Sep 27, 2004
Comments Off on of auctions and the prius

of auctions and the prius

This is the longer response I promised. I will try and deal with three things. First, why we should be thinking about the way the market should be, not what the rules are. Second, I want to share what I believe to be a useful analogy from the real world. Third, I would like to briefly touch on why discussing form (changes to agreements, EDDP) is not important here and now.

The market for expired names is changing. When Ross posted our paper earlier this month it set off a frenzy of folks trying to figure out where things would evolve to and what their place in that new framework would be. Good. The old one wasn’t working. Not for everyday registrants and that is who we should all be thinking about. Not for Verisign and not for ICANN. Those who say that either of them like the status quo really do not have a clue.

These changes will be significant. Every registrar that I speak to is planning their next steps. The changes will be rapid and far reaching. The market for expired domain names will look unrecognizable one year from now. And registrants will be the primary beneficiary if we can help it.

Some discussion about these potential changes has met with disapproval. The guts of the argument made by Robert (and to some extent George) seem to me to be predicated upon an assumption. Robert states this as “domain names that expire do not belong to the registrant, or to Tucows, or to anyone else; they belong to ‘the public'”. But which “public”?

The comment is true only in a narrow sense. However what we are talking about is providing more and better information to registrants prior to their names expiring. This may require some changes in the processes that exist today. Specifically, there are few alternatives to holding some form of auction to determine something of a “fair market value” for domain names.

Those auctions take place today. They simply take place AFTER Robert’s condition is met, that is after the names expire and rights have passed. This is not the result of some careful planning at a policy level but is simply an unintended outcome of a number of other, unrelated, policy decisions.

I want to use an analog from the real world to frame our views on this market. I will tell you about my recent experience buying a car.

Now there are a couple elements to my car buying process that are a little unique. They stem from two things. First, I don’t care much about cars. For me they are a “get me from A to B” kind of thing. Second, I am completely clueless when it comes to repair and maintenance.

Accordingly, I have been a huge fan of “walk away” leases ever since they first came on the scene. They are perfect for me. The car is always new, always under warranty, my monthly cost is completely bound and at the end I just move on to the next one. Fits my needs just right.

One other unique element for me. I hate car shopping. So for my last three cars (in a two car family) I have used a “service”. Essentially I have a Car Service Provider (“CSP” :-)). We simply go online, pick the car we want, including colour and options and they arrange everything from there. I pay $500 above dealer’s invoice and they even arrange the lease. Works just perfectly for me. [ed. note anyone in Ontario wanting more details about the CSP thing contact me offlist]

So what does this have to do with expiring domain names? Well, this year’s experience has been a little unique. My current car, just coming to the end of its lease, is a 2002 Toyota Prius (or “Pious” as I like to call it). At the time the car was new in Canada and was available in very limited quantities. There was no market history for the car, thus the buyback was set without nearly the amount of information that is typical for most cars. No one expected Carmen Diaz to brag about her Prius to Jay Leno in front of a national audience. No one expected oil prices to reach nearly $50/barrel. In short, no one expected the huge demand that now exists for Priuses (Priae? Prium?).

Now the waiting lists for the Prius (I will henceforth avoid the plural at all costs) are huge. Six weeks to six months depending upon where you live. The supply of used ones is extremely small. They are a great car and everyone who has one loves it. In short, I have real value in my buyback.

My lease was with a Credit Union as this was the most favourable option at the time. There were no 0% deals on the Prius. When they sent me the notice letting me know my lease was up they made no mention of the buyback whatsoever other than to set timing around it. If I had chosen to buy a car from another dealer I may or may not have discovered that value. Lucky for me my CSP has been able to help me work through all of the options and all of the puts and takes of dealing with this.

The interesting thing is this. To me, they would have been responsible for this. If I had simply gotten my new Prius (yes a shiny new 2005 is in my future!) and turned in the old one, happy as a clam, only to find out a month later that there had actually been a couple of thousand dollars of value in my buyback I would have been extremely angry.

I would have taken personal responsibility for this in one sense. I knew the rules. It was my responsibility to do the digging. I had every opportunity to exercise the buyback. I wouldn’t have thought them LEGALLY responsible. BUT (and its a big but) I would have been mad and disappointed in my CSP. The relationship would have changed forever. Instead of me singing their praises and referring customers to them on a regular basis I would have never used them again, never mentioned them positively again and may have even spoken negatively about them to other potential customers.

It is not just that it would have been negative. It would have been negative in THE MOST IMPORTANT ASPECT of any service provider relationship. I need to trust them. I need to believe that they are looking out for my interests. That they understand that I am counting on them to help me navigate the world of automobiles, a world for which I have no affinity and a world that I need as part of my life.

Substitute “Internet” or “domain names” for “automobiles” and the above paragraph describes EXACTLY how I believe most of you are viewed by your customers. Your role is to make your customers NOT FEEL STUPID. Your role is to make them comfortable with something that they need but have no affinity for. That is what is at stake here.

And saying that they will never find out what a name they let expire was worth is simply lame. Relying on customer ignorance is not a scalable or sustainable business model.

I do not propose to discuss the many form issues for reasons that should be apparent. The legality of the NSI agreement, of any changes that may be made to our agreements or compliance with the EDDP are not the point of this discussion, at least for me. Those are formalistic and frankly not interesting. It is also worth noting that the big battles in this regard will not be fought on this list, or by this company.

We should all be thinking about what where this market is likely to go, where we think it should go and how we can all best get there. We need to do this in a way that enhances, not detracts from, registrants’ rights.

Registrants, at least ours, should have as much information as they can in dealing with their online assets. Today we think the best way to accomplish this is to provide them with a way to determine fair market value. If we can do this without detracting from their existing rights then we are serving them.

We all need to remind ourselves that domain name policy is an infant and  it needs to constanly evolve if it is to keep up with the market. Our analysis should always start with how things should be at a market level and to try and shape policy to fit that reality.

Perhaps most importantly, no one has yet come up with a set of facts that demonstrates how taking an approach as we have broadly discussed will in any way detract from the rights of registrants. For me the concept of “the public” having some right to expiring names in no way conflicts with a registrants’ right to better information as to the market value of their domain name.

There are thorny edge cases here no doubt (ie. registrants who can’t be located), but they pale in comparison to the mess that is the current state of affairs. Every week someone lets a domain name expire that has a value in excess of $10,000, in fact is bought for that price. Some may view that as the registrants own fault. I think the registrant’s supplier was derilect in their duties. I wonder who the registrant, the CUSTOMER, would agree with?

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I am elliot noss.

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