ICANN’s new gTLD fund at $352.3m

ICANN had $352.3 million in its new gTLD program bank account as of October 13, according to notes from a recent board meeting.
The numbers suggest that ICANN had only spent about $6 million on the program since the application window closed at the end of May.
With 1,930 applications at $186,000 a pop, excluding the seven refunds, ICANN should have grossed about $358 million.
The money is being held in a non-interest-bearing account, partly due to ICANN’s insistence that the program is not an exercise in self-enrichment.
Notes from the October 13 Board Finance Committee meeting also reveal that ICANN plans to revise its 2013 budget to account for the accelerated gTLD timetable.
The current budget was prepared before Digital Archery was scrapped and ICANN expected to process its applications in batches over two years. It now expects one batch lasting one year.

TLDH expects gTLD auctions in second half of 2013

While some new gTLD portfolio applicants are trying to get their contention sets resolved as quickly as possible, Top Level Domain Holdings reckons auctions won’t happen until the second half of 2013.
In a trading update this week, the company also said that it expects to start seeing revenue from its first successful new gTLD applications next year, with contested bids producing revenue in 2014.
TLDH said in a statement:

Provided that the ICANN proposed timetable is broadly adhered to, the Board of TLDH believes that a number of the Group’s 17 uncontested gTLD applications on its own behalf and the 5 uncontested client gTLD applications are likely to be revenue producing in 2013, with the balance becoming so in the first half of 2014. TLDH has commenced discussions with the leading worldwide registrars, premium name specialists, and secondary market platforms for distribution of these gTLD names.
TLDH is also working with other gTLD applicant groups to define formats for private auctions and other name resolution arrangements in respect of the contested names that TLDH has applied for. The Board expects that these auctions are likely to happen in the second half of 2013.

As we reported last week, fellow portfolio applicant Donuts approached competing applicants at the Toronto ICANN meeting last month with a proposal for running private auctions in early 2013.
The idea was not warmly received by many, we hear, and TLDH evidently does not agree.
The company also revealed this week that it plans to move its headquarters to Dublin, Ireland, and expects to start hiring more staff and directors in the near future.
Clark Landry, who has been a non-executive director of TLDH for several years, has left the board, TLDH announced.
Caspar von Veltheim, who has been managing some of TLDH’s geographic gTLD bids in Europe, has joined the board as an executive director, the company added.

ICANN looking for new gTLD testing provider on very tight deadline

ICANN is seeking one or more pre-delegation testing providers for its new gTLD program on a very ambitious timetable.
An RFP issued yesterday calls for a company that can scratch-build a testing suite to put new gTLD applicants through the ringer before they go live, and have it up and running by March 25, 2013.
Pre-delegation testing is the last stage of the new gTLD program’s approval process.
Some new gTLD applicants have recently called on ICANN to begin testing as soon as possible — before even Initial Evaluation has finished — in order to speed up time to market.
The Applicant Guidebook suggests that ICANN itself would be doing the testing, and some applicants had made that assumption, but that’s clearly not the case.
The RFP spells out exactly what is required of the testing providers.
First, they’re expected to build bespoke software to run the tests.
In addition to load-testing and verifying the registry’s compliance with standards such as EPP, DNSSEC and Whois, it also needs a custom-made user interface for applicants and back-end integration with ICANN’s wobbly TLD Application System.
ICANN also wants to be able to open-source the software, which seems to rule out any off-the-shelf testing suites.
RFP respondents also need to be able test 20 applicants’ back-ends per week — potentially scaling up to 100 per week — as soon as ICANN starts signing registry agreements next year.
ICANN does not expect to announce the winning provider(s) until December 5. The deadline for responses is November 20.
In short, it looks like a challenging project on a very tight deadline.
I wonder how much institutional knowledge there is out there of, say, DNSSEC, in companies that are not also involved in new gTLD applications as either applicant or back-end.
The pool of possible RFP respondents is likely very small indeed.
The ability to run tests on the testing suite itself may also be limited by the timetable and the possible shortage of guinea-pig registry back-ends.
Why ICANN has waited until this very late date to issue the RFP is a real head-scratcher.
ICANN is offering a 24-month contract with a possible 12-month extension. The RFP can be downloaded here.

Demand Media: ignore our Republican gTLD rivals

Demand Media has asked ICANN to “ignore” complaints from the US Republican party about its application for the .republican gTLD.
Last month, the Republican National Committee and the Republican State Leadership Committee submitted comments to ICANN arguing that Demand would be an unsuitable custodian for the gTLD.
Demand is best known for its “unofficial, mediocre and sometimes incorrect” content farms, such as eHow, the letter (pdf) said.
The company should not be allowed to run .republican because it implies endorsement by the Republican party, or some kind of community backing for a non-Community application, the letter said.
This week, Demand has responded, saying it’s nothing but competitive posturing, given that the RSLC has applied for .gop (for “Grand Old Party”, a nickname for the Republicans):
A letter to ICANN from Demand subsidiary and .republican applicant United TLD Holdco, says:

Because the RSLC and RNC have applied for .GOP, an arguably competing string, it is easy to see through these arguments and ignore them as nothing more than an attempt to undermine the credibility of United TLD in order to gain a competitive advantage.
…
By their own admission, RSCL and RNC agree that “.REPUBLICAN has the potential to be a very powerful gTLD.” It is natural then, that they would attempt to discredit United TLD in the hope of eliminating competition for their own string.

The thrust of Demand’s rebuttal is that Republicanism is not an exclusively American movement — other parties around the world use the name — and that it also has generic meaning.
It further argues that the quality of the content Demand provides elsewhere is irrelevant, because the company plans to sell .republican domain names, not produce content there.
Demand has also applied for .democrat, the other major US political party, but did not receive any complaints from the Democratic party during the designated ICANN comment period.

Trademark protection stalemate follows ICANN 45

Trademark interests and new gTLD applicants are at odds about trademark protection — again — following the ICANN meeting in Toronto two weeks ago.
In a welcomed, not-before-time show of cooperation, the Intellectual Property Constituency and Business Constituency submitted to ICANN a bulleted list of requests for improved rights protection mechanisms.
The list is, for the most part, not particularly egregious — calling for a permanent Trademark Claims service and a Uniform Rapid Suspension service that meets its cost goals, for example.
But the New TLD Applicants Group (NTAG), an observer component of the Registries Constituency, has dismissed it out of hand, anyway, saying that the time for policy changes is over.
Here’s the IPC/BC list:

1. Extend Sunrise Launch Period from 30 to 60 days with a standardized process.
2. Extend the TMCH and Claims Notices for an indefinite period; ensure the process is easy to use, secure, and stable.
3. Complete the URS as a low cost alternative and improve its usefulness – if necessary, ICANN could underwrite for an initial period.
4. Implement a mechanism for trademark owners to prevent second-level registration of their marks (exact matches, plus character strings previously determined to have been abusively registered or used) across all registries, upon payment of a reasonable fee, with appropriate safeguards for registrants with a legitimate right or interest.
5. Validate contact information for registrants in WHOIS.
6. All registrars active in new gTLD registrations must adhere to an amended RAA for all gTLD registrations they sponsor.
7. Enforce compliance of all registry commitments for Standard applications.
8. Expand TM Claims service to cover at least strings previously found to have been abusively registered or used.

Most of these requests are not entirely new, and some have been rejected by the ICANN policy-development process and its board of directors before.
The NTAG points out as much in a letter to ICANN management last week, which says that new gTLD applicants paid their application fees based on promises in the Applicant Guidebook, which should not be changed.

Many of the BC & IPC proposed policy changes have been considered and rejected in no fewer than four different processes and numerous prior Board decisions. Indeed, many go far beyond the recommendations of the IRT, which was comprised almost exclusively of trademark attorneys. These last-minute policy recommendations amount to just another bite of the same apple that already has been bitten down to its core.
The new gTLD policy development process is over. Applicants relied on the policies in the final Guidebook in making business decisions on whether to apply. At the time that ICANN accepted applications and fees from applicants, ICANN and applicants entered into binding agreements. ICANN should not change these agreements unilaterally without extraordinary reason and especially not when it would materially harm the counterparties to the agreements.

The Applicant Guidebook, as it happens, asks applicants to explicitly acknowledge that ICANN may make “reasonable
updates and changes” to the rules, even after the application has been submitted.
But if applicants reckon changes would create a “material hardship”, ICANN is obliged to “work with Applicant in good faith to attempt to make reasonable accommodations in order to mitigate any negative consequences”

Here’s how Donuts wants to resolve its 158 new gTLD contention fights

Donuts is backing a private auction model designed and managed by Cramton Associates as its preferred solution for resolving its 158 new gTLD contention sets.
The proposals, spelled out by auction design expert Peter Cramton during private sessions with new gTLD applicants, caused a bit of a buzz — not all of it positive — at the ICANN meeting in Toronto last week.
But Donuts co-founder Jon Nevett told DI today that Cramton has addressed rivals’ concerns and that Donuts wants to handle as many of its contention sets as possible via private auction.
The idea is that private auctions will be faster and cheaper for applicants than the process set out by ICANN as the “last resort” method for resolving contention sets.
In the ICANN model, all of the proceeds of the auction would go to ICANN, to be distributed to worthy causes at a later date. But with a private auction, the winning bidder pays the losers.
This makes it more attractive to applicants, according to Donuts.
“The cost of losing an ICANN auction is greater than the cost of losing a private auction,” Nevett said. “If you lose an ICANN auction you get nothing, zero, you lose your asset.”
But with private auctions, “it doesn’t hurt as much to lose, so the theory is the second-place guys won’t stretch as much,” he said.
Cramton is a professor of economics at the University of Maryland. A long-time auction specialist, he’s been involved in designing processes for selling off wireless spectrum around the world.
For new gTLDs, Cramton proposes an “ascending clock” auction. At each stage, the price is increased by the auctioneer and the bidders/sellers can either commit to pay that amount or drop out.
The last man standing wins the gTLD, paying the amount that the second-highest bidder was willing to pay.
The money would be divided equally between all the losing applicants. According to Cramton, the advantage over proportional distribution is that it does not encourage applicants to over-bid, keeping costs down.
Cramton’s original plan, which left some applicants scratching their heads last week, was to run the auctions in the first quarter of 2013, before ICANN announces the results of Initial Evaluation.
That would mean that losing bidders would get a 70% refund of their ICANN application fee, which may be an attractive percentage in the case of low-value strings.
But it also means that an applicant could win an auction and later discover its application has been rejected. The other applicants would have withdrawn, so the gTLD would just disappear into the ether.
Judging by a series of videos shot last week and published on Cramton’s YouTube account, many applicants are in favor of running the auctions after IE results have been announced.
Another complaint expressed by Donuts’ competitors last week is Cramton’s “all or nothing” approach, in which Donuts’ rivals would have to commit to use the auctions for their entire portfolio of applications.
According to Nevett, that idea is no longer on the table.
“In the beginning he was discussing that it would have to be all your TLDs or none, and I think a lot of applicants told him that was unacceptable, so he changed his view,” he said.
The idea now is that the auctions would proceed on a TLD-by-TLD basis.
Given that winning bidders are giving money to their competitors, another concern is the ordering of the auctions. You don’t necessarily want to give your rivals a big wedge of cash they can use to out-bid you on the next lot.
The preferred solution here appears to be a simultaneous auction, with all the participating contention sets being resolved at the same time.
There was also a deal of suspicion in Toronto about whether Cramton would be biased towards Donuts, given that Donuts is responsible for finding Peter Cramton and introducing him to the gTLD program.
But Nevett said that Donuts has not contracted with Cramton. Peter Cramton showed up in Toronto on his own dime and has not required an up-front payment from Donuts, Nevett said.
“Every applicant has a veto on whether to participate, and it won’t happen unless every applicant wants to do it,” Nevett said. “Our incentive is to have an auction provider who is attractive to every applicant.”
“Our goal is to get as many applicants to participate in a private auction, so we need the auction to be designed in a way that is simple, fair and inclusive,” he said.
But there’s no denying that Donuts has a greater incentive than most to have a consolidated auction. By its own admission, it’s an eight-person operation without the manpower to negotiate 158 contention sets.
Cramton’s materials from last week’s Toronto sessions can be found at applicantauction.com or here.

Soon Verisign could sell .com domains direct

With little fanfare, ICANN last week formally approved new rules that could allow incumbent registry operators to own registrars that sell domains in their own gTLDs.
The policy would give the likes of Verisign, Neustar and Afilias the right to become affiliated with registrars that sell .com, .biz and .info names respectively.
These registries would have to sign up to the standard new gTLD registry agreement first, or submit to contract renegotiation in order to drop their current cross-ownership bans.
In either case, they would become bound by the new registry Code of Conduct, preventing them from offering preferential terms to their affiliated registrars.
The new rule came into effect following the ICANN board meeting on Thursday, at which this resolution was passed.
ICANN had already dropped cross-ownership restrictions for new gTLD registry operators, but held back from bringing in the same rules for incumbents due to concerns from competition authorities.
After exchanges of letters with the European Commission and US Department of Commerce, these concerns appear to have dried up, however. ICANN said in its resolution:

it appears that there is no longer any reason against extending the approved process to existing registry operators for their own TLDs.
This action will be an advantage for the ICANN community, as it will provide the opportunity for treating all registry operators equally with respect to cross-ownership restrictions.

Registries would have their requests for contract changes referred to competition authorities for comment before ICANN would approve them.
Based on previous comments, Verisign might have a struggle with respect to .com but the other incumbents might have an easier time renegotiating their deals.
Neustar has been particularly outspoken in its desire to get rid of the contractual language preventing it owning a .biz registrar, so we might see that company first to get into talks.
Both .biz and .info contracts are up for renewal before the end of the year.

Dengate Thrush quits TLDH

Peter Dengate Thrush, executive chairman of new gTLD portfolio applicant Top Level Domain Holdings, has decided to quit not much more than a year into the job.
According to a press release, Dengate Thrush will leave the company in January 2013, to be replaced by original chair Fred Krueger.
No reason for the departure was given.
When he joined TLDH, his share option package envisaged him sticking around until at least July 2014.
Dengate Thrush will continue to advise some of TLDH’s new gTLD applicant clients after he leaves, according to the press release.
His decision to join TLDH in July 2011, just a few weeks after helping to push through approval of the new gTLD program as ICANN’s chairman, was a nodal point in ICANN’s recent evolution.
It led directly to strict conflict of interest rules being put in place on ICANN’s board, which are now being criticized by some contracted parties for removing vital expertise from the board.
It also gave plenty of ammunition to those who criticize ICANN for being too focused on enriching its insiders.
TLDH has applied for 70 gTLDs, and its Minds + Machines subsidiary is the named back-end provider for several more.

Original .web gTLD applicant sues ICANN

Image Online Design, which unsuccessfully applied for the .web gTLD all the way back in 2000, has sued ICANN, alleging trademark infringement and breach of contract.
IOD, which says it has over 20,000 .web domains under management in an alternate root, says ICANN never officially rejected its .web bid, and that it should not have allowed other companies to apply for it.
It’s looking for an injunction preventing ICANN awarding .web to any other company, as well as seeking ICANN’s “profits” resulting from the alleged infringement of its mark.
There are seven .web applicants in the current round, but IOD is not among them.
The company paid $50,000 for its application in 2000, but it’s not happy with the $86,000 discount ICANN offered 2000-round applicants on their $185,000 fees if they wanted to resubmit their applications.
The IOD complaint claims:

Allowing other entities to file applications for a .web TLD while IOD’s .WEB TLD application was still pending is improper, unlawful and inequitable.

The complaint cites the November 2000 ICANN meeting in Marina Del Rey, during which the first proof-of-concept gTLDs were approved by ICANN’s board of directors.
It notes that then-chair Vint Cerf steered the board away from approving .web applications filed by Afilias and others because IOD was already operating .web in an alternate root at the time.
You can watch a video of that meeting here.
The complaint also alleges tenuous conflicts of interest between two .web applicants (Afilias and Google) and members of ICANN’s board of directors (current chair and vice-chair Steve Crocker and Bruce Tonkin in the case of Afilias, and long-gone chair Vint Cerf in the case of Google).
The suit comes just a few days after IOD’s fellow 2000 applicant and alternate root player, Name.Space, sued ICANN on similar grounds, trying to prevent 189 gTLDs being approved.
Here’s the IOD complaint.

Company files for injunction against 189 new gTLDs

Alternate root player Name.Space has sued ICANN for trademark infringement and anti-competitive behavior, saying “insiders” have conspired to keep it out of the new gTLD program.
If successful, the suit would prevent dozens of new gTLD applicants from having their applications approved.
The lawsuit, filed in California this week, follows a warning the company fired at ICANN this March.
While only ICANN is named as a defendant, the suit alleges that the new gTLD program was crafted by and is dominated by “ICANN insiders” and “industry titans”.
It wants an injunction preventing ICANN delegating any of the 189 gTLD strings that it claims it has rights to.
It also fingers several current and former ICANN directors, including current and former chairs Steve Crocker and Peter Dengate Thrush, over their alleged conflicts of interest.
Name.Space has been operating 482 diverse TLDs — such as .news, .sucks, and .mail — in a lightly used alternate root system since 1996.
Most people can’t access these zones and are unaware that they exist.
The company applied to have 118 of these strings added to the root in ICANN’s “proof of concept” gTLD expansion in 2000, when the application fee was $50,000, but was unsuccessful.
Now, the company claims the new gTLD program is “an attack on name.space’s business model and a mean by which to create and maintain market power in the TLD markets”.
The complaint (pdf) states:

Rather than adopting a procedure to account for the pending 2000 Application and facilitate the expansion of TLD providers in the DNS, ICANN has adopted a procedure so complex and expensive that it once again effectively prohibited newcomers from competing. It instead has permitted participation solely by ICANN insiders and industry titans.

If it had applied for all 118 again in this year’s round, it would have cost almost $22 million (though it would have qualified for an $83,000 discount on a single bid).
Name.Space is asking for damages and an injunction preventing ICANN from approving 189 gTLDs that match those it currently operates in its alternate root.
The full list of affected applications is attached to the complaint.