Restrictions of Competition in Internet Governance

Abstract

This paper analyses and discusses the regulation of the DNS, i.e. the system of Internet unique identifiers. There is a widespread belief that this industry needs a regulator, be it a private one in which all stakeholders could be represented, or rather a public international one in which all world governments could be represented. In this power struggle, an issue was left substantially underexplored, that is whether a regulator is needed in the first place and what the object of the regulation should be.

The paper aims at exploring the possible answer to such questions, on the basis of an economic analysis of the industry. After having described the technical characteristics of the DNS, the paper presents the current structure of the DNS industry and attempts an economic analysis thereof, in search of market failures liable to justify a regulatory intervention. In particular, it questions the unsubstantiated assumption that the DNS industry shows the characteristics of a natural monopoly. Further, it contends that the actual reasons why this industry has, at least in some segments, not evolved towards competition rather have to do with network effects, as exploited by the dominant operators by means of arguably anti-competitive behaviour. Subsequently, the paper analyses the distortions of competition caused by the current DNS governance model. It focuses on the one hand on the exclusionary behaviour towards new entrants at several levels of the market and on the other hand on the dubious agreement recently entered into by the two main players in the industry. The last part suggests some possible options for a reform of the management of the DNS with a view to reducing unnecessary distortions of competition.

Keywords: Competition, Regulation, Domain Name System, ICANN, Verisign

JEL Classification: K21, K42, L44, L51, L96