there’s nothing special about any level of domains, it was always a hierarchical protocol
Of course, this could be trivially fixed if .name would take the shared part of every second level domain, treated it like a TLD for legacy customers, and turn it into a hierarchical system.
But they'd need to do that for possibly thousands of paying customers, there's no way they'd be able to afford that, Verisign only makes 1770000000 dollars of yearly revenue! Honoring these existing contracts would bankrupt them!
There's no strict need to do it, let alone to do it now, but an eventual transition does make sense, if spread out over a couple of years with guaranteed backwards compatibility and maintaining existing domains and ownership.
shame that there’s no room in the world for some creativity and we need to normalize the space of all tlds into the same uncreative .com clone
this is in large part pushed by custom tlds being at high risk of prices suddenly going up by 10 times or 1000 times.