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ICANN Auctioning New Top-Level Domains: Serving Public Interest or Its Own?

ICANN has recently published a number of updates to the implementation program for new gTLDs.

One of these updates is a paper by ICANN’s “auction design consultant PowerAuctions LLC”. The document makes a case for an auction to be held for the “resolution of contention among competing new gTLD applicants for identical or similar strings.” In other words, two (or more) applicants for “.bank”, or applicants for “.bank” and “.banks.”

The paper acknowledges that auctions are not the perfect answer to resolving these contentions, but says that they would be used for “tie-breaking.”

The problem with this argument is that, in our imperfect world, it seems unlikely that there will be real ties to be broken. Auctions lately have become popular with one of the US federal agencies, the Federal Communications Commission, to allocate portions of the frequency spectrum, and the ICANN paper relies heavily on some academic support for them. But frequency spectrum allocation is not the same as selecting from among applicants to operate a generic Top-Level Domain registry. ICANN has a fundamental obligation to “promote the global public interest in the operational stability of the Internet. . .” (see http://icann.org/general/articles.htm)

ICANN is not a commercial operation, and it should not look at the possibly substantial proceeds of auctions as a motivating factor for a quick and easy solution to “tie-breaking.”

The ICANN paper treats the new gTLDs as a “scarce resource”. This is not necessarily the case, but the paper goes on to say that auctions would accomplish three things:

  • Applicants whose true intentions or abilities are to serve many users would be able to justify higher bids than applicants who will serve few users;
  • Applicants capable of providing high-quality service at low cost would be able to justify higher bids than low-quality, high-cost applicants; and
  • Applicants who intend to develop the gTLD immediately would be able to justify higher bids than applicants whose purpose is to hold the gTLD, unused, for speculative purposes.”

There is no question that it will be more difficult for ICANN to make selections of operators based on these three criteria, as opposed to holding auctions.

Despite the difficulties, ICANN’s public interest obligations require it to investigate carefully and make judgments about the merits of gTLD applications, whether based on the three criteria above or other criteria, such as fostering competition and recognition of prior responsible registry management.

By David Maher, Attorney

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