Comments on "Initial" report of Jan 8, 2008 on domain "tasting"

[Karl Auerbach <karl@xxxxxxxxxxxx>]

A few short comments:

1. One essential question has never been asked, much less has it been 
answered:
  + What is the actual cost to a registry to process a transaction?

Why is this question so important?

Because one of the issues about "tasting" is whether the costs of this 
frenzy of speculative sub-5-day registrations are being subsidized by 
the registries or the systemic costs being effectively transfered onto 
those who acquire names on a full-term basis without using the AGP.
If the registry transaction costs are very low, then the costs of 
"tasting" may in fact be covered by the interest generated by the 
amounts on-deposit by the tasting registrars with the registries.
If the registry transaction costs are higher than that interest revenue 
on the deposits then the tasters are being implicitly subsidized.
An ancillary aspect is that if the transaction costs are low, then one 
must wonder why ICANN has created registry fees that are greatly in 
excess of actual registry costs?
All of this leads to an important task that needs to be performed in 
order to go forward on this domain tasting policy process:
  + ICANN must perform a deep and believable audit of the actual costs 
at the registry level of processing transactions of various types.

2. The 5 day grace period gives rise to another kind of abuse that was 
not, I believe, discussed:  A group of colluding registrars can use AGP, 
in conjunction with synchronized Drop and Add transactions to create a 
kind of round-robin system in which a name is passed among the colluding 
registrars like a baton and never made available to the name buying 
public.  Through this mechanism a name that generates revenue - via 
Google Ad Sense income for example - can be effectively maintained for 
the price of the cost of the interest on a few dollars that are 
deposited at a registry, in other words for far less than a normal 
registration.
This round-robin passing of sub-5-day registrations is not foolproof, a 
name may be lost during the hand-off.
One might think that there is no advantage using this round-robin system 
- the same amount of money is used whether it be on deposit with the 
registry or actually paid in the form of the registry fee.  But 
round-robin does allow early relinquishment of a name that starts to 
perform less well and thus frees up the money on deposit for use on 
another name.  And round-robin is also a means to further hide the real 
identity of an owner of a name that may be in use in a way that is 
abusive of the rights (such as trademark rights) of another.
3. We need to be careful about the term "AGP".  The ICANN-registrar 
contracts define several types of 5 day grace periods with the "add" 
version being but one.  Yet the other types may also be susceptible of 
similar abuse.
                --karl--
                Karl Auerbach
                Former (and only) publicly elected member of the
                ICANN Board of Directors for North America