Now South Africa looks to second-level domain sales

South Africa looks to be the next country to start letting people register domains directly at the second level of its ccTLD.
Local registry authority ZADNA this week opened a policy consultation on allowing registrants access to direct, second-level .za names.
Currently, if you want a .za you have to register at the third level under the likes of .co.za or .net.za.
But ZADNA says second-level names will help it continue to compete in a market now populated by hundreds of new gTLDs.
The company said it has been “inundated” by calls for such a move.
The policy shift would see South Africa follow the the path beaten in recent years by UK, New Zealand, Kenya and (probably) Australia, which have all changed policy to allow second-level names.
But these things are never without controversy.
Domain investors are typically resistant to such moves, fearing dilution and the possible devaluing of their portfolios.
There are often also intellectual property concerns, and concerns about priority “grandfathering” rights when matching .co.za and .org.za names, for example, have different owners.
ZADNA is floating the possibility of auctions to resolve these kinds of conflicts.
The proposal (pdf) is open for comment until April 16.

auDA probably won’t pass on full Afilias savings to registrants

Switching .au’s back-end to Afilias will cut auDA’s per-domain costs by more than half, but registrants are not likely to benefit from the full impact of the savings.
auDA’s Bruce Tonkin, who led the committee that selected Afilias to replace incumbent Neustar, told DI this week that the organization is likely to take a bigger cut of .au registration fees in future, in order to invest in marketing.
That would include marketing the ability of Aussies to register .au domains at the second level for the first time — a controversial, yet-to-roll-out proposal.
Tonkin confirmed that the back-end fee auDA will be paying Afilias is less than half of what it is currently paying Neustar — the unconfirmed rumor is that it’s 40% of the current rate — but said that Afilias was not the cheapest of the nine bidders.
While .au names are sold for a minimum of two years, the current wholesale price charged to registrars works out to AUD 8.75 ($6.85) per year, of which Neustar gets AUD 6.33; auDA receives the other AUD 2.42.
A back-end fee of roughly $5 (US) per domain per year is well above market rates, so it’s pretty clear why auDA chose to open the contract to competition.
Tonkin explained the process by which Afilias was selected:

We first considered scoring without price, and Afilias received the highest score for non-financial criteria.
We then considered pricing information to form an assessment of value for money. The average pricing across the 9 [Request For Tender] responses was less than half of the present registry back-end fee ($6.33). Afilias was close to the average pricing, and while it was not the cheapest price — it was considered best value for money when taking into account the highest score in non-financial criteria.

I asked Afilias for comment on rumors that its price was 60% down on the current rate and received this statement:

Afilias believes auDA chose us based on the best overall value for the Australian internet community. The evaluation heavily weighted expertise, quality and breadth of service over price. While we don’t know what others bid, Afilias works to be competitive in today’s market. Attempts to price significantly higher than market without a value proposition are unrealistic and could even be considered price gouging.

It’s not known what price Neustar bid for the continuation of the contract, but I expect it will have also offered a deep discount to its current rate.
By switching, auDA is basically going to be saving itself over AUD 3 per domain per year, which works out to a total of AUD 9 million ($7 million) per year at least.
But the organization has yet to decide how much of that money, if any, to pass on to its registrars and ultimately registrants.
The auDA board of directors will meet in March to discuss this, Tonkin (who is in charge of the registry transition project but not on the board) said.
“We don’t want to set expectations that the wholesale price is going to change massively,” he said.
“I don’t expect it’s going to be any higher than the current wholesale price,” he said.
But he said he expects auDA to increase its slice of the pie in order to raise more money for marketing. The organization does “basically no marketing” now, he said.
“There’s certainly strong interest in doing more to market and grow the namespace,” he said. “One option is that more money is put into marketing the namespace and growing awareness of .au… That AUD 2.42, I expect that to change.”
This would include marketing direct second-level registrations, an incoming change to how .au names are sold that has domain investors worried about confusion and market dilution.
Outrage over the 2LD proposal — it appears to be a done deal, even if the details and timeline have yet to be finalized — has started attracting the attention of business media in Australia recently.
But auDA’s own research shows that opposition is not that substantial outside of these “special interests”.
A survey last year showed that 40% of .com.au registrants “support” or “strongly support” the direct registration proposal, with 18% “opposed” or “strongly opposed” Another 42% were completely unaware of the changes.
Support among .org.au registrants was lower, and it was higher among .net.au registrants.
But 36% of “special interests” — which appears to mean people who discovered the survey due to their close involvement in the domain industry — were opposed to the plan.
There’s no current timeline for the introduction of direct registrations, but the back-end handover from Neustar to Afilias is set to happen July 1 this year.
Neustar acquired AusRegistry, which has been running .au since 2002, for $87 million a couple of years ago.

Australia considers dumping the .com.

Australian domain overseer auDA is thinking about allowing people to register .au domains directly at the second level for the first time.
The organization has opened up a consultation that would allow registrations such as example.au, rather than just the current system of example.com.au, example.org.au and so on.
The move follows the successful recent releases of 2LDs in the UK (.uk) and New Zealand (.nz) ccTLDs and can be seen as a bid to remain competitive in the face of the new gTLD program’s huge expansion of TLD choice.
A consultation paper (pdf) published today reads:

It is suggested that unprecedented competition from new gTLDs requires .au to be more responsive to global market forces. For .au to remain a strong and highly-regarded TLD we need not only to rely on its distinctive Australian identity and good reputation, but continue to innovate in order to counter the likely impact of hundreds of new gTLDs flooding the market. Whilst .au is currently very popular with Australian users, there is potential for new gTLDs to erode the brand equity in .au.

Currently, .au has over a dozen different second-level options, but about 85% of registrations are in .com.au. The TLD has just shy of three million names today.
Complicating matters slightly, the different 2LDs have different registration policies, so auDA would need to figure out a way to harmonize them for direct registrations.
auDA speculates that direct registrations may increase the adoption of .au domain names by individuals not currently able to obtain .com.au names but unaware of the individual-focused .id.au (it exists, apparently), thereby growing the .au name space.
It also worries that many second-level direct registrations may turn out to be defensives, registered by the registrants of the matching .com.au names.
The consultation is open for comments until June 1.