A recent article in People’s Daily Online describes the rapid decrease in domain name registrations in .CN, the country code TLD for China (under which there are over 30 second-level extensions) over the past year. The amount of registered .CN domains has fallen from 13.7 million to just over 6 million in the year that has passed since China’s Ministry of Industry and Information Technology imposed new regulations to govern .CN registrations.

In 2007, as part of an effort to encourage the use of .CN domains, the China Internet Network Information Center (CNNIC) allowed domain names to be registered for just one yuan apiece. This is roughly equivalent to 15 US cents. By December 2009, the number or .CN domain names had reached 13.7 million.

The Chinese government realized that reducing the registration price so drastically had opened up the domain name space to cybersquatters who were registering infringing domain names in order to profit off them. As far back as 2007, experts were noticing that cybersquatting in .CN was on the rise. Since cancelling the one yuan registration program, the number of .CN registrations has fallen by more than half, and many of the dropped registrations were cybersquatted domains. According to Zhang Xiangdon, CEO of one of China’s largest domain name registrars, the cancellation of the program managed to eliminate most “ineffective” domain names, or those that had been registered speculatively, i.e., cybersquatted.

These events – the liberalization of the .CN space and then reinstatement of higher registration costs – should serve as a valuable lesson here in the U.S. and all over the world about how policy changes can affect cybersquatting. If registration costs for domain names are low and regulations are loose, cybersquatting will abound. If the costs are higher and regulations tighter, the cybersquatting business model becomes unprofitable and risky; therefore, many would-be cybersquatters decide against registering infringing domains.

Here in the U.S., the .CN example should give lawmakers the impetus to reform ACPA, the Anticybersquatting Consumer Protection Act. Now over ten years old, ACPA has a lot of room for improvement. The changes in .CN prove that revising ACPA in an effective way will force cybersquatters to drop squatted domain names and enable a market-based correction of the cybersquatting epidemic. Today, too many squatted names cloud the domain brandscape, making it too difficult for brand owners and law enforcement to adequately police, and therefore unsafe for consumers. With fewer brand-infringing domains, it will be easier for “brand cops” to more adequately police the space and protect consumers from a range of cyber assaults on their privacy, physical safety, and financial security.