July 9, 1999 4:25 PM PDT

ICANN defensive in letter to Commerce

The body leading the privatization of the Net's crucial address system today responded to a flood of Congressional questions about its authority and funding while facing new demands from the Commerce Department.

The Internet Corporation for Assigned Names and Numbers' (ICANN) more than 40-page letter aims to quell numerous concerns laid out by House Commerce Committee chairman Tom Bliley (R-Virginia), who late last month opened a probe into the nonprofit corporation chosen by the Clinton administration to manage the Net's core technical functions.

Bliley, who plans to hold hearings on the issue, criticized the body for holding closed meetings and for its plan to recover administrative costs through a $1 fee for each Net name registered by businesses or consumers.

But in an unexpected move today, the Commerce Department also took a dig at ICANN by echoing some of Bliley's concerns. In its own letter to the committee, the agency agreed that the meetings of ICANN's interim board should be public. Furthermore, Commerce stated that ICANN should not collect the fee on domain names until more permanent board members are elected by representatives of the Net community and industry later this year.

"ICANN should eliminate the $1 per-year per domain name registration user fee," Commerce's letter stated. "Although the user fee may be determined to be an appropriate method for funding ICANN's activities, it has become controversial, and we believe a permanent financing method should not be adopted until after the nine elected members are added to the ICANN Board in November."

ICANN was anointed in November to implement the White House's proposal to loosen Network Solutions' grip on the billion-dollar domain name registration market and shift maintenance of the Net's address system from the government contractor to the private sector.

For the past six years, NSI has been the sole registrar for names ending in ".com," ".net," and ".org," which are the critical linchpins that allow computers and Web sites to be live on the global network--similar to how telephone numbers connect households and businesses around the world.

The House Commerce Committee will use ICANN's response and Commerce's anticipated letter as fodder for hearings it is expected to call later this summer or in early fall.

Funding mechanism derailed
As previously report, ICANN is going broke, and in its letter to the committee it justified its plan to absorb $1 from every registered Net name via its agreements with more than 50 new registrars that are in line to compete with NSI.

"ICANN has never had any government funding, and in fact it has assumed responsibilities historically funded by the U.S. government without any commitment by the U.S. government to continue that funding," ICANN's response states.

Although it has a projected budget of $5.9 million for the fiscal year that began July 1, right now ICANN has less than $100,000 in the bank, according to interim president Mike Roberts.

The nonprofit corporation told the committee that it needs to collect the fee on Net name registrations to pay its staff, finance meetings, and ensure the stability of the domain name system. For example, ICANN plans to escrow registration data on a daily basis so that in the case a registrar goes out of business, the nonprofit can ensure that consumers' and businesses' Net addresses don't lose their sites.

Although ICANN is trying to get more corporate donations, the Commerce Department's statements today likely mean that ICANN won't collect the fee, which could threaten the future of the organization and possibly derail the historical transition of control of the Net's technical underpinnings.

During a public comment period, ICANN contends that it received little feedback about the $1 fee, and that both it and NSI agreed to the terms laid out in the White House's Statement of Policy, which says that "once established, the new corporation [i.e., ICANN] could be funded by domain name registries, regional IP registries, or other entities identified by the board."

Is ICANN open enough?
One other tough query ICANN had to tackle in its letter was how it came into existence, and why some of its board meetings are closed to the public. Since its inception, hopeful registrars and Net users have complained that ICANN's board members were picked in secret and have asserted that its deliberations should take place in public.

"In fact, all of the results of the ICANN decision-making process, and much of the actual decision-making, are fully accessible to the general public," ICANN stated. "No significant policy matter can be considered by the board without prior public notice and consideration of public comments."

Still, now Commerce is calling for open meetings as well.

"ICANN should immediately open its board meetings to the public. Transparency is critical to establishing trust in decision making," the agency stated in its letter today. "And trust is essential for ICANN's ultimate success."

ICANN's letter does offer some additional disclosure. It includes ICANN's official account of how each of its initial nine board members were picked--a process that has only been vaguely explained thus far, generating skepticism and mistrust among many.

"The original suggestions of those people who ultimately came to serve on the initial board came from private individuals, business organizations, trade associations, and officials of various governmental organizations," ICANN stated. The final candidates were picked by the late Jon Postel, who oversaw the Net address system before ICANN came into being. Then the "official invitations were issued on behalf of Dr. Postel by his counsel [Joe Sims]," the letter states.

ICANN: We're not a regulator
Countering NSI's complaints that ICANN is trying to regulate its business as well as those of the new registrars through operating agreements, the nonprofit insisted today that it is a grassroots organization, not a policy-setting body.

"If they come into existence, these contracts will be the product of voluntary agreements; since ICANN has no governmental power, and indeed no existence outside the context of community consensus, it cannot coerce cooperation," ICANN told the Commerce Committee.

Still, legal experts and other observers have said that ICANN has to ability to "make law" on the Net through its agreements. That's because to enter NSI's business, new registrars have to promise to comply with numerous terms and conditions, such adopting an impending domain name dispute procedure that could give offline trademark holders special rights to Net names even if they already are in use by someone else.

NSI has refused to sign the agreement. It says that under the agreement, ICANN could shut it down due to a provision that states ICANN can terminate accreditation within 15 days if a "registrar acts in a manner that [it] reasonably determines endangers the stability and operational integrity."

But ICANN's letter states that unless NSI signs on, there won't be a level playing field among registrars.

"ICANN neither has nor claims any 'authority to terminate NSI's authority to register domain names,'" ICANN stated. "Instead, the requirement that NSI must be accredited by ICANN to act as a registrar after the introduction of competition, so that it operates to the extent possible, given its continuing operation of the registries for '.com,' '.net,' and '.org,' under the same conditions as all other competing registrars, flows directly from NSI's own agreement with the U.S. government."

When it comes to NSI and ICANN forging an agreement, Commerce seemed to indicate today that the registrar must come on board.

"NSI's view is very clear. Its position is that when the Cooperative Agreement terminates, whether prematurely or upon its expiration on September 30, 2000, NSI will be free to operate these domains without any supervision by the Government," Commerce told the House committee. "The Commerce Department believes just as strongly that NSI does not have the legal right to operate these domains in the authoritative root in perpetuity."

Commerce goes on to say that it expects NSI to sign a registrar agreement with ICANN but didn't specify the extent of such a contract.

"NSI must fulfill its obligation to recognize ICANN," Commerce stated. "The transition of DNS management to the private sector can succeed only if all participants in the domain name system--including NSI--subject themselves to rules emerging from the consensus-based, bottom-up process spelled out in the White Paper."

 

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