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Progress Snapshot 
Volume 5, Issue 4 April 2009
1444 EYE STREET, NW
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WASHINGTON, D.C. 20005202-289-8928
 mail@pff.org 
 www.pff.org 
ICANN’s Economic Reports:Finding the Missing Pieces to the Puzzle
by Michael D. Palage
The global business community and a number of national governments have expressedsignificant concerns about ICANN’s proposal for processing large numbers ofapplications for new Top Level Domains (gTLDs) such as .BLOG, .NYC or .WEB.
1
Thecommunity has been especially concerned about the economic reports used by ICANNto justifyits decisions as to whether, and how, to implement applications for newgTLDs.
2
Among the greatest sources of concern has been the failure of ICANN staff toissue a complete public response to the ICANN Board’s October 2006 demand thatICANN Staff:commission an independent study by a reputable economic consultingfirm or organization to deliver findings on economic questions relating tothe domain registration market, such as:whether the domain registration market is one market or whether eachTLD functions as a separate market,whether registrations in different TLDs are substitutable,what are the effects on consumer and pricing behavior of the switchingcosts involved in moving from one TLD to another,what is the effect of the market structure and pricing on new TLDentrants, and
Michael Palage is a former ICANN Board member (2003-2006) an Adjunct Fellow with Center forInternet Freedom at The Progress & Freedom Foundation. The views expressed here are his own,and are not necessarily the views of the PFF board, other fellows or staff.1.
See 
 
Michael Palage 
,
ICANN’s gTLD Proposal Hits a Wall, Now What? 
, PFF Blog, Dec. 22, 2008,http://blog.pff.org/archives/2008/12/icanns_gtld_pro.html 2.
See 
Letter from Meredith Baker, Acting Assistant Secretary for Communications and Information,U.S. Department of Commerce, to Peter Dengate-Thrush, Chairman of the ICANN Board, Dec. 18,2008,http://www.icann.org/correspondence/baker-to-dengate-thrush-18dec08-en.pdf; NationalAssociation of Manufacturers,
Industry Comments to the New GTLD Program and Process 
, Dec. 152008,http://forum.icann.org/lists/gtld-guide/msg00157.html; AT&T,
Comments on the New gTLD Applicant Guidebook 
, Dec. 15, 2008,http://forum.icann.org/lists/gtld-guide/msg00171.html;USTelecom,http://forum.icann.org/lists/gtld-guide/msg00129.html; Internet Commerce Coalition,
Comments on Introduction of new gTLDs 
, Dec. 15, 2008,http://forum.icann.org/lists/gtld-guide/msg00150.html.
 
Page 2 Progress Snapshot 5.4 
whether there are other markets with similar issues, and if so how arethese issues addressed and by whom?
3
 To date, no proper “study”—based upon real facts and not the mere opinion of “experts”retained by ICANN—has been released. Instead, ICANN has published three“economic reports” that respond only in part to the Board’s demand for an economicstudy of the “full market” (as ICANN President and CEO Paul Twomey put it):
•
The “CRAI Report” by CRA International (CRAI or CRA):
Revisiting Vertical Separation of Registries and Registrars 
(October 2008);
4
 
•
The “Carlton Report I”:
The Preliminary Report Of Dennis Carlton Regarding Impact Of New gTLDs On Consumer Welfare 
(March 2009);
5
and
•
The “Carlton Report II”:
The Preliminary Analysis Of Dennis C arlton Regarding Price Caps For New gTLD Internet Registries 
(March 2009).
6
 These reports address some, but not all, of the questions ICANN Staff was required toanswer by the ICANN Board’s 2006 resolution. In many ways, these reports haveraised more questions than they’ve answered: The scope of their findings is much morelimited than required by the original mandate of the Board, and the reports fail toadequately address some of the fundamental questions raised by the Board.A timeline of events relevant to these economic studies is included as an appendix tothis article. This timeline reveals a number of anomalies and potentially inconsistentstatements that ICANN needs to address properly, specifically:1. When CRAI initially began reaching out to registrars for its report, it listed twoareas of research: new gTLD demand and vertical (registrar/registry) separation.It appears that, over time, CRAI’s priority was reversed with, vertical separationbecoming the focal point of their research. The CRAI Report makes no referenceto new gTLD demand.
So where is this research and when will it be published? 
2. In June 2008, ICANN staff communicated to a third party that CRAI hadproduced two reports that were pushed back for revision.
How many reports,including both drafts and proposed final versions, were pushed back to the report’s drafter by ICANN Staff? Can these various versions be made available? 
3. Kurt Pritz (ICANN’s Senior Vice President for Services) indicated to the GNSOCouncil on its 7 August 2008 meeting that a draft of CRAI Report would beavailable in a couple of weeks. During this same meeting he indicated that PaulTwomey would be involved in a call with CRAI the next day to discuss specificissues.
What were those specific issues and how did a report that was to be 
3.
See 
 http://www.icann.org/en/minutes/minutes-18oct06.htm 4.http://www.icann.org/en/topics/new-gtlds/crai-report-24oct08-en.pdf 5.http://www.icann.org/en/topics/new-gtlds/prelim-report-consumer-welfare-04mar09-en.pdf 6.http://www.icann.org/en/topics/new-gtlds/prelim-report-registry-price-caps-04mar09-en.pdf 
 
Progress Snapshot 5.4 Page 3 
released in two weeks, well before Cairo, get delayed by approximately two months? What role if any did Paul Twomey have in this delay? 
4. During ICANN’s 11 December 2008 meeting, Pritz stated: “CRA [has] also beenretained to undertake a study of the wider TLD marketplace and report onaspects of that and also give insight into new demand gTLD might be, this ispiece to a large engagement with Charles River.”
Where is this other study? 
 5. ICANN has not provided the community the ability to directly interact with theauthors of these reports, either in person or via a teleconference, to questiontheir conclusions/statements.
Why not? 
 6. The two Carlton reports, but not the CRAI Report, are labeled “Preliminary.”
Given that at least two drafts of the CRAI report were pushed back due to incompleteness, should the CRAI report not have included the same caveat? 
 Answers to these questions would provide important insight into the development of thenew gTLD process. The ICANN community deserves the benefit of a full and detailedstudy of the economic implications of ICANN’s plan for new gTLDs prior to itsimplementation. Such a study should address the questions raised by the ICANNBoard in its October 2006 Resolution, as well as issues raised in subsequent Boarddeliberations as outlined in the timeline set forth in the Appendix below. The issue ofhow, and even whether, to launch a new gTLD application process is too important toproceed without ICANN giving the community the opportunity to review and consider theimplications of the economic reports behind ICANN’s decisions.ICANN Bylaws clearly require that ICANN “shall operate to the maximum extent feasiblein an open and transparent manner and consistent with procedures designed to ensurefairness.” Unfortunately, some important pieces seem to be missing from the economicstudy “puzzle” that the ICANN Board mandated to get a better understanding of the “fullmarket” before making critical policy decisions. The only way the ICANN Board canassure the community that the actions of ICANN Staff on new gTLDs have been—or, atleast,
will 
be—based on objective factual analysis is for the Board to investigate anyunpublished economic studies, reports, opinions that might have informed ICANNStaff’s decision-making. Any such studies should be published to allow maximumtransparency and to facilitate a dialogue with the community about gTLDs.
 
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