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iGoldRush Blog   September 1997

Saving the Domain Name System

September 01, 1997 in News

By Edwin Hayward

The winds of change are howling towards the domain name system, and they are going to leave nothing but destruction and desolation in their path. Applications are now being accepted for new domain registrars; that process will be complete by October 16th 1997, by which time it will likely be too late to save the system.

This is not another hype story, this is the truth: if you have any current or future interest in domain names, you MUST find out what the changes will mean to you , and why you should stop them . The plan will have negative effects on domain name owners, bankrupt domain name registrars and generally cause havoc across the Internet.

First, select the relevant summary article(s) from the list below, and arm yourself with all the information you need to make an informed decision. Then sign the

“Proposal to Nullify and Replace the CORE-MoU”

either as an individual or as a corporate entity. If we all work together, there is still time to save the domain name system, but only just…

  • A little background information
  • Slicing through the verbiage : a cold, sharp look at the proposal on the table
  • How the changes will affect domain name owners
  • How the changes will affect domain name registrars
  • How the changes will affect domain name brokers
  • How the changes will destabilize the Internet
  • Picking the wrong fight : in defense of Network Solutions
  • A real alternative

Background Information

For several years, there has been talk of reforming the domain name system. Proposals have come and gone, a veritable alphabet-soup of organizations has sprung up to add their comments to the morass of debate surrounding the domain name system, and finally the debate is crystalizing in action.

The wrong action.

The latest proposal is carefully worded in convoluted terms, and laced with jargon and acronyms; as such, it is a truly daunting document. After a great deal of wading through the information it contains, I have found it to be fundamentally flawed.

The proposal currently in the process of implementation does nothing to address problems in the existing domain name system, and indeed [as will be made clear later] explicitly disowns responsibility for the existing system.

In brief, the proposal would directly or indirectly lead to:-

  • The creation of seven new top level domains; these would coexist with the existing top level domains such as .com, .org and .net
  • The delegation of responsibility for the administration of these new top domains to selected organizations — registrars — who would be in charge of billing for and registering names under the new top domains.
  • A dispute resolution body with defined procedures for handling domain name disputes.
  • Stricter rules on registering new domain names.

The proposal has been drawn up on the basis of the document prepared by the now-disbanded IAHC; the IAHC’s proposal had been roundly criticized by dozens of organizations and governments, including the US government. The “new” proposal does nothing to address any of these concerns, and the implementation of this proposal would clearly be against the interests of a significant section of the Internet population.

The Current Proposal

The following analysis quotes extensively from the July 17 1997 draft of the MEMORANDUM OF UNDERSTANDING FOR THE INTERNET COUNCIL OF REGISTRARS (“CORE-MoU”) The full text of this memorandum can be found at:

http://www.gtld-mou.org/docs/core-mou.htm

[LEGAL NOTICE: This document is quoted for review purposes only, and all rights remain with the originator of the document. Quoted portions appear in italic in the text below]

This is a long analysis, but I trust you will bear with me as I go through the CORE-MoU and dissect it to find the cancers in its midst. The passages quoted below have been selected as exhibiting the biggest problems — I would suggest that you spend the time to read the whole memorandum by following the link above.

Article 2. Principles

The following principles set forth in the gTLD-MoU are adopted as part of this CORE-MoU (my comments are in italics):

(c) related public policy needs to balance and represent the interests of the current and future stakeholders in the Internet name space;

As we will see, the interests of the current stakeholders are completely bypassed. They are the biggest losers under the proposals.

(d) the current and future Internet name space stakeholders can benefit most from a self-regulatory and market-oriented approach to Internet domain name registration services;

The proposal is not, in fact, regulated by the market, but by a single Swiss organization, governed by the laws of Switzerland.

(f) as set forth in Section 2(f) of the gTLD-MoU, a policy shall be implemented that a second-level domain name in any of the CORE-gTLDs which is identical or closely similar to an alphanumeric string that, for the purposes of this policy, is deemed to be internationally known, and for which demonstrable intellectual property rights exist, may be held or used only by, or with the authorization of, the owner of such demonstrable intellectual property rights. Appropriate consideration shall be given to possible use of such a second-level domain name by a third party that, for the purposes of this policy, is deemed to have sufficient rights;

Warning: The passage above indicates that existing trademark owners will NOT be protected, unless their trademark is “internationally known.” In other words, if your company or product name is only known on a national scale, you will have no recourse to the arbitration process. Anyone can just walk in and register a domain name that is the same as your trademark. Only the biggest corporations, which are truly international in scale, will be protected under this point.

Article 3. gTLDs

(b) Pending the expiration or appropriate amendment of the NSF Cooperative Agreement No. NCR-9218742 under which the “.com”, “.org” and “.net” gTLDs are presently administered, the “.com”, “.org” and “.net” gTLDs shall not be subject to the provisions of this CORE-MoU.

In other words, this proposal will in no way fix problems with the existing system.

(c) Likewise, as long as the “.com”, “.org” and “.net” gTLDs are not subject to the provisions of this MoU, any Registrar which administers those gTLDs may not be considered to be a gTLD Registrar for the purposes of this CORE-MoU.

Carefully making sure that Network Solutions, the organization currently responsible for administration of the .com, .org and .net domains cannot put itself forward as one of the candidates to manage the new domains.

(d) The two-character top level domain name space within the DNS, which is reserved for ISO 3166 country codes under existing accepted Internet RFCs, shall not be subject to the provisions of this CORE-MoU.

This ensures that none of the other existing domains will be covered by this new agreement either.

Article 5. Structure and Responsibilities of CORE

(a) Each entity selected under Article 4 above as qualified to sign the CORE-MoU shall become a member of CORE and, if it conforms to the operational and technical requirements set by CORE, shall become a Registrar. After the commencement of registration activities by CORE, only registrars may remain members of CORE. Registrars, and only Registrars, shall participate in the on-going activities of CORE.

This is a fascinating passage, since on the application to sign the CORE agreement , interested parties must pay $10,000 each to join the organization. This passage guarantees that everyone who showed their support for CORE, but who is not selected as a registrar will lose that money and furthermore have no further say in the domain name system .

(b) CORE shall be incorporated under the laws of Switzerland as a Swiss Association governed by Articles 60 – 79 of the Swiss Civil Code.

Indeed, not a particularly international approach. The whole of the world-wide domain name system will be administered from Switzerland? That’s great… it reminds me of a claim a few months ago that the domain debating process was totally open, and that anyone who went to the meeting in Geneva was welcome to take part in the debate!

(f) CORE shall establish such policies and technical protocols as are necessary to insure that SLDs are assigned on a first come first served basis with respect to registrar interaction with the CORE repository database for the gTLD under which the SLD is being registered. However, CORE may establish policies and technical protocols such that something similar to a “round robin” order of processing applications by Registrars for SLDs is used by the repositories. No duplicate SLDs shall be assigned in the same gTLD.

What this means is that all the registries are competing to register names first. I foresee the mother of all battles when the central registry opens and all the registries go for the thousands of “premium” names that are available. Plus what happens to the average consumer, if one registrar is a little slower than others at processing purchase requests? All registrars should be created equal, or consumer confusion will reign supreme. It would be like offering a franchise, but with no plans for any kind of consistency check or quality control. One place you eat the best burger of your life — the next place, with the same sign outside, you have a suspicious the “chef” threw together the burger from ingredients discarded by the local butcher.

(g) CORE shall maintain Repositories of all SLDs registered by the Registrars, and shall adopt the most expeditious procedures which implement correct and reliable repository services. There shall be a separate repository for each gTLD. CORE shall establish and enforce a requirement that each Registrar provide the data set forth in Appendix B to this CORE-MoU for each SLD registered by such Registrar. CORE shall make the data in each Repository available and updated on a daily basis so that it can be searched (e.g., by whois) or downloaded as a complete file on the Internet (e.g., by ftp). In order to establish the Repositories, CORE shall proceed as set forth in Appendix E. CORE shall generate DNS zone files for use by DNS servers.

So apart from the order entry and forwarding process, CORE will have the same “monopolistic” role as Network Solutions is currently. CORE, and only CORE, will have control of ALL the repositories. Makes one wonder. Plus, divide up the repositories and there are that many more chances of a bug fouling up the system, databases getting updated out of synch and so on.

(h) CORE shall provide financial support to the POC (and to its predecessors, IAHC and iPOC) for the reimbursement of reasonable expenses actually incurred in carrying out the responsibilities of those organizations. POC shall retain such amounts of application fees paid by Registrars as are needed to reimburse such expenses, and CORE and POC shall agree from time to time on a budget for POC to be financed by funds received by CORE.

What is the difference between Network Solutions taking a slice out of each registration fee, or CORE taking a cut of every registrar’s take?

(j) CORE shall establish and enforce requirements that Registrars shall not register SLDs for their own account or for accounts of an Affiliate for the purpose of trafficking in SLDs for sale, resale or transfer to applicants.

CORE will just lead to the formation of a lot of dummy companies! Virtually all registrars, and indeed anyone involved in the industry, have purchased domain names for their own accounts already. How can this statement be consistent with the idea of protecting the right of existing domain owners?

(a) Each Registrar may accept applications for the assignment of SLDs in any CORE-gTLD.

What is implicit here is that the Registrars will be the only registrars; i.e. the literally hundreds of companies that are making a living out of domain name registrations will not get a look in, and only the new elite Registrars [with a capital “R”] will have a chance to sell the new domain names. Not the best way to open up the market to competition. Can anyone say “OPEC”?

(b) Each Registrar may charge such fees, if any, as it determines, in its reasonable discretion, for the services it performs.

So, in other words, instead of knowing that a domain name will cost me $100 plus a small registration fee, I will have to visit all the registrars to find out what the going rate for each domain is. Domain names will only be sold via the registrars, so there will be no equivalent of InterNIC for direct sales.

[There follows a LOT of administrative fluff and gobbledigook about exactly how to become a Registrar — join CORE, hand over lots of money etc. Then the following interesting passages:-]

II. Each application must be accompanied by a US$10,000 fee, and the instrument by which the fee is submitted must result in actual payment to CORE. This fee will be refunded in the event an applicant is found to be not qualified.

III. Each applicant will be responsible for payment of an appropriate fee for a report by an independent auditor, designated by the iPOC, which will examine whether the application is complete and in proper order; this fee is non-refundable, and may be deducted from the application fee.

Note that ALL this money is lost if the applicant does not become a registrar. That’s a lot of money changing hands, flowing to the new entity that is to replace Network Solutions because the latter is too greedy!

How The Changes Will Affect Domain Name Owners

Current domain name owners stand to lose from the creation of new domain names. The value of their current names will be diminished in several significant ways:-

  • The loss of the “location” factor. Domain names currently serve as very simple mnemonics to remember a web site’s URL. Even newcomers to the Internet learn within a few days that most addresses are of the form www.address.com, with a smaller number of addresses ending in .org, .net or .country. Once 7 [or whatever arbitrary number of names is finally chosen] new domains are introduced, the mnemonic aspect of the domain name becomes much less significant. Will I be interested in or able to remember that a site I visited was www.sitename.firm and not www.sitename.web or www.sitename.org, and so on ad nauseam…
  • Companies will have to fight their battles all over again. For instance, if they have managed to secure the .com, .net and .org forms of your trademark or company name, they will now have to navigate their way through a tortuous and unfamiliar new system and get all 7 extra names before anyone else gets there.
  • The loss of identity: once domain names become more common, the significance of each individual domain name is diminished.
  • The loss of value: any resource that becomes less scarce also becomes less valuable.

A LITTLE GOOD NEWS: It is likely that .com names will retain their value, both monetary and mnemonic-related, since they are so ingrained in the public consciousness. To many people, .com names ARE the Internet.

How the Changes Will Affect Domain Name Registrars

Current domain name registrars will see their business destroyed by the new plan . There are several hundred firms currently in the business of registering domain names, either as their sole business or as part of a package such as web site hosting or a similar service.

The new domain names will ONLY be available [according to the proposal] to the official Registrars, who will have to pay $10,000 plus a variety of other fees for the priviledge of joining the “exclusive club” of entities that can register domain names. Under the current system, registries add value to InterNIC’s registrations by providing DNS services, email forwarding and other services. This opportunity will be lost, the business gone forever.

Even if the process is opened up, with many Registrars competing for registrations, there is no place for second-class entities that have to make a living by adding a profit margin on top of the costs due the various Registries.

The only alternative is not really an option for many small companies: find the money, and meet the financially exigent requirements imposed by CORE. That is the only way all these companies will keep going.

How The Changes Will Affect Domain Name Brokers

Current domain name brokers will see their business disrupted by the new plan . With the availability of many new top domains, a lot of the urgency to snap up domain names will fade away. With the exception of .com names, the other domain names may drastically reduce in value. With many brokers relying on the commission income from domain sales to stay in business, any disruption in the domain name market is extremely bad news on a business level.

How The Changes Will Destabalize The Internet

The implementation of the plan for new top level domains will have a destabilizing effect on several aspects of the Internet.

  • Increasing risk: mistakes happen, and a mistake such as the one by Network Solutions, which led to domain names being inaccessible for upto 48 hours recently, will be much more likely to occur if the system is divided into a number of databases and bodies in charge of administration. There are enough problems with one database and one registrar. Imagine the madness surrounding 7 databases [all updated daily!] and a potentially unlimited number of Registrars!
  • Increasing complexity: The success of the Internet as a global medium depends in part on its simplicity. Although they are by no means instantly understandable, Internet conventions are simplicity itself compared to the arcane, cryptic commands and procedures in other areas of computing. Increase the number of domain names, and you increase the complexity of the Internet. The Internet is already too complicated. Any steps towards complexity are steps in the wrong direction.
  • Reduced funding: At the moment, the procedure is a little flawed, but at least in theory much of the money collected for domain name registrations gets reinvested in the network infrastructure. There is no provision for such an investment in the current proposals for the new domain names.
  • Increased mistrust: The expansion in the number of top level domains will lead to a very high increase in lawsuits. With 3 top domains, there are 3 potential lawsuits [.com vs .net, .net vs .org, .com vs .org] for any given set of “matching” domain names. With 10 top domains, there are 45 potential lawsuits for each “matching” domain name [.com vs .org, .org vs .firm, .web vs .net etc.]
  • Increased bureaucracy: One advantage of a “monopolistic” arrangement like the current domain name system is that there is a single entity responsible for the maintenance and upkeep of the domain name system. Once the system is expanded, the amount of bureaucracy required to police and implement the system will go up by several orders of magnitude. Bureaucracy = money, so this increase will be reflected in the cost of domain name ownership.

Picking The Wrong Fight – In Defense Of Network Solutions

According to many media reports, and to evidence on various newsgroups and web sites, Network Solutions is almost unique on the Internet in the degree to which the company and its operations are vilified. Yet it is clear to anyone who looks at the situation with a level head that most if not all problems are easily dismissed, and that in fact Network Solutions has been doing an amazing job given the circumstances .

DANGER — EXPLODING MYTHS!

FACT: The domain name explosion could not, and was not, predicted. The number of domain names jumped within less than 3 years from a few hundred a month to a few hundred thousand a month. That is an increase of a factor of ten per year. No company, no matter how well organized, can be expected to handle that kind of gargantuan change of pace without a few teething troubles.

FICTION: Network Solutions is somehow exploiting people, as the Internet should be free and the domain names belong to “the people”. In fact, the “Internet is free” rule is nothing but a tradition stemming from the Internet’s roots in academia. The case could be made that the Internet’s development is actually stymied rather than furthered by this general abhorrence to any attempts to impose charges for Internet-related services.

FACT: The domain name issue is something totally new. The domain name industry was created almost literally out of thin air [after all, domain names are fundamentally nothing but figments of the imagination made “real” by being recorded on a server somewhere — domain names do not exist until they are registered for the first time]

FICTION: The domain name industry could function better under the auspices of a multitude of competing companies whose only real criterion for “job experience” is a very fat wallet. Network Solutions has had many years of experience in running the domain name system, streamlining the registration process, implementing more stringent fee collection policies, etc.

FACT: Domain name registration has not always been a cash cow. In fact, until very recently [even in Internet terms] the process was free and domain name demand was very low. It was only once speculators set their sights on the market and the number of registrations headed towards the stratosphere that a charge was instigated.

FICTION: At $50 a name, Network Solutions must be raking in the money. Sure, if their collection procedures were efficient, they would undoubtedly turn a modest profit — but the costs of issuing invoices, reminders, contributing to the network infrastructure, upgrading the existing DNS servers and so on suck most of the money right out of the system.

FACT: Some things could be improved in the current system. Absolutely! There are a lot of problems with many of the existing procedures, such as the payment collection procedures, domain name dispute resolution procedures and so on. But these problems can certainly be solved, and at much less cost, both financially and in terms of disruption and confusion, than a complete change in the domain name system.

So think on the above next time you read an article or opinion pillorying Network Solutions. They are not the bad guys. At the very worst, they could be described as victims of circumstance.

Saving the Domain Name System : A Real Alternative

The following proposal is based on a feature I wrote for this site a few weeks ago. This feature has garnered a good deal of response, and I have accordingly made a certain number of changes and simplifications to the content. In short, there is no need to expand the domain name system. Instead, the following changes will solve the problems associated with the current system.

1) Doubling of annual maintenance charge
The annual maintenance charge for domain names should be doubled from $50 to $100, with the first 2 years payable in advance. This would deter speculators holding dozens or hundreds of domain names, while causing relatively little harm to individual domain name holders.

2) Policy changes
The existing payment policy should be changed to require payment in advance, upon initial domain name registration and domain name renewal. This will deter speculators who rely on the long “grace period” under the current system.

3) Public awareness and public accountability
Public awareness should be increased by promoting domain names and the domain name system, in simple terms. At the same time, public accountability should be increased by mandating that registrars [such as InterNIC and the various country NICs] must make public their accounts containing details such as the number of domain names registered and the amounts received.

4) Complete liberalization of .org and .net domains
The .org and .net domains should be fully liberalized, acknowledging the existing ambiguity of InterNIC’s policy towards those names; these names would be placed on an equal footing with .com names. These names would be made available to all parties as long as no intellectual rights are infringed.

5) Formation of new body to handle intellectual property disputes
An international body should be formed to handle intellectual property disputes according to a rapid, rigidly defined process. Trademark holders and parties with similar valid claims to given domain names, no matter the country of origin of such claims, should be given priority for domain name issuance. However, when two or more parties possess valid claims for a given domain name, such as conflicting trademarks issued in different countries, the domain name rights should remain with the original registrant. First come, first served in other words. Subsequently the parties could negotiate privately some form of agreement to resell the domain name, but this would be left up to market forces. Retrospective claims should be outlawed i.e. a party cannot apply for a trademark after a domain name has been issued to a different party, then parlay that trademark into a ruling that the domain name must be handed over.

6) Simplification of domain name transfer process
The transfer process for domain names should be simplified. Speculators and other parties willing to abide by the new more stringent requirements should not be penalized in attempting to profit from domain name sales. Domain names should be recognized as a commodity, and as such, as having a value set by the market and the laws of supply and demand.

7) “Capping” of transaction fees
An international body should be set up to determine the “appropriate price” of a domain name registration. This should be based on the costs that would be incurred by the registry in charge of administering the name, factoring in charges for infrastructure expansion and improvement, plus a fixed profit margin.

The above changes would curb domain name speculation, protect the rights of trademark holders and domain name owners, restore confidence in the system and put it on a more official, sounder footing. They would also ensure that no significant damage is done to domain brokers, registrars, owners and other parties with a vested interest in the domain name system.

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