March 2, 2004 4:00 AM PST

If ICANN can't, who can?

A lawsuit accusing a key Internet agency of stymieing innovation could lead to fundamental changes in the way the global network is run, threatening an already tenuous balance between commercial and public interests online.

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What's new:
VeriSign has filed an antitrust lawsuit against the agency that oversees the Internet address system, highlighting years of conflict between commercial and public interests.

Bottom line:
The suit could invite responses from the Department of Commerce, the U.S. Congress or the United Nations, which could decide to affirm ICANN's regulatory role or supplant it with a completely new structure.

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VeriSign last week lashed out against the Internet Corporation for Assigned Names and Numbers (ICANN), saying the group violated antitrust laws by repeatedly preventing Mountain View, Ca.-based VeriSign from launching new services based on its control over the master database for Net addresses that end in .com and .net.

On one level, the lawsuit represents a straightforward business dispute between two powerful groups, the nonprofit ICANN and the for-profit VeriSign, over terms in a densely worded contract. On another, though, it stands as the first outbreak of public hostilities between the twin titans that effectively control the domain name structure that is the defining characteristic of the Internet. The result could have a long-term impact on e-mail, Web browsing, and how domain names are bought and sold.

"We are at that incredible pivotal point where we have to make a transition to commercial entities running this and having the ability to create innovative new products and get paid for them," VeriSign CEO Stratton Sclavos said in an interview last week.

ICANN is no stranger to controversy and litigation; it's been sued about 10 times in its relatively brief existence. But this lawsuit is unique because it calls into question the organization's ability to function as a kind of Internet regulator. Depending on the outcome, the lawsuit could invite responses from the Department of Commerce, the U.S. Congress or the United Nations, which could decide to affirm ICANN's regulatory role or supplant it with a completely new structure.

VeriSign's lawsuit comes at a crucial time for Internet governance. National governments have complained about how ICANN has managed country code domains. And last week, in a shot across ICANN's bow, the International Telecommunication Union (ITU) convened a meeting in Geneva to discuss the issue.

In addition, a proposal currently in the U.S. Congress contemplates transforming ICANN into a federal advisory committee, effectively ending its unique, pseudo-independent status as a separate organization that has a contract with the U.S. government.

Complicating matters further is a second lawsuit that ICANN was slapped with on Friday. Filed by domain name registrars, it claims that ICANN's Wait Listing Service unlawfully favors VeriSign over plaintiff companies Name.com and RegisterSite.com.

ICANN representatives were in Rome for a meeting that began Sunday and said they were still reviewing the lawsuit. "I don't get it," ICANN spokesman Kieran Baker said on Friday. "It doesn't make sense to us. They've worked with us in other areas."

Roots of controversy
For all the rancor that has arisen over the years, ICANN represents a relatively new attempt at inventing an international structure for overseeing the core functionality of the Internet. Efforts like ICANN's Internet-wide elections for board members, a first, were genuinely novel. Because of the organization's youth, though, important questions like whether its blessing from the U.S. Department of Commerce immunizes it from antitrust laws remain unanswered.

That topic has long been the subject of speculation. Michael Froomkin, a law professor at the University of Miami, and Mark Lemley, of the University of California at Berkeley, have written an article that concludes ICANN could be found guilty of antitrust violations. But they also speculated that in some cases, so could its foes: "VeriSign will face antitrust liability for persuading a private company in a position of power to grant it control over a market."

The VeriSign dispute comes some 20 years after researchers and technicians at the University of Wisconsin laid the foundation for the Internet's domain name system with the creation of the first "name server," allowing ordinary words to represent numeric Internet Protocol addresses. The system offered an easy way for people to navigate the Internet and remember destinations, but it also planted the seeds for later controversy when the U.S. government formally approved commercial uses of the Internet in the late 1980s.

At its deepest level, the VeriSign suit highlights opposing philosophies of commercialism and nonprofit communitarianism that have wrestled ever since--and could presage bitter, new confrontations ahead. To VeriSign, the .com and .net database is a corporate asset that can be exploited up to the letter of its contracts with the U.S. government and ICANN. But many others view the master database for the world's most popular domains as a public trust that should not be the unique property of any for-profit corporation.

Ever since ICANN's birth in 1998, its relationship with VeriSign has veered between chilly and cordial. In 2001, it agreed to extend VeriSign's monopoly over .com and .net and helped the company fend off objections from Reps. John Dingell, D-Mich., and Edward Markey, D-Mass. The two also worked together on moving .org domains from VeriSign's control to the Public Interest Registry.

But VeriSign chafed when ICANN proved less helpful in expediting its plans for new businesses based on the domain name database. Irritation burst into open conflict last fall, when VeriSign launched a new service known as Site Finder that took control of all unassigned .com and .net domain names, redirecting nonexistent Web addresses such as misspellings to a page run by the company. In its defense, VeriSign argues that other, smaller top-level domain operators had been allowed to do the same thing without objection from ICANN.

But the move sparked a violent reaction from Web technicians, who pointed out that Site Finder wreaked havoc on many e-mail utilities and antispam filters by rewiring a portion of the Internet that software designers always had expected would behave in a certain way. In an unusual move, ICANN convened two hearings about Site Finder in Washington, D.C., and later ordered VeriSign to pull the plug on the service.

Site Finder is one focus of last week's lawsuit, which asks the court to block ICANN from interfering with its reinstatement. The suit also lists 43 pages of grievances alleging that ICANN repeatedly thwarted VeriSign in its attempts to cash in on its master database for .com and .net.

The University of Miami's Froomkin says that ICANN may have made the right choice in shutting down Site Finder, but it faces the real possibility of seeing its powers curtailed.

"In the short run, we're better off without Site Finder," Froomkin said. But "in the long run, there isn't any reason why ICANN ought to be allowed to control the business models of registries. (VeriSign has a) credible contract claim (and a) plausible antitrust claim."

One public vote of confidence came from Register.com, which sells domains in more than 40 extensions, including .com, .net, .de and .jp. "We think that VeriSign's going too far," said Elana Broitman, Register.com's policy director. "We have great confidence in ICANN's leadership and the fact that they're really trying to make good changes. We want to work with them to do that."

If not ICANN, then what?
VeriSign is seeking injunctive relief that would bar ICANN from interfering in its business plans. But the company could get more than it bargained for. ICANN has won few fans over the years, and critics are standing by waiting for their chance to overhaul or replace it.

The United Nations has already made moves to position its ITU as a candidate for an ICANN takeover.

A presentation by Tim Kelly, the head of the ITU's strategy and policy unit, made a pitch for the organization to supplant ICANN, at least in part. It touted the strengths of the ITU as neutrality, "international legitimacy, credibility and accountability," and "observance of due process."

Not everyone would welcome such a change, however. ICANN defenders suggested that critics of the agency should be careful what they wish for, given the alternatives.

"The U.N. tends to be a very slow moving vehicle," said Register.com's Broitman. "It's very bureaucratic. Frankly it doesn't give the private sector a seat at the table very often, and so from that perspective it's highly unlikely we'll see the same kind of innovation and efficiency that we see in ICANN."

Paul Levy, a litigator at the Ralph Nader-affiliated Public Citizen group, contemplated suing ICANN years ago. But his group chose not to for fear that the alternative--direct government control of the Internet--might be worse than the closed-door meetings and penchant for secrecy that characterized ICANN during portions of its existence.

"Our concern was if, for example, Congress has to regulate this matter, or if we turn this into a United Nations body, are we going to be better off or worse off?" Levy said. "It seemed to us at the time, four years ago, that we ought to give ICANN a chance to function and see how bad a job it does before we open (the) Pandora's box that would be opened if these matters were litigated."

Now, Levy said, the VeriSign lawsuit might do just that. "What VeriSign has done is made the practical judgment that from its perspective, things have gotten so bad that they're willing to take the chance of possible destabilization," he said. "I think Pandora's box is about to open...I'm worried about where we're going. But it may be that we have to face that uncertain future at this time. Once a major player like VeriSign starts raising these questions, they may become unavoidable."

Commercial versus public interest
For his part, VeriSign's Sclavos is an unapologetic advocate of greater commercialization of the core of the Internet. "A transition needs to occur, going from purely academic and public sector funded to something that is now a mix in-between," Sclavos said last week.

If that sounds a little like the views of an Internet marketer, it's no accident. Although Sclavos is an electrical engineer by training, he rose through the sales and marketing ranks of technology companies including MIPS Computer Systems, GO Corporation and Taligent before joining VeriSign in 1995. At the height of the dot-com boom in 2000, Sclavos saw the meteoric growth of Internet domain names and decided to spend $21 billion on buying Network Solutions, which operated the .com and .net database and collected $6 each year for each domain.

Since then, however, sales of domain names have languished. In what must frustrate any good salesman, .com registrations grew at a mere 5.5 percent a year from December 2001 to December 2003. Meanwhile, VeriSign shares have never regained the luster they had during the glory days of 2000, and the company reported a $250 million net loss last year--which provides an additional incentive for Sclavos to profit from his company's most famous asset.

"ICANN has had mission-creep in its definition over what it has authority over," said Tom Galvin, VeriSign's vice president for government relations. "Working through the ICANN process is like being nibbled to death by ducks."

ZDNet's Dan Farber contributed to this report.

 

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