[gnso-vi-feb10] A case for minority caps

[Eric Brunner-Williams <ebw@xxxxxxxxxxxxxxxxxxxx>]

We attempt to solve two problems by the least means.

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For a minority cap on registry ownership of registrars, nominally 15%.

Few existing registrars are equally or preferentially capable of
offering sales channels for registries which are IDN-centric, or
local-currency-centric, or regional, and other reasonable properties.

With .cat we had four registrars "in Catalonia". Other linguistic and
cultural applicants are not so lucky. There is only one ICANN
accredited registrar in all of Africa, etc.

A minority interest cap sufficient to allow equitable access to
registries operating a shared registrar is adequate to solve the
problem that at registry start-up, where the registry is sufficiently
distinct from the current market, it will lack registrars.

A consequence of economically executing a shared registrar is that the
EPP and business model divergence among the participating registries
is self-limiting, and any registrar implementing the same EPP and
business model supporting registration profiles has access to all of
the participating registries, reducing the cost of entry for second
and subsequent competitive registrars.

The competition policy benefit is that applications are not invisibly
constrained to the existing dominant model defined by ASCII, dollars
(or euros or ...) and the OEDC economies, creating diversity of models.

The public interest policy benefit is ending structural economic
discrimination reducing the abilities of unserved and underserved user
populations to use the domain name system.

The ICANN policy benefit is that exception to the general requirement
for registrars is not necessary to achieve these fundamental policy goals.

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For a minority cap on registrar ownership of registries, nominally 15%.

The existing dominant economic terms are $6 to VGRS and $1 to a
registrar. Prices have gone up some, and some registrars compete on
value propositions other than lowest price, but 6-and-1 characterize a
significant portion of the existing prices. Actual per entry cost for
domain database is on the order of $1/year.

Under this system, no competition for Verisign has emerged.

A minority interest cap sufficient to allow equitable access to
registrars operating a shared registry is adequate to create a 1-and-6
alternative to the 6-and-1 allocation of margin exists in the current
market.

A consequence of economically executing a shared registry with a
equivalent price point is that the registrar margin will be sufficient
to motivate registrars to preferentially sell the 1-and-6  over the
6-and-1, creating competition for Verisign. For margin reasons, the
cooperating registrars may chose to set a price point below Verisign,
expanding the competitive benefit to registrants.

The competition policy benefit is that applications may rationally be
framed as price competitive with legacy market, rather than price
indifferent, or worse, and only "brand" or "other services"
competitive, with Verisign.

The public interest policy benefit is ending structural economic
price-support for the legacy market.

The ICANN policy benefit is that existing, and new registrars, rather
than some unanticipated, and possibly non-existent third party, are
sufficient to achieve these fundamental policy goals.

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Summary: Caps allowing minority cross ownership are a constructive
tool for achieving important competition and public interest policy goals.

Minority registry participation in registrars allows expansion of the
registries outside the existing market, in particular for IDN
registries, linguistic and cultural or geographically purposed
registries, and non-{dollar,euro,...} denominated markets.

Minority registrar participation in registries allows registrars to
set both registry and registrar margins, creating price competition to
the registry-capped incumbent monopoly, for which no competition has
been created by any other means, other than redelegation.

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"No change but symmetry on the pre-Nairobi cap" is the one-liner.

Comments, corrections, on the list or privately. To those that read
this, thanks for your time and thoughts.

Eric