What if ICANN finally, after 12 years, created a process for adding new top level domains to the root — and nobody qualified to apply?
ICANN has released its new “Draft Applicant Guidebook” (DAG) for new top level domains. As promised, it contains draconian restrictions on cross-ownership and bans any vertical integration. These restrictions are intended to spur the warring economic interests involved to come to an agreement on issues related to cross ownership and vertical integration. The threat is, the squabbling kids have to come to a reasonable agreement, or Mommy takes all the toys away.
What does the DAG mean? Stated simply, almost all of the companies that are intending to apply for new top level domains will not qualify. Registrars cannot apply. Entities controlling or owning more than 2% of any class of securities of an ICANN-accredited registrar or any of its Affiliates cannot apply. Entities that are more than 2% owned by a registrar cannot apply. No forms of vertical integration will be allowed.
Everyone knows this is a silly policy. The reason this is being put forward is that the VI Working Group has not succeeded in coming up with a policy toward cross-ownership and vertical integration that most of the parties can agree on.
The main obstacle to an agreement now are the incumbent registry interests, especially Afilias. Afilias controls .info, .mobi and provides back-end services for .org and many other TLDs. Many registrar interests have proposed more flexible policies that would allow some innovation in business models so that new entrants into a market dominated by VeriSign and GoDaddy can have a chance. The Noncommercial interests and ccTLD interests have also shown some flexibility, as has Neustar. Afilias and its spokespeople, however, are trying to secure their spot as the permanent #2 player in the registry market by defining rules that keep registrars and other likely new entrants out of the market. Similarly, and depressingly, GoDaddy has decided that it is comfortable enough with its existing, leading market share (30-40%) to oppose rocking the boat. GoDaddy also wants to maintain the market status quo, making the excuse that any changes will delay implementation of the new TLD round. It's a pretty funny argument, given that under the proposed DAG4 rules, no one with any background and competitive capability will qualify to enter the market in the new TLD round. But that will suit Afilias and GoDaddy just fine – better to have a large share of a small market than risk being eclipsed by a rush of new entrants and business model innovations.
Every economics expert who has looked at the issue has suggested some loosening of registry-registrar separation. Hopefully, these draconian rules will provoke some movement from the intransigent business interests who are blocking progress in the working group.