Notes and Action Items - New gTLD Subsequent Procedures PDP WG - 04 May 1500 UTC - Gnso-newgtld-wg

May 4, 2020

      Dear Working Group members,

Please see below the notes from the meeting on 04 May at 1500 UTC. These high-level notes are designed to help WG members navigate through the content of the call and are not a substitute for the recording, transcript, or the chat, which will be posted at: https://community.icann.org/display/NGSPP/2020-05-04+New+gTLD+Subsequent+Pro....

Kind regards,
Julie

Notes and Action Items:

Actions:

ACTION ITEMS: In preparation for the next meeting on Thursday, 07 May at 0300 UTC WG members should:

  1.  Review the latest version of 2.8.1 Objections [GAC Consensus Advice and GAC Early Warning Only] – link to be sent with the agenda.
  2.   Review the proposed edits from Paul McGrady: “[ In the event that GAC Consensus Advice is issued after the application period has begun and the GAC Consensus Advice applies to categories, groups or classes of applications or string types, the ICANN Board should take into account the circumstances resulting in such timing and the detrimental effect of such timing when considering such GAC Consensus Advice which should result in a strong presumption against the Board adopting such late GAC Consensus Advice.]”
  3.  Review the Compilation of GAC input on Draft Recommendations of GNSO SubPro PDP WG on future New gTLDs at: http://mm.icann.org/pipermail/gnso-newgtld-wg/2020-May/002759.html

ACTION ITEM re: 2.1 Auctions: Mechanisms of Last Resort & 2.2 Private Resolution of Contention Sets (including Private Auctions) – Staff will revise the Proposal based on the WG discussion.

Notes:

1. Updates to Statements of Interest: No updates provided.

2. Discussion of Final Report Topics: https://docs.google.com/document/d/1kUlmZH8nxWTgfcRluA5FxLheMm4XhhOwkRt7om52...

2.1 Auctions: Mechanisms of Last Resort & 2.2 Private Resolution of Contention Sets (including Private Auctions), page 1

Option 1: Submission of bid at application submission. Once the contention sets are established, only the application with the highest bid is evaluated (this would require significant changes to the processing of applications as carried out in the 2012 round).

Option 2: Submission of bid prior to reveal day. Contention sets are established, but applicants are only provided the number of applications in the set, but not the applying entities. After all bids are submitted, the identify of entities in contention sets would be revealed and applicants could participate in various forms of private resolution (perhaps including private auctions). The assumption is that all applications are evaluated, as well as other application procedures.

Proposal (Option 3):
-- Add T&Cs warning applicants that:

     *   They shall not submit applications for the purpose of financially benefiting from the resolution of contention sets
     *   They shall not participate in the resolution of contention sets where non-winning applicants receive financial benefit to lose.
     *   The above rules shall not prohibit applicants from creating partnerships or other forms of joint ventures that would allow two or more applicants within a contention set to jointly run and/or operate the applied for string if that joint venture ultimately is otherwise qualified to operate and administer the registry in accordance with the rules set out in the then-current Applicant Guidebook.
 -- No additional changes would need to be made to the application/evaluation/objection processes.
-- Applicants are permitted to resolve contention sets as laid out in the T&Cs
-- Auctions of last resort are strictly a single round and via sealed bid.
-- A PIC is incorporated into the registry agreement to capture the requirements from the T&Cs. The punitive measures could include the potential loss of the registry as well as a bar on participation in any future rounds (both for the individuals as well as the entities (and their affiliated) involved.

Discussion:

-- We have yet to identify the problem and harms.
-- It is not universally accepted that this was problematic, but there were enough comments from the community and Board that to allow financial gain from auctions by those who lose doesn’t fit with the whole notion of operating in the global public interest and the allocation of public resources.
-- We are trying to come up with potential solutions where you don’t have to go to an auction of last resort, such as joint bids or joint ventures.
-- Our goal is not 100 percent solving the situation, but to mitigate/reduce.
-- Need to be careful not to make the rules too complicated.
-- Don’t think they are complicated -- no private auctions, but allow private resolutions.
-- There could be other penalties.  This seems to ensure that no smaller entity ever gets a registry.  What keeps a big entity bidding a billion dollars and I get it for the second higher price?
-- Keep in mind that you were required to put 10 percent of your bid down.  That could dissuade huge bids.
-- If we go to a sealed auction bid then we could get large entities making huge bids.
-- Someone could think this was to hard/complicated.  Need to be careful that we aren’t creating an extremely complicated process.
-- Like the idea of having a financial penalty.  If we go ahead with this we need to carefully think about the Ts&Cs, who does the evaluation, what are the consequences, how are they enforced.  You also could have them put into escrow what their bid amount is.
-- Question re: Option 1 -- Wondering where you have in parenthesis “(this would require significant changes to the processing of applications as carried out in the 2012 round).” Wouldn’t it be easier to change the evaluation process than having Ts&Cs that are hard to enforce and easy to game?
-- If it is only the one with the highest bid is evaluated, then what if you object to all of them, or to the first bidder but not the other bidder?  You will have to do the community evaluation first.
-- There was a Visio document that showed a flow chart/process diagram.
-- It would be easier to figure out a different process then to have rules that were hard to enforce.
-- Both options have advantages and disadvantages.
-- Requiring full bid to put into escrow would disadvantage small firms who can’t do that.
-- Rather than just present options for public comment it would be better to present recommendations.
-- Don’t lose the suggestion of a multiplier for those that qualify under the Applicant Support Program.
-- Option 3 (this proposal) eliminates blind bids.
-- We will always have the ‘giant guy always wins’ problem in any scenario.
-- Re: “The above rules shall not prohibit applicants from creating partnerships or other forms of joint ventures that would allow two or more applicants within a contention set to jointly run and/or operate the applied for string if that joint venture ultimately is otherwise qualified to operate and administer the registry in accordance with the rules set out in the then-current Applicant Guidebook.” -- Could say this in a more positive light.
-- At-Large asked for consideration for an applicant which gets Applicant Support to get priority in a contention set.  We put out as a potential option early on, but it didn’t get traction.  It is possible.
-- I'm concerned that we're losing sight of the intent of the program, which is to increase competition and innovation. New entrants in a contention set might need a leg up.
-- We still need to find a solution to a situation where there is not a new entrant in the contention set.
-- Question: The auctions of last resort via a seal bid, at what point would that happen?  Why can’t you have Option 2 with these terms and conditions? “Submission of bid prior to reveal day.”  Option 3/Proposal - you aren’t having the sealed bid until the very end when you know you haven’t resolved anything.  We got push back to the notion of submitting a sealed bid before knowing who you were bidding against.
-- There was also the problem that if new members were added to the contention set after string sim review, these applicants would have different information compared to the others in the contention set.  This was seen as unfair.
-- If you keep the sealed bid as the very first step then you don’t have some applicants who may have more information and an advantage.
-- Others said that if the auction of last resort isn’t held until 2-3 years after submitting the sealed bid then things could have changed.
-- Suggest Option 2, with Ts&Cs and no private auction.  The only difference with Option three is the timing of the sealed bid.
-- Question: What is the benefit of doing the sealed bid earlier or later? Answer: Earlier in the process is the true value of the bid since you don’t know who you are bidding against.  Submitting later on you could gain more intelligence, but if you submit right away by the time the auction is held it may not be worth the same amount as when you submitting the bid.
-- When we first thought about Option 2 private auctions were still allowed.  If it isn’t a private auction all the money goes back to ICANN.  So, private auctions are not off the table.
-- Seems that there is support for Option 2, with Ts&Cs, and no private auctions.  Need to agree on the timing of the sealed bid.
-- This new version of Option 2 would still prohibit gaming.  Would still allow creative solutions.  Would require more detail in implementation.  We are not saying you could pay someone off (horse trading).
-- One of the issues raised with Option 2 is that the contention set composition may be impacted by String Confusion objections.   New applicant could have more information than the others in the set. - Any new additions to the contention set get an advantage.
-- We could say what is acceptable and provide a guiding principle.
-- Think we need to work through the details of what happens while waiting for the sealed bid.
-- Seems like Option 2 with Ts&Cs and without private auctions, but need to agree on the timing of the submission of the sealed bid.
-- One concern is that what we are trying to do here is to push applicants to resolve the contention set through a joint venture or some other mechanism, other than private auctions.  If it ends in an auction of last resort and the bud is submitted at that time, then the applicants would have more time to gather information to make a winning bid -- it is unfair because now you have more information and you can make sure your bid will win the day.
-- Under Option 2 you would know how many in the contention set, but not who they were.  But after a string confusion objection a new player could be added who could know the number and also the identity.
-- Maybe all three applicants have the option to resubmit their sealed bids if they want to.
-- Why not have Option 2 but with everyone submitting their bids at the beginning?  It’s biased against those who don’t have lots of resources.
-- Need to have a reveal day so that you can have objections and public comments.
-- The original concern with Option 1 is that there is no information to base the value of the TLD.  If you wait until reveal day and you know how many strings are in the contention set, why put applicants through the angst of trying to figure out how much a string is worth to them without any information.  If you understand how many are in the contention set with you, you can make a decision with more information.
-- Question: Could two of the three in a contention set combine their resources, or set up a joint venture?  Answer: It would depend on the timing of the submission of the sealed bid.  The only way to do a joint venture to convince all applicants to withdraw in favor of the joint venture.  You could do it if you did the sealed bid at the very end.
-- If there were material changes to an application it would have to be submitted as a change request.
-- If the composition of the set changes after the submission of the bids, the set can be given the opportunity to re-bid. if the composition of the set changes after the submission of the bids, the set can be given the opportunity to re-bid.
-- In the case of sealed bids there is no need for a deposit.  The application fee is the deposit.

Notes and Action Items - New gTLD Subsequent Procedures PDP WG - 04 May 1500 UTC

Julie Hedlund

Austin, Donna

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