[gtld-council] ISPCP Position Paper on the Policy Development for the Introduction of New gTLDs.

["GNSO.SECRETARIAT@xxxxxxxxxxxxxx" <gnso.secretariat@xxxxxxxxxxxxxx>]

ISPCP Position on New gTLD Expansion
====================================

Introduction
------------
This paper reflects the position of the ISP and Connectivity Provider
Constituency (ISPCP) within the Generic Names Supporting Organization on
new gTLD Expansion. The Constituency has reflected on this issue in
April of 2005 and published a joint paper with two other constituencies
within the gNSO (the Commercial and Business Users’ Constituency and the
Intellectual Property Interests Constituency). In December of 2005 and
January of 2006 the ISPCP once again considered the issue.

Fundamentally, the ISPCP believes that the mechanism for recognizing and
implementing new, generic Top Level Domains is adequate. However, our
constituency believes that there needs to be an informed discussion on
how to decide when new gTLDs are needed. The ISPCP uses this occasion to
reiterate its support of the existing strategy for new gTLD
implementation and provide guidelines for establishing the need for new
gTLDs.

On New gTLDs
------------
The expansion of the gTLD namespace is not a self-evident requirement.

Nothing in the ICANN mission, nor in the Memorandum of Understanding
with the U.S. Department of Commerce requires that the gTLD namespace be
expanded. Instead, the ICANN by-laws simply require the organization to
use market-driven mechanisms to promote and sustain a competitive
environment. The by-laws also suggest that the introduction and
promotion of competition should be done in the public interest.

As a result, the introduction of new gTLDs should never be solely done
to create or recognize business opportunities as the by-laws indicate
that new gTLDs should only be introduced because there is a strong
public interest in the competitive benefits of different types of gTLDs.
In addition to ICANN’s by laws, other foundation documents for our
organization also provide support for a reasoned, deliberate approach to
introduction of new gTLDs. The United States government, which is
referenced in ICANN’s own strategy for the recognition of new gTLDs,
does not require ICANN to recognize any gTLDs. In fact, while the MoU
does require ICANN to have a strategy in place for the recognition of
new gTLDs, it does not require the implementation of any specific number
of gTLDs nor does it have a timetable for introduction of new gTLDs.
Again this supports the adoption of a measured approach.

Does Competition Exist?
-----------------------
If the driving need in the gTLD namespace is to provide market-driven
mechanisms for a competitive environment in the public interest, then
how can one determine if the competition exists?

Competition Amongst Registrars
------------------------------
The ISPCP believes that competition amongst registrars exists and
flourishes. The model of having multiple registrars compete within given
TLDs with an underlying single source registry has been an ICANN
success. More than 500 accredited registrars now exist and competition
on price, service and other differentiators flourishes.

In fact, the competition in some parts of the name space is so effective
that ICANN has had to make equitable treatment, contract compliance and
inter registrar activity monitoring part of its strategic plan for the
coming years.

Competition Amongst Registries
------------------------------
The registry/registrar model gives each registry a natural monopoly. As
a result, competition at the registry level is achieved when three
conditions are met:

1. there are no unjustified barriers to entry to the market for registry
services resulting in a level-playing field for market access leading to
a plural supply base;
2. there is no market distorting supplier dominance which prevents
registrants (users of the gTLDs) from having a fair share of any
benefit; and,
3. market access brings new name types which add value in the eyes of
registrants.

The earliest attempt to introduce new gTLDs was a "proof of concept"
round which included both open gTLDs (similar to .com) and restricted
gTLDs (similar to .int). One goal of the "proof of concept" round was to
introduce new gTLDs that would act as competition to open TLDs such as
.com, .net and .org. The new, sponsored gTLDs were an attempt to
introduce a new name type into the namespace.

By any reasonable measure -- market share, number of names registered,
percentage growth -- the introduction of open, unsponsored names failed
to add any competition at the registry level. With five years of
experience it seems to the ISP community that their failure was the
result of being undifferentiated to existing market offerings -- a sort
of "me-too" style of competition where the new names offered no unique
value to registrants.

The small number of sponsored gTLDs in the "proof of concept" faced a
different problem. The early sponsored gTLDs were from tiny slices of
the marketplace with minimal customer populations. In these small
markets, the sponsored gTLDs have not made any significant impact in the
area of competition.

Evaluation of Competition
-------------------------
In its April 2005 statement to the ICANN Board of Directors, the ISPCP
listed five key results of the attempt to create registry-level
competition.

It may be confusing to consider the concept of registry level
competition when discussing new top-level domains. First, a single
vendor dominates the existing landscape for registry activity. Second,
registries have a natural monopoly over their existing domain spaces.
The ISPCP looks at registry competition as competition in the expansion
of the name space. In this way, we assert that there must be competition
at both the registrar and registry level.

We continue to believe that these five points are crucial in
understanding our constituency’s position that registry-levelcompetition
does not yet exist.

--> 80% of registrants were not new to the marketplace. 20% of the
respondents in surveys were new to the DNS whereas 80% were not. The
.name TLD had the
highest proportion of new registrants at 44%. The .biz and .info TLDs
had the lowest number of new registrants at 16% and 14% respectively
according to the
Summit Strategies Incorporated survey.
--> Many registrations were "defensive" registrations to prevent bad
faith use by others. Overall 41% of the organizations or individuals
surveyed by Summit Strategies Incorporated indicated that their
registration was defensive. This is further broken down by TLD: 52% in
.biz 41% in .info and 34% in .name.
--> Most of those who used the new names thought of them as a second
choice. Very few people were using the new gTLDs unless their first
choice was
unavailable: 18% in .biz, 17% in .info and 8% in .name.
--> "Me-too" competition is not working. There was a recognisable drop
in .com, .net and .org registrations in the first twelve months that the
new gTLDs were available. However, the market recovered very quickly and
market dominance by .com, .org and ccTLDs continues to this day.
--> ICANN’s "proof of concept" approach led to consumer confusion.
According to the Summit Strategies Incorporated survey: "There were
reports of significant confusion among actual and potential registrants,
registrars and the broader community following launch of the new gTLDs
as a whole. Some confusion flowed from the nature of the "proof of
concept" idea, which was to try different start-up mechanisms and see
which of them worked best. Registrars and consumers therefore had to
learn about not just one new mechanism, but several, and at nearly the
same time."

Five Crucial Principles
-----------------------
The ISPCP believes that, if there are to be any expansions of the TLD
namespace, any new gTLDs should create value for potential registrants.
Registrants will perceive this value, if it exists and create user
demand. We believe there are five principles that should govern and
determine all future expansion:

1. Competition.
Any new gTLD must create value-added competition amongst the registry
community. In it not enough to simply provide interesting alternatives.
New gTLDs should make the domain name system more useful and more
accessible to broader communities of interest and a wider community of
end users. A name which seems to simply supply "me-too" alternatives
should be avoided.

2. Clear differentiation.
Any new gTLD must provide clear differentiation from other gTLDs. When
gTLD sponsors suggest a name whose differentiation is evident, that
should be enough for the application. Success in achieving
differentiation in the marketplace would be a function of the success of
its business model. In addition the potential for cyber-squatting, fraud
and abuse is also limited wuth sTLDs.

3. Good faith.
Any new gTLD must avoid increasing opportunities for bad faith entities
who which to defraud users. Any new gTLD proposal should avoid names
that have the potential to confuse end-users because they are lexically
similar to existing gTLDs. In addition, no new gTLD should be allowed
that confuses the new gTLD with popular marketing terminology, brand
names or trademarks.

4. Diversity.
Any new gTLD must be able to serve both commercial and noncommercial users.

5. Certainty.
A new gTLD must propose names that assist the Internet end-user in
determining the relationship between the name and its purpose. Obscure
names are not necessarily to be avoided: if the name has meaning and
value to a delimited part of the marketplace, this relevance should be
sufficient to meet the principle of gTLD certainty. The semantics of the
name is just as important as the relationship between the name and its
perceived purpose.

New gTLDs -- How to Move Forward
--------------------------------
The ISPCP believes that no new gTLDs should be introduced unless they
can be shown to add value and competition while promoting the public
interest of the name space.

How should ICANN decide if a new gTLD proposal meets this requirement?

- Any new gTLD proposal should be sponsored.

- Any new gTLD must provide added value to the namespace -- not simply
alternatives to existing, generic names.

- Any new gTLD proposal should adhere to the principles of competition,
clear differentiation, good faith, diversity and certainty.

- Any new gTLD proposal must support Internationalized Domain Names at
the econd and subsequent levels - consistent with the IDN architecture
standardized by the IETF. In the standard Internationalized Domain Nname
Architecture, the term internationalized domain name means specifically
any domain name consisting only of labels to which the IDNA ToASCII
algorithm can be successfully applied. ToASCII is based on the Punycode
ASCII encoding of nameprepped (normalized) Unicode strings. ICANN issued
guidelines for implementation and use of IDNA in July of 2003.

- Any new gTLD must be shown to have support in the marketplace and
provide a

- demonstrable public benefit to the DNS namespace.

ICANN should move forward cautiously: ensuring that no damage is done to
the namespace and no problems are created for users of the namespace.
ICANN should allow for proposals for sponsored names to come forward on
an annual basis and provide a reliable process for judging the proposals
against the criteria set forth above.

Evaluators of the proposals should err on the side of caution: the bar
for introduction of
new gTLDs should be set high.

Should an Auction Model be Used?
--------------------------------
The ISPCP believes that an auction model is a very bad idea.

An auction model for new gTLDs ends up selling the monopoly rights to a
high bidder and then hopes that they have the wherewithal to provide
good service. Unfortunately, it is not clear how the names to be
auctioned would be determined. Instead of using the market to drive the
introduction of names, an auction puts the determination of the names
into the arbitrary hands of a few entities.

Without the principles of differentiation, certainty and good faith, an
auction model has no inherent ability to add value in the public
interest. Finally, and perhaps most importantly, an auction model
introduces the potential for market distortion by dominant or desperate
businesses. As with bids for spectrum for 3G mobile applications,
experienced organizations can sometimes grossly overbid on "potential"
in an auction model. It would certainly be possible for a winner to
overvalue a potential name and then never be able to economically bring
it to the market. In addition, an auction tends to favor large, dominant
players with significant capital backing. Given the current situation in
the marketplace (84% marketshare by a single company) an auction could
easily be dominated by existing players.

Should the Marketplace Simply be Thrown Open?
---------------------------------------------
The ISPCP believes that simply opening the name space to all and any new
ideas is a very bad idea.

There is often a proposal made that suggests allowing minimal
interference in the introduction of top level domains. Many, many
domains should be allowed to be introduced. The market will determine
which will succeed and which will fail. Under such a proposal any
applicant for a new gTLD would have to meet a very minimal set of
criteria to establish a new gTLD under an existing registry. The
implications of such a proposal are that many names would be introduced
and that some would succeed. However, some would also fail. This is the
core reason not to proceed with an open marketplace. The ISPCP community
believes the expectation of significant registry failures, with no
mechanism of safeguards is against the public interest and goes against
ICANN’s mission and contrary to its core values. Any possible benefit
that a laissez-faire approach might have is outweighed by the
disproportionate cost due to the increased likelihood of multiple
registry failures.

--

Submitted on Behalf of the ISPCP Constituency
Generic Names Supporting Organization

Mark McFadden
Secretariat, ISPCP Constituency
Generic Names Supporting Organization
Internet Corporation for Assigned Names and Numbers


--
Glen de Saint Géry
GNSO Secretariat - ICANN
gnso.secretariat[at]gnso.icann.org
http://gnso.icann.org