A better contention set model for fresh top level domain names

With private resolution out, applicants ought to still be able to recover some of their costs if they lose a contention set.

ICANN didn’t like how many contention sets were resolved in the last round of top level domain expansion, despite asking parties to resolve contention sets among themselves. I think it has overcorrected with its plans for the next round.

A contention set means that more than one firm applies for the same top level domain.

In the last round, ICANN encouraged those in a contention set to choose a winner amongst themselves. If they couldn’t, then there would be an ICANN-orchestrated auction with the top bidder getting the domain.

There were many ways for parties to settle a contention set without using ICANN’s auction. But the majority were settled via private auctions. In private auctions, the losers split the proceeds that the winning bidder paid.

Some people didn’t like this model. They believe it distorted the prices paid for top level domains as firms used the proceeds from losses to bid in other content set auctions.

Furthermore, now that people have seen how much they can make from losing auctions, there are worries that people will apply in the next round with the goal of losing auctions rather than operating top level domains.

It’s a fair point and I can see the concern. Still, I believe the community and ICANN’s board have swung too far in the other direction for this round.

Following nixing the idea of joint ventures, the board settled on an “alternate string” plan.

The idea is that upon seeing that their domain is in a contention set, an applicant could submit an alternative top level domain that is not in contention rather than proceed with its original application. If they choose to proceed with the original string, the contention set will be settled in an ICANN auction. The loser won’t get money back from the auction.

It will be interesting to see how alternative strings play out in practice. There will likely be a dance in which those in contention sets feel each other out. Will Party A choose an alternative string so Party B doesn’t have to? Will the parties coordinate with each other even though they can’t pay each other off? What if both parties choose an alternative string? And then what regarding contention sets created by alternate strings?

I’m sure many of these scenarios can be settled with further planning, but it’s notable to think through this.

While alternate strings might make sense for portfolio applicants, it’s a raw deal for single applicants.

I don’t recall who it was, but during the Board open mic at the ICANN meeting in Istanbul last November, a person representing non-profits mentioned how this doesn’t really help his constituents.

He’s right. Consider a non-profit focused on diabetes that applies for .diabetes. What kind of alternative would it choose if there’s a contention set?

Or perhaps a firm applies for a dot-brand and lands in a contention set. There aren’t good alternatives for that.

So here’s my idea: a partial recovery mechanism if you lose an ICANN auction.

Losing auctions wouldn’t be profitable, but applicants could at least recover up to their application fee of $227,000. I’d argue they ought to be able to recoup a bit more to cover some of their other expenses, too.

Auction losers would split the proceeds up to $227,000 or another fixed number set by ICANN, say $350,000.

This at least softens the blow for applicants who don’t get the domain they apply for.

I’m curious what others think regarding this.