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New gTLDs and the 1%

Antony Van Couvering

While Occupy Wall Street and other groups representing the so-called 99% are getting most of the press, the 1% is raising its profile as well, at least when it comes to gTLDs. They are complaining that introducing global choice and competition to the Internet will cost them money. The chief of the Association of National Advertisers (ANA) now says that it has "spent the last few months" considering the new gTLD program, and has found it lacking. They want ICANN to shut the whole thing down.

The ANA sprang up in August to "vigorously oppose” the new gTLD program. Recently it has morphed into a larger group called CRIDO, and this group (which, ironically, counts among its membership companies that are actively pursuing new gTLDs) is picking up the pace by issuing more threats at ICANN, telling them that they must abandon the new gTLD program or — something. There are vague murmurs of a lawsuit, which I'll discuss below. Their number one cause of complaint? New gTLDs will cost "the industry" money.

ICANN has seen fit to allow this opposition to go unanswered for nearly two months. It might therefore be useful to review why the CRIDO effort is doomed to failure, and why it deserves its doom. While the companies behind CRIDO and the ANA are powerful, in this case the 1% is not going to frustrate innovation in the name of keeping a small blip in "industry" costs. This article explains why they won't succeed.

"Facts"

The ANA and CRIDO may control 99% of the money, but they have about 1% of the facts. Facts may not matter that much when you're running a FUD (fear, uncertainty, and doubt) campaign, but for completeness' sake it is worth pointing out that the figures being presented by the ANA and CRIDO have as tenuous a relationship with reality as Somalia does with law and order.

As Jeff Ernst of Forrester Research points out in a recent article, the ANA claims that new gTLDs will cost their members "billions of dollars" without once providing any verifiable basis for this claim.

Minds + Machines, by contrast, put together a study, "What Cost New gTLD Trademark Infringements to Brands?” that is easily replicable by anyone. Completely fact-based, relying on publicly available data, our study shows that infringements are correlated very highly with volume, and that if new gTLDs increase the number of names in the market by 15%, there would be an additional 316 UDRP filings per year, or an average of ten cents cost per trademark. If the domain name market grew more (which indicates greater public benefit), there would undoubtedly be more UDRPs, but the costs would remain very low.

GoDaddy has also done a study, which concludes that UDRPs have gone up in volume due as much to the ease of filing as to any increase in cybersquatting:

Although there is little doubt that the ongoing practice of cybersquatting factors into the tide of arbitration cases, the ease of filing, along with more vigilance on the part of IP holders, undoubtedly influenced the measurable increase in cases.

In addition ICANN has hired numerous economists, who all reach the same conclusion: yes, there will be costs to brands, and even though the public benefits are not yet clear, there are some obvious benefits that can be predicted. In general (the economists say) competition is in general a good thing, and there is certainly no compelling case to be made that the introduction of new gTLDs will cause harms that will outweigh the public good.

Last Come, First Served?

The ANA and CRIDO face a credibility problem. After 5 years (or 10 years, depending on how you count) of very public, noisy, open debate about these issues, these groups show up (or are formed) at the 13th hour, after the gTLD policy was approved and the ship had left the harbor. Where were they all these years? The ANA published some comments on the 2nd Draft of the Applicant Guidebook, but otherwise, in face of the program that they now claim is the worst thing since unsliced bread, they were completely silent. Although their absence wouldn't matter much if they had some compelling evidence, they don't. In effect, what they are saying is that we never gave it much thought, but now that they've woken up, they want everything changed. Try going to GoDaddy and telling them that you've suddenly realized that sex.com is valuable, and they need to overturn all their procedures and give it to you because you want it. The ANA is receiving a distinct lack of sympathy around their timing.

Congressional Hearings to Protect the 1%?

It appears that there is no appetite in Congress for hearings on this subject, even leaving aside the questions of whether the U.S. can or should act unilaterally. Of course appetites in Congress can be created, and that is what CRIDO is trying to do. But "Protect the 1%!" is hardly a rallying cry in the U.S. these days.

What Does the U.S. Government Think?

The NTIA, an arm of the Department of Commerce that oversees ICANN, has been lobbied intensively by interests opposed to the new gTLD program for the better part of a decade. The extensive new protections for trademarks are one result, as is the the Early Warning System for governments worried about TLDs that might threaten law and order. Another indication of the view of the U.S. Administration comes from the modified IANA contract specification. The IANA is the largely technical function, now in ICANN's hands, that would actually enter new gTLDs into the root zone. The IANA contract comes up for bid periodically, and it would be a disaster for ICANN to have IANA's technical function changed into a technical + policy function — effectively adding another layer of policy development on top of ICANN's, outside and separate from the multistakeholder model and controlled exclusively by the U.S. Government. There was some fear of this when the bid specifications first came out. The initial Notice of Inquiry said:

For delegation requests for new generic TLDS (gTLDs), the Contractor shall include documentation to demonstrate how the proposed string has received consensus support from relevant stakeholders and is supported by the global public interest.

But the amended notice says:

The contractor shall verify all requests related to the delegation and redelegation of gTLDs are consistent with the procedures developed by ICANN. In making a delegation or redelegation request, the Contractor must provide documentation verifying that ICANN followed its policy framework including specific documentation demonstrating how the process provided the opportunity for input from relevant stakeholders and was supportive of the global public interest.

In other words, the US Government has removed the policy-making component from the IANA contract. Instead of IANA making a decision about whether the application is in the public interest, IANA is now asked only whether ICANN policy was followed. This is very a much of vote of confidence in ICANN policies, and a turning away from setting up any alternate source of authority. Asking the U.S. Government to overturn a process it initiated, participated in, and supports seems forlorn — especially when just two days ago they received the blessing of the European Union, who said in a press release, "the new IANA tender is a clear step forward for global internet governance."

Overturning 10 Years of Global Consensus Based on a Lobbying Campaign
Even if ICANN really wanted to be ordered around by trade associations, it really doesn't have the power to just overturn policy that's been developed through its processes. The Board does have a lot of power, but overturning the new gTLD program, with its hundreds of thousands of volunteer hours, its votes of consensus on provisions, its carefully tuned compromises, is tantamount to throwing away its entire governance model. If CRIDO really expects ICANN to abandon the gTLD program, it needs to provide a rationale of why the multi-stakeholder process is a mistake and should be jettisoned. Until it can do that convincingly, ICANN can't cancel or even much modify the gTLD program — and the governments who have lined up behind ICANN's governance model (including the U.S.) will have a hard time supporting any initiative that vitiates it.

ICANN Has Been Preparing for This

ICANN fully expects to be sued over the new gTLD program. They believe this for the same reason that it took them ten years to come up with the new gTLD program — there are huge number of affected people, and you won't make all of them happy. That's why ICANN has fully examined the legality of their program, and has set aside a lot of money to fight any challenges. Where do you think a big portion of that $185,000 fee is going to be spent? ICANN has budgeted a large amount to be spent in court. I can guarantee that ICANN has spent a lot more time thinking about this than the ANA has.

On What Grounds Would an Injunction Be Granted?

If the ANA or CRIDO were to sue ICANN, on what grounds would they succeed in getting a judge to enjoin ICANN from continuing the program? I'm not a lawyer, but I invite those who are to comment and present an compelling rationale. I haven't heard any.

Why Are They Doing This?

The effort of ANA and CRIDO has been pretty substantial. They have already spent more in lobbying and marketing than any introduction of new gTLDs could cost them. So the question is, why? Why are they putting all this effort, so late in the day, into a cause that seems quixotic at best? The answer has nothing to do with defensive registrations, or cybersquatting. Instead, it's because new gTLDs will change the face of advertising and branding, and like a lot entrenched industries, they're terrified of change. Here's what Thom Kennon, SVP and Director of Strategy at Y&R says:

Shame on the ANA for taking such a misinformed and myopic view of one of the most significant changes in how brands and consumers find each other since the birth of the commercial Web.

Although none of us have any idea of the broad, deep implications of this re-architecting of the interwebs, it doesn't take much of a creative bent to see the powerful opportunities this will likely afford every brand — and organization, and industry and even cities, states and towns.

Unlike the ANA — whose argument here seems to be nothing more than a repetitive loop of "ICANN's wrong, it doesn't add up..."- some of us are working to explore what this change might offer for the future of the brands and businesses we represent.

As the ANA (and sadly any of its members who take this Luddite advice) sit on the sidelines, some of us are exploring how the early brand movers — in the right category with the right architectural strategy — can reap huge, long-term rewards and competitive advantage from leading instead of lagging.

Here's some better advice: every single brand manager, marketing strategist, technologist, content developer and CMO should start spending some serious time understanding what these changes can and will bring to how the 'human web' is evolving. Be smart, nimble and opportunistic and be ready to steal the march from those who chose to worry and wait.

What Would Happen if the ANA Got Its Way?

People who have been involved in the ICANN process scratching their heads. Where were all these companies and associations over the last five years of policy developments? What is this group and what is their aim? Are they really going to sue, and do they have any hope of succeeding? Is there anything fact-based about their assertion, or is this a pure lobbying play? And since ICANN is in its usual dilatory fashion saying nothing in response to these groups, many are wondering what's going on, and what will happen to the new gTLD program.

The ANA and CRIDO, using the same arguments, but in a louder voice, are not going to succeed in overturning a hard-fought consensus that has involved all the significant interests in the space. The arguments have been taken seriously, been given years of hearings, have resulted in numerous changes to the gTLD program to accommodate the concerns that they raise, additional protections have been put in place, and the finally the program passed on a vote by the ICANN Board. Governments, businesses, intellectual property owners, ISPs, civil society, everyone participated.

Internet innovation doesn't stop because it upsets someone's business model. Let me refer readers to an article published in 1995 by Newsweek (now nearly defunct). Among other the many reasons it gives as to why the Internet will never work, it says:

The truth is no online database will replace your daily newspaper… no computer network will change the way government works. We're promised instant catalog shopping — just point and click for great deals. We'll order airline tickets over the network, make restaurant reservations and negotiate sales contracts. Stores will become obsolete. So how come my local mall does more business in an afternoon than the entire Internet handles in a month? Even if there were a trustworthy way to send money over the Internet — which there isn't — the network is missing a most essential ingredient of capitalism: salespeople.

That's what the ANA is saying: you need to prop up our outdated business model as an "essential ingredient" — or else capitalism will end. But actually we don't, and it won't.

The new gTLD program is not going to be undone. For that to happen would mean jettisoning 10 years of the ICANN experiment and all the work that has gone into it. Too many people, governments, and institutions have put in too much work, and have too much at stake for that to happen. If, on the basis of a lobbying campaign in the United States by some fearful people, a global consensus were overthrown, the splitting of the root is not far behind, and if that happens the results will be much worse for ANA and its members (and everyone else) than the introduction of new gTLDs.

By Antony Van Couvering, CEO of Minds + Machines. Antony Van Couvering also contributes to the Minds + Machines weblog located here.

Related topics: DNS, Domain Names, ICANN, Internet Governance, Policy & Regulation, Top-Level Domains

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Comments

Thanks Antony.Very well articulated article. Couldn't agree Constantine Roussos  –  Nov 17, 2011 10:07 AM PST

Thanks Antony.

Very well articulated article. Couldn't agree more.

Constantine Roussos
.MUSIC

Since the report, costs of enforcement diminish more in AG Jothan Frakes  –  Nov 17, 2011 1:00 PM PST

Actually URS and many other new TLD mechanisms for Rights Protections that live in the Applicant Guidebook create a far lower ACTUAL costs.

The projected numbers, unless I am mistaken (some time has passed since that report), were based upon UDRP costs.

Since the m+m report, at least two factors should even further reduce the enforcement costs.

Lower bulk fees exist in Rapid Suspension as a reactive means of enforcement.  This drives costs down.

IP Clearinghouse and other rights protections that are proactive, I assert, will create a situation where occurrences will be lower because of the protections create distasteful environment for perpetrators of infringement at time of registration. 

These two factors, combined with the facts from the m+m report offer substance of evidence that enforcement costs from infringement will be absurdly low. 

There are absolutely no data points supporting the claims of 'Billions of Dollars' in costs mantra coming from the new TLD hater camp.  It is pure .FUD

Keep up your campaign of truth, Antony.

Billion Kevin Murphy  –  Nov 17, 2011 1:51 PM PST

It's not hard to get over $1 billion using fairly conservative assumptions.

Say there are 500 .brands, which doesn't seem unreasonable given some of the predictions about over 1000 applications some people are making.

ANA is saying that each .brand will cost its owner $2 million over the 10 year life of the contract, or $200k a year. That's one number they have repeatedly used. Again, that's not unreasonable given the fees registry service providers are charging and the other costs associated with running a TLD.

There's your first $1 billion right there.

You can add on another few hundred million spent on UDRP fees over a decade if you assume that there will be 50-100 gTLDs that are just as badly cybersquatted as, say, .mobi.

URS, the other IP protection mechanisms, and registrant behavior may bring second-level enforcement costs down. But they may not.

Let's face it, none of us really knows. We don't even know whether URS will be substantially cheaper than UDRP because the prices haven't been finalized yet.

Getting a bit of balance into the coverage of new TLDs Alexa Raad  –  Nov 19, 2011 4:03 PM PST

Antony

Great piece and thanks for addressing some of the factual inaccuracies on which some of the arguments are being made.

Re the cost to brand owners.  Since none of us possess a crystal ball, the best we can do is look at how say Fortune 500 brands dealt with the introduction of new gTLDs of the last round.  As I said in my Circle ID article (http://www.circleid.com/posts/the_association_of_national_advertisers_ana_blinders_on_new_tlds/):

"Paul Stahura, founder of the registrar eNom, researched the issue in 2009. His study looked at same name registrations in seven established gTLDs (com/net/org/info/biz/us/mobi). If the same name is registered in various gTLDs, it is a sound heuristic rule that some of them will be defensive registrations by brand owners. He found only 194,325 domain names were registered across all seven of the most popular gTLDs. Therefore, some but not all of the registrations could be assumed to be defensive registrations by brand owners. Keep in mind at that there were more than 100 million domain names in these seven gTLDs. So the registrations represented less than 0.2% of the total registrations. His conclusions are:

"The vast majority of trademark holders are not registering their trademarks in all the current generic TLDs, let alone all the TLDs. Therefore, we do not expect them, in general, to register their trademarks in new gTLDs."

What has surprised me is the biased nature by which some have sought to criticize the program and yet still get basic facts wrong.  So lets take a look at a seminar that recently concluded in NYC called: “what’s at Stake’ (http://www.cadna.org/Whats-At-Stake/): 

One of the issues that they claim is at stake - right on the home page - is the following:
“Will the result of an increase in new and unfamiliar gTLDs create extensive consumer confusion, thereby setting the stage for new MITM (Man in the Middle) attacks?” HUH????
Its unfortunate that for all the organizational efforts, and industry experts, the conference organizers not do check the validity of one of the main points they have on their homepage.

Now the facts: Per the new gTLD program, all new gTLDs have to implement DNSSEC (see page 128 Question 43 of the Applicant Guidebook listed here http://www.icann.org/en/topics/new-gtlds/dag-en.htm). Why require DNSSEC?  Well because it is the infrastructure upgrade to the DNS that prevents Man in the Middle attacks
http://www.tcpipworld.com/prevent-man-in-the-middle-mitm-attacks-with-dnssec/242)
So is it safe to assume then that this point at least is “not at stake”?

Now regarding balanced coverage: This conference It was organized by CADNA (an IP and trademark lobbying group) whose founders also run Fairwind partners, which interestingly enough lists among the services in their website that “FairWinds offers a full suite of new gTLD consulting services. From the initial strategy formation all the way through preparing the application and successfully launching and operating the new gTLD registry, we work with clients to advise them on the best choices to make in order to thrive in this new environment." An interesting if not entirely transparent business model.

Look- I appreciate open debate and opposing view points, it leads to better reasoned and more robust solutions.  And that debate is made even richer and more useful if: a) we examine relevant facts (not conjecture) from both sides of the issue, AND b) we are forthcoming and transparent about our motivations.  Some of the views by ANA as well as some of the purported conferences (such as the one described above) to "educate" the public lack one or both of these. 

Thanks for helping to shed light on them.

The whole issue with ANA and CRIDO Constantine Roussos  –  Nov 19, 2011 4:47 PM PST

The whole issue with ANA and CRIDO is quite obvious in execution. The brands not interested in launching their own TLD are trying to block the ones that are. CRIDO is a coalition of these corporations. So what will ANA tell members that will apply for new TLDs? These corporations have been successful because they have managed to sustain a competitive advantage over time with a differentiated product offering while crushing or buying up competition. Needless to say, competition does creates better products for consumers, including an improved web.

This is nothing but a block on competition. Just because CRIDO does not want new TLDs and are clueless in regards to how to create value with TLDs, they feel that it is in their best interests to block others just in case others create enough value that would take away customers from them. If they think that new TLDs were worthless why do they bother with this anti-competitive behavior? I think many of us read between the lines. This was planned years in advance in my opinion and it was expected to occur. The "ICANN is to blame" excuse is getting old. Seems close to bullying if you ask me.

Constantine Roussos
.MUSIC

UDRP filings Ardan Michael Blum  –  Oct 10, 2013 9:19 AM PST

http://cyber.law.harvard.edu/udrp/process.html shows us the steps to filing a complaint. They state: "One of the main purposes of the UDRP is to provide a quick, cheap, and easy means to adjudicate domain name disputes between trademark holders and bad faith registrants of domain names. Whereas litigation of a domain name dispute in court can be protracted and, in some cases, prohibitively expensive, resolution of a dispute under the UDRP takes only 45 days and can cost as little as $750....". Maybe so. But brand name, brand image, hence "DotBrand" protection is NOT managed at "750 dollars" and never can be. The likely rush to file is going to provide for a backlog; far more of a problem for the future of new web domains, in my view, than any cybersquatting.

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