RE: [wg-c] non/for profit

[Jonathan Weinberg <weinberg@mail.msen.com>]

	Near as I can tell, the e-mails of the last few days hit two main topics:
[1] Is there a problem?
[2] If there is a problem, is the non-profit/for-profit distinction the
right way to approach it?

	[1] Is there a problem?

	Milton suggests that no gTLD registry will be able to exercise significant
monopoly power in the first place, b/c prices for the services offered by
new TLD registries will be constrained by competition from NSI and the
ccTLDs.  Specifically, he suggests, a new registry, with little mindshare,
will be hard-pressed to exceed the $6 charged for registry services by NSI.

	This is an interesting question; the larger issue is how much competition
we have to have before the market will operate properly.  I'm not sure I
know the answer.  There's some evidence, though, that NSI and the ccTLDs
today may not be providing significant market constraint: Milton's noted in
another context that Matt is seeking to sell .md domains for $299/year.  So
at least some people think the current marketplace leaves room for
outrageously high, non-cost-based prices.  It doesn't strike me as wholly
implausible that a registry annointed as one of the first "real,"
"official" new commercial gTLDs might be able to exploit pent-up demand —
and the fact that its SLDs, in contrast to those in .com, are actually
available — to extract significant rents.

	[2] If there is a problem, is the non-profit/for-profit distinction the
right way to approach it?

	Milton urges that, in any event, non-profits are as likely to set prices
at profit-maximizing levels as for-profits are.  This strikes me as
overstated (the FTC comments state that there is insufficient evidence to
support a conclusion).  Some non-profits do exploit market power.  OTOH, I
expect it's fair to say that nearly all for-profits do, and it seems
possible to construct particular non-profit organizations in forms that
will make them likely to set prices at cost- recovery levels.  As Kent has
pointed out, setting up a registry as a cooperative controlled by its
customers is a pretty effective way.  (The customer-owned cooperative, in
the real world, is often poorly managed, and may have other flaws.  But it
tends to set its prices at cost-recovery levels.)

	Nonetheless — as more than one person has pointed out — it may be
distracting and unhelpful to focus on the blanket "for-profit" and
"non-profit" labels.  As Roeland notes, the mere fact that an entity is
classed as non-profit does not magically endow it with "enlightened
benevolence."  Rather, we need to consider more specific structures or
rules that will lead registries, notwithstanding market power, to set
prices at or near competitive levels.

	This gets us back to the question raised before: To the extent that we
think registry market power may be a problem (for either for-profit or
non-profit registries), b/c the market for registry services is not yet
competitive, what structures -- or provisions in the registry contracts --
would be appropriate to ensure that the registries don't inappropriately
exploit that market power?  A few days ago, I suggested the "ceiling
price."  Does anybody else have other suggestions?

Jon


Jonathan Weinberg
weinberg@msen.com