[comments-deletes] Further Comments on Final Report of the Transfer Task Force on the WLS proposal

[Bruce Tonkin <Bruce.Tonkin@melbourneit.com.au>]

Hello All,

I have considered the comments made by John Vogel (a small Tucows reseller,
and primarily an end user for around 50 domain names).

In my previous comments I stated:

" I think if the problem of deletes is solved first to the satisfaction of
consumers, the resistance to WLS will be minimal from a consumer
perspective.
The Redemption Grace Period is one step in this solution.
A standard deletes process is still missing, and I would advise that ICANN
consider setting up a similar if not the same group as for the Redemption
Grace Period, to propose a solution to this problem."

John's comments have reinforced for me the problem with considering
introducing the WLS as part of the current deletes process.

I was a member of the technical steering group that developed the paper on
the Redemption 
http://www.icann.org/bucharest/redemption-topic.htm.
One of the decisions we made early on in the group was to take a phased
approach to the introduction of the Redemption Grace Period.

RECOMMENDATION:
My recommendation is that the task force accept a phased introduction of the
WLS service.

Phase 1: A WLS may only be placed against a domain name prior to the
expiration date of the domain, and prior to the receipt of a deletion
command for the domain.

Phase 2: Consider extending WLS into other stages of the domain name
deletion process.

This recommendation could replace the first recommendation of the Transfer
Task Force on the WLS proposal.

The reason for this is to clearly separate the current competition for names
that are about to be or are deleted from the registry using the registry
"add" command.  There are also less monopoly considerations in Phase 1.  The
use of WLS after a delete command has been received but before the name is
available for registration using the "add" command, could be potentially
viewed as a price increase in the monopoly "add" command.


If the above recommendation is accepted then I expect the following
behaviour during a domain name life cycle.

PRIOR TO THE EXPIRY DATE OF A DOMAIN NAME
*****************************************

If a consumer does a check availability on a domain name, and the name is
not available, the user would have the following choices:
(a) Place a WLS subscription on the name if available (this would mean that
the consumer would get the name if it was ever deleted)
(b) Check to see if the name was available in the secondary market (e.g
search auction sites etc)
(c) Contact the current registrant and determine if it is possible to come
to a commercial arrangement

In this mode WLS is not really a monopoly service, and would need to compete
with options (b) and (c).  The WLS has a lower chance of success than (b)
and (c) for valuable names.  In this mode WLS is a true "wait-list" or
"back-order" service.  Registrars and other market participants are free to
try a range of business models to obtain currently registered names.

For valuable names, there may be some competition to be the first to place a
WLS on the name as an outside chance, or be the first to pick up a WLS on a
valuable name if the prior WLS was cancelled or expired.


AFTER EXPIRATION DATE BUT BEFORE DELETION
*****************************************

This is a slightly different market.  Options (a), (b) and (c) above are
still available.  However the chance of a WLS being successful may increase
as often registrants fail to renew a domain name.    This is in fact a
failure of the system, which is currently being addressed with the
introduction of the Redemption Grace Period.  In fact there may be a 50%
chance of the WLS being successful.  At the time of domain name expiry, the
Verisign registry charges the registrar $6.   There is currently a 45 day
grace period after a name expires, during which a registrar may delete the
name at anytime and receive a credit for $6.  If a registrant has not
renewed the name, a registrar should delete the name at the end of the 45
day grace period.  Some registrars do not do this, so the time when a name
is deleted becomes complicated.  If the WLS was allowed during this period,
it would be interesting to see what algorithms competing registrars would be
able to use to optimise the best time to place a WLS on a name.  There are
opportunities for inappropriate gaming of the system if WLS is introduced
while the process for deletes has not yet been reviewed and improved.
I recommended in my previous posting, that the WLS not be introduced during
this phase, until the delete issues are sorted out.


AFTER DELETION
***************

Registrars can predict fairly accurately when a name is about to become
"available" by observing changes in zonefiles, WHOIS etc.  The instant a
domain name is "available", there is competition to obtain the domain name
using the "add" domain command.  Bear in mind here that all registrars
should have equal access to the registry at this point.
In a perfect market for obtaining deleted names:
- all registrars should be able to find out precisely when a group of names
will become available
- all registrars that compete for these names would have equal probability
of obtaining the name  (e.g if there are 100 registrars, there will be a
1/100 chance of getting the name)

This is similar to the distribution of obtaining a new name when a new
registry starts up.
A registrant can improve their chances by placing a request with multiple
registrars.  Some companies may act as brokers and place a request with
multiple registrars to improve the chances of getting a name.  A bad
consequence of the current market, is that some registrars collude to use
their collective connections to improve the probability of getting a name,
and lock out other registrars.  They can then charge a higher price for the
privilege of obtaining a higher probability of success.  
Again if the market worked properly it would equate to the same market as
for registering a new name at the time a new registry starts operation.

The problem with introducing WLS in this process is that a WLS could be
placed on a name between when it is known that the name is about to be
deleted (when the "add" command will not work), and when the name is
available (when the "add" command will work).
Effectively in a competitive market the WLS becomes equivalent to the "add"
command the instant that the name is known to be deleted.  At this point the
competitive strategies to place a WLS will be exactly the same as the
strategies to place an "add".  However the WLS may be priced higher than the
"add" command, and thus will effectively be an increase in price for "add".

As I stated in my previous posting, I hope the WLS can be introduced in such
a way that the service would not need to be subject to price regulation.  In
this situation I think WLS should be subject to price regulation.

I now restate my recommendation:

RECOMMENDATION

My recommendation is that the task force accept a phased introduction of the
WLS service.

Phase 1: A WLS may only be placed against a domain name prior to the
expiration date of the domain, and prior to the receipt of a deletion
command for the domain.

Phase 2: Consider extending WLS into other stages of the domain name
deletion process.

This recommendation could replace the first recommendation of the Transfer
Task Force on the WLS proposal.

CONCLUSION

I believe that provided that WLS is not involved in the process after it is
known that a domain name will be deleted for certain, that it would not
necessary result in any harm to the consumer in terms of higher prices.  In
terms of competition, I still stand by my earlier comments that competition
will not be affected by the introduction of WLS at any of the stages I have
described above. A phase introduction would initial allow WLS during the
first of the stages above, and then consider allowing it after the
expiration date of a domain name licence provided that the expiration
process is reviewed to ensure that it is consistent across all registrars.

Regards,
Bruce Tonkin