Reply To Auction Rules Comments from dotStrategy, Co. and DOTPAY SA

[Bill Doshier <bill@xxxxxxxxxxxxxxx>]

dotStrategy, Co., and DOTPAY SA appreciate the opportunity provided by ICANN
to reply to comments regarding the recently updated New gTLD Auction Rules.

In December last year, ICANN opened a public comment period on a proposed
set of rules for the new gTLD program auctions. On January 15, 2014, ICANN
opened a reply period with a closing date set at February 4, 2014. The
following is submitted as part of this reply period.

The new gTLD program is a landmark attempt to improve the Internet¹s
namespace through a number of worthy goals. The program¹s philosophy is
summarized in the second sentence of the Applicant Guidebook: "The new gTLD
program will open up the top level of the Internet¹s namespace to foster
diversity, encourage competition, and enhance the utility of the DNS."

After reading the proposed rules for the Last Resort Auctions, the worry is
that no, it won't! The program will not foster diversity, encourage
competition and enhance the utility of the DNS if financial clout is allowed
to rule over intended use and provision of services!

As written, the rules are an encouragement for wealthy applicants to
disregard any attempt at negotiation prior to the auctions. In the Applicant
Guidebook, the auctions are described as a ³Mechanism of Last Resort² with
the intent clearly being that applicants would be encouraged to resolve a
contention set before reaching this last resort.

However, in practice, the current rules encourage exactly the opposite.
Because there is no recognition of the extent to which proposed strings may
augment the diversity of services Internet users benefit from, improve those
users' browsing experiences, increase their security online, enhance their
own personal or professional lives or even increase the cultural and
geographical diversity of content available online, the auction process as
defined risks failing the New gTLD Program, its applicants and the users it
aims to serve.

In this comment period alone, several alternatives have been suggested (see
Annex below). For example, the introduction of a coefficient strategy seems
like an interesting proposition to try and level the playing field between
bidding applicants and steer the whole process away from its current "money
is everything" mindset.

Other proposals include a requirement to show a commitment to serving the
public interest through a string, so as to avoid such TLDs applied for by
smaller applicants from getting excluded by larger applicants whose large
coffers are the only factor they are counting on.

The community, and ICANN, should also be concerned with the optics of an
auction process where the outcome is a low number of large companies from
the US owning a large number of generic terms as TLDs and applying a uniform
model to operate them. This is detrimental to the New gTLD Program¹s ideals
of diversity of use, business models and applicants.

We feel it is therefore imperative that a discussion be held to examine such
alternatives (and any others that may surface as the community is given a
proper chance to brainstorm on this topic) and encourage ICANN to organize
such a discussion at its next International Meeting, in Singapore, in March
2014.

There is simply too much at stake for the entire New gTLD Program, its
users, its applicants and the Internet community as a whole, for the Last
Resort Auction rules to be allowed to stay defined as they are today.

Bill Doshier, President  dotStrategy, Co.
Oleg Serebrennikov, CEO DOTPAY SA

ANNEX

Excerpt from comments submitted by Artemis
(http://forum.icann.org/lists/comments-new-gtld-auction-rules-16dec13/msg000
08.html 
<http://forum.icann.org/lists/comments-new-gtld-auction-rules-16dec13/msg000
08.html> ):
³As general auction principles have already been widely used in numerous
settings where Œpublic assets¹ are to be sold, ICANN would not have to
invent anything new nor ³move the goalposts² and modify the core tenants of
the Guidebook in order to level the playing field between portfolio and
innovative applications. For example, as part of its auction process to
award the ³golden frequencies² of its 4G/LTE spectrum, the French Government
decided to apply a coefficient multiplier to bids from applicants that were
willing to commit to specific uses of the spectrum and additional service
levels. Thanks to the coefficient, bids with a smaller monetary amount but
with a bigger commitment on usage and service levels were able to compete
with pure monetary bids.²

Excerpt from comments submitted by DOTPAY SA
(http://forum.icann.org/lists/comments-new-gtld-auction-rules-16dec13/msg000
01.html 
<http://forum.icann.org/lists/comments-new-gtld-auction-rules-16dec13/msg000
01.html> ):
³The auction rules & policy should be established in a way that would
discourage an applicant from, or penalize an applicant for resolving
contention through auctions routinely. Such policy could, for example: (...)
Require portfolio applicants to prove via experts or arbiters approved by
ICANN, at their own expense and for each contention set they are party to,
that their intended use of the TLD string is aligned with the ³public
interest goal² and introduces more ³diversity² and ³innovation² than the
intended use by their contenders; (...) Require portfolio applicants to
prove via experts or arbiters approved by ICANN, at their own expense and
for each contention set they are party to, that their intended use of the
TLD string is essentially different from the intended use of the other
strings they have applied for.²

Excerpt from comments submitted by DotMusic Ž CGR E-Commerce Ltd
(http://forum.icann.org/lists/comments-new-gtld-auction-rules-16dec13/pdfMZi
XEX4Eiw.pdf 
<http://forum.icann.org/lists/comments-new-gtld-auction-rules-16dec13/pdfMZi
XEX4Eiw.pdf> ):
³ICANN must adopt an effective auction methodology to resolve string
contention with rules and procedures that are aligned and consistent with
its Mission and Core Values to serve the global public interest and promote
competition, innovation, diversity and consumer choice. [...] Solution to
Address Competition, Innovation and Diversity: Implement a ³luxury²
competitive balance tax on bidding. The size of the ³luxury² bidding tax
should be imposed according to the total number of uncontested strings each
portfolio Applicant has and the number of strings awarded to the same
Applicant after contention resolution (e.g. after a private auction).²