An Economic Analysis of Domain Name Policy

One of the most important features of the architecture of the Internet is the Domain Name System (DNS), which is administered by the Internet Corporation for Assigned Names and Numbers (ICANN). The DNS is organized into a hierarchy of domains. The physical infrastructure of the DNS consists of name servers, which provides the information that directs name queries to the appropriate server. These facilities and devices are scarce resources in the economic sense, since they have a finite capacity and expansion is costly. The name space is scarce because each address (or set of characters) can only be allocated to one Registry or operator. From the economic perspective, therefore, the question arises: What is the most efficient method for allocating the root resource? Prior experience reveals that a case-by-case allocation on the basis of ad hoc judgments about the public interest is doomed to failure, and that auctions provide the best mechanism for insuring that such public-trust resources find their highest and best use