[CPWG] CCOR

[John McCormac]

On 10/01/2020 14:39, Nat Cohen wrote:
> John,
> 
> Thank you for your in-depth contribution to the discussion.  I can't say 
> that I have fully digested it all, but a couple of points stood out.
> 
> There's a noteworthy contrast between how some ccTLD authorities handle 
> their responsibilities and how ICANN does.
> 

The ccTLDs can make ICANN look like a simple operation, Nat,
What makes a lot of the ccTLDs different from the gTLDs is that the 
ccTLDs are generally backed by strong legislation and it is the 
country's government that decides to delegate it to a registry. This is 
the case with the .IE (Ireland), the .EU (European Union) and a few 
more. The governments effectively have a nuclear option if a registry 
becomes a problem. The ccTLD registries tend to be far more responsive 
to their communities than ICANN in that many of them have been through 
the bad old days when .COM was the leader in their local market.

> ccTLD authorities for France, Australia, India and New Zealand, among 
> others, have put out tenders to registry service providers for operating 
> their respective ccTLDs.  As a result of competitive bidding among 
> registry service providers, the cost of operating the registries have 
> fallen sharply.

Some of the falling costs are due to economies of scale. The ccTLDs 
generally started out being run from university CS departments with much 
of the administration being manual. The ccTLDs registries that kept 
manual processes remained small and kept their prices high. The .COM was 
cheaper even at $100 for two years. Once the shared registry system hit 
the gTLDs, the prices dropped for the gTLDs and some of the ccTLD 
registries had no option to but to lower their prices.

Most of the ccTLDs had relatively slow growth for the first few years of 
the 2000s. It wasn't until ICANN screwed up on dealing with Domain 
Tasting in 2004-2005 that year on year percentage growth in the ccTLDs 
started to compete with (and overtake) that of the gTLDs. (The actual 
numbers and percentages are in the Domnomics book.) Every ccTLD that is 
now dominant in their local market should have a framed photograph of 
the ICANN management who facilitated their dominance.

> Even though the ccTLD authorities are presumably a branch of the 
> government, and could directly set prices if they wished, they turn to a 
> competitive market to set price - thereby getting them out of the price 
> setting business.

The ccTLD registries are typically separate from the government 
department and minister or secretary that has ultimate authority over 
the ccTLD. The last thing that most of them want to get drawn into is an 
argument over pricing.

> ICANN in contrast treats Verisign and ISOC not as registry service 
> providers but as owners of the .com and .org name spaces.  Verisign and 
> ISOC do not need to compete with other registry service providers to 
> operate those name spaces.  They are thus free from competitive pressures.

It looks more like ICANN sees itself as having governmental level 
control over .COM and the other gTLDs and as such it makes decisions on 
.COM and .ORG because it can.

Verisign, due to its position in the market, could easily gather support 
from its customers on a scale that could cause terminal problems for the 
elected management of ICANN. Politically, I doubt if ICANN ever wants to 
upset Verisign.

Perhaps there is a fundamentally different mindset in ICANN to that of 
the ccTLDs. The ccTLD registries realise their position is due to the 
decision of the relevant government. ICANN seems to think that it is a 
government when it comes to making decisions on who runs which gTLD.

> The $1.35 billion that Ethos Capital is prepared to pay ISOC for .org is 
> a (low end) valuation of the ongoing harm imposed on registrants due to 
> ICANN's mismanagement of .org.  If .org was run at cost, there would be 
> no surplus for Ethos Capital to plunder.  It's an example of the road to 
> hell being paved with good intentions.  ICANN may have been motivated by 
> good intentions when it awarded .org as a sinecure to ISOC so that 
> ISOC could fund its operations by overcharging dot-org registrants.  But 
> now that power to overcharge .org registrants is worth over a billion 
> dollars, and now that ISOC wants out, ICANN has created the conditions 
> for a private equity firm to strip mine the nonprofit community of the 
> charitable contributions that they rely on to carry out their public 
> service missions.

The optics are terrible. ICANN is being made to look incompetent and 
ISOC is being made to look like a bunch of greedy management types, even 
when the reality is different, who would sell out the people who made 
.ORG a good gTLD. Running .ORG at cost in the current gTLD market (where 
discounting basically facilitates bad activity) might be a very 
dangerous thing. The .ORG has spent a lot of time trying to clean up the 
damage that discounting did to the gTLD and has largely succeeded.

If Ethos Capital succeeds and starts to increase prices, then it is in 
for one Hell of a shock. It would put itself in the position of being an 
enemy of the registrants and when that happens, all the happy-clappy job 
titles and PR in the world won't help it when registrations start being 
dumped.

The legacy gTLDs are in a very tricky position outside the US market. 
The .COM has plateaued in many country level markets and .NET and .ORG 
are struggling. The .BIZ and .INFO are essentially dead in most markets. 
The registration volume for most of the legacy gTLDs is, apart from 
.COM, almost completely dependent on the renewal of historical 
registrations.

With the .ORG, the bulk of registrations are, by country of registrar 
and by website IP address, in the US market. With the rise of the 
ccTLDs, it has become less relevant in markets outside the US. The web 
usage %s on .ORG are quite good but the majority of .ORG domain names 
have no active websites.(Most TLDs have more domain names with no active 
websites than domain names with active websites.)

The value for an entity like Ethos Capital isn't in .ORG's growth but 
rather in the historical registrations that keep on being renewed. It 
has all the optics of a Vulture Capitalism deal.

> If ICANN does not want to be in the business of regulating prices, it 
> should have let the marketplace do that by putting the .com and .org 
> registries out for regular rebid.

In theory, it is a good idea. In practice, it can lead to market 
uncertainty. Market uncertainty damages TLDs. The .EU mess with Brexit 
had a bunch of cluelessly ignorant and unelected politicians making 
stupid decisions about the status of UK owned .EU domain names without 
bothering to tell EURid (the .EU registry). That affected about 10% of 
the .EU ccTLD and was a group of registrations that the ccTLD could not 
afford to lose.

The public and registrants need to be able to see a registry like a swan 
moving gracefully across a pond without realising that there's a lot of 
furious paddling going on beneath the surface. The one thing that the 
gTLDs cannot afford to do is to create any sense of uncertainty. That's 
a lesson that many ccTLDs have had to learn the hard way in the past.

> That ICANN instead ceded a perpetual right to run the registries to 
> Verisign and ISOC is clear evidence of just how much under the thumb of 
> the registries ICANN is.

It is hard not to think of ICANN management as being the John Sculleys 
of the domain name business when the business needs more Steve Jobs 
types. Some of these registries have been in business for decades and 
know how to play the game.

> Even after granting a perpetual no-bid right to run the registries, 
> ICANN could still have looked to the current market prices charged by 
> registry service providers in other competitive bid situations to 
> determine the market price.  Here again, ICANN would not be a price 
> regulator, they would merely be applying the price as determined by the 
> market.

The main issue with that is that a gTLD is not a single market but 
rather a composite of many country level markets and a much smaller 
global market. A price that might seem competitive in the USA might seem 
expensive elsewhere.

> But again ICANN swallowed the self-serving and entirely false position 
> pushed by the registries and their many lobbyists planted throughout 
> ICANN, that competition from new gTLDs would serve to constrain prices 
> on .com and .org.  That has been debunked in depth elsewhere, and I'd be 
> glad to share the articles with anyone still holding this view.

The more that I looked at the ICANN arguments for competition for the 
new gTLDs for the Domnomics book, the more that I realised that those 
arguments were rubbish. The economic reports dealing with competition 
were clueless about the domain name business. The reality is that apart 
from gTLDs and ccTLDs, gTLDs don't really compete with each other. They 
form an interdependent ecology. This is why brand protection at a 
trademark/service market level and at a small business level is such a 
major part of the legacy gTLDs. The biggest overlap with .COM is with 
ccTLDs in that the commonest registration combination is from people and 
businesses registering their .COM and .ccTLD.

> ICANN, acting as if it were a parasitic host whose brain had been taken 
> over by the registries, blindly swallowed the "we are not a price 
> regulator" and "competition with other gTLDs will hold down prices" 
> mantras, and lifted all price caps on .org.

ICANN, at times, seems to be quite rudderless. It really never recovered 
from the Domain Tasting period and that gave the ccTLDs their current 
momentum. Once these ccTLDs became dominant in their markets, the gTLDs 
drifted into the background. The 2012 round of new gTLDs seemed like a 
last hurrah of an organisation that was becoming less relevant to 
end-users by the day.

ICANN has an unlucky history of being overtaken by events. The first 
round of new gTLDs, promoted in the late 1990s and announced in 2000, 
were hit by the bursting of the .COM bubble in 2000. The second group of 
that round of new gTLDs where hit by Afilias' decision to offer free 
.INFO registrations and the Domain Tasting debacle. As if that wasn't 
enough, the remaining first round new gTLDs had to launch when the 
bursting of the Subprime mortgage bubble caused an economic recession.

The 2012 round of new gTLDs were basically a response to an artificial 
scarcity caused by Domain Tasting and each day's deletions being 
hoovered up by drop catcher and tasting registrars. Once ICANN got 
around to implementing some changes in AGP costs, that artificial 
scarcity disappeared and with it the potential demand for most of the 
2012 round of new gTLDs. To ICANN management, it seemed that competition 
was like some holy grail. To people with actual business experience in 
the domain name industry, demand is everything. No demand = few 
registrations = no business.

> If ICANN had been properly run from the beginning, a group like the 
> newly formed CCOR would be currently operating .org.  It would be run by 
> a non-profit, with respect for civil society principles written into its 
> by-laws, with certain funds clearly allocated to support IETF, but 
> otherwise operated at cost.

ICANN was always going to be influenced by the industry. Its main 
problem is that there is no proper oversight. The ccTLDs generally seem 
to have an element of governmental oversight. In moderation, this can be 
a good thing. With the paragraph above, the position of governmental 
oversight is replaced by a kind of benevolent CCOR oversight.

> If this had happened, end users would not have seen hundreds of millions 
> of dollars that they had contributed to nonprofits over the years, 
> needlessly diverted to ISOC and PIR where ISOC and PIR adopted a 
> wasteful approach to this undeserved gusher of funding from controlling 
> .org.

The high profile sites in .ORG are generally NGO/do-gooder sites but 
that is only the tip of the iceberg. The reality is that many of the 
.ORG registrations are brand protection and other kinds of registrations 
that are definitely owned by for-profit organisations. Brand protection 
registrations, as a category, renew extremely well. Without them, the 
.ORG could be less than 20% of its current registration volume.

>  From an end-user perspective, the choice between having .org controlled 
> by CCOR, subject to regular rebid, or controlled by Ethos Capital, 
> subject to resale to who knows what corrupt oligarch, is clear.

 From an end-user perspective, the .ORG is a special gTLD unlike the 
others. It is associated with NGOs and do-gooder operations. But that 
can change quickly. End-users are not stupid and the branding of Ethos 
Capital will be seen as a crass attempt to plunder that good will. And 
when the end-users realise that they've been played, they generally dump 
registrations. Losing the true believers is a very dangerous thing for a 
TLD because they are the unpaid salespeople and proponents of the TLD.

This loss of the true believers problem happened with the .EU ccTLD. The 
.EU was supposed to be a ccTLD for the European Union and many of the 
people promoting were left down by a poorly designed regulatory 
framework and an understaffed and inexperienced registry that was 
incapable of dealing with what happened. (Again, the gory details are in 
Chapter 1 of the Domnomics book.) The true believers were betrayed and 
usage in the ccTLD collapsed. Instead of becoming a competitor to .COM 
in the European Union market, it is just competing with .NET/.ORG and 
other non-core TLDs while each of these markets are approximately 80% 
.ccTLD/.COM. It typically has less than 5% of the market in most 
European Union countries.

ICANN might act on the .ORG deal but it will probably only do so having 
exhausted all other possibilities. But given its history, it is always 
external events that force it to act.

Regards...jmcc
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