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Two comments on the NSI proposal from the first consultancy

  • To: crai-report@xxxxxxxxx, "'Nevett, Jonathon'" <jnevett@xxxxxxxxxxxxxxxxxxxx>
  • Subject: Two comments on the NSI proposal from the first consultancy
  • From: Eric Brunner-Williams <ebw@xxxxxxxxxxxxxxxxxxxx>
  • Date: Fri, 19 Dec 2008 12:28:26 -0500

Two comments on the NSI proposal from the first consultancy.

These are made in a personal capacity, though like some others also making comments in a personal capacity, I draw upon experience from the late 1980s to the present, originally as a USG contractor, an IAHC contributor, and later as an ICANN "stakeholder", throughout most of the ICANN period, both as registry and as registrar.

1. p2, para 1, suggests that via cross-ownership in a registrar (or registrars) a registry could diversify its revenue base, strengthen its financial position and reduce risk to its registry operation.

When NeuStar/NeuLevel was preparing to go live with .biz (and I worked for incompetent buffons) I proposed that we (Nu*) have a "registrar in a can" for testing and registrar continuity purposes. I can't imagine the buffons (then CEO Ganick included) going long on spending NuStar and Melbourne's investment capital on selling Verisign's three brands, and/or the Afilias or GNR or RCOM brands, but not their own. I can't imagine even them using .biz money to sell anything but the .biz inventory (though I don't have to imagine them using .biz investment capital to complete the NANPA build-out).

I similarly can't imagine Elliot coming to a radically different choice, to flog com/net/org and biz but not his brand, to use his limited resources to promote competing brands, for some diversity of income that necessarily has to have a greater ROI than spending the same money on his brand.

So what about the other end of the initial new gTLD registry participants? I'm shaking my head there too. A cooperative registrar that sells everything but cooperative product, to make a bigger buck? A museum registrar that sells everything but museums? An aviation registrar that sells everything but what SITA could have sold but managed to fail on for internal reasons? I'm still shaking my head.

I just don't see how this rationale for cross-ownership, the registrar lifts registry that created or acquired it, works.

Would it have made sense when .org was given to ISOC? If so, would the correct threshold have been a million registrations or a hundred thousand registrations, and then only of the remaining VGRS inventory, and the then rather fictional inventories of NuStar and Afilias, but not the .org inventory?

Similarly, during the .net redelegation fraud?

For the subsequent new gTLD launches, up to the present?

If the "why is a dollar better spent on not marketing .foo by the foo registry" not enough of a headache, there's the fact that the registrar market is degenerating along two axis -- the larger registrars account for more of the total market than in past years, and ICANN's managed to allow a simply staggering number of shell registrars, owned by domainers, to come into existence via several well-known gaming routes. To be a good long-term bet, the foo registry's registrar property must either be a consolidation winner in the com market or a gaming operation, in the same market.

I'm involved with several current applications, all of which are concerned about the basic one time 185k fee and the annual 75k fee, and avoiding additional costs such as those for RSTEP and objection. The idea that these applicants are going to "diversify [their] revenue base[s], strengthen [their] financial position[s] and reduce risk to [their] registry operation[s] by starting up highly competitive traditional or domainer registrar operations, both for VGRS inventory, seems wicked unlikely to me.

2. p2, para 2 suggests that cross-ownership is the appropriate mechanism to relieve the restrictions which prevent a competitive registry from "reach[ing] a sustainable level of registrations in order to [become and] remain competitive in the market".

There are a number of candidate mechanisms to relieve the existing restrictions, the .museum operator sought one (5k direct), the .coop operator sought another (6 months direct), and we haven't even mentioned mandates for existing com/net/org/info registrations by museums or cooperatives to be transfered to those registries and their prior registrations marked "reserved" to protect the transferred registrant, at any present price, or with any retroactive refund from the monopoly operator for the prior multi-year payments, at up to the 1995 level of $50/yr, or paid future-year payments, or the creation of a public interest registrar and a transfers mandate from some equally exploitive registrar price points. Yet this is the only mechanism for which an existence proof exists. The .org brand, existing independent from the prior incumbent monopoly operator.

We have to solve the registry capture problem. Restated, there is no ICANN gTLD brand, there is only the pre-ICANN C/N/O brands.

A decade ago there were two propositions on the table. The first one was to reallocate existing registry inventory into competing registries, without necessarily creating new namespaces. The second one was to leave existing registry inventory with the incumbent monopoly, and necessarily create new namespaces, and coincidently, create a distinct retail channel for all the namespaces, which we call "registrars". This is the genesis of "vertical separation" and "equal access".

The second proposition has not yet created an ICANN gTLD brand, and cooperatives and museums and aeronautical registrants remain overwhelmingly captured by the pre-ICANN, pre-competitive, C/N/O brands.

If our goal is to relieve the restrictions which prevent a registry from "reach[ing] a sustainable level of registrations in order to remain competitive in the market", ending the pre-ICANN capture of their registrants, and transferring their market share from the incumbent monopoly to the competitive registry goes to the root cause of existing inventory capture. The incumbent monopoly can elect to retain a registrant, but must pay the sponsored registry which ICANN considered, and authorized, as the competitive sponsored registry, the value of the registration, or it can cooperate with the transfer and prevent domainer seizure of the registrant's name and good will in the namespces of the incumbent monopoly.

Solutions that require the competitive registry to leave pre-competition captured inventory in place and "compete" with the incumbent monopoly by creation of new inventory, with, or without, any of a number of variations on the "vertical separation" and "equal access" rules for new inventory creation, are simply less effective than solutions that do not leave the existing inventory stranded at the incumbent monopoly and unable to transfer to the competitive registries.

Dressing the problem up with dancing registrars doesn't solve the problem, and as others have pointed out, the dancing registrars may have a greater interest in acquiring a greater share of the incumbent monopoly market share than the viability of new, and competitive registries.

I understand how a registrar would arrive at a registrar-centric solution to the registry start-up problem, but "competitive registrars" only exist in a market defined by the pre-competitive registries, everything else is simply too small to matter, with apologies for that observation to my friends Jeff and Ken.

Eric Brunner-Williams
again, in a personal capacity.

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