons of the program:

I’ve heard expressed the idea that somehow I or the United States is opposed to the expansion of top-level domains. That’s not the case. I don’t have a view one way or the other. Frankly, that’s up to you to decide.
What I do care about is that when you decide that question, that you do it with a quality of decision-making with all of the information in front of you that you ought to have with the experts having given you the opportunity to ask questions and evaluate the pros and cons of decisions as fully as possible.

He later added:

It’s very clear that there are a lot of warning signs, just in the studies that have been done so far, incomplete as they are, to suggest that rushing headlong into this issue, I think, could be a mistake.
But I want to very quickly kind of backtrack from that remark in the sense that I don’t think it’s my place, in my role, to tell you how to make your decisions in terms of what the outcome should be.
And I do think I have a role to play and will play the role of evaluating the quality of decision-making, which largely is processes, but at the end of the day it really comes down to did the board have in front of it the facts it needed to have to make an informed decision, and does their decision, as reflected in their report of that decision, reflect a reasoned, mature, responsible decision.

It’s impossible to tell precisely what the tone of the meeting was from the transcript, but it’s possible to infer from the content that it was likely that of a parent scolding an unruly child.
At one point in the transcript, director Rita Rodin Johnston refers to Strickling as “Dad”, and Strickling says moments later that he does not want to “play schoolteacher” .
Seemingly pushing for it to mature as an organization, he urged ICANN to engage more seriously with the GAC, which had concluded a frustrating public meeting with the board just minutes earlier.

I don’t know what all of the top challenges are to ICANN in the next three to five years, but I absolutely believe that in that top three will be the issue of ICANN’s relations with foreign governments.
…
I think you all are missing a tremendous opportunity to deal with this issue of ICANN and Internet governance and the role of foreign governments, and it’s absolutely incumbent upon you all to find a way to work with the GAC along the lines that Heather [Dryden, GAC chair] and her fellow members expressed to you today.
…
I think that’s important for your ultimate preservation as an independent organization, and I cannot, I guess, emphasize enough the importance of working out these processes with the GAC in terms of receiving their advice, treating it with respect by responding to it promptly and fully, sitting down and mediating with them where it appears there are disagreements.

His words hit home.
Later that week, ICANN deferred a decision on approval of .xxx, pending formal discussions with the GAC, and it arranged to meet with the GAC in Brussels to discuss the new gTLDs program.
Over the last six months we’ve seen numerous changes to the Applicant Guidebook – addressing the concerns of trademark owners, for example – as a result of these consultations.
The structure of this process also appears to been formed during this private Cartagena meeting.
Strickling clashed with then-chairman Peter Dengate Thrush on their respective interpretations of ICANN’s bylaws as they relate to rejecting GAC advice.
Dengate Thrush expressed a view that could be characterized as “vote first, consult later” (my words, not his), which Strickling dismissed as “silliness”.
Strickling evidently won the argument; ICANN this year has started consulting formally with the GAC prior to voting on important issues.
The first beneficiary of this policy was .xxx applicant ICM Registry, which Strickling addressed directly during the Cartagena meeting:

But let me just say I don’t know how — based on, as I understand the facts on both top-level domains and ICM, how you can possibly have a mediation this week, in terms of the fact that information has not been provided to the GAC that they’ve asked for, the fact that they do not feel they understand exactly what the board has disagreed with and why.

This appears to be the reason we’re looking at .xxx domain names hitting the market in September, rather than right now.
Finally, I find it ironic that, given the meeting’s focus on transparency, it was Strickling, rather than ICANN, who asked for a transcription of the talks to be made.

>>PETER DENGATE THRUSH: We are currently scribing this session. But under our rules if you want us not to scribe this, we just turn it off.
>>LAWRENCE STRICKLING: I’m fine to be on the record. I have spoken to some of you individually, and I urged every one of you who I talked to individually to share my views as far as they wished. And I have absolutely no problem with anything I say here being in the public record.

Despite this exchange, the transcript did not become part of the public record until last Friday, 30 days after I filed a request using ICANN’s Documentary Information Disclosure Policy, which is a little like its Freedom Of Information Act.
I wish I’d filed it sooner.
You can download the PDF of the transcript here.

Calls to fix new gTLD “revolving door” at ICANN

ICANN’s CEO has acknowledged calls for a rethink of its ethics policies in light of the approval of the new generic top-level domains program and a recent high-profile staff departure.
Rod Beckstrom, during his opening remarks at ICANN’s international public meeting in Singapore last week, said he expects to lose staff to new gTLD applicants:

we could see a rise in departures as our highly qualified staff are recruited by other organizations, including some in this room, for their unique experience in this emerging area.
This would be a solid endorsement of our staff. Not unexpectedly, the first such resignation has already occurred.
I am pleased to hear the community begin discussions on whether ICANN ethics policies need to be strengthened.

The resignation referred to was that of Craig Schwartz, who has quit his job as ICANN’s chief gTLD registry liaison to head BITS’ application for .bank and other financial TLDs.
There are fears that the sudden influx of new money into the gTLD space could easily attract ICANN’s top talent away from the organization, making it less effective.
This looming problem is particularly troubling given ICANN’s recent staff retention problems.
Adrian Kinderis, CEO of likely applicant and registry services provider AusRegistry, said during a meeting between the ICANN board and the GNSO Council last week:

I need to ramp up some people very very quickly that know about this domain application process, and I’ll pay big dollars because there’s big dollars out there…
If you don’t do something, I will poach all your good people.

A small number of people who know the Applicant Guidebook inside-out – I’ve heard stories of meetings where ICANN executives use a whiteboard to brainstorm all the possible ways to game the program – would make invaluable recruits for registry services providers or consulting firms.
Senior vice president Kurt Pritz, who’s been heading the development of the Guidebook for the last few years, would be a killer hire if and when he decides to leave.
Currently, there’s nothing in these employees’ contracts that would prevent such talent leakage – although many have signed confidentiality agreements – Beckstrom said on Monday.
The GNSO has started talking about a policy that could help prevent a “revolving door” between the industry and ICANN, which is in many ways its regulator.
A very early-stage draft document compiled by Go Daddy’s Tim Ruiz has been circulated to the Council, outlining eight ideas for such a policy.
It could for example require contracted parties to agree not to hire ICANN staff during their employment and for a period thereafter, and vice versa.
It also suggests banning staff joining ICANN from a contracted party working on matters related to that company for two years after being hired.
Governments around the world already have such policies in place, although they vary wildly and are enforced with various degrees of effectiveness.
Perversely, the fact that everyone knows these talks are now underway may in fact accelerate registries’ headhunting of ICANN staff – there presumably can be no revolving door ethics policy violation before a revolving door ethics policy has been created.

VeriSign’s .net contract renewed

VeriSign has been given the nod to continue to run the .net domain registry after a vote by ICANN’s board of directors today.
The vote was 14-0, with director Bertrand De La Chappelle abstaining without explanation.
The renewal is hardly surprising – nobody thought for a second that VeriSign would fail to retain the contract – but the deal was controversial anyway, due to a Boing-Boing misunderstanding.
The contract still allows VeriSign to carry on raising prices, by up to 10% in any given year, and it still calls for ICANN to receive $0.75 per domain, which currently adds up to over $10 million a year.
The money is still ostensibly earmarked for special projects including extending ICANN’s outreach into developing nations and DNS security, and the resolution passed by the board today says:

ICANN commits to provide annual reporting on the use of these funds from .NET transaction fees.

This is presumably designed to address criticisms that it basically ignored its commitment under the 2006 .net agreement to set up two “special restricted funds” to manage .net cash, as I reported on here.

Crocker picked to lead ICANN

Steve Crocker has been elected chairman of ICANN’s board of directors, following the departure of Peter Dengate Thrush, whose term on the board expired today.
Described earlier this week by CEO Rod Beckstrom as “one of the uncles of the internet”, Crocker is the creator of the Request For Comment format for internet standards.
Replacing Crocker as vice-chair is fellow geek Bruce Tonkin, chief strategy officer of Melbourne IT, the Australian domain name registrar.
Both men were selected by secret board poll.
The board revealed the unsuccessful candidates for the first time too: Cherine Chalaby and Sebastien Bachollet stood for chair, while Bachollet and Ray Plzak stood for vice-chair.
Because Crocker’s term on the board ends in October, his long-term future depends now on whether the ICANN Nominating Committee decides to renew his term for another three years.
I expect it will. Last year, NomCom kicked out all three of its appointees whose terms were up, irking some. Declining to re-appoint Crocker this year could look like regicide by committee.
This leaves NomCom with only one pick in 2011. It will almost certainly be a woman from a region currently under-represented on the board. My guess is Russia.
Also joining the board today was .au’s Chris Disspain, who replaces Dengate Thrush as ccNSO appointee, and Canadian consultant Bill Graham, who replaces Rita Rodin Johnston from the GNSO.

ICANN names European vice president

ICANN has appointed Thomas Spiller to be its first vice president, Europe.
Spiller has worked for the French Prime Minister’s Office, but most recently was head of global policy strategy at the software vendor SAS.
He’s a French national, but will be based in ICANN’s Brussels office when he begins, August 29.
“I look forward to reinforcing ICANN’s outreach to all stakeholders and strengthening the ongoing inclusive dialogue with Europe’s Internet users, national governments, EU institutions and business,” he said in a press release.
If you’re counting, Spiller will be ICANN’s eighth vice president, the third to be appointed this year.

Kroes slams ICANN new gTLD approval

Neelie Kroes, vice-president of the European Commission, has repeated her call for ICANN reform after it rejected governmental advice in its newly approved top-level domains program.
According to a statement from her official spokesperson sent to Intellectual Property Watch, Kroes said the approval of the program “disregard[ed] governmental advice on public policy issues” and “underscores the need for the model to be reformed to remain sustainable”.

The lack of an adequate response on the part of ICANN Board clearly points to some deficiencies in the current functioning of the model. This calls for specific actions in order to remedy the situation.

Kroes seems to believe that governments are entitled to every concession they demand from “multistakeholder” policy-making processes.
According to IP-Watch, she promised to coordinate a response with EU member states and the US.
While the Governmental Advisory Committee had filed about 80 objections to aspects of the Applicant Guidebook earlier this year, ICANN managed to whittle the list down to a small handful.
It refused to remove the requirement for trademark owners to provide proof of use before participating in sunrise periods, and to lower the burden of proof in certain anti-cybersquatting mechanisms.
Governments also don’t seem particularly convinced by ICANN’s decision to approve the program before consulting more deeply with competition authorities over the vertical integration issue.
GAC chair Heather Dryden delivered a more measured statement expressing “disappointment” with the decision yesterday.
EC GAC representative Gerard de Graaf, who’s earning himself a reputation in ICANN as a bit of a firebrand, was less measured in his response, accusing ICANN of potentially putting new gTLD applicants at risk of violating European competition laws.
More at Intellectual Property Watch.

Afilias links up with Right Of The Dot

Afilias and Right Of The Dot have announced a partnership to jointly assist new top-level domain applicants.
Right Of The Dot is Monte Cahn and Mike Berkens’ latest venture, a consulting firm focused primarily on helping new registries price their “premium” second-level domains.
Afilias runs the .info registry and provides registry services for many other TLDs, including .org.
The Afilias deal is the first major partnership Right Of The Dot has announced.

Neustar eats own dog food, plans .neustar bid

Neustar has become the first domain name registry to publicly reveal its own “.brand” top-level domain application, announcing this week a .neustar bid.
The company is one of many offering registry services to brand owners that want to run their own custom TLD, so it makes marketing sense for Neustar to put its money where its mouth is.
But it may also run the risk of diluting its .biz brand (such as it is), depending on whether or not it plans to migrate its primary site, neustar.biz, entirely to .neustar.
Neustar is one of only a handful of companies to announce .brand bids. Canon and Hitachi are the two best-known, but others including IBM and Nokia have expressed serious interest.
ICANN has previously predicted as many as 200 .brand bids in the first round, which begins January 12, 2012.

First post-approval new gTLD bids announced

After ICANN approved its new generic top-level domains program here in Singapore on Monday, many people I spoke to predicted a new “quiet period” for gTLD application announcements.
There’s a feeling among some that there’s little to be gained now from revealing what gTLD you plan to apply for, particularly if you’re a smaller player that could easily be out-bid by a larger, later applicant.
Nevertheless, today we have the news that GJB Partners plans to apply for .jewelers, one of the narrowest niche gTLDs to be announced to date.
GJB’s managing partner is George Bundy, CEO of .fm and .am registry BRS Media, which also plans to apply for .radio.
I imagine the choice of string took some thought – it’s plural rather than singular, US rather than UK English (in which it would be “.jeweller”).
In such cases, you only need to pick one. If this bid is successful, ICANN’s confusing similarity rules will make sure that .jeweller, .jeweler and .jewellers never see the light of day.
Also emerging this week, the city of Tokyo has announced that it will seek a .tokyo delegation, and is calling for expressions of interest.
That news follows the announcement last week of a commercial bidder for the .okinawa and .ryukyu geo-TLDs, to represent the Japanese region of Okinawa.