.web fight back in “court”

ICANN is heading back to the quasi-courtroom of its Independent Review Process, after .web auction runner-up Altanovo Domains filed its second IRP complaint about the controversy-ridden gTLD.

I first reported that the complaint had been filed back in July, but it was not until last Thursday that ICANN published the document, along with thousands of pages of exhibits and its own response, almost all thoroughly redacted to remove references to the one contract at the heart of the mess.

Now-independent Altanovo, which was part of Afilias before that company was acquired by Donuts, claims that ICANN broke its bylaws commitments to apply its policies equitably to everyone.

The company remains incredibly cheesed off that it lost the 2016 auction for .web, which saw a company called Nu Dot Co pay ICANN $135 million for the domain, at a time when it was secretly backed by Verisign.

Altanovo claims that NDC broke the terms of ICANN’s Applicant Guidebook and the rules of the auction by declining to disclose the existence of the Domain Acquisition Agreement it had signed with Verisign.

That deal saw Verisign bankroll and dictate the terms of NDC’s handling of the auction; in exchange, NDC would transfer .web to Verisign shortly after signing its ICANN registry agreement.

Altanovo has already won one IRP about this. The panel in the first case ruled in May 2021 that ICANN broke its bylaws because its board did not make a decision on whether NDC’s behavior was kosher.

As a result of that ruling, the board spent over a year mulling and eventually decided this April that, no, NDC didn’t break the rules. It’s that decision that Altanovo is challenging now. The complaint says:

NDC had no independent business plan for .WEB that it intended to implement. Its sole purpose in applying for .WEB was to obtain it for the oldest of the incumbent players, not to market .WEB itself in any way or to compete in the market… No one in the Internet Community, including the other .WEB Contention Set members, had any clue that, as of August 2015, they were competing with Verisign and not NDC.

ICANN’s response to the complaint states that its board was exercising its “business judgement”, which must be deferred to, and that Altanovo’s claims about bylaws breaches merely amount to differences of interpretation.

Speaking to analysts on Verisign’s third-quarter earnings call last week, company CEO Jim Bidzos quoted from the conclusion of ICANN’s IRP response and added: “Altanovo’s IRP request should be denied. We agree with ICANN.”

“We continue to believe that this IRP filed by Altanovo and its backers has been filed for the purpose of delay,” he said.

Altanovo reckons that Verisign and ICANN have been colluding on their legal responses to the .web and that certainly seems likely in terms of the redactions ICANN has made to the complaint and response published last week.

All quotations of the Verisign-NDC DAA are redacted in the Altanovo complaint are redacted as “third party confidential”, presumably at Verisign’s request; in the ICANN response the single DAA quote remains unredacted.

.web hit by second ICANN complaint

Altanovo Domains, the Afilias spin-off that is fighting Verisign for control of the .web gTLD, has filed a second Independent Review Process complaint with ICANN.

The filing could add years to Verisign’s launch runway for .web, which it won via secret proxy Nu Dot Co at auction in 2016.

ICANN has not yet published the IRP complaint — presumably it’s being redacted to remove commercially confidential information — but documentation shows Altanovo has “filed” an IRP.

Altanovo and ICANN has been in a Cooperative Engagement Process — a form of negotiation designed to avoid an IRP — since May 3, but a document published July 19 shows that the CEP is now over.

It was quite a brisk process. Other CEPs have been known to last many months.

When the CEP first emerged in May, Verisign was pretty brutal in its reaction, accusing Altanovo of “delay for delay’s sake”.

As the second-place bidder, Altanovo could stand to take control of .web if Verisign’s bid was found to be outside the rules. That was the focus of the first IRP case, which lasted almost four years.

The first IRP panel ruled that ICANN broke its bylaws by failing to consider whether Verisign secretly bidding via NDC broke the new gTLD program rules. But ICANN a couple months ago finally bit the bullet and ruled that Verisign did no wrong.

ICANN decided not to rule on whether Altanovo, then Afilias, broke the auction rules by communicating with NDC during a comms blackout period.

The specific allegations in the new IRP are not yet known. The IRP is only for complaints about ICANN’s actions or inaction breaking its own bylaws and other foundational documents.

.web delay likely after Verisign rival files ICANN appeal

The .web gTLD appears unlikely to see the light of day any time soon, after the Afilias spin-off that came second to Verisign in the $135 million auction in 2016 kicked off another appeals process.

Altanovo, which is made up of bits of Afilias left over when Identity Digital acquired the company, has asked ICANN to enter a Cooperative Engagement Process, according to ICANN’s records.

The CEP is a form of mediation companies can force ICANN into when they have beef. It’s designed to avoid the relative expense of a full-on Independent Review Process. They usually result in an IRP anyway.

Altanovo made its request the same day ICANN announced that its board of directors had decided to take .web off hold and resume registry contract negotiations with Verisign, following Altanovo’s original, unsuccessful IRP.

Verisign yesterday said the move amounted to an “abuse of process” and “baseless procedural maneuvering”, likely to lead to “delay for delay’s sake”.

IRPs typically last years and cost many hundreds of thousands of dollars in panel fees, not counting each party’s lawyer fees.

Altanovo believes that Verisign broke ICANN’s new gTLD program rules when it bid for .web via a secret intermediary. Verisign has countered that its rival, then Afilias, broke the rules by trying to negotiate a private deal during the auction’s “black out” period.

Verisign “pleased” at ICANN’s .web call

Verisign said it is “pleased” that ICANN has decided it should be awarded the .web gTLD, but hinted that it might not launch this year.

“We now look forward to NDC’s execution of the .web Registry Agreement and submission to ICANN of the request for assignment of the .web Registry Agreement to Verisign,” the company said in a statement this afternoon.

It follows the news this morning that ICANN’s board of directors decided that the company did not break any rules when it won the auction for .web via a secret intermediary company, Nu Dot Co.

Verisign reiterated that its current financial guidance for the year does not include any impact from .web.

Verisign WILL get .web, ICANN rules

Verisign did nothing wrong when it won the $135 million .web gTLD auction via a secret intermediary, ICANN’s board of directors has decided.

The board voted at the weekend to declare that Nu Dot Co, the shell company that applied for .web “did not violate the Guidebook or the Auction Rules” when it signed a secret side-deal that would see Verisign fund its bid in exchange for handing over the registry contract after it is signed.

The board has told ICANN management to continue to process NDC’s application, which has been tied up in legal red tape since the auction in 2016.

ICANN did not rule on Verisign’s claims that second-place bidder Afilias broke the rules when executives sent text messages trying to resolve the contention set during a “black out” period immediately prior to the auction.

The ruling means that, absent any further legal action, NDC can soon sign its Registry Agreement and attempt to transfer it to Verisign, a procedure that is not often controversial when M&A takes place.

It could mean .web, which has been fiercely contested for over 20 years, launches this year.

.web gTLD was first applied for in 2000. Afilias, Neustar (then Neulevel) and others viewed it as the best probable competitor for .com and wanted that sweet, sweet action.

But ICANN instead awarded them .info and .biz respectively, in part because another applicant, Image Online Design, was already running .web in an alternate root.

There were seven applicants in the 2012 round, but attempts at privately resolving the contention set were resisted by NDC, leading to suspicions that it was being secretly bankrolled by a much larger non-applicant company.

That turned out to be true when Verisign fessed up after the auction that it was funding NDC’s $135 million winning bid.

Because Verisign has market power, ICANN referred the deal to US competition regulators, the Department of Justice, which gave the all-clear in 2018.

Runner-up Afilias immediately set the ball rolling to file an Independent Review Process complaint with ICANN, which it did in 2018, claiming ICANN broke its bylaws by failing to establish that Verisign was NDC’s sugar daddy before the auction.

The Afilias .web application is currently owned by Altanovo, the company formed of all the bits of Afilias that Identity Digital (then Donuts) didn’t want when it acquired Afilias.

The IRP panel ruled for Afilias, saying ICANN should have at the very least made a decision on whether the deal was kosher before starting to contract with NDC. That ruling became final at the end of 2021.

It’s taken ICANN 16 months to actually make its decision.

And its rationale? Hard to say with any degree of certainty.

Both sides’ arguments rely heavily on the text of the Domain Acquisition Agreement between Verisign and NDC, and ICANN has redacted all references to that document’s contents (presumably at Verisign’s demand) in its resolution and accompanying rationale.

The board said:

NDC remains the applicant and, if NDC enters into a Registry Agreement with ICANN, NDC will become the Registry Operator for .WEB. Whether or not NDC then attempts to assign the Registry Agreement to Verisign is, at this point, an event that has not occurred and conceivably may not occur depending on the circumstances at the time. And if NDC subsequently decides to request such an assignment, there are processes in place to review such a request, including the need for ICANN’s approval of that request. Such an assignment does not equate to a “circumvention” of the application process but, rather, is a necessary component for servicing Registry Operators and allowing the continued operation of gTLDs.

The board additionally notes that the process of sorting all this out took years and millions of dollars of legal fees.

Verisign and Afilias spar over .web delays

Afilias and Verisign are at odds over a further delay to the resolution of the .web gTLD dispute.

Afilias, aka Altanovo Domains, says its lawyers are too busy to meet ICANN’s deadline for arguments about whether either company broke the rules in the 2016 auction of .web, but Verisign thinks they have plenty of time,

ICANN’s Board Accountability Mechanisms Committee had set a deadline of July 15 for both applicants to submit a document explaining why they believe the other broke the rules and should have their auction bids voided.

But Afilias’ lawyers say they “have longstanding international travel and hearing commitments in June and July that cannot be rescheduled” and want an extension to July 29.

Just two weeks seems like no big deal in a contest that has been running for literally a decade, but Verisign is opposing it anyway, according to emails Afilias submitted to ICANN (pdf).

“ICANN provided the parties with a generous briefing schedule sufficient to accommodate counsel’s other commitments. For this reason, Verisign and NDC do not support Altanovo’s current request for a further extension,” a Verisign lawyer wrote.

Verisign, which won the auction via its proxy, Nu Dot Co, believes Afilias broke a communications blackout period before the auction by texting NDC to negotiate a deal. Afilias believes NDC broke the rules by not disclosing Verisign’s involvement.

The BAMC’s job, following the outcome of an Independent Review Process case last year, is to decide whether either of these claims is legit and settle who won the auction once and for all.

ICANN kicks the can on .web yet again

Did Verisign cheat when it bought .web for $135 million in 2016? ICANN will make its mind up one day, but not today.

The ICANN board of directors has asked the three parties in the contested new gTLD auction for an info dump, so it can decide, presumably before the end of the year, whether to bar the top two bids for breaking the rules.

The Board Accountability Mechanisms Committee has written to Verisign, Nu Dot Co (the proxy Verisign used to hide its bid) and Afilias (aka Altanovo, the second-place bidder) to ask them to condense their last six years of claims and counter-claims into two 75-page documents.

Afilias reckons Verisign and NDC broke the rules by not disclosing that the former was secretly bankrolling the latter’s winning bid. It wants the bid invalidated, allowing Afilias to take over .web for a cheaper price.

Verisign has counter-claimed that Afilias should be disqualified for allegedly privately communicating with NDC during a pre-auction comms blackout period. It’s published screenshots of text messages it says prove this took place.

The Independent Review Process complaint against ICANN technically resulted in a win for Afilias, with the IRP panel ruling that ICANN broke its bylaws by not making a decision on Verisign’s alleged rule-breaking back in 2016.

That decision was reached in December, and ICANN has been faffing around pointedly not making a decision ever since.

Now, BAMC wants the parties to present their final pleadings in this ongoing drama.

It wants both side to “provide a comprehensive written summary of their claims and the materials supporting their claims” in order “to ensure that the BAMC is reviewing a complete picture of the parties’ positions”.

I don’t think there’s anything untoward about this — BAMC is basically just doing what the IRP panel told it to, albeit it in a roundabout way — but it is a little surprising that it thinks there isn’t enough information about their complaints in the public domain already.

As well as three years of legal filings, there are extensive transcripts of seven days of hearings that took place in 2020. ICANN will have access to the unredacted versions, too, which include details of the Verisign-NDC deal that the rest of us aren’t allowed to look at.

Maybe there’s just too much information to wade through.

Under the BAMC’s new process, the parties have until July 15 to present their cases, then another month to rebut their opponents with a further 30-page document.

Assuming the subsequent decision proceeds at ICANN Speed (which is to say, glacial) I don’t think we can reasonably expect a decision before the fourth quarter.

After 10 months, ICANN board “promptly” publishes its own minutes

ICANN’s board of directors has approved a huge batch of its own meeting minutes, covering the period from July 15 last year to March 10 this year, raising questions about its commitment to timely transparency.

The board approved the minutes of its last 14 full-board meetings in one huge batch of 14 separate resolutions at its May 12 meeting, and they’ve all now been published on the ICANN web site, along with redacted briefing papers for said meetings.

The period includes decisions on planning for the next new gTLD round and Whois reform, the legal fight with Afilias over the contested .web gTLD, and apparently divisive discussions about the timing of a post-pandemic return to face-to-face meetings.

No explanation has been given for why it’s taken so long for these documents to appear, the timing of which appears to go against ICANN’s bylaws, which state that minutes are supposed to be approved and published “promptly”:

All minutes of meetings of the Board, the Advisory Committees and Supporting Organizations (and any councils thereof) shall be approved promptly by the originating body and provided to the ICANN Secretary (“Secretary”) for posting on the Website.

ICANN almost always published its board’s resolutions within a few days of approval, and a preliminary report — which also includes the number of votes yay or nay, without naming the directors — within a couple of weeks.

The minutes, which are published only after the board rubber-stamps them, typically include a further vote breakdown and a little bit of color on how the discussion went down.

In the newly published batch, some of the documents are somewhat illuminating, while others barely nudge the dimmer switch.

For example, the preliminary report for the July 15, 2021 meeting, published 11 days later, notes that three of the 16 voting directors rebelled on a resolution about making the October annual general meeting in Seattle a virtual-only event, but the just-published minutes name those directors and flesh out some of their reasons for dissenting.

It turns out the directors had a “robust discussion”, with some arguing that it would be safe to go ahead with a “hybrid” meeting comprising both face-to-face and remote participation options.

The dissenting directors were Ron da Silva, Avri Doria, and Ihab Osman, it turns out. Osman and da Silva had voted a similar way a year earlier.

Directors could not reasonably have been expected to know about the impact the Delta variant of Covid-19 would have on world health in the latter half of the year. It had been identified and named by scientists but had yet to spread to the extent it was making headlines.

But they were aware of concerns from the Asia-Pacific members of the community, worried that a hybrid meeting in Seattle would disadvantage those unable to attend due to pandemic travel restrictions. This appears to have been raised during the discussion:

Some Board members expressed desire to see more work done to have ICANN72 as a hybrid meeting. They noted that Seattle has protocols in place to ensure the health and safety of ICANN staff and the community, and ICANN should use this opportunity to begin to return to its normal meeting standards as much as possible. Others noted that the concerns about travel inequities or restrictions for certain parts of the world should not prevent moving forward with an in-person component for ICANN72 because such inequities and restrictions exist with or without the pandemic.

The return to in-person meetings was discussed again in November, when the board decided to junk plans, secured by the dissenting directors in July, for a hybrid meeting in San Juan, Puerto Rico.

Ron da Silva had left the board by this point, but the new minutes show that Doria and Osman were joined by León Sánchez in advocating for a hybrid meeting with an in-person component.

While the July minutes contains a few paragraphs summarizing discussions, the November minutes simply notes that the board “reviewed the proposed resolution and rationale to confirm that it reflects the Board’s discussion and edits”.

And that’s pretty typical for most of the documents published this week — time and again the substantive discussion appears to have either happened off-camera, during non-minuted sessions of the board at unspecified times, or was simply not minuted.

Interested in the talks leading to the approval of the new gTLDs Operational Design Phase? The minutes shed no light.

Interested in how the board reacted to ICANN losing its Independent Review Process case with Afilias about .web? The minutes merely note that the resolution was approved “after discussion”.

There’s also a glaring hole in one set of minutes, raising questions about whether these documents are a reliable record of what happened at all.

We know for a fact that on September 12 the ICANN board approved a resolution naming the new chair and vice chair of its influential Nominating Committee, only to reconvene two weeks later to scrap that decision and name a different chair instead.

But if you read the September 12 minutes, you’ll find no record of NomCom even being discussed, let alone a resolution being passed appointing a chair.

The newly published batch of documents cover several resolutions related to executive pay, but none of the minutes contain the same level of transparency as ICANN displayed in February 2021, when it revealed that three directors voted against CEO Göran Marby’s pay rise.

In terms of transparency, that now appears to fully confirmed as an isolated incident.

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.