.org price caps: ICANN chair denies “secret” meetings

ICANN chair Maarten Botterman has denied that the board of directors approved the removal of price caps in .org, .biz and .info in “secret” meetings in 2019.

In written testimony (pdf) recently filed as part of Namecheap’s two-year-old Independent Review Process proceeding, Botterman scoffed at the idea that ICANN secretly gave the nod to the removal of price caps in 2019:

I understand that Namecheap is claiming that the Board acted in secret when deciding to go forward with the 2019 Registry Agreements. Nothing about the Board’s conduct occurred in secret. The Board did not convene a “secret” annual, regular, or special Board meeting and did not make any “secret” formal decisions or “secret” resolutions. Instead, the Board was briefed by ICANN staff regarding contract renewals that were well within their delegated authority to negotiate and execute.

Namecheap is claiming in its IRP that ICANN broke its bylaws when it renewed the .org, .info and .biz contracts without the historical price caps that all three had in place for the better part of 20 years.

It wants those decisions annulled, potentially enabling the reinstatement of the caps.

Part of its case is that ICANN failed in its transparency obligations, with Namecheap saying that the decision to remove caps was “entirely opaque” and made with “no analysis whatsoever”.

The .info, .org and .biz contracts were renewed without the ICANN board making a formal resolution or discussing them during a session that was being recorded and minuted.

Botterman, along with declarations from with fellow director Becky Burr and VP Russ Weinstein and outside lawyers’ filings, says that the extent of the board’s involvement was two briefings that occurred at workshops in January and June 2019.

ICANN staff explained to the board why it intended to go ahead with signing the cap-free contracts, and the board “saw no reason to intervene”, Botterman wrote. Staff have delegated authority to deal with contract stuff, he said.

Now, it could be argued that these meetings were not “secret” as such — ICANN board workshops are a standard event, happening in the few days leading up to each of ICANN’s thrice-yearly public meetings.

ICANN’s chair (then Cherine Chalaby) even blogs about them, posting a rough agenda beforehand and a summary of discussions a few weeks later.

In the case of the January 2019 pre-workshop post, there’s no mention whatsoever of any contract renewals. Nor is there in the post-workshop summary.

The June 2019 post-workshop post fails to mention the fact that the board had essentially given the nod to the lifting of caps at that meeting.

The pre-workshop post makes a passing, blink-and-you’ll-miss-it reference to “Göran will update the Board on the renewal of some registry agreements”, which substantially played down what was actually going on.

At that time, ICANN was well-aware that there was huge public interest in at least the .org renewal, where over 3,300 comments had been submitted, mostly objecting to the removal of price caps.

It’s possible that the first time ICANN disclosed that the discussions had even taken place was when a spokesperson told me how the .org decision was made, in July that year.

You don’t have to be a conspiracy theorist to wonder why ICANN pretty much skimmed over the whole issue in its public disclosures, even though it was the hottest topic in town at the time.

Even now, Botterman and Burr are both invoking attorney-client privilege to limit their testimony about what happened at these two workshops.

You don’t have to think anything untoward was going on to ask whether this is all paints a picture of ICANN acting “to the maximum extent feasible in an open and transparent manner”, as its bylaws requires.

Botterman says in his declaration:

The Bylaws are clear that ICANN must “operate to the maximum extent feasible in an open and transparent manner.” But I have never understood this Bylaws provision to require that every time the Board needs to get work done, or every time the Board receives a briefing from ICANN staff on a specific topic, it must do so in public or at a annual, regular or special Board meeting. Nor would such a requirement be feasible.

Mutually assured destruction? Now Afilias faces .web disqualification probe

Afilias’ ongoing quest to have Verisign’s winning bid for the .web gTLD thrown out may have backfired, with ICANN now launching a probe into whether Afilias’ own bid should be disqualified.

Afilias and Verisign could now BOTH be kicked out of the .web fight, delivering the coveted gTLD into the hands of the third-placed bidder for a knock-down price.

There’s even the possibility that Verisign’s winning $135 million bid could be more than cut in half, taking tens of millions out of ICANN’s coffers.

ICANN’s board of directors on Thursday said it will investigate not only whether Verisign broke new gTLD program rules by using a Nu Dot Co as proxy to bid, but also whether Afilias broke the rules when an executive texted NDC during a pre-auction comms blackout period.

It’s the first time board has resolved to take a look at the allegations against Afilias, which so far have only come up in letters and arbitration filings from Verisign and NDC.

The .web auction in 2016 resulted in a winning bid of $135 million from NDC. It quickly emerged that its bid was bankrolled by Verisign, which had not directly applied for .web.

Afilias’ applicant subsidiary (now called Altanovo Domains, but we’re sticking with “Afilias” for this story) has been trying to use Verisign’s sleight-of-hand to get the auction overturned for years, on the basis that ICANN should have forced NDC to show its cards before the auction took place.

An Independent Review Process panel last year ruled that ICANN broke its own bylaws by failing to rule on Afilias’ allegations when they were first made, and told ICANN to put .web on hold while it finally formally decides whether Verisign broke the rules or not.

What the IRP panel did NOT do was ask ICANN to rule on Verisign’s counter-allegations about Afilias violating the auction blackout period. ICANN’s decided to do that all by itself, which must piss off Afilias no end.

The board resolved last week, with my emphasis:

Resolved (2022.03.10.06), the Board hereby: (a) asks the [Board Accountability Mechanisms Committee] to review, consider and evaluate the allegations relating to the Domain Acquisition Agreement (DAA) between NDC and Verisign and the allegations relating to Afilias’ conduct during the Auction Blackout Period; (b) asks the BAMC to provide the Board with its findings and recommendations as to whether the alleged actions of NDC and/or Afilias warrant disqualification or other consequences, if any, related to any relevant .WEB application; and (c) directs ICANN org to continue refraining from contracting for or delegation of the .WEB gTLD until ICANN has made its determination regarding the .WEB application(s).

I see four possible outcomes here.

• Nobody gets disqualified. Verisign wins .web and ICANN gets to keep its $135 million. Afilias will probably file another IRP or lawsuit.
• Verisign gets disqualified. Afilias gets .web and ICANN probably gets paid no more than $79.1 million, which was its maximum bid before the auction became a two-horse race. Verisign will probably file an IRP or lawsuit.
• Afilias gets disqualified. Verisign wins .web and then it has to be figured out how much it pays. I believe the high bid before the third-place bidder pulled out was around $54 million, so it could be in that ball-park. Afilias will probably file another IRP or lawsuit.
• Both Afilias and Verisign get disqualified. The third-placed bidder — and I don’t thinks its identity has ever been made public — wins .web and pays whatever their high bid was, possibly around $54 million. Everyone sues everyone else and all the lawyers get to buy themselves a new summer home.

The other remaining applicants are Donuts, Google, Radix and Schlund. Web.com has withdrawn its application.

The people who will decide whether to disqualify anyone are the six members of the Board Accountability Mechanisms Committee who are not recusing themselves due to conflicts of interest (Edmon Chung has a relationship with Afilias).

Given that the board has already ruled that it has a fiduciary duty to dip into the new gTLD auction proceeds pretty much whenever it pleases, can’t we also assume that it has a fiduciary duty to make sure that auction proceeds pool is as large as possible?

Surprising nobody, Verisign to raise .com prices again

Verisign has announced its second consecutive annual price increase for .com domain names.

The wholesale registry fee for .com names will rise from $8.39 to $8.97 on September 1 this year, an extra $0.58 for every new or renewing domain, of which there are currently over 160 million.

Verisign announced the move, which was expected, as it announced a 2021 profit of $785 million and a 65.3% operating margin.

CEO Jim Bidzos, speaking to analysts, played down the impact of the increases on .com registrants, pointing out that .com prices were frozen under the Obama administration and have only gone up once before, last year, since 2012.

“This is the second wholesale price increase for COM since January of 2012,” he said. “So, if you look back over the last 10 years, that translates into a cost increase of only 1.3% CAGR over the last ten and a half years actually.”

The current .com contract, signed off by the Trump administration and ICANN, allows for two more 7% annual price increases, excluding the just-announced one, but Bidzos would not say whether Verisign plans to exercise those options.

If it does (and it almost certainly will) it would raise the price to $10.26, where it would stay until at least October 2026, he said.

“We believe .com continues to be positioned competitively,” he said.

It’s still basically free money for Verisign, which saw strong fourth-quarter and full-year 2021 results.

The company yesterday reported revenue of $1.33 billion for 2021, up 4.9%, with net income of $785 million, down from $815 million. The operating margin was 65.3%, compared to 65.2%.

For the fourth quarter, revenue was up 6.3% to $340 million, with net income of $330 million compared to $157 million. Operating margin was 65.3%, compared to 63.9%.

For 2022, the company is guiding for revenue of between $1.42 billion and $1.44 billion, based on the price increases and predicted unit growth of between 2.5% and 4.5%. The operating margin is expected to be between 64.5% and 65.5%.

Bidzos also addressed the controversial .web gTLD, which it won at auction but has been unable to launch due to legal action pursued by rival bidder Afilias/Altanovo.

An Independent Review Process panel recently threw a decision about .web back at ICANN, which is now considering Afilias’ allegations of wrongdoing at the board level.

“ICANN looks to be moving forward with making the decision on the delegation of .web, and we will be monitoring their process,” Bidzos said. He said that Verisign has not budgeted for any revenue or costs from .web in 2022.

That’s probably wise. Afilias recently told us that it has not stopped fighting against Verisign’s .web win.

Battle for .web “far from over”, says Afilias lawyer

Altanovo Domains’ fight with Verisign and ICANN for the .web gTLD is not over, despite an adverse ruling late last month, according to a top lawyer for the company.

Altanovo, the company previously known as Afilias Domains No 3, has not thrown in the towel and left the path clear for Verisign to launch .web, Arif Ali of the law firm Dechert told DI last night.

“Bottom line: this matter is far from over and no, Verisign doesn’t ‘get to run .web after all;’ certainly if the Board does its job objectively and fairly,” he said in an email.

He said this just hours before ICANN published its latest, but by no means final, board resolution on the .web case.

Ali represented Afilias in its Independent Review Process complaint against ICANN’s decision to award .web to Verisign following a 2016 auction, which was won by a company called Nu Dot Co, secretly backed by $135 million of Verisign’s money.

Afilias technically won its IRP, with the panel ruling last May that ICANN broke its bylaws by shirking its duty to address Afilias’ claim that NDC broke new gTLD program rules. Afilias said ICANN should have forced NDC to disclose itself a Verisign pawn before the auction went ahead.

ICANN got close to signing a registry agreement for .web with NDC, despite it being an open question as to whether the auction was legit, the panel ruled. It ordered ICANN to pay Afilias its $450,000 in legal fees and $479,458 of IRP costs.

What the IRP did not do was void the Verisign/NDC bid, nor give Afilias rights to .web.

Instead, it instructed ICANN to stay the .web contract-signing until its board has formally “considered and pronounced upon the question of whether the [Verisign-NDC Domain Acquisition Agreement] complied with the New gTLD Program Rules”.

The board had held a secret, undocumented discussion about the case in November 2016 and decided to keep its mouth shut and just let the IRP play out, according to the IRP ruling, which essentially told the board to stop avoiding difficult questions and to actually make a call on the legitimacy of the Verisign play.

Before the board could do so, Afilias/Altanovo filed an unprecedented appeal with the IRP panel. Technically an “application for an additional decision and interpretation”, Afilias asked the IRP panel to definitively answer the question of whether Verisign broke the rules rather than merely passing the hot potato back to ICANN’s board.

But in a December 21 decision (pdf), the IRP panel denied Afilias’ request as “frivolous” in its entirely, writing:

The Panel has dismissed the [Afilias] Application in its entirety. In the opinion of the Panel, under the guise of seeking an additional decision, the Application is seeking reconsideration of core elements of the Final Decision. Likewise, under the guise of seeking interpretation, the Application is requesting additional declarations and advisory opinions on a number of questions, some of which had not been discussed in the proceedings leading to the Final Decision.

In such circumstances, the Panel cannot escape the conclusion that the Application is “frivolous” in the sense of it “having no sound basis (as in fact or law)”. This finding suffices to entitle the Respondent [ICANN] to the cost shifting decision it is seeking and obviates the necessity of determining whether the Application is also “abusive”.

The panel told Afilias to pay ICANN’s $236,884 legal fees and the panel’s costs of $140,335, leaving Afilias out of pocket and back to square one in terms of getting clarity on whether Verisign’s actions were kosher.

Afilias had basically accused the panel of shirking its duties and punting its decision on Verisign’s auction bid in much the same way as the panel decided that ICANN had shirked its duties and punted its decision on Verisign’s auction bid.

Nobody seems to want to make a call on whether the successful Verisign-NDC ploy to win the .web auction with a secretly bankrolled bid was legit.

On Sunday, the full ICANN board met to discuss the outcome of the IRP and — surprise surprise — it punted again, instructing a subcommittee to look more closely at the matter:

the Board asks the Board Accountability Mechanisms Committee (BAMC) to review, consider, and evaluate the IRP Panel’s Final Declaration and recommendation, and to provide the Board with its findings to consider and act upon before the organization takes any further action toward the processing of the .WEB application(s).

There’s not yet a publicly announced date for the next BAMC meeting. It tends to meet as and when needed, so we might not have too long to wait.

Once the committee has made a decision, it would be referred back to the full board for a final rubber stamp, and it seems that only after that would Afilias make its next move.

Ali, in an email sent to DI just a few hours before ICANN published its Sunday board resolution last night, said:

The [IRP] Panel also made it clear that the Board can’t just punt on the matter as it did previously, but must decide it, and that its decision is subject to review by a future IRP panel.

There’s nothing preventing Afilias filing another IRP to challenge the board’s ultimate decision, should it favor Verisign. Likewise, if it favors Afilias, Verisign could use IRP to appeal.

Verisign has been pursuing a counter-claim against Afilias, albeit so far only in the court of public opinion, accusing the company of breaking ICANN’s rules by trying to secretly “rig” the .web auction during a communications blackout period.

Ali calls this a “red herring”, among other things.

In my view, whichever way ICANN’s board goes, it’s going to wind up back in an IRP.

With IRP proceedings typically measured in years, and no indication that Afilias or Verisign are ready to back down, it seems the .web saga may still have some considerable time left on the clock.

If you’re desperate to register a .web domain, don’t hold your breath.

Note: most of Afilias was acquired by Donuts a year ago, but the .web application was not part of the deal. The IRP proceedings have continued to refer to “Afilias” interchangeably with “Altanovo”, and I’m doing the same in my coverage.

Verisign boss talks .web launch, timing and pricing

Verisign hasn’t fully won .web yet, but it expects to soon and is talking in general terms about what the it might look like live.

CEO Jim Bidzos yesterday told analysts that he expects the Independent Review Process panel currently considering an appeal by rival applicant Afilias to deliver its final verdict before the end of the year. No hearings are scheduled.

Afilias claims Verisign and its secret proxy, Nu Dot Co, cheated, and that ICANN broke its own rules, in the 2016 auction that saw Verisign promise to pay $135 million for .web. Verisign thinks the claims are rubbish.

Bidzos told analysts, wanting to known when they can put .web revenue into the models, that it while it’s a “bit early to speculate” when the company will launch .web, it will likely happen a “couple of quarters from delegation”.

On pricing, he noted that .web does not have the same price controls as .com and .net:

.web is, of course, different from .com and net and that it’s not a price controlled TLD… We do have flexibility with it that we don’t have with other TLDs, and premiums are available. Other sorts of options are available.

But will the company put its marketing muscle behind .web? Many people, myself included, have said that Verisign’s interest in the gTLD is more about keeping it out of its rivals hands. Bidzos said:

There certainly will be some sort of marketing launch that will occur, but I just think it’s too early to really talk about what that would look like and what the expense impact will be. But we certainly intend to market and promote .web. Our plan, our desire, as we’ve stated — and I’ll say again — is to offer our customers more choice and to make .web a very successful TLD.

His comments came as Verisign reported its third-quarter financial results.

The company reported revenue up 5.1% at $334 million and net income of $157 million compared to $171 million a year ago.

It had 172.1 million .com and .net domains in its registry at the end of the quarter, up 1.48 million sequentially and a 5.1% increase on the year-ago number.

Afilias appeals .web ruling, Verisign responds with “rigging” claims

Afilias has filed an unusual and unprecedented appeal against the May ruling that found ICANN broke its bylaws by awarding the .web gTLD to a Verisign affiliate.

The company is arguing that the Independent Review Process panel that decided the .web case shirked its duties, by not actually resolving the major disputes placed before it.

Verisign, in response, has accused Afilias of asking for a “do-over”, which it said is against the rules, and published information it said showed the company had tried to “rig” the .web auction.

The IRP followed the 2015 ICANN last-resort auction, which saw Verisign secretly fund a shell applicant called Nu Dot Co to win with a $135 million bid, on the basis .web would later be transferred to its custody.

Afilias was the runner-up, and argued that ICANN should have voided the NDC bid because Verisign’s involvement was not disclosed.

But the IRP panel merely found that ICANN had breached its bylaws by failing to have the courage to actually rule on the legitimacy of Verisign’s tactics, and threw it back to ICANN to make a decision.

ICANN has yet to make that decision. Instead, Afilias has filed an appeal (pdf) with the in the form of an “application for an additional decision and interpretation”.

IRP cases are handled by the International Center for Dispute Resolution, and Afilias is invoking the ICDR Arbitration Rules that allow a claimant to request an “interpretation” or “additional award” from the original decision:

By failing to resolve all of the claims and issues Afilias presented to the Panel for decision, the Panel has not only failed to satisfy its mandate; it has also undermined the very Purposes of the IRP (as set out in Section 4.3(a) of the Bylaws)—especially, but not exclusively, by its decision to refer Afilias# claim arising from Nu Dot Co’s (“NDC”) violation of the New gTLD Program Rules back to the ICANN Board and Staff to “pronounce” upon “in the first instance.”

The lengthy request is, I believe, an unprecedented attempt at an appeal of an IRP ruling. It’s also heavy on the legal arguments and does not really shed much light on the facts of the case.

The gist of it is that Afilias wants the panel to rule that ICANN breached its bylaws, new gTLD program rules and international law by failing to disqualify NDC and awarding .web to Afilias instead.

Verisign, in response, said in a blog post that Afilas’ application is “not permitted by the arbitration rules – which expressly prohibit such requests for ‘do overs.'”

It also published a letter (pdf) from NDC to ICANN in which it argues that Afilias tried to engage in a “collusive scheme” to “rig” the .web auction.

The letter contains many pages of private correspondence — emails and phone text messages — in which rival .web applicants, before Verisign’s involvement had been confirmed, fruitlessly attempted to persuade NDC to join them in a private auction in which the winning bid would have been shared among the losers rather than all going to ICANN.

While this kind of private settlement was envisaged, and indeed encouraged, by new gTLD program rules, Verisign reckons its smoking gun is messages sent by Afilias during the so-called “blackout period” before the last-resort auction, during which communications between applicants were forbidden.

As far as I can tell, all or almost all of the documents provided by NDC to ICANN had already been submitted to the public record during the IRP.

Note — the “Afilias” referred to throughout this post is the portion of the company, now known as Altanovo Domains, left behind after most of its operating businesses were acquired by Donuts late last year.

Another new gTLD applicant lawyers up on ICANN

Another rejected new gTLD applicant has filed an Independent Review Process complaint against ICANN, claiming the org failed to follow proper procedures on fairness and transparency.

And I think it’s got a pretty good chance of winning.

A Bahrain company called GCCXI has filed the IRP, eight years after its application for .gcc was thrown out by ICANN on the vague advice of its Governmental Advisory Community.

.gcc is for Gulf Cooperation Council, the short-hand English name for the Cooperation Council for the Arab States of the Persian Gulf, a proto-union of six states on the east coast of the Arabian peninsula.

The applicant’s problem is that it’s not affiliated with, nor supported by, the GCC or its member states.

The GAC, in its controversial Beijing communique of April 2013 objected to GCCXI’s application in the same breath and under the same power as it objected to DotConnectAfrica’s .africa bid.

Back then, the GAC was much more secretive than it is today, and did not have to provide a rationale for its advice. Its powers to object to gTLD applications pretty much amounted to a veto.

ICANN dutifully followed the GAC’s advice, throwing out the .gcc application later that year.

The applicant has evidently been trying to get ICANN to change its mind, using the Request for Reconsideration and then Cooperative Engagement Processes, since early 2014. That CEP concluded in May, and GCCXI filed for IRP in June.

Why did the CEP — a form of arbitration designed to avoid expensive IRP complaints and lawsuits — take so long and ultimately fail?

Don’t look to the IRP complaint published by ICANN (pdf) for answers — it’s redacted the whole ruddy lot, a few pages of text, without explanation.

That’s ironic given that a lack of transparency is one of GCCXI’s beefs against the org, along with an alleged failure to follow its bylaws on neutrality and fairness.

ICANN has ignored all of its carefully developed and documented policies, and instead has kowtowed to unspecified government concerns — devising a secret process to kill Claimant’s investment and opportunity, and completely disregarding the public interest in delegating the TLD for use.

The continued fight for a gTLD it surely has no hope of ever operating is a ballsy move by the applicant.

It’s roughly equivalent to some random European company applying to run .eu to represent the geographic region of EU member states without the consent of the EU institutions themselves and then complaining when it’s told to take a walk.

But that doesn’t necessarily mean it will lose the IRP. In fact, I think it has a pretty good chance of winning.

GCCXI does not deserve to prove it should be given .gcc, it only needs to show that ICANN broke its own bylaws.

DotConnectAfrica, which was rejected by the GAC and then ICANN for pretty much the same unsubstantiated reasons — the GAC “veto” — won its IRP in 2015, with the panel finding that ICANN accepted the GAC’s unexplained advice without even rudimentary due diligence, violating its commitment to fairness.

It was particularly embarrassing for the GAC, whose then-chair admitted that the committee deliberately kept its advice vague and open to interpretation

While .africa is not exactly the same as .gcc (the former is officially a geographic string, the latter is not), GCCXI had DCA had their applications rejected based on the exact same piece of GAC advice.

It’s also similar to Amazon’s IRP fight for .amazon, which it won. That bid was also kicked out as a result of ICANN’s adoption of opaque GAC advice from the Beijing communique.

You’ve got to think GCCXI has a decent shot at a victory here, though if recent IRPs and general ICANN foot-dragging on accountability are any guide we won’t know for a couple years.

Afilias hints at more legal action over .web

As Verisign does everything but declare outright victory in last week’s Independent Review Process result, .web rival Afilias is now strongly hinting that its lawyers are not quite ready to retire.

John Kane, VP of Afilias (now Altanovo) said in a statement that Afilias is prepared to “take all actions necessary to protect our rights in this matter”.

This matter is of course the contested 2015 auction for the new gTLD .web, which was won by Nu Dot Co with $135 million of Verisign’s money.

Afilias thinks the winning bid should be voided because Verisign’s involvement had been kept a secret. The IRP panel stopped short of doing that, instead forcing ICANN’s board of directors to make a decision.

The earliest they’re likely to do this is at ICANN 71 later this month.

But with one IRP down, Afilias is now reminding ICANN that the board’s ultimate decision will also be “subject to review by an IRP Panel.”

So if ICANN decides to award .web to Verisign, Afilias could challenge it with another IRP, adding another two years to the go-live runway and another couple million dollars to the lawyers’ petty cash jar.

None of which should overly bother Verisign, of course, if one subscribes to the notion that its interest in .web is not in owning it but rather in preventing its competitors from owning it and aggressively marketing it against .com.

But Verisign also put out a statement reviewing the IRP panel’s decision last week, reiterating that it believes Afilias should be banned from the .web contest and banned from making any further complaints about Verisign’s bid.

While Afilias spent its press release focusing on trashing ICANN, Verisign instead focused its blog post on trashing Afilias.

According to Verisign, Afilias is no longer competent to run a registry (having sold those assets to Donuts) and is just looking for a payday by losing a private auction.

“Afilias no longer operates a registry business, and has neither the platform, organization, nor necessary consents from ICANN, to support one,” Verisign claims.

Afilias could of course outsource its would-be .web registry, as is fairly standard industry practice, either to Donuts or any other back-end operator.

.web ruling hands Afilias a chance, Verisign a problem, and ICANN its own ass on a plate

ICANN has lost yet another Independent Review Process case, and been handed a huge legal bill, after being found to have violated its own rules on transparency and fairness.

The decision in Afilias v ICANN has failed to definitively resolve the issue of whether the auction of the .web gTLD in 2016, won by a shell applicant called Nu Dot Co backed by $135 million of Verisign’s money, was legit.

ICANN’s now urging NDC, Afilias and other members of the .web contention set to resolve their beefs privately, which could lead to big-money pay-days for the losing auction bidders at Verisign’s expense.

For ICANN board and staff, the unanimous, three-person IRP panel decision is pretty damning, with the ruling saying the org “violated its commitment to make decisions by applying documented policies objectively and fairly”.

It finds that ICANN’s board shirked its duty to consider the propriety of the Verisign/NDC bid, allowing ICANN staff to get perilously close to signing a registry contract with an applicant that they knew may well have been in violation of the new gTLD program rules.

Despite being named the prevailing party, it’s not even close to a full win for Afilias.

The company had wanted the IRP panel to void the NDC/Verisign winning bid and award .web to itself, the second-highest bidder. But the panel did not do that, referring the decision instead back to ICANN.

As the loser, ICANN has been hit with a $1,198,493 bill to cover the cost of the case, which includes Afilias’ share of $479,458, along with another $450,000 to cover Afilas’ legal fees connected to an earlier emergency IRP request that ICANN “abusively” forced Afilias into.

The case came about due to a dispute about the .web auction, which was run by ICANN in July 2016.

Six of the seven .web applicants had been keen for the contention set to be settled privately, in an auction that would have seen the winning bid distributed evenly among the losing bidders.

But NDC, an application vehicle not known to be particularly well-funded, held out for a “last resort” auction, in which the winning bid would be deposited directly into ICANN’s coffers.

This raised suspicions that NDC had a secret sugar daddy, likely Verisign, that was covertly bankrolling its bid.

It was not known until after NDC won, with a $135 million bid, that these suspicions were correct. NDC and Verisign had a “Domain Acquisition Agreement” or DAA that would see NDC transfer its .web contract to Verisign in exchange for the money needed to win the auction (and presumably other considerations, though almost all references to the terms of the DAA have been redacted by ICANN throughout the IRP).

Afilias and fellow .web applicant Donuts both approached ICANN before and after the auction, complaining that the NDC/Verisign bid was bogus, in violation of program rules requiring applicants to notify ICANN if there’s any change of control of their applications, including agreements to transfer the gTLD post-contracting.

ICANN has never decided at the board level whether these claims have merit, the IRP panel found.

The board did hold a secret, off-the-books discussion about the complaints at its retreat November 3, 2016, and concluded, without any type of formal vote, that it should just keep its mouth shut, because Afilias and Donuts had already set the ball rolling on the accountability mechanisms that would ultimately lead to the IRP.

More than half the board was in attendance at this meeting, and discussions were led by ICANN’s top two lawyers, but the fact that it had even taken place was not disclosed until June last year, well over three and a half years after the fact.

Despite the fact that the board had made a conscious, if informal, choice not to decide whether the NDC/Verisign bid was legit, ICANN staff nevertheless went ahead and started contracting with NDC in June 2018, taking the .web contention set off its “on-hold” status.

Talks progressed to the point where, on June 14, ICANN had sent the .web contract to NDC, which immediately returned a signed copy, and all that remained was for ICANN to counter-sign the document for it to become binding.

ICANN VP Christine Willett approved the countersigning, but four days later Afilias initiated the Cooperative Engagement Process accountability mechanism, the contract was ripped up, and the contention set was placed back on hold.

“Thus, clearly, a registry agreement with NDC for .WEB could have been executed by ICANN’s Staff and come into force without the Board having pronounced on the propriety of the DAA under the Guidebook and Auction Rules,” the IRP panel wrote.

This disconnect between the board and the legal staff is at the core of the panel’s criticism of ICANN.

The board had decided that Afilias’ claim that NDC had violated new gTLD program rules was worthy of consideration and had informally agreed to defer making a decision, but the staff had nevertheless gone ahead with contracting with a potentially bogus applicant, the panel found.

In the opinion of the Panel, there is an inherent contradiction between proceeding with the delegation of .WEB to NDC, as the Respondent [ICANN] was prepared to do in June 2018, and recognizing that issues raised in connection with NDC’s arrangements with Verisign are serious, deserving of the Respondent’s consideration, and remain to be addressed by the Respondent and its Board, as was determined by the Board in November 2016. A necessary implication of the Respondent’s decision to proceed with the delegation of .WEB to NDC in June 2018 was some implicit finding that NDC was not in breach of the New gTLD Program Rules and, by way of consequence, the implicit rejection of the Claimant’s [Afilias’] allegations of non-compliance with the Guidebook and Auction Rules. This is difficult to reconcile with the submission that “ICANN has taken no position onw hether NDC violated the Guidebook”.

The upshot of the panel’s ruling is to throw the issue back to ICANN, requiring the board to decide once and for all whether Verisign’s auction gambit was kosher.

If you’ll excuse the crude metaphor, ICANN’s board has been told to shit or get off the pot:

The evidence in the present case shows that the Respondent, to this day, while acknowledging that the questions raised as to the propriety of NDC’s and Verisign’s conduct are legitimate, serious, and deserving of its careful attention, has nevertheless failed to address them. Moreover, the Respondent has adopted contradictory positions, including in these proceedings, that at least in appearance undermine the impartiality of its processes.

…

[The panel r]ecommends that the Respondent stay any and all action or decision that would further the delegation of the .WEB gTLD until such time as the Respondent’s Board has considered the opinion of the Panel in this Final Decision, and, in particular (a) considered and pronounced upon the question of whether the DAA complied with the New gTLD Program Rules following the Claimant’s complaints that it violated the Guidebook and Auction Rules and, as the case may be, (b) determined whether by reason of any violation of the Guidebook and Auction Rules, NDC’s application for .WEB should be rejected and its bids at the auction disqualified;

At the same time as the decision was published last night — shortly after midnight UTC and therefore helpfully too late to make it into today’s edition of ICANN’s godawful new email subscriptions feature — ICANN issued a statement on the outcome.

“In its Final Declaration, the IRP panel ruled that the ICANN Board, and not an IRP panel, should decide which applicant should become the registry operator for .WEB,” CEO Göran Marby said.

“The ICANN Board will consider the Final Declaration as soon as feasible, within the timeframe prescribed in the Bylaws, and remains hopeful that the relevant .WEB applicants will continue to seek alternatives to resolve the dispute between them raised during the IRP,” the statement concludes.

That should be of concern to Verisign, as any non-ICANN resolution of the .web battle is inevitably going to involve Verisign money flowing to its competitors.

But my first instinct strikes me that this a is a low-probability outcome.

It seems to me much more likely at first glance that ICANN will rule the NDC/Verisign ploy legitimate and proceed to contracting again.

For it to declare that using a front organization to bid for a gTLD is against the rules would raise questions about other applications that employed more or less the same tactic, such as Automattic’s successful bid, via an intermediary, for .blog, and possibly the 100-ish applications Donuts and Rightside cooperated on.

The ICANN bylaws say the board has to consider the IRP’s findings at its next meeting, for which there’s currently no published date, where feasible.

I should note that, while Donuts acquired Afilias last December, the deal did not include its .web application, which is why both the panel’s decision and this article refer to “Afilias” throughout.

Verisign hopeful after decision reached in .web gTLD case

The fate of .web has been decided, over 20 years after it was first applied for, and Verisign thinks it might emerge triumphant.

The company said last night that the ICANN Independent Review Panel handling the case of Afilias v ICANN reached a decision May 20 and delivered it to Verisign the following day.

Verisign says the panel “dismissed Afilias’ claims for relief seeking to invalidate the .web auction and to award the .web TLD to Afilias, concluding that such issues were beyond its jurisdiction.”

Sounds good for Verisign so far. Afilias wanted its $135 million bid for .web, submitted via an intermediary called Nu Dot Co, thrown out due to claims that ICANN violated its own bylaws by not sufficiently vetting the bidder.

But Verisign goes on to say “the panel’s ruling recommends that ICANN’s Board of Directors consider the objections made about the .web auction and then make a decision on the delegation of .web”.

It adds that the panel found that ICANN violated its fairness and transparency commitments:

With respect to ICANN, the ruling finds that certain actions and/or inaction by ICANN in response to Afilias’ objections violated aspects of ICANN’s bylaws related to transparency and fairness. These findings are particular to ICANN’s actions and not conduct by Verisign. Verisign anticipates that ICANN’s Board will review the panel’s ruling and proceed consistent with the panel’s recommendation to consider the objections and make a decision on the delegation of .web.

Based on Verisign’s statements, it seems that ICANN lost, but Afilias didn’t win.

The revelation was buried in a Securities and Exchange Commission filing on an unrelated financial matter last night. Hat tip to @jintlaw for spotting and tweeting about it.

It’s the most eagerly anticipated IRP ruling since 2011’s .xxx case, but in stark contrast to Rod “let’s draft this tweet” Beckstrom-era ICANN, where the decision was posted in a matter of hours, the 2021 org has not yet posted the panel’s findings or made a public statement acknowledging the ruling.

Verisign says it intends to “vigorously pursue” .web, but “can provide no assurance” as to which way the ICANN board of directors will swing.