Amendment to .XXX Registry Agreement

Why the Board is addressing the issue now?

Pursuant to Section 4.3 of the Registry Agreement, the parties have agreed to engage in bilateral, good faith negotiations regarding possible changes to the terms of the proposed amendment to the .XXX Registry Agreement upon request, including to Section 7.2 regarding fees and payments to ICANN. In 2016, ICM requested an amendment to align its fee schedule with the fee schedule contained in the new gTLD Registry Agreement. As a result of the bilateral negotiations between ICANN and ICM, this proposed amendment has been drafted to effect the requested changes to transition to the new gTLD Registry Agreement fee structure for fees payable to ICANN and to adopt additional safeguards and compliance audit requirements for the .XXX top-level domain.

What is the proposal being considered?

The amendment to the .XXX Registry Agreement approved by the Board provides a staged reduction in the registry-level transaction fee from $2.00 to $0.25 over a period of several years if there are no unresolved compliance issues relating to the Registry Operator and an increase in the quarterly registry fixed fee payable to ICANN from $2,500 to $6,250, provided that, until the first adjustment to the registry-level transaction fee is effective, the Registry-Level Fees will not be less than US$90,000 per rolling twelve month period (as currently provided in the .XXX Registry Agreement). Additionally, the amendment includes certain Rights Protections Mechanisms, including Uniform Rapid Suspension, contractual and operational compliance audits rights consistent with those contained in the new gTLD Registry Agreement and additional Public Interest Commitments that are contained in ICM's Registry Agreements for its new gTLDs corresponding to .ADULT, .PORN and .SEX.

Which stakeholders or others were consulted?

ICANN conducted a public comment period on the amendment to the .XXX Registry Agreement from 12 October 2016 through 01 December 2016, following which time the comments were summarized and analyzed. Additionally, ICANN engaged in bilateral negotiations with the Registry Operator to agree to the terms included in the proposed Registry Agreement amendment that was published for public comment.

What concerns or issues were raised by the community?

The proposed amendment to the .XXX Registry Agreement was published for public comment. Commenters expressed their views in four key areas during the public comment period:

Inclusion of new gTLD Rights Protection Mechanisms: Some commenters expressed support for the inclusion of Rights Protection Mechanisms in the amendment to the .XXX Registry Agreement, while others expressed concerns over the inclusion of certain Rights Protection Mechanisms, specifically Uniform Rapid Suspension, to legacy Registry Agreements. Additionally, commenters who objected to the inclusion of Rights Protection Mechanisms felt strongly that the Rights Protection Mechanisms Policy Development Process Review work should be completed prior to further inclusion of Rights Protection Mechanisms in the renewal of, or amendments to, legacy Registry Agreements.
Transition to New Fee Structure: Although none of the commenters objected to the updated fee schedule, some expressed concern regarding the justification for inclusion of additional new gTLD safeguards with the updated fee schedule. Commenters expressed concern that the staged reduction of fees should have been approved without additional conditions and that the registry fee reduction was a powerful incentive for ICM to agree to other proposed modifications effectively creating additional leverage for ICANN.
International Foundation for Online Responsibility: Commenters expressed concern over the lack of clarity on whether International Foundation for Online Responsibility had reviewed and approved the proposed amendment and International Foundation for Online Responsibility's role in contract negotiations between ICANN and ICM. Additionally, they stated that no further action should be taken by ICANN in regard to the proposed amendment until there was clear evidence that International Foundation for Online Responsibility, the policy-setting sponsoring entity for the .XXX gTLD, had reviewed and approved it. Within the public comment forum, ICM responded to these comments by explaining that ICM has not delegated all policy-making decisions and authority to International Foundation for Online Responsibility and that ICM has the ability to develop policies for .XXX gTLD in delineated areas. Commenters incorrectly asserted that ICM delegated all policy-making decisions and authority to its sponsoring organization, International Foundation for Online Responsibility. Additionally, ICM has the authority to develop the policies, terms and procedures proposed in the .XXX amendment and to negotiate directly with ICANN just as other sponsored gTLD Registry Operators have had the ability to develop policies, terms and procedures for delineated areas of their sponsored gTLDs and to negotiate their new terms and agreements with ICANN.
Negotiation Process for The Proposed Amendment to the .XXX Registry Agreement and Contract Negotiations in General: Commenters suggested that the negotiations for amendments to Registry Agreements should be more transparent and accountable, stating that stakeholders could be affected by the terms of the .XXX Registry Agreement, either directly or indirectly. There was also question as to how ICANN determined which additional terms to add to the proposed amendment. Commenters questioned how ICANN specifically determined whether or not to add Public Interest Commitments in the proposed amendment to the .XXX Registry Agreement, including if ICANN considered mandating that the Registry Operator use only ICANN accredited registrars that are party to the 2013 Registrar-Accreditation Agreement. Additionally, commenters raised concern over what they viewed as ICANN's use of bilateral contract negotiations to "effectuate policy". Some commenters urge ICANN and the Board to reconsider its positions, and to ensure that ICANN ceases and desists from taking similar action in the context of future RA renewals and amendments until the Rights Protection Mechanism Review Working Group renders the community's judgment as to whether the Uniform Rapid Suspension and other new gTLD Rights Protection Mechanisms should become Consensus Policy, including until such recommendation is reviewed by the Generic Names Supporting Organization Council and the ICANN Board.
What significant materials did the Board review?

As part of its deliberations, the Board reviewed various materials, including, but not limited to, the following materials and documents:

Current .XXX Registry Agreement
Proposed Amendment to the .XXX Registry Agreement [PDF, 442 KB]
Public Comments Received
Summary and Analysis of Public Comments [PDF, 184 KB]
.ADULT Registry Agreement
.PORN Registry Agreement
.SEX Registry Agreement
What factors has the Board found to be significant?

The Board carefully considered the public comments received for the amendment to the .XXX Registry Agreement, along with the summary and analysis of those comments. The Board also considered the terms agreed to by the Registry Operator as part of the bilateral negotiations with ICANN. The Board acknowledges the concerns expressed by some community members regarding the inclusion of new gTLD Rights Protection Mechanisms in legacy TLD agreements. Some of the provisions in the proposed amendment to the .XXX Registry Agreement are similar to the changes that were made to several legacy gTLDs, namely the .JOBS, .TRAVEL, .CAT and .PRO Registry Agreements, which were renewed utilizing the new gTLD Registry Agreement and as a result of bilateral negotiations between ICANN and the applicable Registry Operator.

With respect to legacy gTLDs adopting the Uniform Rapid Suspension in their renewal Agreements as well as the inclusion of the Uniform Rapid Suspension and safeguards in the proposed amendment to the .XXX Registry Agreement, some commenters suggested the Uniform Rapid Suspension may only be added to non-new gTLD agreements only after a full Policy Development Process and that including the Uniform Rapid Suspension in incumbent gTLD agreements via a bilateral contract renewal or amendment process is unacceptable staff intervention into the policymaking process.

Conversely, a different commenter expressed support for the inclusion of the Uniform Rapid Suspension through the proposed amendment to the .XXX Registry Agreement.

It should be noted that the Uniform Rapid Suspension was recommended by the Implementation Recommendation Team as a mandatory Rights Protection Mechanism for all new gTLDs. In the Implementation Recommendation Team Final Report [PDF, 299 KB], the Implementation Recommendation Team stated: "Therefore, the IRT recommends that ICANN implement the URS, which would be mandatory for all new generic top-level domains ("gTLD"s), implemented through the new gTLD registry agreements, which would in turn bind registrars supplying new gTLDs to the marketplace.

Although the Uniform Rapid Suspension was developed through the process described above, including public review and discussion in the GNSO, it has not been adopted as a consensus policy and ICANN has no ability to make it mandatory for any gTLDs other than those subject to the new gTLD Registry Agreement. Accordingly, ICANN has not moved to make the Uniform Rapid Suspension mandatory for any legacy gTLD. In the case of the proposed amendment to .XXX Registry Agreement, as well as legacy gTLD Registry Agreement renewals (namely, .JOBS, .TRAVEL, .CAT and. PRO), inclusion of the Uniform Rapid Suspension was agreed to through bilateral negotiations between the applicable Registry Operator and ICANN. In response to the comments, ICANN confirmed that during the bilateral negotiation process, ICANN and ICM did not discuss adding the Rapid Evaluation Service Policy. Additionally, there is nothing restricting Registry Operators from imposing additional Rights Protection Mechanisms, such as the Uniform Rapid Suspension, in other ways, such as through the Registry Services Evaluation Policy process.

Finally, a question was posed inquiring, "Why neither the proposed amendment to the .XXX Registry Agreement nor the agreement as presently amended contains the base template PIC mandating that the Registry Operator use only ICANN accredited Registrars that are party to the 2013 Registrar-Accreditation Agreement". The Public Interest Commitments, or PICs, included in the proposed amendment contain terms agreed to bilaterally between ICANN and the Registry Operator. Inclusion of the 2013 RAA requirement could certainly be included in future negotiations with the Registry Operator but was not part of the proposed amendments that resulted from the bilateral negotiations between ICM and ICANN.

Are there positive or negative community impacts?

The Board's approval of the amendment to the .XXX Registry Agreement offers positive impacts to internet users due to the inclusion of certain Rights Protections Mechanisms, including Uniform Rapid Suspension, contractual and operational compliance audits rights consistent with those contained in the new gTLD Registry Agreement and additional Public Interest Commitments.

Are there fiscal impacts or ramifications on ICANN (strategic plan, operating plan, budget); the community; and/or the public?

There is no significant fiscal impact expected if ICANN approves the proposed amendment to the .XXX Registry Agreement. It should be noted however that as a result of approval of the Registry Agreement amendment, projected annual registry fees to ICANN will result in a minimal negative fiscal impact. This change has been considered in ICANN's budget.

Are there any security, stability or resiliency issues relating to the DNS?

There are no expected security, stability, or resiliency issues related to the DNS if ICANN approves the proposed amendment to the .XXX Registry Agreement .The proposed amendment, in fact, includes additional safeguards for the protection of registrars and registrants. As part of ICANN's organizational administrative function, ICANN published the proposed amendment to the .XXX Registry Agreement for public comment on 12 October 2016.