Cross Community Working Group on New gTLD Auction Proceeds

The Cross-Community Working Group on New gTLD Auction Proceeds (CCWG-AP) was created to identify processes and mechanisms for allocating the proceeds of last-resort auctions of new gTLD strings where applicants in competition for a common string could not otherwise resolve ownership of the domain among themselves. The group's final report was submitted to the ACs and SOs for approval in May 2020. After approval from the ACs and SOs, the report was submitted to the ICANN Board on September 14, 2020 Maarten Botterman responded to the working group on behalf of the board on September 18, 2020, acknowledging the working group's efforts and describing the board's intended process. As of November 2021, the report is awaiting board action.

Background

During the New gTLD Program, string contentions that could not otherwise be resolved were often awarded based on auctions of last resort. At the preference of the involved applicants, auctions were coordinated by ICANN or by a third party. In the event that these auctions were coordinated by ICANN, the proceeds of these auctions were placed in a fund under ICANN's control. Minus costs, ICANN-administered auctions from the new gTLD round have generated over $230,000,000.00. In 2015, when the net proceeds amount was closer to $60,000,000, the ICANN board and org had noted that there was "broad and substantial interest" in the use of proceeds.

The Applicant Guidebook set some parameters for the use of proceeds:

Funds must be used in a manner that supports directly ICANN’s Mission and Core Values and also allows ICANN to maintain its not for profit status.
Possible uses of auction funds include formation of a foundation with a clear mission and a transparent way to allocate funds to projects that are of interest to the greater Internet community, such as grants to support new gTLD applications or registry operators from communities in subsequent gTLD rounds, the creation of an ICANN-administered/community-based fund for specific projects for the benefit of the Internet community, the creation of a registry continuity fund for the protection of registrants (ensuring that funds would be in place to support the operation of a gTLD registry until a successor could be found), or establishment of a security fund to expand use of secure protocols, conduct research, and support standards development organizations in accordance with ICANN's security and stability mission.

Charter and Guiding Questions

The working group's charter was finalized in December 2016. The charter contained eleven questions to assist the working group to define the scope of its recommendations, and guide investigation into the issues surrounding allocation of proceeds. The questions covered both operational considerations, such as the structure and organization of the entity making allocation decisions, and guiding principles and objectives for those allocation decisions. The guiding principles included avoidance of conflicts of interest, independence of the allocating entity from ICANN's standard decision-making processes, and reviewability and transparency of the allocating entity's decisions and process. The charter documented that, at the time of adoption, the accumulated auction proceeds were approximately $100 million.

Objectives and Recommendations

The working group's final report specified that the objectives of the program disbursing auction proceeds should be to:

• Benefit the development, distribution, evolution and structures/projects that support the Internet's unique identifier systems;
• Benefit capacity building and underserved populations, or;
• Benefit the open and interoperable Internet.

The final report provides three options for operationalizing these objectives, recommending that the board adopt either option A or option B, with a working group preference for the option A:

1. Create an internal department within ICANN dedicated to the allocation of auction proceeds;
2. Create an internal department within ICANN dedicated to the allocation of auction proceeds, which collaborates with an external nonprofit organization; or
3. Create new charitable entity (ICANN Foundation), functionally separate from ICANN org, which is responsible for the allocation of auction proceeds

The working group also considered a fourth option, which was to distribute funds to an existing nonprofit for allocation according to the rules and objectives established by ICANN. This option could be likened to a scholarship endowment, where the donors had control over the parameters of the award of the scholarship, but the endowed school would be responsible for managing the endowment. It was determined by the working group that that option would be unworkable.

There are a total of twelve recommendations, including the recommendations regarding objectives and choice of mechanism, as well as supplemental guidance regarding the questions contained in the group's charter.

Public Comments

Initial Report

Both the initial report and a proposed final report of the working group were published for public comment. The public comment period for the initial report occurred at the end of 2018. There were thirty-seven comments posted to the mailing list during the period, including several from ICANN bodies (including the board). Comments touched on a variety of issues and topics contained in the initial report. After analysis and review of the comments received, the working group developed a list of agreements and action items, using the questions contained in the group's charter as a framework for organizing the group's agreements and actions in light of comments received. The tasks and agreements to amend the initial report were reflected in the working group's proposed final report.

Proposed Final Report

The public comment period of the proposed final report occurred in the spring of 2020. Sixteen comments were received, including a comment submitted by the ICANN Board. The refinements and agreements resulting from the second round of public comment were less wide-ranging than the initial round, with a total of nineteen agreed-upon modifications to the final report. The modifications were again organized by their responsiveness to specific questions from the charter document.

Minority Statement of the CSG

The working group's final report included a minority statement from the Commercial Stakeholders Group, stating that the working group's preference for option A (creating a department within ICANN to manage allocation of auction proceeds) was not entirely supported by the internal polls used to establish a preference. The CSG argued that, in fact, while there were eight votes in support of option A, there were more votes in favor of "something other than option A" when taken in total. The Intellectual Property Constituency voiced strong opposition to the creation of an internal allocation mechanism, worrying both about overhead costs, strain on fiduciary obligations, and the appearance of self-dealing that might result. The CSG did not dispute the "consensus" label of the recommendation of either option A or option B, but urged the board to closely consider the poll results and other factors when weighing the choice of mechanism for allocation of funds.

Next Steps

As of November 2021, the final report is awaiting board action. It was noted during Prep Week of ICANN 71 that ICANN org had over 250 recommendations to implement or act upon, and that prioritization was thus essential.

Commercial Stakeholder Group. Represents the full range of large and small commercial entities of the Internet, including the Business Constituency, Intellectual Property Constituency and the Internet Service Providers and Connectivity Providers Constituency (ICANN Bylaws).