I was surprised by ICANN’s “Economic Case for Auctions in New gTLDs” paper especially with view to the latest presentation on the new generic Top-Level Domain (gTLD) implementation process in Paris. That Paris presentation highlighted the protection of community interests such as religious organisations, geographically based communities or indigenous groups and suggested a preference of bona fide community-based applicants against pure generic applications for the same string (see New gTLD Implementation Model [PDF]).

Contrary to this the only text passage in the current paper where ICANN considered the community-based applicants is “a 25% bidding credit could be offered to community-based bidders whose community is located primarily in least-developed countries”. This reminds me of the discussion on discounts for HIV medicine for less developed countries a couple of years ago, where pharmaceutical companies cut a very poor figure.

But anyway, let’s see ICANN’s paper on new gTLD auctions as an attempt to get valuable community feedback if auctions are the “one size fits all” way to allocate a gTLD in the case of contention.

I can only write on behalf of the .berlin (dotBERLIN) application, but my ideas as to “what would happen in the case of more than one application” could also apply to other Geographical Top-Level Domains (GeoTLDs) like .paris, .cym or .africa. Let’s assume that there is one applicant with the backing of the TLD community concerned and legally located in the country of that community and another applicant with no community support and located in another country. What could happen?

1. A view on ICANNs’ Evaluation Process flow chart [PDF] reveals that right after posting of the applications the Objection Filing Phase starts. One of the objection criteria is the Community Objection. This is the first turning point where the applicant with no community support can be kicked out of the game if some established institutions for the community file a well founded objection.
2. The second turning point is the Governmental Advisory Board decision. Every applicant for a geographical or geopolitical string knows that a GeoTLD might only be granted if the relevant government agrees with the application. I could hardly imagine that the German government and the Berlin authorities would not object to another .berlin applicant from a country abroad and with no relation to a location with the name Berlin.

Even if both applicants have passed the objection process and the applicant with no community support wins an auction there might be pitfalls like intellectual property rights that can prevent the successful applicant to open up the target market successfully.

Depending on national and international legislations there might also be cases where one of the applicants makes itself liable for the costs associated with an artificial prolonging the application process, for instance if he acts in bad faith.

The auction model would clearly prefer a tax haven based applicant with deep pockets who applies for all of the most valuable city strings like .bejing, .nyc, .tokyo, .london, .paris, .berlin at the same time. I cannot imagine that ICANN aims to create such a diplomatic nightmare. Especially in the case of governmental objections ICANN will be very careful and will do everything to avoid diplomatic implications between countries.

Therefore the only case where I can imagine the auction model to be an appropriate mechanism to allocate a GeoTLD string is if there are two applicants, both from the same country and with support of the community and government. But in any case the best solution would be if both applicants find an agreement to cooperate.