Re: [icann-eu] Domain Name Economics

[Jefsey Morfin <jefsey@wanadoo.fr>]

Bravo and thank you for this detailed response of Thomas' document.

His work desserved that attention. But as he mostly sees the things
externally, as an iCANN user, I fond difficult to relate what he says
with the reality as I know it. Your approach on details just does that
while rising many general points. I was unable to help here, you did.
This way you correct the hurting aspects of the response I sent him
- privately for that reason. Well done.

Jefsey




On 00:57 06/06/01, Marc Schneiders said:
>On Tue, 5 Jun 2001, at 14:14 [=GMT+0200], Thomas Roessler wrote:
>
> > I'll try to paint the "big picture" of ICANN and related topics in
> > this message.  Topics addressed include competition in the root
> > market, competition in the TLD market, user and domain name holder
> > representation.  Note that all this may just be silly nonsense - if
> > so, please tell me about the flaws in my thinking.
>
>Forgive me for adding a few notes to your large vision, for which I
>would like to thank you. I do not offer another one. I am more into
>details by nature.
>
> > The questions I'll be asking are mostly these: What does this or
> > that player have to sell?  Why can the player sell that good?  What
> > happens when multiple players try to sell the same good?
>
>Is my assumption right, that you do not hold that ICANN is involved in
>administering some *public* good? Which would bring up words
>like: legitimacy, representation (if not democracy), accountability?
>
>[...]
>
> >                     The Natural Root Monopoly
>
>[...]
>
> > Also, it should be noted that only such a root monopoly would enable
> > smaller players to participate in the TLD market: It protects these
> > small players from larger players who may try to squash them using
> > conflicting TLDs with - at least - a great destructive potential.
> > It also makes global visibility cheap.
>
>This would be true, if there was a way for small players to get in
>with ICANN. There isn't. What is happening is that ICANN sells
>licenses to run a profitable database of .INFO or whatever, similar to
>our governments selling wireless phone licenses. Pseudo-taxes??
>
>[...]
>
> >                       Breaking the Monopoly
> >
> > Next, we ask what could break the monopoly over the root which we
> > described as natural above.
> >
> > First, what situation would lead rational players to the conclusion
> > that they should take the risk of buying together visibility
> > themselves, and bypassing the root supplier - just as new.net does?
> >
> > The recent events surrounding ICANN give some indication on what
> > this may be:
> >
> > - The monopoly could be unable to deliver its promises even to
> >    strong market players - indeed, new.net is just one example.
> >    Think about the Tucows representative who was talking about his
> >    company being in a unique situation to launch an alternative root
> >    system "as a defensive measure".
>
>This was very much pep talk, believe me. Tucows and similar players
>have all reason to remain within ICANN and avoid too much choice for
>customers. Too many TLDs would kill the market. Tucows just wanted to
>tell ICANN and the world that they were so close, the two of them,
>real great friends to the benefit of all.
>
> > - The monopoly could be too slow, too reluctant, or too expensive in
> >    adding new TLDs.
>
>This has been the case for years, and did not have any result.
>
> > - The side effects of buying visibility from the monopoly could be
> >    devastating.
> >
> > Also, the monopoly could be broken or changed by external forces.
> > In particular, the following players in the game come to mind:
> >
> > - ISPs.  They could easily start to sell visibility themselves.
> >    (Which is basically what new.net suggests.) This may have the net
> >    effect of producing a different root zone monopoly, but mainly
> >    under the control of the ISPs.
>
>This is what very well might happen in fact. If users become dependant
>on fewer and fewer ISPs and we end up with 5 or 7 or 9 big ones, these
>big ISPs may demand money from root services to point to their root.
>The root services then can sell TLDs to others or sell domains in them
>themselves. This process could very well be initiated by competitors
>to new.net or new.net itself. It may have started already. Who knows
>what new.net paid to their ISPs?
>
>Does anyone know, how many TLDs new.net has sold? Do they have a
>business? This would be an important fact to know here.
>
> > - Political and legal forces, which can change the rules according
> >    to which the game is played - these are particularly powerful
> >    since the United States Government still has a critical word to
> >    say in the traditional root monopoly.
>
>This is very vague? Do you mean the EU and anti-trust measures?
>
> > - Current "clients".  Just imagine Verisign and the ccTLDs team up
> >    to create a root service of their own, and don't pay money to
> >    ICANN any more.  This is, in fact, the card the ccTLDs are
> >    currently playing.
>
>The ccTLDs can simply stop paying ICANN (or pay something very
>symbolically, say $100 a year, which would do for keeping up root
>services). I would guess ICANN would not throw them out of their root
>zone. Why don't they try that, the ccTLDs? Some of them may already do
>so, by simply not replying to the ccTLD constituency's emails and
>invitations...
>
>Verisign has no reason whatsoever to team up with anyone else. ICANN
>is doing a great job for them! I don't think I need to elaborte on
>this.
>
> > It's worth noting who's missing from this list:  End users and
> > domain name holders.  I'll discuss these below.
> >
> >                   Side effects of the Monopoly
> >
> > What side effects does the root zone monopoly have on those at the
> > end of the food chain, end users and domain name holders?
> >
> > First, let's note that it may indeed be quite natural for an
> > ICANN-like monopoly on the root zone market to impose certain
> > conditions on its clients - such rules of the game can even be in
> > the clients' best interests, in particular, when they help to defend
> > the clients' interests against some of the possibly destructive
> > forces listed above.  They can also be economically reasonable since
> > they save clients from the costs connected with developping such
> > conditions themselves.
> >
> > One of the best examples for such regulations is, of course, the
> > UDRP, which is being adopted by most of the new ICANN TLDs.
>
>To me this sounds (but I may be missing something) that it was great
>that the Telco's (the one's I know in Europe in any case) had this
>great monopoly on phones (I mean the machines). You could not buy one
>from another manufacturer, as that was illegal. It might not work too
>good anyway and interfere with the network in some dangerous way. You
>may not have liked the colour or design, but it did work this phone
>you had to buy. So why complain about the monopoly?
>
> > The perception of the regulatory regime as benign by the large
> > majority of domain name holders also means that they won't pay the
> > costs it would take to buy services from a monopoly-breaking
> > registrar which offers a better regulatory regime.
>
>You can get domains for free with me. Regulation is very benign. So is
>the regulation with .BIZ (the pre-ICANN one). No UDRP. The regulatory
>character of ICANN's monopoly is keeping out too many competitors in
>the market and avoiding costly litigation by appeasing lobbies like
>TM/IP. There is indeed no customer protection whatsoever.
>
> > Thus, in order to actually break the monopoly, the regulatory regime
> > would have to be extremely draconian, and in fact endanger the
> > ability of registrars to deliver on the promise of stability in the
> > perception of the domain name holders.
>
>And it isn't for most domain name owners, except a small percentage
>that falls victim to the UDRP or some error by a registrar. Precisely
>why users will not 'overthrow' ICANN, like they did not do anything
>against Telco monopolies. Well, maybe use an illegal phone, or now an
>alt root. All peanuts, alas.
>
> > Finally, note that even with a new.net-like competitive model, model
> > regulations may emerge which are adopted by players in order to save
> > costs.  In particular, the kind of competition they suggest wouldn't
> > necessarily lead to regulative competition!
>
>True. New.net uses the same sort of dispute resolution as ICANN. Of
>course it does. ICANN introduced the UDRP to protect itself and its
>registrars and for no other reason whatsoever. IANAL and would be
>interested to know if there is a way out of this legal trap, that all
>registries/registrars must appease TradeMark lawyers, or die of legal
>costs.
>In any case, I think the UDRP is not so much a problem vis-a-vis
>consumer rights as well as legitimacy. There are free speech issues
>involved (sometimes, not always, there are real cybersquatting
>cases). Where does the right to impose UDRP come
>from? Contracts... This would imply we can go elsewhere for the
>services. Can we really? Does ICANN's insistance on a single root not
>suggest otherwise, even in its own vision?
>
> >        Representing Users' and Domain Name Holders' interests
> >
> > From the above, we can conclude that as long as domain name holders
> > are sort of satisfied by at least some registrars' offers, it's
> > unlikely that the root monopoly of which these registrars are part
> > would break.
> >
> > Thus, there are close to no market-driven feedback channels for
> > users or domain name holders.  Users and domain name holders are, in
> > particular, normally not among the possibly destructive players I
> > listed above.
> >
> > Thus, they can only exercise influence by allying with destructive
> > players.  Now, let's go over the list of possibly destructive
> > players:
> >
> > - ISPs.  As long as supporting the monopoly doesn't mean you are
> >    losing customers to competition which doesn't support the
> >    monopoly, there is no incentive to attempt to break it.
>
>Sure, payments to switch. See above.
>
> > - ccTLDs.  Since the more powerful ccTLDs can be assumed to be among
> >    the TLDs which are unlikely to be attacked during a root split,
> >    they are among those players on the market which are most probably
> >    least interested in the monopoly, and possibly most interested in
> >    destabilizing it.
> >
> >    Breaking the root zone monopoly and destabilizing the gTLDs would
> >    in fact help the ccTLDs to squash a lot of competition.
>
>Users would not accept a root that did not carry com/net/org,
>really. This will only work in China, and not because users want it
>there either.
>
> >    In particular, the ccTLDs don't seem to have a natural interest in
> >    helping to better adopt the monopoly's regulations to users
> >    wishes.  Just the opposite is, in fact, the case.
> >
> >    (A similar argument could be applied to the operators of other
> >    well-recognized TLDs.)
> >
> > - Legal/political interests.  These are apparently the only ones who
> >    are left.  And, in fact, the business and intellectual property
> >    constituencies seem to be demonstrating such an alliance,
> >    frequently raising similar issues.
>
>There are also some people active on lists like these, in ALM studies
>etc. The issue of ICANNs legitimacy is not won yet by the
>Corporation. It is being watched.
>
> >                           Consequences
> >
> > As a consequence, we should not expect most of the powerful players
> > in the current ICANN process to support user and domain name holder
> > participation.  In fact, a private-sector organization like ICANN is
> > unlikely to be bottom-up for purely economical reasons.  If such an
> > organization is expected to serve the public good, and to take end
> > user and domain name holder interests into account, pressure is
> > needed by those political parties who are in charge of "nuclear
> > options".
> >
> > As another consequence, the ccTLDs' move to become a supporting
> > organization of their own looks extremely natural.  On the other
> > hand, the bundling of TLD operators, domain name holders,
> > intellectual property interests, and individual domain name holder
> > interests in the DNSO looks extremely unnatural.
>
>Hopefully there are some allegiances possible on other middle
>grounds. A strong domain name owner organisation would have some
>possible impact. But who is going to set that up? Any volunteers?
>
>Also I missed the role of the press and related opinion makers. How
>will people feel, if they see the true situation? Certain funny
>aspects of it, like the lottery for .BIZ names: Buy as many tickets as
>you like at $2 or $3. Is this how ICANN distributes (public)
>resources? Sell TLD-licenses for lotteries for them?
>
>Finally, though your approach from economic consideration does clarify
>things that are happening, and how they could be changed, I really
>miss the 'public' resource character of the internet in your break
>down. Sure the Net is a cooperation of private networks. But like all
>economic activities these need regulation. Either by national
>governments, which would be rather unpractical, or some sort of
>publicly accountable worldwide body.
>
>--
>Marc Schneiders