.ai registry fights deadbeats with tweaked auction rules

With too many auction winners failing to hand over the loot, the .ai registry has changed its auction terms to make being a deadbeat more expensive.

The registry has increased its deposit requirement from 2% to 5% for bidders considered “high risk”, which basically means new customers, or $100, whichever is higher. The deposit is forfeit if the buyer fails to pay.

The move comes because too many winners are currently failing to pay. On Twitter, registry manager Vince Cate wrote yesterday:

On http://auction.whois.ai we have had too many cases of people not paying for domains they bid for so we are increasing the deposit requirement to 5% and the non-payment fee to 5% effective immediately.

The registry conducts monthly auctions of expired inventory on its own platform using park.io software and is mirrored at Dynadot. The highest-interest names regularly attract five-figure bids, due to the increasing popularity of artificial intelligence.

Sometimes, the same names show up in consecutive auctions because the previous winner didn’t pay up. In January, for example, dog.ai and insure.ai, which had both attracted bids over $20,000, returned to auction.

Private auctions could be banned in new gTLD next round

ICANN is “sympathetic” to the view that private auctions between competing new gTLD applicants are a Bad Thing that should be discouraged in the next application round.

Director Alan Barrett told the GNSO Council at ICANN 79 today that the board of directors, following Governmental Advisory Committee advice, has hired a consultant and is looking at ways to design an ICANN-run “last resort” auction in a way that “disincentivizes” the use of private auctions.

In the 2012 round, many contention sets were settled with private auctions, with tens of millions of dollars changing hands. Losing auctions was a real money-spinner for several portfolio applicants. When ICANN conducted the auctions, ICANN got the money.

Last June, the GAC advised ICANN to “ban or strongly disincentivize private monetary means of resolution of contention sets, including private auctions”, and Barrett said ICANN is considering how to fulfill that advice.

“We don’t know the answers yet, but what I can say is that we are looking at it and we are sympathetic to the idea of disincentivizing private auctions,” Barrett said.

He added that ICANN is looking at how it might discourage competing applicants from settling their contention sets using joint ventures “in a bad faith kind of way”.

“There’s the risk that applicants might use a joint venture in a bad faith kind of way, as a way of transferring money from one applicant to another, in much the same way as private actions could have done,” he said. “We want to figure out a way of allowing good-faith joint ventures.”

My sense is that whatever ICANN comes up with will have to have a substantial carrot component, or an equally big stick. The domain industry can be incredibly devious at times, and if there’s a way to make a big chunk of change filing unsuccessful new gTLD applications, somebody will figure it out.

DNS Women barred from ICANN funding?

A networking group set up to support women in the domain name industry, especially in the developing world, may be banned from applying for ICANN funding under rules published earlier this week.

Concerns have been raised that DNS Women may be excluded from the $10 million in non-profit Grant Program funding ICANN is making available this year because its CEO participated in the program’s community rule-making process.

ICANN’s rules, written by Org staff based on the recommendations of the Cross-Community Working Group on New gTLD Auction Proceeds (CCWG-AP), ban anyone from applying for grants — set at between $50,000 and $500,000 — if they have potential conflicts of interest.

Participation in the CCWG-AP is listed as one such conflict:

No person that participated as a member (including temporary member appointments) of the Cross-Community Working Group on New gTLD Auction Proceeds (CCWG-AP) is eligible to apply for or be included within funded proposal activities as principals, advisors, or in other roles. Grants may not be awarded to businesses and organizations owned in whole or in part by the CCWG-AP members or their family members. Grant funding may not be used to pay compensation to CCWG-AP members or their family members.

DNS Women is currently led by Vanda Scartezini, who was a member of CCWG-AP representing the At-Large Advisory Committee. She’s written to ICANN to express surprise to find herself suddenly unable to apply for funding. ICANN has responded with a pointer to the CCWG-AP’s recommendations, where the language closely mirrors that found in the new application rules as implemented.

But if Scartezini has shot herself in the foot, she may not be alone. According to the CCWG-AP’s final report, there may have been almost enough foot-shooting to create a Paralympic football team.

Of the 22 people who participated as full members of the group — and would be therefore barred from financially benefiting from grants — 10 people answered “yes” or “maybe” when asked to disclose whether they or their employer expected to apply for funding (almost all, including Scartezini, were “maybes”).

The $10 million tranche available this year comes from a $217 million fund ICANN raised auctioning off contested gTLDs following the 2012 application round.

$10 million of ICANN cash up for grabs

ICANN has officially launched its Grant Program, making $10 million available to not-for-profit projects this year.

The Org expects to start accepting applications for between $50,000 and $500,000 between March 25 and May 24 and start handing out the cash early next year.

It’s the first phase of a program that currently sees ICANN sitting on a distributable cash pile of $217 million that it raised by auctioning off contested new gTLD registry contracts under the 2012 gTLD application round.

The money is only available to registered charities that in some way support ICANN’s mission in terms of developing internet interoperability or capacity building.

Organizations worldwide will be able to apply, but it seems unlikely anyone from a country currently subject to US government sanctions will be successful. Conflicted organizations — such as those led by somebody involved with the program — are also barred.

Applications for grants will be assessed by ICANN staff, a yet-to-be-named Independent Application Assessment Panel comprising “a diverse collective of subject matter experts”, and ultimately the ICANN board of directors.

More information and the application form can be found here.

ICANN accused of power grab over $271 million auction fund

ICANN has acted outside of its powers by ignoring community policy recommendations and leaving its $271 million gTLD auction windfall open to being frittered away on lawyers, according to community members.

The Intellectual Property Constituency of the GNSO has filed a formal Request for Reconsideration over a board resolution passed at ICANN 78 last month in Hamburg, and other constituencies may add their names to it shortly.

The row concerns the huge cash pile ICANN was left sitting on following the auction of 17 new gTLD contracts between 2014 and 2016, which raised $240 million (as of July, around $271 million after investment returns and ICANN helping itself to a portion to fund its operations reserve).

It was decided that the money should be used to fund a grant program for worthy causes, with organizations able to apply for up to $500,000 during discrete rounds, the first of which is due to open next year with a $10 million pot. Around $220 million is believed to be earmarked for the grant program over its lifetime.

But the Cross Community Working Group for Auction Proceeds (CCWG-AP) that came up with the rules of the program was concerned that unsuccessful applicants, or others chagrined by ICANN’s grant allocations, might challenge decisions using ICANN’s accountability mechanisms.

This would cause money earmarked for worthy causes to be spaffed away on lawyers, which the CCWG-AP wanted to avoid, so it recommended that ICANN modify its fundamental bylaws to exclude the grant program from mechanisms such as the Independent Review Process, which usually incurs high six-figure or seven-figure legal fees.

ICANN seemed to accept this recommendation — formally approving it in June last year — until ICANN 78, when the board approved a surprise U-turn on this so-called Recommendation 7.

The board said it was changing its mind because it had found “alternative ways” to achieve the same objective, “including ways that do not require modification to ICANN’s core Bylaws on accountability”. The resolution stated:

As a result, the Board is updating its action on Recommendation 7 to reflect that ICANN org should implement this Recommendation 7 directly through the use of applicant terms and conditions rather than through a change to ICANN’s Fundamental Bylaws.

This left some community members — and at least one ICANN director — scratching their heads. Sure, you might be able to ban grant applicants from using the IRP in the program’s terms and conditions, but that wouldn’t stop third parties such as an applicant’s competitors from filing an IRP and causing legal spaffery.

The board was well aware of these concerns when it passed the resolution last month. Directors pointed out in Hamburg that ICANN is still pursuing the bylaws amendment route, but has removed it as a dependency for the first grant round going ahead.

This left some community members nonplussed — it wasn’t clear whether ICANN planned to go ahead with the program ignoring community recommendations, or not. The reassuring words of directors didn’t seem to tally with the language of the resolution.

So the IPC took the initiative and unironically invoked an accountability mechanism — the RfR — to get ICANN to change its mind again. I gather the request was filed as a precaution within the 30-day filing window due to the lack of clarity on ICANN’s direction.

The RfR states:

the impetus behind the Bylaws change was to prevent anyone from challenging grant decisions, including challenges from parties not in contractual privity with ICANN. The Board’s hasty solution would only prevent contracting grant applicants from challenging decisions; it would not in any way affect challenges by anyone else – including anyone who wished to challenge the award of a grant. The grant program could be tied in knots by disgruntled parties, competitive organizations or anyone else who wished to delay or prevent ICANN from carrying out any decision to grant funds. This is exactly what the CCWG-AP sought to prevent

The IPC says that by bypassing the bylaws amendment process, which involves community consent, the ICANN board is basically giving itself the unilateral right to turn off its bylaws-mandated accountability mechanisms when it sees fit. A power grab.

It wants the Hamburg resolution reversed.

Discussing the RfR a few days before it was filed, other members of the GNSO Council suggested that their constituencies might sign on as fellow complainants if and when it is amended.

RfRs are handled by ICANN’s Board Accountability Mechanisms Committee, which does not currently have a publicly scheduled upcoming meeting.

.web fight back in “court”

ICANN is heading back to the quasi-courtroom of its Independent Review Process, after .web auction runner-up Altanovo Domains filed its second IRP complaint about the controversy-ridden gTLD.

I first reported that the complaint had been filed back in July, but it was not until last Thursday that ICANN published the document, along with thousands of pages of exhibits and its own response, almost all thoroughly redacted to remove references to the one contract at the heart of the mess.

Now-independent Altanovo, which was part of Afilias before that company was acquired by Donuts, claims that ICANN broke its bylaws commitments to apply its policies equitably to everyone.

The company remains incredibly cheesed off that it lost the 2016 auction for .web, which saw a company called Nu Dot Co pay ICANN $135 million for the domain, at a time when it was secretly backed by Verisign.

Altanovo claims that NDC broke the terms of ICANN’s Applicant Guidebook and the rules of the auction by declining to disclose the existence of the Domain Acquisition Agreement it had signed with Verisign.

That deal saw Verisign bankroll and dictate the terms of NDC’s handling of the auction; in exchange, NDC would transfer .web to Verisign shortly after signing its ICANN registry agreement.

Altanovo has already won one IRP about this. The panel in the first case ruled in May 2021 that ICANN broke its bylaws because its board did not make a decision on whether NDC’s behavior was kosher.

As a result of that ruling, the board spent over a year mulling and eventually decided this April that, no, NDC didn’t break the rules. It’s that decision that Altanovo is challenging now. The complaint says:

NDC had no independent business plan for .WEB that it intended to implement. Its sole purpose in applying for .WEB was to obtain it for the oldest of the incumbent players, not to market .WEB itself in any way or to compete in the market… No one in the Internet Community, including the other .WEB Contention Set members, had any clue that, as of August 2015, they were competing with Verisign and not NDC.

ICANN’s response to the complaint states that its board was exercising its “business judgement”, which must be deferred to, and that Altanovo’s claims about bylaws breaches merely amount to differences of interpretation.

Speaking to analysts on Verisign’s third-quarter earnings call last week, company CEO Jim Bidzos quoted from the conclusion of ICANN’s IRP response and added: “Altanovo’s IRP request should be denied. We agree with ICANN.”

“We continue to believe that this IRP filed by Altanovo and its backers has been filed for the purpose of delay,” he said.

Altanovo reckons that Verisign and ICANN have been colluding on their legal responses to the .web and that certainly seems likely in terms of the redactions ICANN has made to the complaint and response published last week.

All quotations of the Verisign-NDC DAA are redacted in the Altanovo complaint are redacted as “third party confidential”, presumably at Verisign’s request; in the ICANN response the single DAA quote remains unredacted.

Governments call for ban on gTLD auctions

Governments are calling for a ban on new gTLD contention sets being settled via private auctions, a practice that allowed many tens of millions of dollars to change hands in the last application round.

ICANN’s Governmental Advisory Committee said in its ICANN 77 communique that it formally advises ICANN: “To ban or strongly disincentivize private monetary means of resolution of contention sets, including private auctions.”

Private auctions typically see the losers split the winner’s winning bid among themselves. The GAC endorsed the At-Large Advisory Committee’s recommendation that applicants should be forced to ICANN-run “last resort” auctions, where ICANN gets all the money, instead.

The concern is that companies with no intention of actually operating a gTLD will file applications purely in order to have a tradeable asset that can be sold to competing applicants for a huge profit.

In the 2012 round, 224 contention sets were settled in private, often via auctions. ICANN not only allowed but encouraged the practice.

For example, publicly listed portfolio registry Minds + Machines disclosed tens of millions of income from losing private auctions, some of which was reinvested into winning auctions for gTLDs that it did intend to run.

Another applicant, Nu Do Co, did not win a single auction it was involved in, with the exception of the ICANN-run “last resort” auction for .web, where its winning $135 million bid was secretly funded by Verisign.

In the case of .web, rival bidders urged NDC to go to private auction until almost the last moment, eager to get a piece of the winning bid. It remains the subject of legal disputes to this day.

The current GNSO “SubPro” policy recommendations do not include a ban on private settlements, instead saying that applicants should affirm that they have a “bona fide” intent to operate the TLD, under penalty of unspecified sanctions if they lie.

The recommendations include a set of suggested red flags that ICANN should look out for when trying to determine whether an applicant is game the system, such as the number of applications filed versus contention sets won.

It’s pretty vague — the kind of thing that would have to be ironed out during implementation — and the ICANN board of directors has yet to formally approve these specific recommendations.

The GAC’s latest advice also has concerns about the “last resort” auctions that ICANN conducts, which see ICANN place the winning bid in a special fund, particular with regards non-commercial applicants.

The GAC advised ICANN: “To take steps to avoid the use of auctions of last resort in contentions between commercial and non-commercial applications; alternative means for the resolution of such contention sets, such as drawing lots, may be explored.”

Some previous ways to mitigate contention gaming include Vickrey auctions, where every applicant submits a high bid at the time of application and the applicant with the highest bid pays ICANN the amount of the second-highest bid.

Bidding before one even knows whether the gTLD string will be subject to contention is seen as a way to dissuade applicants from applying for strings they don’t really want.

ICANN directors said repeatedly at ICANN 77 last week that the Org will be hiring an auctions expert to investigate the best way to handle auctions and reduce gaming.

Cahn says .hiphop premiums could show up at auction next month

“Premium” .hiphop domains could show up at auction next month, according to RightOfTheDot.

The company is planning a “digital asset auction” for February 24 and boss Monte Cahn said in a press release “you may also see some .hiphop premium reserve names as well as some other premium TLDs.”

Cahn is a partner in Dot Hip Hop, along with JJN Consulting and DigitalAMN, the new company currently battling ICANN bureaucracy for the right to have UNR’s .hiphop registry contract reassigned.

Along with 22 other UNR buyers, DHH is waiting for ICANN approval of its purchase. ICANN is wary and/or confused by UNR’s representations about matching blockchain alt-root TLDs that accompanied the sales.

The company plans to lower the cost of .hiphop names to bring them to a wider audience.

DHH filed a Request for Reconsideration with ICANN recently, to speed up a process that has so far taken almost six months, but withdrew it when it became clear it had merely triggered another time-consuming bureaucratic process.

ROTD was formed to coordinate gTLD auctions, but is perhaps better known nowadays for selling left-of-the-dot domains, such as at its annual NamesCon conference live auctions.

The company is currently seeking lots for its February 24 auction, including high-value domains and NFTs. The deadline for submissions is February 17.

UNR getting out of the registry business with $17 million no-reserve auctions on 23 new gTLDs

UNR, the former Uniregistry, plans to auction off its portfolio of 23 new gTLD contracts in April.

The company, owned by domain investor Frank Schilling, said on a new web site at auction.link:

In a move to completely dedicate the company and its resources to its backend registry and IP rights protection services, UNR has announced that 23 of its Top Level Domain assets will be sold in no-reserve auctions on April 28, 2021.

The TLDs will be sold individually, rather than as a package.

While they’re all no-reserve auctions, the published starting prices add up to $16,870,000. Some have minimum bids of zero, some are less than the price UNR paid ICANN for its application fee back in 2012.

Here’s a list of the TLDs, along with their starting prices.

[table id=63 /]

The prices appear to be based on the reg fee and volume of existing registrations, which range wildly from around 300 for .hiv to 159,000 for .link. The .country gTLD, aimed at country music makers and fans, currently has no starting bid listed.

The most-likely buyers of these gTLDs would be the rapidly dwindling list of fellow portfolio registries, such as Donuts and Radix.

While UNR’s exit from the registry business may be surprising — Schilling was a big fan of new gTLDs and Uniregistry applied for 54 of them, investing $69 million — it’s merely the latest stage of the business being dismantled.

Uniregistry sold its registrar and secondary market businesses to GoDaddy last year, and later sold its stake in three car-related gTLDs to business partner XYZ.com.

UNR said the April auctions will be managed over one day by Innovative Auctions, which is pretty much the de facto standard player in new gTLD auctions.

While the company says the auctions are open to “businesses and individuals”, I’m pretty sure ICANN rules forbid a gTLD being owned by individuals.

The company now plans to focus on being a pure-play back-end registry services provider, with a focus on dot-brand gTLDs, where it will continue to compete with the likes of GoDaddy, CentralNic, Donuts and Verisign.

Crackdown looms for new gTLD auction gaming

ICANN will be urged to consider taking a stronger position against companies who apply for new gTLDs simply to lose them at auction or immediately flip them to others.

A community working group, known as SubPro and tasked with developing rules for the next new gTLD round, delivered its final Final Report this week, and the one area that failed to gain a designation of “consensus” or stronger was private auctions.

In the 2012 application round, several companies applied for large portfolios of strings that look — in hindsight at least — like efforts to game the system by forcing rivals to auctions they planned to deliberately use.

Companies such as MMX made millions losing auctions during the round, some of which was reinvested in winning auctions for other TLDs.

Applicant Nu Dot Co was notable for losing every private auction it participated in, then quickly flipping its successful .web application when Verisign stepped up with a $135 million bankroll.

While it’s difficult to know the extent to which this was all planned in advance, it proved the business model — filing spurious applications for new gTLDs you have no intention of launching — could be lucrative in future rounds.

But SubPro has put forward a slew of recommendations that, should they pass the remaining hurdles of the policy development track, could bring in substantial sanctions for those applicants and registries found to be gaming the system.

The SubPro recommendations are heavily buttressed with square parentheses, indicating disputed text, and supplemented by some minority statements from members of the working group who think that private auctions should be banned outright in future application rounds.

But the headline recommendation, numbered 35.3, is this:

Applications must be submitted with a bona fide (“good faith”) intention to operate the gTLD. Applicants must affirmatively attest to a bona fide intention to operate the gTLD clause for all applications that they submit.

Far from merely providing a check-box assertion that they’re legit, which would itself be easily gamed, applicants would also find their applications scrutinized by ICANN and its external evaluators to check for signs of a lack of bona fides.

Factors used to determine shadiness could include how many applications for contested strings are applied for, how many private auctions are lost, whether the successful applicant has not launched its gTLD within two years, and whether contracts are flipped within the first year.

SubPro discussed penalties for gaming could include the loss of registry contracts, a ban from future rounds or straight-up monetary fines. But the group did not put forward any recommendations.

SubPro couldn’t seem to come to agreement on most of this. The recommendations were determined to have “strong support but significant opposition” during the group’s recent consensus call.

One strong objection came from a somewhat diverse group of SubPro participants comprising Alan Greenberg (At-Large), Christopher Wilkinson (At-Large), Elaine Pruis (Verisign), George Sadowsky (Afilias/ISOC), Jessica Hooper (Verisign), Jim Prendergast (consultant), Jorge Cancio (Swiss government, but signed in a personal capacity) and Kathryn Kleiman (non-commercial users). They said:

The recommendations in the final report are a mix of overly complex disclosures and attestations that needlessly complicate the program to allow for private auctions. And they will not work. The only way to prevent a repeat of the activity from the 2012 round is to ban private auctions

They also claimed that allowing private auctions would putter smaller, niche and community applicants at a disadvantage, and that ICANN’s reputation would be harmed if it was seen to be overseeing gaming.

The At-Large Advisory Committee also issued a strong objection to private auctions along the same lines:

We remain concerned about attempts to “game” the application process through use of private auction and share the ICANN Board’s concerns on the consequences of shuffling of funds between private auctions. The ability for a loser to apply proceeds from one private auction to fund their other private auctions only really benefits incumbent registry operators or multiple-string applicants and clearly disadvantages single-TLD/niche applicants. We believe there should be a ban on private auctions, and that by mandating ICANN only auctions, the proceeds of ICANN auction can be directed for uses in public interest

The assumption there of course is that an ICANN “last resort” auction, in which the winning bid is funneled into ICANN’s cash pile, would be spent on stuff genuinely in the public interest, rather than frittered away on secretly settling employee lawsuits or indulging in more expensive, self-important navel-gazing.

Perhaps unsurprisingly, the ICANN board of directors has indicated that it prefers the idea of last resort auctions to private auctions.

But SubPro has also made some recommendations that could potentially keep the price of last-resort bids down, completely redesigning the auction process compared to the 2012 round.

If the recommendations are implemented, applicants would have to submit bids towards the start of the application process, when they don’t even know who they’re bidding against.

After all the applications have been submitted, ICANN evaluators would group them all according to whether they’re identical or confusingly similar to each other, then inform each applicant in a contention set how many bidders — but not their identities — they’re up against.

Applicants would then have to submit a sealed bid stating the maximum price they’d be willing to pay for the gTLD in question. It would be only after “reveal day”, when ICANN publishes the applications themselves, that everyone would learn who they’re bidding against.

They’d then be able to engage in private resolutions (auctions could come into play at this point), but it would only be after contention resolution phases such as objections and Community Priority Evaluations were complete that applicants would find out who’d submitted the highest bid.

The winning bidder would pay the amount of the second-highest bid to ICANN.

The 400-page final report (pdf), along with the minority statements, will now be sent to the GNSO Council for approval, before it makes its way to the ICANN board.

Given how much work remains to be done on private auctions and other issues that I’ll get to in later coverage, it seems that a lot of the mechanics of how contention resolution will work will have to be devised by ICANN and the community during the Implementation Review Team and Operation Design Phase phases, along with at least one round of commentary on at least one edition of the next Applicant Guidebook.

The next round of new gTLDs has moved a step closer, but it’s still going to be well over a decade after the last application window before we see the next one.