Re: [wg-c] Position paper

[Rod Dixon <rod@cyberspaces.org>]

I would like to go on record fully supporting Milton's proposal.

Milton Mueller wrote:
> 
> Comments and people willing to sign on as supporters welcome
> 
> NEW GTLDS: COMPETITION, INNOVATION, AND CULTURAL DIVERSITY.
> AN ALTERNATIVE REPORT FROM MEMBERS OF WORKING GROUP C
> 
> 1. Adding new gTLDs to the root is an important part of ICANN’s
> mandate
> ICANN was created because the institutions that preceded it were
> unable to resolve the intense political and economic conflicts
> created by demand for new top-level domain names. The US
> Department of Commerce White Paper included “oversee policy for
> determining the circumstances under which new TLDs are added to
> the root system” as one of the 4 key purposes of the new
> corporation. Thus, ICANN’s handling of new TLDs is an important
> test of its DNS stewardship. We urge a flexible, diverse, and
> open approach to this problem.
> 
> 2. Demand for new gTLDs
> There is abundant evidence of significant end user demand for
> expanding the name space. While some users will continued to be
> satisfied registering under ccTLDs, a very large number prefer
> gTLDs and want alternatives to .com, .net, and .org. Evidence of
> the intense demand for new, semantically interesting gTLDs is
> enumerated below:
> 
> a) Second-level domain names under the dot com TLD routinely
> change hands for enormously inflated prices. (See Table) These
> are not cases of “cybersquatting” but legitimate trades of
> ordinary, untrademarked words. High prices reflect the artificial
> scarcity of common names in existing gTLDs, and the premium on
> .com names in particular.
> 
> Domain Name Price
> Bingo.com US$ 1.1 million
> Wallstreet.com US$ 1.03 million
> Rock.com US$ 1.0 million
> Eflowers.com US$ 1.0 million
> Drugs.com US$ 800,000
> University.com US$ 530,000
> Computer.com US$ 500,000
> Blackjack.com US$ 460,000
> BBC.com L 200,000
> Business.com US$ 150,000
> Internet.com US$ 100,000
> Trade.com US$ 40,000
> 
> b) There are widespread complaints among users that it is
> becoming increasingly difficult to find simple domain names in
> the NSI gTLDs. The basis for these complaints was verified in an
> April 14, 1999 Wired News survey, which found that of 25,500
> standard dictionary words, only 1,760 were free in the com
> domain. At the time of that article, only about 7.5 million
> domain names had been registered. More than 3 million have been
> registered in the ensuing five months.
> 
> c) Currently, the weekly growth rate of domain name registrations
> is over 270,500. Projecting that growth rate into the future
> would put the number of domain name registrations at 67 million
> by 2003. Current gTLDs simply will not be able to contain such
> growth.
> 
> d) The growing demand for domain names cannot be satisfied by
> ccTLD registries. The problem is not capacity, but consumer
> choice. Given a choice, most users prefer gTLDs. 74% of the
> world’s domain names are registered in gTLDs; 61% are in dot com.
> The gTLD’s share of total domain name registrations has remained
> constant since 1997. This is true despite the fact that the
> proportion of Internet users outside North America has grown
> significantly in the same period. Internet users’ preference for
> gTLDs over ccTLDs has remained evident despite the limited choice
> of gTLD names available now. Expanding the number of gTLDs and
> making their semantic content relate to different cultures and
> languages will make this preference even stronger. We believe
> that TLD policy ought to reflect end user preferences, not
> top-down, preconceived notions of where users “ought” to
> register.
> 
> e) On the supply side, there are numerous potential suppliers of
> registry services willing and able to administer new gTLDs. These
> include, but are not limited to, Core, Image Online Design,
> Name.space, VRx, and MHSC. Thousands of registrants have paid to
> reserve domain names under TLDs not carried in the legacy IANA
> root. Several ccTLD registries, such as .NU, .CC, and .TO, have
> transformed themselves into gTLDs, marketing their names globally
> as alternatives to .com, .net and .org. It is obvious that these
> businesses perceive a serious demand for gTLD services.
> 
> 3. The WG-C Recommendations
> WG-C’s report to the DNSO proposes to add only 6-10 new gTLDs to
> the root as a “testbed.” It would then engage in an evaluation
> period before adding any more. There is no commitment or
> presumption that more would be added, and the duration and
> criteria of the evaluation are not specified. An entirely new
> process would have to be initiated to add more. Although many of
> the signatories of this report supported the 6-10 proposal as the
> lowest-common denominator for widespread agreement in the working
> group, we believe that the proposal is far too limited and
> imposes undue restrictions on competition, innovation, and
> cultural diversity.
> 
> 4. An Alternative Proposal
> The following policy better reflects the mandate of ICANN and the
> needs of the Internet:
> a) ICANN announces its intention to accept applications for a
> maximum of 500 new gTLDs over the course of the next three years.
> 
> b) The applicants for these new gTLDs would be added at a gradual
> pace – e.g., 10 the first six months, 40 the next six months, 150
> the second year and 300 the third year.
> 
> c) A defined proportion of the new gTLDs should be reserved for
> names that reflect distinct cultural/linguistic groups. ICANN’s 5
> geographic regions could be used as the basis for these
> reservations.
> 
> d) Instead of an open-ended “evaluation” period, we propose that
> ICANN define clear, objective, quantitative indicators of
> problems that would justify an interruption or cessation of the
> process of adding new gTLD registries and names to the root. In
> other words, new gTLDs should be considered innocent until proven
> guilty.
> 
> A proposal similar to this one received the support of about 35%
> of the voting working group participants in a straw poll
> conducted by the WG-C chairs. Below, we enumerate the reasons for
> the more open, diverse, and competitive approach to the new TLD
> problem.
> 
> 4.1 Competition Policy
> The most important reason to specify at the outset a specific and
> large number of gTLDs is to ensure a competitive market and a
> level playing field in the provision of domain name registration
> services under new gTLDs. Only 6-10 new gTLDs, with no commitment
> to add more later, risks creating an oligopoly of registries and
> a monopoly under each name. Competition would be attenuated, and
> the incumbents might have a vested interest in slowing or
> stopping the addition of new competitors. The initial grantee(s)
> will have a significant and unfair competitive advantage. They
> will be able to capitalize on the pent-up demand for new names in
> the short term.
> 
> 4.2 Market Certainty
> A highly restricted initial rollout, with no commitment to move
> forward, makes the initial grant of the gTLD to new registries a
> far less rational process for consumers and producers alike. The
> public will not know whether new alternatives will be available
> in the near future, and hence their choice of a supplier may be
> based on the assumption that the new gTLDs are the only option. A
> small number of new gTLDs encourages pre-emptive and speculative
> registrations that are based on the possibility of continued
> artificial scarcity. Prospective competitors will have no idea
> when they will be allowed into the market or whether they will be
> allowed at all. Limiting the number makes the initial assignment
> decision more controversial and arbitrary as well. ICANN will not
> be able to ensure that its initial award is not a permanent and
> final grant of a very special privilege, similar to the NSI
> monopoly of the past.
> 
> A pre-announcement of a larger number, on the other hand, makes
> it clear that the initial winners of new gTLD awards can
> anticipate plenty of additional competition. Investment and entry
> decisions of new competitors will be far more rational.
> Consumption decisions will be based on the need for and value of
> the domain names themselves, not on attempts to exploit
> artificial scarcity.
> 
> 5. Trademark Concerns and new GTLDs.
> Some concerns were expressed in WG-C that the number of new gTLDs
> should be restricted and the pace of introduction slowed in order
> to guard against trademark infringement. We believe that that
> argument is deeply flawed.
> 
> It is legitimate for the trademark and intellectual property
> interests to advocate case-specific dispute resolution procedures
> to protect themselves from abusive domain name registrations. It
> is not legitimate, however, for trademark holders to demand what
> amounts to a blanket prohibition on entry into a market for a
> legal service (domain name registration) solely to make their
> policing and enforcement task cheaper and easier. Such a policy
> unfairly imposes costs and restrictions on millions of innocent
> consumers and suppliers. Operating a TLD is not, per se, abusive
> or infringing; infringing and speculative name registrations
> constitute a tiny fraction of the total number of registrations
> in any TLD. Similarly, we know that the existence of VCRs,
> photocopying machines and similar recording devices will result
> in copyright violations. No one in this day and age proposes to
> ban them or severely restrict the number that can be manufactured
> and sold for that reason. Technology should be allowed to
> develop, and legal protections should be adjusted, if necessary,
> to reflect new realities. We should not, therefore, restrict the
> number of gTLDs based on concerns about their impact on trademark
> protection.
> 
> Even if one does not agree with the reasoning above, the adoption
> of a UDRP by ICANN completely severs any linkage between the
> number of gTLDs and concerns about trademark protection. Under
> the UDRP, contact information will be accessible and accurate,
> and challenges to registrations will be easy and inexpensive.
> Cybersquatters have lost every court case in which they have been
> challenged at any rate, and all objective indications are that
> the problem is declining. The UDRP should serve as an additional
> deterrent.
> 
> Finally, we would point out that narrow restrictions on the
> number of gTLDs actually contribute to many “cybersquatting”
> problems. Name speculation is fueled by the premium value
> attached to domain names in gTLDs. That premium value is largely
> a product of artificial scarcity in the TLD space. Also, if there
> are only four or five new gTLDs, the most logical course of
> action for major trademark holders will simply be to
> pre-emptively register names across all gTLDs. That defeats the
> purpose of adding gTLDs.
> 
> 6. Diversity and Competition in Registry Models
> Perhaps the most controversial issue in Working Group C concerned
> the proper economic model for registries and the process for
> selecting names. All of the following questions were debated at
> length:
> a) Should registries be shared, exclusive, or should both be
> allowed?
> b) Should registries be non-profit, for-profit, or should both be
> allowed?
> c) Should ICANN define the names to be added to the root, or
> should applicants come to ICANN with proposals for names? Should
> the names available represent a fixed, standardized taxonomy?
> 
> All of these questions can be boiled down into one fundamental
> issue. Does ICANN control the market structure for domain name
> registrations and then license specific firms to fit into its
> pre-ordained structure? Or, do end users and suppliers,
> interacting in a marketplace, determine the market structure of
> registries, registrars, and names, and ICANN in turn coordinates
> their activities?
> 
> We believe that the latter alternative is the best one. ICANN
> should not impose any specific model upon registries, nor should
> it centrally impose any specific pattern of names. It should
> allow the choices of end users in the marketplace to decide which
> models and names succeed and which fail. The content of the
> top-level name space should be driven by applications submitted
> by prospective registries. Registries should contract with
> registrars on a free market basis, with no pre-ordained pattern.
> Competition in the marketplace and user preferences will
> determine which approaches succeed. Regulatory and legal remedies
> to consumer protection problems that develop should be left to
> professional regulators in national governments. ICANN should
> concentrate exclusively on technical and administrative
> coordination of registry operators to ensure stability,
> interoperability, and accountability. It should establish basic
> qualifications for top-level domain name registries, and these
> should be confined exclusively to technical stability and
> financial responsibility.
> 
> The following are the reasons for this approach:
> 
> 6.1 Product differentiation and innovation may require
> integration of the registrar-registry function.
> A registry that wants to create a distinct identity and unique
> features for a TLD may need to control who registers within it.
> It may also want to control the front-end software interface for
> registration or other technical and business parameters. For
> example, a TLD devoted to North American aboriginals, as was
> proposed to WG-C, may want to ensure that specific tribal names
> are only assigned to legitimate members of that tribe. Or a
> privacy-enhanced gTLD, which was also proposed in comments to
> WG-C, may want to dictate certain technical parameters and
> protect the integrity of its data. Either requirement might best
> be implemented by integrating the registry-registrar function.
> This should be an option available to applicants.
> 
> 6.2 Imposing uniform models on new entrants will probably make it
> more difficult for them to compete with NSI.
> Dot com already has enormous market dominance and a huge economic
> premium is attached to names in that TLD. Com and the other NSI
> gTLDs are already shared, and their wholesale price is regulated.
> If new entrants into the marketplace are forced to adhere to the
> exact same business model, their ability to generate the profits,
> mindshare, and investment required to challenge NSI may be
> hampered.
> 
> 6.3 Compulsory sharing requires detailed technical and economic
> regulation.
> As the US Department of Commerce has learned, imposing “equal
> access” upon a registry requires: a) fixing the wholesale price;
> b) ensuring that the same SRS software is used; c) trying to
> determine the economic costs of the registry; and other complex
> monitoring and regulatory/contractual issues. ICANN lacks the
> resources and the expertise to engage in such activity on a
> global basis. Furthermore, ICANN is not the only line of defense
> against abuse of market power. Antitrust actions, price
> regulation, consumer fraud proceedings, and other remedies are
> available in national and international jurisdictions.
> 
> We believe that discussion of the issue of models has been
> distorted by the case of Network Solutions and its near-term
> market dominance. NSI’s monopoly on gTLDs may have justified
> requiring sharing in .com, .net, and .org. But NSI’s short-term
> dominance should not dictate how the domain name market works in
> the long term
> 
> 6.4 The benefits of sharing can be realized without making it
> compulsory.
> Shared-registry TLDs are one option in the marketplace. The NSI
> gTLDs are already shared. Several ccTLDs are also operating on
> that model. If consumers express a clear preference for the price
> and service delivered by this model, then it will be emulated.
> If, however, consumers willingly choose services offered by
> businesses following a different model, why should ICANN
> interfere?

-- 


Rod Dixon, J.D., LL.M.
Visiting Assistant Professor of Law
Rutgers University School of Law - Camden
rod@cyberspaces.org
http://www.cyberspaces.org