Scribe's Notes - Commerce DNS/ICANN Hearings

Commerce Hearings on DNS/ICANN - Scribe's Notes

The following notes were taken by Berkman staff at hearings of the House Commerce Committee Subcommittee on Oversight and Investigations on the morning of July 22 in a session called "Hearing on "Domain Name System Privatization: Is ICANN Out of Control?" They are unofficial in the sense that they represent solely the points thought to be salient by the particular staff attending. However, we believe that, along with the audio archive of the proceedings, these notes generally represent a reasonable archive of what was discussed.

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Panel I Questions

Bliley: Did DoC see these problems coming?

Burr: Yes, expected private sector initial funding for ICANN.

Bliley: Did ICANN consult with USG re advisability of $1 fee per domain?

Burr: Yes, DoC reviewed and commented on draft accreditation agreement which contained the $1/domain fee. Discussed alternative funding mechanisms. Issue put up for public comment, not many comments received on the subject, esp not many opposing.

Klink: Washington Post this morning says NSI refuses to recognize ICANN’s legitimacy. "They’re not really necessary," says the article. Is this accurate?

Rutt: Quote taken out of context. First, said that a "good ICANN" is a good thing. Then the question was posed "Is ICANN necessary for competition in domain registration?" "No, it’s not," was my response.
Pincus: NSI exclusively operates the commercially viable domains (as the registry for those domains). After the MoU with NSI expires in the fall of 2000, NSI could do whatever it wants – and not allow competition in those domains – so either government or private oversight is necessary.
Rutt: Business is already fiercely competitive. 248 registries in operation around the world.
Klink: But NSI has 75% or more of the domains.

Upton: How many directors are there, and what is holding up elections?

Roberts: There are nine directors now, also Roberts, the CEO. Processes seem to be on track.
Dyson: Expect to have nine elected board members by November of this year.

Upton: Why will the next meeting be in Chile?

Roberts: Latin American representation is important.
Burr: Moving around the world makes it possible to include more people from around the world in the consensus-building process.

Degette: Who owns the intellectual property that makes up the DNS?

Pincus: Government owns them as a result of the Cooperative Agreement.
Dyson: Public property. Important that the information be publicly available for a number of public interest reasons.
Rutt: In its compiled form, the intellectual property is quite clearly NSI’s. NSI’s lawyers say so, after reviewing hundreds of other cooperative agreements which seem to set a clear predent. But, agrees that the community needs access to this data (i.e. through the WHOIS service).
Degette: Please submit that legal analysis. The data is simply facts, so it would be difficult to copyright.

Degette: NSI’s primary fiduciary duty is to shareholders, not to the Internet community or USG, right?

"Clearly, as an officer of a public company, my first responsibility is to shareholders. But, what's good for the Internet is good for NSI."
Degette: Not sure if others would agree.

Degette: Should there be full competition in domain name registration, and do you think this will benefit your shareholders?

Yes and yes. Others will think of other ways to use domain names, and we’ll sell to some of those people.
Degette: This seems surprising, for your testimony and press statements indicate that NSI questions the basis of ICANN’s authority.

Bilbray: NSI’s shareholders are its employees – it’s an employee-owned business. Does DoC have a plan if NSI doesn’t sign an agreement with ICANN?

Pincus: Hope to reach an agreement, haven’t yet decided how to proceed if no agreement possible. DoC believes it has the authority to reassign the cooperative agreement, but this would likely lead to lengthy litigation so we want to reach agreement if possible.

Bilbray: What is NSI doing to move towards a competitive environment?

Rutt: Have invested $10 million, will spend tens of millions more, to develop competitive registrations in .com, .net., and .org. Are moving as fast as practicable to bring in the competition. Capable of bringing online at least five additional registrars a month. Five competing registrars are actually in business right now, the first one having gone online on June 5.
Bilbray: Committee would like a "closer estimate" of how much NSI has spent.

Stupak: NSI claims that it only has to recognize ICANN if ICANN has a "final agreement." DoC says the agreement has been finalized. Sounds like a delay tactic to me. What do you think? Have you ever told ICANN or DoC that there is no final agreement?

Rutt: Let me ask my lawyer and get back to you tomorrow. Yes, have said there is no final agreement.
Pincus: Didn’t and don’t want to let this stall the process of ICANN moving forward.

Stupak: Who’s the final arbitrator here? The courts?

Pincus: Can’t force NSI to enter a contract against its will. Would have to put the gTLDs back out for "recompetition" (bidding).

Klink: The longer you drag it out, the more money you’re making. What do you say to that?

Rutt: I didn’t come here to have border wars with lawyers or try to squeeze a few more pennies out of an old business. Want to grow the business and compete and be a ferocious competitor in a fair and open market, not waste everyone’s time with "small change matters." Think we can make a lot more money with more interesting businesses, being an aggressive fast-moving Internet company.
Klink: Are you saying the money NSI is making from its current business is small change? You are walking away from a sure thing? That gravy is running all over your plate.
Rutt: I don’t think of it that way.
Stupak: I think that if DoC has the ability to enter into a cooperative agreement, then it has the right to rebid it.

Cox: What’s the status of the $1 fee now? What’s your personal recommendation? Is WIPO role funded through that dollar?

Dyson: Postponed until at least November when there are more (elected) board members. I think it’s good – the registrars agreed to it, the Internet community thought it was acceptable. And, in the context of the payment to NSI going from $35 per domain name per year to $9, it will be a net gain for consumers. WIPO has made recommendations to ICANN, but the money is for funding ICANN generally (and not WIPO). Trademark is but one of ICANN’s concerns.

Upton: ICANN received donations from high-tech companies. Is it appropriate for ICANN to be seeking assistance from these sources?

Roberts: ICANN has raised on both a short-term and permanent basis from a variety of constituencies. Both Dyson and I have had conversations with the White House with people attempting to promote the President’s e-commerce initiative. Do anticipate that contributions to ICANN will be tax exempt; IRS will rule after paperwork is submitted, within next 30-40 days (because needed more financial details before submitting forms).

Upton: Are you aware that Sims contacted DoJ re possible pursuit of NSI for antitrust violations?

Burr: Doesn’t generally follow the correspondence of ICANN with other parts of the USG.

Klink: Funding problem. Have you solved the problem? Plans?

Dyson: Sims works on credit. Directors haven’t gotten their expenses paid. Roberts’ company hasn’t been paid in some months. Some money coming in from companies as listed on web site. Two registrars have volunteered to pay the $1/domain fee even though it isn’t required.

Klink: NSI has said it won’t recognize ICANN unless it operates in compliance with the White Paper. (See your testimony, page 7, middle of first full paragraph.) But who says whether or not they’re in compliance?

Rutt: It’s a comment about the contract discussions between NSI and ICANN.
Klink: Allegation is that NSI is reluctant to give up the cash flow from gTLDs and only has to stall. You need to persuade me that such stalling is not happening.
Pincus: DoC won’t approve a NSI-ICANN contract if DoC doesn’t think the contract satisfies the White Paper.

Bilbray: As a layman involved with regulatory agencies for 25 years, I note that this is hard to comprehend. Moves fast, many dimensions. So I don’t expect to understand everything, but a reduction from $35 to $10 seems huge, incredible, outstanding.

Pincus: When NSI charges $35, that covers both registry and registrar operations. The $9 covers NSI’s registry fee (for maintaining the central list), but there’s also likely to be a registrar fee for the retail side of the business. Nevertheless, it’s still anticipated that the sum of registry and registrars fee will be less than $35.

Bilbray: How much does ICANN owe its lawyers?

Roberts: Total money owed to all creditors is $800,000. $500,000 of that is to lawyers.

Bilbray: Concern about openness and how people get involved in ICANN. How were you approached to become involved with ICANN? And when will the light of day shine into the board meeting? Will all meetings be open from then on?

Dyson: Magaziner and Cochetti (of IBM) asked if she’d be interested if officially asked. Official invitation came from Joe Sims. Santiago will be open. Subsequent meeting will be open pursuant to vote of new board.
Stupak: But you said you reserved the right to have a private session?
Dyson: Just for litigation, personnel issues, and other subjects that have to be discussed in private.

Stupak: NSI will still be paid even when there’s competition, right? How will you feel about competitive bidding in the fall of 2000?

Yes, NSI will still be paid for registry services. NSI expects to agree to terms that last considerably beyond September 30, 2000.

Stupak: NSI wants industry consensus, but who decides whether or not there’s consensus?

Rutt: One obstructionist player shouldn’t be able to stop the process from going forward. Should have some sort of supermajority standard. "Consensus is like pornography – you know it when you see it."
Pincus: Need an agreement between NSI and ICANN, and should see what public comment says also.

Cox: Government Advisory Committee, created by By-Laws, board can change those, so board can change structure of GAC, right? Concern that ICANN is becoming a government or will be run by governments. Concern also re who can be there – why China (which is taking some policy actions we might regard as undesirable) and not Taiwan?

Roberts: Yes. But White Paper is quite definitive that governments should not play a major role in ICANN.
Dyson: Committee is advisory, just writes recommendations. Unlike SOs which provide more of a policy-setting role. ICANN can only manage technical infrastructure, not content, freedom of speech. Can’t control what PRC does.
Burr: Taiwan is in the GAC. Initially, the GAC required members to be nations, but change was made to allow "distinct economies" to participate as equals.

Panel II Statements

Love: Interested in Network Solutions and ICANN.

NSI: Concerned that NSI says it owns the information in its registry. There’s a lock-in problem that needs to be addressed, because it’s hard to move to a new address once established at some initial address.
ICANN: Power limited only by the ability of others to work around it. ICANN’s non-profit status provides no structural protection against abuses. Wants ICANN to sign an agreement promising not to go beyond technical issues. But they won’t. How USG could oversee ICANN if it wanted to? Could be harder than overseeing NSI.

Norquist: Thinking about how and why to tax commerce on the Internet.

Concerned about ICANN’s $1 tax – not a lot of money, but where does the authority to do so come from? They could make the tax bigger. Congress shouldn’t delegate the power to tax.

Barry: ICANN is not just plumbing. Goes far beyond what’s contemplated by the White Paper.

Will sacrifice small business and individual interests without structures in place for accountability.
US Small Business Administration says WIPO’s recommendations are not appropriate because they may be discriminatory against small businesses.
Agree with ICANN that competition is important. But ICANN is requiring too much of registries to adopt provisions detrimental to small businesses and individuals.
Andrew has all the power of a government, but none of the oversight.

Miller: Hearing today is important because it sheds light on a confusing and previously-obscure process.

Key points: Pleased to hear the meetings will be open in the future. New era of competition in domain names. Government involvement needs to be reduced.
Those who challenge ICANN may unintentionally be undermining the Internet itself, for we can’t turn these powers back over to governments.
Must deal with the problem of cyber-squatting.
Users must pay for the services of ICANN.

Weinberg:

ICANN suffered self-inflicted wounds: Board members don’t have very technical backgrounds. Closed meetings. Communicates to outside world through lawyers, PR firm. Has created an arbitrary structure for DNSO. Hasn’t limited its policy role appropriately.
Todo: Needs new board members, more representative, drawn from the Internet community. Needs to define and limit its own policy mandates.
Criticism of $1/year "tax" is overblown.
Conflict between NSI and ICANN is inevitable because NSI is enjoying huge profits from its monopoly while ICANN’s task is to eliminate NSI’s monopoly. NSI has consistently sought to slow down the process of creating competition.

Zittrain: Berkman has sought to document the process of ICANN’s creation, identify underlying issues at stake, and develop systems for deliberation in ICANN’s decision-making process.

What ICANN has been asked to do: The system prior to ICANN was a series of handshakes and traditions, plus a couple cooperative agreements with vague terms. Government involvement was limited to subsidies (like NEA, maybe, but less controversial). The IETF developed the actual protocols by which the network worked, informally and among only engineers with little beyond technical "glory" at stake.
Why it’s hard for ICANN to do it: But now there’s real money at stake, and engineers don’t want to deal with those kinds of problems. ICANN therefore really does have some regulatory power. And there are very powerful interests involved. To make ICANN work, there should be openness (not just open board meetings, but that’s only the beginning). Better to have a forum in which issues are discussed as openly as possible rather than have the deliberation take place in private without the procedures of openness. Also due process, representation, etc.
What happens if ICANN fails

Panel II Questions

Upton: Is ICANN board representative? Is ICANN going too far by attempting to address cybersquatting?

Barry: No, because individuals are under-represented. Yes, because cybersquatters have never won a case in the US or in any other country.
Miller: Board is doing a good job, but faces hard challenges. Need representation of users. Need to include all parts of the world, so board is to be commented for moving meetings around the world. It’s appropriate to discuss WIPO issues.
Weinberg: Board isn’t representative. PSO and ASO will send engineers to the Board. DNSO will send people interested in the business of registering domain names. Need At-Large Membership to represent the interests of individuals. An agreement will be reached re cybersquatting.
Zittrain: Major voices missing? I don’t think they’re meant to each represent different interests, rather they’re a sort of collective. Going forward, the bicameral structure of the board gives the At-Large Membership a significant power. But how to make the A-L M representative? The Membership Advisory Committee worked on that. Re cybersquatting, disputes like Spring having mci.com have been resolved by the courts satisfactorily so far, and I’m generally not hoping for heavy-handed power wielded by ICANN.

Klink: Is there a game of chicken going on here? Will the Internet come crashing down if NSI walks away?

Barry: Internet will route around instability. Internet did not come crashing down when NSI had significant technical difficulties. Running a root server is not magic or even especially difficult.
Miller: This is not an easy system to run, and it’s getting more sophisticated every day as the size of the network grows. It would be terribly disruptive to forcefully remove NSI.
Weinberg: NSI would like to have the real power over its gTLDs, ideally with the "fig leaf" of someone else’s so-called control. It would be a big mess if the gTLDs were pulled away from NSI.
Zittrain: It really is a game of chicken – DoC doesn’t want a lawsuit, ICANN doesn’t have the money for a lawsuit, NSI wants a monopoly for as long as possible (so there’s law and structure to prevent them from doing so!) – so we should expect agreement at the eleventh hour.
Klink: Government has created a monopoly and now doesn’t know what to do with it?
Zittrain: You find yourself on top of the goldmine.
Miller: It’s like the food service at a stadium – there’s only one, but you want it to be high-quality, so someone has to watch the monopolist.

Pickering: Want to set up a structure for accountability. Does USG need to step in until issues are adequately addressed in an open forum? Does NTIA/DoC have adequate authority?

Weinberg: Don’t need to step in. ICANN has a long way to go, as does NSI of course. But DoC is basically doing all the right things, maybe being too timid sometimes in its negotiations with NSI (but that’s "backseat driving"). Committee should throw its support behind the DoC.
Miller: Committee should hold another hearing in November, when ICANN will have seated the first nine elected members, when the issue of openness will have been dealt with or not, when there will be real competition in registrations, and so on. So don’t step in now.
Barry: A freeze might be appropriate given the extent to which the ICANN process represents significant worries.
Zittrain: This process has been like watching a faucet drip – nothing all that shocking has happened. There’s a contract between ICANN and the USG which expires in October 2000; Congress could weigh in any time between now and then with instructions or concerns. Re the NSI monopoly, not sure there’s much Congress can do. Finally, it’s not clear why domains should be "rented" rather than "bought."

Panel III Statements

Forman: register.com was the first company to go live with a competitive registration system. Market expected to grow by a factor of twenty in the next four years.

ICANN Participation: have been involved at every ICANN public meeting. Can attend physically and talk at a microphone, or participate remotely (listening to audio and/or watching video, submitting questions to be responded to immediately) as I did in Singapore.
Comfortable with $1 fee, just as obliged to pay NSI the $9 fee.
Need level playing field: internic.net needs to be impartial, making it hard to offer service to customers. NSI should have to sign a Registrar Accreditation Agreement so that it operates on the same terms as competing registrars.

Stubbs: Is ICANN fulfilling its responsibility to open the DNS to the Internet community? No, because it can’t. NSI still makes the process more difficult than it needs to be. Customers must be able to choose their registrar without having to pay excessive transfer fees.
Bramson: Transition event is extraordinary, bringing competition to an important part of the Internet. Need predictability, stability, and a level playing field. ICANN has provided the only structure for this process, and we think it needs to continue.

Want to focus on test bed. Why? Allow community to be involved. Maintaining consumerability. But still lack fundamental structure Working on internal principles.
Expect to launch AOLs registration system by end of test bed period. Want consumers to be able to be involved/compete
Is ICANN process to be reassessed? Some parts, but healthy questions going on today, with DoC playing a part.