ICANN and its Objectives

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Introduction

The GNSO council invoked a committee of the whole to address the question asked of it by the ICANN Board (resolution 2.151 see annex 1): "whether to structure the evolution of the generic top level namespace and, if so, how to do so." The committee met monthly by telephone conference between February and May 2003 and all but one constituency submitted written positions during this time. One fundamental question was the interpretation of the question asked. Some participants related the question to the statement on "taxonomic rationalization" made by the ICANN CEO in October 2002, and interpreted "structured" as meaning to them a top-down taxonomy with a pre-determined set of names chosen by ICANN. Others saw no conflict between the concept of a taxonomy and a bottom-up, demand-driven system. Many constituencies interpreted "structured" more widely meaning within a framework of objectives.

The Auction Rules are Not Aligned with ICANN’s Goals

The auction mechanism prepared by Power Auctions LLC for ICANN fails to address these core issues and align its Auction Rules to the Applicant Guidebook and ICANN’s own Bylaws to promote competition, innovation and diversity. ICANN itself even agrees that ” auctions are not perfectly aligned with ICANN’s objectives” but have been chosen as an allocation method because other alternatives would have “have more severe limitations and defects” (ICANN, Economic Case for Auctions in New gTLDs, 8th August 2008, Pg.1).

ICANN holds the power to adjust its auction rules to be consistent with its non-for profit status, its Mission and Core Values and to promote effective competition. ICANN should strongly consider aligning critical elements of its auction rules to level the playing field especially given the current status of the new gTLD Program which is dominated by Portfolio Applicants. For example, Google, Amazon and Donuts alone represent over 400 non-branded and generic gTLDs

Applicant Guidebook (AGB) that “most” contention sets being resolved “voluntarily” or “through other means before reaching auction stage” have not been met.

Conclusion

ICANN should implement Auction Rules that are consistent with its Bylaws, its non-for profit status and the Objectives of the new gTLD Program and the AGB to promote competition, diversity, innovation and consumer choice. Auctions should be simple to understand and quick to implement and not favor portfolio Applicants who can afford to lose in private auctions (since the contention losers split the final auction amount plus receive a 20% application refund of $37,000 from ICANN) in order to enrich themselves in preparation of ICANN auctions (where losers only receive a 20% application refund of $37,000 from ICANN).

It is clear that community-based Applicants who have restricted applications can not economically justify outbidding “open” Applicants who have a higher ROI since their “open” registration model generates more registrations and greater profit. For example, according to ICANN’s gTLD domain counts, the restricted .JOBS and .PRO gTLDs have a registration volume of about 50,000 and 150,000 respectively, while the open .INFO and .BIZ gTLDs have about 6 million and 2 million registrations respectively. Nearly all community-based Applicants have applied for only one gTLD and can not hedge their bets with other gTLDs. Furthermore, they run a serious risk of failure if they decide to overbid to win over an “open” Applicant since they would be unable to recover those monies. According to the AGB, Applicants are not allowed to “loosen” registration policies to spur an increase of domain registrations to merely attempt to break-even after a financially-devastating auction.