ICANN (International Corporation for Assigned Names and Numbers)
has said that auctions will be used if two organisations vying for
the right to a gTLD are tied on other grounds.
ICANN announced earlier this summer that it would no longer
limit the number of gTLDs to 21, and that almost any word or phrase
could be registered as a domain.
The move has been condemned as a "nightmare" for brand owners
because many will feel compelled to buy their brand's name at each
of numerous new TLDs expected to appear.
ICANN's announcement that auctions will settle disputes over who
will have the right to register words as domains is likely to be
just as controversial.
The body announced in June that anyone can register any word as
a TLD as long as it meets four conditions. "It must respect prior
rights and marks, it mustn't be confusingly similar to any existing
TLD, for example a .KOM would be too close to a .COM, if it
represents a community, it must be with the full agreement of that
community, and it must respect morality and public order," said
ICANN chairman Peter Dengate Thrush at the time of the
announcement.
If two applications are tied then ICANN has now said it would
use an auction to determine who wins the right to own the
domain.
"ICANN intends to use auctions in the new gTLD process as a
tie-breaking mechanism, not the primary allocation mechanism, for
the resolution of string contention among competing new gTLD
applicants for identical or similar strings," said a consultation
document discussing the move. "Auction would be the final means of
settling any contention cases that have not been resolved at any of
the previous stages in the process."
A report produced by consultancy Power Auctions said that a four
year old paper produced by the Organisation for Economic
Cooperation and Development (OECD) had backed auctions as the most
efficient way to distribute domains.
"On balance the economic arguments favour the use of auctions in
some form, where scarcity exists, in relation to the goals set by
ICANN for allocation procedures," said that report. "They are
particularly strong in relation to allocation decisions concerning
to existing resources and where a ‘tie-breaker’ is needed during a
comparative selection procedure for a new resource. In all cases,
the best elements of comparative selection procedures could still
be incorporated, at a prequalification stage for registries, using
straightforward, transparent, and objective procedures that
preserve the stability of the Internet."
In its report, Power Auctions argued that auctions help to
attach the correct value to domains. "Auctions are well suited to
accomplishing the goal of allocative efficiency: putting scarce
resources into the hands of those who value them the most," said
the report. "As such, the results of auctions tend to create
greater social value than alternative allocation mechanisms."
In order to ensure fairness, the report also proposed a system
of handicaps in favour of some kinds of applicants.
"Various devices can be considered for favoring disadvantaged
bidders in an auction," it said. "For example, a 25% bidding credit
could be offered to community-based bidders whose community is
located primarily in least-developed countries: a $300,000 bid from
such a bidder would be viewed as equivalent to a $400,000 bid from
a wealthy country."
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