[NA-Discuss] The societal harm of domaining, episode 413

Sat Feb 13 21:30:04 UTC 2021

David,

I agree with your comment about the limitations of using metaphors.

Economic activity in the DNS is quite diverse.  A metaphor that might be
suitable for describing one aspect of the DNS may be ill-suited for a
different form of economic activity under the DNS.

Perhaps a parable is better - the blind men and the elephant:
https://en.wikipedia.org/wiki/Blind_men_and_an_elephant

We may each be focussed on a particular aspect of economic activity in the
DNS, but our perspective and conclusions from a limited subset may not be
applicable across the full scope of activity.  "The moral of the parable is
that humans have a tendency to claim absolute truth based on their limited,
subjective experience as they ignore other people's limited, subjective
experiences which may be equally true."

I acknowledge my own limitation here, as I am focussed on one aspect of the
aftermarket:  transactions involving non-distinctive domain names that were
first registered many years ago.  This may be similar to physical real
estate transactions.

Others appear to be focussed on those who register otherwise unregistered
domain names directly from the registry and who then resell them at far
higher prices.  Some, incorrectly in my view, have suggested that ticket
scalping may be the appropriate metaphor for this practice.

Another distinction that is often blurred and that muddles the policy
discussions is that the role of the registries in the legacy extensions,
such as .com, .net and .org is entirely different from the role of the
registries of the new gTLD extensions.

The ultimate owners of the legacy extensions of .com, .net and .org are the
public, first through the U.S. government and then through ICANN, which was
charged with operating them for the public benefit.  Verisign and ISOC/PIR
were engaged as contractors to perform the administrative and technical
functions of distributing the domain names and maintaining the zone files.
The presumptive renewal provisions, while anti-competitive, do not change
the nature of the legacy registries as hired service providers - not owners.

In contrast, with the new gTLD program, ICANN assigned ownership of entire
name spaces to the registries, at times through an application process
alone, and at other times through a competitive bidding process.  The new
gTLD registries own their name spaces in a manner that the legacy
registries, as merely registry service providers, do not.

Significant policy considerations depend on these distinctions.

- As David correctly stated earlier - "the pool of human relevant domain
names is smaller than infinite. The value of a domain name is connected to
the relevancy it has to humans (aka Brand Marketing)."

In the .com name space, the pool of available human relevant domain names
were for all practical purposes registered 20+ years ago.  If there was a
way to value the current .com name space (excluding any value associated
with TM usage so that only the inherent human relevant value is
considered), one would find that the domain names representing 99% of that
value were first registered many years ago.

Effective policy should take into account that the vast majority of
Aftermarket economic activity in the .com name space involves domain names
that were first registered decades ago.

Concerns about speculators registering available domain names and holding
them for resale at far higher prices may have been relevant when the legacy
registries were first launched in the 1980s.  Different approaches could
have been taken then rather than a first-come, first-served, flat rate
pricing (or initial free registration) using a land rush model.  But
second-guessing this approach decades later serves little purpose.  Even
some who have expressed concerns about this approach acknowledge that the
"ship has sailed" long ago on this topic.  While some may focus on those
who register freely registered domain names for resale in 2021, this
represents an inconsequentially small segment of the aftermarket. Drawing
broad conclusions for the entire aftermarket from those who still in the
present day register unregistered domain names would be akin to proposing
urban land use policies with the aim of trying to thwart people from buying
up unclaimed land in the Sahara Desert.

- If premium pricing unregistered domain names is a problem, then what is
the new gTLD program other than institutionalizing this across hundreds of
new name spaces for the financial benefit of ICANN?  ICANN has made
hundreds of millions of dollars by auctioning of fresh name spaces with the
specific intention of permitting new gTLD registries to charge higher
prices for the more "human relevant" domains within their name spaces.

- the new gTLD program shifted domain speculation from the aftermarket and
from folks like me dealing in individual domain names, to the registries
speculating in entire name spaces.  If ICANN believes that the free market
should not determine the value of domain names, then why did ICANN put new
gTLD name spaces out for bid and enable new gTLD registries to charge
prices for domain registrations as high as the market would bear?

- Is it wise policy to treat legacy registries the same as new registries
and to adopt the same agreements for both?  How does it serve the public
good to award a sole-source service contract to one company, and then to
allow that company to charge whatever fee it chooses to perform the service
it is contracted to provide?

- In other aspects of economic life, such as with utility providers, when
there is one company with a sole-source contract to be the exclusive
provider of services, that utility is heavily regulated and any price
increase is closely scrutinized and must be justified.  What is the
justification for Verisign's recently announced increase of its fees for
providing .com registry services - when its profit margins are already an
extreme outlier since milking the .com contract has made it one of the most
highly profitable companies in the world?

- Is there effective competition for .com?  How come .com registrations
have increased by more than the total of all new gTLDs combined?
Verisign's latest Domain Industry Brief (
https://www.verisign.com/en_US/domain-names/dnib/index.xhtml?section=executive-summary)
reports that .com/.net registration increased by 6.3 million from Q2 2020
to Q3 2020, while total new gTLD registrations actually fell by 1.4 million
registrations.  Doesn't effective competition lead to lower fees?  How is
Verisign able to keep increasing its fees if it faces effective
competition?   Are other TLD extensions effective substitutes for .com?
Not according to the aftermarket, where .com domain names sell for over 10x
as much, in general, as the identical SLD in any other TLD.  This strongly
suggests that none of the other TLDs are effective substitutes for, or
effective competition to, .com.  Similarly, if one company has a monopoly
on producing and selling cars, it would not diminish that company's
monopoly power to set up hundreds of motorcycle companies as competitors.

Regards,

Nat

On Sat, Feb 13, 2021 at 2:44 PM David Mackey <mackey361 at gmail.com> wrote:

> Hi Volker,
>
> I'm starting to conclude that metaphors are useful when explaining
> technology to non-technology people, but metaphors only go so far when
> trying to understand how ICANN policy for Domain Names affects end users.
>
> A domain name is not a house. It is not a ticket to an event. It is not a
> trademark. It is not a copyright.
>
> A domain name is simply a technical identifier used to facilitate
> human interaction on the internet ... and it is controlled by ICANN policy.
>
> Nat raises a legal question about interpretation ... a property right or a
> contract right?
>
> Evan raises an economic question about "rent seeking".
>
> I wonder if it might be better to identify and discuss the different
> factors of domain name policy which affect end users, rather than getting
> overly caught into a discussion about metaphors.
>
> e.g. Legal, Economic, Operational, User Experience (DNS Abuse), ??, ??, ??
>
> Cheers!
> David (I am not a cat)
>
> On Sat, Feb 13, 2021 at 12:25 PM Volker Greimann <
> vgreimann at key-systems.net> wrote:
>
>> In that case, domaining can also be likened to the practice of buying
>> land or houses for resale or renting out to third parties, to buying art
>> for the purpose of resale, buying or amassing copyrights and trademarks or
>> even to buying stocks.
>>
>> Are we really prepared to say any form of investing, renting, leasing or
>> using property for your own personal gain are a societal evil?
>>
>> --
>> Volker A. Greimann
>>
>>
>> On Sat, Feb 13, 2021 at 4:42 PM John More via NA-Discuss <
>> na-discuss at atlarge-lists.icann.org> wrote:
>>
>>> +1
>>>
>>> On Feb 11, 2021, at 11:59 AM, Evan Leibovitch <evan at telly.org> wrote:
>>>
>>> Hi David,
>>>
>>> I didn't see your original email, but I did see the response and your
>>> followup.
>>>
>>> There are significant differences between ticket scalping and domaining,
>>> mainly arising from the finite number of seats and hard expiry dates that
>>> make unused event tickets worthless once the event is over. However IMO the
>>> two share a fundamental characteristic broadly known in economics as "rent
>>> seeking": wealth obtained through manipulative use of resources without any
>>> associated increase in productivity.
>>>
>>> Being in a queue early to buy a ticket/domain (without intent to use it)
>>> inflates the price without adding any value. I am fascinated by speculators
>>> who claim what they're doing is innovation, and even more by those who
>>> peddle themselves as branding experts to try to give some veneer of added
>>> value. Nobody is fooled by this. Nor does anyone shed any tears when the
>>> primary sellers (ie, Ticketmaster/Godaddy) see the greed and then seek to
>>> compete with them. The losers are the end-users in both cases.
>>>
>>> Cheers,
>>>
>>> Evan Leibovitch, Toronto Canada
>>> @evanleibovitch / @el56
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