ICANN forecasts 646 applications will be withdrawn, mostly after the initial evaluation period.

66 applications for new top level domain names have been withdrawn as of today. For budgeting purposes, ICANN projects that number will explode to 646 before everything is said and done.

The number was disclosed in ICANN’s proposed operating plan and budget for the 2014 financial year, which begins in July 2013. The number is up from a previously budgeted 545 applications withdrawn.

ICANN expects 105 applications will be withdrawn before they pass through the initial evaluation phase. Applicants get a 70% refund of their $185,000 application fee in this case.

A further 390 applications are projected to be withdrawn after initial evaluation but before string contention resolutions, dispute resolution is completed, or extended evaluation. ICANN is betting that many applicants in contention sets will withdraw as applicants strike deals with each other. These applicants will get a 35% refund.

The forecast shows a further 150 applications withdrawn after string contention resolution, dispute resolution, and extended evaluation. These applicants will get 20% of their money back.

This is a reverse of the prior forecast, which predicted most withdraws would come only after final contention resolution. Frankly, I wouldn’t be surprised if more companies settle their contention sets privately before initial evaluation results are posted.

One application was withdrawn within 21 days of getting a GAC Early Warning. That applicant received an 80% refund.

Largest new TLD applicant commits to resolve up to 63 new TLD contention sets through first private auction.

Donuts, the company that applied for the most top level domain names, announced today that it will commit to private auctions for 63 of the 307 strings that it applied for in the first auction to be held by Applicant Auction.

Private auctions allow new TLD applicants to settle contention sets faster than waiting for ICANN’s “auction of last resort”. They also allow the proceeds to be distributed to the losing bidders rather than to ICANN.

For the Applicant Auction designed by Peter Cramton, the law firm of Morrison & Foerster will act as a “neutral” for legal and settlement functions and JP Morgan Escrow Services will provide escrow. The Applicant Auction web site says the first auction is scheduled for May 28, although Donuts’ press release says it will be June 3.

Some new TLD applicants claim that private auctions may violate antitrust rules, although other applicants have said these claims are just a PR stunt by companies that don’t want to participate in private auctions.

In order for a private auction to work, all applicants for the string must voluntarily participate in the auction. So applicants that don’t like private auctions simply don’t have to participate. However, some applicants may worry that competitors will be enriched through private auctions, giving them more money to compete on other strings.

There will be a lot of strategic thinking by all applicants as to which domains they want to have private auctions for.

Donuts’ press release and list of 63 strings is available here.

[This story was updated to reflect that the 63 strings committed refer to the "first" auction held by Applicant Auction.]

Is the GAC right? It depends on who you ask.

The ICANN New gTLD Board Committee request for comment on the GAC’s safeguard advice has closed, and the reply period will open soon. Here are some select comments, along with links to the full comments.

“Instead of Guidebook advice, the GAC has offered public policy advice and expects the whole New gTLD program to be halted until such advice is considered and adopted.”

-Jonathon Nevett, Donuts Inc

“The GAC is proposing restrictions upon the new gTLDs which have not been imposed on their own ccTLDs.”

-Graeme Bunton, Tucows

“Governments play an important role in the multi-stakeholder model of Internet Governance, but the implications of the GAC Beijing Communiqué represents a fundamental re-write of the New gTLD Program by a single stakeholder at the very end of a multi-year process.”

-James Bladel, Registrar Stakeholder Group

“…the Insurance Council considers that the risk of harm being done to the public interest means that some strings should not be permitted as new gTLDs no matter the level of safeguards applied.”

-Robert Whelan, Insurance Council of Australia

“…use of the GAC Objection procedure to create new, one-size-fits-all, across-the-board mandatory requirements at this late date is in fundamental tension with the ICANN multi-stakeholder model in general, and its bottom-up policy development principle in particular.”

-J. Beckwith Burr, Neustar

“The GAC did not advise or comment on the actual ICANN policy, but seems to have attempted to take over the process of defining and implementing new gTLD policy at an impossibly late stage of the process.”

-Robin Gross, Non-Commercial Stakeholders Group

“It is vital to take special care when assigning strings representing generic terms like .APP because those terms have the opportunity to artificially define an entire industry. Generic terms logically lead consumers to assume that the gTLD represents the industry as a whole.”

-Jonathan Zuck, Association for Competitive Technology

“The GAC Advice has created a competitive disadvantage for applicants who have, from the start, committed to responsible policies that others in their contention set now have a third chance to get right.”

-John Berard, VoxPopuli Registry

By incorporating the GAC Advice into the new gTLD program, ICANN will strengthen and lend credibility to the multi-stakeholder process.

-Steven Metalitz, Coalition for Online Accountability

“…there are good reasons for the Board to follow the GAC’s advice regarding the GAC Safeguards, which represent a thoughtful response to the GAC’s legitimate scalability concern, which Turn shares. There is no good reason not to.”

-Todd D. Williams, Turner Broadcasting System

“While the recommendations offered in the GAC Communiqué are extensive, and come at a late stage of the new gTLD process, many of the issues they address go to the very heart of the success and stability of the new gTLD program.”

-Meredith Baker, NBCUniversal

“If GAC advice were followed, the new gTLD program would be changed from an objective process in which qualified applicants are granted new gTLDs into a ongoing subjective regime in which new policies and rules can be issued by the GAC on ad-hoc basis without reference to principles, rationales, or access to any appeal by affected parties– it would turn the multi-stakeholder model on its head.”

-Antony Van Couvering, Minds + Machines

“The Internet is too valuable and important to consumers, brandholders and the economy for ICANN not to address the issues raised in the Advice.”

-Dan Jaffe, Association of National Advertisers

“We ask the ICANN Board to reject the GAC advice on “Consumer Protection, Sensitive Strings, and Regulated Markets” because it is untimely, ill-conceived, overbroad, and too vague to implement.

-Bret Fausett, Uniregistry

“The GAC’s recommendations raise complex issues of ICANN’s mission and governance and how they relate to the laws of the jurisdictions in which the registries operate.”

-Thomas M. Lenard, Technology Policy Institute

“The role of GAC advice at this stage, as outlined in the Applicant Guidebook, is to address individual strings, not provide advice on the program as a whole.”

-Aparna Sridhar, Google

“GE remains concerned that ICANN will be under such pressure to move forward with the new gTLD program that it may not sufficiently implement or consider the GAC’s advice, or enter into the serious negotiations necessary to come to a mutually agreeable solution.”

-Kathryn Park, GE

SEC filing sheds (some) light on relationship for new top level domains.

A lot of fuss has been made about the connection between Demand Media and Donuts and the new TLD program.

What exactly is the relationship between the two companies? Demand Media’s latest 10-Q, filed today, explains the terms of the agreement:

As part of its initiative to pursue the acquisition of gTLD operator rights, the Company has entered into a gTLD acquisition agreement (“gTLD Agreement”) with Donuts Inc. (“Donuts”). The gTLD Agreement provides the Company with rights to acquire the operating and economic rights to certain gTLDs. These rights are shared equally with Donuts and are associated with specific gTLDs (“Covered gTLDs”) for which Donuts is the applicant under the New gTLD Program. The Company has the right, but not the obligation, to make further deposits with Donuts in the pursuit of acquisitions of Covered gTLDs, for example as part of the ICANN auction process. The operating and economic rights for each Covered gTLD will be determined through a process whereby the Company and Donuts each select gTLDs from the pool of Covered gTLDs, with the number of selections available to each party based upon the proportion of the total acquisition price of all Covered gTLDs that they funded. Gains on sale of the Company’s interest in Covered gTLDs will be recognized when realized, while losses will be recognized when deemed probable. Separately, the Company entered into an agreement to provide certain back-end registry services for gTLD operator rights owned by Donuts for a period of five years commencing from the launch of Donut’s first gTLD. Demand Media is not an investor in Donuts nor involved in any joint venture with Donuts or its affiliates.

Note the last line of the explanation, which may have been added to diffuse any suggestions of a tighter relationship between the companies.

So far Demand has made $18.2 million in capital investment in the new TLD program, most of which was paid to Donuts. The company’s $185,000-per-application fee for its 26 own TLD applications represents less than $5 million of the capital investment.

Demand has already incurred formation expenses of $4.3 million through the end of March related to new TLDs. It expects up to spend an additional $5 to $10 million on formation expenses in 2013.

In a somewhat unrelated note regarding to the company’s 10-Q, it appears there’s an error in its filing. The filing refers to the cost of .com domains and Verisign’s latest agreement with ICANN. The note in the 10-Q says the new agreement allows Verisign to hike prices 7% in four of the six years of the contract. That’s not the case; the prices are fixed for the term. I suspect this information was inserted when the contract was agreed to by ICANN but before the Department of Commerce got involved. It was never updated after the final agreement was inked.

A Generally Atrocious Communiqué.

I’ve learned a lot over the years while writing about the domain industry. In the past three years I’ve learned that if there’s a laborious article I need to research and write that has to do with new TLDs, I can just wait a little while and Kevin Murphy will do it instead.

That’s what he’s done with “This is how stupid the GAC’s new gTLDs advice is“.

The GAC’s “advice” about new top level domains coming out of Beijing is mind boggling. Here’s how Murphy sums it up:

For the last few weeks I’ve been attempting to write a sensible analysis of the Governmental Advisory Committee’s advice on new gTLDs without resorting to incredulity, hyperbole or sarcasm.

I failed, so you’ll have to read this instead.

Indeed, “stupid” is the first word that came to mind when I saw the GAC’s Beijing Communiqué. Incompetent was the second word that came to mind.

Unless, of course, the entire goal of GAC is to kill off or slow down the new TLD train. Then its Communiqué was frickin’ brilliant.

I see only one way for ICANN to handle the situation: after public comment, politely reject the “advice”.