March 16, 2006

Internet Gambling, The ICANN Way: Using Someone Else's Wallet

Bret Fausett's blog quoted Stratton Sclavos (CEO of Verisign) as saying that every week Verisign's registry gets 7,000,000 name registrations but that only 0.6% (42,000) of those last more than 5 days.


In other words, for every "normal" registration transaction there are 167 five-day speculative registration transactions (plus an additional 167 drop transactions.)  Thus for every normal registration there are 333 speculative transactions (i.e. one normal add transaction and 167 5-day add/drop transaction pairs.)

And, it seems from what I've been able to discover so far, but I'd certainly like clarification, that Verisign receives revenue only for the "normal" registration transactions but has to eat the cost of the 5-day add/drop transaction pairs.

Which, if true, means that the registry fee charged for each normal registration transaction has to cover the cost of 333 speculative registry transactions.  That's a heavy and unjustifiable burden.

I have long assumed that the actual cost of registry operations is down in the 1 cent per year range.  I'm not alone in this belief.

We know that Verisign isn't losing money with the $6 registry fee.  And if we take into account the 1:333 ratio of normal-to-speculative registrations we see that the actual registry transaction fee has to be below $0.02, with the "normal" customer picking up the tab for 333 speculative transactions.

One of the reasons that Joe Sims, ICANN's architect-apparent of the ICANN-Verisign agreement, said in a posting at Circle-ID is that this new .com agreement was needed was to encourage Verisign to invest in infrastructure.

However, according to Sclavos statement, apparently the vast bulk of that infrastructure is there to support speculation rather than "normal" name registrations.

And that's not even counting the infrastructure that Verisign has to maintain to handle the stupid system of polling by registrars who circle like vultures waiting for names to drop.

In other words, those of us who consume domain names in the "normal" way, i.e. we use 'em for long terms, appear to be carrying an enormous burden (measured in terms of hundreds of millions of dollars per year in inflated registry fees) to support the ICANN allowed, if not ICANN created, speculative fever.

And yet, those of us who pay this tab get no vote in ICANN and simply get to pay the bill every year, year-in/year-out.

To the degree that my speculations (pun intended) are accurate, ICANN and its registry system are building up an enormous pool of money that one could claim has been dragged out of domain name buyers because ICANN is a combination in restraint of trade that can't be bypassed because ICANN occupies a monopoly position that is buttressed by a very shadowy governmental presence.

It is appalling to be reminded, once again, of how badly ICANN has damaged the internet.  Rather than creating a domain name system that is rich in competition and innovation we find, after over half a decade of ICANN blundering, that the domain name system marketplace is devoid of real competition except among registries and even there the only real difference is price.  Rather than low prices that reflect underlying economies of scale we see a system that grossly subsidizes speculators out of the pockets of normal internet users to the tune of several hundreds of millions of dollars every year.  Under ICANN's hand innovative domain name providers have been arbitrarily denied the right to go into business and those who do get ICANN's blessing are required to follow rules that subordinate user and business choice to the desires of ICANN's "stakeholders" and to pay large fees to support ICANN's ever growing bureaucracy.  And ICANN created FUD (Fear, Uncertainty, and Doubt) is used to besmirch those who suggest that ICANN's approach is as empty as the Emperor's fabled wardrobe.

Update: I've been wondering whether a decimal point has been slipped and that the real number is 6% rather then 0.6%.  That is more consistent with a steady-state of roughly 40 to 50 million names in .com.

But even if the number is 6% that still means that to 420,000 paying registrations are supporting the cost of 6,580,000 freeloading speculative transactions.  That's still an egregious subsidy being paid by normal domain name users.

Posted by karl at March 16, 2006 1:02 AM