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01 Feb 2006

More TLDs: why and how ICANN

This is a joint posting; John Levine is posting it to his blog and Paul Hoffman is posting it to his blog.

Susan Crawford, a new member of the ICANN board, asked about auctions and lotteries for new gTLDs. Lots of people responded in the comments, and then the two of us kind of took over. We have now stopped, and are posting here.

The two of us agree on some things, and disagree on others. We agree that:

  • The best thing for the internet is to release the next batch of gTLDs all at once, and to have that batch be about 50 new gTLDs. That way, no one gets much advantage of having a new TLD other than the semantics of the TLD's name.
  • Anyone even considered being awarded a gTLD needs to prove in advance that they have the technical ability and skills to run a gTLD. This means existing DNS nameservers in geographically and topologically diverse areas, lots of bandwidth to those nameservers, and the ability to maintain a large number of queries on each one. Fortunately, these numbers can be agreed to ahead of time, and simple tests can be created to test the applicants. This is like the qualification process for a CLEC (competitive local phone company) in the US. In many cases, we expect applicants would simply contract with someone that already runs other TLDs to provide the technical infrastructure.
  • ICANN should not profit from releasing the new gTLDs. If ICANN thinks it needs a bigger budget, it should go through a budget process to justify that budget, not just get windfall money from the gTLD process.
  • The winners of the new gTLDs get no exclusivity over any other names issued by ICANN. That is, the first round might include .rugs and .carpets, or the first round might include .tooth and the next round might include .teeth; the winner of .rugs cannot prevent .carpets from being created.
  • Generic (non-country) TLDs have failed at being directories, and that failure is getting worse over time. Users will always prefer to use search engines to find which sites relate to a particular topic than to assume that only domain names with a TLD that is semantically linked to that topic are of interest.
  • There are probably only two plausible routes to a successful TLD: .com clones and certification. The clones are just like .com, only less crowded; we already have two of those, and a few more could probably be useful. The other route is certification. The reason that .edu is a success while .coop and .museum aren't is that people care whether something is an actual degree granting institution, while few people care about "real" museums and "real" co-ops. ("What a fool I was, they said they were a co-op but really they were only a producer's collaborative.") For a certified TLD to be useful, it has to cover an area that is relevant to many Internet users and be managed by an organization that will ensure that only bona fide SLDs are issued.
  • Some of the most useful domains like .edu are not particularly large or lucrative. None of the proposed schemes (including our own) are likely to find them. If there is a place for creativity to be focused, it should be on figuring out which new TLDs are the most useful to typical Internet users and make sure those TLDs exist and are well-managed.

The two of us disagree on the best way to make these bunches of 50 gTLDs appear.

John sees two routes to selecting TLDs. For TLDs intended to make money, the best approach is an auction, with the N highest bids getting to pick their N favorite domain strings, and the money given away to a suitable worthy cause, not ICANN. Other people have made more detailed proposals to deal with the obvious trademark issues, e.g., only IBM can pick .ibm but they still need a winning bid to do so. As Paul notes below, ICANN's beauty contest has picked losers, and a lottery tends to turn into auctions where the lottery winners keep the auction proceeds. Possible approaches include a separate lottery for five or ten names for which only non-profits can apply, giving virtuous bidders funny money they can use in the auction, as was tried in the PCS frequency auctions in the US. John doesn't have any great confidence that these will work, but if the auction process can be made simple and predictable enough, it should be possible to try one approach this year, another next year, and so on until one turns out to work.

Paul believes that there is no way to predict which TLDs might be "best". The track record so far is abysmal. Having an auction might get people to think harder about which gTLDs would work best, but it is completely unclear who should profit from the auction. Instead, a lottery based on the desires of the organizations who qualify to be gTLD owners could be designed to get a wide variety of TLDs, with some organizations becoming big winners and the rest having ones that don't cost much to run. A lottery would prevent ICANN from making unnecessary money on the system, and would open the market to many companies who might otherwise be locked out.

Both of us agree that once the 50 gTLDs are assigned, there will be a lot of buying and selling of assets, regardless of what the rules for the auction or lottery say. Just live with it; that is how big business works. But the values of the new gTLDs will be much lower than might be expected because there are so many of them, with maybe another 50 or 100 a year later.

  posted at: 14:10 :: permanent link to this entry :: 1 comments
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