Re: Level playing field
There were two distinct groups of top level domain (TLD) originally.
The country codes (.uk, .us, .de, .io etc) which are operated under license from respective country. These domains are great for sites with a specific geographic location and help avoid name clashes, and also give useful information to end users of where the content is targetted to. In some of those codes they were then subdivided into categories (.co.uk, .org.uk, .ac.uk etc) whilst others just allowed domains directly below them.
Then there were the non-geographic domain names (.org, .gov, .com, .edu). These were principally designed for sites which didn't have a specific geographic location, but the US org tended to just use them anyway (everything is in america right?) hence .com becoming the dominant domain, and many US schools using .edu etc rather than the more correct co.us or ac.us if they had followed the UK scheme.
There is no real technical reason why you need the additional subdivision - as can be seen in countries that didn't do it, however humans do like categorisation and by splitting up companies from charities or schools it does allow the names to be repeated in different contexts, and also quick and simple recognition of what the subject is likely to be before reading it. E.g. originally an email coming from a .co.uk is likely to be marketing, from .org.uk a donation request and .ac.uk something academic.
More recently the industry have gone to the extreme of having lots of generic top level domain names (.bargains, .charity, .dating, .xyz). The only convincing argument for why these are a good thing is for those who wish to make money from them.. otherwise they just add confusion.