To your first point, large numbers of sLDs are not in fact used for websites. There are at least two reasons for this. One is that a domain name has a myriad of other uses than just for a website. Domain names were in use long before Tim Berners-Lee et al came up with the HyperText Transfer Protocol. The second is for a number of somewhat related reasons, speculators, defensive registrations, the dotbomb implosion. For examples of domain (mis as well as un)use one could check out some of the work [harvard.edu] of Ben Edelman. Additionally, we are not talking about the same item in an inventory. ICANN controls the root zone, registries control the TLD zone, registrars control the sLD zone, speculators and others control the resale zone.|
To your second point, I submit, and have said so here, on the DNSO GA list, and elsewhere for more than a year now that the pyramid would be, and for some time now has been, collapsing. One need look no further than the tepid response to ICANN's last rollout of TLDs (at the sLD level), or the renewal numbers for existing domains, if one wishes proof of an implosion.
Finally, you are responding to my, until then, only post regarding Pyramids on this thread, I am not (normailly) Anonymous, so if this is tedious (and I don't find it so), I can only cop to a minority of the tedium. -g