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Username: Ray_F
Date/Time: Wed, October 17, 2001 at 3:48 AM GMT
Browser: AOL Browser V6.0 using Windows 98
Subject: Is TLD Review Task Force paying attention?

Message:
 

 
        .com will be the desirable TLD for the foreseable future.  It has had a head start that can't be duplicated.  But, this does not solve the fact that the .com zone is basically exhausted at the second level leaving new entrants to the market place at a disadvantage in terms of a simple or reasonably literate addressing identity.

.info is a good TLD.  It offers the dual purpose of meeting such addresssing needs of the current and future market place and a navigational purpose for the end user.  But, like anything else, it is a new product offering requiring capital investment to achieve market definition and penetration objectives.

These new TLD's are not like .com where the second level registrants basically did all of the marketing for the registry.  It is also no longer a monopolistic environment where no matter how much market share was obtained, it would equate to 100%.

It is a relatively simple business model to properly maintain cost as a relationship to revenue given you will be guaranteed 100% market share regardless of the per unit price.  Add high demand for the product to this equation and you get Network Solutions selling for $15+ billion.

The new TLD entrants do not have the luxury of such an equation.  Yet, the applicants were basically price-capped at about $6 by the wisdom of the application process itself.  This same process also mandated that these new "winning" registries commit financial resources that would achieve desirable market share objectives. This is a formula for disaster at worst and one of ineffectiveness at best.

Look at what we have seen since the application process ended: the .pro registry renegotiating marketing expenditures; speculation that Afilias did not commit the necessary financial resources into its technical infrastructure;  .biz getting into trouble with a lottery scheme that was an effort to produce on-top revenues above the normal per unit fee;  The .name registry being allowed to materially alter their application to obtain monopoly power on various e-mail services towards ancillary revenue generation;  The .coop registry attempting to totally circumvent the competitive model by trying to become both exclusive registry and registrar of its TLD.

These were all moves to circumvent the price-cap maneuver.  It is reasonable to conclude that all of these non-technical problems (resulting in massive delays to even the launch of these new registries) is due to a flawed application process that forced a dismal cost-to-revenue relationship from the winning applicants.

For the Afilias registry, it could even be worse if the speculation holds.  Given this, they will have to steal dollars targeted for global market definition to solve their short term technical deficiencies.

You can not apply price-capping in a competitive environment.  This was the mistake.  The market needs to dictate price structure which is only but one component of a successful ongoing business concern.  In a monopolistic environment, the variables are less complex generally resulting in sub-par products and services.  It just so happened that in this space, .com has been greeted as the greatest thing ever - without any marketing at the registry level - thus masking the true deficiencies of its environment.

This is not an excuse to price cap and the early returns show this to be a huge flaw in the process.  It is no coincidence that each winning applicant came in at NSI pricing or less.  A truly competitive TLD environment dictated by market need will not yet exist because the registry cost-to-revenue relationship will not allow for it, certainly not on a global basis. 

$7 million, for example, is no where near a global marketing budget.  At this point, I do not where see any of the registries will even have this type of capacity at their disposal.  So, they just won't spend it.  And they will sit back and hope that second-mover advantages come to fruition to some degree as occurred for NSI as the first mover. I believe the application termed this the "10% confidence level".

If the TLD review task force is paying any attention at all, they should see that capping registry pricing at $6 is not going to produce a competitive environment, and certainly not one to .com.

Ray Fassett

     
 


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