[NA-Discuss] Mentioned during the 13 September NARALO Teleconference ... VI PDP WG

[Eric Brunner-Williams]

Dear All,

At the close of today's call Evan mentioned the Vertical Integration 
Working Group and his impression of it, which I expect are shared by 
several others.

As I see it there is one fundamental issue: will the registrar 
function remain mostly indifferent to registry ownership or will the 
registry function partition into several disjoint patterns?

The general proposal promoted by registrars wanting to acquire 
registry margins, and also by registries wanting to acquire registrar 
margins, is to have both registrar function and registry function held 
by the same investors.

With each of {GoDaddy, eNom, TuCows, NSI, ...} and each of {VGRS, 
Afilias, NeuStar, CORE-RSP, ...} holding portfolios of new gTLD 
properties, and affiliated registrars, respectively, this will lead to 
a market in which each actor promotes their portfolio interests.

The resulting market, independent of the value of the commercial 
propositions of the dominant registrars and the incumbent registry 
operators, will be "Balkanized".

A variant of this proposal is also promoted by registrars wanting to 
acquire registry margins, and also by registries wanting to acquire 
registrar margins, is the "Not in your own TLD" modification, which is 
described by some (me included) as lipstick on a pig.

Under NiyoT, any pair of {GoDaddy, eNom, TuCows, NSI, ...} and/or 
{VGRS, Afilias, NeuStar, CORE-RSP, ...} may cross sell the portfolio 
interests of their partner, or more generally, the corporations within 
their trust or combine.

Again, resulting market, independent of the value of the commercial 
propositions of the dominant registrars and the incumbent registry 
operators, will be "Balkanized", into larger commercial clumps than in 
the original cross-ownership proposal.

These are adverse outcomes for consumer choice, however, the effect 
does not stop at the certainty of price gouging and limited choices. 
The real harm is not the immediate "consumer harm", but the failure of 
the competitive portion of a formerly monopoly market, now an 
oligopoly, to transform the monopoly market to a competitive market.

Thank you all for your time reading this. I don't expect to change 
anyone's mind, only to explain why I don't think the most important 
issue is some claim of merit advanced either by a registrar looking to 
own one or more registries, or by a registry looking to own one or 
more registrars, and why I think the Board made the correct choice at 
Nairobi and lowered the allowed cross-ownership from 15% generally in 
the 2001 and later registry contracts to a strict separation of 0% 
cross-ownership.

Eric