Effects of a Norwegian domain name policy regulated by quota
This document analyses and discusses the positive and negative effects of a domain name policy that restrict the number of domain names that each domain name holder may register.
The domain name policy for .no originally fell into the category of strictly regulated domain name policies, but in February 2001 Norid implemented a transition to more liberal regulations. The basic premise for the change was a desire to give priority to freedom of choice and fewer restrictions for the applicant over the desire to prevent illicit registrations of domain names. After a public inquiry, it was decided that applicants should no longer be required to document rights to the domain name they wish to register. To place some limits on speculation and warehousing, it was however decided to set a quota for the number of domain names which each domain name holder may register.
This document describes the positive and negative effects observed during the five years that the .no domain has had a domain name policy regulated by quota.
High renewal rate
From January 1st 2005, domain name holders under .no have had to actively renew the domain in order to keep it. The renewal rate has been more than 90 % each month since the new scheme was introduced. This is a high renewal rate compared with comparable top-level domains; for example, .uk has 62 %, .com 70 % and .dk 83 %. This shows that domains under .no are registered with a view to long-term use to a greater extent than those under other top-level domains. Experience from other countries suggests that we can expect a further increase in the renewal rate in the coming years.
The high renewal rates are probably a result of three different factors:
- The fact that previous domain name policies under .no have been fairly restrictive means that a relatively high volume of early users had time to assess their needs and find good domain names that they will keep for a long time.
- In contrast to individuals, organizations mainly register domain names associated with products and enterprises that have a longer lifetime. The fact that only organizations can register domain names directly under .no thus encourages a higher degree of domain name registration for long-term use.
- In addition, the quota limitation on the number of domain names per domain name holder contributes to the high renewal rates. While only 0.2 % of the domain name holders have filled the quota of 20 domain names, the fact that there is a limit at all appears to have an effect on the usage pattern.
The high renewal rates mean that the .no domain has a relatively stable name space, and a user can expect a web address or an e-mail address to function for a long period.
A quota system imposes some limits on the possibility of earning money on the domain market through purchases and sales of large numbers of domain names (domain speculation). This phenomenon is especially common under the .com domain, in which there are no restrictions on who can register what. Domain speculation depends on a large enough market for the domain names in question. The problem may thus arise under other top-level domains than .com as the market for their names develops enough to be of interest to professional speculators.
To some extent, the quota also restricts registration of names that infringe on the rights of others (domain-name piracy). A typical example of domain name piracy occurred under .se in Sweden after the regulations were liberalized, when a single applicant registered thousands of incorrect spellings of well-known trademarks. The .se domain has an alternative dispute resolution system in line with that of .no, but the sheer volume of complaints meant that it took time to sort this out.
Other effects of not having a quota include the problem observed in the Netherlands, where the domain names that customers have requested are registered by certain registrars for themselves. This makes it almost impossible for the customer to change registrars, since the registrar is the de facto holder of the domain name. At the same time, there is little that the registry or others can do about the situation, since it does not contravene Dutch law as long as registrars explain to their customers what they are doing. The fact that .no has a quota helps to create obstacles to this kind of business model among Norwegian registrars.
Domain names are a limited resource. It is therefore desirable to limit the number of domain names available to each applicant, to prevent a few early applicants from taking most of the names. This could have been solved by raising the price to make warehousing expensive, but this conflicts with Norid’s principles of providing a cost-effective service. Instead, regulating by quota has been chosen to prevent warehousing.
The quota system probably also causes domain name holders to go through their domain names at regular intervals and delete the names they do not want, which releases names for other applicants.
A real obstacle for some
It is a familiar principle that if you have no restrictions on a resource, a minority of the players will control the majority of the resources. When we compare the number of organizations with the number of domain names each organization controls, this principle seems to apply to domain names as well, as the figure shows. In the distribution, the great majority has one or two domain names. If no quota for .no had existed, we can assume that the distribution would have continued along the grey trend line.
A consequence of the quota is that certain organizations have stopped at a lower number of domain names than they would otherwise have had. This is reflected in the graph for organizations with 15 domain names (previous quota) and 18, 19 and 20 domain names (the area around the current quota). Analysis of the organizations in the upper region indicates that these are largely organizations that want domain names to meet their own needs.
In addition, the quota imposes a limit on how much a registrar can gain from the sale of domain names to a single customer, and how much the registry can earn in total. This means that removal of the quota would be in the registrars’ interest.
Society’s opinion of the quota
To obtain an impression of how the quota is perceived in Norwegian society, primarily by the Norwegian organizations that can register domain names under the current domain name policy, Norid has conducted two surveys.
One of the surveys was directed at the public, represented by 1046 individuals. Their responses to the question on their opinion of the current quota restrictions were as follows:
- 3 % feel that the quota is too small
- 53 % feel that the quota is the right size
- 21 % feel that the quota is too large
- 3 % feel that the quota should be removed altogether
- 20 % have no opinion about the issue
Only 6 % of the respondents feel that the quota should either be increased or be removed. Thus we can conclude that the current quota system is accepted by the public.
In addition, Norid has conducted a survey directed at 500 organizations registered in Norway’s Central Coordinating Register for Legal Entities (Enhetsregisteret). Their responses to the same question were as follows:
- 2 % feel that the quota is too small
- 71 % feel that the quota is the right size
- 18 % feel that the quota is too large
- 4 % feel that the quota should be removed altogether
- 5 % have no opinion about the issue
The figures show that the great majority of the organizations have accepted the quota and feel that it is at an appropriate level. As expected, the proportion of respondents who have not taken a position on the issue is lower among the organizations than among individuals. This is probably because the organizations can in fact register domain names directly under .no, and are thus more likely to have an opinion about the size of the quota.
Balancing the different interests
For the great majority of the .no domain name holders, the quota system is no problem. It represents no real limit for them, while the quota makes it more likely that a given domain name will be available should the need for one more name arise.
Users of the .no domain probably benefit from a quota, provided that the quota is not too low. A quota contributes to a more stable namespace and to registration of domain names for long-term use.
At the same time, what ever size is chosen for the quota, it will entail limitations for some parties. This applies to a clear minority of the domain name holders, but it affects large organizations, such as large shareholder companies as well as government agencies at State and county level. The quota also has positive effects for them in the form of a more stable namespace, less domain name piracy, etc., but these are the ones who pay the price for the advantages a quota system gives to the community.
A domain name policy regulated by quota has both advantages and disadvantages, and the domain name policy model chosen for a top-level domain depends on what the local Internet community regards as most important. As the needs of the local Internet community change over time, the domain name policy will also be changed. It is important to be aware that it is relatively easy to liberalize a restrictive policy, but it is extremely difficult to go back and restrict a liberal policy. One must therefore ensure that the local Internet community understands the consequences of a change before it is implemented.
The domain name policy for .no is assessed continuously. This year, Norid has evaluated the quota system to ensure that it is still in line with the needs of Norwegian society. On the basis of the analysis above, Norid concludes that a domain name policy regulated by quota have broad support among the Norwegian society, and that for the great majority a quota system results in more advantages than disadvantages. The size of the quota also appears to be at a roughly correct level.
Based on this, Norid is not currently planning any changes in the quota system. The issue has also been discussed with Norpol, which includes among others representatives from ICT Norway, the Consumer Council of Norway, the Norwegian Patent Office (Patentstyret), the Ministry of Government Administration and Reform, and the Norwegian Post and Telecommunications Authority. Norpol supported Norid’s assessment.