[ga] Lawrence Solum on Karl's comments on lotteries/auctions

[Danny Younger <dannyyounger@xxxxxxxxx>]

Excerpt:

Karl Auerbach (ICANN Director and all around genius)
has posted regarding the controversy over new generic
Top Level Domains. 

Here is an excerpt from Karl's very articulate
remarks, entitled Why Lotteries Are Better Than
Auctions When Distributing New TLD Slots:

"[T]he top level domain space be expanded not through
the deployment of "names" but rather through the
deployment of "slots". The difference is subtle. When
I say deployment by "names" I mean that the character
string that will be the actual domain name label for
that new TLD is made part of the selection process.
When I say deployment by "slots" I mean that the
character string is utterly irrelevant except to know
whether that string is already in use. A "slot" is a
right or privilege to have a character string of one's
choosing inserted into the DNS root zone (along with
various NS records pointing to a suite of name
servers.)

In other words, I prefer that we deal with "slots"
rather than named strings, that we focus on the
capabilities of the holder of the slot rather than on
the semantics of the string. There are courts a-plenty
to handle the real or imagined slights of those who
claim to have rights of one kind or another over a
given string. If we deal with "names" we are tacitly
getting involved in those disputes, if we deal with
"slots" we are explicitly saying that we chose not to
be a forum for fights over character strings."

Karl also addresses the question whether auctions or
lotteries represent a better approach to the
allocation of the new slots. Here are his remarks on
that issue:

So, how do we chose who gets to have a slot?

There are technical limits to the size of the DNS root
zone - there simply isn't enough room to give a name
to everyone. An allocation mechanism is necessary. And
perhaps there also needs to be a garbage collection
mechanism as well to reap dead allocations.

The paper sTLD Beauty Contests: An Analysis and
Critique of the Proposed Criteria to Be Used in the
Selection of New Sponsored TLDs proposes auctions.

Auctions are a means that guarantees the prize to the
qualified applicant willing to pay the most money. In
practical terms this means that the wealthy will
inherit the Internet, or at least the DNS top level
domains.

For many, that is an acceptable outcome.
However, I feel that there are social values other
than cubic money. And those who live by those other
values ought to have a chance to obtain TLD slots.

This is why I feel that allocation ought to be by a
lottery system. Everybody who buys a "ticket" has a
chance. The wealthy can, by buying more tickets,
improve their chances to an arbitrary degree. But no
matter how many they buy, there is still is a chance
that the small guy might win.

If we have lotteries for a non-trivial number of slots
we can expect that at least a few will be won by the
less well healed applicants.

Karl certainly has a point. There may be uses of the
root that are in the public interest, but would not
result from a pure auction approach. 

Here are some of the reasons that Karl is right about
this:

--Some public-interest TLDs may be associated with
organizations that lack the resources to prevail in an
auction.

--There is a tremendous need for TLDs that serve the
non-English speaking, non-European, non-Wealthy
regions and peoples of the world. There is a special
need for gTLDs using IDN for LDCs.

--Some gTLDs may provide what economists call "public
goods," which by definition cannot effectively be
provided by markets.
But a pure lottery system may not be the best way to
solve this problems. The FCC experience with spectrum
lotteries was dismal. In fact, the lotteries turned
into an inefficient form of auctions as a secondary
market developed for the auctioned licenses; the
lottery resulted in windfall profits for lottery
winners and higher transaction costs as the secondary
market got the spectrum to its highest and best use.

An Alternative to Pure Lotteries

So how can we accomplish both goals. Getting
commercial gTLDs to their highest and best economic
use, while preserving some of the root for nonprofit,
third-world, and/or public good gTLDs. There are a
number of possible solutions to this problem. 

Here are some:

--Set aside a certain number of slots for a nonprofit
gTLD lottery.

--Use the proceeds from the lotter to subsidize the
development and start-up of IDN gTLDs targeted at
LDCs. My colleague, Karl Manheim, and I have written a
short position paper on this issue, called Equity
Enhancing Auctions.

--Use a streamlined, low-cost "beauty contest"
procedure to qualify a certain number of public-good
gTLDs for free entry into the root.

No doubt there are other alternatives as well.
Lotteries alone won't achieve the twin goals of
getting putting the root to its highest and best use
while at the same time insuring that the root serves
the public interest. A mixed-regime of lotteries and
auctions is a promising alternative.

http://lsolum.blogspot.com/archives/2003_04_01_lsolum_archive.html#200102145

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