Evaluation of the New gTLDs:
Policy and Legal Issues
Prepared for the
Internet Corporation for Assigned Names and Numbers (ICANN)
Summit Strategies International
July 10, 2004
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In November 2000, the Board of Directors of the Internet Corporation for Assigned Names and Numbers (ICANN) selected seven proposals for new top-level domains (gTLDs): .aero, .biz, .coop, .info, .museum, .name and .pro. This was the first effort to expand the domain name system (DNS) since the 1980s, other than by adding "country code top-level domains" that correspond to particular countries or territories. Shortly before the first of the new gTLDs was launched in September 2001, the ICANN Board decided that it was important to evaluate the "proof-of-concept" under which they were introduced. The Board established the "New TLD Evaluation Process Planning Task Force" (Task Force) to determine the scope of the evaluation. The Task Force decided that seven questions, among others, would take priority. Those questions, which are the focus of this report, address the effectiveness of intellectual property protections, compliance with registration restrictions, competition, the reasonableness of the legal framework, and regulatory issues.
The new gTLD start-up periods proved generally effective at protecting the interests of trademark holders, but suffered from other problems. The lack of any screening or verification in the .info Sunrise period led to serious abuses, including an unusually high number (43%) of registrations that had to be cancelled or transferred. The intellectual property claim process that .biz established operated more smoothly, but was extremely complicated. It proved fairer than a Sunrise period because parties without registered trademarks – including individuals – could defend registrations by demonstrating a legitimate interest or right. The .name system of defensive registrations was complex too, and in an unrestricted TLD would not be consistent with attracting new users and uses to the DNS. Looking to the future, these experiences suggest several options: (i) a Sunrise period that verifies registrations by use of online databases and other means in a cost-effective manner; (ii) notice to prospective registrants and trademark holders of their respective claims prior to adjudication, perhaps on the basis of the familiar UDRP rather than the new "STOP" procedure .biz used; or (iii) reliance on UDRP alone, as simpler and appropriate given that trademark registrations may constitute only 2 - 3% of all registrations.
The process .info and .biz used to allocate names – called a "round robin" -- was criticized for enabling manipulation of the system. Some registrars kept their list of desired names short and offered coveted slots to their best customers. Others used registrars they controlled to do the same, while they opened their own lists to the general public. (Initial efforts by .biz to design an alternative distribution system for led a court to determine it would have constituted an illegal lottery.) The .name registry sought to eliminate the advantage of submitting shorter lists by using random batch processing, but that did not prevent registrants from submitting duplicate requests through multiple registrars. Admittedly, the dilemma of how best to allocate names does not have an easy solution. Other options include first-come, first-served; auctions; and reverse Dutch auctions. The most appropriate method depends to a great extent on which underlying values should be given priority. It also depends on which entity should benefit from the monetary rewards that certain names generate. Both subjects require more discussion within the ICANN community.
Both the .biz and .name gTLDs are subject to restrictions that limit registrations to commercial purposes and to personal names, respectively. Random sampling indicated fewer problems than expected in .biz, with 1.8% of the registrations appearing to fail to satisfy the criteria and another 9.6% being unclear. In .name, where it was somewhat easier to estimate noncompliance, 10.6% of registrations raised questions, with another .8% unclear. While the registries are not obligated to enforce the restrictions through verification, there are simpler methods, such as random screening, or heightened scrutiny when a registrant reaches a certain number of registrations, which could help. Another solution is to recognize the difficulty of enforcing restrictions on global registries and adopt the model offered by the .com, .net and .org TLDs, which were once restricted but are no longer.
The new gTLDs have introduced some competition, but how much is debatable. Examining market share, extent of actual choice and price elasticity suggests that impact has been minimal. Other evidence, however, indicates that TLD expansion has attracted about 20% new registrants and led to new uses among 40 – 60% of registrants. The most significant contribution has been the development of facilities-based competition. As a result, new providers of registry services have been able to compete effectively with the incumbent registry, VeriSign, on that basis. Innovation has played a supporting role, and may become increasingly important as the three largest registries work to distinguish themselves from one another.
The agreements that underpin the new gTLDs reflect a level of detail that may not be necessary for future TLDs. While it was understandable for ICANN to have erred on the side of caution as it undertook initial expansion, the resulting legal framework is cumbersome. There was relatively strict insistence that the agreements adhere to key provisions of the original proposals, although it appears that such rigidity was not always the wisest course. While the agreements are relatively uniform, there are some cases -- such as the requirement that smaller, sponsored TLDs use only ICANN-accredited registrars – where divergence would have made sense. In a future round, it should be possible to use a streamlined base agreement and limit appendices to those necessary to ensure critical elements of registry performance and compliance with ICANN policies. There should also be more flexibility in the agreements to enable both ICANN and the registries to address routine issues.
Launching a new gTLD is not for the faint of heart. The experiences of the six that have done it already, and the wisdom the community as a whole as gained, should provide valuable assistance to those TLDs that follow.