document for submission to the congressional hearing

From: Kent Crispin (kent@songbird.com)
Date: Sat Apr 04 1998 - 23:04:18 PST


Folks, I have prepared a document I am going to send to the House
Science Committee, in the hopes that it will get placed in the public
record of the hearings they are holding on domain names. It appears
at http://songbird.com/pab/hearings1.html. I am appending a text
version to this message...if you have a chance read it over and let
me know if there are any further things I should add. I will send
this Monday -- there isn't much time...

-----------------------------------------------------------------------

Comments of Kent Crispin, Chair, gTLD-MoU Policy Advisory Body

In the matter of:
HEARING OF THE U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON SCIENCE
SUBCOMMITTEE ON BASIC RESEARCH
SUBCOMMITTEE ON TECHNOLOGY

Subject:
"The Domain Name System: Where Do We Go From Here?"

  

Honored Committee Chairpersons and Members:

I wish to clarify two matters mentioned in the Hearing Charter for
the above proceeding:

   A. Stakeholder Representation in the CORE Model

      From the Charter, section entitled "Internet Governance":

        "However, the one criticism of the CORE proposal is that the
        POC is too exclusive and does not properly represent all the
        key players in terms of governing the Internet. An additional
        complaint is that the CORE proposal does not address the
        functions of IANA."

      The perceived lack of representation of the POC is a matter that
      has concerned the POC greatly, and for some time they have been
      developing an alternative that will strongly address this issue.
      This proposal has been available for public comment since Dec
      16, 1997, and may be seen on the gTLD-MoU web site at

             http://www.gtld-mou.org/docs/rfcs.html#97-04

      Briefly, the proposal is to substantially increase the
      membership of the POC to about twice its current size, and for
      half of the total membership to be chosen by election. The
      elections will be conducted by the members of the gTLD-MoU
      Policy Advisory Body (PAB), but anyone may be nominated.
      Membership in PAB is very open -- there are no dues, and
      organizations of any size or composition may join. Currently it
      is a requirement that an organization must sign the MoU to
      become a member of PAB, but, as part of this proposal, that
      requirement is being relaxed, and a signature on a non-binding
      statement of principles will be sufficient to become a member of
      PAB.

      The net effect is that an open assembly of Internet stakeholders
      will elect half of the POC, and that anyone who is interested
      may participate in this election.

      It is true that the MoU does not address the functions of IANA.
      It is believed that the IANA is autonomous from the POC, and
      should remain that way. In the MoU model, IANA remains in
      charge of the root zone of the DNS, and delegates to POC policy
      oversight over the generic TLDs only.

      In this model it would be inappropriate for the MoU to dictate
      structure for the IANA, or to propose how it should be managed.
      IANA has been preparing on its own to transition from US
      Government funding -- the POC believes that IANA is capable of
      doing this on its own.

        

   B. Competitive Issues and the FTC Paper

      From the Charter, section titled "The Registry Issue":

        "The CORE proposal, however, would establish one non-profit
        shared registry containing all the individual registries.
        Under their proposal, NSI would lose the .com, .edu and .org
        registries (these registries would become part of the
        non-profit shared-registry) and NSI would compete, as a
        registrar, for business against all the other registrars
        (approx. 100) without the benefit of controlling a registry.
        The CORE group argues that registries are largely
        administrative, back-office operations that offer little in
        added value for customers, and therefore there is no need for
        competition at the registry level. The Green Paper argues
        that only through the profit-motive and competition among
        various for-profit companies will the money be generated to
        maintain the registries that will allow the Internet to
        succeed."

        "The Administration acknowledges that under its
        registry-scheme, 'switching costs and lock-in issues' could
        arise in instances in which users wish to change from one
        registry company to another. Once it becomes widely known,
        for example, that a certain business can be found under the
        .store Domain Name, the operator of that register could
        increase the price charged to the locked-in company.
        Moreover, the cost of switching to a different company may
        lead to a situation in which it is difficult to move from one
        registry to another. On balance, however, the Administration
        believes that the benefits of competition among the registries
        outweigh the possible burdens caused by this issue. The
        Federal Trade Commission is working on this issue and has
        submitted comments to the Commerce Department on this topic."

      Indeed, the FTC did present comments to the Green Paper.
      Unfortunately, the issues are complex and time was short; and
      consequently those comments leave significant gaps.

        1. The FTC document does not describe the CORE registry
        model, and instead speaks of a model of "competing non-profit
        registries". Consequently, much of its analysis is at an
        oblique angle to the actual proposals under consideration.

        The CORE registry model is not, as is commonly supposed, a
        monolithic entity. Instead, the CORE model has three
        components: CORE itself, which is a non-profit association
        whose function is primarily operational; POC/PAB, which
        together control policy; and one or more database operators
        (DBOs), who operate under competitively bid contracts to CORE.

        Each DBO operates a database for one or more gTLDs. These
        databases run the CORE Shared Registry System (SRS). The SRS
        is explicitly designed so that it is straightforward to move
        the data for one gTLD from one DBO to another.

        Currently there is one DBO, Emergent. Emergent is a special
        case, because their operation of the registry is a phase of
        their development contract for the SRS. It is not intended
        that they run the database indefinitely.

        Having multiple DBOs is desirable from several perspectives:
        First, it allows multiple dispersed small entities, each of
        which can take over for the other, in case it is necessary.
        This is generally considered a superior model technically,
        when compared with a single monolithic entity. Second, there
        are the obvious benefits that accrue from having several
        entities competing to provide service. And third, there are
        undeniable political advantages to having DBOs located in
        different countries.

        On the other hand, there are natural economies of scale that
        are involved -- the incremental cost of adding a new TLD to an
        already existing database are very small. It is unlikely,
        therefore, that there would be a large number of DBOs -- a
        balance will be struck between the economies of scale and the
        various advantages mentioned above.

        To summarize, CORE operates a registry that can be segmented
        on gTLD boundaries, and can also be distributed on that basis.
        Each segment is run by a DBO, under contract to CORE. Those
        contracts are let on a competitive basis, and thus the DBOs
        definitely compete. Each segment (database) is run on a
        non-profit, cost-recovery basis, as far as CORE is concerned,
        but the DBOs can be for-profit companies.

        In addition, explicit and direct control over CORE policy
        comes from POC/PAB. These bodies are not composed of CORE
        registrars, have no financial interest in CORE, and are
        explicitly designed to give representation to users and
        stakeholders in the DNS. Thus the goals of POC and PAB,
        especially as far as pricing and service are concerned, are
        far more likely to be aligned with the end-users of the DNS
        than they are with the DBOs, or even the CORE registrars.

        2. Instead of dealing with the CORE model, the FTC paper
        makes a strawman contrast between "competing non-profit
        registries" (non-profits) and "competing for-profit
        registries" (for-profits).

        In this hypothetical and theoretical context the paper first
        argues that the competitive environment surrounding registries
        may be sufficient to avoid "lock-in" effects, and then draws
        two conclusions:

          First, that competing for-profit registries would be more
          likely than competing non-profit registries to bring the
          "potential benefits to customers from enhanced competition
          -- such as price reductions and quality improvements..."
          There is essentially no argument given, however, to support
          this conclusion, and, given that competition would be
          operating in both cases, it isn't clear why the benefits of
          competition should not apply to both.

          Second, that competing non-profit registries would be just
          as likely to exploit "lock-in" as competing for-profit
          registries. This is a curious argument, given that the
          first part of the paper goes to some lengths to minimize the
          probability of "lock-in". More than that, however, the
          paper gives no explanation of why, if competition can
          mitigate lock-in, it wouldn't mitigate it for competitive
          non-profits.

        However, neither of these conclusions is really germane to the
        CORE model.

        3. The FTC paper, understandably enough given the FTC's
        mission, makes in implicit assumption of a regulatory regime
        that remains under the control of US law. However, this
        clearly will not remain the case -- the Green Paper itself is
        operating under a mandate to internationalization, and
        promises that the US Government will be completely out of the
        picture in the year 2000.

        This assumption is most clearly spelled out in the following
        sentence from footnote 14: "If significant lock-in problems
        develop, NTIA may wish to revisit these technical issues and
        consider means for enhancing portability." Since lock-in by
        definition is a long-term problem, the NTIA will long be out
        of the picture by the time it becomes a major problem in
        practice, and will be in no position to revisit the issues.

        While the FTC paper minimizes concerns about lock-in, it
        concedes that it may indeed be a problem. It seems fairly
        clear, therefore, that the international regulatory issues
        must be explored by the NTIA before it puts anything in place.
        Note that the CORE model, with the contractually enforced
        oversight of the POC/PAB, does address this issue.

        4. The FTC paper considers switching costs and lock-in as a
        "plausible" theoretical possibility. However, its analysis
        vastly underestimates the extent of this problem. As has
        repeatedly been pointed out, domain names are parts of the
        hyperlinks that make up the World Wide Web, and those links
        can be embedded in tens and hundreds of thousands of web pages
        all over the world. A presence on the web is valuable to
        precisely the extent that the site is reachable. A change in
        domain name invalidates all the links to the page, and thus
        destroys almost all the value of the web presence. For a
        web-based business this is not an inconvenience, it is a
        catastrophe.

        5. The FTC paper properly focused only on a narrow set of
        economic issues, and did not address other issues that may
        have overriding significance. For example, the FTC did not
        address the very real costs to consumers of inconsistent
        policy (for example, in dispute resolution) that multiple
        competing for-profit registries would engender. (It is of
        course also true that this cost would be born in the
        hypothetical case of competing non-profits -- the CORE model
        explicitly addressed this issue by providing a consistent
        policy framework for all registrars and database operators.)

      In summary, the FTC paper does an excellent job describing
      several theoretical economic2 results. However, it does not
      compare the actual competing proposals, it ignores the problem
      of regulation in an international context, and gives only a
      cursory analysis of the monopoly problems inherent in DNS.

  
      Thank you very much for your consideration

      Kent Crispin, Chair
      gTLD-MoU Policy Advisory Body

-- 
Kent Crispin, PAB Chair			"No reason to get excited",
kent@songbird.com			the thief he kindly spoke...
PGP fingerprint:   B1 8B 72 ED 55 21 5E 44  61 F4 58 0F 72 10 65 55
http://songbird.com/kent/pgp_key.html



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