Hi all,

Thanks Bruce Tonkin for your recent mail on this
subject; in the main you bring a range of key
market structural considerations into sharp
focus.

BTW it is nice to see this list generating
thoughtful non libelous discourse <smiles>.   

After saying this IMHO a number of factual over
simplifications you made need to be highlighted
and addressed. I have dealt with these point by
point below: 

You wrote:

>The registrars that compete for the business of
>resellers aim to provide a back-end technical
>service for interfacing with one or more
>registries at a cost below what the reseller
>could do itself.  The business model here is
>that a specialist registrar can use economies of
>scale to provide the technical registration
>services at a lower cost than most other
>companies.  

<snip>

The market reality is a little more complex.

Intermediaries exist in both traditional and
Internet based markets not just on the basis that
the supplier (in this instance the specialist
registrar) might be able to use economy of scale
effects to deliver lower unit product costs but
also because of the following additional market
effects:

Product Information Dissemination. 

One class of supplier services provided by
intermediaries relates to informing consumers
about the existence and characteristics of
products. Suppliers rely on a variety of
intermediaries, including in the DN market, ISPs,
Web Developers, and Telcos, to inform consumers.

Provision of Customer Information. 

In addition to information and influence
services, intermediaries also provide valuable
information about customers themselves. 

Needs Assessment and Product Matching. 

It is not reasonable to assume that individual DN
purchasers possess the knowledge needed to assess
their needs reliably and identify the DNs which
will efficiently meet those needs. Therefore,
intermediaries provide a valuable service by
helping customers determine their needs.

Integration of Consumer and Producer Needs. 

Intermediaries must deal with problems that arise
when consumer needs conflict with the needs of
suppliers. A successful intermediary often
provides a bundle of services that balances the
needs of consumers and producers and is
acceptable to both.

You also wrote:

<snip>

>The registrars will use low prices and high
>quality electronic interfaces to try to
encourage
>more companies to enter the market as resellers,

>and thus further encourage .... competition.

<snip>

It's nice 'benevolent' idea that market
participants in any market are interested in
encouraging competition, however there is
voluminous evidence to suggest that the name of
the game is in fact developing competitive
advantage. In other words make it harder for your
competitors to match your market position and
therefore your return on shareholders funds
(ROSF).

In the DN industry, market participants (like
MIT) develop reseller channels to:

increase market coverage; and
shift the competitive rules of market engagement
away from price towards 'customer value
proposition'; therefore
increasing competitive advantage; and
increase gross margin; thus
maximising ROSFs.
    
This is not to say that all this doesn't result
in customer benefits. To the contrary, it results
in increased diversity of bundled DN value
propositions resulting in the consumer having a
greater choice of offerings. However to suggest
the objective of registrars is to 'increase
competition' is not correct.

Further you wrote:

<snip>

>auDA should take the likely industry structure 
>into account in the development of the registrar
>agreement.  

<snip>

auDA **has** taken industry structure into
account when developing its Registrar agreement.

After saying this the industry structure outcome 
is 'a work in progress' because structure at the
Registry wholesale level will be determined by
the outcome of the forthcoming RFT process.

See http://www.auda.org.au/transition/index.html

Notwithstanding this auDA has put considerable
effort into ensuring that it promotes:

competition in the provision of .au domain name
services;
fair trading; and
consumer protection;

and will continue to do so.

Cheers

David G Thompson 

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