[ga] Auctions

[Danny Younger <dannyyounger@xxxxxxxxx>]

Re:  "Even during my term there were those who were
absolutely, totally, and utterly against auctions, and
some of those are still on the board."

Karl,

While we have heard the arguments in favor of auctions
(Manheim, Solum, Mueller, yourself, etc.), we have
frankly not yet considered the opposing points of
view... in part because those privately-held views
haven't been made public.

For the sake of parity, I am therefore posting the
Cross-Constituency view (BC-IPC-ISPCP) that opposes
auctions (you may note that I don't agree with their
position but I am posting it for the sake of
discussion).  This is an excerpt from Philip
Sheppard's White Paper on internet domain name
expansion (June 2005):


"5. The problem with an auction model for new domain
names

Sell to the highest bidder and hope that they have it
right

ICANN has indicated it may experiment with an auction
model for the allocation of new domain names. This
follows a suggestion aired though not justified in a
2004 paper from the OECD telecoms working party
(bibliography reference 14). The paper compared an
auction model to the laissez-faire model but
regrettably did not address the quality benefits
inherent in the added-value sponsored gTLD model.

On the surface an auction model is more desirable than
a 100% laissez-faire approach as the market would
decide by price on the viability of success. But the
approach has several drawbacks:

?X	Not so market-driven. An auction model may rely on
a third party to dream up the names to auction. Who
will that be? ICANN? Who says these will be the right
names? 
 
?X	Introduces bias. A work-around would be to allow
the names to be proposed by the first prospective
registry and then allow others to bid. But in such a
case the latter bidders would always be at a
disadvantage with respect to preparedness and their
ability to assess the upper limit on a viable auction
bid.
 
?X	Still no added value. Without the principles of
differentiation, certainty and good faith, an auction
model has no inherent ability to add value in the
public interest. 

?X	Market distortion from market hype. As the global
bids for third generation mobile telephony have shown,
even experienced companies may be tempted to grossly
overbid in an auction model. The Internet has had its
share of hype and will continue to do so. The prospect
of the ¡§winner¡¦s curse¡¨ is real.

?X	Potential to be anti-competitive. An auction model
has the potential to favour the existing dominant
players. Given the current failure of competition at
the registry level (84% market share by one company)
this is not the model to use today.

Summary
In short, any supposed benefit from an auction model
for new domain names has a disproportionate cost due
to the increased likelihood of market distortions. 

Such an approach is contrary to the public interest
and therefore contrary to ICANN¡¦s core values."
http://www.bizconst.org/positions/WPnewgTLDsfinal.doc



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