[Gnso-newgtld-wg] Notes and Action Items - New gTLD Subsequent Procedures PDP WG - 17 October 2019

[Julie Hedlund]

Dear Working Group members,

Please see below the notes from the meeting on 17 October 2019. 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/2019-10-17+New+gTLD+Subsequent+Procedures+PDP.

Kind regards,
Julie
Julie Hedlund, Policy Director

Notes and Action Items:

Actions: No actions captured.

Notes:

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

2. Review of summary documents:

a. Auctions: Mechanisms of Last Resort -- See: https://docs.google.com/document/d/15S_sUuP_gmKqba26tU9kYQ8mVF76W_3CSl4raxSgvm8/edit?usp=sharing, page 10, Vickrey Auctions (continue discussion)

Comments:
-- Options were presented in the Initial Report.
-- IPC supported Vickrey auction: support the use of sealed bid auctions where bids are submitted at the time of application only where the bid is unsealed when there are multiple contenders for the same string and none of the contenders have obtained community priority, and urge that processes used avoid disclosure of potentially sensitive commercial information when it may not be required.
-- ALAC:  supportive of the option to introduce the Vickrey auction in place of the regular auction process, as the resolution mechanism of last resort.
-- RySG: Some support some do not.
-- BC and BRG agree.

Question: If the WG recommends a Vickrey sealed bid option, when would we recommend that the bids are submitted and when are they revealed?
-- Determining when the bids should be submitted, opened, etc. -- those factors might be dependent on the objectives of the WG.  Such as resolving string contention early, improve transparency, reduce impulsive bids.  May drive the answer to the above question.  If you can agree on those objectives you may not have to make a decision on the details of the process.
-- The RySG struggled over the idea that there is not one path for every application.
-- If you do bids at any other time it’s not a Vickrey auction.
-- Allowing people to submit bids after the reveal could result in collusion.
-- Force people to evaluate what the TLD is worth to them at application.
-- Vickrey is a type of sealed bid auction -- at the time of the submission of the application.  Commonly used in other types of government and other public resource auctions.
-- There are contention sets that are still being resolved from 2012.
-- We can talk about a sealed bid, but the timing is the biggest issue.  The realities of how the process plays will have the biggest impact.
-- Because we didn't consider the timing of bids, ALAC’s reference to and support for Vickrey auction is a qualified one (along with the multiplier).
-- Unless two parties submitted the same exact bid - there wouldn't be any contention sets.  Highest bidder gets its at second highest bid.

-- Except in cases where one of the bidders is a Community Based application that has to go through Community Evaluation.
-- On the timing of bids for sealed bid auctions. The willingness to pay for a string is confidential information. We shouldn't be expecting applicants to disclose that information unless it is necessary (ie to resolve a contention set).

-- In ICANN's auction of last resort the applicants had to prove they had the funds to participate, how does that happen with sealed bids?

-- Why would there be a delay in selecting who is the successful bidder of the string?  Many of these questions can be dealt with in implementation.
-- Seems to be support for a sealed bid auction, but there are value judgement.  This WG needs to decide what is most important.

b. Private Resolution of Contention Sets -- https://docs.google.com/document/d/15S_sUuP_gmKqba26tU9kYQ8mVF76W_3CSl4raxSgvm8/edit?usp=sharing, page 14

Policy Goal:
Implementation Guideline F: If there is contention for strings, applicants may:

i) resolve contention between them within a pre-established timeframe
ii) if there is no mutual agreement, a claim to support a community by one party will be a reason to award priority to that application. If there is no such claim, and no mutual agreement a process will be put in place to enable efficient resolution of contention and;
iii) the ICANN Board may be used to make a final decision, using advice from staff and expert panels.

High-level Agreements

Refer back to Changes of Applications Sections where high level agreement in the formation of joint ventures to address contention (See Section 2.4) which states: “Commenters generally supported allowing application changes to support the formation of joint ventures. ICANN org may determine that in the event of a joint venture, re-evaluation is needed to ensure that the new entity still meets the requirements of the program. The applicant may be responsible for additional, material costs incurred by ICANN due to re-evaluation and the application could be subject to delays”.

Outstanding Items:

Who Supports private financial resolution?
-- Some RySG, RrSG, BRG, IPC, Neustar

Who opposes private financial resolution or has concerns?
-- GAC, ICANN Board has “concerns”, Some RySG, NCSG, ALAC, .in
-- ICANN Board: ICANN Board: One of our major concerns in reading the discussions in the Supplementary Final report relates to new procedures that may be open to abuse in ways that have not yet been understood. We would like to better understand the analysis that has gone into determining the likelihood, and types, of abuse that may open up with any new procedures. We believe that any new recommendations should guard against bad faith applications to the extent possible. These concerns mostly center on the issues of auctions of last resort and on private auctions. We take special note of the possible practice of participating in private auctions for the sole purpose of being paid to drop out. We also take note of the abuse that becomes possible in alterations to the change request mechanisms. The Board has concerns about whether, and in what ways, the availability of private auctions incentivizes applications for purposes other than actually using the string; and we are interested in how these incentives for abuse might be minimized.

Amend AGB and Terms & Conditions to disallow private string contention resolution where a party is paid to withdraw? Should the RA include provisions to take a string away from an RO that has taken part in private resolutions?
-- ALAC, NCSG agreed.
-- RySG: Divergence/New Idea/Agreement
-- BRG/IPC/Neustar: Divergence (oppose restrictions on private resolution).
-- RrSG: Given that private auctions were the result of a free marketplace, addressing private auctions within the Applicant Guidebook (or ICANN Org) does not seem appropriate.

Ban all forms of private resolution of contention sets?
-- Some RySG members: Some agreement/some divergence.
-- BRG: Private auctions can be a valid way to resolve contention.
-- ALAC: While ALAC opposes private auctions or other private resolution where the loser benefits financially for withdrawing their application, this option would force applicants into auctions of last resort as the only method of resolving contention.
-- IPC: Opposes this option as it would curtail or prohibit the parties in a contention set from seeking to resolve the matter by negotiation.
-- RrSG: Divergence.
-- IPC: New Idea - Reiterates support for stronger LRO.

Discussion:
-- If there is something more accommodating in the ICANN mechanism of last resort, then maybe that alleviates some of the need for private resolutions.  These are dependent.
-- If we do an auction after the fact, as a last resort, then you could have private resolutions.
-- What kinds of things would make the ICANN auction more enticing?  Perhaps if it was more reasonable and cost effective.
-- Proposal: One of the concerns Neustar has is that if you submit a sealed bid at the time of application you have no idea of the market/competition, and whether you will end up in a contention set.  What if once the applications were submitted would it be possible for applicants who applied for the same string, in a contention set, and if a portfolio applicant know others in the group, they submit sealed bids at that time and the winner comes out of that?  That would give the applicant a little more certainty.
-- The above proposal was one of the options in the Initial Report.
-- The problem with that scenario is it allows for collusion between applicants.  You bid high on this one and I’ll bid high on another.  Collusive private auctions could be very problematic in the eyes of competition authorities.
-- If ICANN uses a Vickery auction then why not notifying the highest bidder ASAP (without revealing how much they have to pay / aka the 2nd bid amount) - then that applicant might see an incentive to NOT enter into private contention resolution  (aka private auction); but going with the Vickery auction of ICANN.
-- You could put into terms and conditions that you wouldn’t be allowed to do certain things (such as collude).
-- Matching that with partial contention sets could be challenging (the above point).
-- There are no doubt Implementation aspects we can explore  if we go down this pathway of course... But identification of concerns and risks needs to come first.
-- What if before reveal day the parties are contacted by ICANN indicating that they are in a contention set (without disclosing who is in the set) and they will need to submit a sealed bid, and then reveal comes after that?  They would have the option to withdraw.
-- So, requirement to put in a sealed bid is subject to establishment of a contention set, and identity of applicants still not revealed.
-- Why would we need to get every applicant to submit sealed bid right up front?  Better to wait until there is a known contention set.
-- Vickrey auctions would be very daunting and discouraging to newcomers to this area. (Here is an asset that costs $100,000 but how many millions are you willing to pay?) I think (as a policy) these are the types of participants we are trying to attract. To make sealed bids palatable, the bidding should take place close to the award when the value of the asset can be evaluated.
-- Would the above scenario prevent someone from making a legal rights objection to knock out the other applicant(s) in the set?

3. AOB: ICANN66 (5 min)

Four Sessions:
Saturday, 02 November:
12:15-13:15 -- SubPro Full WG Meeting Session 1 -- WT5 presentation on Report
13:30-15:00 -- SubPro Full WG Meeting Session 2 -- WT5 presentation on Report

Monday, 04 November:
15:15-16:45 -- SubPro Full WG Meeting Session 3 -- areas for public comment
17:00-18:30 -- SubPro Full WG Meeting Session 4 -- topics for smaller groups (predictability model, closed generics, RSP pre-approval, etc.)


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