RE: [gnso-vi-feb10] First stab at objectives and a definition of VI

[Milton L Mueller <mueller@xxxxxxx>]

From: Stéphane Van Gelder [stephane.vangelder@xxxxxxxxx]
>I have to admit don't understand why the equal access part is in the proposed 
>definition. If a registry is >vertically integrated with a registrar, it can 
>still be required to provide full and equal access to its TLD to all 
>>accredited registrars. For me, any VI definition need only describe the 
>relationship between the integrated >parties, not any theoretical relationship 
>between them and other parties which may be governed by other >circumstances 
>(such as an ICANN contract for example).

>Avri, Milton, as you say you have already discussed the subject at some 
>length, perhaps you can enlighten me >as to why the equal access part was 
>deemed necessary.

Yes, we did discuss that at length. Its basically a semantic distinction, but 
one that I think avoids potentially serious confusion about policy. 

If there are regulations that require a bottleneck provider to provide equal 
access to downstream suppliers, then market structure can no longer be said to 
be "vertically integrated." Many if not most of the technical economies of 
scope and scale made possible by VI are gone, and all you are left with is 
cross ownership. The distinction between a cross-owned but fully separated 
subsidiary subject to regulations governing its relationship with competing 
suppliers (on the one hand) and true vertical integration (on the other) is 
well-recognized in regulatory economics and has important implications for how 
firms behave and are regulated.

If the effects of VI are "regulated away" via equal access, and uniform 
contractual obligations, then there is no point in talking about or worrying 
about VI anymore. Because it isn't VI. 

Thus, I have trouble understanding how you can say, "For me, any VI definition 
need only describe the relationship between the integrated parties, not any 
theoretical relationship between them and other parties." 
Vertical integration is of interest to policy makers ONLY because of what it 
does or might do to other parties; i.e., other suppliers and consumers. Does it 
foreclose competitors? Does it facilitate lock-in of consumers? Does it permit 
innovations or make a supplier more efficient, giving it a competitive 
advantage over another? If VI simply describes what a company does in isolation 
it is of no interest to us, it is nothing more than an internal organizational 
issue. Why would we care? What do we need a PDP for? 

If allowing vertical integration is a real change in the policy regime, which I 
am convinced it is, then it is likely to bring both potential benefits and 
potential harms. 

--MM
________________________________________


Thanks,

Stéphane

Le 4 févr. 2010 à 21:03, Milton L Mueller a écrit :

>
>
>> -----Original Message-----
>> From: owner-gnso-vi-feb10@xxxxxxxxx [mailto:owner-gnso-vi-feb10@xxxxxxxxx]
>
>>> So just to make sure I got this right, the definition that is being
>> proposed at this stage is the following?
>>>
>>> Vertical integration is defined as a business structure in which there
>> is no separation between the registry operator and the registrar; they are
>> owned and operated by the same company and the domain name supplier is not
>> required to provide access to independent firms to sell names under its
>> TLD.
>
> Yes, that's a perfectly fine definition. But the good news is that Avri's 
> proposed definition really has very few, if any, substantive differences from 
> a correct one:
>
>> Vertical integration is defined as a business structure in which there is
>> no separation between the registry operator and the registrar in relation
>> to a particular gTLD; they are either owned and operated by the same
>> company or have another contractual affiliation that covers the specific
>> gTLD, and the domain name supplier is not required to provide full and
>> equal access to independent firms to sell names under its TLD.
>
> Other than the phrase " or have another contractual affiliation that covers 
> the specific gTLD", which is a bit vague, I have no problem with this 
> definition. This is in fact not what our difference was within NCUC. It is 
> the equal access issue that didn't seem to be understood at the time, but 
> this definition includes that.
>
> I still think it wise to include the economic reference and the official 
> definition used therein, so that policy experts and real economists who 
> observe our work at least know we did our homework. I do not consider 
> Wikipedia to be an authoritative source on anything, and typically no subject 
> matter expert does.
>
> --MM
>
>