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An Economic Analysis of Domain Name Policy Karl M Hastings Communications and Entertainment Law Journal Volume 25 | Number 3 Article 1 1-1-2003 An Economic Analysis of Domain Name Policy Karl M. Manheim Lawrence B. Solum Follow this and additional works at: https://repository.uchastings.edu/ hastings_comm_ent_law_journal Part of the Communications Law Commons, Entertainment, Arts, and Sports Law Commons, and the Intellectual Property Law Commons Recommended Citation Karl M. Manheim and Lawrence B. Solum, An Economic Analysis of Domain Name Policy, 25 Hastings Comm. & Ent. L.J. 359 (2003). Available at: https://repository.uchastings.edu/hastings_comm_ent_law_journal/vol25/iss3/1 This Article is brought to you for free and open access by the Law Journals at UC Hastings Scholarship Repository. It has been accepted for inclusion in Hastings Communications and Entertainment Law Journal by an authorized editor of UC Hastings Scholarship Repository. For more information, please contact [email protected]. An Economic Analysis of Domain Name Policy* by KARL M. MANHEIM** & LAWRENCE B. SOLUM**" I. Introduction: Domain Name Policy ................................................. 361 A . The D om ain Name System ....................................................... 364 1. W hat are D omain Names? ................................................... 364 2. Why are Domain Names Important? ................................. 366 3. How Are Domain Names Created? .................... ............... 368 4. How Does the Domain Name System Work? ................... 369 B. Management of the Domain Name and Root Server System s ....................................................................................... 372 1. The Early History of the Domain Name System .............. 372 2. The Internet Corporation for Assigned Names and N um bers .............................................................................. 374 3. The R oot Servers .................................................................. 379 C. Generic Top Level D omains ..................................................... 380 1. Country Code and Infrastructure TLDs ............................ 381 2. The G eneric TLD s ................................................................ 382 D. A Roadmap to the Arguments ................................................. 386 II. An Economic Analysis of Domain Name Policy .......................... 386 A. The Root Is a Scarce Resource ................................................ 388 1. Economic and Engineering Scarcity ................................... 388 2. The Root is a Scarce Resource in the Economic Sense. .390 3. Commitment to Indefinite Service Guarantees to SLD Registrants Produces Additional Artificial Scarcity ..... 395 © 2003 by the authors. We would like to thank the participants at a Loyola Law School, Loyola Marymount University faculty workshop. Frank Partnoy, Richard Hill, and David Steele made helpful suggestions and comments. Lindsay Stevenson provided invaluable research assistance. Professor of Law, Loyola Law School, Loyola Marymount University; Co-Director, Program for Law & Technology at California Institute of Technology and Loyola Law School. ... Professor of Law, University of San Diego. HASTINGS COMM/ENT LTJ [25:359 B. Domain Name Service Is Not a Public Good ......................... 397 C. Networking Effects and the Root Service Monopoly ............ 404 D. Options for ICANN's Management of the TLD Space ......... 409 III. Comparisons with Telecommunications Policy ........................... 411 A. Introduction to Telecommunications Regulation .................. 411 B. Two Fundamental Comparisons: Broadcast and Telephone 414 1. Broadcast Licensing .............................................................. 414 2. W ireline Telephony .............................................................. 423 C. Allocation and Regulation of Name and Number Spaces by the F C C ................................................................................. 432 1. The Road to Market Allocation of Spectrum ................... 433 2. Market Allocation of Telephone Numbers ....................... 448 IV. A Proposed Model for Expansion of the Name Space ............... 451 A. Treating Scarce Name Space as a Public Good-An Example of Regulatory Failure ............................................... 452 1. ICANN and gTLD Expansion ............................................ 453 2. The Market for Scarce Name Space ................................... 457 B. Competitive Bidding for New gTLDs ...................................... 459 1. What Should Be Auctioned? ............................ ................... 460 2. Auction Framework ............................................................. 464 C. gTLD Auctions Would Serve the Public Interest ................... 470 1. ICANN's Mandate to Serve the Public Interest ................ 471 2. gTLD Auctions Serve the Public Interest .......................... 472 D. gTLD Auctions Have Comparative Advantages over the Feasible A lternatives ................................................................ 480 1. A Static R oot ......................................................................... 480 2. The Taxonomy Alternative ................................................. 481 3. Case-by-Case Public Interest Evaluations by ICANN ..... 483 4. A Rule of First Occupation ................................................. 484 5. L otteries ................................................................................. 485 E . O bjections to A uctions .............................................................. 487 1. Why Exclusive Rights? .................................. ....................... 487 2. Public Interest gTLD s .......................................................... 488 3. Cybersquatting and Defensive Registrations .................... 490 V. Conclusion: The Path to Rational Domain Name Policy ............. 492 A. Auctions and the ICANN Process ........................................... 493 B. Alternatives to ICANN ............................................................. 495 C. A Recapitulation of the Argument .......................................... 495 20031 ECONOMIC ANALYSIS OF DOMAIN NAME POLICY I. Introduction: Domain Name Policy "Dotcom" has acquired economic and cultural significance. There has been a dotcom boom and a dotcom bust.' Dotcommers grew wealthy and went bankrupt,2 and a television sitcom parodied this now familiar scenario.' Amazon.com,4 Yahoo.com, Google.com,6 and Ebay.com7 have enormous market capitalizations and have begun to have transformational effects9 on the International economic system. "FearDotCom" is the name of a feature motion picture-in the horror genre, of course, ° and "Startup.com" was a successful documentary." But what does the word-or is it a phrase? 2-"dotcom" mean? "Dotcom" is the transliteration of the string of characters ".com" which form part of a domain name, essentially a name for an address on the Internet.'3 In the nomenclature of the Domain Name System 1. See Phil Mullan, SPIKED, From Dotcom Boom to Dotgloom <http://www.spiked- online.com/Articles/000000005496.htm> (Feb. 12, 2001). 2. See Lisa Margonelli, SFGate.com, Frank's Depression: The Boom-bust of a Dotcommer's Identity <http://www.sfgate.com/columnists/moneytales/> (Jan. 22, 2003). 3. See TVTome, The Ellen Show <http://www.tvtome.com/tvtome/servlet/ ShowMainServlet/showid-3163/> (accessed Mar. 12, 2003). 4. See Amazon.com, Amazon.com Home <http://www.amazon.com> (accessed Feb. 9, 2003). 5. See Yahoo!, Yahoo! com Home <http://www.yahoo.com> (accessed Feb. 9, 2003). 6. See Google, Google Home <http://www.google.com> (accessed Feb. 9, 2003). 7. See Ebay, Ebay Home <http://www.ebay.com> (accessed Feb. 9, 2003). 8. See Yahoo!, Yahoo! Finance, Quotes & Info, Profile for Amazon.com, Inc. <http://finance.yahoo.com/q/pr?s=amzn> (accessed Nov. 3, 2003) (indicating market capitalization of Amazon.com equals 8.32 billion dollars); Yahoo!, Yahoo! Finance, Quote & Info, Profile for eBay, Inc. <http://finance.yahoo.com/q/pr?s=ebay> (accessed Nov. 3, 2003) (indicating market capitalization of eBay equals 22.3 billion dollars); Yahoo!, Yahoo! Finance, Quotes & Info, Profile for Yahoo! Inc. <http://finance.yahoo.com/q/ pr?s=yhoo> (accessed Nov. 3, 2003) (indicating market capitalization of Yahoo! Equals 10.4 billion dollars). By way of comparison, the market capitalization of General Motors is 20.2 billion dollars. See Yahoo! Yahoo! Finance, Quotes & Info, Profile for General Motors Corp. <http://finance.yahoo.com/q/pr?s=gm> (accessed Nov. 3, 2003). 9. See Sue White, Are You 'On Course' With eBusiness? Or Are You Lost at 'EC?' <http://www.ecommquest.com/pages/oncourse.shtml> (accessed Mar. 20, 2003). 10. See Warner Bros., Fear Dot Coin <http://feardotcom.warnerbros.com/?fromtout =videoa2> (accessed Mar. 20, 2003). 11. See Yahoo! Movies, Startup.com <http://movies.yahoo.com/shop?d=hv&cf= info&id=1804383693&intl=us> (accessed Mar. 20, 2003). 12. Both dotcom and dot com are used. 13. See Network Working Group, Domain Names - Concepts and Facilities, Requests for Comments: 882 <ftp://ftp.rfc-editor.org/in-notes/rfc882.txt> (accessed Feb. 16, 2003) (describing domain name system). HASTINGS COMM/ENT L.J. [25:359 (DNS), dotcom is a Top Level Domain (TLD), the sibling of .net, .org, .edu, .gov, .mil, and .int. Dotcom is called a generic Top Level Domain or gTLD, in contrast to the geographically specific country code Top Level Domains or ccTLDs, such as .uk or .fr-assigned to the United
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