News, views and what I choose to dos




Nominet passes governance test with flying colours

Category : Domain names, Internet, Internet governance · by Feb 25th, 2010

The dot-uk registry Nominet has passed a crucial governance test with flying colours, voting yes [pdf] on eight Board resolutions with more than 93 percent member support.

The resolutions will make a variety of changes to the organisation, ranging from an increase in the number of Board members to an explicit statement that Nominet will work in the public interest. The vote was a crucial test for both Nominet’s Board and members: trust and confidence in the Board had been damaged by an acrimonious internal battle, which had subsequently led to the UK government threatening to end self-regulation of the UK’s registry operations.

Overwhelmingly support for the changes will help put Nominet back on the right path and, members hope, enable work to begin on a range of pragmatic issues surrounding the registration of dot-uk domains, such as the ability to register domains for terms other than two years.

Nominet itself called the votes “a defining moment for the UK domain market and the UK Internet landscape” with CEO Lesley Cowley saying that she believed Nominet’s members had “proven their commitment to considering the needs of all stakeholders” and that the changes would demonstrate to the UK government that the reserve powers currently contained in a Bill going through Parliament “will not be necessary”.

Here’s a quick rundown of the changes with what they mean for Nominet and dot-uk:

Public purpose

Nominet’s articles have been changed to include that fact that the organisation works in the public interest i.e. the dot-uk registry has a duty beyond its members to make decisions that work in the overall best interests of the UK.

Upside: This change was highlighted in particular by the UK government as being crucial for continued self-regulation. Nominet’s unusual member model means that those who register dot-uk domains are the only people entitled to vote on changes. This worries people because dot-uk has a far bigger impact than just a market for selling Internet addresses. With this change (with was made up of three separate resolutions that got 95, 96 and 97 percent support), the threat of government regulation should be quashed. It also demonstrates a willingness by Nominet’s members to be pragmatic. All of this is excellent news for a healthy, independent dot-uk registry.

Downside: You can expect the public purpose clause to be quoted by the Board in future for decisions unpopular with members. The public benefit aspect of Nominet’s work was also used as justification for the suspension of several thousand dot-uk domains which the UK police said were being used to sell counterfeit goods. The decision raised concerns that the UK police may be provided with an effective bypass of the law courts when dealing with dot-uk domains.

Board and vote changes

The Board will be expanded from the current six (four non-exec directors plus CEO and chairman) to 11 (three independent directors and up to two more Nominet executives). And the voting threshold for ordinary Board resolutions will be reduced from two-thirds to a simple majority, which is in line with standard company law (measures passed with 94 and 96 percent approval).

Upside: You get a bigger Board, which allows for more expertise and helps spread the load. You also get more day-to-day managers on the Board – which is crucial with helping to introducing pragmatic information and advice (although I think the plan is to add only one more Nominet exec at this time). This should help Nominet deal with its expansion and make the whole outfit more robust and professional.

The voting change should also make the organisation more flexible, which is crucial in an increasingly competitive registry market – particularly with ICANN about to introduce potentiually hundreds of new top-level domains. Nominet’s low turnout problems are also lifted slightly by lowering the voting percentage. And it reduces the possibility for large members to effectively hold a veto over the organisation – which is not in the wider interests of anyone.

Downside: The three new directors are not directly elected but are chosen by the Board and then put to the membership for approval. This approach was specifically designed to prevent possible capture by a determined group. In this case, it was domainers frustrated with what they viewed as unfair decisions, who started using Nominet’s own systems to put representatives on Nominet’s Board and Public Advisory Body. And it was this action that led to the Board crisis, worried the UK government and eventually led to this whole voting situation.

So while having three directors chosen by the Board should effectively prevent the situation from happening again, so making Nominet itself more stable and robust, there is a risk that this approach could cause resentment and, over time, pressure may start building up again. Hopefully what will happen is that Nominet members and Board will settle down, introduce more balancing mechanisms and start addressing domainer concerns – at which point the three directors can be made directly electable.

There is a potential downside in reducing the voting threshold. Nominet largely survived the dotcom boom and crash intact because it had been set up with tight rules that shielded it from speculation. As Nominet opens itself up more to making changes, it is conceivable that there could be a repeat of the crazy dotcom days and the organization be on shakier ground. However, considering where the registry world is now, considering where Nominet is now and considering the other changes made, this is a pretty unlikely scenario.

Also, one important aspect that I believe I’m right in saying still hasn’t been tackled is that there is *still* a 90 percent voting approval requirement. That is something that needs to be dealt with some where down the line. A 90 percent voting restriction just doesn’t make sense.

Pricing

This was the riskiest one. The Board was asking for the right to change prices without requiring a formal vote from members. The logic was good: the current system provides no flexibility and the Board was effectively unable to steer the organisation. The approach where members’ consent was required to make changes to prices was potentially destabilising, and it meant that several large companies had an effective veto over Board action.

Nonetheless, asking people to give up a power that has a direct impact on their businesses and hand it to a Board in whom some do not currently have confidence was a tall order. Incredibly, it passed with a hefty 93 and 95 percent.

I think here was a clear example of the Board listening and explaining and gaining the confidence of its members. The Board dropped initial plans to also give itself the right to change member pricing after a few members said they were uncomfortable with it. Calm reason has prevailed in this case.

Upside: Nominet can start playing more effectively in its market. The Board is also put in a situation where it can act like a Board. And the effective veto over finances by some members, which is not a healthy dynamic, is largely pulled out. The vote also demonstrates that members are willing to hand over some power in the expectation of a Nominet Board making good decisions. It will also please the UK government which in its darker moods looked at Nominet as a price-fixing cartel.

Downside: The Board needs to use its new power carefully and only with respectful engagement with members. This is a big trust issue. The current Board has already said it has no plans to change prices, but a Board in a few years may do so and if the new Board doesn’t have sufficient institutional memory it may make changes bluntly and cause tremendous ill-feeling in its members – who will probably be the same people and so remember the trust that provided in this vote.

Membership

A slightly vague resolution was passed that Nominet would look at its membership model. A 95 percent vote agreed “in principle” that Nominet’s constitution should be “further revised to provide for wider stakeholder involvement”. And that the Board should develop “one or more proposals to achieve this” which it will then put out to public consultation.

This is a big issue. In fact, it is the biggest issue in terms of Nominet’s future. Whichever way it goes, members will at some point have to vote to give themselves less power. This will be a good thing because dot-uk is much, much more than just those companies that sell domains, but a large number of members will need to be persuaded of the greater good and why handing over some power is in their own interests.

I think Nominet risks underestimating the trickiness of this task, especially since it will need to combine gentle persuasion with hard rulemaking, carrots and sticks, to make it work. The best example of this is the voter turnout for these resolutions.

Of 2,727 members, only 1,055 or 39 percent of them actually voted. Nominet went to great lengths to engage its membership on these votes and was very successful in that double the number of people that normally vote turned out this time. And 72 percent of all possible votes were received (there is a vote weighting system in place).

Now, a 72 percent vote turnout is good (although considering its importance you would really want 80+ percent), but a 39 percent voter turnout is terrible.

It’s not hard to figure out why: if you randomly pick Nominet members from its list, chances are that a third of them don’t even have functioning websites, or have websites that haven’t been touched in 10 years.

A HUGE number of Nominet members aren’t really doing anything. And the reason for that is Nominet’s member pricing model. You pay a big upfront fee for joining of £400, and then after that a £100 annual subscription. The problem with this is that people will think the £100 is worth it each year even if they do nothing because they paid such a large amount upfront. So you end up with large numbers of completely disinterested members.

Nominet also does a pretty poor job of engaging its members (although it has hugely improved in recent years) explaining to them why they should get involved and how to get involved. The company also doesn’t actively canvass for members so it is a little out-of-tune with why people would want to become members, and what it is that the silent majority actually want from Nominet.

There are a number of things the organisation could do, but the risk is that it could end up upsetting members but penalising some unnecessarily. I think there are two initial solutions:

  1. Change the membership pricing model – decrease the initial fee and pay for it by increasing the annual fee. The problem here of course is that the Board specifically pulled out the right to change membership fees from this round of votes after members got nervous.
  2. Start enforcing some compliance. If members haven’t updated their websites or contact details, they can be given a warning. Likewise if their website doesn’t exist. Give people a reasonable period of time to update details and if they don’t, cancel their membership when it comes up for renewal.

It would take 12 months for these two changes to work themselves through the system but at the end of it you would have cut out the huge amount of member dead wood that Nominet carries, and it will have put members in the position of deciding whether they really want to engage with Nominet.

But that is just one side of the membership coin – dealing with existing members. The other side is pulling in people that are not Nominet members, and may not even wish to register domains, into Nominet so that the organisation can become more representative and make decisions on behalf of a broader cross-section of people (its public purpose aspect).

Fortunately there are plenty of case studies here – ICANN and the IGF being the most obvious. And, fortunately Nominet’s management and some of its members, know both ICANN and the IGF and the whole idea of “multi-stakeholder” decision-making pretty well. There are also some organisations that would help, such as the Internet Society, who president Lynn St Amour specifically mentioned her interest in this aspect in a supporting quote to the votes.

But that doesn’t mean it will be easy – Nominet will need to develop a hybrid system that accounts for Nominet’s unique membership model and the fact that it has a direct relationship with registrants.

It is possible that recently announced changes to the Policy Advisory Body – where people self-create in order to help develop new policy rather than leave to a selected group – may be helpful in developing a way to get Nominet members working with those that share a common interest.

But at some point you will need to give people who are not Nominet registrars the right to vote on decisions – and most likely without paying for the priviledge. This is not going to be an easy model to create, and it will be the next stage in the evolution of Nominet as the dot-uk registry operator.

In conclusion

Stepping back from the details to the fact that eight Board resolutions were passed with 93 percent and up member approval, this is great news for Nominet and its members. The issues garnered huge support. Vital changes can now be made. The UK government should get off Nominet’s back. And it will be possible to start rebuilding trust and heal wounds. And, most vitally, it means that Nominet can now focus its attention on doing what it is there to do – making the dot-uk registry work better.

SHARE :

(3) comments

Andrew Bennett
7 years ago ·

I would like to make the following objections:

1. You say that “it was domainers frustrated with what they viewed as unfair decisions, who started using Nominet’s own systems to put representatives on Nominet’s Board and Public Advisory Body”.

I may be a domainer, however how do you explain how I got the most votes anyone has ever got in a PAB election? (you can see from my Linkedin CV I have varied interests including being a registrar). Due to the weighted voting rights you do not get elected to Nominet or even pass EGM resolutions unless you have wide support. Also please identify the other domainers that got elected? – Jim Davies for example is an IP lawyer the last time I checked.

2. You also say that: “The Board will be expanded from the current six (four non-exec directors plus CEO and chairman) to 11 (three independent directors and up to two more Nominet executives)”.

This is incorrect as I understand it will be upto 10 directors:

3 appointed independent non-executive directors
4 elected non-executive directors and
up to 3 executives with an initial position that we would have the CEO and one other.
http://www.nominet.org.uk/about/consultations/governance/

3. You also say “Change the membership pricing model.”

As a small member of Nominet I am so greatful and relieved that the first half of article 19A remains intact making this not possible. See draft articles http://www.nominet.org.uk/digitalAssets/40041_Draft_Articles_final.pdf

£100 + vat is affordable every year and I do comply to everything Nominet request from me. Therefore I also disagree with “Start enforcing some compliance” as Nominet do this already.

4. You say that “A HUGE number of Nominet members aren’t really doing anything”. In my opinion members do not renew their membership without using it – they are just using it for different reasons and not voting. For example dropcatchers have to become members in order to use the DAC: http://www.nominet.org.uk/other/dac/
How about licensing the DAC differently like the Public Register Search Service (PRSS) currently is?
http://www.nominet.org.uk/other/prss/

If you take a look at the membership figures they are actually going down – see board reports:

“As at 31 December 2009 there were 2,805 active members”.
“There were 2891 active members and 4031 active tags as at 30th November 2007”.

5. As a journalist I would also expect you to ask BERR for a comment on this and why the Public Interest articles were necessary. They may not wish to reply however you could always put in a Freedom of Information request.

However that said I do agree with you on many points raised and overall a good analysis of the situation.

kierenmccarthy
7 years ago ·

Hi Andrew,

You appear to be reading hidden meaning into some of this post, which is a little peculiar although perhaps understandable considering recent history.

On that point I would strongly encourage you to see these votes as an opportunity to mend bridges rather than continue down a path of suspicious aggression.

But as to your points:

1. You take exception to my saying that domainers used Nominet’s own systems to put representatives on the Board and PAB. I’m not sure what I can do about that because it is, after all, entirely true. It is also what sparked the whole Board crisis and this governance review.

But I would like you to note that I did not go into the whys and wherefores of that situation because, frankly, these votes should help put that issue to bed. You appear to believe that I am implying you personally and Jim Davies did not have backing beyond domainers – but that is self-evidently not true because you were voted on. I am afraid you are reading into the text hidden meaning.

In fact, I specifically go on about how it is a shame that the new directors will not be directly elected. I go on about I hope the Board will deal with domainer concerns and also warn up a build-up of pressure if this isn’t done. The post also notes the new PAB model where interested parties can get involved.

So if anything I think I have over-emphasised the pressure points within Nominet’s membership.

2. The new Board make-up. You may be right here. I simply added the new directors and new execs to the existing Board. Not that it matters particularly but it would be good to get it right; will check it out.

3. It was your strong views, among others, re: membership pricing that caused the Board to withdraw the request to be able to change prices. So you have been heard and were responded to.

Unfortunately that doesn’t mean that there isn’t a problem with membership pricing. Rather than have an allergic reaction to any suggestion of a membership price change, you would do well to try to understand why people are proposing changes.

I suggested reducing the upfront member fee and increase the annual subscription to fund it (assuming that the cost of becoming a member stays the same for Nominet). It could well be that the annual subscription would only need to increase by 10 pounds – and if that resulted in a more engaged membership, I think it would be a small price to pay.

But anyway, it was just one suggestion. The big problem is that no one really had a good grasp of who all of these members are and what they want.

I disagree with you entirely re: compliance. If a member cannot even provide Nominet with a link to functioning website, then can they really be said to be a Nominet member? Do they deserve voting rights? This is a crucial aspect of the membership model. These questions have to be asked and the UK Internet community will need to decide on the answers.

This Board vote to look at the model is a clear acceptance by 95 percent of members that Nominet can no longer keep its head in the sand on this issue.

And with respect to this and your comments re: types of members (point 4). I think we can probably agree on one thing: neither of us have an accurate view of who the members are and how they breakdown.

The first thing Nominet will need to do is develop an objective process for finding out exactly who its members are. And from there everyone will be able to have more informed discussions about what to do going forward.

5. I’m not a big fan of passive-aggressive behaviour. I haven’t asked BERR what they think. But then I’m not sure that’s at all relevant to this article, which was a rundown and analysis of the Board votes.

I might do a follow-up article asking whether the UK government is now content – but then since there is legislation going through Parliament on this, I doubt very much whether I’ll get a usable response. Probably best to wait until the Bill is in the Commons – at which point I have little doubt that the rest of the media will be all over it.

So broadly, I think your response it a little over-the-top but I do appreciate your commenting. Please do pick me up on any points above that you don’t think adequately respond to yours.

Andrew Bennett
7 years ago ·

Hi Kieren,

Thank you for taking the time to respond to me in great detail.

I accept many of the points you make and maybe I am upset and over-reacting.

However this is my business and livelihood we are talking about here…You write stories and I sell domains.

I though do take offensive that i’d rather “continue down a path of suspicious aggression”.

I gave two years of my life to the Nominet PAB and attended every meeting – not something I particularly enjoyed when it was so hostile. I really do hope the new PAB (ICANN styley) will be better and who knows maybe i’ll even get an invite?

I also had to leave a rather highly paid job through stress of it all and lost one of my websites (deleting.co.uk) in the process.

Therefore I’m all for mending bridges however it is a two-way street i’m afraid.

Please keep writing the stories and i’ll be happy to respond.

Cheers,

Andrew Bennett

Leave a Reply

Your email address will not be published. Required fields are marked *