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.WEB is ICANN’s First Test of Accountability

Last month, in a much heralded international event, the agreement that ICANN (Internet Corporation for Assigned Names and Numbers) held with the United States Department of Commerce was permitted to lapse and so ICANN became an independent manager of the Internet’s addressing system. While some argued that the organization was not “ready” for the transition, the majority of ICANN’s multi-stakeholder community, including Afilias, agreed that sufficient accountability measures were in place to ensure that ICANN remains a responsible (and responsive) international organization.

Ensuring competition and choice in domain names has been an essential feature of ICANN’s construct since formation over 15 years ago and it remains one of the core values enshrined within ICANN’s post-transition bylaws (https://www.icann.org/resources/pages/governance/bylaws-en/#article1). The first real test of this core value is now upon ICANN: what to do about the significant violations that occurred in the ICANN run auction process for the .WEB top level domain (TLD).

Afilias is a longstanding, active and constructive member of the ICANN community. We are strongly supportive of competition and choice in the domain name market and we are one of the applicants for .WEB.

.WEB background
In 2011, ICANN finalized a process to further enhance competition and choice in domain names by expanding the top level domain space beyond the legacy .COM, .NET, .ORG and prior round new gTLD addresses. Over 1300 new top level domains were applied for, and over 1100 have already launched. These include addresses as diverse as .BERLIN, .BIO, .RED and even “dotBrands” like .BNPPARIBAS. The .WEB TLD was one of these and has taken some time to come to auction. It is short, generic and expected to be especially attractive to registrants. Seven applicants applied for .WEB in 2012, but the TLD has in fact been sought after since ICANN’s first nTLD application round back in 2000.

The process for determining a registry operator when multiple applications are received is defined in the Applicant Guidebook (AGB). This document is the authoritative procedure manual for all aspects of the nTLD process. Consistent with the AGB, all .WEB applicants had agreed as recently as 11 May 2016, to resolve the contention set via a private mechanism (a private auction). However, a few weeks prior to the scheduled private auction on 15 June 2016, one applicant - Nu Dot Co - mysteriously backed out, forcing an ICANN auction (the last resort process), which had been scheduled for 26 July 2016.

The AGB is clear: it specifies that an “applicant may not resell, assign or transfer any of the applicant’s rights or obligations in connection with the application.” Why did Nu Dot Co back out of the private auction process? Several parties asked ICANN to investigate Nu Dot Co, specifically with respect to alleged changes in ownership or financial control of the company. In response, ICANN enquired of Nu Dot Co in writing, whether any such changes had occurred. Nu Dot Co responded and denied that any such changes had taken place. ICANN dropped the matter and proceeded with the auction.

In the 26 July 2016 ICANN auction, Nu Dot Co was indeed the high bidder, with a record bid for a TLD that exceeded US$135m. Shortly thereafter, Verisign, the .COM and .NET registry operator, came out of the shadows and announced publicly that it had secretly arranged to fund Nu Dot Co’s bid and moreover, that Verisign intended (subject to ICANN’s consent) to take assignment of the .WEB registry agreement from Nu Dot Co after the auction was over – a direct contravention of the AGB rules against assignment. Given the timing, it seems reasonable to surmise that Verisign and Nu Dot Co misled ICANN prior to the auction.

ICANN’s new TLD process was specifically designed to disqualify this kind of behaviour. The restrictions on reselling, assigning or transferring rights exist in the AGB for good reason. Such behaviour is not transparent and damages the honest auction participants. In this case, because Verisign (already the dominant competitor with COM and NET) would be the gaining party, it also further reduces competition in domain names. The potential outcome is contrary to ICANN’s core values and contrary to the extensively deliberated, community approved procedures laid out in the AGB.

Why this is important: the gTLD registry market is not competitive
Verisign began 2016 with over 80% market share of gTLD registrations and enjoys considerable standing and contractual advantages relative to other registry operators. This is not simply the opinion of Afilias. The United States Department of Commerce (DoC), in Cooperative Agreement Amendment 32 with Verisign (https://www.ntia.doc.gov/files/ntia/publications/amendment_32_11292012.pdf), restricts it from increasing prices on .COM unless market conditions show evidence of good competition. Just this past week, after a formal review of the market conditions and Verisign pricing, the DoC confirmed continued lack of competition by forbidding .COM price increases through 2024 (https://www.ntia.doc.gov/files/ntia/publications/amendment_34.pdf).

Competition is a core value of ICANN with very good reason. Competition drives innovation and improves consumer choice through ensuring: (i) market-based pricing; (ii) a widely available variety of unrestricted TLDs; (iii) improved quality of service (e.g. highly available and reliable systems); and (iv) improved customer service. Competition also reflects the global diversity of the Internet user base, and promotes open and collaborative technologies.

What ICANN needs to do
A coordinated effort to circumvent or violate the rules of the Applicant Guidebook has positioned Verisign to potentially acquire the .WEB TLD, a TLD that Verisign did not openly and transparently apply for in 2012 alongside the other 7 applicants.

If ICANN permits the auction result to stand, ICANN will grant to Verisign, the dominant market player in a non-competitive market, the right to operate the registry for .WEB, the only new TLD expected to pose a significant challenge to the market dominance of Verisign’s .COM and .NET franchise. In turn, granting .WEB to Verisign will expand Verisign’s dominance, restrict competition and consumer choice, and directly contradict ICANN’s values and Bylaws. The ICANN Board has the opportunity to not begin its newly independent tenure by favouring Verisign. The ICANN board and, under its direction, ICANN itself, can stand-up for competition and consumer choice. The remedy is clear: disqualify the application that would allow Verisign to illegitimately acquire rights to .WEB.

The next ICANN Board meeting is at the global community meeting in Hyderabad, India from November 3-9. This is also the first global community meeting to occur after ICANN gained independence, and hence is pivotal for ICANN’s emerging reputation as an independent, international organization. Given the controversy over ICANN’s independence, all eyes will be on the ICANN board to see if it is focused on doing the right thing. It’s time for the ICANN board to show resolve and to demonstrate that it is a strong, independent body acting according to the letter and spirit of its own AGB and bylaws and, perhaps most importantly of all, to actively demonstrate its commitment to act both independently and in the global public interest.

Jonathan Robinson
Executive Chairman
Afilias plc