Re: [registrars] Competition: was Compliance with the Memorandum of Understanding between ICANN and DoC

[Larry Erlich <erlich@xxxxxxxxxxxxxxxxxx>]

Bruce Tonkin wrote:
> 
> Hello Bhavin,
> 
> > -----Original Message-----
> > From: Bhavin Turakhia [mailto:bhavin.t@xxxxxxxxxxx]
> > Sent: Wednesday, 19 May 2004 4:40 AM
> > To: 'Registrars Constituency'
> > Subject: [registrars] Copmliance with the Memorandum of
> > Understanding between ICANN and DoC
> >
> >
> 
> >
> > This budget move will REDUCE competition and REDUCE
> > international participation, violating the principles laid
> > out in this MoU
> >
> 

Bruce, I have to start by saying that I normally really
like the things that you write. So please don't take this
the wrong way but your comments below show a very academic
approach to this issue. 

> A few participants could offer a range of prices and services (e.g the
> airline industry)
> A review of the top 20 registrars that account for most of the volume
> will show a very wide range of retail prices (and an even wider range of
> reseller pricing).
> 
> The cheaper prices are very close to being what the most efficient
> operator could possibly achieve - hence I would say that:
> (1) there is already strong competition

There is strong competition now. That doesn't mean
there will always be strong competition.

> (2) any reduction in registrars would have very limited affect on
> competition unless you dropped to one registrar - which is highly
> unlikely - the barriers to entry are still trivial.

I don't agree.
Low prices can be used to drive out competition. 
(Last one(s) standing.)  High entry fees can make it unattractive
to have more than several companies competiting. 

When there are a few remaining companies prices will then rise.

> 
> The cheapest prices are also most likely offered by those companies with
> the most scale,

Not always. It could just be deep pockets, another
motive, or deceptive practices.

> rather than the smaller companies.  A smaller company in
> any market seldom survives based on offering the lowest price.  The
> smaller companies thrive by offering superior and personalised customer
> service.
> Just look at restuarants - and compare McDonalds with your nearest top
> class restaurant.

A restaurant competes on a local basis. Not globally. 

Fine restaurants don't have as many seats to fill, they are not
serving as many meals as a large restaurant. The economics are
different.  And a fine restaurant doesn't
have to pay fixed licensing fees (although they may have to pay a
one time fee for a liquor license). They may have the benefits
of a good location. Etc.

The point is that the fees that are being discussed are a barrier
to entry. The only barriers to entry that I know about that would
be similar are for other reasons (Taxi medallions in NYC or
liquor license). The competion (or supply) needs to be limited
for some other reason.

> 
> Most highly competitive markets (e.g food restuarants) have a wide range
> of companies in terms of size and price.

In a given geographic area.

>  We have this environment in
> the domain name registrar industry and the registrar fee structure won't
> change that.

Bruce, I think you have to understand that there are registrars
that make their living from this business. They don't work for someone
else like, for example, you do. (Sorry.) Having to pay $20,000 extra per year
would be like you all of the sudden getting paid $20,000 less. 
Of course $20,000 is not where it will end. 

Please don't ever think that a change in costs will not
have a ripple effect on the market and not
end up hurting competition.

In the end I think Bhavin makes excellent points (although I haven't
checked the accuracy of all of them). And people like Bhavin are
exactly the reason why ICANN should want to have as many registrars
as possible. 

Larry Erlich


>  In fact the best consumer result would probably be
> achieved by simply having no transaction fee and dividing the fees by
> the number of registrars.   I think ICANN is trying to achieve a
> "reasonable" balance - which allow a range of different business models.
> 
> Regards,
> Bruce

-- 
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Larry Erlich - DomainRegistry.com, Inc.
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