RE: [gnso-vi-feb10] Notice: VI Call Thursday with the Economists Salop/Wright at 20:UTC

["Michael D. Palage" <michael@xxxxxxxxxx>]

Jeff,

I am not a big theory man myself, however, I think we both appreciate the
economic reality of today's market place. 

So let me list some economic realities and see which ones you do not agree
with:

-       The expanse of the domain name space will result in an influx of
tens of millions of dollars into the domain name registration authority
marketplace (registrars & registries);

-       Most businesses in the domain name registration authority
marketplace want to grow their slice of the pie. While the new gTLD economic
pie is not an exact zero sum gain, when a prospective TLD applicant chooses
VeriSign's backend registry services over NeuStar's backend registry
services, VeriSign's slice of the pie is now bigger and NeuStar must now go
out and find other slices of pie to grow its quartering earnings.

-       While the 2000 round of new gTLD spurred a number of registry
operators that built out their own infrastructure in the 2000 round, ever
registry operator in the 2004 round sub contracted out their services to one
of four companies VeriSign (.JOBS), Afilias (.MOBI, .ASIA), NeuStar (.TEL,
.TRAVEL) or CORE (.CAT).

-       Over the last several years various registrations authorities have
explored/expressed their interest in expanding into other areas of the
marketplace. 

-       Some of the proposals put forward to date within the Working Group,
provide an economic advantage to some, while representing an economic
barrier to others.

Do you disagree with any of these points? Will now respond to your other
mail while awaiting your response to these points prior to continuing my
analysis.

Best regards,

Michael



-----Original Message-----
From: Neuman, Jeff [mailto:Jeff.Neuman@xxxxxxxxxx] 
Sent: Thursday, April 29, 2010 11:43 AM
To: Michael D. Palage; Gnso-vi-feb10@xxxxxxxxx
Subject: RE: [gnso-vi-feb10] Notice: VI Call Thursday with the Economists
Salop/Wright at 20:UTC

Michael,

In order for "audits" to be successful, one needs to know exactly what is
being audited and why?  The mere fact of having audits is not in and of
itself a solution, so I think your reliance on that is a little misplaced. 

No one is saying that Salop and Wright don't know their stuff.  But like
most economists (and even law professors), they work with theory and base
their theories on assumptions that may or may not be correct.  If the
underlying assumptions are not correct or are not grounded in true facts,
then they are just theories.  Salop and Wright gave their theories of the
perfect world model of integration and cross ownership.  They talked in
general about how markets operate, and that's all well and good, but should
not be relied upon as the be all end all.  

In theory, from day one there should have been multiple TLDs by multiple TLD
providers.  In theory, from day 1, we should never have a an artificial
distinction between registries and registrars.  In theory today we should
have no distinction between registries, registrars and resellers.  In
theory, from an economic standpoint, there should be no equal access
requirements.  In theory, Registries should be able to use whoever they want
to distribute domain names.  In theory, registries should be able to
distribute all products themselves and create a closed environment (ala
Apple).   In theory, there should be no switching costs in switching from
one TLD to another.  In theory, the demand for each TLD should be completely
elastic.  In theory, ICANN should let market conditions prevail, let
registries fail and let consumers take the risk of which TLDs they want to
register without any assurances that the TLDs will be there the next day.   

As you can see, there are a lot of theories of what should be in a truly
competitive marketplace, but we do not live in a world of theories.



Jeffrey J. Neuman 
Neustar, Inc. / Vice President, Law & Policy


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-----Original Message-----
From: owner-gnso-vi-feb10@xxxxxxxxx [mailto:owner-gnso-vi-feb10@xxxxxxxxx]
On Behalf Of Michael D. Palage
Sent: Thursday, April 29, 2010 11:15 AM
To: Gnso-vi-feb10@xxxxxxxxx
Subject: RE: [gnso-vi-feb10] Notice: VI Call Thursday with the Economists
Salop/Wright at 20:UTC


Keith,

I myself have also disagreed with some of the points put forth by Salop and
Wright. Notwithstanding these differences, they are widely recognized as
experts in this subject area. As part of the Team MMA research I have been
doing, the more law professors I speak with the more they reaffirm that
these guys know their stuff.

A big difference between the Australia & Seoul Presentations is that MOST
proposals we are now talking about include some type of audit safeguard.
Let's use our time today to talk to the experts and ask how other industries
have used audits and safeguard mechanisms to minimize potential harms to
consumers - a common goal we all share.

I also support your call for a full market economic analysis which ICANN has
failed to undertake when first raising this issue back in 2006. Once we get
this information (the first part which should be available by Brussels) we
then can begin to have a fully informed discussion of how to bring about
full choice and innovation within the marketplace (while protecting
registrants) as opposed to models which offer only incremental choice and
innovation while safeguarding incumbent business models/interests.

Best regards,

Michael



-----Original Message-----
From: owner-gnso-vi-feb10@xxxxxxxxx [mailto:owner-gnso-vi-feb10@xxxxxxxxx]
On Behalf Of Drazek, Keith
Sent: Thursday, April 29, 2010 10:38 AM
To: 'Roberto Gaetano'; 'Milton L Mueller'; 'Tim Ruiz';
Gnso-vi-feb10@xxxxxxxxx
Subject: RE: [gnso-vi-feb10] Notice: VI Call Thursday with the Economists
Salop/Wright at 20:UTC


Thank you Roberto. In my opinion, Salop and Wright were hired by ICANN Staff
to advocate for vertical integration. At the very least, their instructions
from ICANN omitted the study of potential harms. They told us so on several
occasions.

The VIWG should ensure it relies on a balanced and independent analysis of
both benefits and harms. I don't believe S&W should be considered
independent or fully informed on this topic. They can certainly be one input
into the overall analysis, but to consider them more impartial than others
would be a mistake. Also, there were some significant differences between
the Salop/Wright analysis and the CRAI Report, including on the key issue of
potential harms unique to the domain name marketplace. Do we plan to invite
the CRAI folks as well? 

Unfortunately, the economic analysis of potential harms (as requested by the
GAC, among others) has yet to be commissioned or conducted. I believe this
analysis and due diligence is a prerequisite to any recommendation for
fundamental change to the structure of the domain name marketplace. Our
near-term goal should allow for reasonable exceptions (single registrant,
community, orphans) to be made to the Board's strict separation requirement
while allowing for a medium-term independent study of both benefits and
harms.


-----Original Message-----
From: Roberto Gaetano [mailto:roberto@xxxxxxxxx] 
Sent: Wednesday, April 28, 2010 6:21 PM
To: Drazek, Keith; 'Milton L Mueller'; 'Tim Ruiz'; Gnso-vi-feb10@xxxxxxxxx
Subject: RE: [gnso-vi-feb10] Notice: VI Call Thursday with the Economists
Salop/Wright at 20:UTC

Keith,

> But why only Salop and Wright? Where's the plan to invite 
> other (independent) economists with differing opinions or 
> perspectives?

To the best of my knowledge, this has been a study requested by ICANN.
Regardless, to have a teleconference inviting them to present their view has
been something that has been on the table as "to do list" since day 1.
It is part of the "due diligence" we are committed to perform: we,
co-chairs, are committed to give voice to everybody's proposals (by the way,
it would be high time to my personal taste to close the window for
presentation of proposals, but see below). This includes the study that was
part of the setup of this WG, i.e. the one that we are proposing for the
teleconference in roughly 24h.
I fully agree with those who have commented that it comes at a point where
we have advanced already, and it feels like we are going back to the
beginning. This was not at all in the intention of the co-chairs, or staff,
or ICANN at-large. There's no conspiracy here to favour one position over
another one, but simply the fact that this WG is proceeding at the
supersonic speed my colleague co-chair has been able to create, and that a
presentation only few weeks down the line might seem overtaken by events.
Personally, and as co-chair who has taken commitments to do some due
diligene and housekeeping as part of the duties to co-run the WG, I feel
that this teleconference is a necessary step for the completeness of the
actions and records of this WG.
As for other economists that might have produced studies as consultants for
individual members of this WG, I do not personally feel that we have to put
them on the same level of the ICANN-related study. I believe that some
members of this WG have indeed contracted economic studies. These studies
might even be of higher value than the one we are going to hear about in
roughly 24h, but still I do not feel that we need to treat them in the same
way. If a study has been done for a stakeholder, the result of this study
has been without doubts incorporated in the proposal that this stakeholder
has presented, and in the presentation of the proposal there has been time
to produce economica analysis elements in support of the proposal, so I
think that the contribution of the different economists has been already
taken into account.
Regards,
Roberto