7/10/98

 

 

Supplemental Questions for Witnesses

 

before the

 

Subcommittee on Telecommunications,

Trade, and Consumer Protection

 

On the subject of

 

Electronic Commerce:

The Future of the Domain Name System

 

 

 

By Jay Fenello,

President

 

Iperdome, Inc.

1150 Lake Hearn Drive, Suite 200

Atlanta, GA 30342

 

 

June 10, 1998

10:30 a.m., Room 2123

Rayburn House Office Building

U.S. House of Representatives

Washington, D.C. 20515

 

 

Question 1.

The .US domain has lagged far behind other domains because it has been severely restricted in its structure. It's has also been handicapped by the dispersion of registration authority to multiple sub-registrars, making it extremely difficult for any economies of scale to apply, especially with regards to marketing.

.US can be made more attractive by freeing it from this undue structure and regulation, and by letting the free market drive its evolution. And while this may result in millions of new .US registrations, it will do little to ease the demand for prime commercial domain names. With over 1 billion people expected on the Net by the year 2002, even if every current gTLD and every country code TLD was populated to the current level of .COM, less than 30% of these Netizens will have their own domain name.

That's why the name space must expand, and that's why the name space must remain competitive. That means both for-profit and not-for-profit registries, competing together in a competitive name space.

As an aside, the recently revealed negotiations between Brian Kahin, the U.S. Postal Service, and Jon Postel raise serious questions about the U.S. Government's role in the future of .US. While the USPS proposal may be a wonderful idea, the process being used to make these decisions are highly suspect.

 

Question 2.

The easiest way to look at Registrars is that of the retailer, while the Registry is the wholesaler. Using this framework, one could argue that Registrars are unnecessary. One could also argue that they are necessary.

In my opinion, Registrars provide a valuable service to Netizens. They are the ones who are closest to the consumer, they are the ones who will most likely handle the support questions involved in domain names, and they are the ones who will provide value-added services like email and web page forwarding.

 

Question 3.

Since others will be addressing the advantages of non-profits, I will focus on the advantages of for-profits. Ultimately, I agree with the Green Paper and the FTC on this issue. Pro-competitive policies should be used unless there are clear and unequivocal reasons not to. This is not just a cultural difference, but it is an historically proven concept.

Larry Irving, in recent C-Span coverage, declared that telecom deregulation in the US has resulted in an explosion in benefits to telecom user's world-wide. The same effect will be realized if pro-competitive policies are implemented in the domain name space, as well. It is also consistent with the phenomenal growth the Internet has experienced to date. Changing this to a highly controlled business model is anti-American, and not in the best interests of the Internet, American corporations and American taxpayers.

While infrastructure requirements can be steep, and a for-profit registry will be better able to jump this hurdle, the biggest expense for new TLDs will be marketing and branding. Just like the .US domain has languished, so too will other new TLDs who do not market their concept to the Internet community.

Based on Iperdome's business plan (after being refined through over 20 meetings with investors), Iperdome will need between 30 and 50 million dollars in advertising to market and position .per(sm) as the "Personal Domain Name" TLD.

Remember, if there are over 1,000,000,000 people on the Internet by the year 2002, domain names will have to segment to meet the needs of assorted market niches. Marketing will not be optional, it will be required. Non-profits alone will be poorly suited to meet the needs of this market.

Other areas where a for-profit will excel will be recruiting technical talent for the registries. In today's booming technology sector, finding and keeping qualified personnel is quite challenging. It is almost impossible with out incentives like ESOP and stock options. Again, for-profit registries are the only solution to this problem.

To summarize, I support for-profit registries because it will result in better service and pricing for Netizens, as well as non-profit registries for specialized market niches..

 

Question 4.

According to Dr. Milton Mueller of Syracuse University in a paper he prepared for the Cato Institute on the DNS debate, we have an artificially restricted supply of domain names. He pointed out that whenever a domain name sells for $100,000, there is a market anomaly in effect.

Domain name brokers are simply providing a matching service in an artificially constrained market. The real problem in this scenario is the cyberpirate/speculator who registers desirable names (often infringing on trademarks) in the hope of selling them for large profits. Most courts have been ruling against these pirates, but that hasn't stopped them. The biggest reason for this is that the pirates can register names without ever paying a dime. That allows them to lock-up hundreds of domain names at a time, without any overhead.

The two most successful ways to deal with this problem are 1) add some new gTLDs, and 2) require prepayment for domain names.

 

Question 5.

As the number of Netizens expand to over 1,000,000,000, the TLDs will segment to cover different market niches. The .XXX TLD will be a very successful niche, and I believe that it should be allowed, not mandated. The hurdles here are primarily political.

 

Question 6.

Domain Names are not Trademarks, and Trademarks are not Domain Names. Domain Names can, however, acquire Trademark like qualities. This is perfectly reasonable.

The problem with Domain Name / Trademark mappings are more about the multi-jurisdictional nature of the Internet, especially as it applies to gTLDs. Throughout the world, there can be hundreds of legitimate trademark holders who all have the same name. For example, there might be 100s of companies named Acme in the U.S. alone. Which one gets acme.com? There are probably 1000s more scattered throughout the world. Which one gets acme.com?

My favorite example of an unequivocal Domain Name / Trademark is Amazon.com. Here, a company has branded a company name that is also a domain name. If everyone would look at domain names in this light, we would no longer have this controversy.

In other words, first come first serve is the rule that should apply to a domain names. Let the courts decide the Trademark issues.

 

Question 7.

While there are some encouraging signs with regard to the diverse Internet community reaching a consensus, there are also some danger signs on the path to September 30th. On one hand, we finally have a process that appears to be supported by both the old and new stakeholder communities. On the other, we still have many activities that are occurring behind the scenes which could hijack this process at any time.

Some of my concerns include:

- The take-over of the open GIAW process under the IFWP banner. This has been orchestrated by Barb Dooley of the CIX, and appears to be a hand selected group of large trade associations. No process has been defined for invitation to the steering committee, their meetings have been closed, and many of the original organizers of the GIAW event were simply removed without explanation. One week after the unanimous support for a "fair, open and transparent" process at the GIAW event, the IFWP steering committee is still practicing their secret ways.

- The continued posturing of the POC/CORE supporters. Although many of the concepts in the MoU have been clearly rejected by the U.S. Government and many members of the Internet community, the POC/CORE bloc continues to position the MoU as the only viable solution. This was obvious at the recently concluded EC meeting in Europe. Their alignment with the European governments is apparently an attempt to destroy Network Solutions, and to force a socialistic control model on Internet governance.

- The secret plans of the IANA (Jon Postel), the ITAG (IANA Transition Advisory Group), and the Aspen Institute. The central theme among these groups is that no consensus will emerge, in which case they will step forward with an Interim Board and simply incorporate the new non-profit.

In all of these scenarios, my concern remains the same: Internet Governance and the business model under which the Internet will move forward are too important to be decided by any narrowly defined special interest group. All of the groups mentioned above are legitimate, respected, and should be part of these deliberations. It is only when they try and resolve this debate on their own, or among themselves, that the smaller and weaker stakeholders (i.e. the entrepreneurial community, the free speech advocates, etc.) become disenfranchised.

What we have today is a power vacuum, and many groups are now circling trying to be first in line to jump into the vortex. I suggest that the members of Congress continue to monitor these developments. In the event of anything less than a "fair, open and transparent" process is discovered, Congress should be prepared to intervene in this process.

 

Question 8.

IF the private sector is successful at incorporating such a corporation, I suspect that the Interim Board will be selected by the September 30th deadline. The evolution from an Interim Board to the final board, with the corresponding decisions with regard to new gTLDs, the establishment of a Names Council, etc. could take years.

Unfortunately, there is only one organization that benefits from these continuing delays.

 

Question 9.

In establishing Internet Governance, we are boldly going where no-one has gone before, and it is unclear how to accomplish the goals of the White Paper. Hopefully, by the conclusion of the IFWP process, the Internet community (including all of the governments of the world) will find a way to meet the lofty goals as articulated by Beck Burr:

"We are looking for a globally and functionally representative organization, operated on the basis of sound and transparent processes that protect against capture by self-interested factions, and that provides robust, professional management. The new entity's processes need to be fair, open, and pro-competitive. And the new entity needs to have a mechanism for evolving to reflect changes in the constituency of Internet stakeholders."

Respectfully Submitted,

 

Jay Fenello

President, Iperdome, Inc.

"None of us knows where all this is heading, but if we get it right, we have an opportunity that only comes once every couple of hundred years." -- Ira C. Magaziner