MIT researchers estimate the value of the domain name system (DNS) at $ 8 billion

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Since 1985, the Domain Name System (DNS) has played a vital but underestimated role in mapping names to Internet addresses. Domain names have significant value as an intellectual property and marketing asset, in addition to their ability to “channel the money of the Internet”. The market value of the global DNS ecosystem is approximately $ 8 billion per year, with additional value for domain names. This conclusion comes from an important new article Developments in domain name markets: technical, economic and political challenges presented to the 48e Telecommunications Policy Research Conference (TPRC48) by William Lehr, David Clark and Steve Bauer. The article represents another important step in the research of MIT Computer Science and Artificial Intelligence Laboratory whose researchers explore the fundamental scientific questions of the Internet. Clark was one of the early Internet pioneers who later served as its chief architect of the 1981-1989 protocol.

Over the past 10 years, the number of generic Top Level Domains (TLDs) has grown dramatically, from a handful of suffixes (.com for business, .org for organization, .edu for education, .gov for US government and .mil for US military) to nearly 1200. Including country code TLDs (.EU, etc.), this makes about 1500 TLDs. This evolution has given businesses more flexibility beyond .com to register their business addresses online and may even provide additional marketing value with suffixes like .baby, .cafe, etc.

The DNS is managed under multi-stakeholder global Internet governance coordinated by the Internet Corporation for Assigned Names and Numbers (ICANN). It sets the rules for the generic TLD registers such as Verisign (.com, .net) and the Public Interest Registry (.org) which provide wholesale second-level domain names to registrars like GoDaddy and Alibaba which are then registered for a fee by registrants like Forbes (i.e. Forbes.com). The primary domain name registration, 350 million and growing, generates approximately $ 8 billion in annual revenue. The secondary or resale market is $ 2 billion with the purchase and renewal of .com domain names. Calculating DNS market value is admittedly difficult as DNS activities are calculated within other business activities of large online companies, the decentralized ecosystem of the Internet itself, and the lack of transparency of players in the domain. in China and other countries.

The importance and relevance of DNS

The authors observe the intellectual property associated with domain names and the value of DNS itself as an integrated and reliable infrastructure. However, the change in behavior reduces the value and function of DNS by separating names from addresses. Search engines, content delivery networks, and digital object identifiers prevent the user from needing to access DNS. As users spend more time on mobile apps, DNS may not be used at all.

Another problem is the encrypted DNS protocol called DNS Over HTTPS or DOH which moves that DNS resolution to a new part of the internet. It could bring undue navigation control to large entities like Google and Mozilla. Normally, DNS is a separate service from the platform, but encrypted DNS shows how platforms can exercise control over points outside their network. This unintended consequence disrupts law enforcement agencies who are unable to locate registrants when traffic is encrypted.

Policy issues in DNS governance

The article explores the complex issues of market power, governance, regulatory oversight and ecosystem fragmentation. Few consumers realize this, but price controls have been put in place to allow easy and inexpensive switching from one registry to another (from .com to .org for example), similar to the portability of numbers. However, companies like GoDaddy and Network Solutions are not price regulated and can easily increase domain name prices without losing customers. If a business is going to have a certain domain name, it will likely buy it and / or renew it, whether the price is $ 10 or $ 100.

There is an existing domain name secondary market in which speculators or “domainers” buy desirable domain names in the hope of “returning” them for a higher price. The article cites a one-of-a-kind aftermarket study by the Boston Consulting Group (BCG) which estimates that 18% of .com domain names are currently registered exclusively for resale by domainers with an average price of 1,660. $ in 2020. These domain names are withdrawn from being made available at the general public price and therefore from productive use. In addition, buyers of domain names in this market suffer not only from price shocks (BCG estimates that prices are 150 to 200 times the usual registrar prices), but also from potential brand abuse, copyright, trademark and keywords.

The MIT authors suggest that this is not necessarily about added value in the economy. The lack of transparency in the secondary market is further problematic as governance actors cannot necessarily anticipate or monitor abuse.

Technically informed policy and policy informed technology

The document is part of a larger million dollar convergence accelerator project by the National Science Foundation to improve Internet security by studying its structural dependencies, ownership, and economic interrelationships. Funding for these vital multidisciplinary research projects has all but dried up in the wake of Covid-19. Federal agencies and businesses have tightened research budgets. Funding is needed to support quality academic research in the public domain and to improve the quality of policy debate. Understanding DNS and other Internet phenomena has never been more important. People increasingly rely on the Internet for work, learning, shopping, communication and health care. A major interdisciplinary conference on Internet policy now in its 49e year, TPRC49, is a forum for this and related academic articles. Summaries of articles, posters and panels for the September conference are expected on March 31.

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