DAGv3 comments by Leap of Faith Financial Services Inc.

[George Kirikos <gkirikos@xxxxxxxxx>]

DAGv3 Comments by Leap of Faith Financial Services Inc. 

Submitted By: George Kirikos
Company: Leap of Faith Financial Services Inc.
Company URL: http://www.leap.com/
Date: November 22, 2009

I. Introduction

We reiterate our previously submitted comments:

http://forum.icann.org/lists/gtld-guide/msg00000.html
http://forum.icann.org/lists/gtld-guide/msg00026.html
http://forum.icann.org/lists/gtld-guide/msg00027.html
http://forum.icann.org/lists/gtld-guide/msg00046.html
http://forum.icann.org/lists/gtld-guide/msg00110.html
http://forum.icann.org/lists/2gtld-guide/msg00000.html
http://forum.icann.org/lists/2gtld-guide/msg00005.html
http://forum.icann.org/lists/2gtld-guide/msg00014.html
http://forum.icann.org/lists/2gtld-guide/msg00020.html
http://forum.icann.org/lists/irtp-draft-report/msg00000.html
http://forum.icann.org/lists/irt-draft-report/msg00015.html
http://forum.icann.org/lists/irt-draft-report/msg00016.html

For all the reasons we've previously discussed, we oppose the introduction 
of new gTLDs. We believe the process has been captured by a small group looking 
to directly make short-term profits from their introduction at the expense of 
the broader community through the resultant confusion for consumers and 
imposition of negative externalities upon 3rd parties. None of our comments 
should be taken as an endorsement of ICANN's plans.

Under the "Affirmation of Commitments":

http://www.icann.org/en/announcements/announcement-30sep09-en.htm

ICANN made the commitment that they would be "continually assessing the extent 
to which ICANN's decisions are embraced, supported and accepted by the public 
and the Internet community"

It is very clear that any decisions to move forward with new gTLDs are not 
embraced or supported by the public. ICANN only points to a very old decision 
by the GNSO Council as its "supporting evidence" in favour of new gTLDs. That 
is insufficient. There must be an overwhelming level of support from the 
*public* too (as opposed to captured constituencies that have double-weighted 
voting by registries and registrars). What do we see in actuality? The number 
of comments by the public has declined over time, because ICANN staff is 
engaged in a war of attrition, whereby they hope to tire out opponents of their 
unsupported plans. That decreasing level of public comment should not be 
interpreted as "consent" or "support" or "acceptance" or "lack of opposition" 
-- it can only be properly interpreted as an indictment of ICANN, that they 
have failed to win over the public. Recall that there were *thousands* of 
public comments when ICANN tried to amend the
 .biz/info/org contracts to eliminate price controls, for example. There was a 
huge outcry over SiteFinder. For ICANN to move forward on new TLDs, a much 
bigger change, there needs to be an outpouring of support equal or greater than 
those prior issues. "Silence" is not "consent."

Also, "ICANN commits to provide a thorough and reasoned explanation of 
decisions taken, the rationale thereof and the sources of data and information 
on which ICANN relied." Re-read the last part --- ICANN has not provided *any* 
data on new gTLDs when it comes to economics. The economic studies that were 
promised long ago must be conducted, and be conducted by truly independent 
experts, not those who are hired to parrot the position of ICANN staff with 
much handwaving. There should also be an evaluation of the new gTLDs that were 
already approved and operating, such as .biz/info/cat/jobs/travel/pro. The 
obvious conclusion would be that they are for the most part complete failures. 

One definition of insanity is "repeating the same thing again and again 
expecting a different result." Repeatedly offering new gTLDs might qualify as 
"insanity" by that definition, given all past ones have failed. What makes 
ICANN think this time will be any different? The only conclusion that makes 
sense is that ICANN seeks to line its own pockets, acting against the interest 
of the public.

What the public truly desires is that operation of gTLDs be tendered on a 
regular basis to the lowest cost bidder, just like any other procurement 
contract. That's the kind of competition that would save registrants billions 
of dollars, instead of having monopolies like VeriSign gouging consumers. The 
CFIT anti-trust lawsuit against VeriSign might eventually bring forth that 
change, and if it does it will demonstrate that ICANN's policymaking is full of 
holes, to have permitted those monopolies to exist in the first place.

THe Affirmation of Commitments clearly stated that "ICANN commits to perform 
and publish analyses of the positive and negative effects of its decisions on 
the public, including any financial impact on the public." This has not 
happened. The financial impact on the public, including existing gTLD 
registrants (e.g. com/net/org) through the "equitable treatment" clauses, from 
the elimination of price caps, the continued need for defensive registrations, 
consumer confusion and domain abuse is enormous. Where has ICANN published 
these financial impacts? Nowhere. I recall when ICANN approved the VeriSign 
settlement, I asked ICANN's legal counsel (during a conference call) to 
quantify the impact to the public on perpetual 7% annual price increases --- he 
did not have an answer, even though simple math would make it obvious it was a 
multi-billion dollar negative impact on consumers. The AOC now *requires* that 
ICANN provide that answer. I'd like to see that
 answer not only for decisions currently being discussed, but also for past 
decisions. What was the financial impact on the public by granting VeriSign 7% 
annual price increases, instead of having a tender process that would have led 
to .com fees being closer to $2/yr per domain? What was the financial impact on 
the public of "presumptive renewal" for all registry contracts? What was the 
financial impact on the public of ICANN speculating with its reserve fund and 
losing $4.6 million in the stock market? What's the financial impact on the 
public of ICANN continuing to pay ICANN staff using for-profit comparables, 
instead of non-profit ones? 

http://www.circleid.com/posts/20090105_icann_for_profit_companies_comparables/

According to the AOC, "ICANN and DOC recognize that there is a group of 
participants that engage in ICANN's processes to a greater extent than Internet 
users generally." That is a polite way of referencing the registries and 
registrars, who have captured ICANN over the years, and who have captured the 
GNSO via double-weighted voting. It is clear that their votes and influence 
need to be reduced, to better reflect the wishes of the public, the domain 
registrants who ultimately pay for everything through their fees.

The AOC clearly states "ICANN will ensure that as it contemplates expanding the 
top-level domain space, the various issues that are involved (including 
competition, consumer protection, security, stability and resiliency, malicious 
abuse issues, sovereignty concerns, and rights protection) will be adequately 
addressed *****prior***** to implementation." Note I've emphasized the word 
"PRIOR". ICANN is not even close to adequately addressing these serious issues. 
On that basis alone, ICANN would be in violation of the AOC if it moves forward 
with the current plan.

In light of the continued failures by ICANN, it should seriously consider 
rebooting the entire process, instead of trying to "polish the turd" that is 
the current Draft Applicant Guidebook. A radical rethinking of the process 
should take place, instead of pretending that small changes here and there will 
get the job done -- they won't.

Below is our proposal (which we submitted during the IRT process, and which 
ICANN and the IRT ignored), which would represent a sound economic and legal 
basis to go forward with new gTLDs in an *orderly* fashion. While we oppose new 
gTLDs for all the reasons previously stated (and in our previous comments), the 
approach below would be far superior to anything ICANN has produced, and would 
likely have the support of major stakeholders.

----

Ascended TLDs: A more elegant approach to new gTLDs than the DAG or IRT

I. If new gTLDs are to proceed, they should be consistent with ICANN's mission 
of stability, and need to be introduced in an orderly manner. We believe our 
approach as described below for "Ascended TLDs" (or aTLDs for short) is more 
elegant, more economically efficent, less prone to gaming, and would have less 
opposition than the current DAG. It would still not be a wise move, but would 
be a lesser evil than ICANN's current plan.

II. History and Motivation

1. A top level domain, for nearly all intents and purposes, has no special 
advantages over 2nd level domains or 3rd level domains. They are equally 
functional as serving as unique identifiers. An organization that owns:

example.com (2nd level)

can do the same things as one that owns:

example.co.uk (3rd level)

or one that owns:

.example  (top level domain)

Thus, those folks who speak of "innovative business models", etc. that can only 
be accomplished through a top-level domain are really not telling the truth. 
They can do everything they dreamed of with gjhjkhjkhgkjh.qt.a.org 
(non-existent but "ugly" fourth-level domain) that they can with .sports or 
.shop or .movie or .xxx

2. There are very serious reasons why new gTLDs are a bad thing, as noted by 
Tim Berners-Lee:

http://forum.icann.org/lists/2gtld-guide/msg00020.html

"The value of each domain name such as example.com also drops because of brand 
dilution and public confusion. Even though most people largely ignore the last 
segment of the name, when it is actually used to distinguish between different 
owners, this increases the mental effort required to remember which company has 
which top level domain. This makes the whole name space less usable."

The entire document by Tim Berners-Lee should be required reading by the 
community, to understand that TM rights need to be considered along with many 
other kinds of rights.

3. So, why do folks want top-level domains? Firstly, they are shorter. 
Secondly, they would allow covetous organizations to attempt to leapfrog 
successful owners of elite 2nd-level domains, trying to encroach on their turf. 
These successful organizations have already "won" in the competitive 
marketplace for domains since the first domains were registered in 1985. In a 
very real sense, the organizations and individuals who've built up an internet 
identity over the past quarter century can be grouped as either winners or 
losers. The winners don't see a need for new gTLDs, as they've already won. The 
losers wish to keep playing new games, to change the rules to their advantage, 
instead of competing in the level playing field that exists in today's stable 
marketplace.

4. Is it possible to turn the tables on the "losers" and make the playing field 
reflective of the current reality, but still allow for new gTLDs in a fair 
manner? We think it might be under our approach, which does not reward the 
losers' attempts to game the system.

III. The cases of Canada and Mexico

1. In Canada, 3rd-level domains were popular at one time, allowing 
organizations in different provinces to have identical names at the 3rd level, 
but different at the 2nd level. For instance, a company in British Columbia 
(BC) might own:

example.bc.ca   (3rd level domain)

while a totally separate organization in Ontario (ON) might own:

example.on.ca (3rd level domain)

with no company owning the 2nd level domain:

example.ca

If one attempted to register example.ca, it would be considered a "Conflicting 
Name", see section 3.4 of:

http://www.cira.ca/assets/Documents/Legal/Registrants/registrationrules.pdf

and special rules would apply requiring the approval and consent of the other 
registrant(s). See also:

http://www.cira.ca/assets/Documents/Legal/Registrants/RCDN.pdf

2. In Mexico, all domains used to be 3rd level domains, for instance 
example.com.mx, example.org.mx, example.edu.mx (just like .uk currently is). 
Starting in March 2009, though, they are opening up the 2nd level (so 
example.mx could be registered). They have decided upon certain rules, in 
English one can find them at:

http://www.nic.mx/es/Noticias_2?NEWS=314

and in particular holders of 3rd-level domains have the ability to rise (or 
"ascend") to the 2nd-level, with highly simplistic tie-breaking rules (older 
domain name wins).

3. Can we find a model that takes the best from the Canadian and Mexican 
examples, and allow 2nd-level domain name registrants to "rise" to the 
top-level? I think we can. We call this "rise" an "ascension" and thus leading 
to the name "ascended TLDs" or aTLDs for sure.

4. As an aside, it's important to call these TLDs something other than regular 
gTLDs (like .com, .net, .org) in order to not trigger the "equitable treatment" 
clauses of existing gTLDs! (that clause will truly cause a lot of problems in 
all approaches) That's one reason to call these aTLDs.

IV. Right of Light and Easements

1. Following the line of thinking of Tim Berners-Lee, we really need to 
consider that TM issues alone are not the only "rights" that people have that 
can be infringed. What we really are in favour of is strong property rights for 
all domain name registrants, and we can learn lessons from the "real property" 
world, not just the intellectual property world.

2. Imagine that domains are like buildings, and there exists the domains 
abc.com, abc.net and abc.org situated on a landscape. This can be represented 
visually (apologies for the poor drawings, my background is finance, not art) 
by:

http://www.loffs.com/images/ascension1.png

Note that the sun is shining, and everyone is happy. This represents the world 
of today.

Now, suppose that "hovering platforms" due to antigravity machines are 
invented, and suddenly it's possible to have floating buildings. This can be 
represented visually by the following picture:

http://www.loffs.com/images/ascension2.png

The floating platform itself is .abc (representing a new gTLD), and the little 
buildings on top of it are representative of new 2nd-level domains under the 
.abc TLD, such as sex.abc, casino.abc, and games.abc.

Note in the second image, the sunlight that was formerly beaming down upon the 
abc.com, abc.net and abc.org buildings is blocked, and those buildings are now 
in the shade, or in darkness. Sure, the buildings are still there, but in a 
real sense their property rights have been encroached upon. They have been 
diminished. In the trademark world, they might call this "confusion" or 
"dilution."

What would happen in the real world if such a technology (the floating 
platforms) existed? Certainly planners would not allow anyone to build a 
plaform anywhere. That would simply be chaos. The owners of buildings would be 
up in arms if just anyone put a platform 100 feet above their building and 
started erecting new buildings directly above them. It would violate their air 
space. It would violate their "right to light" and other basic rights.

3. The right to light is a form of easement that gives a long-standing owner of 
a building with windows a right to maintain the level of illumination:

http://en.wikipedia.org/wiki/Right_to_light

There are other kinds of easements, too, see:

http://en.wikipedia.org/wiki/Easement

4. In short, just like the Canadian example for .ca, when conflicts exist, we 
turn to rules to sort them out. Thus, if we think of these interests as ones 
that are attached to existing domain names, forms of property rights, then we 
have a natural way forward if we want to allow "ascension" up a level like in 
the Mexico example, with multiple conflicting parties but more sophisticated 
rules.

V. Proposed Solution for Allocating Ascended TLDs (aTLDs)

1. Our basic approach, then, would be to recognize that each and every owner of 
abc.com, abc.net and abc.org should have a veto to disallow anyone to have 
.abc. The only way for .abc to be allocated is for the prospective TLD owner to 
buy an easement from each of abc.com, abc.net and abc.org. Think of it as a 
right of way, or a license, or an approval, etc. It's only abusers and "losers" 
who think they should be able to build for free directly over someone else's 
property.

2. Using this approach, if a single organization owned all three of 
.com/net/org (e.g. eBay.com/net/org, Disney.com/net/org, 
Microsoft.com/net/org), they are already in possession of all the relevant 
easements, and don't need to consult with anyone else.

3. If Polo.org (Polo association) wanted to run .polo, they would need the 
consent of Ralph Lauren (which owns Polo.com) and another company (that owns 
polo.net) by acquiring the easements.

4. How does one obtain the easements? One way would be to buy the other domains 
outright. The other way would be to create a simple registry recording the 
owners of the easements. This would be relatively easy to accomplish by 
creating a shadow for each domain that shows who owns the easement.

5. By default, domain registrants automatically own the easements associated 
with their domains. They can later assign or transfer them to others for 
consideration. 

Note I intentionally exclude .biz, .info, other gTLDs and all ccTLDs. .biz and 
.info are essentially failed TLDs. Strictly speaking, .biz is also a 
"generic-restricted" TLD, while .info is a generic TLD like .com/net/org. See 
the "gTLDs" tab at:

http://www.iana.org/domains/root/db/

But, even NTIA/DOC/DOJ considered .info a failed TLD, see:

http://www.ntia.doc.gov/comments/2008/ICANN_081218.pdf

"In this regard, we discovered that .info often seems to have little value as a 
stand alone gTLD." (footnote 2, page 5 of the PDF)

In the terms of II.3, .com/net/org registrants are the "winners" (and everyone 
else really are the losers).

6. Using this approach, we do away completely with things like Global Famous 
Marks Lists, or huge databases of worldwide trademarks, etc. Any important 
trademark already owns their .com, .net or .org. If they don't, they're not as 
important as they think they are. And if someone else already owns the 
.com/net/org, they have the UDRP as a tool to acquire those domains (in 
addition to lawsuits), if and only if the current registrants are 
cybersquatting. If the terms are generic and domains are being used in a 
non-infringing manner, tough luck.

7. Less monitoring is needed. If you own the .com, .net or .org (or 2 of the 3, 
or all 3) and don't want that term to appear as a new TLD, you don't have to do 
anything (you don't have to transfer your easement, you just keep the right to 
yourself).

8. No money flows to ICANN from TLD auctions or other boondoggles. Instead, 
private individuals in the marketplace can determine which TLDs, if any, are 
allocated. The cost of obtaining a TLD is not related to how much money one 
throws at ICANN, but instead is determined by what it would cost to acquire the 
easements (or optionally the entire domains) from existing domain name 
registrants. This is an economic solution. TLDs that cause more collateral 
damage to existing registrants would be fewer because they would simply be more 
costly to acquire. TLDs that would cause less collateral damage because they're 
more obscure would cost less.

9. Registrants would directly take into account how much confusion would be 
caused by the creation of the TLD, how much "sunlight is blocked" using the 
"right of air" analogy, in determining how much it would cost to acquire an 
easement from them. For example, suppose someone owns music.org and calculates 
that they would lose $50,000 if .music was owned by someone other than 
themselves, due to the "loss of sunlight", confusion, etc. If someone 
approached them offering $25,000 to acquire that easement, they would logically 
say no, as the cost-benefit analysis just wouldn't work out for them. The 
damage from the new TLD ($50,000) would not be outweighed by the $25,000 offer. 
If someone else offered $75,000, they might say "yes" (they would not be 
compelled to say yes, it's their easement and they could negotiate or choose 
any number they wish to sell it for, or keep it for themselves).

10. What is the value of .music, then? To someone who doesn't own 
music.com/net/org, it would be the sum of the costs of acquiring the easement 
from all three current registrants. Note that this is LESS than the value of 
each individual domain, because the easement can be assigned/transferred 
without transferring the domain name itself --- the two are separable.

11. Gaming is less of a problem, because of the fact that the easements are 
required, and those cost money at "market" prices. For a company like IBM, they 
might price their easements at $100 billion if approached, and not have to 
worry about the International Brotherhood of Magicians or others trying to get 
.ibm. This is a broader solution than anything proposed as a rights-protection 
mechanism to date --- this gives everyone for which there is a conflict 
property rights and a veto, just like the Canadian model.

12. In order to solve certain issues (e.g. parties not negotiating, holdouts, 
etc.), we can add an additional wrinkle, namely a challenge-response system to 
ensure that non-responsive registrants are compelled to assert their easement 
rights in an efficient manner. For example, suppose I own abc.com, abc.net but 
don't own abc.org. I decide I really want to launch .abc, but am prevented from 
doing so because the owner of abc.org never responds to inquiries about their 
easement, or doesn't negotiate in good faith. I enter an offer into the 
centrally run Easement Database of $100,000 for the abc.org easement (not for 
the domain name itself, but just for the easement). Then, the owner of abc.org 
is contacted by the central database (or ICANN, or whoever) and is given a 
choice. If they do nothing, they automatically receive the $100,000, but lose 
the easement. In the alternative, they must pay 1% of the offer ($1,000) to 
positively assert their veto rights.
 (this 100:1 ratio is chosen intentionally, as it reflects things like real 
levels of interest rates, etc.) If the "loss of sunlight" and negative 
externalities of the .abc TLD are really above $100,000, the abc.org registrant 
would gladly pay $1,000 to prevent its launch (asserting positively their 
rights). If the loss was really only $50,000, it would be crazy to not only 
reject the $100,000 offer, but then be compelled to put up $1,000 of one's 
money to boot (buying one protection for a year or two, before one could be 
challenged again). This system would be a lot cleaner and more efficient than 
the courts, and would lead to the correct outcome as to whether the TLD should 
go forward (and how much it cost to buy out the other interests from 
conflicting 2nd-level domains).

13. Of course, this does nothing to stop cybersquatting at the 2nd level in new 
TLDs (e.g. someone could register microsoft.abc, verizon.abc, cocacola.abc), so 
one would need additional rules besides this aTLD approach using easements. 
However, any guidebook using this approach as a foundation would be a lot 
simpler, smaller and fairer than the current one. It would also promote 
stability, as existing registrants could decide for themselves whether the 
costs of a new TLD that conflicts with their domain are less or greater than 
the benefits to them.

14. This proposal would also quickly expose wannabe TLD speculators instantly. 
Someone who has been in favour of new TLDs because they covet high-value 
generic terms that they have no rights to (but hope to get at low cost from 
ICANN in order to flip/speculate/cause defensive registrations) would oppose 
our proposal, because they know they could not obtain easements for terms like 
.shop, .store, .chat, .sex, .casino, etc. for free. They're exposed as wanting 
to twist the ICANN rules in their favour to essentially encroach other people's 
"right to light" (like building a floating platform over your house to put you 
in the shade). People that have legitimate desires to run a new TLD (e.g. maybe 
eBay or Disney want .ebay or .disney or Microsoft might want .xbox) would be in 
favour, as this proposal protects them, and promotes stability. It's like the 
owner of a building deciding to build that floating platform over their own 
house --- they're enhancing
 their own property. Other people that legitimately want to run a .store or 
.shop or .pets would not hesitate to pay a fair price for the relevant 
easements, prices determined in the open market through competition with others 
and through negotiations. In other words, the howling will come from the 
"losers" who wanted to use the ICANN lobbying to take and encroach upon 
something of value from others for free. Their howls should be ignored.

15. In a phased approach, public announcements (and advertising via newspapers 
of record like the Wall Street Journal, or global publications like The 
Economist) would be made once a company acquired all the relevant easements and 
wanted to apply for a new TLD. TM holders who might be affected (and who didn't 
own the relevant domain names) could still file a UDRP within say a year or two 
(i.e. there would be other rules besides just the ones documented above, albeit 
much simpler than the DAG), and acquire the relevant easements if they won the 
UDRPs. This would prevent the TLD from ever launching if it violated other 
people's rights.

VI. Conclusion

In conclusion, we continue to oppose new gTLDs. If Ascended TLDs were 
permitted, using property rights systems like easements to allow the 
marketplace to resolve conflicts using economic principles would be a far 
superior system than anything proposed via ICANN's convoluted and self-serving 
DAG, or the IRT's proposals which are unworkable and rewrite laws to the 
detriment of registrants. Our approach, in contrast, works *WITH* TM-holders 
and domain registrants alike, strengthening both their rights simultaneously. 
Of course, much more would need to be done to combat abuse at the 2nd level, 
and to combat other top-level issues such as "morality", etc.

Sincerely,

George Kirikos
http://www.leap.com/