Vertical Integration for brand gTLDs & Communities ( Constantine Roussos / .music)

[Constantine Giorgio Roussos <costa@xxxxxxxx>]

Afilias has indicated in their post on CircleId on April 8th, 2010 that in
2010 the domain industry has grown to over 190 million domain names. The
.com, .net and .org grew to over 80 million names and ccTLDs like .de
(Germany) and .cn (China) have grown to about 45 million names. However, new
gTLDs total less than 15 million names or only 7% of domain market share.

New gTLDs are under-represented and competition generated from the existing
new gTLDs (any gTLD other than .com, .net and org) is minor, as highlighted
by the existing 7% market share. Keeping the registry-registrar separation
makes sense for dominant extensions such as the .com, .net and .org but it
makes no sense for upcoming new gTLDs, who will be attempting to set
themselves apart from the Big gTLD 3 (.com, net, .org) and provide better
services to benefit consumers.

This holds especially true for the cases of brand owners with trademarks and
community applicants. Why would these types of applicants engage in lobbying
activities to get shelf space on registrars such as Godaddy? In the end what
ICANN is assuring is the dominance of the other Big Registry 3. That is
Verisign, Neustar and Afilias. How does ICANN expect to have any competition
in the registry industry if it adopts anti-competitive and anti-innovative
measures such as registry-registrar separation, when the reality of the
matter is that new TLDs are not expected to become as large as .com but are
expected to differentiate themselves from the old regime and market leaders.

Vertical Integration, especially for closed community gTLDs, will benefit
consumers by allowing the creation of service/product bundling as well as
offering consumers differentiated pricing options given an increased product
variety. Vertical integration will allow new gTLDs to be innovative by
introducing new distribution and marketing channels in regards to product
placement.

Vertical integration will allow new gTLDs to differentiate themselves from
competitors such as .com. It will allow them to offer a higher quality
product with a competitive advantage that is attached to the opportunity to
incorporate new, innovative services that extend beyond mere domain name
registrations. Domain names are currently treated as commodity items, with
.com as the leader in market value. Vertical integration will help increase
consumer willingness to pay given the value creation opportunity that it
brings. These are some benefits:

   - Economies of scale
   - Economies of scope and strategic similarity between vertically-related
   activities
   - Cost reduction
   - Competitiveness
   - Reduce threat from powerful suppliers and/or customers
   - Higher degree of control over the entire value chain
   - Leads to expansion to core competencies

ICANN's decision to expand the internet will increase competition and
provide consumers with more options. Brand TLDs and community-based TLDs
must be vertically-integrated. Why would these types of TLDs be forced to
use a registrar? Vertical integration should be a case by case scenario.

In addition, I would like to know how ICANN believes that the oligopoly
market power of the Big 3 registries can be addressed to increase
competition in the registry industry and lower prices. How is preventing
competition in this space good for the Internet? This is the year 2010 and
the very concept of not allowing vertical integration based on historic
reasons and the lobbying power of current registries certainly defies the
purpose of leveling the playing field in the domain marketplace. There are
always two sides to the story and argument. If the GNSO and ICANN believes
vertical integration is anti-competitive, the community would like to know
how the current situation of the Big 3 registry dominance be addressed. Many
in the community see ICANN protecting the dominance of the Big 3 registries
and not allowing others to enter the marketplace. If the reason is because
Godaddy, eNom and Network Solutions have market power, why do other
registrars have to suffer because of the market share and positions of the
top 3 registrars?

If you would like to level the playing field, then anything other than
vertical integration will only protect the dominance of the current Big 3
registries as well as registrars such as Godaddy who enjoy considerable
market share. How will innovation in the domain space happen if startup new
gTLDs are penalized due to the existing prevailing market leaders who have
been successful in ensuring their dominance. A vote against vertical
integration goes contrary to the foundations of basic business principles of
improving customer offerings at cheaper prices. How can bundling, better
prices and integrated services be accomplished with the registry-registrar
separation existing? Why did ICANN go against academic research, papers and
opinions of scholars that found zero evidence that vertical integration
would be bad for consumers. Why destroy the possibility of offering greater
services because of a pessimistic or may I say self-serving opinion of the
current market leaders who will continually push their agenda and preserve
their self interest, by lobbying at ICANN meetings and asserting their
influence? What would consumers want? Why stall innovation and cut off the
possibility of providing integrated services that will benefit the end
customer? Competition and Innovation should be the approach for new gTLDs.
How are they expected to compete by limiting their flexibility?

Voting against vertical integration is an indication of keeping the status
quo, the current monopolies and eliminating any possibility of any
innovation. Why not give new gTLDs a chance to compete instead of shooting
them in the foot because the "Big 3" say so? I also think there is a
conflict of interest in regards to Vertical Integration voting by the ICANN
Board. Ram Mohan represents the Afilias registry, Bruce Tonkin represents
Melbourne IT, an ICANN registrar and also Harald Alvestrant represents
Google, which also is an ICANN accredited registrar. The ICANN ruling was
voteing down Vertical Integration and handing it to the GNSO for further
deliberation using the bottom up process. My question to ICANN is why there
are 3 Board members that have vested interest in the decision of vertical
integration in the decision making process? Isn't there a conflict of
interest? I hope the GNSO does the right thing: introduce vertical
integration. Ask consumers what they want. Pessimism and protecting the
status quo or do they want the possibility of better services and innovation
in the domain space. This is a no brainer for brand gTLDs and community
gTLDs.

Constantine Roussos
.music
http://www.music.us