Tag Archives: gtLDs

Comments on the second draft of ICANN’s gTLD applicant’s guide

These are the comments I sent today to ICANN

Unfortunately, this second draft version of the applicant’s guide does not yet address major concerns in the process.

As stated in the previous comments round, it is fundamentally wrong to assume that all new gTLD applicants will use the .com model of mass market approach for domain names. Both the amount of the application fee and the yearly registry fee imply that the registry will need to sell as many domain names as possible, favouring numbers over quality. This is the wrong approach with regard to community-based TLDs.

The amount of the application fee should be reduced, as it may discriminate against less financially resourceful applicants, such as communities. While I understand ICANN may want to prevent frivolous applications with a high application fee, it nevertheless excludes from the process a lot of potential serious applications targeting a limited community.

It is unfair that only the applicants of the first round would have to cover the past costs of the new gTLD development program. On the other hand, it is difficult to guess how many applications will be submitted on each round. Because these costs have already been expended and that ICANN clearly states that whatever is recovered will be transferred to a reserve fund, it is therefore suggested to simply drop the $26,000 that represents the incidence of gTLD development program cost on each application.

Note that this request for a large up-front investment in the application process is orthogonal to the expectation of ICANN for the applicants to demonstrate the availability of continuation funding. Whatever capital will be invested in submitting the application will not be available in the future. Hence, ICANN’s financial expectations at the application stage may plant the seed of future registry failure.

Further, payment of the application fees in several installments should be offered to TLD applicants. For those applicants that need to submit a strong business plan to their investors, having a pay-as-you-go fee through the application process will make it easier to convince investors.

ICANN should also consider postponing for two or three years the collection of the annual registry fee, to allow new gTLD operators to start operating in a financially sound context, with no loans and other debts that may compromise the start-up of their activities. On the short and medium term, this help new registries to become more solid and will be beneficial for the the long term stability of the DNS space.

The fact that ICANN only allows for payments to be made in USD places a high risk on the business plans of those applicants that work in other currencies. As suggested elsewhere, ICANN should accept payments in other
currencies, at a rate fixed at the time the applicant’s guidebook is published.

There is still a fundamental contradiction in using an auction model as a last resort for community-based applications. By definition, community-based applications will target smaller communities and use a cost-recovery model, rather than a purely commercial one. For the winner of the auction, this will mean recovering its costs through increasing the gross price of registrations. As a consequence, the number of domain names sold may be reduced and the newly launched registry may not meet its business plan. Ultimately, auctions may also be a cause of registry failure.

The ICANN new generic TLD process (Las Vegas edition)

I have not submitted any comments on ICANN’s new gTLD process, mostly because many other people have said more diplomatically what I think, but I thought I could blog about it.

My main concern from the beginning was that the process should allow any serious candidate to run with a reasonable chance to be able to actually start running a gTLD. This includes small and medium sized communities and startup companies with little seed money.  This also includes registry models that may not favour mass registrations. For all these, the current model is flawed.

Communities based on values, whether cultural or ethnic are by definition limited in scope. So are communities based on geography, although they could larger.  These communities could get their TLD, if they have strong political support and  the attached financing. It this case, the short term profits are not the registration fees themselves, but the prestige linked to a community having its own TLD. I bet the application for the  .VLA TLD will succeed, because it has the strong political support of a wealthy community.

For the startup registries wishing to enter the gTLD arena and compete to a certain degree with the incumbents, the skies are cloudy, to say the least. First and foremost: you need money. A lot of it. Anthony Van Couvering  at Names@Work has a timeline, which details the associated costs. However, a lot of the costs are not appearing. My personal estimation is that the whole process, up to the contract signing ceremony with ICANN,  is USD 1 million at the very minimum. More realistically, you need  50% more to be on the safe side.

400K will go to ICANN and its subcontracted  evaluators. The associated costs with the evaluations can quickly add up.  At this stage, there is no way to know exactly how much they will cost, because there are many parameters.  ICANN tells you these costs will be payed directly to the evaluators, not through ICANN.  This will make it even more opaque.

The rest needs to cover consultants,  lawyers, salaries, ICANN meeting sponsorships, meetings with your community leaders to gain support for your application (and everything that goes with it: profits sharing, gadgets, gourmet dinners, escorts, you name it) and travel to ICANN meetings for you and your staff.

On top of that, ICANN wants you to be able to guarantee the operation of the TLD for 3 years, even if your TLD is not a success.

Note that this will not guarantee at all that your application will succeed.  But at least it will guarantee one an a half year of hard work and travel to exotic places for two or three people, and others on a as-needed basis.  Now go out and tell your banker, if he has not gone bankrupt already.

If you are lucky enough to reach the contract signing stage, the real work begins: hire staff, build an infrastructure, convince registrars to carry your TLD, set up a sunrise period . These are another four or five months without a single cent falling on your bank account.  In conclusion, this whole new gTLD process will be most profitable for established actors, who will not have to cover many of the above-mentioned costs, or have the reserves to cover them.

Even if ICANN revises parts of their RFP, I am not sure it will attract the 500 applications it expects. This RFP should have been published 8 years ago, at the height ofthe Internet bubble, when everything related to the Net received full funding. Now, in this recession period, investors and bankers are cautious. It will not be easy to find partners who are willing to potentially loose USD 1.5 million, if it cannot be demonstrated with certainty they can recoup their investment in less than two years.

Good luck. May the farce be with you.

ICANN to Auction new generic top level domains

ICANN has just published a paper from its contractor PowerAuctions LLC, regarding the use of auctions to award new TLD strings in case of contention.

I can understand what ICANN wants to avoid. In the past, it has been criticized for using the “beauty contest” model with the redelegation of the .net TLD. It was finally “redelegated” to its incumbent operator, although it was obvious to many industry observers that other bidders were as good, if not better on several points. There was a large part of subjectivity in the decision, simply because beauty criteria are a very personal matter.

However, the auction model is based on the idea that whoever wins the auction will be able to recoup its investment on the sale of domain name, and that the goal of the gTLD operator is to sell as many names as possible. It also promotes a capitalistic model, where only those with the most money will be granted generic strings, regardless of other considerations. There is no room for gTLDs wishing to remain purposely small.

It is not clear yet if the auction model will be the only one used by ICANN for all new gTLDs. It would be unfortunate if it were, because there are different TLD models and communities. Not all potential gTLD operators are looking to “get rich quick”. Some may even care about the community they wish to serve, and actually put societal values before profits. How naive they are. What will matter is not how you are going to serve your community, but how much you are willing to pay ICANN for it.

By announcing it will go to an auction model, ICANN is actually creating potential for contention. After all ,it may be a wise investment decision for wealthy copycats to simply watch what early proposers of new gTLD strings are doing and how much support their proposal gets. Those early proposers have spent a lot of time and money over the last two years in participating in ICANN processes to launch this new TLD round. They have done all the dirty work.  In the meantime, copycats have been silently watching.  Once the auction opens, early proposers will have burnt all their cash and will not be able to compete with the copycats.

Advice to those early proposers: keep some cash to pay your lawyer’s fees and get some undisputable proof your came up with the idea first. There’s going to be blood, sweat and tears. Those who are going to steal your idea will hold no quarter.

A public forum has been established. Comments should be submitted to auction-consultation@icann.org

Comments on the GNSO report on new GTLDs

As I am not able to attend the Los Angeles meeting of ICANN, I sent the following comment to the GtLD workshop:

There have been numerous comments periods over this report in the past and what I want to state is not new, but it seems it has not been addressed in the report.

Basically, the report is based on the assumption that the current model for gTLDs is the only possible one. It assumes that domain names will be sold on a mass market, mostly through intermediaries, and that this will generate a profit.

Was it ever envisaged that there could be other business models that do not fit into that mould ? There are several but, unfortunately, it will be next to impossible to try them out. There may be TLDs for very small communities, or an advertisement driven model in which domains are given out for free. A dynamic DNS service, like DynDNS.org, but performed a the TLD level could not accommodate the registrar model.

Regarding the Application Fee for proposed new gTLDs: while the report states that “Implementation Guideline B suggests that application fees be designed to ensure that adequate resources exist to cover the total cost of administering the new gTLD process, and that application fees may vary for different applicants”, the criteria that will be applied to various applicants are not yet clear, and this is a sensitive area. Will that be a one-time upfront cost ? How do we set it to avoid eliminating good ideas from the start of the process and privilege those incumbent players with deep pockets ? Could that be a per domain name fee to be paid over several years once the TLD is up and running ?

In short, the way the application fee is implemented will be a key factor for the success of new business models.