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Misapplication of Free Market Principles

  • To: <biz-tld-agreement@xxxxxxxxx>
  • Subject: Misapplication of Free Market Principles
  • From: "Antonis Polemitis" <antonispolemitis@xxxxxxxxxxx>
  • Date: Fri, 25 Aug 2006 18:08:29 -0400

Dear BoD of ICANN,


This post is meant to apply to all three extensions: info/biz/org

I can only presume that the only, even conceptually justifiable, rationale
for the lifting of price controls is the superficial belief that this is
more of a "free-market" outcome and will somehow lead to an improved outcome
for the internet community through increased competition or innovation
between registries.


Unfortunately, the relationship between registrants and registries does not
remotely resemble a free market:

1.      Domains between registries are only partial substitutes for each
other.  Changing from a .org to a .info domain for example has certain
connotations for example (e.g. .org is meant to be for non-profits; .info
for reference information)

2.      Specific domain names (e.g. worldbank.org) have very few
substitutes, particularly in a world with one registry.  Presumably the same
rapacious registry that might take the prices to extortionate levels for
worldbank.org could do the same for theworldbank.org, etc.  This becomes
important particularly, AFTER a business has built a successful web presence
at a certain domain.  Significant brand equity is often built up in the
domain name even for offline businesses; for many online businesses, the
domain name and the company name are one and the same.  Given the lack of
effective substitutes, the pricing model envisioned would allow landlords to
extract extreme amounts of value from the registrant.



Differentiated pricing, it is declared up-front, can potentially be managed
around by registrants.  But the uncertainty created by allowing domain
prices to change post-registration will have a vastly chilling affect on
development of the gTLDs and in fact could push development to well-managed
ccTLDs even if the extension is logically inappropriate for that business.
To anyone that thinks that the 10 year clause provides adequate protection,
I would simply point out the fact that Yahoo.com is 11 years old.

At this point, someone might say, well landlords can change the rent they
charge in the real world.  The distinction lies in the fact that there are
a) far better substitutes for a specific real estate lot than for domain
names and b) there are multiple providers of real estate so a market price
gets established.

Even though a domain name is an "address", it is not equivalent to a mailing
address or retailing location in the offline world.  If Nike has to change
its physical mailing address, it does not particularly impact its company's
branding and certainly does not have to consider changing its name.  The
same analogy would not hold for Google and Google.com.  Furthermore, if Nike
does not like the terms of its latest building lease, it has plenty of close
substitutes (e.g. the office park down the street) from other sellers.


3.      If you accept that different gTLDs and more specifically different
domain names (post registration) are not close substitutes for each other,
then you will not have anything resembling a free-market and "competition"
between registries WILL NOT occur.  Registries are already free to compete
with each other by lowering their price and yet we see limited examples of
this behavior and certainly do not appear to be seeing it in this contract


We should look to the actual free markets to see if these terms would be
considered reasonable or laughable. For large and small businesses the
closest analogy to a domain name contract is a commercial ground lease upon
which a building is built.  In this free-market, we would never see a
free-market outcome where a leasee agrees to the following terms:

1.      The leasee make all of the investment in developing the property (as
in website development)
2.      The landlord / owner of the ground lease can change the rent at will
and with no restriction (the latest provisions)
3.      The leasee cannot, short of extensive material breaches, rent from a
different landlord ever (presumptive renewal)
4.      The terms apply to all leasees and cannot be individually negotiated
(one-time negotiation by ICANN on behalf of all registrants)


I strongly recommend that ICANN reject these current contracts which are
abusive to the point that they might threaten the development of the
internet itself.  If ICANN accepts these proposals on behalf of registrants,
I think it is fair to say that it has given up any pretense of caring about
representing its most important constituency, the millions of men, women,
small and large businesses that are driving economic growth around the


Respectfully submitted,


Antonis Polemitis




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