Date: Mon, 23 Mar 1998 08:30:36 +0100 To: dns@ntia.doc.gov From: Javier SOLA Subject: Comments on Green Paper. Comments of the Asociación de Usuarios de Internet (Spanish Internet Users' Association) in regards to the Department Of Commerce National Telecommunications and Information Administration 15 CFR Chapter XXIII [Docket No. 980212036-8036-01] Improvement of Technical Management of Internet Names and Addresses Introduction The Spanish Internet Users Association would like to comment on some of the most important topics touched by the Green Paper on Improvement of Technical Management of Internet Names and Addresses. The Green Paper adresses quite correctly many of the issues referenced. In order to save you the effort of reading all the point in which we agree, we will concentrate our comments on the few points in which we disagree. 1. The paper has ignored the efforts that have been made the Internet Community for the last two years to determine the best way for the Internet shared structures to be managed. These efforts were (and are) well known to the Department of Commerce. 2. Our impression is that the only purpose of the regulation proposed in the paper is to maintain the status-quo of Network Solutions Inc. as a monopoly for the longest possible period of time. Only having such a goal in mind makes it possible to understand that the paper: a) Tries to create a system based in multiple for-profit monopolies, ignoring the tremendous danger of placing domain holders in a lock-in position, in which a registry may charge whatever he desires for the renewal of a TLD (see appendix A). b) Creates chaos in the Intellectual Property Community by allowing several US-centered, multiple-criteria conflict resolution systems for different TLDs, ignoring the international character of the Internet and the need for unified laws and criteria. c) Claims that the US Governement will not interfere with the Internet, while specifying a system that will create a few new undefendable monopolies and will maintain Network Solutions Inc. as the predominant monopoly. Our opinions were strongly reinforced when, on March 12th, 1998, at a Conference in the Spring Internet World '98 Trade-show (Los Angeles), Donald Telage, vice-president of Network Solutions Inc. boasted (twice at least) that the Department of Commerce Green Paper was basically the same as their own proposal handed in four months ago (the conference was recorded). We believe that: 1. The US government should not interfere with IANA's plans to incorporate and should not concern itself with the management of the Internet, specially when it is asking other countries to form a world-wide global market in the Internet. IANA should determine in which way the DNS system will be managed. No irreversible decisions should be made by the US government in the interim period. 2. The time in which monopolies were possible in the Internet are finished, as it will probably be shown by some pending court cases. Only an international system, in which shared resources are treated as such, and managed by non-profit registries controlled by all registrars, may have a chance to work. The CORE model is not just one more organizational model, it is the result of two years of analysis by the Internet Community. The contract with Network Solutions should be terminated and it should not be given any advantage over other registrars. We assume that the US government is not interested on granting to them any more illegal privileges. 3. A unified international conflict resolution system should include all gTLDs, simplifying cases and giving equal opportunities to companies from all countries. We cannot think of a better system than the one developed by WIPO for the gTLD-MoU after consultation with all major forces in the Trade-Mark community. Conclusion We believe that the US Goverment should not attempt to regulate the managment of the Internet, and should let the Internet Community continue it self-goverment, creating its own management structures. Appendix A: On competing registries. What follows is a formalization of the problem, and a reasoning of why it cannot work, based on traditional corporate strategy theory. Background There is a traditional model for Corporate Strategy that is widely accepted, it was set by Michael Porter. In short, it says that a company must compete with the other companies in its industry segment, but the whole segment, united, must compete with: - New possible entrants in the market - Products that may substitutes their own AND MUST ALSO PRESENT A UNITED FRONT IN ORDER NOT TO GIVE TOO MUCH POWER TO ITS CUSTOMERS OR SUPPLIERS. In the specific case of suppliers, if they have too much power, they can increase prices and give bad service, and the customer cannot go away. One of the forces that give suppliers power is the "Switching Cost" that a company has when it tries to change to another supplier. If the cost of switching to another supplier is higher than the cost of being "locked-in", then the company will stay in the "locked" position, and pay whatever is demanded by the supplier. In the case of companies like Coca-cola, the switching cost is very low, I can change to another drink whenever I want. In the case of companies that have a sophisticated method of communication with the supplier (automated orders, for example), the switching cost is very high, changing may force the customer to hire new people in their purchasing department and may be increase their stocks to assure production. In the case of monopolies, the company does not have a chance, unless it can change to a substitute product (for example radio vs. telephone) Domains In the case of gTLDs, we are talking about the WHOLE industry. The switching cost from a domain name in use to a new one may be higher, for some companies, than what the company can afford altogether. I was talking two days ago to the CEO of a key US based Internet company and he said that it would probably mean bankruptcy for them. These might be extreme cases, but in general, companies who have developed a high visibility in the Internet would be forced to pay ANYTHING they were asked in order to keep their domains. This means that we are in a very clear "lock-in" position if the company that distributes TLDs can do it for-profit and set its own rules. COMPETITION BETWEEN TLDS CANNOT EFFECTIVELY EXIST. The solution The solution must be one that gives no power to the supplier of TLDs over its "customers" (all of us). The CORE model has this effect. The registry runs in a non-profit cost-recovery basis and registrars compete on the price of their administrative work. No "lock-in" exists, as the price of the domain (charged by CORE in a cost recovery basis) is the basic minimum, and the administrative cost (charged by the registrar) must stay competitive, or the customer will change to another registrar. By forcing for-profit registries, the US government would be placing all US and foreign companies in a very weak "lock-in" position as regards their domain-name supplier, which, I believe, is the opposite of what a Department of Commerce should do. Its role is to help its industry, not to place it in a weak position for the profit of a few. Javier Solá Executive Director Spanish Internet Users' Association