STATUS REPORT TO THE DEPARTMENT OF COMMERCE
JUNE 15, 1999
On November 25, 1998, the United States Department of Commerce ("DOC")
officially recognized the Internet Corporation for Assigned Names and
Numbers ("ICANN") as the global, non-profit consensus organization designed
to carry on various administrative functions for the Internet name and
address system that it had called upon the Internet community to create
in its White Paper issued in June,
1998. Approximately six months have now passed since the signing of the
of Understanding between DOC and ICANN; this document constitutes
a status report on both progress made and issues remaining to be solved.
I. STANDARDS AND CRITERIA FOR EVALUATING PROGRESS.
process of establishing ICANN has understandably been a difficult and
contentious one from the beginning. The creation of a worldwide, non-profit,
private consensus organization to manage various aspects of a global resource
is a unique undertaking; there are no models for such a non-governmental
entity with similar responsibilities. We have sought consensus from a
necessarily diverse set of actors, ranging from academics to businesses
to infrastructure providers to engineers; consensus is frequently elusive
even in more homogeneous groups. There were inevitably many different
views about how to accomplish the goal, not to mention a variety of opinions
as to whether the goal was desirable at all.
In this environment, it is hardly surprising that there remains today
a diversity of views on what has been done, what should be done, and how
things could be done. It is also almost certainly true that there is no
single right way to move toward the stated goal; there are likely to be
several paths that could be followed to an acceptable outcome. On the
other hand, there is a set of standards and criteria against which the
work of the last six months can reasonably be measured: the standards
and criteria set forth by the US Government in the White Paper.
While the White Paper may not be the equivalent of the Magna Carta, it
did set forth a series of guiding principles (subsequently adopted essentially
verbatim in the MOU) that seemed at the time to have wide-spread support
within the Internet community from both private and public commenters.
The core principles articulated in the White Paper were as follows:
1. Stability: "During the transition and thereafter, the stability
of the Internet should be the first priority of any DNS management
2. Competition: "Where possible, market mechanisms that support
competition and consumer choice should drive the management of the
Internet because they will lower costs, promote innovation, encourage
diversity, and enhance user choice and satisfaction."
3. Private Sector, Bottom-Up Coordination: "A private coordinating
process is likely to be more flexible than government and to move
rapidly enough to meet the changing needs of the Internet and of Internet
users. The private process should, as far as possible, reflect the
bottom-up governance that has characterized development of the Internet
4. Representation: "Management structures should reflect the functional
and geographic diversity of the Internet and its users. Mechanisms
should be established to ensure international participation in decision
These principles formed the basis of the MOU, and have dictated ICANN's
policy decisions to date. They are the standards which the ICANN Initial
Board has used to guide its policy development efforts, and against which
the results of those efforts should be measured.
In addition to these core principles, the White Paper went on to discuss:
funding: the White Paper assumed that the new corporation
would be funded by "domain name registries, regional IP registries,
or other entities identified by the Board;"
staff: the White Paper assumed that the new corporation would
absorb the IANA staff that had been carrying out many of these functions
pursuant to government contracts;
incorporation: the White Paper assumed that the new entity
would be incorporated in the United States, but have a Board made
up of members from around the world;
governance: the White Paper called for a "sound and transparent
decision-making process;" and
operations: the White Paper stated that processes should
be "fair, open and pro-competitive."
In addition, the White Paper suggested a structure that was "balanced
to equitably represent the interests of IP number registries, domain name
registries, domain name registrars, the technical community, Internet
service providers (ISPs), and Internet users (commercial, not-for-profit,
and individuals) from around the world." The White Paper went on to declare
that the new corporation should take the following early actions:
1. "appoint, on an interim basis, an initial Board of Directors,"
which would serve "until the Board of Directors is elected and installed."
2. "establish a system for electing a Board of Directors . . .
that insures that the new corporation's Board of Directors reflects
the geographical and functional diversity of the Internet, and is
sufficiently flexible to permit evolution to reflect changes in the
constituency of Internet stakeholders," while preserving, "as much
as possible, the tradition of bottom-up governance;" Directors "should
be elected from membership or other associations open to all or through
other mechanisms that ensure broad representation and participation
in the election process."
3. "develop policies for the addition of TLDs, and establish the
qualifications for domain name registries and domain name registrars
within the system."
4. "restrict official government representation on the Board of
Directors without precluding governments and intergovernmental organizations
from participating as Internet users or in a non-voting advisory capacity."
The White Paper also set forth views on intellectual property
issues, including that (1) all interested parties "should have access
to searchable databases of registered domain names; (2) domain name registrants
should be required to "pay registration fees at the time of registration
or renewal;" (3) domain name registrants would agree to "submit to and
be bound by alternative dispute resolution systems;" and (4) the new corporation
would protect "certain famous trademarks from being used as domain names
. . . except by the designated trademark holder."
Finally, the White Paper stated that the United States Government would
itself take certain steps to "accomplish the objectives" set forth in
the White Paper. These were identified as the following:
1. "ramp down the cooperative agreement with NSI with the objective
of introducing competition into the domain name space."
2. "enter into agreement[s] with the new corporation under which
it assumes responsibility for management of the domain name space."
3. ask WIPO to "convene an international process . . . to develop
a set of recommendations for trademark/domain name dispute resolutions
and other issues to be presented to the Interim Board for its consideration
as soon as possible."
4. "consult with the international community, including other
5. "undertake . . . a review of the root server system to recommend
means to increase the security and professional management of the
While the transition process is still young, periodic evaluations of
progress are desirable checks on both the direction and pace of the transition.
This report attempts to provide such an evaluation.
The following list sets forth important actions and
decisions by ICANN since the signing of the Memorandum
of Understanding with DOC in November, 1998:
Follow-up action on many of these items will take place during the next
ICANN Board meeting on August
24-26 in Santiago.
III. POINT-BY-POINT COMPARISON TO WHITE PAPER.
Paper identified four overarching principles that should guide the
formation and decisions of ICANN: stability, competition, private-sector
bottom-up coordination, and functional and geographic representation:
1. Stability. The DNS has remained fully operational, notwithstanding
increasing demand for domain-name services and the introduction of
competition in the registration of names in the .com, .net and .org
TLDs (as described below). This issue -- operational stability --
requires constant attention, especially given the less than enthusiastic
cooperation that ICANN and the DOC have received from Network Solutions,
Inc., the historical monopoly registry and registrar in these domains.
There remain important steps to be taken in the transition process,
including the introduction of fully competitive name registration
services, the full separation of NSI's registry and registration services,
and the ultimate transfer of root server administration/control to
ICANN. ICANN and DOC will carefully manage these events with this
primary objective in mind.
2. Competition. With the accreditation of five testbed registrars,
and the beginning of competitive domain-name registration services
by those registrars, the transition from monopoly to competition has
begun. As has been true in every other transition from monopoly to
competition, there have already been difficulties, and there will
undoubtedly be others. In such situations, the incumbent monopolist
has no particular incentive to do anything more, or quicker, than
is absolutely required to expedite this transition, and our experience
to date is that this situation will not prove to be an exception.
Nevertheless, one of the testbed registrars is now operating and selling
domain name services in competition with NSI; the other four testbed
registrars are expected to begin competitive operations within the
next two weeks; 37 other entities have been conditionally accredited
to begin operating when the testbed phase is completed; and ICANN
and DOC are continuing to seek appropriate cooperation from NSI to
facilitate the transition to full and open competition.
3. Private-Sector Bottom-Up Coordination. The Initial Board
has encouraged the self-organization of its constituent units through
bottom-up efforts, rather than dictation of the organization, structure
and membership from the top. This has predictably resulted in a somewhat
chaotic process, and taken some time; bottom-up process has much to
recommend it, but those benefits do not include efficiency and speed.
Nevertheless, we have seen great progress: the Domain
Name Supporting Organization is essentially formed, and has begun
to function in its advisory role to the ICANN Board by taking under
consideration various recommendations
made to ICANN by WIPO, and referred by the ICANN Board to the
DNSO for its recommendations. In addition, the Protocol
Supporting Organization proposal was approved by the ICANN Board
in its recent Berlin meeting, and we hope that this entity can be
officially recognized soon. The final part of this puzzle, the Address
Supporting Organization, is scheduled to submit a proposal to
the ICANN Board for its review at its next meeting in Santiago
4. Representation. With the three Supporting Organizations
listed just above responsible for electing three members each to ICANN's
19-member Board, the functional diversity objective of the White Paper
will be substantially met once those entities are formed and have
provided Directors to the Board. ICANN will also require that those
Directors be geographically diverse, as is true to a significant extent
today with the Initial Board (which includes residents of three of
the five ICANN-defined geographic regions). The more difficult effort,
described in some detail below, is the design of the process for electing
the nine At Large Directors called for by the ICANN Bylaws, but the
process of defining an electorate and establishing Director election
procedures consistent with the White Paper principles is well underway.
Thus, the four guiding principles of the White Paper have in fact been
realized in ICANN's organizational and policy development process to date,
as can be seen in somewhat more detail by the following focus on specific
issues addressed in the White Paper
Incorporation and Initial Board. As suggested by the White
Paper, ICANN was incorporated in the United States in October, 1998.
Its Initial Board is broadly representative of the Internet community,
with five Directors (including the Interim CEO) from the United States,
three from Europe, one from Australia and one from Japan; their professional
backgrounds include educational computing, telecommunications, Internet
technical/academic interests, trade associations and Internet entrepreneurial
Funding. The White Paper suggested that ICANN should be funded
by name or address registries, presumably by allocation of a portion
of the fee charged by those registries. Since ICANN is intended to
be non-profit, and therefore revenues may only recover its costs,
over time those fees will be adjusted to balance ICANN's specific
funding needs, which are not yet clear. In the interim, ICANN has
proposed to fund its future operations primarily from a fee of no
greater than $1 annually per domain-name registration, an approach
suggested (without a specific amount) by the White Paper, with the
exact amount of that fee to be determined over time by ICANN's costs
and the revenue generated by a particular fee level. Since ICANN is
not yet fully functional, it has existed to date on private donations
and credit, with some recent small amount of funds received from those
seeking accreditation as registrars.
Staffing. As called for by the White Paper, most of the former
IANA staff are now managed and compensated by ICANN, and have continued
to carry out their technical and administrative responsibilities without
Governance and Operations. The White Paper called for an "open
and transparent" decision-making process. As a result, the ICANN bylaws
require a broad set of procedures to ensure that all points of view
be considered before any decisions are taken. These include extensive
notice and comment requirements before any decisions are made that
"substantially affect the operation of the Internet or third parties,
including the imposition of any fees or charges."
In addition, the ICANN Board has made it a practice to hold a public
meeting immediately prior to our regular quarterly Board meetings,
in which all matters on the Board agenda are discussed with participants.
While Board meetings are not open to the public, to facilitate the
candid and objective decision-making so critical at this stage of
ICANN's development, the Board has adopted the practice of immediately
publishing all Board decisions, making the text of resolutions public
as quickly as possible, and holding a public press conference immediately
following its meetings to explain its decisions and take questions
Structure. The ICANN structure follows almost exactly the
prescription of the White Paper. There is an Initial Board which will
serve until a regularly elected Board is installed, but in any event
not beyond October 2000. Since the latter will be composed of three
persons elected by each of three Supporting Organizations (a total
of nine), nine persons elected by the At Large membership, and the
president of ICANN ex officio, the creation of the Supporting
Organizations and the At Large membership is a necessary condition
for the existence of a regularly elected Board.
Taking care to follow the principle of bottom-up coordination, the
Initial Board has left to the communities involved the creation of
the Supporting Organizations. These groups have, not surprisingly,
moved at different paces, to the effect that the Domain Name SO is
now close to full formation, and is likely to elect its three Directors
by the end of 1999, while the Protocol SO and the Address SO are somewhat
further from completion. Still, it does seem possible that the nine
SO Directors could all be in place relatively early in 2000. The Initial
Board's present intention is to simply add these Directors as elected
to the Initial Board.
The nine At Large Directors scheduled to be elected by a membership
present a more complicated problem. Despite a significant amount of
work by a diverse Membership Advisory
Committee, we still have not identified the specific process by
which a broadly representative membership can be constituted, with
due regard for the cultural and economic differences within the global
user community and the need to protect against minority capture. The
White Paper seemed to assume that Directors would be elected "from
membership or other associations;" as presently contemplated, however,
the nine At Large Directors are scheduled to be elected by individual
members. This deviation from the White Paper prescription presents
a number of serious practical and economic problems to be overcome
before a process consistent with the stability that the White Paper
described as the "first priority" of the transition can be established.
Nevertheless, the Membership Advisory
Committee has recommended a set of policies to the Board, and
the Board has directed staff and legal counsel to recommend before
the Santiago meeting
how those policies could be implemented. The fact that it is a very
difficult problem to solve consistent with the White Paper principles
does not mean that it is not necessary to solve this challenge; there
must be a way for the users of the Internet, who will undoubtedly
be affected by the policy decisions of ICANN, to have a role in influencing
those policy decisions, and the Initial Board is committed to making
New TLDs. The White Paper assumed that the Initial Board would
both address the possibility of a need for new TLDs, and establish
a system of qualifications for DNS registries and registrars in current
and any new TLDs. WIPO has now, pursuant to the invitation in the
White Paper, made a series of recommendations
relating to new TLDs, dispute resolution and related issues. We have
referred those recommendations to the newly-established DNSO for its
review and recommendations to the ICANN Board.
ICANN has developed a set of guidelines
for the accreditation of registrars in the .com, .net and .org
domains, and has accredited five registrars (the testbed registrars)
and provisionally accredited 37 others who will begin operations following
the completion of the testbed. It is developing guidelines for the
accreditation of registries, and has begun discussions with both registry
administrators and its Government
Advisory Committee about the appropriateness of, and standards
for, contractual relationships with registries and registrars for
country code TLDs.
Relations with Governments. In order to meet the White Paper
objective of facilitating input from national governments and international
organizations while remaining a private, non-governmental organization,
ICANN created the Government
Advisory Committee. The GAC now comprises representatives of 33
national governments and international organizations, and functions
as a vehicle for advising the ICANN Board of particular concerns of
governmental entities relating to the domain name system and IP addresses
and protocols. Consistent with the White Paper prescription, the GAC
has no authority over ICANN or its policies; it exists to offer advice
and to serve as a conduit for the transmission of the interests and
concerns of governmental bodies to the ICANN Board and the public.
Concerning each of these specific issues or proposals identified in the
White Paper, ICANN has acted consistently with the principles outlined
in that document. In particular, ICANN agrees with the White Paper's assertions
that "the stability of the Internet should be the first priority," that
competition should "drive the management of the Internet," that the private
coordinating process should, "as far as possible reflect . . . bottom-up
governance," and that its structure and processes should reflect the "functional
and geographic diversity of the Internet and its users." As the above
description illustrates, the policies ICANN has adopted to date universally
reflect the implementation of those principles.
There are a number of important issues that remain
to be dealt with, including the creation of a workable At Large membership
structure, the resolution of various issues relating to the relationship
of intellectual property principles and the DNS, and the policies that
will guide the relationship of ICANN with country code TLDs. Nonetheless,
the most critical immediate challenge facing ICANN and the DOC remains
the creation of a fully competitive environment for the registration of
names in the global Top Level Domains -- in particular, .com., .net, and
.org. The transition from monopoly to competition in these domains is
necessary for the long-term success of the privatization approach endorsed
by the White Paper, and at the moment the critical uncertain element is
the cooperation of the current monopoly government contractor, Network
Solutions, Inc. ("NSI").
NSI occupies a central role in the DNS process. It is the registry operator
for the most important TLDs -- .com, .net and .org. It has until recently
been the monopoly registrar for those domains, and it still remains by
far the dominant registrar. It is responsible for the operation of the
A root server, under the direction of the DOC. And it is by far the most
powerful entity in the DNS environment. So long as NSI operates the .com
registry, all new registrars must rely on NSI -- their principal competitor
-- for access to that registry. Thus, in a very practical sense, NSI has
a significant influence on the pace of progress toward the competitive
environment envisioned by the White Paper.
NSI's cooperation with ICANN and DOC to date has been limited. Its principal
responsibility under Amendment
11 to its Cooperative Agreement with DOC was to create a Shared Registration
System interface for its registry so that competitive registrars could
use the registry on the same terms as the NSI registrar. The SRS was supposed
to be functional on April 26; in fact, the first competitive registrar
was not able to begin offering competitive registrations until June 2.
The other four testbed registrars are still trying to achieve workable
interfaces. In addition, NSI's demands for overly broad intellectual property
protection and various other restrictive license terms for the SRS have
considerably slowed progress. The result has been the likely delay of
the end of the testbed period and of the beginning of fully competitive
Perhaps even more importantly, at least for the short term, NSI has to
date refused to accept the community-consensus registrar accreditation
policies adopted by ICANN after public notice and comment, and has even
asserted that it should not have to comply with the same accreditation
standards that apply to all other registrars. Obviously, full and fair
competition requires that all have the same opportunities, and to the
extent that there are consumer protection or other requirements, that
all meet them equally. Thus, it is critical to accomplishing the White
Paper objective of maximizing competition that (1) NSI's registry and
registrar functions be fully separated, so that NSI as a registrar does
not have any structural advantage over its registrar competitors; (2)
NSI accept community consensus policies relating to registrars, as reflected
in ICANN's accreditation standards; and (3) the relationship between NSI
as registry and all registrars does not allow NSI to impair or adversely
affect the development of competition because of its continuing monopoly
position as registry operator.
Both DOC and ICANN have stated that only accredited registrars will be
permitted to carry out registration activities in the .com, .net and .org
domains after the completion of the testbed phase; combined with NSI's
current position, this obviously creates the potential for conflict between
NSI and DOC/ICANN. In addition, NSI is required by Amendment 11 to fully
separate its registry functions from its registrar functions, and to charge
for its registry functions a fee that covers its costs and a reasonable
return on its investment but no more. The amount of this fee obviously
has competitive implications, especially if NSI continues as a registrar,
and the fact that NSI and DOC have not yet reached an agreement on this
key issue is also a basis for potential conflict.
Finally, as a general proposition, NSI has to date refused to accept
the policy authority of ICANN, although it continues to "participate"
in the creation of ICANN institutions and policies. It has funded and
encouraged a variety of ICANN critics, including some whose only common
cause with NSI would appear to be unhappiness with ICANN. In short, NSI
has generally been an impediment, not a help, in the transition from government
controlled monopoly to a private competitive DNS. While this is perhaps
not surprising, if this approach continues, and depending on how it continues,
it could have adverse implications for the short-run stability of the
domain name system. Because of this possibility, ICANN and DOC are taking
prudent steps necessary to be able to implement the White Paper objectives
with or without the cooperation of NSI.
In summary, the first six months of ICANN's existence have been productive,
albeit somewhat frenetic. There is much to do, and a cacophony of voices
with a range of advice from "go slow" to "speed up," and everything in
between. The volunteers who make up the Initial Board have been dismayed
by the amount of work required, and tremendously impressed by the incredible
willingness of people from all over the world to work with us to try to
make this great experiment work. We have a difficult road in front of
us, but our experience to date makes us even more confident that the job
will get done.
Interim Chairman of the Board
Michael M. Roberts
Interim President and Chief Executive Officer
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