Meanwhile, across town, the Association of National Advertisers (ANA), who a few months ago decided to become the public face of opposition to new gTLDs after years of only desultory interest, had managed to convince the Senate Commerce Committee to hold a hearing on the matter. It was supposed to be a great party, but nobody came. The most powerful group of public-opinion changers in the United States barely got a quorum at their public event on how awful new gTLDs would be for the 1%.

Space in People’s Heads

The Senators that did appear were somewhat cool to the New Luddite message being peddled by the ANA and Esther Dyson, ANA’s star performer. Esther, fully inhabiting her new role of grumpy ex-Chair of ICANN, said:

“The rationale is that there’s a shortage of domain names… but actually, there’s a shortage of space in people’s heads… So was that Marriott.com or Marriott.hotel, or dyson.com or dyson.hotel if I decide to rent out my apartment?”

Of course Esther doesn’t own dyson.com, that’s owned by a vacuum cleaner company in the UK. And “.com” doesn’t indicate whether the site is about renting your apartment or sucking up loose dirt — but never mind….

Apparently there was enough space in the head of Senator Rockefeller, Chair of the Commerce Committee. He said,

I think we have to get used to .hotel…. I think we have to get used to .auto… I start from that position, but I listen…. I think a surge of new names and addresses can create opportunities: whether they will or not, I do not yet know…

A Principled Defense

Larry Strickling’s speech was the opposite of the low comedy in the Senate. His principled and passionate defense of ICANN’s model of Internet governance is worth quoting at some length (emphases mine):

This year has been a very active one for NTIA in the area of Internet governance as well as in privacy policy. In fact, the Senate Commerce Committee had a hearing this morning on the new top level domain program that Internet Corporation for Assigned Names and Numbers (ICANN) will be starting in January. Our work at NTIA in this area has focused on how we can preserve and expand the marvelous economic and job creation engine that the Internet has become. As we address these issues, we are guided by two principles.

First is trust. It is imperative for the sustainability and continued growth of the Internet that we preserve the trust of all actors on the Internet. For example, if users do not trust that their personal information is safe on the Internet, they may not use it to its full potential. If content providers do not trust that their content will be protected, they may be reluctant to put it online.

Second, as we find ways to address Internet policy challenges, we want to preserve the flexibility companies need to innovate. Our view at NTIA is that multistakeholder processes are best suited for striking this balance. By engaging all interested parties, multistakeholder processes encourage broader and more creative problem solving, which is essential when markets and technology are changing as rapidly as they are. They promote speedier, more flexible decision making than is common under traditional, top-down regulatory models which can too easily fall prey to rigid procedures, bureaucracy, and stalemate.

The United States strongly supports the use of a multistakeholder process as the preferred means of addressing Internet policy issues. We have been active in promoting the multistakeholder model in the international arena through our work at ICANN and the Organization for Economic Cooperation and Development (OECD).

…we are now seeing parties that did not like the outcome of that multistakeholder process trying to collaterally attack the outcome and seek unilateral action by the U.S. government to overturn or delay the product of a six-year multistakeholder process that engaged folks from all over the world. The multistakeholder process does not guarantee that everyone will be satisfied with the outcome. But it is critical to preserving the model of Internet governance that has been so successful to date that all parties respect and work through the process and accept the outcome once a decision is reached. When parties ask us to overturn the outcomes of these processes, no matter how well-intentioned the request, they are providing “ammunition” to other countries who attempt to justify their unilateral actions to deny their citizens the free flow of information on the Internet. This we will not do. There is too much at stake here.

We all know the Internet for its technological achievements. What is less understood, but possibly just as important, is that it has pioneered a global decision-making model that involves the people who are interested in and affected by the decisions, irrespective of status or geography, and de-emphasizes the power of moneyed interests. Going forward, if the ANA or some other group cares about an issue, they may have to rub shoulders with the hoi polloi, listen to other viewpoints, and reach a compromise that can attract wide acceptance.

With the speech by Larry Strickling (and, in a different context, similar remarks by Hillary Clinton), the U.S. government has now stated unequivocally that it won’t open a new door to censorship in order to placate the ANA, and for this defense of the right of free speech they should be applauded. With rights come responsibilities: now it’s up to the operators of top-level domains, and ICANN, to vindicate this faith in consensus decision-making.

The ANA sprang up in August to “vigorously oppose” the new gTLD program. Recently it has morphed into a larger group called CRIDO, and this group (which, ironically, counts among its membership companies that are actively pursuing new gTLDs) is picking up the pace by issuing more threats at ICANN, telling them that they must abandon the new gTLD program or — something. There are vague murmurs of a lawsuit, which I’ll discuss below. Their number one cause of complaint? New gTLDs will cost “the industry” money.

ICANN has seen fit to allow this opposition to go unanswered for nearly two months. It might therefore be useful to review why the CRIDO effort is doomed to failure, and why it deserves its doom. While the companies behind CRIDO and the ANA are powerful, in this case the 1% is not going to frustrate innovation in the name of keeping a small blip in “industry” costs. This article explains why they won’t succeed.

“Facts”

The ANA and CRIDO may control 99% of the money, but they have about 1% of the facts. Facts may not matter that much when you’re running a FUD (fear, uncertainty, and doubt) campaign, but for completeness’ sake it is worth pointing out that the figures being presented by the ANA and CRIDO have as tenuous a relationship with reality as Somalia does with law and order.

As Jeff Ernst of Forrester Research points out in a recent article, the ANA claims that new gTLDs will cost their members “billions of dollars” without once providing any verifiable basis for this claim.

Minds + Machines, by contrast, put together a study, “What Cost New gTLD Trademark Infringements to Brands?” that is easily replicable by anyone. Completely fact-based, relying on publicly available data, our study shows that infringements are correlated very highly with volume, and that if new gTLDs increase the number of names in the market by 15%, there would be an additional 316 UDRP filings per year, or an average of ten cents cost per trademark. If the domain name market grew more (which indicates greater public benefit), there would undoubtedly be more UDRPs, but the costs would remain very low.

GoDaddy has also done a study, which concludes that UDRPs have gone up in volume due as much to the ease of filing as to any increase in cybersquatting:

Although there is little doubt that the ongoing practice of cybersquatting factors into the tide of arbitration cases, the ease of filing, along with more vigilance on the part of IP holders, undoubtedly influenced the measurable increase in cases.

In addition ICANN has hired numerous economists, who all reach the same conclusion: yes, there will be costs to brands, and even though the public benefits are not yet clear, there are some obvious benefits that can be predicted. In general (the economists say) competition is in general a good thing, and there is certainly no compelling case to be made that the introduction of new gTLDs will cause harms that will outweigh the public good.

Last Come, First Served?

The ANA and CRIDO face a credibility problem. After 5 years (or 10 years, depending on how you count) of very public, noisy, open debate about these issues, these groups show up (or are formed) at the 13th hour, after the gTLD policy was approved and the ship had left the harbor. Where were they all these years? The ANA published some comments on the 2nd Draft of the Applicant Guidebook, but otherwise, in face of the program that they now claim is the worst thing since unsliced bread, they were completely silent. Although their absence wouldn’t matter much if they had some compelling evidence, they don’t. In effect, what they are saying is that we never gave it much thought, but now that they’ve woken up, they want everything changed. Try going to GoDaddy and telling them that you’ve suddenly realized that sex.com is valuable, and they need to overturn all their procedures and give it to you because you want it. The ANA is receiving a distinct lack of sympathy around their timing.

Congressional Hearings to Protect the 1%?

It appears that there is no appetite in Congress for hearings on this subject, even leaving aside the questions of whether the U.S. can or should act unilaterally. Of course appetites in Congress can be created, and that is what CRIDO is trying to do. But “Protect the 1%!” is hardly a rallying cry in the U.S. these days.

What Does the U.S. Government Think?

The NTIA, an arm of the Department of Commerce that oversees ICANN, has been lobbied intensively by interests opposed to the new gTLD program for the better part of a decade. The extensive new protections for trademarks are one result, as is the the Early Warning System for governments worried about TLDs that might threaten law and order. Another indication of the view of the U.S. Administration comes from the modified IANA contract specification. The IANA is the largely technical function, now in ICANN’s hands, that would actually enter new gTLDs into the root zone. The IANA contract comes up for bid periodically, and it would be a disaster for ICANN to have IANA’s technical function changed into a technical + policy function — effectively adding another layer of policy development on top of ICANN’s, outside and separate from the multistakeholder model and controlled exclusively by the U.S. Government. There was some fear of this when the bid specifications first came out. The initial Notice of Inquiry said:

For delegation requests for new generic TLDS (gTLDs), the Contractor shall include documentation to demonstrate how the proposed string has received consensus support from relevant stakeholders and is supported by the global public interest.

But the amended notice says:

The contractor shall verify all requests related to the delegation and redelegation of gTLDs are consistent with the procedures developed by ICANN. In making a delegation or redelegation request, the Contractor must provide documentation verifying that ICANN followed its policy framework including specific documentation demonstrating how the process provided the opportunity for input from relevant stakeholders and was supportive of the global public interest.

In other words, the US Government has removed the policy-making component from the IANA contract. Instead of IANA making a decision about whether the application is in the public interest, IANA is now asked only whether ICANN policy was followed. This is very a much of vote of confidence in ICANN policies, and a turning away from setting up any alternate source of authority. Asking the U.S. Government to overturn a process it initiated, participated in, and supports seems forlorn — especially when just two days ago they received the blessing of the European Union, who said in a press release, “the new IANA tender is a clear step forward for global internet governance.”

Overturning 10 Years of Global Consensus Based on a Lobbying Campaign

Even if ICANN really wanted to be ordered around by trade associations, it really doesn’t have the power to just overturn policy that’s been developed through its processes. The Board does have a lot of power, but overturning the new gTLD program, with its hundreds of thousands of volunteer hours, its votes of consensus on provisions, its carefully tuned compromises, is tantamount to throwing away its entire governance model. If CRIDO really expects ICANN to abandon the gTLD program, it needs to provide a rationale of why the multi-stakeholder process is a mistake and should be jettisoned. Until it can do that convincingly, ICANN can’t cancel or even much modify the gTLD program — and the governments who have lined up behind ICANN’s governance model (including the U.S.) will have a hard time supporting any initiative that vitiates it.

ICANN Has Been Preparing for This

ICANN fully expects to be sued over the new gTLD program. They believe this for the same reason that it took them ten years to come up with the new gTLD program — there are huge number of affected people, and you won’t make all of them happy. That’s why ICANN has fully examined the legality of their program, and has set aside a lot of money to fight any challenges. Where do you think a big portion of that $185,000 fee is going to be spent? ICANN has budgeted a large amount to be spent in court. I can guarantee that ICANN has spent a lot more time thinking about this than the ANA has.

On What Grounds Would an Injunction Be Granted?

If the ANA or CRIDO were to sue ICANN, on what grounds would they succeed in getting a judge to enjoin ICANN from continuing the program? I’m not a lawyer, but I invite those who are to comment and present an compelling rationale. I haven’t heard any.

Why Are They Doing This?

The effort of ANA and CRIDO has been pretty substantial. They have already spent more in lobbying and marketing than any introduction of new gTLDs could cost them. So the question is, why? Why are they putting all this effort, so late in the day, into a cause that seems quixotic at best? The answer has nothing to do with defensive registrations, or cybersquatting. Instead, it’s because new gTLDs will change the face of advertising and branding, and like a lot entrenched industries, they’re terrified of change. Here’s what Thom Kennon, SVP and Director of Strategy at Y&R says:

Shame on the ANA for taking such a misinformed and myopic view of one of the most significant changes in how brands and consumers find each other since the birth of the commercial Web.

Although none of us have any idea of the broad, deep implications of this re-architecting of the interwebs, it doesn’t take much of a creative bent to see the powerful opportunities this will likely afford every brand — and organization, and industry and even cities, states and towns.

Unlike the ANA – whose argument here seems to be nothing more than a repetitive loop of “ICANN’s wrong, it doesn’t add up…”- some of us are working to explore what this change might offer for the future of the brands and businesses we represent.

As the ANA (and sadly any of its members who take this Luddite advice) sit on the sidelines, some of us are exploring how the early brand movers – in the right category with the right architectural strategy – can reap huge, long-term rewards and competitive advantage from leading instead of lagging.

Here’s some better advice: every single brand manager, marketing strategist, technologist, content developer and CMO should start spending some serious time understanding what these changes can and will bring to how the ‘human web’ is evolving. Be smart, nimble and opportunistic and be ready to steal the march from those who chose to worry and wait.

What Would Happen if the ANA Got Its Way?

People who have been involved in the ICANN process scratching their heads. Where were all these companies and associations over the last five years of policy developments? What is this group and what is their aim? Are they really going to sue, and do they have any hope of succeeding? Is there anything fact-based about their assertion, or is this a pure lobbying play? And since ICANN is in its usual dilatory fashion saying nothing in response to these groups, many are wondering what’s going on, and what will happen to the new gTLD program.

The ANA and CRIDO, using the same arguments, but in a louder voice, are not going to succeed in overturning a hard-fought consensus that has involved all the significant interests in the space. The arguments have been taken seriously, been given years of hearings, have resulted in numerous changes to the gTLD program to accommodate the concerns that they raise, additional protections have been put in place, and the finally the program passed on a vote by the ICANN Board. Governments, businesses, intellectual property owners, ISPs, civil society, everyone participated.

Internet innovation doesn’t stop because it upsets someone’s business model. Let me refer readers to an article published in 1995 by Newsweek (now nearly defunct). Among other the many reasons it gives as to why the Internet will never work, it says:

The truth is no online database will replace your daily newspaper… no computer network will change the way government works. We’re promised instant catalog shopping — just point and click for great deals. We’ll order airline tickets over the network, make restaurant reservations and negotiate sales contracts. Stores will become obsolete. So how come my local mall does more business in an afternoon than the entire Internet handles in a month? Even if there were a trustworthy way to send money over the Internet — which there isn’t — the network is missing a most essential ingredient of capitalism: salespeople.

That’s what the ANA is saying: you need to prop up our outdated business model as an “essential ingredient” — or else capitalism will end. But actually we don’t, and it won’t.

The new gTLD program is not going to be undone. For that to happen would mean jettisoning 10 years of the ICANN experiment and all the work that has gone into it. Too many people, governments, and institutions have put in too much work, and have too much at stake for that to happen. If, on the basis of a lobbying campaign in the United States by some fearful people, a global consensus were overthrown, the splitting of the root is not far behind, and if that happens the results will be much worse for ANA and its members (and everyone else) than the introduction of new gTLDs.

ICANN’s current plan for a Continued Operations Instrument (COI) is a self-insurance scheme that asks registries to tie up a massive amount of cash, when much cheaper and more sensible options are available. The COI is a massive barrier to entry for all applicants, and one that hits smaller registries and those from developing countries with disproportionate weight. The COI requires massive amounts of cash to be set aside in case of business failure. It is so punitive that it will certainly encourage falsely conservative sales volume estimates by applicants, and likely to lead to higher prices for registrants. Combined with the Emergency Backend Registry Operator (EBERO) RFI, it will rob developing registries of much-needed funding during their critical first few years, and use the funds from the resulting failures to reward large incumbent registries. This is not a conspiracy theory — several incumbent registries, notably Afilias, also recognize this plan as dumb and have been working actively to make it more sensible: all boats float on a rising tide, and sink together too.

While registrants do need to be protected against registry failure, the ICANN formula for the COI seems much better calculated to cause registry failures than to prevent them.

The requirements for the COI are given in Question 50 of the Application Guidebook. Basically, the applicant has to set aside funds (or get a letter of credit) to assure “core registry functions” for 3 years. Core registry functions are: access to the shared registry system; Whois, DNS resolution; data escrow; and DNSSEC. That sounds reasonable enough until you start to get into the details — and the difference between what this would actually cost and what ICANN wants set aside.

At a recent session at the ICANN Dakar meeting dedicated to the COI, no-one spoke in favor of the current COI requirement. A registry stakeholder group proposal that would pool the risk was shot down by intellectual property interests, who predictably were not in favor of a mandatory payment to protect others (large companies will have no problem coming up with the COI). Others insisted that the pool was a form of insurance, and ICANN should not be in the insurance business. But some preliminary ideas toward the solution proposed in this post did receive some support. The way forward is provide estimates of actual likely costs, instead of the “sky is falling” scenario that the current plan envisages. Several groups are working to gather such data to present to ICANN. This post critiques the current system and provides an outline for a way forward.

Delay Is Not an Option

A short but important point: changing the amount of the COI does not mean a delay: it is not a change in policy, it is only a method for more reasonably estimating cost. The EBERO RFI, as the name implies, is a request for information. This too can be modified within the parameters of existing policy. Everyone involved in trying to reform this crazy mechanism has spoken out against any delays.

The Amount of the COI Is Directly Tied to the EBERO

Quoth the Guidebook:

The Continuing Operations Instrument (COI) is invoked by ICANN if necessary to pay for an Emergency Back End Registry Operator (EBERO) to maintain the five critical registry functions for a period of three to five years. Thus, the cost estimates are tied to the cost for a third party to provide the functions, not to the applicant’s actual in-house or subcontracting costs for provision of these functions.

Note that ICANN is building a model for these costs in conjunction with potential EBERO service providers. Thus, guidelines for determining the appropriate amount for the COI will be available to the applicant. However, the applicant will still be required to provide its own estimates and explanation in response to this question.

That’s what the Guidebook says, but that’s not what the EBERO RFI says. The EBERO is filled with extraneous requirements that have nothing to do with core registry functions, with the result that only large incumbent registries can qualify.

What Are the Real Costs of Transitioning a Failed Registry?

A registry stakeholder group presentation estimates that the current system would require a registry with 100,000 names in Year 3 to set aside $450,000, and a registry with 1,000,000 names in Year 3 to set aside $4,500,000. Will this kill any growing business? Is this more than most registries’ estimated profit margin? Is this completely crazy? Yes, yes, and yes.

You would think that ICANN would have done some research into the real costs of providing these five core functions to a failed registry. Maybe they did, but it doesn’t show. Let’s look at what it will actually cost. There are a few answers:

• The first and most likely answer is “almost nothing,” because the registry service provider of a failing registry can easily be persuaded to continue these operations (M+M guarantees it for their clients). That’s because in their assessment the risk is low (or they wouldn’t work with the registry in the first place) and because their incremental cost to do so is in fact near zero.
• A second answer is also “almost nothing,” because even supposing the registry operator *in addition to the registry* were to fail (a very low likelihood), in most cases any other registry service provider would be happy to pick up the names, since their incremental costs to run additional names are also near zero (there are transition costs, but these are not great — M+M transitioned a sizable zone over a weekend).
• A third answer is the ICANN way: multiply the estimated volume registrations by a dollar amount to be determined by the results of the EBERO RFI — which is only open to the most expensive incumbent registries, who charge orders of magnitude more than smaller, perhaps more efficient registries. (As one example among many, VeriSign charges $7 per name per year for .com names; Minds + Machines and many of its competitors charge less than $2 at a fraction of the volume of .com — and per-unit costs generally fall with increased scale).

Fortunately, there are plenty of examples of transition costs drawn from both the ccTLD and gTLD world that provide actual costs, and there is an effort to gather up these examples and provide them to ICANN, to give them cover (sigh) to do something sensible.

Accrediting Registry Service Providers

ICANN doesn’t like Answers 1 and 2, because (they say) “How do we know that the new registry service provider can do the job?”

Actually, the question should be reframed, “Why don’t you know?” because frankly they should know already. ICANN’s reluctance to accredit registry service providers is the greatest source of unnecessary cost and delay in the post-application period.

Without a doubt the biggest inefficiency of ICANN’s new gTLD process is the silly requirement of answering the entire tech section for each and every application. There are only a few registry service providers — Minds + Machines is one of perhaps ten — and nearly every application will use one of them. Although it’s theoretically possible to file an application for a system that’s not yet built, the level of detail required by the application effectively requires an existing, working registry. And yet for each new gTLD application, the tech section, the bulk of the application, will be reviewed anew in its entirety. So if there are 1000 applications, the evaluation of the tech section will be duplicated effort for 990 of them. I defy anyone to defend this as sensible.

Why did ICANN not simply accredit registry service providers, so that applications using accredited providers would not need to be tested and retested. Given that the application fee is based on cost recovery, an accreditation process would surely have reduced the $185,000 to something more manageable. Now that this opportunity has passed, accrediting registry providers for the five core registry functions is surely possible.

Happily, the fix is within reach and will not require further policy development or delay, if only ICANN comes to its senses. One obvious solution lies in amending the current EBERO RFI. In fact, amending the EBERO RFI could result in huge cost and time savings across the board.

The EBERO: Gold Mine for Incumbent Registries, Paid for by Applicants

The EBERO as written could be retitled the “Incumbent Registry Free Money RFI.” It is in fact a registry service provider accreditation program, but only for the chosen few. It is written to exclude any provider who is not a high-volume incumbent, assumes a .com-like one-size-fits-all model, and includes pages of requirements that have nothing to do with providing “core registry services,” even though Question 50 of the Guidebook links the two explicitly. In fact, the EBERO is filled with requirements that aren’t required of applicants in the Guidebook. Why are they required here?

Here are some examples of overreaching EBERO requirements (picked from among many such entries):

• High Capacity traffic service capability
• Ability to handle up to 20,000 concurrent client connections and a daily minimum peak volume of 2 million transactions with a read/write ratio of 10/1 (based on an estimated 1 million aggregate domains in the EBERO).
• Provide examples of thought leadership, industry participation, and publications that highlight your experience ["Thought leadership" as a technical requirement? - puh-leeze!]
• Ability to support and maintain IDN registrations
• Multiple DNS service locations that are geographically diverse and can be demonstrated to fully serve global resolutions
• Ability to accept live call volumes from an estimated user base of 300 and an expected contact rate of 15-20% during emergency migration periods without queuing times exceeding 10 minutes

The list goes on, one gold-plated requirement after another. The problems with this approach are manifold, but they all stem from the idea that one registry service provider should be able to handle *any and all* failing registries. That’s just plain silly — why not accredit a diversity of registry service providers as EBERO candidates and then assign failing registries to them according to the requirements of the registry?

Why the EBERO Doesn’t Make Sense As Written

The EBERO doesn’t pass the sniff test:

• Even though the most likely scenario for registry failure is an inability to sell as many names as estimated, resulting in a registry with few names, the EBERO calls for high-volume experience only. If anything, they should be looking for low-volume experience.
• If the failing registry doesn’t sell IDNs, why should the EBERO support them?
• If the failing registry only has 3 registrars, why should the EBERO support 300 concurrently?
• Data escrow, one of the five core registry services, is by definition outsourced. DNS is not outsourced necessarily, but in many cases it makes good sense both financially and technically (for redundancy) to do so. Why does the EBERO need to provide DNS services? ICANN could easily ask for EDNS (Emergency DNS) providers — they would line up to provide reasonably priced services.
• The EBERO as drafted assumes (unreasonably) that it will take 3 years to find a new home for the registry. Instead of providing a gold mine to large incumbent registries with little obligation, why not ask EBERO’s to provide a permanent home? In that case the funding wouldn’t need to cover three years — more like three weeks at the outside.
• Why should billing be suspended during the emergency period? If functions are being provided as normal, why not accept renewals at least, if not new registrations? This would substantially reduce the amount needed in the COI.

The EBERO as written is perfect for the fool who gives away millions of .BLAH registrations and then finds that no-one wants to renew them for money. For everything else, it’s overkill, and tying the COI for all registries to the cost of rescuing .BLAH is unreasoningly punitive. ICANN is asking all applicants to tie up precious cash reserves to cover for ICANN’s poor planning in this regard, and the result will be that new registries will find it hard to market their new TLDs in the critical first years of their registries — leading, inevitably, to registry failures.

Fix the EBERO, and the COI Suddenly Becomes Reasonable

ICANN should ditch the one-size-fits-all EBERO specification, and change it to accept a diversity of models, and rate registry service providers for volume of names, IDN capabilities, and some other criteria. Most of all, they should be rated on their ability to provide the required core registry services, and not on the number of gold-plated toilet seats they have. Once rated, these providers would be accredited for the capabilities they provide. Will this take a while? Maybe, but no new registry will be online for over a year. ICANN should also ask for Emergency DNS providers, since DNS can be easily provided independently of the Shared Registration System. DNS prices in the open market range from free to expensive — again, one size does not fit all. Overall, the prices for emergency services would drop drastically, and the effect would be to re-price the COI at a reasonable amount.

In a free market, registry service providers would be lining up to provide transition services for free if they were allowed to collect renewal fees for a certain period of time. Why is this not allowed in the EBERO? Only in extreme cases would there be no takers, and only then should a larger payment be invoked. The EBERO as written is a gift to large incumbent registries to pick up distressed registries (probably permanently, because why should they move again?), leaving aspiring applicants to pay for their gain via the COI.

There is a better way, and if ICANN (and, ahem, the GAC) actually gave a thought about the real-world issues faced by small registries or those from developing countries, they would insist on tying the COI to a real-world cost, and they would resist give-aways to incumbents through a guaranteed-income scheme paid for by struggling newbies. The COI and EBERO severely reduce choice and competition, and the security they promise is illusory and unsupported by experience or fact. They need to be changed, and the way to do it is to widen the field of emergency providers and thereby reduce the cost of the COI.

Today, though, ICANN released a number of results and initiatives that are quite newsworthy. There’s a lot to digest and report on, which should keep the journalists a safe distance away from Wondering What It All Means.

Among the releases from ICANN:

• A new updated Applicant Guidebook. It is missing the important word “final,” but does nail down some dates and clarifies some GAC issues. Still unanswered, in the guidebook or elsewhere, are questions about the Continuing Operations Instrument (a ham-fisted business-killer that has raised many concerns). Nonetheless, for those thinking of applying, a must-read. ICANN unfortunately did not publish a red-lined version to quickly see the changes from the last version, though there is a Summary of Changes to the Applicant Guidebook.
• A new web site devoted to the gTLD program. Until today, looking at the main ICANN homepage, you’d never guess that the major undertaking of ICANN’s history was about to get underway. Now, however, the photo of CEO Beckstrom and the guys from .BR, which looked like it was lifted from the annual report of a Minsk tractor factory, has been pushed down to make way for the headline “New gTLD Program In High Gear,” accompanied by some stock photography of a woman looking determined and competent. On the gTLD mini-site, there’s a section with videos of “experts” (some are, some aren’t) as well as an FAQ, knowledgebase, latest materials, and so on. It’s still in development, and that’s ok. Let’s hope it keeps developing.
• The final report of the contentious and dysfunctional JAS Working Group concerning support for disadvantaged applicants. You can’t read the report yet (at least I can’t) but it should be made public soon. This has been listed as one of the major issues left unsolved from the Singapore meeting in June. If you’re a serious ICANN geek, you can listen to the working group session (thanks to Joly MacFee of ISOC NY)

It’s good to see ICANN breaking their radio silence and providing a useful resource to applicants.

New program and pricing for brands

We will be introducing a new program for brand owners who have decided to apply for a new gTLD. Features include:

• Emphasis on a complete partnership. We’ll handle the entire gTLD process, from application to operation, from ICANN questions to technical implementation, without passing you off to other consultants or technical providers.
• Reasonable flat-rate pricing, making it easy to plan, and easy to expand.
• Brand-friendly workflow once you’re up and running, making it easy to ensure that your internal registration policies are followed.
• Expert advice. Did you know that members of our team have handled the domain portfolios of many of the world’s largest companies? (Complete list upon request).
• Do you work with a favorite registrar? We work with them too. Our registry platform is connected with all major registrars, including Mark Monitor, CSC, and others. You won’t have to switch anything if you don’t want to.
• Do you want a private, fully ICANN-compliant registrar for internal use? We supply one as part of the package. We’ll help you get accredited and provide you with a complete registrar solution.

We expect that the conference will be very interesting, with lots of different points of view. ICANN Chairman Steve Crocker will be a speaker, as will many members of ICANN’s Intellectual Property Constituency, along with other prominent IP lawyers.

If you’re going to be at the INTA show, please find us on the floor or at a session. Everyone at the conference will be carrying a very handsome bag with a Minds + Machines logo, but we will be the ones wearing the distinctive Minds + Machines lapel pin.

See you at INTA, and watch this space!

A recent article on SEO.com looked at the value of new top-level domains for search. The author is skeptical:

As an online marketer, I can’t help but question how these domains will rank in the major search engines.

One of the reasons for his skepticism comes from a common but completely erroneous notion that there’s some sort of order to how top-level domains work today:

As domains become less standardized (.com for commercial sites, .edu for educational sites, etc.)…

I’d like to question that premise. While .EDU certainly has meaning (it’s restricted to accredited educational institutions in the U.S.), .COM really doesn’t mean commercial anymore, .NET certainly doesn’t mean network infrastructure anymore, and .ORG is available to whomever wants it.

Contrary to the view above, the new gTLD namespace is likely to become more standardized than than the current namespace, largely through self-selection. If .LACROSSE is created as a new TLD, there’s an excellent chance that web sites under it will have something to do with lacrosse — it would be silly to put your site about ice hockey there, for example. A similar dynamic will take hold with other top-level domains, with the exception of a few (such as .WEB) that will want to copy the free-for-all that .COM has become. One of the reasons that search engines don’t really use top-level domains to rank results is that they are largely meaningless: at this point .COM is just four meaningless characters after a name.

To the extent a TLD extension is indicative of the content on the web sites within it, the TLD will have a positive effect on search. Users will also respond to the semantic cues offered by new TLDs. If, for instance, someone is searching for “hotels in New York,” they may well choose to click on the listing with an address of

www.hotels.nyc

rather than something long and unwieldly like

www.expedia.com/New-York-Hotels.d178293.Travel-Guide-Hotels

(the first result when I searched for that phrase on Google).

There may well be a virtuous cycle where users respond to the semantic cues offered by new top-level domains, and because user choice is part of the relevance algorithms used by search engines, web sites under relevant top-level domains will be promoted.

New top-level domains will re-introduce meaning into the extension, and search engines will need to pay attention to that, because the TLD extension will once again start to contain real information.

George Sadowsky’s comment is worth quoting at some length:

Fourth, and extremely important, I believe that the future of the unified DNS could be at stake [if .xxx were approved].

I submit that the approval of the application for dot xxx could encourage moves to break the cohesiveness and uniqueness of the DNS.

In my judgment, it would undoubtedly lead to filtering the domain, and quite possibly instigate the erosion, degradation, and eventual fragmentation of the unique DNS root.

Now, while we know that filtering already exists, I believe that the creation of dot xxx would mark the first instance of an action by this board that may directly encourage such filtering, posing a risk to the security and stability of the DNS.

In my judgment, the board should not be taking actions that encourage filtering or blocking of a domain at the top level.

Further, I believe that the filtering of so-called offensive material can provide a convenient excuse for political regimes interested in an intent on limiting civic rights and freedom of speech.

Further, I believe that such moves provide an incitement to fracture the root, a concern that we’ve recognized in preparation for
the new gTLD program as a distinct threat to the security and stability of the DNS.

There can be no doubt that .xxx will be blocked by some countries: the government of India has already announced its intention to do so. The .xxx domain exists in order to be filtered — that’s almost the entire point of it. It is premised on segregating content into adult and non-adult categories, so that people can find it easily — or avoid it. So no-one could disagree with George’s assessment of the likelihood of .xxx leading to filtering.

Widespread Blocking of the Internet Exists Today

As George Sadowsky points out, filtering and blocking already exist. Not just at the second level (individual web sites) or the top level (TLDs), but also of the entire Internet. Consider this graphic from a recent presentation by Packet Clearing House showing Internet traffic in Egypt:

This is filtering on a massive scale, done by a regime that didn’t want its citizenry to have any information that conflicted with its message.

Meanwhile, Hillary Clinton presented the U.S. State Department’s annual report on human rights, running to 7,000 pages. The Associated Press writes:

More than 40 governments are now blocking their citizens’ access to the Internet, and the firewalls, regulatory restrictions and technologies are all “designed to repress speech and infringe on the personal privacy of those who use these rapidly evolving technologies.”

Second-level domain names are blocked almost as a matter of course in large parts of the world. The most-blocked site is Facebook, followed by YouTube, Twitter, and a host of other sites that are hugely popular — some of them porn, but many of them not.

Basically, the governments of the world engage in blocking and filtering on a massive scale. They are blocking second-level as well as top-level names, and sometimes they just block the entire Internet. They block based on content: porn, political statements across the ideological spectrum, religious speech of all kinds, and they also block just on the basis that they don’t want people sharing information. This kind of governmental action is not new. Monopoly of information has long been a goal of many governments: until recently, one of the major goals of a coup or a revolution was to capture the TV and radio stations.

Will TLD Blocking Fracture the Internet?

Blocking of Internet content is pervasive, and the creation of new TLDs which are offensive to someone, somewhere, will probably increase it. But will it fracture the Internet? That’s where I think George’s fears may be out of place. The current blocking is so widespread, so thorough, and so invisible to those who don’t have to deal with it that it’s just part of life in much of the world. Why hasn’t blocking already encouraged a fracture?

For one thing, an alternate root by itself is not a fracture. There are already many TLDs on alternate roots out there, from Karl Auerbach’s .ewe to the semi-autonomous Chinese-language TLDs. The threat to the single root doesn’t come from just the fact of setting it up, it comes in the form of a viable alternative that threatens the current Internet by gaining users and adoption at the expense of the current favorite (think MySpace and Facebook). Karl’s .ewe is not getting a lot of takers, and in China you don’t really have a lot of choice — no-one is “choosing” any of the alternatives. (The only alternative use, in this sense, has come from new TLDs/roots in non-Latin scripts, and ICANN’s push to delegate new IDN ccTLDs has done a lot to alleviate that pressure.) So blocking .XXX (or any other new TLD), as long as it doesn’t threaten to create a competing root, is just more of the same old blinkering of its citizens that governments are addicted to and will never stop unless their people insist on it.

Let’s suppose, however, that it was possible for a mandatory alternate root to be set up, enforced by governmental authority. In a state with just a few major ISPs, the government might compel them to point to the new, alternative, government-mandated root. Isn’t that a problem? (Note that this is not currently the case in China, which allows access to the Internet, just not to many of its sites.)

To examine that possibility, let’s turn to television, where this situation is common. In Iran, for instance, there is a limited roster of TV stations and they are all closely censored. What happens there?

One of the biggest hits on Iranian TV is not on Iranian TV. A kind of Persian “Daily Show” called Parazit is broadcast by the Voice of America. Parazit is watched by millions of Iranians through their illegal satellite dishes, which are extremely common in Iran, despite periodic attempts by the morals police to get rid of them (satellite dishes can also be used to access the Internet). Parazit is a hit — it gets 45,000 You Tube visits a week, and 17 million Facebook visits per month.

The net effect of Iran’s censorship is to make its leaders laughable and hated, but it has not threatened the Iranian TV “root,” which goes on broadcasting propaganda. It has not led to a call for an alternate state television either — people simply bypass the restrictions and access the rest of the world.

In the world today, Internet blocking and filtering of all kinds is widespread and deep, and it has not threatened the single root. Censorship is a favorite habit of some governments, and they are not weaned from it easily. Limiting “controversial” TLDs in order to appease that impulse, in the name of preserving a single root, is illusory (alternate roots already exist), not likely to matter (people will get out to the “real” Internet somehow), and it doesn’t really make sense.

As Milton Mueller put it: “The idea that it is somehow better for the Internet to use centralized, global administrative mechanisms to block domains from existing in order to prevent a few individual countries from using technical means to block them locally is absurd and dangerous.” Or, to quote another ICANN Board member, Suzanne Woolf: “The issue of governments or any other entity blocking or filtering access to a specific TLD is not unique to the issue of the dot xxx sTLD. What we agree is blocking of TLDs is generally undesirable. If some blocking of the XXX sTLD does occur, there is no evidence the result will be different than the blocking that already occurs.”

George Sadowsky is a principled person who clearly loves the Internet and wants to preserve it. He gives a clear voice to a fear that many have. But when we look at what blocking actually is, and what it does, I think the fears are unfounded. People will find a way to see what they want to see, and ignore stuff that they don’t like. Blocking of a TLD by a local government is not going to lead to the fracturing of the Internet. If the case of Egypt is any guide, it’s more likely to lead to the fracturing of the local government.

The ICANN Board has just voted to get rid of all co-ownership restrictions between registries and registrars. This is major news, with far-reaching consequences. ICANN’s announcement says:

“In the absence of existing policy or new bottom-up policy recommendations, the Board saw no rationale for placing restrictions on cross-ownership;” said Peter Dengate Thrush, Chairman of the Board. “Any possible abuses can be better addressed by properly targeted mechanisms. Co-ownership rules are not an optimal technique in this area.”

This is the only principled decision the ICANN Board could have come to, and they deserve a lot of credit for doing it. By “principled,” I mean taking ICANN’s stated institutional principles and following them to their logical conclusion.

The decision is a surprise (more below on that) and will fundamentally change and liberate what has become a stagnant commercial ecosystem. Restrictions put in place to break up the monopoly of Network Solutions had long since become a burdensome and pointless legacy. ICANN has restored the issue of competition to where it belongs by reserving to themselves the ability to “refer issues to relevant competition authorities.”

The decision has all kinds of consequences, most of them good:

• VeriSign or any other registry can now run a registrar (at least in theory), while GoDaddy and other registrars can run a registry.
• Brand owners that start branded TLDs won’t have to navigate a ridiculous obstacle course just to register their own names for themselves.
• Small cultural-linguistic TLDs will now be able to set up a public-facing registrar to service their customers in their own language, instead of going begging to registrars to carry their small-volume TLDs.
• Most important, it means that new TLDs will be able to market themselves. For many new gTLDs, this ruling will mean the difference between slow death and a profitable business.

This last critical point needs explanation. Any Internet business, which is most businesses these days, relies on being able to drive traffic to their site and converting a percentage of visitors into paying customers. Under the rules that separated registries from registrars, this would not have been allowed for new gTLDs, because registries would not have been allowed to sell directly to the public, and any marketing money spent on promoting their new gTLD would have had to be purely of the “awareness and branding” variety, which is very expensive, difficult to measure, and of uncertain effectiveness. The new ruling now makes it possible for new gTLDs to devise marketing plans that send customers directly to a website where they can actually buy the domain name being promoted. This change may well be the difference between life and death for many new gTLDs.

As for existing gTLDs, they will be able to play in this new reality, with some exceptions:

ICANN will permit existing registry operators to transition to the new form of registry agreement, except that additional conditions may be necessary and appropriate to address particular circumstances of established registries.

The decision was a surprise because betting men were giving odds that the Board would institute a cross-ownership restriction limiting registrars and registries to owning between 2% and 15% of each other. The two percent figure is what the Board voted for in March 2010, a vote widely understood to be a warning to the so-called ICANN community to reach an agreement on the issue. The fifteen percent figure is what had been lobbied for heavily by various powerful incumbent players, who buttressed their position with the argument that this was what had been done in the past. But the Board (rightly) cast that argument aside:

Whereas, historical contract prohibitions on registries acquiring registrars do not provide a compelling basis for principled decision-making….

The new landscape will require everyone in the domain name business to re-examine their business, their partners, their strategy. It will have consequences between those I enumerated above. It will re-invigorate the industry, and it will help establish the respect that ICANN has lacked for so long.

Those of us who have grown cynical from years of contrasting and comparing ICANN’s principles with its actions are feeling an uncomfortable sense of possibility — uncomfortable because in the past that feeling has always been a precursor to a cruel letdown. Let’s hope instead that this proper and even slightly courageous decision is actually a sign of ICANN growing up into the organization many of its founders hoped it could become. If so, this Board will be remembered as a group of people who loved the Internet and did what they could to help it prosper.

I would be remiss if I didn’t recall what was to me the spark for the spinefulness the Board has shown, and probably for the entire new gTLD process: the remarks by ex-Board member Susan Crawford during the debacle of the original vote on .XXX in March 2007, which she rightly called “weak and unprincipled” — using “unprincipled” in exactly the same sense that the current ICANN Board has acted in a principled way today. Both her stinging dissent and her later remarks set out all of the weaknesses and hypocrisy of the ICANN approach to gTLDs at that time. Her voice against ICANN’s culture of political meddling, censorship, ad-hoc policy-making, and craven concessions to intellectual property lobbyists was a lone one. But she said what many of us were thinking, and I think her cogency, reasonableness, and above all the plain-spoken rigor of her arguments was a spur to the reform of which we may finally be reaping the benefits. Thank you Susan.

The short version is that the news is good for new gTLDs. ICANN is nailing down the final outstanding issues and the timetable is clearer than ever.

Predictions

1. The Board will make the new gTLD program happen by March 2011.
2. The official announcement will be at the ICANN meeting in March in San Francisco.
3. The final Applicant Guidebook will be published before the San Francisco meeting, which means that we’ll know a lot even before the official announcement.

The Board is determined to make gTLDs happen soon

On a number of contentious issues, the Board resolutions gave some finality. In general, they stuck with what they had already decided. Some highlights:

• Fees: fees will remain the same at $185,000 per application. No price breaks for anyone.
• Root Scaling: ICANN estimates that they can add 1000 new gTLDs to the root per year. Of course, they can take many more applications than that, but this is the number they think they can safely introduce into the wild. Most estimates put the number of new gTLD applications at 500 or under.
• Trademarks: trademarks will need to have “substantive review.” As with most things trademarkian, this is a little complicated, but in practice it means that you can’t just go register a trademark and then use it to challenge registrations: you must also have used it in trade.
• Morality and Public Order: On this issue, where the Government Advisory Committee (GAC) essentially vetoed the previous procedure, the Board was less than clear. A working group (which I participated in) came up with some recommendations, and the Board said that they would use “recommendations that are not inconsistent with the existing process.” So we don’t know exactly what this will look like. Unless you’re planning to inflame social hatred, however, your application is unlikely to be affected no matter what the outcome.
• Vertical Integration: The Board noted that the working group tasked with sorting this out (which I also participated in) could reach no consensus, and that they (the Board) would make a decision.
• San Francisco: the next ICANN meeting after December in Cartagena will be March in San Francisco. This is the big news that makes the timeline clear.

To give a sense of the Board’s determination, here’s an excerpt from ICANN’s post-retreat bulletin:

The detailed Board discussion was guided by recent community input and provided direction in the implementation of trademark protections, the new registry agreement terms, measures to mitigate malicious conduct, and ensuring root zone stability. The resolutions indicate that many important issues have been addressed, including trademark protection, morality and public order, and vertical integration.

Chairman Peter Dengate Thrush indicated that “The board made considerable progress on the remaining issues and has asked staff to prepare additional working papers and a modified applicant guidebook for public review prior to the upcoming ICANN meeting in Cartagena in December 2010. The meeting results represent a key milestone after years of work by the ICANN community as we prepare for community discussion and debate in Cartagena.”

Reviewing the Board direction, President and CEO Rod Beckstrom stated, “ICANN is prepared to implement this important new offering to increase consumer choice and to promote competition.”

The official kick-off will be at ICANN San Francisco in March 2011

The March meeting will take place in the front yard of the tech industry, which in general pays little attention to the domain name world. This time, they will be watching, and therefore this is a perfect place for ICANN leaders to cover themselves in glory and boast of their achievement in finally getting gTLDs going. It doesn’t require much of a crystal ball to predict that this is where and when the new gTLD program will get its final blessing.

Applicants will have plenty of information before March

It seems that the plan is to publish a version of the Applicant Guidebook before Cartagena, take comments, then release a final version sometime after the December ICANN meeting in Cartagena, Colombia. Since this will be the final guidebook, it should include all the information pertinent to an application, including the dates of the application window. The San Francisco meeting is likely to be a coronation, not an election. To the extent possible, everything will already have been decided, and everything will be choreographed. Which means we’ll probably hear about stuff well in advance.

Summary

We all know better than to say “sure thing” when it comes to ICANN, right? Right…

Still, the momentum is palpable and the timeline is clearer than it has ever been. The main risk factor is new obstructionism by GAC, fueled by lobbying by trademark owners, who continue to claim that the program will be too expensive for them. But it looks as if the ship is edging into the destination harbor at last.

Remember, .CO is the country-code TLD for Colombia. Until this summer, you could only register names under .com.co, .net.co, etc. You couldn’t register myname.co. Now anyone in the world can register a .co name, and register it directly under the top level. Remember also that as a country-code TLD, .CO was not constrained by ICANN rules, which means that they were able to (re-) launch their TLD relatively quickly. Even so, their rules and regulations closely hewed to the latest ICANN rules, especially in regard to cybersquatting.

The response to the .CO launch was tremendous. Let’s review:

• 11,000 names applied for during the Sunrise Period
• 28,000 names sold during the Landrush Period (closed July 15, 2010)
• Total paid by applicants for Sunrise and Landrush names: over $10 million
• Total .co names registered as of this writing: 440,000

What do these numbers mean for prospective new gTLDs? Obviously, they prove that there are lots of buyers out there if the value proposition is good, and that’s a very good sign. There is no indication that people have anything against new TLDs. Quite the opposite, in fact: if it’s a good one, they’ll flock to it in droves.

But .CO is somewhat of a special case. There are a few things to keep in mind:

First, although cybersquatting of brand names was dealt with aggressively by the talented .CO team, we have to assume that many of the registrations were done in hopes of getting traffic from people who forgot to add the “m” to a .com URL. No new gTLDs will be able to benefit from similar fat-fingered mistakes, because ICANN is running a “similarity test” to make sure that there aren’t such confusions. We won’t know how much typo traffic there actually is until it comes time to renew the names. Then, speculative traffic names will either be renewed (if they received typo traffic) or will be dropped (if they didn’t). So keep an eye on next July for interesting stats.

Second, the .CO team is really good, and did everything right. They hired smart veterans and spent a fair amount of time and money making sure that brand owners and registrars knew what was happening, what the rules were, how and when to apply, etc. This had the virtuous double effect of almost completely eliminating complaints about the process and also maximizing registrations. New TLD applicants, take note.

Third, .CO had the field to itself. When new gTLDs start launching, it will probably be on a rolling schedule, but nonetheless there is likely to be more than one launch at any given time.

These are the factors giving .CO an edge, but this doesn’t mean that new gTLDs won’t be able to duplicate or surpass their success. Many of these considerations are double-edged swords. The fact that .CO is a misspelling of .COM also means that fewer real sites will get built, fewer names will be renewed, and cybersquatting problems will be relatively larger than in most new gTLDs. The fact that .CO spent a lot of money means that their profit margin is lower.

Every new TLD launch will have specific considerations and circumstances that will both help and hinder its growth. Several new gTLDs, especially geographical names and communities, will have natural constituencies that will fuel registrations. Others will have worldwide appeal. Many will not measure their success in registrations, but instead on service to their communities.

Overall, the .CO launch should make prospective new gTLD applicants very happy indeed. It is a great proof of the market, and it shows (once again) that intelligent branding and marketing will go a long way to making a project a success.