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 Memorandum 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.
The 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 system."
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 to date."
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 making."
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 interested governments."
5. "undertake . . . a review of the root server system to recommend means to increase the security and professional management of the system."
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.
II. IMPORTANT ACTIONS.
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.
The White 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 in August.
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 activities.
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 interruption.
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 about them.
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 that happen.
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.
IV. CURRENT CHALLENGES.
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 registrations.
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