ICANN’s gTLD Proposal Hits a Wall: Now What?

Mike Palage, the first Adjunct Fellow at PFF’s Center for Internet Freedom, just published the following piece on the PFF blog.

ICANN‘s plan to begin accepting applications for new generic top-level domains (gTLDs) in mid-2009 may have been derailed by last week’s outpouring of opposition from the global business community and the United States Government (USG). Having been involved with ICANN for over a decade and having served on its Board for three years, I’ve never seen such strong and broad opposition to one of ICANN’s proposals.

This past June, the ICANN Board directed its staff to draft implementation guidelines based upon the policy recommendations of the Generic Names Supporting Organization (GNSO) that ICANN should allow more gTLDs such as .cars to supplement existing gTLDs such as .com. In late October, the ICANN staff released a draft Applicant Guidebook detailing its proposal. The initial public forum on this proposal closed on December 15-with over 200 comments filed online.

In its December 18 comments, the USG questioned whether ICANN had adequately addressed the “threshold question of whether the consumer benefits outweigh the potential costs.” This stinging rebuke from the Commerce Department merely confirms the consensus among the 200+ commenters on ICANN’s proposal: ICANN needs to do more than merely rethinking its aggressive time-line for implementing its gTLD proposal or tweaking the mechanics of the proposal on the edges. Instead, ICANN needs to go back to the drawing board and propose a process that results in a responsible expansion of the name space, not merely a duplication of it.

United States Government’s Wake-Up Call to ICANN

The comments submitted by the USG consisted of two letters. The first, from the Commerce Department’s National Telecommunications and Information Administration (NTIA) began by citing the failure of ICANN staff to conduct a detailed study on the costs, benefits and implementation of a new gTLD process-as called for by an October 2006 ICANN Board resolution. NTIA then listed a number of prerequisites for implementation of any gTLD proposal, including:

• Ensuring that the introduction of a potentially large number of new gTLDs would not jeopardize the stability and security of the Domain Name System (DNS);
• Revising the gTLD approval process to take into account (i) adverse competitive welfare effects; (ii) competitive bidding mechanisms; and (iii) maximum price caps or other term to protect consumers;
• Demonstrating ICANN has sufficient contract compliance staff;
• Explaining further how ICANN will conduct legal reviews of gTLD applications;
• Requiring ICANN to focus on technical functions related to the management of the DNS and leaving other matters such as the adjudication of morality and public order to be addressed by governments;
• Developing a mechanism to expand the gTLD reserved names associated with technical or infrastructure-related names; and
• Expressing a clear rationale for the gTLD fee structure, as well as a transparent mechanism for the disposition of any excess revenues.

More Feedback to Come from Other Governments

Just as the U.S. government filed comments on the proposal only after ICANN’s deadline for public comment had passed, other governments have indicated that they need more time to provide substantive comments on ICANN’s proposal-including the Government Advisory Committee and the Australian government. The U.S. government’s strong opposition to ICANN’s proposal may inspire other countries to voice their own concerns in the next two months-which could derail ICANN’s current plans to publish a revised draft of the proposal shortly before its next meeting in Mexico City the first week of March, 2009. If ICANN does not revise its aggressive timeline, the GAC and other governments will be commenting on the October 2008 Draft just as the ICANN staff is seeking new comments on the February 2009 draft. Given the timing of GAC deliberations, GAC probably will not be able to provide comments on any draft released in February until ICANN’s June meeting in Sydney.

Global Business Community Opposition

A common thread of concern expressed among the majority of the submissions from the business sector is how the proliferation of gTLDs will significantly increase the cost of defensively registering domain names to protect trademarks and prevent consumer confusion. Currently, many global brand holders must maintain enormous portfolios of domain names (sometimes in excess of ten thousand). Only a tiny percentage of these domain names are actually used; the vast majority are variants on the names of a company’s products or services, such as yah00.com. Because the existing procedures for protecting trademark holders cost far more than it costs to register a single domain name, there currently exists a gross imbalance between “offense” (cyber-squatting) and “defense” (brand protection). Without additional safeguard mechanisms in any new gTLD application procedure to protect existing trademarks, every new gTLD created would simply compel existing trademark holders to duplicate their domain portfolio for that new domain name-for example, if .search were created, Yahoo might have to register yah00.search (as well as every other domain name it has currently defensively registered). This could mean additional costs of millions of dollars every year in purely defensive registrations-all because of the lack of procedural safeguards.

The sheer outpouring of opposition to ICANN’s proposal makes it difficult for the non-expert to know where to start, and few readers are likely to take the time to digest all 200+ comments. So here’s a quick overview of those comments I’d consider required reading for anyone who wants to understand the problems raised by ICANN’s proposal-which might seems very attractive on its face. After all, having “more choices” is something we’d all generally agree with.

The comments of corporate registrar MarkMonitor (endorsed by over seventy global corporate giants such as 3M, Costco, eBay, FedEx, Nike, Goodyear, Verizon and Viacom) provide an excellent summary of important points raised that were common threads in many of the other submissions, including:

• Reevaluation of the new gTLD process and its associated costs in light of the global economic downturn;
• The need for increased safeguards above and beyond the Uniform Dispute Resolution Policy and Sunrise registrations periods to protect brand-holders and prevent consumer confusion;
• Removing any costs to a successful challenger under ICANN’s various dispute processes; and
• A commitment to publicly accessible, free and accurate WHOIS data.

MarkMonitor’s position is perhaps unsurprising, given its obvious interests as a registrar for large corporations with extensive trademark portfolios. But some of these same concerns were raised by GoDaddy-which, as the world’s largest domain name registrar, represents a far more diverse array of interests.

The comments of AT&T offered detailed recommendations for improving ICANN’s proposal, including:

• A tiered roll-out of new TLDs with an initial focus on internationalized domain names (IDNs, which display non-ASCII characters) and “sponsored/community TLDs,” such as .coop or .travel;
• That ICANN conduct an economic analysis of the impact new gTLDs will have on the domain name marketplace;
• Creating a “white list” for global brand holders that could be utilized at both the top (.ibm) and second level (ibm.com); and
• A mandate for “thick” WHOIS data, as opposed to “thin” WHOIS data. The WHOIS service identifies who owns a particular domain name. “Thick” WHOIS data incorporates specific registrant information, and would allow law enforcement to track down illegal activity or trademark-holders to discover the identity of someone cybersquatting a domain related to their mark.

Last, Microsoft filed two sets of comments. The first emphasized Microsoft’s legal concerns, which were consistent with the criticism of other major brand holders: questioning the demand for new TLDs, stressing the need for rights protection mechanisms, and urging transparency in the dispute challenge processes. Microsoft also stressed the need to protect against ‘gTLD flipping” where top-level domain names could be traded by speculators in the secondary market. The second emphasized Microsoft’s technical concerns, such as single label names; hosting services in new gTLDs; DNS heuristics in web based sub-systems; and intranet certificates.

International Concern

While U.S.-based businesses (e.g., Adobe, TimeWarner, eBay, HP and ITT) were strongly represented among the comments, a substantial number of non-U.S. businesses and organizations also submitted comments expressing their concerns about ICANN’s draft proposal including the BBC, economiesuisse ( the largest umbrella organization representing the Swiss economy), and MARQUES (the European Association of Trade Mark Owners).

Financial Sector Concern

The financial services sector has traditionally not been a very active on ICANN policy matters except those related to the WHOIS domain-look up service. But this sector expressed its concerns about the new TLD process-especially concerning the possibility that banking or finance related gTLDs (such as .bank) might be created without necessary safeguards. See the comments of GE Money, Bank of America, Securities Industry and Financial Markets Association, Visa, the American Bankers Association, and FDIC.

What’s Next?

The ball is clearly in ICANN’s court, as both the private and public sector wait anxiously for ICANN’s next steps. ICANN has planned to release a revised Draft Applicant Guidebook sometime in late February (shortly before the next ICANN regional meeting in March in Mexico City). But at a minimum, ICANN owes both the global business community and governments a detailed response to the many concerns raised about its proposal. ICANN’s existing public forum format offers an excellent vehicle for ICANN to engage affected parties constructively. Let us hope that ICANN takes advantage of this opportunity to discuss the October draft proposal at the Mexico City meeting in March-before issuing yet another draft.

But more fundamentally, it is difficult to see how the ICANN Board can adopt any new gTLD process and claim bottom-up consensus unless substantial and substantive modifications are made to the October Draft Applicant Guidebook. In advance of the March ICANN regional meeting, I will be working with the staff of The Progress & Freedom Foundation as an Adjunct Fellow to develop a number of changes that address the serious concerns expressed about ICANN’s proposal.

The stakes in the discussion are high. The second letter in the USG’s comments, from DOJ’s Antitrust Division to NTIA, raised a number of concerns about the competitive dynamics of the gTLD marketplace, and declared that “ICANN has not come close to fulfilling its obligations to employ competitive principles in its management of TLD registry obligations.” While there has been growing international demand for the USG to set ICANN free of its oversight, the rather pointed analysis from the DOJ regarding the inadequacy of ICANN process to date on this critical mission objective raises serious questions about whether a extension/renegotiation of the Joint Project Agreement currently set to expire in 2009 is warranted.

ICANN has a lot of work to do between now and September.

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