The Ethics of Auctioning Contested Strings for Charity vs Lowering Fees

When the Internet Corporation for Assigned Names and Numbers expanded the domain name system to include hundreds of new generic top-level domains (gTLDs), it introduced a mechanism for resolving one of the most common points of contention: what to do when multiple applicants sought the same string. The solution, in many cases, was an auction, with the highest bidder winning the rights to operate the contested gTLD. While private auctions between applicants were allowed, ICANN also ran its own “last resort” auctions in which the losing bidders’ funds were placed into a pool for future use in the public interest. Over the course of the 2012 new gTLD program, ICANN’s last resort auctions raised more than $230 million. From the outset, the question of how to use these funds sparked deep ethical debates, especially around whether they should be allocated to charitable causes or used to reduce the financial burden on domain name registrants by lowering fees.

The original justification for public benefit auctions rested on the principle that contested strings represent shared resources. No single entity inherently “owns” a term like .book, .app, or .shop, so when multiple qualified applicants vie for such a term, it is reasonable to treat the resolution of the dispute as an opportunity to return value to the internet community. By diverting auction proceeds into a public benefit fund, ICANN signaled that these were not windfalls for private profit but rather community assets to be reinvested. This framing appealed to many stakeholders, especially those from civil society and developing regions, who saw an opportunity to channel otherwise wasted competitive spending into initiatives that could bridge the digital divide, improve internet infrastructure, or support underserved communities.

However, the ethics of prioritizing charitable disbursement over lowering operational costs for registrants has never been settled. Advocates for reducing fees argue that ICANN is, at its core, a technical coordination body, not a global philanthropy organization. From their perspective, the most direct and equitable way to distribute auction windfalls is to lower the recurring fees that registries and registrars pay to ICANN, which could in turn lower prices for domain name holders. This approach, they contend, would spread the benefits more evenly across the millions of individuals and organizations that make up the global internet community rather than concentrating them in select charitable projects that may or may not align with the core mission of domain name governance.

Critics of fee reduction point out that the per-domain fees collected by ICANN are relatively small in absolute terms, meaning that even a significant cut would result in only marginal savings for most registrants. Furthermore, they argue that lowering fees would disproportionately benefit large registries and registrars with massive portfolios, rather than individual users or small nonprofit operators. In contrast, auction proceeds earmarked for targeted grants could have transformative impacts if deployed strategically, such as funding digital literacy programs in underserved regions, supporting the development of open-source internet infrastructure, or bolstering advocacy for human rights online. The ethical case for charitable allocation rests heavily on the idea of maximizing public good in a tangible, measurable way rather than providing modest financial relief that may go largely unnoticed by most users.

The debate is further complicated by the question of governance and accountability. ICANN’s decision-making structure is built on a multi-stakeholder model that emphasizes consensus, but deciding how to allocate millions of dollars in auction proceeds has proven politically delicate. The development of the ICANN Auction Proceeds Grant Program has been slow, shaped by concerns about avoiding conflicts of interest, ensuring global geographic balance, and preventing mission creep that could transform ICANN into a quasi-development agency. Critics worry that the more ICANN engages in grant-making, the more it risks drifting from its narrowly defined technical mandate into areas where it lacks both expertise and legitimacy. The possibility of politicization looms large, as decisions about which projects to fund could reflect the interests and lobbying power of certain stakeholder groups rather than a neutral assessment of public benefit.

On the other side, using the funds to lower fees also presents challenges. ICANN’s operating budget is complex and based on long-term projections of domain name growth and related costs. Substantially lowering fees could create revenue instability, especially if domain name registrations plateau or decline. Moreover, once fees are reduced, raising them again would be politically unpopular and could undermine trust in ICANN’s financial stewardship. This makes any fee reduction an inherently conservative move, with limited scope for dramatic change in the affordability of domain names.

In essence, the ethical dilemma turns on the question of fairness versus efficiency. Charitable disbursement has the potential to deliver high-impact outcomes for targeted communities but concentrates decision-making power in ICANN’s hands and introduces risks of mismanagement or mission drift. Lowering fees distributes benefits broadly and indiscriminately but dilutes the impact to the point where many recipients may hardly notice the change. Each approach carries trade-offs in terms of equity, transparency, and alignment with ICANN’s core mission, and neither offers a perfect solution.

The auction proceeds controversy reflects broader tensions in internet governance between viewing domain names as public resources versus treating them as commercial commodities. If contested strings are indeed a shared asset, then reinvesting their monetary value into the digital commons through charitable initiatives may seem morally compelling. Yet if ICANN’s legitimacy depends on its narrow, technical mandate and avoidance of discretionary spending on non-core activities, then fee reduction might be the more defensible choice. As ICANN continues to wrestle with these questions in the years ahead, the ethics of how to handle auction windfalls will remain a litmus test for how the internet’s governing institutions balance their technical responsibilities with their role as stewards of the public interest.

When the Internet Corporation for Assigned Names and Numbers expanded the domain name system to include hundreds of new generic top-level domains (gTLDs), it introduced a mechanism for resolving one of the most common points of contention: what to do when multiple applicants sought the same string. The solution, in many cases, was an auction,…