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Big Rumble in Tokyo Over JPRS's Announcement to Offer gTLD Domains

In an announcement at a registrars meeting in Tokyo on October 19th 2010, JPRS announced that they would be offering generic Top-Level Domains (.com, .net, .org, etc.) to their .jp accredited registrars in the near future. JPRS is already famous for their double-dipping practices, acting as both registry and registrar for .jp domains, for their dubious "campaigns" which are aimed at being dis-advantageous to smaller registrars and for their famous registrar back-end "system" which is circa 1995 technology and even prone to accidental DOS attacks by registrars trying to simply drop-catch domains. Now they are an ICANN accredited registrar and plan to piggy-back gTLD registrations onto their .jp platform, which is accessed by their 700+ registrars.

Whereas we hear about the "bottom up process" throughout the domain industry around the world, we have a "top-down", "dictator-style" registry model in Japan. Let's take a look at how this evolved. Up until the year 2000, JPNIC (a not-for-profit association) was the organization which managed all domains and IP addresses in Japan. In the latter part of 2000, JPRS was established as a for-profit Japanese corporation which was given the task of launching top-level .jp names and over the course of several years, taking on management of all .jp domains. The Japanese government blessed this arrangement by approving the transfer and giving approval to ICANN. At that time, JPNIC was given the task of "over-seeing" JPRS to make sure their activities were in the best interest of society, business, technology and the government. But this was just the beginning of where the situation gets extremely interesting. JPNIC and some of its employees became share-holders of this for-profit monopoly called JPRS, becoming a band of share-holder brothers, self-supervising themselves, and in the meantime, receiving governmental monopoly protection.

This arrangement would make sure that JPNIC's "over-site" task would guarantee that JPNIC's motives would be driven by making sure JPRS becomes as profitable as possible with complete disregard for the end user and the many companies working so hard to build and promote the .jp product and brand. How could the Japanese government approve this monopoly? It's a mystery to all of us except those shareholders who enjoy JPRS's profits. At a wholesale .jp price to its registrars of about US$30, and about 1.1 million registrations under its belt, JPRS has an annual revenue of at least about US$30 Million, on the registry side alone.

Lets look at some of the huge problems and failures of JPRS:

IDN scandal – There is also the IDN (Internationalized Domain Name) scandal JPRS had back in 2002 when Real-Names filed bankruptcy (see related article)

Biased campaign fixing – If you dissect the ins and outs of their "campaigns" they are really aimed at making the big registrars bigger and the small smaller. Registrar campaigns are voluntary, but the stakes are high. Sign up for a campaign and you get domains for a much lower discounted price. But you are required to commit to a volume mark that the registry sets. If in one year your volumes are not met, they back-charge you for the difference between the discount rate and normal prices for all the domains you registered in the last year. A big company with deep pockets can take a risk like this, but small companies trying to grow just can't. So the result is that big companies essentially get domains at lower prices than smaller entities.

Registry/registrar NON-separation policy – When JPRS launched their registry business back in 2001, they simultaneously launched a retail domain site. They received much criticism for this, but when posed with the question of why set up a registrar, their answer was "to help registrants who are in trouble". So if a registrar goes out of business and their users have no place to go, JPRS would be the friendly neighbor and manage their domains until they found a new registrar. JPRS initially set their prices high, so it did appear they were making an attempt at being true to their initial statements. They also did not make it easy for users to newly register domains and they offered a list of registrars when domain availability checks were performed. But once they got the registrars off their back about the initial launch of their retail site, they slowly made subtle changes. Today, their retail site does not offer up a list of registrars, they have slashed their prices in half, and now boast an estimated top 5 position in volume rank in Japan among almost 800 registrars.

Free domains for advertising, campaigns and informational sites – Because they are the registry, it is like the central bank printing its own money to spend. When they need domains for sites, campains, advertising, etc. they can just register and use as many as they want. If this were a small list of 100 or so I dont think there would be an issue, but it seems that JPRS has taken the liberty to register thousands of domains for its own use.

gTLD domain launch to take advantage of their current customer base – JPRS became accredited as a registrar in 2009. A lot of companies became concerned about this bold step. JPRS emphasized to the community that they knew their current .jp system was outdated and weak and needed upgrading. Therefore, if they became accredited, they would be able to "study" how the EPP registration system works. They made it clear they had no intention of selling gTLDs. Now, a year later, they have decided to indeed begin selling gTLDs and compete with Japanese registrars in a new competitive arena.

To conclude, I want to leave us with some interesting numbers to ponder. There are about 3.5 million gTLD's currently registered in Japan, this is about three times the volume of .jp registrations. We also see that the price for gTLD's is about 1/3 that of a .JP. In my opinion, there is a direct correlation between price and volume. Also, there are about 130 employees at JPRS managing 1.1 million domains. I think we can see examples of hard-working registrars with MORE than 1.1 million domains, also selling hosting, email, SSL and packages of other bundled services, doing all this with LESS than 130 employees. It makes one wonder what all these employees are currently doing and what the company's plans are for them in the future. In the last week we have seen an explosion of criticism in the domain community in Japan and I look forward to seeing how this turns out. All I can say is that if JPRS is not stopped, they will venture into many new businesses and eventually the .jp registrar system will be obsolete. Companies in Japan who sell both .jp's and gTLD's will wake up wondering how JPRS not only has the governmental backing as a registry monopoly, but how and why they ended up monopolizing the entire Japanese domain registrar market.

By Darshaun Nadeau, President, WIXI, Inc.

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