Internet Corporation for Assigned Names and Numbers

Public Comment: Proposed ICANN Process for Handling Requests for Removal of Cross-Ownership Restrictions for Existing gTLDs

2 May 2011

Background:

On 21 April 2011, the ICANN Board resolved (see http://www.icann.org/en/minutes/resolutions-21apr11-en.htm) that ICANN develop a process for existing gTLD registry operators to transition to the new form of Registry Agreement or to request an amendment to their Registry Agreement to remove the cross-ownership restrictions. This follows the 5 November 2010 resolution (see http://www.icann.org/en/minutes/resolutions-05nov10-en.htm) that ICANN will not restrict cross-ownership between registries and registrars for new gTLDs, and that "ICANN will permit existing registry operators to transition to the new form of Registry Agreement, except that additional conditions may be necessary and appropriate to address particular circumstances of established registries." Included in the Board’s rationale for their 5 November 2010 decision on cross-ownership (see http://www.icann.org/en/minutes/rationale-cross-ownership-21mar11-en.pdf [PDF, 172 KB]) is, "So long as certain restrictions were put into place on the conduct of registries and registrars, specifically as they relate to data, and so long as competition review remained available in the event of concerns regarding market power – there was no economic support to restrict, on an across-the-board basis, the ability of registries to hold ownership interests in registrars, and vice versa."

Purpose:

Existing registry operators assert that they need their current restrictions on cross-ownership to be removed in order to be able to compete on a level-playing field with registrars that are planning to apply to operate new gTLDs. Commencing a public comment period on the process at this time is intended to solicit community input so the Board may consider the process on 20 June 2011 along with the new gTLD Applicant Guidebook.

Public comment may be submitted to cross-ownership-existing-registries@icann.org through 1 June 2011 and viewed at http://forum.icann.org/lists/cross-ownership-existing-registries/.

Proposed Process:

In order to lift co-ownership restrictions, existing gTLD registry operators could: elect to transition to the new form of Registry Agreement once it has been approved for the new gTLD Program; or they could request an amendment to their existing Registry Agreement to remove the cross-ownership restrictions. Transition to the new form of Registry Agreement would be facilitated through a negotiation between ICANN and the registry operator upon written request by the registry operator. Any proposed material amendments to gTLD registry agreements would be subject to public comment prior to ICANN approval. The proposed process is as follows:

  1. The gTLD registry operator submits a written request to ICANN to amend its Registry Agreement and includes the proposed amendment. The amendment will include:

    1. Adding covenants similar to those that appear in Section 2.9(b) and (c) of the new gTLD agreement (see current draft at http://www.icann.org/en/topics/new-gtlds/draft-agreement-specs-redline-15apr11-en.pdf [PDF, 2.01 MB]) as follows:

      "(b) If Registry Operator (i) becomes an Affiliate or reseller of an ICANN accredited registrar, or (ii) subcontracts the provision of any Registry Services to an ICANN accredited registrar, registrar reseller or any of their respective Affiliates, then, in either such case of (i) or (ii) above, Registry Operator will give ICANN prompt notice of the contract, transaction or other arrangement that resulted in such affiliation, reseller relationship or subcontract, as applicable. ICANN reserves the right, but not the obligation, to refer any such contract, transaction or other arrangement to relevant competition authorities in the event that ICANN determines that such contract, transaction or other arrangement might raise competition issues.

      (c) For the purposes of this Agreement: (i) "Affiliate" means a person or entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the person or entity specified, and (ii) "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person or entity, whether through the ownership of securities, as trustee or executor, by serving as an employee or a member of a board of directors or equivalent governing body, by contract, by credit arrangement or otherwise."

    2. Adding a covenant to comply with the new Registry Operator Code of Conduct. This is in Section 2.14 of the new gTLD agreement as follows:

      "In connection with the operation of the registry for the TLD, Registry Operator shall comply with the Registry Code of Conduct as set forth in the specification at [see specification 9]."

      The Registry Operator Code of Conduct would then need to be added as a new Appendix.

    3. Deleting Sections 7.1(b) and (c) of, for example the biz/info/org agreements (or like terms in other agreements), which read as follows:

      "(b) Registry Operator Shall Not Act as Own Registrar. Registry Operator shall not act as a registrar with respect to the TLD. This shall not preclude Registry Operator from registering names within the TLD to itself through a request made to an ICANN-accredited registrar chosen in Registry Operator’s sole discretion, or reserving names according to Appendix 6 of this Agreement.

      (c) Restrictions on Acquisition of Ownership or Controlling Interest in Registrar. Registry Operator shall not acquire, directly or indirectly, control of, or a greater than fifteen percent ownership interest in, any ICANN-accredited registrar without ICANN’s prior consent in writing."

  2. Each request to remove cross-ownership restrictions would be subject to a competition review, similar to that which is conducted in the preliminary determination phase of a Registry Services Evaluation Process (see http://www.icann.org/en/registries/rsep/prelim-competition-issues-en.htm) request. In the event ICANN reasonably determines that removal of the cross-ownership restrictions might raise significant competition issues, ICANN shall notify the registry operator that ICANN intends to refer the request to the appropriate governmental competition authority or authorities with jurisdiction over the matter. The registry operator may at this point, at their discretion, withdraw their amendment request. If the registry operator opts to proceed with the request, the amendment request will remain in pending status until such time as the competition authority or authorities have provided a substantive response to ICANN. Upon response from the competition authority or authorities, ICANN will complete its review and consideration of the amendment request.

  3. An amendment requested under this process would be evaluated to determine whether or not public comment is necessary based on the materiality of the change and whether or not it substantially affects third parties.

Other:

ICANN has received requests from a few gTLD registry operators inquiring about the process for them to become an ICANN-accredited Registrar. In order for a registry to apply for ICANN registrar accreditation, they would have to first have an amendment approved by the process outlined above. After the amendment has been approved, the registry operator could then complete the application for registrar accreditation process posted at http://www.icann.org/en/registrars/accreditation-process.htm.

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