This is a Guest Post by Dan Warner.  Dan in a domain industry veteran who has presented and spoken at many industry conferences. Dan is was part of the Exclusive team at Dark Blue Sea Ltd (Fabulous.com) for 8 years, which became the 14th largest in the world, had a domain sales platform (DDN) with penetration into 80% of the worlds registrars by volume; an affiliate marketing network ranked as 5th in the world; a dynamic web development engine which published over 1.2 million websites; and acquired more than 600,000 domain names as investments for the company.  Dan also previously served as CEO of DomainAdvertising.com and is currently the founder of RegistryStrategy.com, an independent company that provides professional consulting on registry and registrar businesses.

The following is Mr. Warner Post:

New gTLD Registries cannot own their domains! – or can they?

Traditionally registries have been forbidden from owning domains other than for those “reasonable and necessary for the management and operations of the TLD.” New applicants seem to believe that the separation between Registry – Registrar – Registrant doesn’t exist anymore. If those restrictions still exist a number of applicant business plans will be cut to ribbons.

This issue is addressed in Specification 9, section 1, REGISTRY CODE OF CONDUCT of the New GTLD Agreement Specifications page 54.

1. 1.In connection with the operation of the registry for the TLD, Registry Operator will not, and will not allow any parent, subsidiary, Affiliate, subcontractor or other related entity, to the extent such party is engaged in the provision of Registry Services with respect to the TLD (each, a “Registry Related Party”), to:

1. a.Directly or indirectly show any preference or provide special consideration to any registrar with respect to operational access to registry systems and related registry services, unless comparable opportunities to qualify for such preferences or considerations are made available to all registrars on substantially similar terms and subject to substantially similar conditions;

1. b.Register domain names in its own rights, except for names registered through an ICANN accredited registrar that are “reasonably necessary for the management, operations and purpose of the TLD”, provide, that Registry Operator may reserve names from registration pursuant to Section 2.6 of the Registry Agreement; [ICANN banned domains]

In regard to (a.):  No Registrar Preference

It is worth noting that the design of any registry system needs to be highly open, transparent, and equitable – so that it doesn’t favour one specific registrar in the way it is implemented.  Registries are required to make the ability to register generic domains available to diverse registrars and registrants.

In regard to (b.): Private Domain Ownership

Under this code of conduct it would appear that ICANN is continuing the clear separation between registry, registrar, and registrant.  It appears as if any ownership of second level domains from any associated entity (even far removed ones) is not allowed.  It does make allowance for domains “reasonably necessary for the management, operations and purpose of the TLD”.  The argument can be made that the purpose of the registry is to provide self ownership of unique domain assets.  However, that argument requires that ICANN first recognizes that a registry can be created expressly or partially for the purpose of self use, and in an effort to monopolise a concept on the Internet. Even then ICANN may decide that it must be one or the other self use or public – making a new class of registry.  If this is the case how can directory.luxury, sports.bet, directory.cpa, play.app be allowed to be owned by a registry related entity of the same extension?

ICANN has in the guidebook and public commenting areas alluded to the use of domains for a registry’s own purpose beyond the current scope, but the fact remains they haven’t declared a public policy on it.  We believe that the current Registry Code of Conduct, at the very least, casts doubt on their utilization.  There has also been a history of debate and hand slapping for infractions where registries have crossed this line.

It is hard to believe that ICANN entrusted to increase competition would allow registries to use domains from their own registry for use outside of registry promotion and maintenance. In effect acting like a Branded gTLD but cornering the market on a generic concept.

Regardless of what ICANN may or may not do. In speaking with applicants and even their legal representation it is apparent that a wide variety of applicants believe that ICANN will roll over and play dead on this issue. That the cornerstone of their registry model is self-use of domain names in the related registry. They plan to treat their registry very similar to domain portfolio owners (registrants) who have bought up all the competitive names in a particular market segment and plan on dominating that segment at the exclusion of other real competition.

Will ICANN, as per precedents set in the past, make a clear delineation between the Registry – Registrar – Registrant relationship and protect the open market? Or is this a new era where registries are free to compete in any way they wish including monopolies?

Registry Strategy is an independent company that provides professional consulting on registry and registrar businesses. If you want advice which will help you create a fully informed decision we can help. Specifically we can give you a realistic valuation of your potential registry even if no business plan is provided. Our research has developed a means to create a best practice valuation that highlights what can be expected from your registry experience. The outcomes will give you a foundation for bidding in competitive registry auctions, business planning, premium auction lists, and individual domain valuations for domains that do not yet exist. To contact please email Consultants@RegistryStrategy.com or use the contact form on RegistryStrategy.com

Dan Warner, Managing Consultant, RegistryStrategy.com