Comments on the unsigned "The Economic Case for Auctions"
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—we don't need no stinkin' rules, we've got cash—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>.