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UK's internet registry prepares a £100m windfall for its board members – and everyone else will pay for it

UK's internet registry prepares a £100m windfall for its board members – and everyone else will pay for it

Postby smix » Sun Jun 09, 2019 5:44 am

UK's internet registry prepares a £100m windfall for its board members – and everyone else will pay for it
The Register

URL: https://www.theregister.co.uk/2019/06/0 ... _windfall/
Category: Business
Published: June 5, 2019

Description: Snouts in the trough for The Great British Brand Sell-off
Special report Nominet, the operator of the dot-UK domain-name registry, has been accused of designing a scheme to give its largest members a £100m payday. On July 8 this year, more than three million unregistered .uk domains – including household brands from Mars.uk, Heinz.uk, and Maltesers.uk to Colgate.uk and Lipton.uk – will be released to the general public to purchase. But before that date, .uk overlord Nominet has decided to create a special one-week registration period solely for its members – the registrars that sell the domain names – who will be allowed to register whatever domains they want from the list at cost price, and then sell them on for a fat profit. The value of those internet addresses is estimated to be worth anywhere between £10m and £100m, representing a massive payday for the companies that fund Nominet, a non-profit organization that is supposed to operate in the public interest. Theoretically, the registrars are only supposed to register domains on someone else's behalf, but the system has been abused in the past, and Nominet has notably failed to take action. One large registrar registered millions of .uk domains and claimed they were doing so on their customers' behalf – even when those customers hadn't asked them to. At least one registrar has also said with the new release of names that if more than one customer applies for the same name, they will put the name up for auction, creating a direct and significant financial benefit for registrars. Even if registrars play by the rules, they stand to make millions of pounds in registration and renewal fees for domains that don't need to exist and which Nominet will be actively adding to its registry. Just this week, the news that the domains were going to be released saw one multinational brand – Asda – register its asda.uk name. It's unclear how many other companies will be caught unawares by the release and so see their company or brand name appear in the .uk registry under someone else's name.
But in addition to Nominet's decision to give first dibs on millions of new names to its own members, the company has specifically designed the system to benefit its largest registrars – who have seats on the organization's board - and actively exclude smaller companies, according to an open letter from dozens of those smaller companies. Three of Nominet's 11 board members represent three of the world's largest registrars: GoDaddy, Key-Systems, and Names.co.uk. Another is a domain-name and brand consultant, and the remaining seven are from the corporate and finance worlds and from Nominet's top brass. No smaller registrars are represented. The big businesses stand to make millions of pounds from the system that Nominet has created to cover the release. That was not by accident, say the smaller registrars who claim they were not informed about the special process and when they did find out earlier this month, Nominet informed them that they had already missed a registration deadline. "Over 3 million remaining .uk rights are set to be released over the coming few weeks and so far, Nominet has proposed what we consider to be unfair and unequal access to those remaining .uk rights," a letter to Nominet's board, signed by 37 companies at the time of writing, complains. In addition to not adequately informing them about the process, and introducing what appears to be an arbitrary deadline, Nominet decided to create an entirely new process for the release – even though the existing system is used to register and renew millions of .uk domain names every year. A key part of that new system is a pay-to-play approach that allows companies that pay Nominet more upfront to have more chances to grab valuable names. If you pay Nominet £450, a registrar will be allowed to register six domains per minute; £4,500 will get you nine per minute; £45,000, sixty per minute; and £90,000, 150 per minute. The system appears specifically designed to make sure that Nominet's biggest members are given the biggest opportunity to snag valuable internet addresses.
Nominet denies the accusations. Asked why the special purchase period exists at all, the company told The Register: "This approach reflects the fact that .UK domains are registered through registrars. That’s the easiest and cheapest way to register domains." As to why Nominet felt that a special system was needed to register the names, it told us: "The key challenge for Nominet is to ensure the integrity and resilience of our registration systems, both for these names and for names registered in the normal course of business. "This has resulted in two key features: firstly, we are using a separate system and a specific release process for these domains. This is due to the likely volume of domains being made generally available for the first time and a requirement to keep registration entirely segregated from our usual registrations. "Secondly, in order to prevent system overload by users seeking to register very many names simultaneously, we are limiting registration requests to a prudently low number per minute." Asked why it had introduced different technical requirements to the current system that is used to register and renew the UK's over 11 million domain names, the company said: "Regarding choice of technical systems, we have taken the decision to adopt a conservative approach using one system to maximise resiliency for this short period of heightened demand. It has not been our approach to provide or write code for registrars. Registrars unfamiliar with our main EPP system have the option of using publicly available code, or could work through another registrar." In response to a question over why buyers that pay Nominet more upfront will be allowed to register more names, the company said: "We decided that registration requests would be allocated most fairly in relation to the total number of domains that a registrar was aiming to register. This was based wholly on each registrar’s own assessment of volumes. The requirement for sufficient funds or credit limits is designed to ensure that successful registrations can be paid for, and to avoid gaming of the system." Nominet claims that it provided everyone with "a clear and adequate period of time for participation – around one month" and that it had notified all its members "through the usual channels on several occasions."
No extension
Notably, however, Nominet has refused to extend the deadline – one of the main demands from the unhappy registrars and, while it says that it is "reviewing the issues raised by some members," it also claims that "the vast majority of our 2,460 members have not raised any issues." It promises the board will respond to those members that have complained soon. This is far from the first time that Nominet has been accused of representing the financial interests of its largest members. The company was originally set up as a public interest member organisation where paying members were able to purchase .uk domain names at a discount. But as the .uk registry exploded, and Nominet made millions of pounds more than it needed to run its technical systems, tensions built. Despite the creation of a charitable trust into which Nominet placed much of its profits, the company's board and staff were repeatedly accused of lining their own pockets with large salary rises and bonuses. A stakeholder revolt intended to force greater accountability on the organization and use excess funds to reduce the cost of .uk domains was defeated in large part thanks to a voting structure where registrars with more domain names are given greater voting rights. That in effect gave the largest four .uk registrars a veto over the organization, something that they used to great effect to undermine reform efforts and ouster a chairman pushing those efforts. The organization descended into civil war and eventually required the intervention of the UK government.
Money, money, money
Since then, despite remaining a non-profit with a public service mission, Nominet has become an increasingly commercial enterprise, hiring an acquisitions expert as its CEO in 2014. It has expanded into commercial markets, raising the price of .uk domains by 50 per cent in order to fund those expansion efforts. In 2017, an increasingly secretive board of directors stopped publishing its meeting minutes and conflict of interests statements. And in 2018, Nominet scrapped its charitable trust and pulled the money back into the organization. Meanwhile director and senior staff salaries have seen double-digit annual growth. The decision to move from a third-level registry where all domains end in '.co.uk', 'org.uk' or similar, to a second-level one – with straight .uk domains – was controversial at the time and decried as a money-making scheme. The organization compromised by saying that any existing .co.uk domain holder would be given an automatic right over the same .uk domain for a period of time. That time period will end next month. And so while the current .co.uk holders are still able to register their names, millions are not expected to, opening the floodgates to a long list of valuable internet addresses. Nominet's system for releasing their names is unusual even within the diverse domain name market and, if Nominet's smaller registrars are to be believed, has been specifically designed and implemented to make sure that the dominant market players – who still posses an effective veto over Nominet's action and are heavily represented on its board – reap the lion's share of the rewards. We have asked Nominet to reveal at what level the three registrars represented on its board – GoDaddy, Key-Systems and Names.co.uk – are registered within the new system: £450, £4,500, £45,000 or £90,000, and will add an update if we hear back.
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