Resolving the ICANN-Proposed
TLDs Debate
Alex
Tajirian
February 11, 2009
The Internet Corporation for Assigned Names and
Numbers (ICANN) has recently
decided to allow any entity to register a top-level domain name
(TLD). The best mechanism for valuing this decision, a mechanism
that outperforms crowdsourcing,
blogs, and committee decisions, is the legal and easy-to-implement
solution known as prediction
markets.
In handing down its TLD decision, ICANN never
identified the problem it was trying to solve. This gap has resulted
in numerous unresolved discussions and speculations.
The discussions have focused on whether:
- An open-ended generation of TLDs is needed—that
is, would it be value adding compared to the current case-by-case
decision?
- The open-ended proposal would create unintended
hardship for current brand owners, hardship that cannot be internalized.
The reasoning is that, to protect their intellectual property,
brand owners will not be compensated for any damage and thus will
incur the unnecessary additional costs of having to register their
brand names under each of the new TLDs.
How should ICANN and our community resolve the
above two issues? If ICANN were a for-profit organization, only
the first question would apply. But, as a nonprofit and a community-conscious
organization, ICANN also has to worry about the decision's negative
side effects, including brand dilution. In either case, prediction
markets can supply the answers.
The central strength of markets is that they
give participants the right incentive to disclose their private
information and tastes. In effect, participants are rewarded with
money when they get the price right, and they lose money when they
are wrong. Theory and evidence demonstrate that other view-aggregation
mechanisms are less desirable for handling the ICANN decision.
Let's take statistical crowdsourcing. Despite
its popularity, the technique is effective only when a majority
rule is used and when it's more likely than not that each participant
will answer correctly. Under such conditions, the crowd's decision
comes closer to 100% accuracy as the number of participants increases.
(An example of failure is when crowds are asked to guess the distance
between the earth and the moon, a topic on which each participant
is more likely to be wrong than right.) Thus, the approach would
not help us if participants had speculative reasons in favor of
increasing the TLDs, or if they believed their brands' value would
suffer because of the ICANN decision. Under such a scenario, expert
opinion is best.
Decisions by committee deliberations fail when
there are better coordination mechanisms. For example, the infamous
Soviet five-year economic planning system failed in favor of markets.
But one should not forget that, in the cases of Wikipedia and open source, the final product involves committee decisions
and filters. For Wikipedia, the final editor can make numerous changes. Apache, to take another example,
has adopted a system of e-mail voting, with complex rules to ensure
consensus within the Apache Group.
Blogs are not effective in aggregating diverse
information. I outline their limitations in a forthcoming essay,
but my claim is supported by the numerous numbers of posts and comments
on the topic on this blog alone. None have resulted in any convincing
understanding of the new TLD decision's implications.
Many corporate giants, including Google, HP,
and Microsoft, have successfully used prediction markets internally.
For example Google used them to answer how many people will use
Gmail accounts in the next three months. HP has used the mechanism
for sales projections, among other decision issues.
Nevertheless, once our community has experience
with one such market, future implementations would be much easier.
There is no better time to start than now. Moreover, such a market
is not difficult to set up and participants can easily be shown
how to take part. For example, each HP participant was given just
15 to 20 minutes of instructions.
There are a number of popular online software
vendors already available. In addition, there is available help
by experts to set up and make the interface easy to use. Legal concerns
are not an issue, since the markets do not place real money at risk
and therefore do not fall under the legal definition of securities
trading. Instead the rewards can be in virtual currency and gifts,
such as free domain registrations, hosting, free UDRP, free trademark
application etc.
Last, but not least, who should be entrusted
with the process? Is ICANN the best entity to manage the markets
and the follow-up steps of designing the allocation mechanism? The
answer may be simple, as this announcement gives us a clear idea
as to how ICANN works, and to many it is a sad case of déjà vu.
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