DSTI/ICCP/TISP(2004)2/FINAL 
a greater number of not for profit registries to participate.  On the other hand, auction design might also be 
used to try to deal with any such objectives. 
Fixed fee 
Unlike an auction, a comparative selection procedure can determine the final entry price in advance of 
the resource being allocated and separate from the determination of successful candidates. This might be 
seen as an advantage if the objective is to set a low or high fee. The mechanism does not, however, set out 
to find the market value of the resource with other criteria being given greater weight. However, it is also 
possible to design a comparative selection procedure where one of the criteria, which is given weight in the 
selection procedure, is the level of the fee a candidate is willing to pay or, in the case of the DNS market, 
the maximum price the prospective registry is willing to charge registrars. If an auction mechanism is 
being used it is also possible to require registries to set a maximum price for registrars. This would still be 
done through contractual negotiation. 
At present, ICANN specifies the maximum amount a registry can charge a registrar for any 
registration. If that fee is USD 6, for example, then prospective registries may be willing to undertake that 
function with a lower maximum fee per transaction (
e.g.
 USD 5 or USD 4 and so forth). If this reduction 
were to be passed on to end users that could be seen as an advantage, and consequently it could be argued 
that this criterion should be given a significant weighting in the comparative selection process. A further 
advantage is that it provides the comparative selection process with a verifiable criterion with its attendant 
benefit of transparency. 
One question that can be raised is whether such a reduction would be passed on by registrars. The 
answer can most likely be found in the existing market for gTLDs. Some registries charge prices that are 
very close to the underlying registration fee which they pay registries and they would, in all likelihood, 
pass on any reduction. Other registrars, on the evidence to date, would probably not pass on the reduction 
to end users as long as their customers appear to be relatively insensitive to the price of their registration or 
place a higher value on other aspects of service. 
Forecasts may matter less 
The type of expertise required to succeed with a comparative selection procedure is different from the 
one needed for a successful auction. Because less emphasis is placed on price 
per se
, forecasts over the 
future market for domain names, future demand and so forth are not so crucial to market entrants. Instead, 
financial and technical experts determine a prospective registry's ability to supply the market from their 
current financial situation and technological base. Some of these elements are observable and verifiable by 
a third party. On the other hand, firms may not be required to reveal their true valuation of the market in a 
comparative selection process and ICANN may not admit a new gTLD to the market if a forecast showed 
low prospective demand. Indeed, there may have been an incentive for candidates to inflate their 
projections beyond their own true expectations. 
Possibility to include broader objectives 
One of the reasons that some governments favour comparative selection over auctions in the 
allocation of licences to use the radio spectrum, is that they believe they have a greater ability to encourage 
operators to build social objectives into their proposals. However, with both auctions and comparative 
selection procedures any social objectives can be made a requirement.  If such social objectives are not met 
then the seller has the right to withdraw the right to exploit the gTLD from the buyer. Auctions can have 
 49 




  

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