General Counsel's Analysis of .name SLD E-mail Forwarding Service 30 July 2001

Analysis of .name SLD E-mail Forwarding Service

This report gives my analysis of the objection raised by Abril i Abril regarding the .name SLD E-mail forwarding service.

Mr. Abril's objection is (as usual) a thoughtful one. Evaluating the objection gives a welcome opportunity to explain some of the considerations underlying promoting competition and consumer choice in the context of unsponsored TLDs. When the issues surrounding the .name e-mail forwarding are fully analyzed, I believe that the manner in which they are addressed in the proposed .name agreement maximizes competition and consumer choice, and also adheres to the principle that ICANN should not place restraints on businesses that are not necessary to achieve an ICANN goal.

Background

Mr. Abril is correct that TLD registry operators will inevitably acquire some attributes of monopoly power. This is a necessary consequence of (a) the technical impracticality of having more than one operator of the core registry function for a given TLD and (b) the economic "lock-in" that consumers undergo when they establish web sites and other services at a registered domain name within the TLD. Without protective provisions about how they operate, TLD operators will have incentives to use this sole-source position in abusive ways.

To counteract the inherent problems of exclusivity, beginning in 1999 ICANN worked to depoly a split registry/registrar model in which the core registry functions, which practically must be done by a single coordinating company, are separated from the customer-service part of the registration business, which is performed by many registrars in competition with one another. This model has proven very successful in introducing competition in the marketplace, with prices dropping dramatically and the variety of consumer choices of service offerings increasing.

This highly effective means of introducing competition and consumer choice requires, somewhat paradoxically, that the registry operator's "freedom" to operate its business be constrained because, after all, a registry operator left to its own preferences would use its control over the exclusive registry functions to make itself the sole registrar and thereby wipe out the registrar-level competition.

To avoid these anticompetitive abuses, ICANN's agreements with the registry operators have a series of competition-promoting constraints on the registry operators' behavior. Indeed, much of the bulk of the agreements is caused by the inclusion of these provisions. These provisions include:

• requiring registry operators to deal with all registrars passing ICANN's independently administered accreditation process;
• prohibiting registry operators from bypassing those registrars through direct offerings or captive reseller networks;
• capping prices the registry operator can demand from registrars;
• stating minimum defined performance levels and service functionality that will be delivered through the accredited registrars; and
• prohibiting the registry operator from favoring particular registrars.

The agreements, however, are crafted to avoid placing constraints that are unnecessary to prevent anti-competitive abuses. They do this in two ways. First, the unsponsored TLD registry agreements deal much differently with service offerings (such as domain-name registration) that are sole-source due to technical requirements than offerings that are not (such as web-hosting services). The registry operators are, in general, free to engage in non-exclusive services in the same way that other businesses are; it is only the services that a registry operator can provide because it is appointed as TLD operator (called "registry services" in the agreements) that are subject to the agreements' requirements.

The second feature of the agreements intended to avoid unnecessary constraints is to ensure that competition-promoting constraints are not unnecessarily restrictive. In other words, even with respect to necessarily sole-source services, the agreements seek to address the potential for abusive practices only, and otherwise to leave matters up to the operator's business decisions. (For this reason, the agreements establish price caps, but allow the operator downward pricing freedom.)

Description of the Service

The .name proposal, as considered in the selection process last November, contemplates that domain-name registrations will be made in the format <first name>.<last name>.name or <last name>.<first name>.name. This convention, which it was noted tends to make more possibilities for names available (i.e. no one can register "smith.name" to the exclusion of other Smiths), means that second-level names are retained by the registry operator, so that it may delegate third-level names to the registrants.

Because second-level domains are shared rather than being registered to particular customers, the technology does not allow conventional second-level e-mail addresses (in the form <first name>@<last name>.name), to be established by the customers (who register domain names only at the third level). To give customers the option of having a second-level e-mail address in .name, the agreement allows GNR (the registry operator) to offer registrants a forwarding mechanism by which an address like john@smith.com can be forwarded to an e-mail address designated by the registrant. The person who registered the corresponding third-level domain (john.smith.name) has a right of first refusal to obtain the SLD e-mail forwarding service for the corresponding e-mail address (john@smith.name).

Because GNR is enabled to offer this service by virtue of its having been appointed as the operator of the registry, the service is designated a "registry service," and therefore subject to provisions requiring that it be operated in the public interest. These provisions include price caps (starting at $1.65 and decreasing to $1.25 per month as the registry), functional service requirements, etc. Moreover, GNR must offer the service only through the competitive registrars. In the event that GNR is replaced as registry operator in the future for some reason, the second-level e-mail forwarding service would be transferred to the successor operator. In addition, there are protections against use of the SLD e-mail service for unsolicited commercial mailings and security requirements, as outlined in Appendix C, Part 1(d).

It is worth noting that there is nothing that affects a registrant's ability to establish an e-mail address under its registered domain name. Thus, delegations of third-level names are made by "ns" resource records; the domain-name holder can arrange the nameservice ("mx" record) to point to mail service of his or her choosing. For example, the holder of john.smith.name can establish an e-mail account like personal@john.smith.name. GNR believes, however, that many these customers would like the option of having a second-level e-mail address (john@smith.name). The decision of whether to purchase the e-mail forwarding service with the corresponding domain is entirely up to the customer.

Analysis

The second-level e-mail forwarding service is, for technological reasons, a sole-source service. (Strictly speaking, it is not a "monopoly" service, since other forms of e-mail addresses, such as third-level e-mail addresses, are available and are reasonable substitutes, though not as attractive to consumers.) Given the technological facts, the registry agreement treats second-level e-mail forwarding as a "registry service", so that the registry operator cannot abuse its sole-source position.

Mr. Abril argues that rather than treating the service as a sole-source service (with the protections from abuse), ICANN should prohibit GNR from providing the service at all. I believe that the agreement's approach is superior to an outright prohibition, for two reasons:

1. The approach of allowing the service to be offered, with protections, provides more competition and consumer choice than a complete ban on the service. If some consumers don't want to be subject to a sole-source situation, they can always use another option for e-mail service, such as a third-level e-mail address. Prohibiting the option of a second-level service, however, constrains consumer choice and competition among different e-mail options.

Given that second-level e-mail forwarding under smith.name can be provided by only a single provider, it is better economically and as a matter of consumer welfare to allow it to be provided by that provider, with protections, than to prohibit it altogether. Prohibiting the service would be equivalent to prohibiting the operation of a natural monopoly facility, such as a canal, rather than establishing terms of service that require the service to be offered in a way compatable with the public interest.

2. Prohibiting the service altogether is heavier-handed than justified. By treating the service as a "registry service", the agreement gives the registry operator the choice to operate the service, while consumers remain protected. As noted above, in my view ICANN should, even where a service is sole-source, attempt to place the minimum restrictions on the operators that will ensure that ICANN's goals (here competition and consumer choice) are preserved.

Outright prohibition is simply not needed here; it would harm consumers and competition, and it would unnecessarily constrain the registry operator's business choices.

Louis Touton
General Counsel