New
ICANN Requirements for New gTLDs Are Irrelevant
Alex
Tajirian
June 1, 2011
ICANN
is barking up a number of wrong trees with the latest
version of its Evaluation
and Questions Criteria for generic top-level domains
(gTLDs). The document asks for financial projections,
the applicant’s goals for its TLD, and the benefits the
applicant expects to derive. All that information is meaningless.
Instead, ICANN should require applicants to present a
detailed risk-management plan, consider price
premiums on existing TLDs, and an estimate of value
derived from prediction
markets.
On page 40, ICANN expanded
the financial statements section to require financial
projections and their underlying assumptions. At the bottom
of page 42, the document states that applicants “must
demonstrate a conservative estimate of costs based
on actual examples of previous or existing registry operations
with similar approach and projections for growth …” How
can applicants quantify conservative estimates? How can
they provide any meaningful estimates of growth when they
cannot even determine the initial demand for the new gTLD?
What we have here is a case of garbage in and garbage
out. As a result, viable TLDs may wind up being rejected
and nonviable ones accepted.
Some events can’t be predicted,
only experienced. For example, what would people pay for
apps? How successful would the launch of Twitter be?
Moreover, using existing registry-cost estimates
may overstate a new gTLD applicant’s cost because existing
registrars will have additional economies of scale and
scope advantages in operations, marketing, and execution.
Growth and value estimates
should be based on prediction markets and price premium
estimates among existing TLDs. Although prediction markets
are not perfect, they can eliminate a lot of the failures.
You may ask why venture capitalists
don’t use prediction markets. The reason is that crowdsourcing
would let the competitors of a technology start-up get
a hold of strategic information. The situation is different
with new gTLDs. Even if an applicant reveals an interesting
new gTLD, it need not reveal the outcome of crowdsourcing.
TLD price premiums provide
valuable information about which TLDs have fared better
than others. Such information can be valuable to applicants
who are able to infer the causes of success.
On page 11, the guidelines
now require applicants to justify their proposed TLD’s
goals and benefits. However, competitive strategy requires
applicants to differentiate
their products to have a chance of success. They don’t
need ICANN to tell them how to make sound business decisions.
With the possibility of a thousand new gTLDs, market solutions
become more viable than ICANN’s beauty contests.
To decrease applicants’ failure
risk, ICANN should require each new gTLD applicant to
provide a risk management plan. The plan, which would
be in addition to the already approved financial risk-management
requirements, would provide details on how the applicant
intended to respond to technical failures and registrations
that were considerably higher or lower than expected.
(The risk range parameters can be quantified.)
In short, ICANN should focus
less on applicants’ tactics and more on their risk management
strategies. ICANN should make it mandatory for applicants
to use prediction markets and should not require applicants
to state the benefits of their gTLDs. Only markets can
determine the value of a gTLD and the value of the new
gTLD program to society. No amount of analyses can provide
a substitute.