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Criticisms of Compass Lexecon

  • To: economic-framework@xxxxxxxxx
  • Subject: Criticisms of Compass Lexecon
  • From: George Kirikos <gkirikos@xxxxxxxxx>
  • Date: Sat, 17 Jul 2010 17:51:22 -0700 (PDT)

Hi again,

Just to followup one last time, I'll note that others have had complaints and 
issues with reports produced by Compass Lexecon. It took only a few minutes of 
research  to find:


"The Compass/Lexecon analytical approach was to compare fare trends over 
time between the three New York and three Washington area airports  and common 
destinations....(skip)...We believe the methodology of the study was 

flawed in a number of  fundamental respects."

"Also, in its comments the Department of Justice expressed criticism of the 
Compass/Lexecon study, observing that the study failed to define  the level of 
correlation in fares that would place the airports in the  same relevant 



"The study, conducted for the NAB by Navigant Economics, addresses “flaws 
and errors” in a study conducted by Compass Lexecon filed with the FCC in 
December  2009 by the National Cable & Telecommunications Association (NCTA), 
the NAB said in a letter dated May 6 accompanying the new study."


"Lexecon’s “consumer welfare” analysis is simply wrong. Lexecon’s one-sided 

"More broadly, while Lexecon’s findings are clothed in seemingly 
sophisticated analyses of bargaining power and demand elasticities, and 
supported with a healthy dose of “factual” evidence, its analyses are flawed or 
inapposite, and 

its facts are often irrelevant or misleading."

ICANN needs to do a proper *independent* study, not using Compass Lexecon 
again (who wasted $300K of registrants' money on the flawed Carlton study). 
There should be multiple independent research teams, preferably university 
researchers looking to produce peer-reviewed ACADEMIC research (as opposed to 
"commercial lobbying support" reports) selected by NTIA, DOC, DOJ and the GAC, 
and definitely not folks hand-selected by ICANN to give another predetermined 
"blessing" of ICANN's self-serving plans.


George Kirikos
Leap of Faith Financial Services Inc.

----- Original Message ----
From: George Kirikos <gkirikos@xxxxxxxxx>
To: economic-framework@xxxxxxxxx
Sent: Sat, July 17, 2010 7:07:07 PM
Subject: Re: A new economic approach to making comments

Just to followup on our prior comment, I was shocked to realize that Theresa 
Sullivan (the third "author") is from Compass Lexecon (who already produced the 
Dennis Carlton "study" which was widely ridiculed):


This smacks of ICANN engineering another "predetermined" result. Indeed if you 
look at the metadata embedded within the PDF, the "author" is tsulli1.

It's time for a truly independent study to take place, with economists not 
hand-picked by ICANN. The DOJ did an excellent analysis already, let them pick 
someone independent.


George Kirikos
Leap of Faith Financial Services Inc.

----- Original Message ----
From: George Kirikos <gkirikos@xxxxxxxxx>
To: economic-framework@xxxxxxxxx
Sent: Sat, July 17, 2010 12:53:33 PM
Subject: A new economic approach to making comments

Comments on: An Economic Framework for the Analysis of the Expansion of 
Generic Top-Level Domain Names

By: George Kirikos
Company: Leap of Faith Financial Services Inc.
Date: July 17, 2010

After recently deciding to leave one of the ICANN working groups:


over the issue of how comments were being handled:

it occurred to me, after reading yet another poor report (I'd rate it a C-) 
produced by overpaid outside "experts" that the reason why ICANN is ignoring 

comments and insights of the public is that you've not been paying for them, 

thus you're placing no value upon them.Compass Lexecon got paid over $300K for 

report that is sitting in the trash bin, according to the most recent Form 990:


and we'll get to see how much we've wasted on this report in a year or two, I'm 

There are folks who've been finding the loopholes in your contracts:


warning you about SiteFinder *before* it launched:


(that post was a week before SiteFinder started), as just a couple of examples, 
and have been performing it as a "public service" for years, not just myself 

others in many constituencies (you know who you are, as many of you actually 
read all the comments and read the various ICANN documents).

So, I say to those people who are about to submit comments on yet another 

report, to really think about whether they should bother, if those comments are 
going to be ignored. ICANN has already decided what they're going to do, and is 
only seeking to "validate" those plans, while they grant favours to the 
"insiders" in the process, all along cashing in themselves with exorbitant and 
unjustifiable salaries:


The solutions:

(1) give your comments to outside parties (US DOC, NTIA, DOJ, governments), if 
you're going to "give" your work away for free, or
(2) insist that ICANN *pay* for those comments

Otherwise, as one person noted in a different comment period, your 
"participation" isn't going to lead to any positive outcomes, because there's 

accountability. "Participation" is no substitute for having a *real impact.*

I would have pity for the authors of the so-called "work" that was produced, 

then I remind myself that the public has seen their money wasted yet again and 
these authors are getting paid. Let me just note what the authors *could* have 
written about, but didn't. As the DOJ, NTIA, DOC and GAC read these comments, 
I've decided to note the following for the record:

(A) Explain why US toll-free numbers cost 10.54 cents/month (i.e. $1.27/yr) as 
per page 81 of the tariff PDF at www.sms800.com (at the wholesale level) and 
have been declining, yet .com prices are far higher and have been increasing. 
Estimate the cost to consumers associated with ICANN not having a tender 

in place for management of the gTLDs for fixed terms like any other procurement 
contract (hint: it's several hundred million dollars per year, undeniably). 
Explain why tenders for a small number of *public-selected* new TLDs would not 
be the most beneficial to consumers, as opposed to handing over new monopolies 
to registry operators.

(B) Are you even aware of the "equitable treatment" clause of the .com 

(section 3.2.a) and other gTLDs? Number of matches in your document for 
"equitable" or "treatment" = zero....I guess not. In other words, bad policies 
(like removing price caps) in new TLDs would directly *harm* registrants in 
existing TLDs like .com...factor that into your economics....this is the only 
reason many folks (who have no intentions of leaving .com and registering in 
junk TLDs) are even bothering to comment about new TLDs, as they don't want 
price gouging to become even worse in .com. Don't think this is a risk? See my 
post at:


where I quote the folks from Neustar. VeriSign must be licking their chops, 
although even if they don't raise prices further, they can use a "fiction" of 
"pretend competition" from new TLDs as a shield against the CFIT anti-trust 
lawsuit (hopefully Bret Fausett is able to pierce through the BS of that 
argument, though).

(C) New Top Level Domains Considered Harmful (Tim Berners-Lee & W3C) -- have 

even read this document?


and gone over the past comments in other comment periods? Here's an assignment 
for you, go back and read all the comments at:


(as well as the final report comments) It was spoonfed to you. Matches in the 
latest document for "Berners" or "W3" = zero. That says it all. Hard to take 
researchers/consultants seriously when they've not done their homework, and are 
getting paid for all this "work." Your cursory examination is very 
superficial.....probably documents that ICANN gave you.

(D) Innovative business models and "benefits" -- finding "innovation" and 
"benefits" appears to be harder for new TLD advocates (including ICANN itself) 
than a blind virgin finding a woman's G-spot. "Myths" and "stories" are written 
about how they "might" occur, but the facts loudly say the opposite. Why not 
compare all the promises and projections made for all the existing "new gTLDs" 
in their applications, vs. the reality? Why not look at public financial 
statements of registries like dot-Mobi (mTLD):


or note how new TLDs like .asia, etc. come begging to ICANN to lower their 

Why hasn't their been research to explain the failure of all these past new 
TLDs? ICANN can't just say "all these TLDs failed....the solution is more of 
them." Some of the planned applications for new TLDs come from those involved 

*existing* TLDs -- where's all the "innovation" in .tv (Demand Media / 
VeriSign), or .info, .biz, etc.? Indeed, as gTLDs whither like .pro, .travel or 
.jobs, we see the operators make self-serving proposals, that can cascade and 
affect registrants in .com (via "equitable treatmen"). This undeniably causes 
instability and creates uncertainty that affects registrants --- the production 
DNS is not a playground for amateur experimenters or those looking to make a 
fast buck. TLDs where the registry operators are trading *against* their 
registrants, instead of *serving* them (via a tender) are inherently unstable, 
they're the Venezuela of TLDs, where Hugo Chavez discourages investment:


(E) Switching costs (hilarious to see all the hand waving and theory in the 
report, reminds me of the bad academic papers and presentations I used to read 
during grad school). All covered ad nauseum at:


where I made explicit offers to buy the domains of both ICANN and Compass 
Lexecon, as a "test" of what their switching costs would be. They revealed 

own high switching costs by not accepting my offers. Simply ask people what 
their domains are worth to them -- you'll quickly get the answers. Don't be 
surprised if the answers are in the billions of dollars for some companies 

Google.com, Amazon.com, Yahoo.com, etc.). And you should consider the switching 
costs when folks are fooled into buying a "bad" domain (i.e. a bad TLD), and 
later switch to a .com


ICANN should not be in the business of promoting Fool's Gold.

(F) Resolved: Top Domain Names (.com) are "Positional Goods"


Discuss how creating infinite "knock offs" are going to affect their values 
(hint: it won't). Scarcity: isn't it intrinsic amongst heterogeneous items, 

a subset is going to be "more desirable"?

(G) Best allocation methods. ICANN presents the public with false choices, ones 
that maximize the benefits to itself, its staff, and to the "insiders". Study 
what tender processes (at fixed regular intervals) for existing TLDs (like 
.com/net/org, etc.) would do for "competition" and consumer welfare, and how 
this could be enacted for any new TLDs that the *consumers* demands. 
Furthermore, consider the concept of "easements" as I discussed in the 

TLDs" document at:


which would be a far better allocation scheme, and lead to a much clearer path 
forward for new TLDs that reduced externalities directly via market mechanisms.

(H) Missed obvious data sources: to compare "like-with-like" in a market where 
most transactions are never made public, you need to at least look at the most 
"liquid" domains for a matched-sample. You miss obvious data-sources like:


where it's clear most new TLDs are completely worthless. Their "best" names 
might squeak into a public sales report from time to time, but you can't 

that to transactions that are never made public in .com which are far, far 
higher. Or, simply ask folks who foolishly bought .mobi, .asia, etc. whether 
they have buyer's remorse. There's only so many times one can "go to the well", 
and each new sunrise has seen fewer "suckers" fall for the promises of new 

save for the "defensive registrations" bought by big TM holders.


I could go on and on, but I think I've made my point, especially for pro bono 
work. You have your work cut out for you, if you actually have the academic 
integrity and courage to do a proper study, one that would find that ICANN's 
plans are *against* the public interest. If you actually came out and said 

as the Department of Justice most clearly did, as Tim Berners-Lee most clearly 
said, and where the public has agreed that they should not be a priority, would 
ICANN allow you to publish it? Or is this just another exercise in ICANN 
politics, as insiders maximize the opportunities for "gaming" to occur, at the 
expense of the public?


George Kirikos
Leap of Faith Financial Services Inc.

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