The proposed Measures of Competition are economically meaningless
The proposed definitions, measures and targets are completely inappropriate for assessing competition. Between the final draft (dated 22 February 2012) of the Advice Letter and ICANN's February 23rd posting, there was an interesting switch in emphasis that suggests ICANN now is trying to minimize the role of competition as a justification. The title of the final draft("Advice requested by ICANN Board regarding definitions, measures, and targets for competition, consumer trust and consumer choice" became ""Draft Advice Letter on Consumer Trust, Consumer Choice, and Competition"[emphases added] This potentially is significant, because it is competition that is the necessary condition-the guarantor-of the other values that ICANN claims to be promoting. It was ICANN's inability to provide a sufficient competitive justification for its expansion plans that has drawn the fire of many, including the U.S. Departments of Commerce and Justice. The existence of competition-properly defined and understood-is a necessary condition for the realization of consumer trust, consumer choice and innovation. It should be the primary concern. But vague invocations of "competition", without more, are meaningless, just as are its purported definition ("Competition is defined as the quantity, diversity, and the potential for market rivalry of TLDs, TLD registry operators, and registrars") and the "Measures of Competition" that have been advanced at p. 11 by ICANN. "Competition" can be assessed only within the context of a properly defined "relevant product market", as that term is understood by economists, competition authorities and the courts to comprise the products (and their producers) that are deemed by consumers to be acceptable substitutes, and to exclude those products that are not so perceived. "Competition" occurs only between and among goods (including services) that are substitutes; producers of complementary goods do not compete with each other in any meaningful sense. This is not just relevant to any discussion of "definitions, measures, and targets" for "competition"; it's critical. The fundamental flaw in ICANN's entire rationale for its plans to increase in number of gTLDs is that it has never offered any satisfactory analysis of the threshold question: Do gTLDs even compete with each other? Put differently, does ICANN-or anyone else-seriously contend that registrants of second-level domains generally are content to register their domains under one and only one of the available gTLDs, and that they are largely indifferent as to which they align with? To anyone familiar with the actual demand by registrants of second-level domains, the question answers itself: These registrants overwhelmingly prefer the .com gTLD. To the extent they undertake registrations under any of the other gTLDs, it is in addition to their .com domains. In other words, these registrations under the other non-.com gTLDs are complements rather than substitutes that are generally undertaken for defensive purposes. Despite the prodding of U.S. government agencies and others, ICANN has never undertaken a proper delineation of the relevant product markets at issue in connection with its three campaigns (in 2000, 2003-2004 and the present). Its currently proposed measures of "competition" reflect that failure. They are meaningless, because they are not based on a clear delineation of the economic markets relevant to gTLDs. Michael A. Flynn Director [AFEConsultingLogo021411-1000 Small.JPG] AFE Consulting 1999 Harrison Street, Suite 2700 Oakland, California 94612 Phone: (510) 985-6712 Mobile: (510) 390-3096 E-mail: mflynn@xxxxxxxxxxxxxx www.AFEconsult.com ____________________________________________ NOTE: This e-mail may contain privileged and confidential information and is intended for the use of the specific individual(s) and/or entity to which it is addressed. If you are not the intended recipient of this e-mail you are hereby notified that any unauthorized use, dissemination, or copying of this e-mail or the information contained in it or attached to it is strictly prohibited. If you have received this e-mail in error, please delete it and immediately notify the person named above by reply e-mail. Thank you. TAX ADVICE DISCLOSURE: To ensure compliance with requirements imposed by the IRS, AFE Consulting hereby informs you that if any advice concerning one or more tax issues is contained in this communication (including any attachments), such advice is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.