Comments on the unsigned "The Economic Case for Auctions"

[Eric Brunner-Williams <ebw@xxxxxxxxxxxxxxxxxxxx>]

When Kurt Pritz briefed the Generic Names Supporting Organization (<a 
href="http://gnso.icann.org/";>GNSO</a>) Council (and observers) in Los 
Angeles April 10th and 11th, the new generic Top-Level Domain (<a 
href="http://en.wikipedia.org/wiki/Generic_top-level_domain";>gTLD</a>) 
process model flows transition through an "auction" state in two of the 
three paths where two or more applications existed for the same (or 
similar) strings. At that time Kurt, speaking for Staff, was clear that 
the existence of a well-defined community was <strong>not 
dispositive</strong>, which surprised the Council members from the 
Intellectual Property Constituency present who recalled coming to the 
opposite position at San Juan. For Staff, a well-defined community was 
"a pebble" to weigh in some balance, where the name-squatting 
speculative bidder's claims to make "better use" might prevail. The 
weights of pebbles and the market-cap of the "better use" claimants were 
not defined.
<img 
src="http://circle.wabanaki.net/sites/default/files/images/new-gtld-contention-process.png"; 
border="0" width="598" height="73" />

Kurt's pebble makes a cameo in <em><a 
href="http://icann.org/en/topics/economic-case-auctions-08aug08-en.pdf";>The 
Economic Case for Auctions</a></em>, as a <em>25% bidding credit ... 
offered to community-based bidders whose community is located primarily 
in least-developed countries</em>, so it seems safe to assume that 
Chrysler LLC will simply have to offer 1.25 times the money to ICANN as 
a consortium which includes the governments or institutions of the 
Cherokee Nation of Oklahoma, the United Keetoowah Band of Cherokee 
Indians, and the Eastern Band of Cherokee Indians. Of course, the ICANN 
lobbyists for Chrysler LLC may ask for, and may obtain, a ruling on the 
question of whether "Indian Country" is "located primarily in 
least-developed countries", and as horked as the economy is in the nine 
districts of the CNO/UKB and the Qualla Boundary, they could be 
described as "inside" the United States, which could cut Chrysler LLC's 
overbid by a quarter.
Obviously, as the author of the original sponsored Top Level Domain (<a 
href="http://en.wikipedia.org/wiki/Sponsored_top-level_domain";>sTLD</a>) 
proposal in Working Group C, for a TLD operated by and for Indians, and 
as the coordinator of the Indigenous Intellectual Property Constituency, 
one of the three original IPC constituency proposals, that's a bean of 
no small size wegdged way up my nose.
But that's not all, as the narrator of the Ginzu knives promotion 
promises, there's more. Much more.
The Executive Summary informs us that <strong>scarce resources</strong> 
are efficiently allocated through auctions, a claim articulated in full 
at page 2, para 6, through the end of page 4, while three paragraphs 
above the anonymous author notes that that TLDs are <strong>not a scarce 
resource</strong>. This may reflect a division between the anonymous 
authors, or a brief moment of sobriety by a single, conflicted author. 
There are as many potential new gTLD bid strings as there are stars on a 
clear night in Marina del Rey. What is (relatively) scarce is the number 
of bid-capable efforts, which presently numbers in the low hundreds, and 
the whole point of the exercise is to intelligently deal with the subset 
of those bidders who chose well-known strings and chose not to encumber 
their application, or more importantly, the legal entity with whom ICANN 
might contract, with a well-defined community.
The anonymous author(s) claim that value is defined by the presence, or 
absence, of bids. However, the World Wide Web Consortium (<a 
href="http://www.w3.org/";>W3C</a>) may offer a community identified 
proposal, a dispositive bid for $0 for the most sought after of all 
potential candidate strings ".WEB", preventing any bids, to remove 
".WEB" from ICANN's GNSO policy area. The Microsoft Corporation may 
offer $1 more than any bid (open ascending assumed) or a year's 
marketing budget (sealed bid assumed), for the same ends. The real value 
here is defined by the capture of the rights of others or theft of some 
linguistic commons, and as a corollary, value is defined by replication 
of the unpolicied, unsponsored, COM/NET/ORG business model. ICANN is not 
handing out random string sausages to queued up Soviet housewives eager 
to go home and get on with cooking up something filling with cabbages, 
it is letting VeriSign and other high-cap speculators grab at a very 
small cloud of marques and generics, and bid price is claimed to be a 
sufficient surrogate for all forms of merit, all purposes, and all policies.
Worse, Microsoft could put in an application for .ETOAIN-SHRDLU or 
.SHAZAM, again, a bid price of $0, and bundle "free" domain names into 
its products and send the entire ICANN market, VeriSign's .COM franchise 
included, the way of the Linotype. The anonymous author(s) have 
completely missed the real contours of both the real ICANN market, and 
the real value(s) present in this market.
The three particular claims made that form the second paragraph of the 
Executive Summary contain assumptions that should be identified.
The first claim assumes that unit price times volume corresponds to value.

This violates the consensus of Working Group C, which established the 
parity of unrestricted and restricted applicants in the 2000 round. I 
know, I drafted the restricted text that Jonathan Weinberg worked into 
the working group's Oct. 23, 1999 interim report.
The second claim assumes that marginal cost corresponds to value.

This violates the consensus of Working Group A, which established the 
parity of prior claims and any other allocation mechanism, and which 
cannot sensibly be reduced, in an intellectual property regime 
encompassing hundreds of jurisdictions, to simple estimates of marginal 
cost. I know that too, because members of Working Groups A and C 
exchanged notes during the pendency of our respective working groups.
This too violates the consensus of Working Group C, which established 
the parity of policy other than the de minimus "first come, first 
served", assumption of the credit card industry risk, and negligence 
policy that defines the "unrestricted" policy model. I know that too, 
because, well, see above.
The third claim restates the first claim, with the odd twist that a 
"scarce resource" declines in value if reserved, whether by a 
"speculator" or a responsible intellectual property custodian, or ICANN. 
Is anyone certain, certain enough to commit ICANN's and scores of 
registries', registrars', and other applicants' resources, eight-figures 
sure, that the value of .WEB is less today that it was in 2000? That the 
value of .SPORT is greatest before the International Olympic Committee 
(IOC), the professional sports associations, the broadcasters and the 
advertisers appreciate it, now, and not ten years from now?
The remainder of the Executive Summary (paragraphs 3 and 4) are 
irrelevant, other than making the mildly amusing case, years late, by a 
bystander, that the .ORG and .NET redelegation "technical evaluations" 
were utter rubbish, and that in retrospect, Paul Vixie's and Carl 
Malmud's groups, or SWITCH, and not Hal Lubson's and Philipp Grabensee's 
groups, that should be operating .ORG, or that CORE/ISC and not VGRS, 
should be operating .NET. The author doesn't actually say that, of 
course, that could cause Sudden Consultant Termination Syndrome, but if 
ICANN can't do comparative evaluations in the future, and will be 
hopelessly gamed, it was hopelessly gamed and couldn't do them in the 
past either.
The notion that ICANN, that the ICANN stakeholders, have no interest in 
the policies or practices of an applicant to operate a gTLD registry, 
other than the applicants ability to pay&#8212;we don't need no stinkin' 
rules, we've got cash&#8212;is illuminating as an evaluation of ICANN as 
an institution. Fortunately, it's not mine.
If there is a place in the ICANN problem's allocation arena where the 
resources are scarce, and the policy of the bidders, as a class, of 
utter disinterest, other than their ability to pay, it is the allocation 
of single-character domains in COM, NET, and ORG. And neither Overstock, 
nor Oprah, propose to operate a gTLD registry, just an <a 
href="http://en.wikipedia.org/wiki/Second-level_domain";>Second-Level 
Domain</a> (SLD) of no particular import. And that is where the unsigned 
note belongs, and no where else.
Also posted at <a 
href="http://www.circleid.com/posts/gtld_comments_economic_case_for_auctions/";>circleid.com</a> 
and <a href="http://circle.wabanaki.net/node/73";>here</a>.