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Department of Commerce Comments on New TLDs

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Average: 2.8 (10 votes)

Here are some key quotes:

While we acknowledge the effort and hard work involved in producing the documents currently out for comment, it is unclear that the threshold question of whether the potential consumer benefits outweigh the potential costs has been adequately addressed and determined. In that regard, we would like to call your attention a decision of the ICANN Board in October 18, 2006, that called for an economic study to address questions such as:

  • whether the domain registration market is one market or whether each TLD functions as a separate market,
  • whether registrations in different TLDs are substitutable,
  • what are the effects on consumer and pricing behavior of the switching costs involved in moving from one TLD to another,
  • what is the effect of the market structure and pricing on new TLD entrants, and
  • whether there are other markets with similar issues, and if so how are these issues addressed and by who[sic]?

The first point from my perspective is each TLD pretty much is a separate market. .COM is king and all others fall in line behind it. The new extensions like info, mobi, etc all have small markets which behave in a lot different manners than .com. .net/.org sort of follow .com but not quite. The second point about substitutability is indisputably false. There simply isn't a substitute for .com.

Revise the gTLD approval process, the applicant guidebook and the proposed registry agreement to: (1) consider, allow objections for, and retain authority to address any adverse competitive welfare effects that may arise during the approval of new gTLDs applications or the renewal of subsequent contracts; (2) employ mechanisms such as competitive bidding whereby prospective gTLD operations would compete by proposing registry terms, including price and quality commitments, that provide consumer benefit; and(3) impose maximum price caps or other terms that would redound to the benefit of consumers in those cases where competitive bidding mechanisms will not adequately limit the ability of registry operators to exercise market power;

ICANN should more carefully weigh potential consumer harms against potential consumer benefits before adding new gTLDs and renewing new gTLD registry agreements... ICANN should establish competitive mechanisms for authorizing new gTLDs and renewals of gTLD registry agreements whereby prospective gTLD operators would compete for gTLDs by proposing registry terms - including maximum fee schedules - that would provide consumer benefits.

Another score for the consumers. At least someone isn't simply giving in to the well financed interests. Competition and consumer benefits, 3 words nobody at ICANN has probably ever heard before.

Introducing new gTLDs likely would enable the exercise of market power by gTLD operators and likely would not constrain the exercise of market power by .com and other existing TLDs.

... new TLDs won't change anything about what already exists. That sounds familiar... (Why New TLDs Don't Change a Thing)

First, we found that VeriSign possess significant market power as the operator of the .com registry because many registrants do not perceive .com and other gTLDs (such as .biz and .info) and country code TLDs ("ccTLDs," such as .uk and .de) to eb substitutes). Instead, registrants frequently purchase domains in TLDs other than .com as complements to .com domains, not as substitutes for them.

.com is king.

We also concluded that existing gTLDs likely would not become a competitive threat to .com registrants because the network effects that make .com registrations so valuable to consumer will be difficult for other TLDs to overcome. Due to a first-mover advantage and high brand awareness, .com registrations account for the overwhelming majority of gTLD registrations. As a result, when users do not know the TLD in which a domain is registered, they most often simply append ".com" to a product or company name when attempting to find the desired website. This phenomenon creates a strong preference for .com

God I could have written this. They even recognize the value of type in traffic! Nice to see to rational thinking coming from government when ICANN has lost its way. They even talk about 'Direct Navigation' in the footnotes!

The need of many registrants to purchase domains in many or most gTLDs allows each gTLD registry operator to impose costs on registrants that purchase domains simply because a gTLD exists.

They are even addressing the landrush issue where a certain set of domains (most often trademark holders and generic words/phrases) are registered every single landrush for a new TLD. Trademark holders have to protect their mark in every gTLD and having to do so on infinite numbers of new TLDs seems ridiculous.

ICANN is obligated to mange gTLDs in the interests of registrants and to protect the public interest in competition. ICANN appears to have assumed that the introduction of new gTLDs necessarily will enhance competition and promote choice and innovation, without offering any evidence to support that assumption. TO our knowledge, ICANN has neither studied competition among gTLDs at the registry level, nor commissioned such a study, despite the ICANN Board of Director's specific direction to do so.

The kick in the face from the government on behalf of consumers to ICANN.

ICANN's approach to TLD management demonstrates that is has adopted an ineffective approach with respect to its obligatoin to promote competition at the registry level. We respectfully suggest that the DOC refrain from expressing satisfaction with ICANN's progress toward the goal of promoting competition among TLDs unless and until ICANN develops a credible and effective policy that compels it to employ tools such as competitive bidding to manage TLDs in a manner that safeguards the interests of registrants in obtaining high quality domains at the lowest possible prices. To date, we believe that ICANN has not come close to fulfilling its obligations to employ competitive principles in its management of TLD registry operations.

The Coup de Grâce.

What an amazing read, thank god someone is looking out for us. Merry Christmas everyone who owns a website.


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