Re: [wg-c] registry contracts

["Kevin J. Connolly" <CONNOLLK@rspab.com>]

Dear Readers:

0.  Jonathan's comments are congruent with those I have raised before 
and, I think, mirror those held by many members of the WG.  However, I 
recoil in horror at the thought of making ICANN or one of its satellites into 
an explicit tariff-receiving and rate-setting or -approving agency.  I think 
that the political hardball that would follow that step makes the tariff 
approach a non-starter.

What is needed is a market-driven method.

1.  A true non-profit registry should, when making its tender, demonstrate 
the manner in which its net revenue will be disposed of in the interest of 
the Internet Community.  Some possibilities are rebate to registrants; 
donation to organizations devoted to improving connectivity in developing 
countries; grants to academics engaged in public interest internet R&D; 
and/or turnover to ICANN.

2.  A for-profit registry, when making its tender, should simply engage to 
pay a fee to ICANN in consideration of delegating authority to administer 
the zone in question.  The bidder should feel free to parse the fee into 
up-front and per-registration components as it sees fit.  Zones held by 
for-profit registries should be re-bid periodically (for some reason, every 
four years suggests itself as a logical cycle :).  

3.  Zones held by non-profit registries should not be re-bid, but should be 
subject to redelegation if (a) the quality standards required of all registries 
are not met or (b) if ICANN determines, in its discretion, that the zone 
should be re-delegated in the interests of the Internet.  A discretionary 
re-delegation should not be undertaken absent an articulated reason for 
the re-delegation and a fair opportunity to the administrator to meet the 
goals and standards articulated by ICANN.

4.  The tricky part is comparing tenders for the same TLD made on 
both the for-profit and non-profit basis.  I do not believe that any metric 
is available for this comparison other than estimating the net price to be 
paid by the internet community for the use of the zone.  In order to make 
the basis of computation uniform, we should base the calculation on a four-
year life for non-profit delegations.  Establishing the net price to the 
internet community  will also require estimating the number of SLDName 
delegations within the relevant zone.  The net price to the community is 
the price per SLDName delegation X number of expected delegations - (fees 
paid to ICANN + amount of surplus disposed of in the public interest).

5.  The winner would be the bidder which offers to make the zone available 
at the lower net price to the Internet community.

6.  If the non-profit registry does not promote the zone adequately, then 
the qualitative metrics and/or discretionary re-delegation discussed at 
point 3, above, could be employed in the best interests of the Internet 
Community.

7.  Now one final point needs to be made clear at this time:  the decision 
as to whether a registry is for-profit or non-profit should not be made simply 
by reference to the organization documents of the entity which is the 
nominal registry operator.  A nominal non-profit registry should be subject 
to the for-profit rules if the registry is (a) the captive of (#SMALLNUM) of 
for-profit registrars and (b) entry into the club of registrars is artificially 
restricted, i.e., by qualitative barriers to entry (e.g., we already have three 
registrars which speak Farsi, and we don't need any more of those) or 
an excessively-high financial barrier to entry (we don't care if the marginal 
cost of adding a registrar is $1,000; you must give us $25,000 in 
capitalization as the price of obtaining a license to be added as a registrar).

8.  One further problem which the foregoing distinction between for-profit 
and non-profit registries needs to address is that of "free riding."  Let us 
suppose, for example, that an organization of internet businesses was 
suckered into spending several million dollars to develop a shared 
registration system for new top level domains; suckered in, that is, by vague 
promises and vaguer disclaimers made by people who, under the ancien 
regime of the Internet, appeared to be in a position to make things happen 
(like getting new TLDs into the root).  Now, after the money has been 
spent, the technology been developed, and years of blood, sweat and 
tears invested, would it be fair to tell those entrepreneurs to write off those 
expenditures and allow new registrars, who sat on the sidelines all this time, 
to join the club on paying some small entry fee?  Or to tell them that absent 
such a sacrifice, their application(s) to administer the TLDs that were 
created for them will be judged on the same basis as any other entrepreneur?  
The compromise solution is one which has already been proposed within 
CORE (I am sure that most readers realize the scenario described in this 
paragraph is not a parable):  the amounts expended by the "old line" CORE 
membership, in excess of the new admission price, are converted to Registry 
Credit Units (RCUs), which can be used to pay the registry fees for SLDName 
delegations.  Newcomers will pay cash on the barrelhead for those zone 
delegations.  The net result will be to prevent free riding by providing the old 
line CORE members with an economic advantage which is directly proportional
 to the risks they took and the money they have been investing in their 
businesses, while at the same time removing the artificial barrier to entry posed 
by the (very high) price that CORE charges for admission into the club.

Kevin J. Connolly
The opinions expressed in this note are personal to the author and not those
of his firm.  This note is not legal advice; if it were legal advice, it would come 
with an invoice.  As usual, please disregard the silly trailer generated by the
firm's mail client.
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