Re: An Open Letter to the IAHC

["Leo Smith" <barter@ntplx.net>]

Perry Metzger writes to Chris Ambler:
...You can take Dave Crocker's mention of the fact that many publishers
...print volumes of literature long out of copyright -- any time you've
...cracked open a copy of "Hamlet" or "Pride and Prejudice" you've seen
...one of their products. Mysterious, isn't it, how people can be induced
...to produce books on which anyone else on earth could print a nearly
...identical book without having to pay a royalty to anyone. Raw
...competitive forces should eliminate all profit altogether, shouldn't
...they? Somehow, though, these publishers continue to exist, and even
...make a profit.

To Perry, Leo Smith poses the same question previously posed to Hank:
Question...Are you open minded on the question for the
need for exclusivity, to the point that you would seriously consider merits
in support of exclusivity? Your questions, which I think may have been
rhetorical, deserve an answer.
>>>Why are there a few dozen companies that publish classic books whose
>>>copyright has expired?  
In theory, a start up company could begin its publishing business by
publishing the classics, although, absent any special circumstances, it
would be highly unlikely to succeed. The special circumstances that would
make publishing the classics good business sense would include:
1) your company just purchased the rights to supply the Classics to the
Girl Scouts for fund raising. The contract guarantees that the Girl Scouts
will purchase 500,000 copies, minimum. With a prepublication agreement
guaranteeing a minimum purchase, it makes sense to publish the Classics, or
2)you're a book publisher and you recently won the exclusive right to
supply all K Mart stores with their entire book department. You currently
do not carry the Classics in your line. Based on K Mart sales figures from
the previous vendor, which did carry the Classics as part of their line,
the sell through at K Mart of the Classics generated $120 a square foot in
sales per year. With these prior sales figures in hand, you might now
determine that it makes sense for you to include Classics in the
publication mix...at which time you either buy as a distributor at a
fraction of retail from a Classics publisher, or publish the Classics
yourself. In every instance wherein you would undertake to publish the
Classics, it would only make good business sense if you had a firm contract
with a third party that would ensure a reasonable basis for distribution.
Without a well developed distribution channel already in place, publication
of the Classics is as close as you can get to guaranteed failure.
----------

In your next question, you asked:
>>>How does Lycos survive vs.Excite, Infoseek or Yahoo? 

Each search engine is OWNED by its operator. Alta Vista may survive because
NEC decides that they want to financially support it in order to
demonstrate the power of their 64 bit Alpha chip, or Yahoo may decide to
seek advertisers to pay for spots on banners....BUT the fundamental basis
for its survival position in the market is predicated upon exclusive
ownership...Only NEC owns Alta Vista, only Yahoo, Inc. owns YAHOO, etc.,
etc. If search engine services were handled exactly as the SHARED proposed
registries, where no one company would own a search engine, instead search
engines would be SHARED among all search engine developers, IT WOULD NOT,
and COULD NOT, provide a business model for investing capital and expecting
a return.

I would like to share with you Jim Fleming's observations posted
previously, which I believe, offer an accurate assessment of the need for
Exclusivity.

I would appreciate any constructive feedback from you on the specific
hazards (if any) you envision as a result of operating an exclusive
registry:

Jim Fleming wrote:
@ : Subject: 	Shared vs. Exclusive TLDs
@ : 
@ : 
@ : Many people have spent a lot of time debating and discussing
@ : the pros and cons of "shared" vs. "exclusive" Top Level Domains.
@ : Most of that discussion seems to come from technical people
@ : who have a strong jealousy factor and are primarily looking at
@ : how much money an EXCLUSIVE TLD registry will make, when
@ : they should be looking at market forces and the realities of the....
@ : 	
@ : 	...SHARED business world...
@ : 
@ : ======
@ : 
@ : It is disturbing that these highly-vocal, technical people do not
@ : seem to have a grasp of how "exclusive" Top Level Domains
@ : will essentially become "shared" (which is what they claim
@ : they want) IF true market forces are ALLOWED to happen.
@ : 
@ : Here is my opinion as to what will happen if these jealous
@ : technical people, who do not seem to have registry resources
@ : to make anything happen, would stop *helping* to prevent
@ : the Top Level Domain market from developing. (Actually,
@ : people need to stop "allowing" them to prevent progress)
@ : 
@ : 1. A top level domain has to be "invented" and claimed by
@ : someone, it does not just develop because of spontaneous
@ : combustion. That claim has to include the ability and
@ : follow through, with public proof, of facilities, servers, networks,
@ : support people, etc. This is called "reduction to practice in the
@ : patent arena". All these fears about people with wireless
@ : lap-tops, dreaming up a TLD, claiming exclusive rights, and
@ : operating a registry out of the back seat of their car, without
@ : lifting a finger, is nonsense, and is delaying the Top Level
@ : Domain market. People need to move past that and focus
@ : on the *few* companies that are making Top Level Domains
@ : happen, now.
@ : 
@ : 2. Once a Top Level Domain is adopted by some organization
@ : and is also adopted by the owners of the Root Name Servers,
@ : the organization will make the investments needed to operate
@ : a Registry. This is required because someone has to keep the
@ : central database of authority information for that Top Level
@ : Domain. Yes, that data base can be distributed and shared,
@ : but ultimately, someone has to be responsible for the contents
@ : and the accuracy of the contents. People are going to pay
@ : for that central authority to do a good job. How much they
@ : are going to pay will go DOWN, as more Top Level Domains
@ : become common. Supply and demand dictates this free
@ : market phenomenon. If technical people do not understand
@ : supply and demand, I suggest they take a course in Economics.
@ : 
@ : 3. Once established, a Top Level Domain registry will have to
@ : develop a DISTRIBUTION CHANNEL, a sales force, a means
@ : to "funnel" customers to that registry. In the current Internet,
@ : the InterNIC is fortunate to have thousands of ISPs who act
@ : as "agents" and sell domain names for the InterNIC. The
@ : InterNIC currently does not pay those ISP agents a commission
@ : but in a FREE market system, commissions and other
@ : typical business fees will become a reality. This type of
@ : evolution will result in an "exclusive" TLD becoming "shared".
@ : Any TLD Registry with the qualifications to become a viable
@ : registry is going to recognize the need to reach out and
@ : develop channels. If they do not develop channels and
@ : "share" the wealth, then they will not grow past some
@ : minimal level, and other TLDs will gain more of the market
@ : share. In the end, market "share" is everything and in
@ : order to gain market share, a company has to "share".
@ : 
@ : 4. Channel development will not be free (low cost) and
@ : the agents and agencies operating in the "shared" management
@ : of the Top Level Domain, will want THEIR piece of the pie.
@ : If they are not given any piece of the pie, and another TLD
@ : registry does share their pie, then agents (ISPs) and other
@ : people, who make up the channel, will gravitate to those
@ : TLD registries who do share the pie.
@ : 
@ : 5. Based on what the Free Market is willing to pay,
@ : the size of the pie will be determined. This will be a
@ : dynamic process. If the pie is set at $50 per name per
@ : year from the consumer, then some small percentage
@ : of that will go to the "exclusive" registry operator and
@ : a larger percentage will go to the *channel* (the
@ : distributors, agents, sales people, ISPs, etc.). As the
@ : industry matures, pieces of the pie will be distributed
@ : to more and more players. In the face of competition,
@ : the "exclusive" registry operator will have to be careful
@ : about how many people are sharing the pie, but that
@ : is what all businesses have to face each day. Obviously,
@ : if more people want (or demand) pieces of the pie and
@ : the pie is exhausted, then the "exclusive" registry will
@ : cease to exist. The checks and balances (no pun intended)
@ : of the system have to be allowed to come into play.
@ : If people are not willing to trust the Free Market system
@ : then, no TLDs should be created, those that do exist
@ : should be turned off, ISPs might as well pull their plugs,
@ : and we can all call it a day.
@ : 
@ : 6. Just as in the Travel industry, some registries may elect
@ : to make it easy for their Channel Partners to register consumers.
@ : After all, the easier it is for agencies to sign people up, the
@ : more business that generates. How these systems evolve
@ : and who pays for these systems is not needed to create
@ : new Top Level Domains at this time. That evolution should
@ : be left to the Free Market forces and will likely take years
@ : to fully mature. (As an aside, United Airlines did not start
@ : flying planes AFTER thousands of travel agents were deployed
@ : in small offices around the world, if they had waited for such
@ : an elaborate system, then no one would be flying today)
@ : 
@ : 7. Finally, Root Name Server operators are going to be
@ : needed to support the TLD Registries and in order to continue
@ : to maintain the support of the Root Name Server operators,
@ : Top Level Domain Registries will have to PAY to be registered
@ : in the Root Name Servers. This will be yet another slice
@ : of that pie. How much of that pie ? No one can tell. That will
@ : probably depend on how badly the Top Level Domain Registry
@ : wants to be registered in a particular Root Name Server or
@ : confederation of Root Name Servers. That of course will
@ : depend on which ISPs use those Root Name Servers and
@ : how many customers those ISPs have. Again, the Free
@ : Market system should be allowed to set these amounts.
@ : 
@ : In summary, an "exclusive" Top Level Domain Registry is
@ : going to find itself in the middle of a Free Market system
@ : where it has to divide the pie that it hopes to bake. It will
@ : only be able to do this via "sharing" and via the development
@ : of standard business relationships that exist in EVERY other
@ : industry on the planet, TV, Radio, Travel, Music, Software,
@ : Education, Banking, etc., etc., etc.
@ : 
@ : I think that business people are getting very impatient
@ : watching a bunch of jealous, technical people trying to
@ : manipulate Free Market systems to their economic and
@ : intellectual advantage. It is time for business people to
@ : assemble and to get on with the creation of the business
@ : of the Top Level Domains. If people interfere with the
@ : investments that business people make, or attempt to
@ : undermine those businesses, then that has to be brought
@ : to the attention of the proper authorities who have been
@ : mandated by the people to deal with such violations of
@ : the law.
@ : 
@ : Once again, as in the past, I suggest that people focus
@ : on the wide-spread deployment of commercial Root Name
@ : Servers. With commercial Root Name Servers operated
@ : by the business community, ISPs will have a stable
@ : platform to use to obtain essential Top Level Domain
@ : information. Top Level Domain Registries can then
@ : use those Root Name Servers to direct ISP customers
@ : to their TLD Name Servers. ISPs will be able to use these
@ : TLD Registries as alternatives to obtain domain names
@ : for their customers. Customers will enjoy a wider number
@ : of choices and everyone will "share" in the progress. Just
@ : because something starts with the "exclusive" idea of
@ : one individual or company, does not mean that it will
@ : not be "shared".


----------
: From: Perry E. Metzger <perry@piermont.com>
: To: Christopher Ambler <chris@hal.iodesign.com>
: Cc: iahc-discuss@iahc.org
: Subject: Re: An Open Letter to the IAHC 
: Date: Sunday, December 29, 1996 5:47 PM
: 
: 
: Christopher Ambler writes:
: > >You know, that probably explains why there are no supermarkets or
: > >other food stores anymore. With the ability for just anyone at all to
: > >start a supermarket at any time selling identical products no one
: > >could make money, so everyone worldwide stopped selling food.
: > 
: > That's not a good analogy, Perry, as supermarkets act as sellers of
: > branded goods.
: 
: Its a fine analogy. Using your logic, the prices at all the
: supermarkets would go down low enough that only the makers of the
: products they sell would make money -- the supermarkets would make no
: money themselves. And yet, they make money. All supermarkets sell
: pretty much the same goods, you see, and yet supermarkets
: advertise -- not the goods, but the market itself! Amazing, isn't it.
: 
: If you don't like this, take a commodity good or service. Take, say,
: wheat. There is no brand name on wheat. Wheat is wheat. Wheat is
: traded on commodity markets. And yet, people make money buying and
: selling wheat, even though I can go to any one of literally hundreds
: of sources -- even though lots of wheat are traded on futures markets
: as being completely anonymous bags o' commodity. No one "owns" wheat,
: no one promotes it. Somehow, though, people make money -- often a lot.
: 
: You can take Dave Crocker's mention of the fact that many publishers
: print volumes of literature long out of copyright -- any time you've
: cracked open a copy of "Hamlet" or "Pride and Prejudice" you've seen
: one of their products. Mysterious, isn't it, how people can be induced
: to produce books on which anyone else on earth could print a nearly
: identical book without having to pay a royalty to anyone. Raw
: competitive forces should eliminate all profit altogether, shouldn't
: they? Somehow, though, these publishers continue to exist, and even
: make a profit.
: 
: So, your argument is that if thirty companies can all register in
: .FOO, there will be no money to be made registering anyone in any of
: the domains because it's a commodity business, right?
: 
: For answers to these and other mysterious questions, take a course in
: microeconomics. A hint, though, is Yogi Berra's old comment about the
: restaurant that was so crowded that no one ever went there any more.
: 
: 
: Perry