ICANN Releases Preliminary Reports on Competition and Pricing for New gTLDs

Yesterday, ICANN released Preliminary Report of Dennis Carlton Regarding Impact of New gTLDs on Consumer Welfare and Preliminary Analysis of Dennis Carlton Regarding Price Caps for New gTLD Internet Registries.

Commissioned by ICANN, these reports were prepared by Dennis Carlton, an independent third-party, who is a Professor of Economics at the University of Chicago.

The first report concludes that, ICANN’s proposed framework for introducing new TLDs is likely to improve consumer welfare by facilitating entry and creating new competition to the major gTLDs such as .com .net and .org. Like other actions that remove artificial restrictions on entry the likely effect of ICANN’s proposal is to increase output lower price and increase innovation. This conclusion is based on the fundamental principles that competition promotes consumer welfare and restrictions on entry impede competition.

While the report does address concerns raised by the DOJ the report clearly states that no new economic or legal issues are created by the introduction of new gTLDs and that a variety of existing legal mechanisms are designed to protect the use of trademarks in domain names and to limit the use of domain names that result in consumer confusion.

The report also states that evaluations of ICANN’s proposal does not require detailed study as recommended by the DOJ.

The second report states that “Price caps or ceilings on prices charged by operators of new gTLD registries are unnecessary to insure competitive benefits of the proposed process for introducing new gTLDs. I further conclude that imposing price caps on the registries for new gTLDs could inhibit the development and marketplace acceptance of new gTLDs by limiting the pricing flexibility of entrants to the provision of new registry services without generating significant benefits to registrants of the new gTLDs.

A public comment forum has been opened on these preliminary reports and it will run 45 days until April 17 2009.

As always MarkMonitor will monitor these developments closely and will follow-up with detailed analysis and recommendations.