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Vertical Separation of Registries/Registrars Report

  • To: crai-report@xxxxxxxxx
  • Subject: Vertical Separation of Registries/Registrars Report
  • From: George Kirikos <gkirikos@xxxxxxxxx>
  • Date: Mon, 15 Dec 2008 08:32:49 -0800 (PST)

The paper presented purely theoretical arguments, with no empirical
data. On that basis alone, one should severely discount their
commentary. 18 interviews (yes, eighteen, that's not a typo!), out of a
market of tens of millions of registrants, is hardly representative,
and is of dubious value.

In particular, some of the graphs are obviously flawed. On page 19, the
authors present a classic supply vs. demand graph. However, given the
scalability of registry services, the supply curve should be
horizontal, and very close to the the price of zero. For a registry
like VeriSign's dot-com, the marginal cost to supply the 10 millionth
domain or the 100 millionth domain is essentially the same, namely less
than a penny.

ICANN has failed to protect consumers by permitting registry operators
to increase prices to captive registrants. Competition should have been
promoted through a tender process, whereby competing registry operators
engage in a tender process to manage the dot-com database for a fixed
term, say 5 or 10 years, just like other government contracts for
school cafeterias, or as a technological example, for management of the
US telephone database.

Indeed, Neustar had to lower its prices for its telephone database
management contract in 2006:


Thus, the entire issue of vertical separation is a red herring,
attempting to draw attention away from the central issue, namely
ICANN's failure in properly regulating monopolistic/oligopolistic
registry operators, thereby subjecting registrants to much higher
prices than would be the case if there was a tender process for gTLD
management. .com fees would be on the order of $2 per domain per year
under a competitive tender, instead of the current levels approaching
$7/yr (and continuing to rise 7% per year). That's a $300 million/yr+
wealth transfer to VeriSign shareholders due to the flawed "infinite
presumptive renewal" giveaway that ICANN's board approved, despite the
opposition of the community.

Registrars operate in a highly competitive marketplace. The problem is
at the registry level, due to ICANN's failure. Revisiting the issue of
vertical separation is simply a distract from the real issues, and
should not be reopened as an issue for debate. The scope of the report
should have been expanded to discuss ways to maximize benefits to
consumers (i.e. maximize competition amongst prospective managers of a
given gTLD like .com). This would have changed the results of the
report substantially (assuming the authors are not totally
incompetent), and in particular would have demonstrated that a tender
process would have been optimal, just like other procurements.


George Kirikos
Leap of Faith Financial Services Inc.

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