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RE: [ga] Draft Resolution
I'm interested in better understanding where the stakeholders are on
different perspectives: for instance, if the registry model for TLDs are
based on "not for profit" models/assumptions, and the competition
essentially begins with the registrars,who are all allowed to (if
accredited) to register in all ICANN accredited registries), then the number
of registrations in a particular registry is less relevant, it seems to me.
There has to be some mechanism to prevent price gouging, etc. in this model.
Otherwise, we'd see bad practices at the registry level, such as charging
different prices for different names to the registrars, who would pass that
along to the user. Competition among registry/TLDs doesn't seem to be quite
the full answer.
Some may disagree with me, but in fact, over time, some TLDs are likely to
be more "used" than others. There are a lot of factors to consider in how
that evolves. And, some TLDs may be (unfortunately) primarily/initially
filled with duplicate registrations from .com, since defensive registrations
will be necessary to avoid consumer confusion, fraud, and trademark
dilution. I see no relief from that in some TLDS.
We'll have to wait and see if in fact, new registrations dominate, or if the
space is largely defensive registrations.
As new services evolve, and directories become more useable/available,
perhaps we'll see a move to more "friendly" names (longer, complete words,
etc.) That may also create new forms of expansion of the name space.
However, in the meantime, of interest, and note, in fact, the present
approach in ICANN seems to also support the concept of "niche" TLDs, that
is, those who are likely to have a limited, but important group of potential
registrants, such as in .museum, for instance. This concept seems to serve
the stakeholders by logical expansion of the name space, for stability,
usability, and minimized confusion by users, rather than to focus on
creating a registry as a money making endeavor for itself.
Treating a registry/TLD as a limited resource, somewhat like spectrum, seems
to be consistent with the ccTLDs' practices, (or most of them).
I don't really see how registry "competition" can work, in short. But if
someone can describe their vision, I'm willing to listen.
-----Original Message-----
From: Kent Crispin [mailto:kent@songbird.com]
Sent: Saturday, March 17, 2001 12:44 PM
To: ga@dnso.org
Subject: Re: [ga] Draft Resolution
On Sat, Mar 17, 2001 at 06:20:07PM +1300, DPF wrote:
> DRAFT RESOLUTION
[...]
>
> Specific concerns the general assembly has regarding the proposed
> contract are:
>
>
> - The granting of a presumptive right to be the *.com registry to
> Verisign. By lowering the necessary performance standard to retain
> *.com *which makes up 65% of all domain names in the world), this
> removes a huge pressure on the registry to keep prices as low as
> possible and to have the best possible relationship with Registrars
"huge"? I doubt that very seriously. While people complain about the
lack of effectiveness of TLD vs TLD competition, the effectiveness of
serial competition is equally questionable, at least as things are
currently constructed. [+] (see note on "serial competition", below)
> - Allowing Verisign to retain its registrar business puts in place
> perverse anti-competitive incentives regardless of organisational
> firewalls.
Whether the incentives are "perverse" is surely an extreme value
judgement. Clearly incentives exist -- they always exist, but the
mechanism of organizational firewalls is deemed sufficient in many
anti-trust circumstances, and if you are going to claim that they are
not sufficient in this one, you should document it.
> - Verisign would be in a position where it could purchase other
> Registrars thus once again gaining over 50% or even 75% of the
> registrar market in *.com, as well as the registry.
Big "So what". Any large company can do this; it is independent of the
issue of the registrar/registry split. See the below discussion on the
"zero wholesale cost" argument.
> - The possibility of a change to the status of *.org registration
1) There is a possibility of that, regardless. In any case, the registry
operator is bound to abide by "consensus policies".
2) Given the complexity of the process we have seen in getting new gTLD
operators in place, it is inconceivable that a new operator/policy for
.org would be put in place without a long-drawn out public process.
> - Granting the ability to Verisign to increase registry prices with
> only 30 days notice
But there are price caps, as I recall. Price caps are the only thing
that matters, in fact, because if some other company wins the rebid,
they win a monopoly for 4 years (or whatever the term might be) in any
case, and can immediately reset the prices. (* "serial competition", below)
> - The ambiguity over what the $200 million to be invested in registry
> development would actually be, and the lack of any clear process to
> audit this.
Reasonable point.
> - The non-transparent process used to negotiate these agreements which
> are then presented as not negotiable to the ICANN Board and DNSO
If a negotiating partner insists on secrecy, one is put in an awkward
position. In any case, what does this have to do with the merits of the
proposals?
> - The detrimental effects on registrars who have become registrars and
> invested money on the basis of the existing contract (which mandates
> the Verisign registry must divest the registrar business)
Reasonable point. Certainly, if I were starting a registrar, this
would have been something I would considered.
> - The unfair advantage the Verisign Registrar would gain by being able
> to sell domains with a zero wholesale cost, thus potentially forcing
> out many smaller competitors
It pains me to say this, since some of my good friends are in the
registrar business, but the "zero wholesale cost" argument is bogus.
See discussion [++] below.
> - The total lack of outside analysis on whether the proposed changes
> will be beneficial to the Internet community
A valid concern. Not clear how that could have been done, though. This
was an exploratory private negotiation, at the behest of NSI, and NSI
played the deadlines in the way it thought was most advantageous. In
retrospect, that may have been a mistake on their part.
William Walsh has pressed me to come up with what advantages I see with
the new proposals. There is no mystery: The advantages have actually
all been stated: splitting off of .net and .org, cleaner contracts,
various monetary committments, and so on. These are clear and obvious
advantages.
The argument has actually mostly revolved around the significance of the
*disadvantages*, and they are in fact, very difficult to evaluate. A
lot depends on things that are unknown at this time, and the primary
issue, from my perspective, is the the relative effectiveness of
competition from new gTLDs vs what I have called "serial competition".
If new gTLDs are effective, then registrars will register in all of
them, the impact a tie between the NSI registry and a NSI registrar will
be small, and thus the new proposals will be a win for the community.
If, on the other hand, you believe that competition between gTLDs is not
going to be effective, and that .com will forever be the only important
player, then it is very important to constrain the power of that
registry as much as possible. Of course, it would be nice if we could
have both, but that option isn't available.
The question is: 6 years from now, will we see .com as a much reduced
player, with .org, .biz, .net, .info, and a bunch of other new domains
getting most of the new registrations, or will .com remain the elephant
in the land of mice?
If the latter, then NSI will have won, regardless, and under either
scenario will fight incredibly hard to keep .com. Anyone who has been
involved in this for any length of time knows just how effective they
can be, and personally, I think that the threat of a rebid is a pipe
dream. The current contract gives them *plenty* of ammunition.
In sum, I believe that the course we are on *requires* that we make
registry competition work. If we don't, we have lost everything.
================================================================
Notes:
[+] Note on "Serial competition": The basic problem is that, as things are
currently, a reasonable rebid cycle would be on the order of 4 years or
more (since the switching costs involved the change of registry operator
are sgnificant -- significant for the registry operator, significant for
the Internet comunity). No matter who wins the rebid, they will be
given a monopoly for the term, and a lot of monopoly advantage can be
exploited in 4 years. That is, there is no reason to expect that the
winner of the bid will be any better than NSI.
The only way that serial competition can be made to work is if the
switching costs are quite low. I described such a model in "Position
Paper D" in the report of WG C
(http://www.dnso.org/dnso/notes/19991023.NCwgc-report.html), and I
encourage everyone to read it, since it is a beautiful proposal.
However, we are a long way from that model. I mention this to
demonstrate that I have been a supporter of the "serial competition"
model for a very long time. But I have sadly been forced to conclude
that it isn't going to happen like I would like it to happen.
================
[++] The "Zero wholesale cost" argument is bogus, because it neglects
the other side of the equation: "zero wholesale profit". To see this,
suppose that the NSI registrar, in a fit of monopolistic greed for
market share, decided to leverage it's supposed "zero wholesale cost" to
the max, and to give away registrations for free. In such a case, every
registration by the NSI registrar would be $6 lost in fees that would
have been collected from any other registrar. This is a real loss for
the registry.
Indeed, Verisign can probably afford to lose the $6, but that is true
for any large company that owned a registrar: If IBM, for example, owned
a rgistrar, it could absorb the $6 cost just as easily as Verisign
could, and could give away registrations to gain market share, just as
easily.
It is perhaps unfortunate, but the fact is that *any* large company
enjoys precisely the same advantage that Verisign does, and the
inescapable conclusion is that small registrars are not going to make it
in the long run, regardless. This is completely independent of any
issue of registry/registrar split.
[When I say that small registrars are not going to make it in the long
run, I mean registrars with domain registrations as a sole activity. I
fervently hope that being a registrar as a sideline will be viable, as
in the Nominet model. We are far from it at this point, because the
startup cost to be a registrar is too high, but that is something that
we should work toward.]
--
Kent Crispin "Be good, and you will be
kent@songbird.com lonesome." -- Mark Twain
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