Groups make flawed case that .com is a cartel

Three pressure groups in the US have called on the government to strip Verisign of its .com contract, saying the company is operating as a “de facto cartel” with ICANN that has allowed its shareholders to milk the public for billions.

But their argument has a pretty significant hole in it, based on an apparent misunderstanding of how Verisign funds ICANN.

The American Economic Liberties Project, the Demand Progress Education Fund, and the Revolving Door Project have written to the Department of Justice and National Telecommunications and Information Administration to demand that they “cut off” Verisign.

The NTIA is the third party in the triumvirate with ICANN and Verisign that controls who gets to run the immensely powerful .com TLD. It’s the NTIA that gets to decide whether Verisign is able to raise its registry fees, how often and by how much.

The Obama administration froze the fee for its last six-year run, but the caps were lifted under Trump, giving Verisign four 7% increase options over the current six-year deal, all of which it has chosen to exercise.

The price of a .com registration or renewal has gone up from $7.85 in 2018 to $10.26 later this year. Verisign enjoys some of the highest profit margins of any public company in the US as a result, with much of its cashflow diverted into share buybacks.

This has to stop, and the .com contract should be open for bidders, the three groups said in their letters:

Ending this contract will force the initiation of a competitive open-bidding process, ultimately bringing down costs for those who must register a domain name. ICANN and VeriSign function as a de facto cartel and the NTIA should stop sanctioning the “incestuous legal triangle” that serves as a shield to deflect overdue antitrust scrutiny into their otherwise likely illegal collusive relationship.

While the letters raise many good points, they’re the same good points that have been raised every few years for the last quarter century. The US government response seems to depend entirely on whether the current occupant of the White House wears a blue tie or a red tie.

Where the argument is flawed is in the statement: “ICANN has a vested interest in VeriSign making as much money as possible, as VeriSign pays ICANN for each annual domain name registration.”

This is not quite correct, as ICANN’s current financial problems can attest.

In reality, while it is true that Verisign is by far the biggest contributor to ICANN’s budget, the dollar value is tied not to how much money Verisign makes, but to how many registrations and renewals it processes.

ICANN gets a quarter for every domain-year, basically, regardless of whether Verisign charges $7.85 or $10.26, so ICANN’s vested interest is in Verisign selling as many domain-years as possible, not its bottom line. If .com shrinks, so does ICANN’s budget.

And that’s exactly what has happened over the last couple of years. As Verisign’s prices have gone up, volume has started to go down, first in China and more recently in the US.

While I don’t believe the company has explicitly linked its volume decline to its price hikes, it’s said that a solution to the problem is new promotional activities later this year, so draw your own conclusions.

ICANN’s budget has taken a hit as a result. The Org said in April that it was looking at an $8 million shortfall and last month said it was laying off 7% of its staff to try to save $10 million.

The fact that it’s just canned 33 staff is pretty decent argument against the cartel claim, and I expect it to form part of ICANN’s response.

The three groups’ letters may be on more solid ground with its claim that ICANN has enjoyed a “$20 million cash bonus” that they describe as a share of Verisign’s “ill-gotten rent to maintain its market power.”

That’s a reference to the $5 million a year for five years additional payment that Verisign agreed to when it renegotiated its registry contract with ICANN in 2020.

Nominally to help fund ICANN’s DNS “security and stability” efforts, the optics of this side deal have always been terrible, the granularity of the accounting transparency has been criticized as lacking, and I’ve frequently referred to the payment as a “bung”.

But that payment is strictly bilateral and not part of Verisign’s deal with NTIA.

The NTIA arrangement has presumptive renewal of six-year terms, but NTIA can revoke it with 120 days notice. That means it will have to act before August 2 if it decides to terminate Verisign’s contract.

You can read the letters in full here.

ICANN slashes staff and domain prices could rise

ICANN has laid off 33 people, about 7% of its 485 staff, and has raised the specter of increased domain name prices, as it struggles to balance its budget.

The job losses are effective today and come “across all functional areas and regions”, acting CEO Sally Costerton wrote.

The Org said this evening that it made the decision to lose the employees as part of a broader cost-cutting effort that it hopes will help close a $10 million hole in its budget. At the end of April, it had said it was looking for $8 million in savings.

Costerton said ICANN will also look at reducing travel expenses and doing more work from its cheaper regional offices, as well as finding other efficiencies.

But it is also “evaluating ICANN’s fee structure to ensure it scales realistically with inflation”, Costeron wrote.

This will be of great interest to domain registrants, particularly those on a tight budget or with large portfolios, as any increases in the transaction fees ICANN charges registries and registrars will inevitably be passed on to their customers.

Registrars currently add a $0.18 per-domain-per-year ICANN fee at their checkouts, and registries pay $0.25 for every add-year, renew-year and transfer. The fees have not changed in at least the 15 years I’ve been writing this blog.

For ICANN community members and the domain name industry, the cuts will selfishly beg the questions of which services ICANN provides could suffer as a result, and whether it means delays to already overdue projects such as the new gTLD program.

The budget shortfall has arisen due to inflation and sluggish domain sales from the likes of Verisign, ICANN’s biggest funding source. Verisign’s outlook for the year is pretty bearish, with a low estimate of a 1.75% decline in domains under management.

I believe it’s the first time ICANN has been forced into a mass layoff, having reliably swollen its ranks almost every year until quite recently.

Chinese domains plummet again in 2023

There was almost no movement in the number of .cn domain names registered in 2023, according to the registry.

CNNIC had 20,125,764 .cn names under management at the end of last year, compared to 20,101,491 at the end of 2022, according to its recently published end-of-year report.

That’s an increase of under 25,000 domains, about a tenth as many net regs as fellow leading ccTLD .de, the domain for far less-populous Germany.

CNNIC also tracks the overall number of domains registered in-country, regardless of TLD, and that dropped dramatically again, following the trend of years.

There were 31,595,563 domains registered in China at the end of December, compared to 34,400,483 a year earlier, according to the report.

GoDaddy price increases lead to revenue growth

GoDaddy last night reported domains revenue ahead of forecasts after it raised its prices and sold more higher-priced domains on the aftermarket.

The company’s Core Platform segment, which includes domains and hosting, reported first-quarter revenue up 4% compared to a year ago at $725 million, with domains revenue driving growth, up 7% percent to $532 million.

Domains under management was 84.6 million at the end of March 31.

“Our growth was driven by strong demand for domains in the primary and secondary market, increased pricing in the primary market and a higher average transaction value in the secondary market,” CFO Mark McCaffrey said in prepared remarks.

Aftermarket revenue was up 12% to an unspecified amount.

Including the company’s other revenue streams, GoDaddy reported net income of $401.5 million on revenue up 7% at $1.1 billion.

Verisign, the .com registry, last week reported stagnating .com growth that it blamed in part on US registrars raising their retail prices, leading to lower first-year sales and renewals.

ICANN to slash costs as Verisign’s magic money tree dries up

ICANN is looking for $8 million of cost savings, $3 million more than it expected a quarter ago, amid gloomy predictions about the domain industry’s likely performance this year.

The Org last week told community members that it’s having to revise its expected revenue down by $3 million to $145 million after it became clear domain sales won’t be as good as previously thought. The new budget is due to be approved by the board this coming weekend.

“ICANN faces an inflation of its costs and also happens to face a lack of inflation of its funding,” CFO Xavier Calvez said on one of two conference calls explaining the changes.

ICANN’s bean counters are now predicting a 4% decline in transaction fees from legacy gTLDs — a line item mostly comprising .com — for ICANN’s fiscal 2025, which begins this July. Back in December, when the first draft of the budget was published, the prediction was for 0% growth.

The grim numbers match Verisign’s own growth story for the rest of the calendar year. Company bosses last week predicted .com/.net to grow at between 0.25% and negative 1.75%, a downwards revision on its guidance in February.

Talking to Verisign and other registries and registrars and looking at the monthly transaction data they file is the main way ICANN formulates its budget predictions.

“We gauged very strong expectations of a contraction in domain name registrations,” ICANN programs director Mukesh Chulani said.

Meanwhile, ICANN estimates transaction fees for new gTLDs will increase 7% in FY25, obviously from a much lower base then legacy, compared to the December estimate of 2% growth.

ICANN was already expecting its funding to miss its spending requirements by $5 million, but that figure is now $8 million. But rather than run ops at a loss, ICANN has instead put this number on a line labelled “Cost Savings Initiatives” in order to present a balanced bottom line.

Where these cost savings might come from doesn’t seem to have been figured out yet, and there’s some community worry that services might be affected by cuts.

There was some talk of finding efficiencies in the travel budget or with contractors, but those budgets are $13 million and $24 million respectively, so any cuts there could be swingeing.

By far the largest expenditure line item is staff, which costs $90 million. But there’s been no change to the expected number of ICANN full-timers in the budget, so layoffs don’t seem to be on the cards just yet.

.com still shrinking because of China

Verisign’s .com gTLD shrunk by over a quarter million domains in the first quarter due to softness in China and US registrars’ pesky habit of putting up prices and the pain is likely to continue for the rest of the year, according to Verisign.

There were about 159.4 million .com domains and 13.1 million .net domains at the end of March, down a combined 270,000 from the end of 2023, Verisign said during its first-quarter earnings call on Thursday. Most of the decline appears to be in .com.

Registrations from Chinese registrars, which are about 5% of the total, were down about 360,000 in the period. Not ideal, but a lot less sharp of a drop than the 2.2 million it lost in Q4.

There were 9.5 million new registrations across both zones in the quarter, compared to 10.3 million in the year-ago period.

But CEO Jim Bidzos told analysts that competition from low-priced new gTLDs, some of which sell year one for under a dollar, is likely harming .com’s growth among cost-conscious Chinese registrants.

But he said the company is also seeing “softness” from US registrars, which he said are increasingly focused on increasing average revenue per user and putting up retail prices. This leads to fewer new registrations and renewals.

Bidzos said Verisign expects to introduce new marketing programs in the second half of the year — around the same time as the company’s base .com wholesale fee goes up from $9.59 to $10.26 — to help offset these declines.

The renewal rate for Q1 is expected to be about 74% compared to 75.5% a year ago. Bidzos said the total domain base shrinkage could be worse in Q2 due to the larger number of names coming up for renewal.

The company lowered its guidance for the year to between 0.25% growth and negative 1.75%. In February, it had guided flat, with a 1% swing in either direction.

Verisign’s top and bottom lines continue to grow during the quarter, with revenue up 5.5% at $384 million and net income up from $179 million to $194 million.

ICANN publishes its Woke Manifesto. Here’s my hot take

ICANN’s antics rarely surprise me after close to a quarter-century of coverage, but today it’s published what I can only describe as its “Woke Manifesto” and while reading through it this afternoon I pretty much peeled my uvula raw and ragged, alternating as I did between howls of outrage and uncontrollable fits of incredulous laughter.

On the latest step of its descent into solipsistic pomposity, Org has released its Diversity and Inclusion Toolkit, an interactive web page and associated documents and survey templates designed to help the ICANN community’s various constituencies become more diverse, equitable and inclusive.

“It is designed to empower our community groups in assessing, measuring, and promoting diversity within and across their membership,” ICANN wrote in its introduction, attributed to outgoing policy VP David Olive.

A laudable goal in theory, but in practice what ICANN has come up with is often hilarious, poorly sourced, badly edited, baffling, hypocritical, self-contradictory, and condescending to both the people it wants to include and the people it perceives are already over-included. In parts, sadly, it’s borderline misandrist and maybe a little bit accidentally racist.

The Manifesto is the result of ICANN’s work to implement the recommendations of the Final Report (pdf) of the Cross Community Working Group on Accountability, the most-recent phase of one of ICANN’s interminable navel-gazing exercises.

Recommendation 1.6 of that report states:

ICANN staff should provide support and tools for the SO/AC/Groups to assist them in assessing their diversity in an appropriate manner. ICANN should also identify staff or community resources that can assist SO/ACs or other components of the community with diversity-related activities and strategies.

Or does it? If we believe the new Manifesto, Rec 1.6 actually states:

ICANN staff should provide support and tools for the SO/AC/groups to assist them in assessing their diversity in an appropriate manner. ICANN should also identify staff or community resources that can assist SO/ACs or other components of the community with diversity-related activities and strategies.D&I requires equity to succeed.

The emphasis in that second pull-quote is mine. The lack of a space after the period before the last sentence is ICANN’s error.

It looks like at some point, possibly quite recently, ICANN has sneaked in the reference to “equity”.

If you’re triggered by the DEI (Diversity, Equity, Inclusion) abbreviation, best look away now. The Manifesto contains all the other zeitgeisty buzz-words you probably also hate.

Microaggressions? Check. Privilege? Check. Identity? Check. Intersectionality? Check. Unconscious bias? Check. Psychological safety? Check.

An easily overlooked footnote seems to explain why “equity” has made its way into the document:

In this toolkit we refer to “diversity” and “inclusion,” but “equity” is also a significant concept to understand. Equity refers to fairness and justice, recognizing that we do not all start from the same place and must therefore make adjustments to imbalances; for example promoting the inclusion of people from marginalized/underrepresented populations. It is distinguished from equality, which means providing the same to all.

I take no position on whether this is a good or bad way to tackle inequality of outcome, if it exists, at ICANN, but let’s be honest, this is just another way of describing what has been known as “positive discrimination” or “affirmative action” in other contexts.

But while affirmative action usually refers to issues of race in North America, such as in the ongoing debate about university admission policies, ICANN’s Manifesto is notable for containing no direct references to skin color whatsoever.

ICANN’s “7 key elements of diversity”, which come from the CCWG-Accountability’s report, are: geographical/regional representation, language, gender, age, physical disability, diverse skills, and stakeholder group or constituency.

Let’s look at what the Manifesto says about some of these identity categories. Yes, I’m going there.

“You were so worried you came from Iran”

Possibly the most egregiously condescending and baffling part of the Manifesto is “Ideas for indivdual action” (pdf) (the misspelling of “individual” is in the original, in the title, on the cover page), which offers suggested language to avoid offending people on the basis of gender, age, disability, or geography.

I’ve no idea to whom this document is addressed (I infer it’s able-bodied, Anglophone men), but it seems ICANN thinks it has a problem with people referring to East Asian community members as “Orientals”. Because apparently it’s the 1950s. In the same breath, it suggests that “whitelist” — a term commonly used in the security industry to refer to lists of explicitly permitted domains — is as offensive as “Chinaman”.

It’s worth noting that the word has been used repeatedly by ICANN itself, including quite recently. Under October 2023 terms, you can’t even apply to be an accredited registrar without agreeing to “whitelist” ICANN’s domains.

In a glorious example of accidental misogyny, the document (six years in the making) later says that people should avoid using forms of address such as “Mrs” or “Ms” because: “This language implies that having a disability is not an ordinary aspect of being human”.

The document is all over the place on issues of gender, on some pages directly contradicting ICANN’s own current practices and on others internally contradicting itself.

At one point, it says “there is no need to mention gender, i.e. saying ‘a female lawyer’ diminishes the professional status of that person”. This from the organization that put out this press release celebrating its two “female leaders”, last year.

At another point, it says we should use “Ombudsperson” instead of “Ombudsman”, while ICANN itself recently made the switch to “Ombuds” instead.

The document is also confused about whether biological reality exists. It tells us that we should accept that “that we are all biased by virtue of our biology” and a couple pages later admonishes against terms such as “biologically male” because “These terms imply that gender is a biological and binary fact that can only be changed through surgery — if at all”.

The most jaw-dropping gender-related moment comes when the document attempts to explain the concept of “privilege” and offers some suggestions as to how those who possess it may overcome it to increase the inclusiveness of their communities.

I swear I’m not making this quote up:

If you have male privilege: Hold back, and allow female community members to speak before you do. If they do speak and are not acknowledged, call this out and give credit for their input.

ICANN wants to make “Ladies first” official doctrine? Perhaps it is the 1950s.

While I don’t doubt there are some women in the ICANN community who would whoop with delight at the chance of automatically getting first dibs at the mic, I know there are many others who will find the suggestion that men should give them special treatment, and subsequently pat them on the head for their contributions, deeply offensive.

“I hear you’re a racist now, Father”

It’s not just gender and age where the Manifesto seems to trip over its own desire to virtue signal without thinking through whether what it’s actually saying is internally consistent.

We’re told to avoid “Asking people of a different appearance where they are from” and a few pages later to “Show an interest in other people’s cultures and backgrounds, ask questions with sincere and respectful curiosity”.

How, ICANN, how?! How can I show an interest in this new friend’s culture if I’m not allowed to ask him where he’s from? Am I only supposed to show an interest in his culture if he shares my “appearance”. Can I only talk to people of the same race? Is that what you want, ICANN?!

We’re talking largely about ICANN meetings here, remember. People from over 100 countries on every continent flock into a drab, windowless conference center three times a year. It’s the most natural thing in the world, unwinding at an after-hours cocktail reception, to ask somebody where they’re from.

If, in the hotel bar after eight hours of patiently not interrupting anybody you think you might not fully intersect with, somebody asks you “Where are you from?”, regardless of whether you share common visual characteristics, chances are it’s because your lanyard has flipped over and they’re asking the name of your employer in order to quickly triage business opportunities.

Speaking as somebody who was an immigrant in the US for the best part of a decade, I know it can be irritating after the hundredth time you’re asked your nationality, but I never found it to be, as ICANN would have us believe, an “aggression”, micro or otherwise.

“I’m Disabled!”

The document defines a microaggression as “the everyday messages we send to other people through our language and behavior that cause them to feel devalued, slighted, discouraged or excluded”. We’re told: “What makes microaggressions offensive isn’t the exact words or actions but, instead, the underlying meaning that reveals bias”.

The first example ICANN gives of a microaggression?

A weak handshake with insincere smile.

I find this hugely offensive on a personal level.

My lived experience is as an effete Englishman with a congenitally pathetic handshake, also suffering from the effects of decades of underfunded NHS dentistry and still recovering from an ischemic stroke that rendered my hand-shaking hand about as strong as a sloth’s yawn.

There’s nothing I find more macroaggressive at an ICANN meeting — apart from perhaps a French woman I barely know attempting to kiss me on the cheek — than an American with a $5,000 suit and teeth the color of a Grand Wizard’s hood trying to tear my arm off at the hip when he or she moves to greet me.

But apparently, under ICANN’s rules, the combination of my disability and nationality makes me the bigot. Thanks ICANN, I’m going to feel really psychologically safe at my next meeting.

“What exactly does IT stand for?”

On a professional level, what really boils my piss is this directive, which appears under a section entitled “Use respectful language”:

Avoid jargon: Minimize your use of jargon, shorthand and acronyms that may not be understood by newcomers or people with different experience and skillsets

I totally agree, of course. It’s long since past the point that even some ICANN community veterans often have no clue what ICANN is talking about without a quick google or reference to a glossary.

So why in the Jiminy Cricket is ICANN introducing this package of Orwellian social guidance with the sentence “I am thrilled to announce the launch of ICANN’s Diversity and Inclusion Toolkit, a pivotal resource to support the implementation of the Work Stream 2 (WS2) recommendations.”

Work Stream 2? Work Stream 2 of what? The blog post doesn’t say, and you have to get several clicks deep into the Manifesto itself before you’ll find a reference to, or link to, the CCWG report.

Who is this aimed at? Insiders. Nobody else could possibly understand this stuff.

Alibaba hit with ICANN breach notice

One of the companies in the Alibaba Group, China’s biggest registrar and one of the largest technology companies in the world, has been handed a breach notice, containing a long list of complaints including abuse failures and non-payment of fees, by ICANN Compliance.

Alibaba.com Singapore E-Commerce, one of Alibaba’s four accredited registrars, failed to respond to abuse reports and failed to respond to ICANN’s requests for information about its failure to respond to abuse reports, the notice claims.

The breach notice will likely to be the last to be sent out for claims under the current version of the Registrar Accreditation Agreement. In two days, April 5, stricter domain takedown rules approved earlier this year will become effective on all registrars.

The abuse claims seem to cover four domains in .com and .vip that look like typos that could have been used in phishing attacks.

ICANN Compliance says that Alibaba also hasn’t published the names of its officers or its redemption fees, as the RAA also requires. It says the registrar also owes it an unspecified amount of past-due fees.

The chronologies reported in the notice claim Alibaba has been giving Compliance the run-around, failing to respond to calls and emails, since early November.

All four registrars in the Alibaba Group have the same published email and phone details, but it’s not clear whether the same ones are listed in ICANN’s internal directory.

Alibaba.com Singapore is one of four accredited registrars owned by Alibaba, the Chinese e-commerce giant. The parent is not short of a bob or two, reporting revenue equivalent to $126 billion last year. It can afford to pay its ICANN fees.

Of the three Alibaba registrars that have domains the “Singapore” one is the smallest, with about 660,000 domains under management. The other two have 3.2 million and 2.6 million domains to their accreditations.

The company has been told it has until April 17 to come back into compliance or risk getting terminated.

ICANN opens $217 million Grant Program

Ten million bucks of ICANN’s money is up for grabs, starting today.

The Org has opened the application window for the first stage of its Grant Program, which it hopes to eventually see hand out over the $217 million that it raised auctioning off contested gTLDs during the 2012 new gTLD program application round.

In this first phase, up to $10 million will be distributed, in tranches of between $50,000 and $500,000, to projects that align in some way with ICANN’s technical and internet governance missions.

Only registered non-profits are allowed to apply.

The application window is open until May 24, and ICANN expects its board of directors to make its final decision in December, before grant contracts are signed early next year.

Successful applicants are expected to begin their funded projects, which should last no more than two years, within 60 days of receiving the money, so presumably the cash will start actually making a difference about a year from now.

In a blog post, ICANN CEO Sally Costeron urged readers to spread word of the program on social media, specifically naming Facebook, Instagram, LinkedIn, Twitter, and WeChat, which appears to be a platform used primarily in China.

With ICANN occupying a rarefied, occasionally incestuous corner of the internet, there’s obviously a risk of the perception that the money will be doled out primarily to community insiders, but the rules ban anyone who was involved in crafting the program’s rules from participating.

The rules also ban applicants from using ICANN’s accountability mechanisms, such as the Independent Review Process, to challenge adverse grant decisions, and ICANN wants to change its bylaws to also ban third-party non-applicants from using IRP to appeal decisions they don’t like.

Details on the Grant Program can be found here.

.art takes a million domains off its premium list

UK Creative Ideas, the .art gTLD registry, is removing premium pricing from over a million domain names and slashing the premium pricing on others.

The company said today that most of the names losing their premium tag were on the lowest pricing tier, which is $70 wholesale a year. I believe the standard wholesale fee they will be moving to is $12 a year. Retail registrars will of course add their markups on their storefronts.

The registry said it’s “also moving a number of names from some higher premium tiers to lower priced premium tiers”.

The price changes, which come into effect February 21, are designed to make .art more attractive to both end users and domain investors, the company said.

.art had almost a quarter of a million domains under management at the last count. Not relying on cheapo registrations, it has one of the least lumpy growth trajectories of any 2012-round new gTLD, having a reliably steady incline pretty much since its 2017 launch.

Its top registrars are Namecheap, GoDaddy, Tucows and SquareSpace (formerly Google) in North America and Alibaba in China.