Interim Chairman of the Board of Directors
Internet Corporation for Assigned Names and Numbers
July 22, 1999
U.S. House of Representatives
Committee on Commerce
Subcommittee on Oversight and Investigations
Mr. Chairman and Members of the Subcommittee:
I welcome the opportunity to appear here today on behalf of the many, many people around the world who are working together to create the global, non-profit, consensus-development body called the Internet Corporation for Assigned Names and Numbers (ICANN).
I. Introduction: The Challenge of Creating a Private Sector, Consensus-Based Organization
As you know, ICANN was formed by the Internet community in response to the challenge set forth by the United States Government in its June 1998 Statement of Policy on the Management of Internet Domain Names and Addresses, commonly known as the White Paper. The White Paper called upon the global Internet community to create "a new, not-for-profit corporation formed by private sector Internet stakeholders to administer policy for the Internet name and address system," 63 Fed. Reg. 31749, and specified that the new corporation should be dedicated to community consensus and to promoting the stability of the Internet; competition and market mechanisms; private sector bottom-up, coordination; and functional and geographic representation.
ICANN is working hard to fulfill the mandate of the White Paper. Developing global consensus is an elusive goal, especially when it must be generated entirely within the private sector, with only the encouragement — but none of the money or power — of the world's governments. Nevertheless, the various communities around the world that make up and depend on the Internet have taken up the challenge, and ICANN is the result: a work still in progress but substantially underway.
Mr. Chairman, I regret that the title of today's hearing ("Is ICANN Out of Control?") conveys an erroneous impression about what ICANN is and what it is doing. Even more seriously, the title of the hearing tends to distract attention from the truly fundamental issue before this Subcommittee: How will the Internet's plumbing be managed? More to the point, will the coordination of the Internet's key technical functions be administered (1) by the world's governments and bureaucrats, (2) by a private company pursuing its own private economic interests, or (3) by the global Internet community as a whole? ICANN represents a strong endorsement of option (3), a consensus-based private-sector vehicle through which the Internet community — engineers and entrepreneurs, businesses and academics, non-profits and individuals alike — will coordinate Internet names and numbers. The fact that these hearings are taking place today under this title, however, is stark evidence that this issue — how will the Internet's plumbing be managed? — is still in doubt.
The ultimate resolution of this issue is very important to the future of the Internet, which owes its successful development in large part to a lack of control by governments or private concerns. The Internet is perhaps the world's most successful voluntary cooperative effort. It has developed based on a voluntary consensus about the technical standards and naming system which allow it to function, fostered by the unusual willingness of governments (especially the United States Government) to leave it alone. It earned legitimacy because it worked well and served its users. This voluntary cooperative environment has produced a truly wonderful global resource, and the Internet community's creation of ICANN is intended to allow that basic approach to continue, even as the Internet becomes ever more complex, more important for commerce and society, and more ubiquitous.
Because nothing like ICANN has ever been attempted before, its success is not assured, but because it seeks to embrace and build on the consensus tradition of the Internet, it has at least a chance to succeed. ICANN is intended to replace a highly informal, unstructured system where a very few individuals made key decisions about the future and direction of the Internet. Those individuals were remarkably wise and unselfish, and the fact that the vast majority of their decisions were in the public interest is evidenced by the very success and growth of the Internet itself. But individuals are not immortal, as we are so frequently reminded, and thus we need more permanent structures if we are to continue this tradition of consensus.
ICANN is itself the product of what the Internet engineers call "rough consensus," and its sole objective is to encourage the continued coordination of some key technical and policy details of Internet management through the development and implementation of community-wide consensus. As I have noted, developing this consensus is not an easy task, and is inevitably accompanied by contention and disagreement. Consensus, after all, is a result of disagreement and debate followed by compromise among people of good faith. As those of us intimately involved in this process have certainly seen, feelings can run deep and the debates can be intense. But this already difficult task has been made even more difficult by the fact that the creation of ICANN is happening simultaneously with the transition from a monopoly to a competitive environment for the activity most widely associated with the Internet's plumbing, the registration of domain names.
Transitions from monopoly to competition are difficult and messy under the best of circumstances, as this Committee is fully aware given its oversight over the telecommunications industry. But in that industry, the transition is being managed by federal, state and local governments, which ultimately can rely on the coercive power only governments possess. Here, by contrast, the transition from monopoly to competition is being attempted at the same time that the United States Government's supervisory power over its contractors is being replaced with a newly-created process for developing community-wide consensus through a private-sector, non-profit entity.
I would like to speak directly to the issues relating to ICANN's relationship with the current monopoly government contractor in this area, Network Solutions, Inc. Network Solutions is an important member of the Internet community, and participated very significantly in the process of forming ICANN and in its consensus-development efforts to date. It has important management responsibilities for the domain name system today, and has contributed to its growth over the last several years. It is a voice that needs to be heard. But it is not the only voice, nor can or should it be the decisive voice. Network Solutions was hired by the United States Government to do a job, and in large part it appears to have done it well. It has much experience and knowledge to offer.
Nevertheless, as Network Solutions's Senior Vice President for Internet Relations noted recently (Inter@ctive Week, July 19, 1999), it has a "fiduciary duty to [its] shareholders," and not to the global Internet community as a whole. Its primary responsibility is to "make a reasonable profit," not to develop and follow the community's consensus. Thus, while it should be an important participant in the debates, and, one hopes, a constructive contributor to the creation of consensus, it should not be permitted to unilaterally determine how this important global resource will be managed.
Mr. Chairman, we need to be clear about this: there is no issue about ICANN being "out of control." ICANN is nothing more or less than the embodiment of the Internet community as a whole. It reflects the participation of a large and growing number of technical, business, public-interest, academic, and other segments of the Internet community. It is this collection of diverse interests and experiences that produces ICANN policies and decisions, as a statement of the consensus of the participants.
But consensus does not always or necessarily mean unanimity, and there are certainly those in the community who disagree, for various reasons, with particular consensus positions produced by this process. Some disagreements are philosophical; some are cultural; some are economic. This is inevitable given the diversity of interests involved and the cultural, political and economic issues implicated by the matters that ICANN has dealt with. The fact of those disagreements, however, is evidence of the process itself, not of any problems with it.
II. Open Meetings, Board Elections, and the "Domain Name Tax"
Mr. Chairman, in your letter of June 22, 1999, you posed a series of questions relating to ICANN's formation, its structure and policies. ICANN's response, transmitted on July 8, 1999, encompassed forty-six pages and nine attachments. Rather than repeat the extensive information detailed in our responses (attached as Exhibit A), let me briefly address the four key issues that have attracted the most attention and controversy in recent weeks:
These four areas of concern have been raised by a number of parties, including you, Mr. Chairman, in your letter of June 22, and the U.S. Department of Commerce in its letter of July 8, 1999. In response to specific suggestions made by the Department of Commerce, the ICANN Board has agreed upon steps to address those concerns.
Closed Board meetings. The Department of Commerce suggested that ICANN open its Initial Board meetings to the public. In response, ICANN's Initial Board has decided to hold the Santiago Board meeting as a public meeting, and to deal with all pending issues publicly (except for personnel or legal matters, if any, that might require an executive session).
Following Santiago, nine elected Board members will join the current complement, and we will defer to that full Board any decisions on future meeting procedures, since the experience in Santiago will then be available to inform their decisions. ICANN's bylaws provide that the Annual Meeting (which will be held in Los Angeles in November) must be a public meeting.
I should note that the Initial Board believes very strongly that it has carried out its responsibilities openly and transparently, recognizing community consensus when it exists and encouraging its development when it does not, and all in full view of the global public. The agendas of all ICANN Initial Board meetings are posted in advance of each meeting; at each quarterly meeting, the agenda is open for full public discussion in advance; any resolutions adopted by the Board or decisions taken are announced and released immediately following those decisions; and the full minutes of every Board meeting are posted for public review. The Board takes care to engage in public discussions of its efforts; it both encourages and considers public input, and fully discloses its own decision-making criteria. All public comments, Advisory Committee recommendations, and staff proposals have been posted on the ICANN web site well in advance of Board meetings. The only Board activity that has not (until now) been fully public is interaction between it and its staff, and discussion among the Board members of staff recommendations, at the exact time that they happen. Full minutes of decisions taken and the reasons for them (including any formal actions of the Board), of course, are posted publicly shortly after they occur. In short, the Board has made all the inputs and outputs of its decision making process fully available to the world at large.
In any event, the Initial Board has decided to open its next meeting, in Santiago, to public observation.
Elected Board members. ICANN's elected Directors will join the Board in two waves: the first wave will consist of nine Directors chosen by ICANN's Supporting Organizations; the second wave will be elected by an At-Large membership consisting of individual Internet users. The Board expects the first wave to be completed by November 1999, and the second wave as soon as possible following that. In any event, the process of creating a fully elected Board must be completed by September 2000.
As to the first wave of elected Board members, ICANN expects that the nine Directors to be elected by its three Supporting Organizations (the Domain Name Supporting Organization, the Address Supporting Organization, and the Protocol Supporting Organization) will be selected and seated in time for ICANN's annual meeting in November in Los Angeles.
As to the second wave, it is ICANN's highest priority to complete the work necessary to implement a workable At-Large membership structure and to conduct elections for the nine At-Large Directors that must be chosen by the membership. ICANN has been working diligently to accomplish this objective as soon as possible. The Initial Board has received a comprehensive set of recommendations from ICANN's Membership Advisory Committee, and expects to begin the implementation process at its August meeting in Santiago. ICANN's goal is to replace each and every one of the current Initial Board members as soon as possible, consistent with creating a process that minimizes the risk of capture or election fraud, and that will lead to a truly representative Board.
Permanent cost-recovery structure. ICANN has decided to defer the implementation of its volume-based cost-recovery registrar fee (mischaracterized by some as a "Domain Name Tax"), and to convene a task force to study available funding options and recommend to ICANN and the Internet community a fair and workable allocation of the funding required to cover ICANN's costs.
The task force will include representatives of the key entities involved in the DNS infrastructure: the domain name registries, address registries, and domain name registrars that have (or are likely to have) contractual relationships with ICANN. Charged with reviewing the options for fair and workable cost-recovery mechanisms, the task force will be asked to make its recommendations by October 1, 1999, with an interim report (if possible) prior to the Santiago meeting in late August. ICANN will, of course, post those recommendations for public comment, so that the Board (which will then consist of a full complement of 19) will be able to consider those recommendations at its November Annual Meeting.
Nevertheless, let me say a few words about ICANN's now-deferred cost-recovery structure. The volume-based user fee that has been mischaracterized as a "Domain Name Tax" — in which the competing registrars contribute to ICANN's cost-recovery budget based on the volume of their registrations — seemed to be a fair and workable way to spread the costs among the companies and organizations that benefit from ICANN's DNS coordination and pro-competition activities. The registry fee was adopted following a thorough process of public notice and comment, and was broadly supported by an apparent consensus of the community. For example, the Coalition of Domain Name Registrars, a group consisting of most of the registrars that would actually be responsible for paying those fees, has written to Congress indicating that they have no objections to paying their fair share of ICANN's costs in this way. I understand that the Subcommittee will have an opportunity to hear from three of the competing registrars later today.
In sum, we continue to believe that a volume-based fee is a fair and appropriate way to spread ICANN's cost-recovery needs. Indeed, in its response to the Chairman's questions, the Department of Commerce (which was fully apprised of the process that produced this consensus position) agreed that this was a rational and appropriate approach that (1) was the result of full notice and comment, (2) was consistent with the White Paper, and (3) was fully authorized by ICANN's Memorandum of Understanding with the DoC. Nevertheless, the DoC suggested that, because it has become controversial, ICANN should suspend this approach until there are elected Board members. ICANN has agreed to do so, pending the recommendations of the new task force on funding options.
Obviously, ICANN must have a stable source of income adequate to cover the costs of its technical coordination and consensus-based policy development functions. The United States Government has asked ICANN to do an important job, but it has not provided the means by which to carry it out, leaving the job of providing funds to the Internet community itself. To date, ICANN has relied on voluntary donations, and a number of people and organizations have been very generous. But this is neither an equitable way to allocate the recovery of costs nor a means to assure stability over the long term. Thus, if ICANN is to continue, it is simply not possible to abandon the cost-recovery mechanism that has been produced by the consensus-development process and replace it with nothing.
ICANN's goal is simple: to establish a funding structure for the technical coordination of the Internet that is stable, effective, and equitable. Any proposed method that would meet this goal will receive serious attention from ICANN and the Internet community at large. If the members of this Committee have thoughts about how ICANN should be funded, we would be pleased to hear them.
Constraints on ICANN's authority. The ability of ICANN to make policy is very carefully cabined, both by its bylaws and by the terms of the White Paper. Nevertheless, as the Department of Commerce has noted, there remain concerns about the effectiveness of existing restrictions and limitations on the authority of the ICANN Board.
On this point, we certainly understand the concern, but it seems misplaced, given the clear limitations in ICANN's bylaws and articles of incorporation on the scope of its permissible activities. Nevertheless, ICANN is entirely willing to incorporate in its contracts with registries and registrars (or perhaps in its Memorandum of Understanding with the U.S. Government) language that says that no ICANN policy is being agreed to in those contracts that is not fully consistent with, and reasonably related to, the goals of ICANN as set forth in the White Paper, which are replicated in ICANN's bylaws. Such language would fully reflect both the original concepts that gave birth to ICANN and this Board's understanding of ICANN's proper role.
III. Network Solutions, Inc., and the Transition to Competition
I have already spoken directly about ICANN's relations with Network Solutions, Inc. I will try to address in some detail a few of the more serious erroneous contentions that Network Solutions has advanced with respect to ICANN.
Network Solutions has asserted in a number of forums that ICANN intends to terminate Network Solutions as a registrar of .com, .net, and .org domain names. Network Solutions has also claimed that ICANN's registrar accreditation agreements (which registrars must sign to become accredited for the .com, .net, and .org domains) grant ICANN the unrestrained authority to terminate a registrar on 15 days' notice. Both contentions are unequivocally wrong.
ICANN has no statutory or regulatory "authority" of any kind. It has only the power of the consensus that it represents, and the willingness of members of the Internet community to participate in and abide by the consensus development process that is at the heart of ICANN.
As you know, Network Solutions has held a government-granted monopoly in the market for domain name registration services in the .com, .net, and .org domains. In its October 1998 agreement with the Department of Commerce (Amendment 11), Network Solutions agreed that, once a competitive registrar system was introduced, a level playing field would be established for all registrars and that only properly accredited registrars would be permitted to provide domain name services to the public. When Network Solutions becomes an accredited registrar, it will continue to be able to offer domain name services as a competitor in a fair and open market; if it refuses to become accredited, as it has to date, its agreement with the US Government will prohibit it from offering domain name services in the .com, .net, and .org domains. When Network Solutions applies for accreditation from ICANN, ICANN will treat the application in the same manner as it would any other application, as required by its bylaws.
If the Committee has been told that ICANN has the power to terminate Network Solutions' authority to register domain names, or has asserted that it does, the Committee has been misinformed. To clarify this point, the following description of the process for accrediting registrars may be helpful:
Thus, Network Solutions agreed in Amendment 11 that, after the introduction of competition into the registrar business, it would operate the registry to give access to, and only to, ICANN-accredited registrars (including Network Solutions). In this way, the level playing field necessary for effective competition in a shared registry environment would be established.
In sum, ICANN neither has nor claims any "authority to terminate Network Solutions' authority to register domain names." Instead, the requirement that Network Solutions 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 Network Solutions' own agreement with the USG.
To date, Network Solutions has not requested to be accredited by ICANN, and certain individuals purporting to speak for Network Solutions have publicly stated that it does not intend to be accredited. ICANN has received no official communication on this issue from Network Solutions, and stands ready to treat an accreditation application from Network Solutions in exactly the same way it has responded to similar applications by others.
In fact, in the event Network Solutions chooses to seek accreditation, ICANN is required by its agreement with the U.S. Government to perform its accreditation function fairly, having specifically agreed in the MOU not to "act unjustifiably or arbitrarily to injure particular persons or entities or particular categories of persons or entities." This fairness provision, which parallels provisions in Amendment 11, ICANN's registrar accreditation policy, and ICANN's own bylaws, appropriately and effectively ensures against arbitrary denial of accreditation to Network Solutions or any other registrar.
Likewise, the registrar accreditation agreement is a contract between ICANN and its accredited registrars that provides a strong set of protections for accredited registrars. First, the registrar accreditation agreement spells out that ICANN can terminate accreditation only on the basis of a defined set of causes — for example, bankruptcy of the registrar or uncured breach of the registrar accreditation agreement. Second, the agreement provides for automatic renewal of accreditation: an accredited registrar (such as Network Solutions) "shall be entitled to renewal provided it meets the accreditation requirements then in effect." ICANN Registrar Accreditation Agreement, Sec. III(B)(i). In the event of an unresolved dispute over any company's renewal of accreditation, the accredited registrar is entitled to fifteen days' notice and the right to invoke neutral arbitration that will be binding on ICANN. Together, the rights to automatic renewal and arbitration afford registrars (including Network Solutions) the predictability that is needed for sensible business planning, and the assurance that ICANN cannot treat a given registrar arbitrarily.
Mr. Chairman, let me conclude by noting that ICANN's July 8, 1999, response to Chairman Bliley touches on a number of questions and issues that I do not have the time to address in my opening statement, including the process by which ICANN's Initial Board was selected, ICANN's relationships with country code top-level domain managers, intellectual property rights in registry databases, and ICANN's Transition Budget. Accordingly, I would ask that ICANN's response, along with the exhibits, be made a part of the record of today's hearing.
I thank the Committee for the opportunity to testify, and I look forward to answering your questions.
Interim Chairman of the Board of Directors
Internet Corporation for Assigned Names and Numbers