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 # 327  

 February 2001




Congressional Intervention in the Internet Domain Name Process Threatens Independence of the Internet

by Amy Ridenour

 

Congress is being pressured by a handful of companies to intervene in the process that determines new Internet domain names. Such a move would threaten the integrity of the Internet by opening it up to government intervention and regulation. The process to introduce new Internet domain names was carefully planned and executed over a two-year period, in which the public and Internet experts were permitted to comment and provide guidance. The introduction of new domain names was to be done in a measured and responsible manner with only a limited number of new domain names being permitted at first. Any action on the part of Congress at the present time would undermine this procedure.

 

Background

The Internet Corporation for Assigned Names and Numbers (ICANN) is a non-profit, private corporation, responsible for coordinating Domain Name System functions for the benefit of the Internet. One of its core tasks is to oversee policy for determining the circumstances under which new top-level domains (TLDs) are added to the root system.

Since before ICANN's inception, the Internet communities involved in ICANN had seriously considered the possibility of introducing new generic TLDs into the Internet's Domain Name System (DNS). This is because a single provider, Network Solutions Inc., has for years enjoyed a government-granted monopoly over new domain name registrations and renewals.

The National Science Foundation originally was responsible for the registration of nonmilitary domain names. In 1993, an agreement was entered into whereby Network Solutions Inc. became the sole Internet domain name registry, registering the only generic TLDs such as .com, .net and .org.

Registration fees were imposed in 1995. With them came criticism of Network Solutions Inc.'s monopoly position as sole registry of the generic TLDs. An International Ad Hoc Committee proposed that seven new generic TLDs be created. The federal government assessed the proposal and the Department of Commerce released a paper calling for a private, non-profit corporation to manage the Domain Name System and Internet Protocol addresses. One of the government's stated goals for privatizing the Internet was to introduce competition to the domain name market space while maintaining stability of the Internet.

As a response to the Department of Commerce's proposal, ICANN was created to administer and manage the DNS functions. In addition, multiple registrars were permitted to provide registration services within the .com, .net and .org generic TLDs. Network Solutions Inc., however, remained the only registry of those TLDs.

On July 16, 2000, ICANN's Board of Directors announced a policy for the introduction of new Internet top-level domains. The policy called for submission of proposals to sponsor or operate new TLDs by interested persons and organizations during the period from September 5, 2000 to October 2, 2000. To apply to sponsor or operate a TLD, applicants would have to submit a detailed, multi-part proposal accompanied by extensive supporting documentation. In addition, the proposal would have to be based on a thoroughly formulated plan for the establishment and viable long-term operation of the TLD. The application would have to clearly describe the plan, show that the necessary resources have been arranged to implement the plan and demonstrate that the proposal would be superior to others in promoting the goals of the new-TLD policy. In addition, each applicant would be required to pay a $50,000 application fee. After a period for public comment, the applications would then be evaluated by a team consisting of ICANN staff and technical, business/financial, and legal advisors. The Board of Directors would choose a handful of the best applications for negotiations between ICANN and the TLD sponsors and operators.

On September 5, 2000, the application process that previously had been laid out by the ICANN Board of Directors began. A total of 47 applications were submitted to ICANN - two of those applications were returned to the applicants for failure to pay the application fee, and one was withdrawn by the applicant because the applicant and the ICANN staff were unable to reach agreement on the applicant's request for confidential treatment of its application. On November 16, 2000, after public comment and staff evaluation, the Board of Directors announced its selection of seven new top-level domains: .aero, .biz, .coop, .info, .museum, .name and .pro. Due to the fact that ICANN is government-backed and its activities are overseen by the Department of Commerce, the new TLD selections are subject to final approval by the Commerce Department. It is likely, however, that at least some of the newly selected TLDs could become operational during the second half of 2001.

Eight unsuccessful applicants for TLDs applied for a second review of their application under ICANN's reconsideration policy. Although all of these applicants sought for ICANN to reconsider its decision in regard to their specific proposal, only two of these applicants requested a stay of ICANN's decisions. Thus, the majority of applicants who requested reconsideration did not seek to have ICANN forbid the successful applicants from going forward with the process.

Since ICANN arrived at its decision in November, Congress has been pressured by a handful of companies to intervene in the process which determined the new TLDs. This pressure has included a couple of the unsuccessful applicants lobbying Members of Congress for hearings into whether ICANN's process was fair. Both the House Committee on Energy and Commerce and the House Judiciary Committee have announced that they will hold hearings in February on ICANN's decision to adopt just seven out of 44 final proposals for new top-level domains. House Energy and Commerce Committee Chairman W.J. "Billy" Tauzin (R-LA) has stated that the Committee wants to ensure that the process is open, fair and fosters competition.

 

Process

It is clear beyond reproach that the ICANN process was open, well-reasoned and fair. The policy for choosing new TLDs was deliberated for over two years with numerous chances for comment and public participation. Because there was no recent experience in introducing new TLDs, ICANN's Board of Directors decided that a limited number of new TLDs would be introduced initially and that the future introduction of additional TLDs be done only after careful evaluation of the initial introduction. In fact, in the ICANN New TLD Application Instructions, applicants were specifically notified that ICANN's intention was to only permit a limited number of TLDs to be established in this round of applications, and that it was likely only applications with very high qualifications would be accepted.

Applicants were given ample opportunity to address concerns and given guidelines to prepare effective proposals. Prior to applications being accepted, ICANN published a list of criteria that it would utilize in assessing the TLD applications. The factors included: 1) the need to maintain the Internet's stability; 2) the extent to which selection of the proposal would lead to an effective "proof of concept" concerning the introduction of TLDs in the future; 3) the enhancement of competition for registration services; 4) the enhancement of the utility of the domain name system; 5) the extent to which the proposal would meet previously unmet types of needs; 6) the extent to which the proposal would enhance the diversity of the DNS and of registration services generally; 7) the evaluation of delegation of policy-formulation functions for special-purpose TLDs to appropriate organizations; 8) the appropriate protections of rights of others in connection with the operation of the TLD and 9) the completeness of the proposals submitted and the extent to which they demonstrate realistic business, financial, technical and operations plans and sound analysis of market needs.

The seven TLDs selected by ICANN met the above-mentioned criteria. Each of the chosen applicants had the requisite stability, financial backing and technical know-how to operate and manage the new TLDs.

 

New Opportunities

The complaining entities that were not awarded a TLD by ICANN argue that the goals of increasing competition and diversity in the Domain Name System were not met because small companies were not given the chance to operate a new TLD registry. This is false.

ICANN's awards of new TLDs to certain registries do not preclude other companies and organizations from becoming registries in the future. The recent addition of the seven new
TLDs was designed to provide a solid "proof of concept" test-bed for the development of new TLDs generally.

ICANN chose solid players with demonstrated experience, financial resources and technical capabilities to ensure that the first addition of new generic TLDs to the Internet would be successful. The stability of the Internet is the first priority of ICANN and the rest of the Internet community. The success of this first group of new generic TLDs is critical if the development process is to continue. If a registry operator proves unable to live up to its obligations, any person or entity that has registered a name with that operator will be harmed when the operator shuts down the registry. Therefore, ICANN is going through a slow and deliberate procedure now (rather than approving all 47 applications) so that more generic TLDs can be introduced in the future and applicants that were not selected by ICANN at this early stage will have the opportunity to become registries later.

 

Registry Monopoly

The Internet is an international medium for commerce, education and communication. Because of its growing importance in our society, there has been a widespread dissatisfaction over the lack of competition in the registration of domain names. To jump-start a thriving competitive Internet marketplace, the U.S. government decided years ago to transfer a large portion of the Internet's management to the private sector. The addition of new TLDs is just the next step in creating a decentralized system.

If the new TLD awards are delayed, it will prolong Network Solutions Inc.'s monopoly position as registry of the only generic TLDs. The demand for domain names will continue to soar while the supply of domain names will decrease, leaving consumers with no recourse if the registrars and registries increase their prices. The pressure of competition is the most effective means of discouraging registries from acting monopolistically.

If the awards are stayed, the prices paid by the registrars, and ultimately the consumers, remain fixed. Consumers pay the registrars a certain amount of money to register domain names. The registrars then pay the registry (here, Network Solutions Inc.) $6.00 per domain name per year. Registrars compete in their packaging and, to a lesser extent, in their pricing; however, the price paid to Network Solutions Inc. for generic TLDs is set because there are no other registries with whom Network Solutions Inc. competes. Demand for new domain names is great, and the sooner the new generic TLDs and their corresponding registries are in operation, the sooner the prices paid to the registries can be subject to competitive effects.

Also, with no competition, there is nothing to promote innovation in the regulation of domain names and registrars and consumers have no user-choice in registries. Because there is currently no competition in the Internet registry market, Network Solutions Inc. is not motivated to create more efficient ways to register domain names. The process becomes stagnant and the consumer is hurt in the long run.

 

Government Intervention

While a Congressional oversight hearing of ICANN's process is, of course, acceptable, any true intervention by Congress or any attempt to legislate in this area would be objectionable. Government interference in the Internet domain name process threatens the integrity of the Internet by opening it up to intervention and regulation. The thought has always been, and should remain, that Congressional assurances of no Internet regulation will help promote the development and deployment of advanced telecommunication services nationwide.

The U.S. government's role should be limited during the period of adding new generic TLDs. The federal government decided years ago to privatize the Internet and it should not withdraw from that decision now.

Government intervention in a nascent industry stalls innovation and minimizes individual freedoms. It would be a giant step backward if the federal government became involved at this stage of the process. It is clear from the government's documents, including its 1998 White Paper, and the comments thereto, that it believed the Internet should be driven by market mechanisms that support competition and consumer choice. An Internet managed in the private-sector will lower costs, promote innovation, encourage diversity and enhance user choice and satisfaction. Government intervention now would send the Internet's development back three years (to before ICANN was created) and would erase the work already completed to create a competitive environment for its use.

The government should step back and allow the registries of the new TLDs to begin operation. Once the first seven registries prove successful, ICANN will issue more generic TLDs to more applicants. This slow and deliberate process will create a competitive atmosphere while maintaining the stability of the Internet.

# # #

Amy Ridenour is President of The National Center for Public Policy Research, a Washington, D.C. think tank. Comments may be sent to [email protected].




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