Statement for the Record Andrew J. Pincus General Counsel, Department of Commerce

Thank you, Mr. Chairman and Members of the Committee, for this opportunity to report on progress towards transitioning management of the Internet domain name system ("DNS") to the private sector.

The Commerce Department's Statement of Policy on the Management of Internet Names and Addresses (the "White Paper"), issued thirteen months ago, identified a number of tasks to be undertaken on a priority basis in order to transition DNS management to the private sector:
(1) private sector creation and organization of a new, not-for-profit corporation to conduct DNS management; (2) rapid introduction of competition in the provision of domain name registration services; (3) adoption of policies to reduce conflicts between trademark holders and domain name registrants; and (4) review of the root server system to increase the security and professional management of that system.

Creation and Organization of New Corporation

The Internet Corporation for Assigned Names and Numbers (ICANN) has made considerable progress toward establishing the structures for representative decision making contemplated in the White Paper, but there is still important work to be done:

• ICANN's top priority must be completing the work necessary to put in place an elected board of directors on a timely basis. Specifically, it must do everything within its power to establish the Supporting Organizations, and ensure the election of nine board members by those Organizations to begin serving at the November 1999 Board Meeting. And it must work diligently to complete the process for electing at-large directors by June 2000.
• ICANN should eliminate the $1 per-year per domain name registration user fee. Although the user fee may be determined to be an appropriate method for funding ICANN's activities, it has become controversial, and we believe a permanent financing method should not be adopted until after the nine elected members are added to the ICANN Board in November. That will ensure that this important decision is made in accordance with the representative, bottom-up process called for in the White Paper. In the meanwhile, we will work with ICANN and the entire Internet community, to the extent permitted by law, to obtain interim resources for ICANN.

 
• ICANN should immediately open its board meetings to the public. Transparency is critical to establishing trust in decision making. And trust is essential for ICANN's ultimate success. As a general matter, ICANN has undertaken the vast majority of its work in an open and transparent manner. The final step of opening the board meetings is critical to establishing trust in ICANN.

 
• There is concern in the Internet community about the possibility of over-regulation, and therefore ICANN should assure all registrars and registries, through contract, that it will restrict its policy development activities to matters that are reasonably necessary to achieve the goals specified in the White Paper and that it will act in accordance with the procedural principles set forth in the White Paper.

With these actions, and the other steps already taken by ICANN, we believe that ICANN will put itself on a very firm footing to achieve the goals and principles spelled out in the White Paper. The ICANN apparently agrees and wrote to the Department of Commerce on July 19, 1999 indicating that these suggestions would be implemented.

Introduction of Competition in Domain Name Registration

Again, there has been considerable progress: the Shared Registration System (SRS) has been created; new registrars have been accredited under guidelines established by ICANN; Network Solutions, Inc. (NSI) has licensed the SRS to those registrars on an interim basis; and testing of the SRS has begun. But significant work still remains to be done in order to establish robust competition:

• NSI must fulfill its obligation to recognize ICANN as required by Amendment 11 of the Cooperative Agreement. This requires NSI and ICANN to reach agreement on a number of contractual issues. The transition of DNS management to the private sector can succeed only if all participants in the domain name system - including NSI - subject themselves to rules emerging from the consensus based, bottom-up process spelled out in the White Paper.

• With respect to NSI's provision of registry services - as to which an unsupervised NSI would be able to exercise market power today and for the foreseeable future - we believe the NSI-ICANN agreement must assure reasonable supervision to prevent the exercise of that market power in a way that injures consumers. With respect to NSI's provision of registrar services, robust competition in the provision of those services - and the lower prices and greater choice that are the benefits of competition - cannot occur until all purveyors of those services abide by the same rules.

• But what if an agreement cannot be reached? NSI's view is very clear. Its position is that when the Cooperative Agreement terminates, whether prematurely or upon its expiration on September 30, 2000, NSI will be free to operate these domains without any supervision by the Government. The Commerce Department believes just as strongly that NSI does not have the legal right to operate these domains in the authoritative root in perpetuity. We believe that all or part of the functions now performed by NSI under the Cooperative Agreement could be reassigned through a competition and, unless NSI won the competition, it would cease to have any legal right to provide the recompeted services. And even if that were not so, an NSI unconstrained under U.S. law would quickly become a target of action by other countries in order to protect consumers against the exercise of market power.

 
• This path - failure to reach agreement with ICANN, recompetition of the Cooperative Agreement and the likely results that would follow, together with action by foreign governments - would be extremely destabilizing for the Internet and therefore quite harmful to its development. We have been able to reach agreement with NSI in the past each time it has been necessary to do so in order to enable the DNS process to move forward. There is no reason to believe that agreement cannot be reached on the remaining questions. We believe all parties should put aside inflammatory rhetoric, set aside parochial concerns, and work for a fair solution that is in the interest of the entire Internet community.

 
• NSI and the Department of Commerce must reach agreement on a post-Testbed license for registrars' use of the SRS. Remaining issues include modification of the SRS to allow registrars to offer different term lengths (and thus compete on this basis in addition to price); and allowing registrants to switch registrars without forfeiting the time remaining on an existing registration contract, upon payment of a cost-based transfer fee (the current system requires the transferring registrant to forfeit all time on its existing registration and pay an additional two-year fee). We are very concerned that imposing this monetary penalty on transfer of existing registrations among registrars creates a barrier to robust competition. We also must reach agreement on the size of the per-registration fee to be paid to NSI as registry.

 
• NSI and the Department of Commerce also must resolve issues regarding the availability of the WHOIS database, and the .com, .net, and .org zone files. NSI took certain actions earlier this year without the consent of the Commerce Department that restricted access to this information, which had previously been widely and readily available to the Internet community. We strongly support the prohibition of uses that adversely affect the operational stability of the Internet, but we oppose other restrictions on third-party use of this information, which has been compiled by NSI in the course of its operations under the authority of the U.S. Government.

• The Commerce Department and NSI also must reach agreement concerning the appropriate use of the InterNIC.net website. The Commerce Department believes that InterNIC should remain a neutral website for the purpose of educating the public about the introduction of competition in domain name registration and possibly for providing a comprehensive WHOIS service.

 

Domain Names and Trademarks

• The provisions of the ICANN Accreditation Agreement, together with the recommendations of the World Intellectual Property Organization (WIPO) when fully implemented, reflect the recommendations of the White Paper related to reducing friction between trademark owners and domain name holders. We commend ICANN for its prompt action on these issues, and urge it to proceed promptly, pursuant to the appropriate ICANN procedures, to establish a uniform dispute resolution procedure for cybersquatting.

Management of the Root Server System

• The Department of Commerce and ICANN are proceeding to implement the White Paper's call to develop and implement means to increase the security and professional management of the Internet root server system.

 

I want to thank the Committee for inviting me to testify today on this important issue. We have attached our response to Chairman Bliley's letter of June 22, 1999 which discusses these issues in greater detail. As always, the Department of Commerce welcomes the Committee's interest in the DNS process. I would be pleased to answer any questions you may have at this time.