Aristedes Maniatis wrote October 28, 2001 1:36 PM:

> To: ian.johnston§infobrokers.com.au; dns§auda.org.au
> on 28/10/01 1:39 PM, Ian Johnston at
> ian.johnston§infobrokers.com.au wrote:
>
> > - Hypothesis: Given the scale and scope of domain name
> > registrations in the .au namespace, under new registry
> > arrangements the marginal cost of issuing a domain
> > name licence should approach zero.
>
> I have been struggling for some time now to truly understand the
> nature of a competitive model for domain registrations.  This
> point you make highlights the difficulty I have with the process.

... snip ...

> What I do not understand is a competitive model where the product
> from every reseller and registrar is identical. They all sell domain
names.
> Differentiation of the product will be almost entirely on the basis of:
> * advertising
> * ease of use of web site and accounting systems
> * price
>
> I would suggest that ease of use and price will be reasonably uniform
> across the market and so marketing will play the major role in this
> competitive model.

Ari

Competition in the registrar / reseller market should be more intense with
perhaps limits to price competition.  There is likely to be more intense
competition in the non-price area as you have pointed out, particularly if
the wholesale price margin falls.  There may be greater product innovation
and mix.

For example, we may even see more bundling of domain name licences with
web-hosting and other e-commerce services.  Mobile handsets and network
connections are sold for next to nothing, with ongoing access and usage
charges off-setting "losses" over a period contract.

But as you have pointed out the real benefits are likely to come at the
registry level (which is a monopoly and will continue to be).  The
competition model will set a wholesale price for domain name registration
and licences, which may be regulated by auDA.  That price should be lower in
for .com.au domain name licences.  If it is not lower, then the model has
failed.


> But how then do Australian registrants (end-users) benefit from this
> competitive model? To me, it seems remarkably similar to the
> business model of the late OneTel: they provided almost
> no product or services directly but simply resold another service.
> They provided the appearance of competition without the
> reality. They were a company that advertising and billed the end
> user (and not very well).

Yes, there are real risks that competition may lead to unsustainable
pricing, particularly in the emerging tougher economic times when firm in
general cut margins to the bone for cashflow and market share reasons.

A major risk is that registrars / resellers enter the market with
competitive pricing that's not sustainable in the longer-term.  In such
event, consumers of domain name services will face losses.

So the importance of early development of effective consumer codes and
complaint handling proceedures is warranted.  Failure to do so will see the
heavly hand of Commonwealth, State and Territory Government / agency
intervention, if the industry (auDA) doesn't deliver effective consumer
protection and safeguards.


> I know I have raised this question before, but I am still puzzled by the
> economic benefit of a competitive model when the product has almost no
> marginal cost and is completely identical from every reseller.

As you mentioned above competitors at the retail level will probably have to
compete on non-price benefits.

There are many markets for homogenous products that survive and grow, BUT
these markets are under-pinned by secondary trading in their products.  In
highly competitive markets, brokers are able to exist and perform a very
useful economic and resource allocation function.

BUT the Panels and auDA have decided to continue to surpress this secondary
market, principally because of concerns about cybersquatting, hoarding,
wharehousing, etc.  A secondary market has been permitted in the US and
elsewhere.

I argued in both Panels (and I was the only one to do so, a I recall) that
we need to establish a "managed" secondary market in domain name licences.
I understand and accept the Panels' positions, but IMO the policy is not
sustainable in the longer-term.  Business people find work-arounds eg. sell
the company that owns the domain name licence.  Not necessarily an efficient
or legal way to transact business.

For example, I can see no good reasons why a bona fide small business facing
cash flow problems shouldn't be able to sell the domain name licence in the
market to enable it to survive or grown in another direction.  I'm sure
others could conceive of other good reasons to permit trading of domain
names.

The one possible windfall for auDA from competition, that hasn't been
discussed much, is the foreshadowed auction of generic .com.au names.

Ian


~~~
Ian Johnston
Candidate for the auDA Board
www.infobrokers.com.au/resume

Consultant, Australian Information Brokers
02 6259 7777(B)   02 6258 3409(F)   0413 990 112 (M)
www.infobrokers.com.au   mailto:ian.johnston§infobrokers.com.au

Policy Consultant
Small Enterprise Telecommunications Centre
www.setel.com.au   mailto:ian.johnston§setel.com.au





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