Re: [gnso-vi-feb10] Board resolution on Vertical Integration

[Eric Brunner-Williams <ebw@xxxxxxxxxxxxxxxxxxxx>]

On 9/27/10 10:21 AM, Richard Tindal wrote:
> It's hard to determine the specific position advocated by GAC.
>
> When you read specific sentences in isolation they seem to support
> certain positions. But when the thing is read in totality
> it can be contradictory. For example, this in the 2nd para --
> "/Governments generally support restrictions on vertical integration /
> /and cross- ownership as important devices for promoting competition,
> preventing market dominance and averting market distortions". /
>
> Overall (to me) they seem to me to be advocating exceptions only for
> smaller, Community TLDs. If they had meant full integration
> except with market power, in any situation, it would have been an easy
> thing for them to say.

The GAC communique starts with this: "The GAC looks forward to further 
discussion of this important issue." That suggests to me that the GAC 
is not finished with the issue, independent of what the current Board 
sets for a deadline.
In the language of para 2, which note the strict separation, market 
power, Salop and Wright, and para 3, which considers the "if market 
power is not an issue", the value that registrars offer is valuable 
technical, commercial and relevant local expertise. The first two can 
be read as generic qualities a mature registrar offers as a 
prospective registry operator, epp client -> epp server, registrant 
CRM -> registrar CRM, but the third value is _local_.
A registrar active in location X is unlikely to being local expertise 
as an vertically integrated applicant for a registry active in location Y.
So far the benefits the GAC mention are the location independent 
enhancing competition and promoting innovation benefits. Applie pie.
The next para describes what the GAC characterize as "an important 
additional benefit". The ability of community-based applicants to find 
technical service providers "in the local market", and the reference 
to registry size expectations.
The final para (page 4) limits the eligibility through "some form of 
regulatory probity" because "certain registrars [are] potentially 
valuable newcomers to the registry market."
We don't know what the "regulatory probity" is, it could be casting 
lots, or IRTP Audit numbers or ... There are lots of choices.
What we do know is the value of registrars as registry operators is 
not unconditional, and location matters a lot. It is _important_.
From this it seems reasonable to conclude that a registrar in North 
America or Europe has less value (to the GAC) in the registry market 
than a registrar in any of {Latin America, Africa, Asia}.
Relevant to this too is at pages 6/7, the section entitled "Addressing 
the needs of developing countries", which reads in part:
"... to set technical and other requirements, including cost
considerations, at a reasonable and proportionate level in order not 
to exclude stakeholders from developing countries from ..."
The vertical separation requirement, assuming there is one, falls 
within the "other requirements".
IDNs are only mentioned in the Market and Economic Impacts (M&EI) 
section, and "languages" only in the final paragraph as a document 
translation barrier to applicants. However, the context in the M&EI 
section is community applications and the suggested process is that of 
the IDN ccTLD FT, so I think the best reading is that the GAC 
considers expertise in scripts other than Latin, and languages other 
than English, to be a part of the "relevant local expertise" and 
present "in the local market".
So if we were to start with "What The GAC Wrote", even if only as a 
hypo to see where it leads, I think it is best read as Richard has 
suggested, as allowing community-based applications to exercise a 
registrar function where the market is local, and restricted by local 
expertise, whether in scripts or language or ... and that such 
applicants may exercise access to _some_ registrars as providers, and 
through their registrar function, where those registrars provide local 
value.
Restated, conditional only upon size and locality, where language and 
other local forms of "expertise" are included in "locality",
(a) an applicant may operate a registrar function independently, and
(b) an applicant may select a registrar as a technical service 
provider (registry function) and may, implicit in that registry 
function, under (a), above, exercise its registrar function through 
the registrar it selected as a technical service provider.
Eric