[registrars] Alice's Registry Response to VGRS Registrar Wait List Proposal

[Rick H Wesson <wessorh@ar.com>]

Alice's Registry Response to VGRS Registrar Wait List Proposal

Date: 01.12.2002

Summary

  In reviewing several months of discussions about the processes
  implemented in response to the overwhelming load on RRP services due
  to speculation on domains during batch delete processes we find the
  proposal lacking in several areas of consumer and intellectual
  property protection. We offer a detailed discussion on requirements
  and where the proposal lacks definition.


Review

   Since the VGRS announcement[1] on July 16, 2001 concerning abuse of
   system resources that prevented non-speculatory transactions for
   most registrars from executing and preventing some registrars basic
   connectivity to registry resources registrars have been requested
   to provide comments to the registry on how to proceed with
   replacing the temporary solution placed into production shortly after
   the announcement[1].

   Some time afterwards VGRS posted a second announcement[2] where by
   resources in the now termed "overflow pool" were becoming so
   strained that again registrars were denied access because of
   abusive use of system resources. The second announcement put
   further limits on the bandwidth and number of connections used for
   speculative purposes. Recently a third announcement further
   restricted operational access to the overflow pools without any
   over-site or public discussion.

   Today the "overflow pools" are a place where registrars have a
   virtual tug-of-war for system resources to acquire newly deleted
   domains. With millions of domains being deleted (previous research
   found the VeriSign Registrar with over 96% of the batch deleted domains)
   during the past several months.



Tragedy of the Commons

   In general, "the tragedy of the commons" is that all common
   property resources tend to be overexploited and thus degraded,
   unless their intensive use is restrained by legal, traditional, or
   (perhaps) philanthropic institutions. The classical instance is
   common pastures, on which, according to the theory, each farmer
   will increase her herds until the pasture is overgrazed and all are
   impoverished. Most of the applications have been in environmental
   and resource issues. The recent collapse of RRP overflow pool seems
   to be a clear instance of "the tragedy of the commons."




Speculation - A Non-Constant Sum Game

   Most registrars and especially SnapNames won't use the word, but
   what we are discussing is building more efficient ways to speculate
   on domains that "may be valuable" to entities with interests in a
   name for the purpose of resale. Yes, most of the parties in this
   game are speculators that want an opportunity to grab a name that
   could have intrinsic value.

   There are several business models other than SnapNames that seem to
   be running rather well and are offering the speculator alternative
   means to access the valuable names that become available. We must
   realize that the current proposal would squash Registrar
   competition in this area.

   In a mail to the icann-delete list Larry Erlich noted to me, "The
   fact is, without speculators there would be no industry." Ok, my
   questions is, "Now, do we need to sell every domain twice?"



Analysis of the Proposal

   There has been a great deal of discussion about this proposal since
   it was first aired in Montevideo in August. On the icann-delete
   list we have discussed several proposals and even a straw-poll to
   see if any proposal was favored by the group. The proposal by VGRS
   isn't very different that what was proposed by SnapNames in
   September on the icann-delete list and the straw-poll the SnapNames
   proposal want the favorite then, I don't understand why VGRS hasn't
   taken the other comments and incorporated them into a proposal. Oh
   yes, price... in the other proposals the price was much lower.

   In the following paragraphs we discuss various aspects of the
   proposal and their impact on the Domain Name Industry



Price

   The proposed price is about what the current SnapNames retail price
   is. I think it was very smart of VGRS to propose such a price, and
   to their credit a well thought out plan.

   Many have stated that the price should be high to discourage too
   much speculation; however I suggest the proposed service is all
   about speculation and as such, speculators make up the vast
   majority of registrations these days. So, I see no reason why we should
   discourage speculation about speculation by setting high wholesale
   prices. Thus, the price should remain low such that VGRS can make a
   reasonable profit and recover their costs.

   In the off-line world we in the USA have a vast amount of
   experience to draw upon when monopolies (such as a Registry) wish
   to set price for a new product, this is a new product -- one for
   speculators.  When a power utility ( a monopoly ) decides to price
   a new product the regulators, in the case of the power utility the
   Public Utilities Commission understands the utilities costs
   structure and allows them to recover their costs plus a healthy
   profit; here we have no such over-site and no window into the VGRS
   costs to provide this analysis.

   To understand what margin VGRS should make we should understand the
   costs of offering the service, the costs should be determined by an
   Independent Third Party. Otherwise the price should be 25% less
   than that of the current offering for the service of SLD
   allocations. I picked 25% because there is less overhead in taking
   a WLS request than a regular domain name because there is no zone
   file generation.



Transparency

   In the current proposal there is no means for, or requirement to
   make available to registrant to determine if a WLS subscription has
   been placed on their domain without attempting to place a WLS
   subscription.

   Registrants MUST be able to determine if a subscription has been placed
   on their own domain, I would go as far to require notification in
   the Registry Whois as to the Registrar of record of a WLS subscription be
   displayed for any domain, active or not. ICANN's mandate is stability
   and non-publications creates instability.

   To judge the market penetration I suggest a list of ALL domains
   with a WLS subscription be made available on regular intervals such
   that registrars, and registrants can determine the utility of this
   service though its initial phase.



Monopolies

   I am greatly concerned with the detrimental effect the WLS service
   may have on registrants and Intellectual Property owners. This
   service as described by VGRS and SnapNames could make tons of
   revenue for both the Registry and Registrars. The reason it could
   deliver such whopping revenues is the compulsory nature of the
   service. Just as IPR owners have to register their trademarks in
   .biz, and .info gTLD during their respective start up [sunrise]
   phases, registrants and IPR owners would feel compelled to purchase
   a WLS subscription on their own domains to protect their
   interests. With such high prices VGRS, SnapNames and the Registrars
   would be double-selling a large number of domains. This compulsory
   effect could squeeze the results of analysis as one could not
   easily determine if the WLS subscription was purchased by the
   domains registrant to protect against predatory speculation or for
   purely speculative purposes by someone else, unaffiliated with the
   domain.

   To aid in determining the true success of this proposal, if it were
   to move forward, I would require a new RRP Status where by a
   Registrant through their Registrar could tag their Registration so
   that a WLS service could not be placed on the domain. Only with
   this tag can we see the true merit of the service verses those who
   are protecting their domains by preventing speculation on that
   domain.

   Also, the proposal limits consumer choice and registrar competition
   in favor of taking the "cream of the crop" in domains names and
   leveraging the domain's current registrants brand, web site traffic
   and potential registrar negligence into a compelling reason for a
   registrant to purchase their own WLS subscription.

   Finally, if a monopoly ( the Registry ) uses the good-will and
   traffic of a currently registered domain, holding registrants
   hostage for their own service contracts, we call that a crime; one
   that ICANN, the DNSO and Registrars cannot allow to happen.



Proposed Changes

  For this proposal to become remotely acceptable the following would
  be REQUIRED:

  o Set the wholesale price of a WLS subscription to $4.50. Setting
    the price high to discourage speculation in a product that
    encourages speculation makes no sense.

  o Require the Registry to display the Registrar that places a
    WLS subscription on a domain in the Registry whois.

  o Enable an OPT-OUT policy to counter the compulsory nature of the
    product by implementing a new RRP status that prevents a WLS
    subscription on a domain.

  o Fix the problem with the "overflow pools" by enforcing contracts.

Summary

   In summary I do not find this proposal to meet the requirements set
   out to alleviate the current issue. In short the VGRS WLS proposal
   creates a new service for the benefit of the Registry and is
   clearly detrimental to the Registrars and Registrants that use the
   DNS.

   We started this discussion out about how to fix a system that is
   being pounded by a hand full of registrars and its turned out to be
   a new method to sell each domain name twice, which is counter the
   philosophy of competition among Registrars and founding principals of
   the ICANN.

   We need to refocus on the problem at hand, one that deals more with
   fair allocation of resources and contractual enforcement not with
   creating new products, with a compulsory effect, to create better
   margins for Registrars and Registries.



Regards,

Rick Wesson
CEO, Alice's Registry, Inc. (www.ar.com)
CTO, ICANN DNSO Registrars Constituency (www.icann-registrars.org)




Foot Notes

[1] Equitable Allocation of Shared Registration System Resources
    http://www.icann.org/announcements/icann-pr16jul01.htm

[2] Second Advisory Concerning Equitable Allocation of Shared
    Registration System Resources
    http://www.icann.org/announcements/icann-pr10aug01.htm