Re: [ga] Re: Antitrust Violations (long)

["Ray Fassett" <ray@fassett.org>]

Dear Rick:

"everyone can point fingers, make accusations and spread FUD, those that
can do the "real work" of developing proposals, and moving them through
some consensus development process are the folks that should be
encouraged."

I can certainly look in the mirror with this comment.  And yes, I will also
admit my overall attitude towards ICANN "processes" has waned over the past
year (thus affecting rational postings to the benefit of the majority that
take the time to read and participate - I do try to avoid this but
sometimes lose sight).

Anyway, my specific difficulty with your suggestion is that I do not
believe in the basic fundamentals behind ICANN's strategy for the fostering
of competition.  I do not think it was wise to create a slew of retailers
competing to sell an identical product without also allowing new "products"
into the market place.  As it stands, many of the problems that exist in
DNS are due to this decision to solve market place competition soley by
expanding the retail channel to sell a unique, identical product.  Many
registrars become accredited soley for speculative motivations.  I do not
think I need to cite examples.  Many point to the community benefit of the
decline in the average retail price of a domain to the consumer - but at
what trade-off?  Accuracy of WHOIS certainly comes to mind.  In addition,
the mandate for a gTLD registry requiring it to make available its product
to all ICANN licensed registrars has allowed entrants to the space that
have harmed the integrity of the industry.  No, I do not favor the single
registry-registrar environment that existed prior to ICANN.  But, I do not
like one bit this new "registrar only" strategy of competition.  It's based
upon artificial principles by way of centralized DNS regulation by an
entity not empowered with this function.

My proposal is - and has been - the fostering of competition at the top
level, a core function of the ICANN entity per the White paper.  Hand-in-
hand, the objective I have advocated is to reduce ICANN's ability to act -
even if in a benign way - as a market place regulator of DNS (something it
admits to being outside of its scope).  This includes the capping of
wholesale pricing via gTLD contract.  For example, if wholesale price
capping were to be removed from the market place today for .com, I think
the entire registrar channel would come crashing down.  In other words,
this "competitive model" is built upon a house of cards or an artificially
perceived value (or demand) for the .com extension (low price fueling high
unit volume for speculative reasons).  Certainly the retail price of domain
names would be sure to increase from $10 without the price cap thus
negating the most often cited benefit of this competitive "accomplishment"
or strategy.  The domino effect then upon many registrar models would
become materially affected to the extent their viability as an ongoing
concern would come into question.  Unit volume for .com has already
suffered over the past 12 months.  Increasing the wholesale price for .com
would further this trend but likely increase revenues for the registry even
with the shrinkage.  A simple example of this is that .com could shrink to
15M units from 20M units (a 25% shrinkage) but at $10 wholesale, registry
revenues increase by 25%.  I am sure Verisign, given current parameters
remain constant, has this elasticity formula worked out to the dollar.

But is it ICANN's role to regulate price at the wholesale level?  Was
this "function" passed along from the USG?  I propose it was not. Is this
competition or is the decline in the retail price of a domain name from $35
to $10 the result of an artificially created competitive environment?
Further, why must Verisign - or any other gTLD registry - be forced to
allow into its supply channel certain retailers that it does not see as
applying sound business practices to end consumers?  How is it ICANN's role
to regulate this business practice?  Verisign's interests have turned to
these very issues because it is affecting their for-profit business in a
weak economic climate where it is unable to adjust (as any sound business
would look to question).  Mr. Lynn cited publicly that Verisign should look
to its customer service issues first.  Is this where ICANN belongs?

I have proposed time and again for an abundance of competition at the top
level as a means to deflate the value of the .com extension that would also
then remove the pressure from the ICANN entity to act as a centralized,
global market place regulator.  This would also solve much of Verisign's
concerns (and any other gTLD registry) to operate its business as it sees
fit (where the market place can decide).  Without a mechanism in place to
admit competition at the top level and should Verisign become successful at
removing the wholesale price cap (where I believe this will indeed be
proven outside of ICANN's function) then becomes a worst case scenario for
the market place.  The very first to be affected will be the registrar
retail channel and the ongoing viability of many of these businesses based
uupon their existing bsuiness models of today.  Consumers will not have
registration options that could otherwise exist which is the very situation
that existed when Verisign held a monopoly status on the space (but
*required* price regulation by the *USG* for obvious reasons).  Today, we
have limited competition at the top level but may well be trading price
regulation of .com as a result of.

To make this simple, the ability for consumers and businesses to port over
to .shop, .books, or .whatever (and patronizing the registrar retail
channel accordingly) is artificially non-existent.  This gets overlooked as
a weakness of ICANN's strategy for DNS market place competition because
people are so quick to point out how retail pricing at the second level has
been reduced (most for domains no one actually wants as shown by the purge
over the past 12 months).  Well, the retail pricing "benefit" changes upon
removal of the wholesale price cap. How many years will Verisign have in
this environment before competition is finally accomplished allowing
consumers and businesses addressing options to the extent that .com
valuation is perceived as being negligible in comparison to other
extensions/options? It is when the latter occurs that the retail price of
domain names will decline for the consumer based purely upon the market
place, nothing artificial.  Verisign stands to gain quite a bit in between
but I have proposed time and again for the "ICANN experiment" to do what it
was created to do towards accomplishing this very objective.  Instead, we
have Verisign questioning price regulation at the highest levels (i.e. DoC
and Congress) - as it should - without even a mechanism in place for
competition at the top level.

Now, where is it exactly that I am supposed to post these type of radical
proposals towards "moving them through some consensus development process"
where I have not done so already?  I am not a bureaucrat, technocrat, paid
lobbyist, lawyer, registrar, registry, or IP member.  Where I do fit?  My
guess has been that I don't.  Sure, I represent a party that desires to
file for a TLD license should the climate be favorable to do so.  And I am
more business minded and do tend to lose patience with bureaucratic
processes that, mostly, get in the way (I did not make DNS addressing a for-
profit industry...others did this).

I certainly did not find the first round process to be a sound business
climate given the "6- 10" mandate.  And I can probably cite about 37 other
parties that would agree with me today.  Perhaps Danny is right in
correcting me that the power to withhold payment referenced by Mr. Palage
was directed at ICANN and not the registry level.  But, for what purpose?
To influence ICANN to hold firm on regulatory issues such as the wholesale
price cap or to influence ICANN to allow registrar retailers new inventory
to sell by way of a mechanism for new gTLD entry?  Logically, one might
assume the latter to be consistent with the core function of the ICANN
entity vs. the former....I am not so sure the registrar community is
motivated to agree that, to me, shows just how ridiculous this "competitive
accomplishment" truly is.

Ray Fassett

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