The displacement of ICANN gTLD auctions by Private Auctions

On the NCSG Policy meeting conference call today (Tuesday 14th April) I 
wrote in the Chat room that in any new (future) gTLD round the 
likelihood of ICANN gTLD string auctions is zero, and hence that there 
will be no new auction proceeds to be allocated for efforts like helping 
developing and under serviced areas of the globe. I was asked for 
background for that assessment. Here is some background and here are 
some links.

http://www.domainmondo.com/2015/02/icann-new-gtld-private-auctions-2015.html

http://domainincite.com/14182-second-private-auction-nets-1-2m-per-gtld

All of the approved contenders (the contention set) for a gTLD are fully 
known to each other and it is in their self-interest to sort out who 
actually is awarded the new gTLD string, without having to resort to an 
ICANN auction. Initially, when they could not sort it out the ICANN 
process held an auction with the winner (as per the terms of the 
auction) got the new gTLD string. ICANN got the net auction proceeds. 
There has been long discussion within the ICANN community with regard to 
how those auction proceeds might be used.

It did not take much thought for the private sector, auction experts, 
and the contenders for the new gTLD strings to come up with a better 
(more self-serving) solution when negotiation, consensus, side payments, 
and/or whatever failed to narrow down the applicant list to one 
contender/. [Note: This is not about the situation where an ICANN 
awarded gTLD is subsequently put up for auction.]/

Rather than triggering an ICANN auction, the contenders resort to a 
private auction among themselves. All contenders have to agree, but the 
benefits of agreeing are considerable. There is a private auction (no 
public disclosure) where the wining bid (as per the terms of the 
auction) is divided up among the losers (if losers is the right term in 
such a scenario). Considerable sums are involved, all is perfectly 
legal. No auction proceeds go to ICANN, hence, under this scenario, 
there will be no new proceeds to ICANN from any subsequent new gTLD round.

Sam L.