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$59M and Counting: ICANN Board Downgrades Community Say on Use of Last Resort Auction Proceeds

Philip S. Corwin

ICANN's new gTLD program provides for last resort auctions to settle contention sets where the competing applicants are unable to reach agreement by negotiation or private auction, with the proceeds going to a segregated ICANN account. With the recent $25 million bid of Google to secure control of the .App registry the total proceeds of those ICANN auctions has swelled to $58.8 million. The final sum by the end of the first round could go higher, perhaps to more than $100 million. That's serious money.

The subject of how these funds should be used has been raised in Public Forums at several ICANN meetings, and the Board had responded that the auction proceeds would be held separately from general revenues. It also said that the ICANN community would have a substantial say in deciding what ultimate uses would be made of the growing account.

Based on those Board statements the GNSO Council, after soliciting feedback throughout the ICANN community, decided at its March 2015 meeting, "to move forward with the creation of a CCWG by, as a first step, forming a drafting team to develop a proposed charter for such a CCWG, which could then be considered by all SO/ACs interested in participating". (Note: I currently represent the Business Constituency on the Council and supported that action.)

In sum, the ICANN body responsible for gTLD policy, after taking into account prior Board statements and reviewing "the feedback received from all the GNSO Stakeholder Groups and Constituencies as well as other Supporting Organizations (SOs) and Advisory Committees (ACs)", transparently initiated a community-based, bottom up process for addressing the question of the best and most appropriate use of funds derived from last resort new gTLD auctions. The first step would be drafting a charter for the proposed Cross Community Working Group.

That's the way ICANN is supposed to work. What happened next is at considerable variance.

On April 15th the Chair of ICANN's Board sent an email to the Chair of the GNSO Council stating in relevant part (full text and string at the end of this article):

The Board has explicitly committed to a full consultation process. Input from the CCWG will be quite welcome, but so will inputs from other sources. The Board has not chartered any group to make decisions about the auction funds, and we plan to proceed very deliberately.

We will proceed very shortly with a call for inputs on general ideas and concepts, not specific projects. We make a point of reaching outside the usual ICANN SO and AC structures to include the rest of the Internet community. We will, of course, be glad to mention the CCWG effort as one of the ways for people to be involved.

I hope this is consistent with your understanding and expectations.(Emphasis added)

This was not at all consistent with the Council's understanding and expectations, and on its April call several Council members voiced their strong distress and concern. The community had initiated a bottom up mechanism, and the Board has now summarily dismissed that approach and revealed that it has already decided on a different course for moving forward. After substantial discussion the Council renewed its commitment to proceeding with a CCWG notwithstanding the Board's view that it would just be "one of the ways for people to be involved".

This Board action was not transparent. It apparently made its decision to reach beyond the ICANN community on this important matter without conveying that information to the community — until the Council action forced its hand.

This Board action also smacks of top down decision-making. If the Board thought there was a valid reason to reach outside of the ICANN community it could have explained its reasoning and consulted with the community on whether this approach made sense.

And this Board action again demonstrates the need for greater accountability mechanisms, as it has been presented to the Council as a fait accompli. It also seems like a clearly missed opportunity. Given the fact that the coming accountability enhancements will almost surely give the community substantially more influence over ICANN's budgeting, it was an opening to publicly embrace the concept in advance of formal adoption of accountability measures. That opportunity has now come and gone.

This Board decision also raises a fundamental question — just who is "the rest of the Internet community… outside the usual ICANN SO and AC structures"? Who populates that non-included Internet community when ICANN is wide open to participation by everyone in the Internet community? Who are they when the present community already includes broad representation of business, civil society, contracted parties, governments, technical groups, and every other category of those with a stake or interest in the domain name system?

In this regard, CEO Chehade has repeatedly stressed in his public statements that the ICANN community welcomes participation by all interested parties. Attendance at ICANN meetings has been growing steadily, and ICANN does an excellent job in facilitating remote participation in all its activities for those who can't attend in person. ICANN meetings also charge no registration fee, and ICANN has various programs to encourage and support participation from the developing world.

So if there are any significant portions of the Internet community that are not presently engaged with ICANN, inviting them to participate in the CCWG would have provided a powerful incentive for them to become involved — and thereby further broadened and strengthened the overall ICANN community. Instead, the Board has implicitly indicated that the ICANN community does not do an effective job in representing all Internet constituencies and it will therefore reach beyond it, which in turn undermines the existing structure's legitimacy.

Whatever those answers are regarding the identity of "the rest of the Internet community", right now the Board's message to the ICANN community is: Thank you for taking the bottom-up initiative — but we will also solicit input from other unidentified parties outside the ICANN community "on general ideas and concepts, not specific projects" for the use of these tens of millions of dollars.

There are already multiple ideas out there for using those funds — from promoting Universal Acceptance of new gTLDs, to boosting developing world engagement, to bolstering ICANN's contractual compliance efforts. The monies involved are large enough to make their disposition matter. And the community is in the best position to assure that they are not used as a slush fund for currying favour, filling an ICANN budget gap, or supporting Directors' pet projects.

The Board's determination dilutes the say of a community-grounded CCWG and thereby leaves the ICANN community considerably marginalized. Input from a CCWG composed of the entire community has been deemed equivalent, at best, to that coming from as yet unidentified outside entities.

This Board plan also appears to leave it with wide discretion over how these funds will eventually be allocated. Rather than letting a community-driven process determine how the funds should be expended the Board will merely consult with the community, along with those unidentified third parties, and then "proceed very deliberately" to make its own decisions.

This downgrading of the CCWG may well be a pyrrhic victory, as any utilization of the auction funds may well occur after new transition-related accountability measures have been implemented. Indeed, this episode strengthens the case for the community exercising greater say over budget and special expenditure decisions. It also follows on the heels of the fact that ICANN publicly stated that the more than $300 million in new gTLD application fees, collected in $185,000 per application increments, would only be used for program purposes. Yet despite no proper accounting being provided for how that money has been spent, applicants have been told to expect no partial refunds, and no community dialogue on the use of any surplus has ever been initiated.

We're watching to see if the Board further clarifies its position or takes additional action on this matter prior to the June ICANN meeting in Buenos Aires. Regardless, there may well be some spirited community feedback at the Public Forum there. Both a lot of money and an important principle are at stake.

* * *

Here are the relevant emails —

From: Steve Crocker
Sent: 15 April 2015 23:19
To:
Cc: Stephen D. Crocker; Icann-board ICANN; Staff-BrdSupport
Subject: Fwd: [ssac] A Cross-Community Working Group (CCWG) to develop a plan for the use of new gTLD auction proceeds

Jonathan,

This just crossed my desk. I compliment you on the initiative to create a CCWG to develop inputs on the use of the auction funds.

The Board has explicitly committed to a full consultation process. Input from the CCWG will be quite welcome, but so will inputs from other sources. The Board has not chartered any group to make decisions about the auction funds, and we plan to proceed very deliberately.

We will proceed very shortly with a call for inputs on general ideas and concepts, not specific projects. We make a point of reaching outside the usual ICANN SO and AC structures to include the rest of the Internet community. We will, of course, be glad to mention the CCWG effort as one of the ways for people to be involved.

I hope this is consistent with your understanding and expectations.

Thanks,

Steve

Begin forwarded message:

From: Glen de Saint Géry <Glen@icann.org>
Subject: A Cross-Community Working Group (CCWG) to develop a plan for the use of new gTLD auction proceeds
Date: 14 april 2015 23:42:50 CEST

ICANN SO & AC Chairs

Dear All,

A Cross-Community Working Group (CCWG) to develop a plan for the use of new gTLD auction proceeds

To follow up on my earlier communication of 2 March 2015 in relation to the possible creation of a Cross-Community Working Group (CCWG) to develop a plan for the use of new gTLD auction proceeds, I wanted to inform you that the GNSO Council discussed this topic further during its meeting of 19 March 2015. The Council reviewed the feedback received from all the GNSO Stakeholder Groups and Constituencies as well as other Supporting Organizations (SOs) and Advisory Committees (ACs) (see http://gnso.icann.org/en/drafts/new-gtld-auction-proceeds-recs-responses-19mar15-en.pdf). On the basis of that review, the GNSO Council decided to move forward with the creation of a CCWG by, as a first step, forming a drafting team to develop a proposed charter for such a CCWG, which could then be considered by all SO/ACs interested in participating.
As such, I would like to invite your SO/AC to designate one or two members to this drafting team effort. Please note that even if your SO/AC is not intending at this stage to become a chartering organization of the CCWG, if there are members interested to assist in this effort, they are more than welcome. In preparing the charter to address this issue, the Drafting Team is expected to develop the framework under which the future CWG will operate. This includes elements such as the mission, purpose, deliverables, as well as the guidelines for formation, staffing, organization, and overall rules of engagement. Following the completion of the work of the drafting team, the proposed charter for the CCWG will be submitted to all interested SO/ACs for their consideration.
Please provide the GNSO Secretariat as soon as possible of with the names of those that are interested to join this drafting team. We intend to kick off the efforts of the drafting team in the week commencing 4th May 2015.
Sincerely,

Jonathan Robinson
Chair, GNSO Council

By Philip S. Corwin, Founding Principal of Virtualaw LLC, a Washington, DC Law and Public Policy Firm He also serves as Of Counsel to the IP-centric law firm of Greenberg & Lieberman. Views expressed in this article are solely his own. Visit Page
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ICANN Fund Will Double Michael Berkens  –  Apr 22, 2015 1:47 PM PDT

Phil

Another great post

I would be shocked if .Web doesn't go to an ICANN auction and fetch at least $50 Million so ICANN will be over $100M in cash from auctions and there are others like .music still hanging around.

You may be over-reading Karl Auerbach  –  Apr 28, 2015 11:02 AM PDT

Under California law (as well as the laws regarding corporations in many other places) the board of directors bears ultimate responsibility for making the policies of the corporation.  They can not delegate that responsibility in its entirety.  Boards may empower subordinate executives, such as the President/CEO, to make decisions within defined limits on defined matters.  But a board may relinquish neither its ultimate authority nor ultimate responsibility.

I read the situation of which you complain less as a board that is trampling over the internet community and more as a board that is saying that it will receive information and recommendations so that it becomes informed, but is expressing the truth that the board bears that ultimate responsibility to decide, that the decision belongs to the board not to an advisory group.

That is not to say that the advice will be ignored - members of a board of directors are required make decisions that are well informed, and independent.  It would be improper for a board member to disregard the advisory group's report.  But a board member is not required to slavishly follow the report either.  For example, if the report advocated illegal action the board would be properly able to refrain from allowing the corporation to take that action.

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