I follow the development of .nz with great interest from several points of view.
First of all I have an obvious commercial interest in a large range of stable TLDs because of my involvement in the domain registrar iWantMyName. We currently offer around 100 TLDs for registration to an international audience (about 80% US based) and are - based on zonefile statistics - NZ largest gTLD registrar. We operate in different modes for NZ based customers and international customers. For locals we show NZ domains on the top, for international customers we show nz quite low in the list because internationally .nz - as a third level TLD - is simply not as sellable as other second levels. Unfortunately it is not only us that think that way. Before the iWantMyName team moved to NZ all of us were involved in large scale registrars in Europe. None of our previous companies ranked .nz high because of the third level restriction. The only third level TLD we ranked relatively high in Germany was .uk for it's obvious geographic proximity to the German market - however sales were not as big as for other second level ccTLDs. From an international point of view, not opening the second level means in the future a rank behind all the new generic TLDs and therefore eventually a drop out of domain search engines that offer a wide range of TLDs. Internationally the choice between a .gen.nz and a .blog is from a marketing point of view an obvious choice, against .nz.
My second angle on .nz is my passion for registries. I was quite involved in the .de, .ch and .at communities and the responsible registries and know the issues they struggled with and the challenges they faced. An ongoing theme in all registries I know is future proofing. Pretty much every registry I know is currently trying to find out how exactly the raft of new TLDs will change their market share. One thing that is pretty obvious is that the market will change, trying to sweep that under the carpet can be dangerous. We are quite fortunate with .nz in terms of reliability of the DNS and the reputation the TLD has. Just banking on that and the fact that everything will just continue as it is, however, is a thing of the past. Third level openings have resulted in other TLDs in a better overall performance over time and gave more clarity to the users, both local and internationally. We, as the community around .nz, have to pick up things like this and change the policy to bring it up to date. We want a registry that remains stable and we want a registry that continues to be able to build and pay for the outstanding technology that delivers the reliability that we are used to.
The other thing that bugs me with third levels in NZ is that the concept is clearly influenced by .uk which has about 15x the national market compared to New Zealand. Working with a third level model works there because of a huge number of domestic registrations over .nz which has to rely on international registrations as well due to its size. This will become more of an issue in the future when we start seeing domestic registrations going more and more to other TLDs.
My third angle on the .nz TLD is my involvement in the startup community in New Zealand and overseas. iWantMyNAme is sponsoring free domains to every startup that participates in "Startup Weekend" events in New Zealand and we track the TLDs used in those events. This is, in my view, a very important demographic as this is the type of industry that we hope to grow in New Zealand. It is a domestic market of highly motivated and highly skilled entrepreneurs that goes through an intense mentoring program during that weekend that includes a thorough market analysis.
The number of .nz domains that get registered at those events is embarrassing. We have events where not a single .nz domain is even considered and that is local startups mostly trying to sell into a local market. We have, however, strong uptakes of .co domains and other more outlandish TLDs. This brings me to the change in demographics that many of us old geeks in the community try to blank out. A third level TLD is simply not what the market wants today.
The DNS was never built for a market but we are now relying on it to pay for our infrastructure so we may as well consider it. Looking at the current demographic "the internet" often starts on Google. This means for us two things, either we make the domain shorter and more memorable or we lose the customer to Google because it is too hard to type the domain. Once we have Google as the interface the TLD is mostly irrelevant, this means any TLD will do and the decision often comes down to price or things "that look cool". The important bit to remember from this change in our target audience is a widely unscientific and very spontaneous way of getting a domain and anything that does not make up for an easy to remember name will not be chosen. The fact that third levels rarely make up memorable names does not help the uptake of .nz in that demographic.
Even if we don't look at the international market and only focus on the domestic market, the change in the TLD landscape and the growing internet literacy of our customer base will change the usage of .nz domains. From our registrations of domestic customers we can see many that choose a "geeky" TLD like .io over a .co.nz simply because it looks better. Once we start loosing the local market to other TLDs we start to need a international exposure even more to counter balance those losses.
A myth that I would like to bust is that partitioning a second level helps figuring out where to find something (guess a domain). The general public has no idea what the different acronyms mean and simply go for whatever is free or change the name if .co.nz is taken already.
I still struggle to find the radio station "the rock" online and repeatedly land on the church page with the same name - and I struggle to see the relation between a radio station and network operators.
For all of the above reasons I would highly welcome a second level opening and honestly think that .nz is not in a viable commercial position to run the TLD if it does not try to react to the changes that are about to happen on the global stage. I am not talking about the TLD becoming unstable in the near future but, if we try to look forward 10 years from now, then the picture of a third level pacific island TLD may look a lot less friendly then it looks today. Opening up the second level may help keeping out beautiful .nz stable.