Funny how marketplace reality can poke holes in claims and theories. A debate is raging between some existing registries (Afilias, PIR, Neustar) and registrars like ourselves over the issue of \'cross-ownership\' in Top-Level Domains (TLDs). At question: should the same set of shareholders be allowed to own all or part of a registry as well as a registrar that sells names in the TLD owned by the registry? These registries are saying \'no\', and one of their principal objections is they think current registrars have an unfair advantage in pursuing TLD deals. Their argument is that we\'re better placed to get new TLDs as we can guarantee retail distribution of the TLD.
Our response has been:
(1) ICANN has no intention of changing the current rules requiring all registries to make available all potential domain names in their TLD for sale by any accredited registrar;
(2) We don\'t have an advantage because we don\'t have market power as a registrar—i.e. our customers can and will go to other registrars if we don\'t offer names and/or competitive prices for names;
(3) Whatever rules ICANN adopts should be about increasing competition to the benefit of consumers—not about protecting established market positions;
(4) Many registries (for example, DENIC and Nominet) have sold names directly to the public for years without apparent consumer harm;
(5) Registries have been affiliated with domain registration companies for a long time without negative consequences to competition—HostWay and .PRO, Poptel and .COOP, CORE and .CAT, GoDaddy and .ME, and, of course, Afilias and .INFO (before they got religious about cross-ownership);
(6) The purpose of the cross ownership rule was to protect against a registry favoring its affiliated registrar at the expense of other registrars. Why is it that registrars—who are the supposed beneficiaries of this needed protection—are, for the most part, not complaining about ICANN\'s proposed rules? Rather, it is the mid-sized registries that do not want compete with new entrants;
(7) If you buy into the argument that our registrar capabilities make us \'unfair competitors\' then how about the 10 year head-start for mind-share that PIR, Afilias and Neustar TLDs will have on our TLD? That doesn\'t seem fair. Should they not be prevented from seeking more TLDs this round? (Again: We think this \'fairness\' discussion is irrelevant. The debate should be about the effect on consumers—not the effect on business models of incumbent market players); and finally
(8) Forced ownership separation of wholesale and retail operations is a rare occurrence in most industries. Typically it occurs when there are exceptional circumstances such as monopoly market power and price controls. Also, the legal/ regulatory burden is typically on the party proposing separation rules. For example, Dell was not forced to seek regulatory approval when it decided to sell PCs direct to the public. Dell hurt the business models of established market players—and the consumer benefited.
All this is good stuff and worthy of an informed debate, but meanwhile in another part of town Minds and Machines (www.mindsandmachines.com) are giving us all a lesson in actual competition and consumer benefit. A reality check if you like. Minds and Machines, a new entity with no registrar capability whatsoever are kicking butt in the TLD department. They\'ve announced deals to compete for .FOOD, .ECO, .NYC, .ROMA, .GAY, .RADIO and .BASKETBALL (and I\'ll bet there are more to come).
How did they get these deals when they couldn\'t guarantee registrar distribution? The answer is that the registrar market is intensely competitive. If one registrar says \"no\" others will offer the names and take market share. Let\'s say Minds and Machines win .FOOD and we (eNom) win .WEB. Will eNom offer .FOOD names even though they compete with .WEB for food related sites? You bet we will. .FOOD is a great string and it will make money for us as a registrar, so we\'ll sell the names.
A final thought, which I think Jon Nevett articulated well, so I\'ll quote him in the ICANN Sydney transcript: \"Whatever rules we come up with, they should be no more restrictive than what\'s in the dot com contract. Because the whole point of new TLDs is to provide competition. We want vibrant competition. To straddle the new TLD operators with more restrictive rules than the market leader doesn\'t make any sense if you\'re trying to encourage competition and help these new TLDs succeed. So we should look at that. There\'s also an old adage in competition law: If competitors are complaining about proposed rules, it\'s usually good for competition. If consumers are complaining about proposals, then it\'s (time) to take a close look\".
