Blog: new gTLDs

Over the course of the last week, ICANN has released several pieces of information that taken together begin to allow us to piece together the overall gTLD landscape. ICANN is releasing partial information, without explanation or context, in dribs and drabs, and rumors are flying that we won’t get the “Reveal” (the release of full information on applications and applicants for new gTLDs) until the ICANN meeting in Prague at the end of June.

This partial information and delay from ICANN is creating consternation and confusion among the many applicants and those watching the new gTLD scene. Therefore some analysis, however imperfect, will help. What follows is what we at Minds + Machines consider a likely scenario based on the facts we have, along with some estimates and calculations that we think are reasonable. This is back-of-the-envelope stuff, but it shows how we see the new landscape forming.

First, let’s start with what we know for sure:

• There are 1,268 total applicant profiles in ICANN’s system (the TAS), each of which allows 1-50 applications
• There were 2,091 applications in the TAS as of April 12, 2012
• There were 214 unpaid applications

Given that the application window was suspended with just twelve hours to go, we believe that anyone who hasn’t paid yet isn’t going to, and that people who are paying for their applications aren’t leaving any unpaid. In other words, we don’t think the 214 unpaid applications are ever going to happen, and that there’s a rough one-to-one correspondence between unpaid apps and number of applicants with unpaid apps. Therefore there are roughly 200 applicants who are not actually going to submit 214 apps.

This leaves us with about 1,000 bona fide applicants and 2100 applications, or roughly 2 TLDs for every applicant. But we can break down these numbers a little further based on industry information.

Categorizing 2100 new gTLD applications

We can divide up the applicant groups into five buckets:

1. Geographical applicants, applying for cities, states or regions.
2. Applicants applying for a specific individual project: one or in some cases two names.
3. IDN applications, applying for generic names in a non-Latin script.
4. Portfolio applicants, applying for 20 TLDs or more.
5. Brand applicants, applying for their trademarked names.

There will be exceptions to these generalizations, but overall these categories are clear. But how many of each? The breakdown is important, because it will determine how the competition for high-value generic names will play out. We assume that geos, IDNs and brands are going to face little or no competition because of the favorable ICANN rules in (for geos and brands) or language specificity (IDNs). Therefore the contention is most like to occur among and between the smaller applicants and portfolio applicants who are applying for English-language generic-word TLDs. Looking at each category, we can identify some further characteristics:

Geo Domains

We estimate 50 geographic domains. Some of these have been in the news, but many others have not. This category includes US cities such as Las Vegas and NYC to European cities such as London, Paris, Berlin and Madrid, states such as Bavaria and NRW, and Japanese cities such as Tokyo and Osaka, and of course the entire continent of Africa. Altogether we do not predict more than 50 geo domains. We are estimating one application per applicant (for these purposes, we consider the geographic entity to be the applicant, even if the official “applicant” is another entity with a letter of support).

Niche Applicants

These are individual non-IDN applicants, applying for just one or two generic-word names such as .KIWI, .MUSIC, .HIV and .RADIO. We estimate that these probably represent another 100 applicants and 150 total applications. This is a very rough estimate based on who has been present at ICANN, or .NXT, or other industry meetings. These applicants will compete with one another and often, but not always with portfolio investors for generic terms — as the projects, such as .HIV, may serve a very specific purpose.

IDNs

IDN applicants, in our calculation, represent another 100+ applicants. We know already of applicants for Russian, Chinese and Arabic strings. While we don’t have very good knowledge about these applicants, our cloudy crystal ball says that the number of IDN applications will be around 10% of the total, or 200, and that on average IDN applicants will have 2 applications each. We foresee limited competition between IDNs, and by definition little competition with Latin-characters gTLds. Note that IDNs could represent brands as well as generic terms and niche products, this is factored into our estimate of 100 applicants, 200 apps.

Portfolio Applicants

Portfolio applicants will be few. With the high cost of applications, there are probably no more than 20 portfolio applicants (such as ourselves) applying for more than 10 TLDs. We will know better when ICANN provides definitive information, but that is our estimate. By estimating 25 apps (on average) per portfolio, we predict a total of 500 applications from portfolio applicants. TLDH is applying for significantly more than the average for its own account; we don’t think that ours is the highest number, but we believe it is in the top five.

Brands

Brands will, with some exceptions, apply just for their trademarks. Based on our previous analysis, anything that isn’t a geo, niche project, IDN or portfolio app is an english language brand app. This gives us a total of 1,200 brand apps, and 730 brands. This implies about 1.65 applications per brand — which is in the general ballpark of the earlier estimate by Fairwinds of 2.2 applications per brand. Verisign has announced 220 applications, the vast majority of which we assume to be brands, many of them from Melbourne IT. We assume that other major registry service providers, particularly Neustar with their loss-leader $10,000 application consulting fee, but also non-U.S. providers like GMO, will have the rest of the brands.

Note that the biggest variable in our analysis is the number of portfolio applications. The number is not likely to be significantly larger than 500, however, as it would reduce the number of applications per brand below credible levels. For example, if there were 1,000 portfolio apps done by the small number of portfolio players, then it would imply 700 brands with 700 apps — not a likely ratio in our opinion. It seems more likely to us that the number of portfolio apps are in the 300-600 range.

Conclusion

The foregoing gives us the following view:

• Geos: 50 applicants – 50 apps (3%)
• Niche applicants: 100 applicants – 150 apps (7%)
• IDNs: 100 applicants – 200 apps (10%)
• Portfolio: 20 applicants: 500 apps (25%)
• Brands: 730 applicants: 1,200 apps (60%)

Total: 1000 applicants, 2100 apps

We therefore see about 700 applications being likely candidates for contention (niche plus portfolio apps). Some strings (.WEB, .MUSIC) are known to have multiple applicants. Others, such as .KIWI, are likely to face no competition. Overall we think that about two thirds (466) of our 700 of these will end up in contention, and of those 466 about half (233) will have more than two contenders.

So, our very rough back-of-the-envelope calculation says that of the 2100 applications, about 233 will have exactly two parties in contention, and these have a much higher likelihood of being settled without an auction. Another 233 will have more than two contenders, which makes a deal more difficult, but by no means impossible. At the end of the day, then, we estimate that ICANN is going to have about 100-125 auctions.

Batching

A word about batching. This is a very difficult area because ICANN hasn’t released much information about how it’s going to happen (which by the way makes any “digital archery” service somewhat suspect). ICANN has said they will pay attention to geographic diversity as well as to “skill” in the digital archery game, but they have also said that applications in contention sets will go in the first batch, which would mean that brands, geos, and IDNs would be sparsely represented in the first batch.

But it is also not at all clear to us that the batches cannot be staggered instead of back-to-back; work on a subsequent batch can begin even before the previous one is finished. Concluding that 2000 apps will take until 2014 is by no means a given if ICANN uses their new-found $350 million windfall wisely. The evaluations should go quickly, particularly since the estimate of how long it will take is based on the fiction that evaluators will be looking at 500 unique applications per batch. They won’t: there are perhaps 15 qualified registry service providers in the world, and therefore ICANN will not be faced with more than that number of unique tech sections — the great majority of the application — in the submissions they receive. Even though ICANN is headquartered at what has become known as “Marina Delay,” it is difficult to imagine that with resources at its disposal, ICANN will not be able evaluate 2000 applications in 12 months.

Summary

Even though information is spotty, there’s enough to start understanding what the post-application landscape will look like. The analysis above is our broad prediction.

Larry Strickling, who runs the NTIA (the part of the U.S. Department of Commerce that handles ICANN), yesterday gave an important and remarkable speech to the Practicing Law Institute about Internet governance. His speech, timed to coincide with an orchestrated ICANN-bashing across town in the Senate, was a striking defense of the ICANN model and a repudiation of special pleading outside the process.

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.

While Occupy Wall Street and other groups representing the so-called 99% are getting most of the press, the 1% is raising its profile as well, at least when it comes to gTLDs. They are complaining that introducing global choice and competition to the Internet will cost them money. The chief of the Association of National Advertisers (ANA) now says that it has “spent the last few months” considering the new gTLD program, and has found it lacking. They want ICANN to shut the whole thing down.

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 has been quiet lately, very quiet. It has been making everyone nervous and leaving the field open to ICANN’s enemies, which has in turn encouraged domain industry hacks to resort to long “think pieces” in the absence of news — always a cause for concern.

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.

It looks as if the new gTLD applicants are finally coming out of the woodwork. Today, thanks to a tip on the Vertical Integration Working Group list, I learned of another new gTLD in the offing: .UNICEF.

Large organizations can’t do anything quickly; they need at least six months to find a vendor and finalize their plans. UNICEF has already started their process, which suggests that they’re looking at ICANN’s December meeting in Cartagena as a kickoff date for the new gTLD program.

One of the pluses of being a veteran of ICANN meetings is the ability to pare down the schedule to what is relevant for our business plans. Minds + Machines will be focused on new gTLDs in Brussels. Following are my circled-with-a-big-red-pen session suggestions for those interested in new gTLDs.

Saturday, June 19

• 15:00 – 17:00 – The Government Advisory Committee (GAC) will discuss developments in the New gTLD process, including the latest Draft Applicant Guidebook (DAG 4), TLD categories, and geographic names. Many of the changes in DAG 4 are the direct outcome of GAC recommendations. If you want a preview of how the rest of the week will play out, don’t miss this meeting.

Sunday, June 20

The Generic Names Supporting Organization (GNSO) has two working sessions on New gTLDs.

• 09:00 – 10:15. Start the day observing the Vertical Integration PDP Working Group meeting with the GNSO Council. At the ICANN meeting in Nairobi, the Board pushed the community to resolve the debate on cross-ownership of registries and registrars by instituting a zero percent cross-ownership rule. This resolution disrupted some high-profile business plans. However, the Board will consider an alternate policy from the GNSO if one is created prior to the launch of the new gTLD program. Nearly 100 community members have participated in the Working Group to formulate a new policy.
• From 14:00 – 17:00 is the GNSO’s New gTLD Working Session. The GNSO will also be briefed on DAG 4 by Kurt Pritz, ICANN’s Senior Vice President.

Monday, June 21

Though some very important work is done during the three previous days, the meeting officially opens on Monday, June 21. If you are interested in the technical side of TLDs, drop in on the ccTLD Tech Day, where registry operators discuss implementing the latest standards and share experiences.

• 15:30 -17:30. Kurt Pritz will take the stage to brief the entire community on the status of the New gTLD program, the highlights of DAG 4 and — not to be missed — an accounting of the remaining open issues.

Tuesday, June 22

• 10:00 – 11:00. The new gTLD highlight on the schedule for Tuesday, a.k.a. “Constituency Day,” is the GAC’s discussion of Morality and Public order, a remaining overarching issue. Attend if you want a glimpse of how this issue could play out.

Wednesday, June 23

• 12:30 – 14:00. Update on Vertical Integration.
• 16:00 – 17:30. A panel discussion on “Reducing Barriers to New gTLD Creation in Developing Regions.” Board Resolution 20 in at the last ICANN meeting in Nairobi requested that the community “develop a sustainable approach to providing support to applicants requiring assistance in applying for and operating new gTLDs.” Working Group members will announce several proposals for consideration. Some of the proposals will be controversial as there is a requirement to recover the costs of new gTLD applications and on-going services to new gTLDs. Applicants, registry service providers, and incumbents will all benefit from attending this session.
• 16:00 – 17:30. Next door, at the same time, panelists will discuss “What brand protection and management measures entities need to consider before, during, and after the launch of the new gTLD program.”

Thursday, June 24.

• 13:30 – 18:00. You can sleep in Thursday morning, because the important public forum is scheduled for the afternoon. This is the time to speak your mind and ask questions directly to the Board before they lock down and decide how to vote on the issues Friday.

The schedule does change leading up to and throughout the meeting, so be sure to double-check the full schedule every morning to confirm dates and times.

Minds + Machines will have multiple representatives at the ICANN Brussels meeting, and we’d be glad to meet with you about our registry services, or just point you in the right direction. You’ll recognize us by our Minds + Machines lapel pins.

I’ve been reading through some of the raft of documents ICANN released earlier this week. Among them is ICANN’s New gTLD Program Budget, which contains good news for new gTLD applicants.

ICANN reveals that it expects just 5% of applications to fail the initial evaluations, and another 5% to request refunds prior to the end of the evaluation stage. This means that they’re intending to pass approximately 90% of the applications — in other words, ICANN’s intent is not to fail applications by finding trivial faults, but rather to simply make sure that they’re operationally and financially sound. That is excellent news.

ICANN also reveals what it expects from the gTLD application round. Among the highlights:

• ICANN estimates 500 applications. The don’t estimate the number of duplicate or conflicting applications, but if we suppose that 25% are in conflict, that would leave us with approximately 425 unique TLDs applied for. Subtracting a further 10% who drop out, that leaves 382 new TLDs that we can expect to see delegated.
• ICANN expects the majority of gTLD applications to be “straightforward,” with no need for complicated and time-consuming procedures. More good news for applicants.
• ICANN expects the Independent Objector to file objections in less than 5% of the total applications. Again, ICANN’s intent does not seem to be to find fault.

It’s good to see these numbers from ICANN, which shows that they want their program to succeed with a full complement of new gTLDs. 382 of them, by my reading.

I’m guessing that few people have bothered to read the gTLD Registry Transition Processes document, which came out earlier this week, along with the Draft Applicant Guidebook (DAG) Version 4. Its name promises a very boring recitation of things to do when a registry needs to make a transition, which is of interest to no-one just yet because ICANN hasn’t even started the process to create any of the new registries that might one day be transitioned.

And yet there are in it some eye-opening clues about how ICANN is going to try to regulate the new gTLDs.

The document opens with a portentous recounting of ICANN’s core values, specifically “Core Value #1,” which is “preserving and enhancing the operational stability, reliability, security, and global interoperability of the Internet.” The idea is that if a registry changes hands, the transition must be undertaken in a way that Core Value #1 is preserved.

So far so good. But once we move past this catechism, we find that the document is just as concerned with preserving and extending the political levers that have been gradually inserted into the DAG over the last year. We find that “transition” means not just changing ownership, or wholesale replacement of the back-end registry, but also very minor things like name changes or small parts of outsourced technical services, and that any changes might need approval of third parties, including governments. It introduces dangerous consequences for any breach (even minor) of the Registry Agreement, including an entire re-evaluation of the registry similar to the initial application process. New “Emergency Operators” will be contracted to take over a registry in the case where ICANN determines that there’s a problem. And all of this will mean new fees and new bureaucracy.

Here is ICANN’s matrix for the kind of evaluation will be required.

In more detail, this is what registries of new gTLDs can look forward to:

Name Change

If the registry wants to change its name, it will be re-evaluated to “ensur[e] it is legitimate to guarantee there is no opportunity for hijacking the TLD.” The language is symptomatic of ICANN’s attitude to applicants, which is to treat them as potential scoundrels. This is in marked contrast to its attitude toward some government players, who are actual, verifiable, proven scoundrels (see “IDN ccTLDs for corrupt states, fast-track process for”). I am not sure what “hijacking the TLD” might mean, and the document does not explain. Suffice it to say that changing your name from “123 Inc.” to “1234 Inc.” will bring ICANN’s suspecting scrutiny upon you.

Sale of Registry

Selling your registry will now be more like selling your co-op in New York City. It’s not enough to find a buyer; you have to convince the Board of the buyer’s worthiness. The Board will put the buyer through the same wringer that you went through as an original applicant, with the same level of fees, and they can turn down the buyer for any number of reasons. There will be an evaluation of fitness from a technical, financial, and “due diligence” perspective. This last category is not defined but presumably refers to the new extensive background check. There is as yet no objection process for governments or the IP lobby to air their fears, but I would be surprised to not see this coming in further iterations of this document. One effect of this policy will be to make a sale to an existing player much easier than to a new entrant, thus concentrating commercial power and discouraging competition.

Fees

Each new owner (even if it’s the same one, with a new name) will have to go through some evaluation process. Every 3rd-party evaluator has to be paid. ICANN does not specify the dollar amounts, but I wouldn’t look for a bargain here. A full-on evaluation could easily run into the hundreds of thousands of dollars.

Geographical TLDs

In a sale (or even, apparently, for a simple name change) the new owner will have to gather the same governmental support or non-objection letters that the original applicant did. Effectively, the relevant government(s) will have veto power. In addition, despite language that creates a presumption of renewal of registry contracts at the end of the contract term, governments are now given the power to withdraw their support of the current registry in favor of another. Normally I would congratulate government officials on their sudden access to season tickets, expensive lunches, and access to no-show jobs should they ever leave the employ of the people, but in fact the model that ICANN supposes is unlikely to exist: I believe that in just about every case it will be the government who holds the delegation to geographical TLDs, and they will hire out the technical functions, preserving their power to do whatever they want, whenever they want.

Community TLDs

Running the registry for a community TLD just got much worse. ICANN’s new rules insert the nebulous concept of “community” directly into the operational life of the registry, instead of just the policy aspects. So, if you are the registry for a community TLD and want to change your name or move to a new back-end provider, your community must be “consulted.” No mechanism is specified about how to consult a community, so chaos is invited. I wonder what consulting the community of Harley Davidson enthusiasts looks like…

Registries in Breach of Contract

A registry may find that ICANN decides that it is in breach of its registry agreement with ICANN. This breach could be because of non-payment of fees, excessive downtime of the WhoIs server, or whatever. If it is uncured, a re-evaluation will follow before the registry is allowed to resume operations. The re-evaluation may include recertification by a government, approval by a relevant community, and other “due diligence” items. It’s just like applying for the first time.

Emergency Back-End Registry Operators

Here is a new beast, the Emergency Operator. Aspirants for this position will fill out an RFP and if they are chosen will be paid to be on stand-by until there’s an emergency, at which point they will be paid to be emergency responders, which ICANN “expects” will be on a cost-recovery basis. They are for the case where a registry can’t perform its functions properly. It’s a good idea in theory, but I wonder what exactly a third party can do in an emergency. A registry has two essential functions: the register (the list of names and associated data) and the resolution (DNS). There are other functions such as a WhoIs server. In this era of hyper-redundant anycast DNS I don’t see resolution being much of an issue. As to the register function, if it’s screwed up, it’s likely to be because of bad processes and bad record keeping, which lead to bad data, and this is not really fixable in an emergency; the whole thing needs to be checked and rebuilt. These new Emergency Operators will have to enter into contracts (“lightweight contracts,” ICANN suggests) with the registrars of the existing registries for which they are backups, creating a whole new layer of bureaucracy. I understand the idea, but wonder if the cure might be worse than the disease.

Summary

The Registry Transition Processes document is a clue to what it’s going to be like to run (or sell) a registry under the new ICANN regulatory regime. For the first time there is a semi-official recognition of the back-end registry operator; there are new colo-rectal exams whenever there is acquisition or other change in corporate structure; there are new fees; and there is an expanded role for governments, whose mission-creep is seen in all areas of ICANN these days.

One effect of this new regime will be to create heavy incentives for registries to stick with whatever back-end registry provider they happen to have. It’s not quite lock-in, but it’s close, because choosing a new one will carry significant costs and risks. The big winners here are the providers of back-end registry services.

If you’re thinking of applying for a new gTLD, you should familiarize yourself with the full document, and comment on it, because it’s going to be important for the life of your registry after delegation.

ICANN Board Member Bruce Tonkin gave a good post-Nairobi webinar (signup required) last week. Among other things, he gave his sense of the timeline going forward, which accords with our own estimate, which we publish below.

This is ICANN, so further delays are always possible. If ICANN is able to make the progress it thinks it can on the remaining open issues, however, the timeline below looks reasonable. Also available for download as a PDF.

Until today’s announcement by Canon, no large brand had broken the “thin brand line” by revealing their plan to apply for their own new top-level domain. Now with Canon’s announcement, other major companies have been challenged to either announce their TLD plans or else state that they plan to forgo the chance to brand themselves at the top level of the domain name space.

Until now, in public, large brands have marched in lock step in opposition to new top-level domains, ostensibly because of the high cost of defending and enforcing their marks in multiple new namespaces. The worst-kept secret in the industry, however, is that brands have been making private plans, and brand-service registrars have been prepping their clients for new gTLDs in anticipation of healthy fees for application submission services.

Canon, at least, has decided that the marketing benefits of their own top-level domain outweigh the costs. In the U.S., legal departments, which are good at identifying risk — though not necessarily expert at quantifying it –, exercise a much stronger presence in the corporate boardroom than they do in European and Asian companies.

Could it be that the highly defensive stance of U.S. intellectual property interests, hardened by the file-sharing wars, is not shared by the rest of the world’s brands?

In Japan, Canon has decided to cast its lot with the money-makers instead of the money-hoarders. I predict we will see more brands opt for engagement with the Internet by visibly branding themselves with their own new gTLD, but that the the last ones to do so will come from the United States.