[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
       DOMAIN NAME SYSTEM PRIVATIZATION: IS ICANN OUT OF CONTROL?

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 22, 1999

                               __________

                           Serial No. 106-47

                               __________

            Printed for the use of the Committee on Commerce



                    U.S. GOVERNMENT PRINTING OFFICE
58-497 CC                   WASHINGTON : 1999



                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING, 
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   James E. Derderian, Chief of Staff

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

              Subcommittee on Oversight and Investigations

                     FRED UPTON, Michigan, Chairman

JOE BARTON, Texas                    RON KLINK, Pennsylvania
CHRISTOPHER COX, California          HENRY A. WAXMAN, California
RICHARD BURR, North Carolina         BART STUPAK, Michigan
  Vice Chairman                      GENE GREEN, Texas
BRIAN P. BILBRAY, California         KAREN McCARTHY, Missouri
ED WHITFIELD, Kentucky               TED STRICKLAND, Ohio
GREG GANSKE, Iowa                    DIANA DeGETTE, Colorado
ROY BLUNT, Missouri                  JOHN D. DINGELL, Michigan,
ED BRYANT, Tennessee                   (Ex Officio)
TOM BLILEY, Virginia,
  (Ex Officio)

                                  (ii)



                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Barry, Michaela M., President and Director, Domain Name 
      Rights Coalition...........................................   144
    Bramson, James R., Counsel, America Online, Inc..............   188
    Dyson, Esther, Interim Chairman, Internet Corporation for 
      Assigned Names and Numbers, accompanied by Mike Roberts, 
      Interim President and Chief Executive Officer, Internet 
      Corporation for Assigned Names and Numbers.................    42
    Forman, Richard D., Chief Executive Officer, Register.com....   179
    Love, James, Director, Consumer Project on Technology........   134
    Miller, Harris N., President, Information Technology 
      Association of America.....................................   150
    Norquist, Grover, President, Americans for Tax Reform........   139
    Pincus, Andrew J., General Counsel, accompanied by Becky 
      Burr, Acting Administrator, Office of International 
      Affairs, National Telecommunications Information Agency, 
      Department of Commerce.....................................    14
    Rutt, Jim, Chief Executive Officer, Network Solutions 
      Incorporated...............................................    93
    Stubbs, Kenyon T., Chairman, Executive Committee, Internet 
      Council of Registrars......................................   184
    Weinberg, Jonathan, Professor Law, Wayne State University....   155
    Zittrain, Jonathan, Executive Director, Berkman Center for 
      Internet and Society.......................................   161
Material submitted for the record by:
    Barry, Michaela M., President and Director, Domain Name 
      Rights Coalition, submission dated August 27, 1999.........   232
    Bliley, Hon. Tom, Chairman, Committee on Commerce:
        Letter dated October 15, 1998, to Ira Magaziner, 
          Executive Office of the President, enclosing questions 
          for the record, and responses to same..................   294
        Letter dated October 15, 1998, to Hon. William Daley, 
          Secretary of Commerce, enclosing questions for the 
          record, and responses to same..........................   306
    Bramson, James R., Counsel, America Online, Inc., response 
      for the record dated August 24, 1999.......................   275
    Dyson, Esther, Interim Chairman, Internet Corporation for 
      Assigned Names and Numbers, letter dated August 4, 1999, to 
      Hon. Thomas J. Bliley, Jr., enclosing response for the 
      record.....................................................   193
    Forman, Richard D., Chief Executive Officer, Register.com, 
      letter dated August 20, 1999, enclosing response for the 
      record.....................................................   281
    Love, James, Director, Consumer Project on Technology, letter 
      dated September 10, 1999, enclosing response for the record   215
    Miller, Harris N., President, Information Technology 
      Association of America, letter dated August 18, 1999, 
      enclosing response for the record..........................   212
    Norquist, Grover, President, Americans for Tax Reform, letter 
      dated August 24, 1999, enclosing response for the record...   219
    Pincus, Andrew J., General Counsel, J. Beckwith Burr, Acting 
      Administrator, Office of International Affairs, National 
      Telecommunications Information Agency, Department of 
      Commerce, letter dated August 24, 1999, enclosing response 
      for the record.............................................   195
    Roberts, Mike, Interim President and Chief Executive Officer, 
      Internet Corporation for Assigned Names and Numbers, letter 
      dated August 20, 1999, enclosing response for the record...   210
    Rutt, Jim, Chief Executive Officer, Network Solutions 
      Incorporated, letter dated August 24, 1999, enclosing 
      response for the record....................................   202
    Weinberg, Jonathan, Professor Law, Wayne State University, 
      letter dated August 24, 1999, enclosing response for the 
      record.....................................................   222
    Zittrain, Jonathan, Executive Director, Berkman Center for 
      Internet and Society, letter dated August 24, 1999, 
      enclosing response for the record..........................   263

                                 (iii)

  


       DOMAIN NAME SYSTEM PRIVATIZATION: IS ICANN OUT OF CONTROL?

                              ----------                              


                        THURSDAY, JULY 22, 1999

                  House of Representatives,
                             Committee on Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 11 a.m., in 
room 2322, Rayburn House Office Building, Hon. Fred Upton 
(chairman) presiding.
    Members present: Representatives Upton, Bilbray, Bryant, 
Bliley (ex officio), Klink, Stupak, and DeGette.
    Also present: Represntatives Tauzin, and Pickering.
    Staff present: Eric Link, majority counsel; Paul Scolese, 
majority professional staff; Mike Flood, legislative clerk; and 
Edith Holleman, minority counsel.
    Mr. Upton. Good morning everyone. One piece of housekeeping 
before we get started. I want to acknowledge and thank the 
Berkman Center for Internet and Society at Harvard Law School 
for carrying today's proceeding live over the Internet.
    While the Berkman Center has an ongoing relationship with 
one of today's principle witnesses, the Internet Corporation 
For Assigned Names and Numbers, or ICANN, I have received 
assurances that the funding for Berkman's presence here today 
is being provided directly by Harvard University.
    I might also add that this hearing is also being webcasted 
on the committee's website. I hope that many Internet users 
take advantage of this opportunity to listen in on the 
subcommittee's proceedings.
    Today the subcommittee will examine the administration's 
efforts to transfer control of the Internet domain name system 
from the public sector to the private sector. This transition 
is important because the domain name system is a critical 
component of the Internet that routes all Internet traffic and 
allows users to locate websites and ensure e-mail is properly 
sent and hopefully received.
    As such, it plays a vital role in the stability of the 
Internet. Under the direction of a 1997 Presidential Directive, 
the Department of Commerce moved to end the Federal 
Government's role in the DNS. To achieve this, the Department 
of Commerce released a series of proposals. The Department of 
Commerce's final proposal, known as the ``White Paper,'' 
outlined the transfer of many of the DNS management functions 
to a private not-for-profit corporation.
    This corporation was to be created by the Internet 
community at large through a consensus-building process. 
Ultimately, ICANN was selected and recognized as this not-for-
profit corporation by Commerce in October 1998.
    Many of the current DNS functions, such as registering 
.com, .net, and .org domain names are carried out by Network 
Solutions, Inc. or NSI. NSI carries out these functions under 
an exclusive cooperative agreement with the Department of 
Commerce.
    NSI signed this cooperative agreement with the National 
Science Foundation in 1993. NSF managed this cooperative 
agreement until it was transferred to Commerce in September 
1998. The Committee on Commerce gained direct jurisdiction of 
this issue when NSF transferred the cooperative agreement to 
the Department of Commerce in September 1998.
    In October 1998, Chairman Bliley began reviewing the 
administration's selection of ICANN, how it was formed, and the 
selection of ICANN's board members. During the course of 
today's hearing, I think you will come to see that these 
questions are just as relevant today as they were last fall. 
The Department of Commerce recognized ICANN in November 1998 as 
the private sector body who would assume responsibility for the 
management of the domain name system. In the 8 months that have 
passed since then, ICANN has attempted to start filling its 
obligations to the administration.
    Most notably, ICANN is responsible for introducing 
competition into the registration of domain names. Introducing 
competition in this area requires the cooperation of NSI, since 
under its agreement with the Department of Commerce, NSI 
maintains the authoritative registry of domain names.
    Competition for Internet domain name registration currently 
is in a test period, with three competitors offering 
registration services, and two others soon to follow. Today we 
will hear from 3 of the 5 test-bed registrars.
    Recently some problems have developed in the transfer of 
the domain name system from the public sector to the private 
sector. For instance, the test-bed period for competitive 
registrars has been extended several times. Also, NSI and ICANN 
have been unable to reach an agreement addressing the transfer 
of fundamental responsibilities relating to Internet 
management. This impasse needs to be addressed before the 
administration's transfer plan can go much further.
    Finally, many observers have taken issue with several 
decisions made by ICANN's unelected interim board of directors, 
including their decision to hold portions of their meetings in 
private, a well as the imposition of a $1 per domain name fee. 
However, following an inquiry by Chairman Bliley regarding 
these practices, ICANN announced that it was suspending both 
until further notice.
    Today's hearing will provide an opportunity to explore the 
present state of the domain name system's transition, and 
evaluate whether the administration's plan, as it is currently 
being implemented, may benefit or threaten the Internet.
    In addition to hearing from the three principal players in 
this situation, the Department of Commerce, ICANN and NSI, we 
also will be hearing from a variety of interested parties who 
will share their perspective on the present situation.
    I thank all of today's witnesses for testifying before this 
subcommittee on a matter that I am sure will take on increasing 
importance. I would note, too, that those in attendance need to 
move from the back wall, or else you will be asked to leave. 
So, if you can spread out a little so we can shut that door, it 
will be helpful.
    I yield at this time my ranking member and friend, Mr. 
Klink.
    [The prepared statement of Hon. Fred Upton follows:]
   Prepared Statement of Hon. Fred Upton, Chairman, Subcommittee on 
                      Oversight and Investigations
    One piece of housekeeping before we get started today. I want to 
acknowledge and thank the Berkman Center for Internet and Society at 
Harvard Law School for carrying today's proceedings live over the 
Internet. While the Berkman Center has an ongoing relationship with one 
of today's principal witnesses, the Internet Corporation for Assigned 
Names and Numbers, I have received assurances that the funding for 
Berkman's presence here today is being provided directly by Harvard 
University. I might also add that this hearing is also being webcasted 
on the Committee's website. I hope that many Internet users take 
advantage of this opportunity to listen in on the Subcommittee's 
proceedings.
    Today the Subcommittee will examine the Administration's efforts to 
transfer control of the Internet domain name system from the public 
sector to the private sector. This transition is important because the 
domain name system is a critical component of the Internet that routes 
all Internet traffic and allows users to locate websites and ensure e-
mail is properly sent. As such, it plays a vital role in the stability 
of the Internet.
    Under the direction of a 1997 Presidential Directive, the 
Department of Commerce moved to end the Federal government's role in 
the DNS. To achieve this, the Department of Commerce released a series 
of proposals. The Department of Commerce's final proposal known as the 
``White Paper''--outlined the transfer of many of the DNS management 
functions to a private, not-for-profit corporation. This corporation 
was to be created by the Internet community at large through a 
consensus-building process. Ultimately, the Internet Corporation for 
Assigned Names and Numbers--or ICANN (``eye-can'')--was selected and 
recognized as this not-for-profit corporation by the Department of 
Commerce in October 1998.
    Many of the current DNS functions, such as registering com, net and 
org domain names are carried out by Network Solutions, Inc.--or NSI. 
NSI carries out these functions under an exclusive cooperative 
agreement with the Department of Commerce. NSI signed this cooperative 
agreement with the National Science Foundation in 1993, and the 
National Science Foundation managed this cooperative agreement until it 
was transferred to the Department of Commerce in September 1998. The 
Committee on Commerce gained direct jurisdiction of this issue when 
National Science Foundation transferred the cooperative agreement to 
the Department of Commerce in September 1998.
    In October 1998, Chairman Bliley began reviewing the 
Administration's selection of ICANN, how ICANN was formed, and the 
selection of ICANN's interim board members. During the course of 
today's hearing, I think you will come to see that these questions are 
just as relevant today as they were last fall.
    The Department of Commerce recognized ICANN in November 1998 as the 
private sector body who would assume responsibility for the management 
of the domain name system. In the eight months that have passed since 
then, ICANN has attempted to start fulfilling its obligations to the 
Administration. Most notably, ICANN is responsible for introducing 
competition to the registration of domain names. Introducing 
competition in this area requires the cooperation of NSI, since under 
its agreement with the Department of Commerce, NSI maintains the 
authoritative registry of domain names. Competition for Internet domain 
name registration currently is in a test period, with three competitors 
offering registration services and two others soon to follow. Today we 
will hear from three of the five test bed registrars.
    Recently, some problems have developed in the transfer of the 
domain name system from the public sector to the private sector. For 
instance, the test bed period for competitive registrars has been 
extended several times. Also, NSI and ICANN have been unable to reach 
an agreement addressing the transfer of fundamental responsibilities 
relating to Internet management. This impasse needs to be addressed 
before the Administration's transfer plan can go much further. Finally, 
many observers have taken issue with several decisions made by ICANN's 
unelected interim board of directors, including their decision to hold 
portions of their meetings in private, as well as the imposition of a 
$1 per domain name fee. However, following an inquiry by Chairman 
Bliley regarding these practices, ICANN announced that it was 
suspending both until further notice.
    Today's hearing will provide an opportunity to explore the present 
state of the domain name system's transition, and evaluate whether the 
Administration's plan, as it currently is being implemented, may 
benefit or threaten the Internet. In addition to hearing from the three 
principal players in this situation--the Department of Commerce, ICANN 
and NSI--we also will be hearing from a variety of interested parties 
who will share their perspective on the present situation.
    I thank all of today's witnesses for testifying before this 
subcommittee on a matter that I'm sure will take on increasing 
importance.
    Mr. Klink. I thank the chairman again for holding what I 
think is a very important hearing on the governing of the 
Internet and the process under which the Commerce Department is 
attempting to introduce competition into the domain name 
registry system. I thank the majority for working with the 
minority on the witnesses here today. They have been very 
cooperative.
    The concept of turning over a major portion of the 
international Commerce to a non-profit, non-governmental 
organization is a grand, complex, and fascinating experiment 
which has never been tried before. We do not know if, in the 
long-run, it is going to be successful.
    If we can judge by the number of calls and visits to our 
office from several of the parties before us today, there is a 
great financial interest in the outcome. I do hope, however, 
that despite the title of this hearing, the majority's mind has 
not been made up about this very new organization, ICANN, but 
that we are all open to a full and fair discussion of the 
issues at hand today.
    The Internet Corporation For Assigned Names and Numbers was 
established last fall to bring competition to the business of 
registering Internet domain names and moving it from the 
control of the Department of Commerce to a non-governmental 
organization. Currently this business, which is worth hundreds 
of millions of dollars annually, and growing exponentially, is 
in the hands of Network Solutions, Inc., through a cooperative 
agreement with the Commerce Dept. NSI, by operating a 
government-created monopoly, has grown from a minuscule private 
company in 1993, which was being paid by the U.S. taxpayers for 
its services, to a publically held, $120 million-plus company, 
to whom every person in the world who wants a .com, or .org 
address pays $70 every 2 years.
    Make no mistake, this is a very lucrative business. In the 
first quarter of 1999, NSI's earnings increased by 130 percent 
over the first quarter of 1998. Its stock is currently selling 
for $140 a share compared to less than $20 a year ago.
    One of the witnesses today will testify that annual 
revenues for domain name registrations are expected to be in 
excess of $2 billion in 4 years. Registrars also provide other 
Internet services. In our economic system, no one can support 
the continued existence of such a monopoly.
    I can only hope, Mr. Chairman, that the purpose of this 
hearing is not going to be to tear apart or even cripple ICANN, 
an organization that has been in existence for less than a 
year, so that the competition in domain name registration is 
delayed again, and

again, with the deliberate or the unintended effect of 
extending a monopoly. Recently there have been some very 
disturbing reports on the threats of Internet disruption, 
intellectual property claims of the ownership of the .com 
registry, and delay tactics by NSI to prolong its unique market 
position.
    Today its Chief Executive Officer was quoted in the 
Washington Post as saying, ``ICANN is not necessary.'' It its 
testimony, NSI says that it does not have to recognize ICANN, 
although the Commerce Department has directed them otherwise. 
NSI also appears to be saying that it, alone, will decide if 
ICANN's procedures for accrediting new registrars are 
legitimate or if there is industry consensus.
    On the other hand, without any industry input, NSI requires 
2-year registrations with a large penalty for transferring from 
one registrar to another. That can only benefit NSI. I am 
concerned about what appears to be a school yard bully 
approach. I expect the Department of Commerce to take firm and 
appropriate steps to deal with these issues.
    I have to say that I have seen no indication of that to-
date. I also expect to receive today from NSI their response 
and their unequivocal commitment to furthering full and open 
competition as soon as possible. It is one thing to bring 
forward legitimate issues.
    It is quite another for the dominant market player to 
refuse to participate in a process because it cannot fully 
control it. In a growing market, there should be room for 
everyone, but everyone is going to have to give a little. We 
will also hear from several witnesses today that they believe 
that ICANN has over-stepped its authority as a non-
representative organization with an unelected board.
    In this environment in which many parties have vested 
interest in the outcome and eventual scope of ICANN's 
authority, it can be difficult for policymakers to determine 
which issues are legitimate and which are being raised to cause 
delay or confusion in creating a new competitive structure.
    However, some of them appear to be worth looking at. They 
include the alleged dominance of large corporations with 
significant trademark issues at ICANN. Who should determine the 
procedures for resolving trademark disputes? Should ICANN use 
its process for accrediting registrars to impose unilaterally 
an alternate dispute resolution process on every holder of a 
.com or .org address, or to set jurisdictions for settling 
trademark disputes?
    Should ICANN limit the number of domains and the resulting 
increase in competition because trademark holders do not want 
to review large numbers of domains for possible infringements. 
In its White Paper, Commerce even suggest that ICANN should 
order its registrars to refuse to grant famous name domain 
addresses to parties that do not hold the trademark for those 
names.
    Many, many people have legitimate claims to addresses that 
may be or may become someone else's trademark. Who is to 
determine what a famous name is? The issue of accountability is 
a major one for both ICANN and NSI. If ICANN is not 
responsibility to any government or governmental organization, 
to whom does an aggrieved party go when a decision by ICANN, or 
one of its agents, has damaged that party's business or their 
relationship?
    When the interim Chairman of ICANN tells a consumer 
representative that pro-consumer policies will never be adopted 
by the board, we must wonder exactly what type of organization 
we are setting up. ICANN's habit of holding part of its board 
meetings in closed sessions also appears to be a mistake.
    On the other hand, to whom is NSI accountable in its 
pricing and contract conditions? Another very important 
question is how long NSI should retain its second monopoly as 
the administrator of the registry data base without any 
competitive process to subject fees and services to market 
review?
    Already, potential competitors are alleging that these fees 
are out of control. NSI claims it actually owns the data base 
to do what it wants with it. In the long-run, the stability of 
the Internet is not dependent on a particular software 
configuration or the number of competing domain registries. It 
must be under the control of an organization that is perceived 
by all stakeholders to be completely trustworthy and fair.
    For an organization like ICANN to survive without 
government controls and rules, it cannot be perceived as being 
under the control of one interest group or another. Congress 
must move expeditiously to ensue that full competition is 
commenced immediately.
    ICANN must move expeditiously to ensure that it is a 
representative organization and has some authority to carry out 
its mandate, but neither can do so without the full cooperation 
of Network Solutions.
    If this is not received, I predict that only the lawyers 
will benefit in the end.
    I thank the chairman.
    [The prepared statement of Hon. Ron Klink follows:]
Prepared Statement of Hon. Ron Klink, a Representative in Congress from 
                       the State of Pennsylvania
    Mr. Chairman, thank you for holding this very important hearing on 
the governance of the Internet and the process under which the Commerce 
Department is attempting to introduce competition into the domain name 
registry system. The concept of turning over a major portion of 
international commerce over to a non-profit, non-governmental 
organization is a grand, complex and fascinating experiment which has 
never been tried before. We do not know if, in the long run, it will be 
successful. If we can judge by the number of calls and visits to our 
offices from several of the parties before us today, there is great 
financial interest in its outcome. I do hope, however, that, despite 
the title of this hearing, the majority's mind has not already been 
made up about the very new organization, but is open to a full and fair 
discussion of the issues at hand today.
    The Internet Corporation for Assigned Names and Numbers (ICANN) was 
established last fall to bring competition to the business of 
registering Internet domain names and move it from the control of the 
Department of Commerce to a non-governmental organization. Currently, 
this business--which is worth hundreds of millions of dollars annually 
and growing exponentially--is in the hands of Network Solutions Inc. 
(NSI) through a cooperative agreement with the Commerce Department. 
NSI, by operating a government-created monopoly, has grown from a 
minuscule, private company in 1993 which was being paid by the U.S. 
taxpayer for its services to a publicly held, $120 million-plus company 
to whom every person in the world who wants a dot-com or dot-org 
address pays $70 every two years.
    Make no mistake--this is a very lucrative business. In the first 
quarter of 1999, NSI's earnings increased by 130 percent over the first 
quarter in 1998. Its stock is currently selling for $140 a share 
compared to less than $20 a year ago. One of the witnesses today will 
testify that annual revenues for domain name registrations are expected 
to be in excess of $2 billion in four years. And registrars also 
provide other Internet services.
    In our economic system, no one can support the continued existence 
of such a monopoly. I can only hope, Mr. Chairman, that the purpose of 
this hearing is not to tear apart or even cripple ICANN, an 
organization that has been in existence for less than a year, so that 
competition in domain name registration is delayed again and again with 
the deliberate or unintended effect of extending a monopoly. Recently, 
there have been some very disturbing reports of threats of Internet 
disruption, intellectual property claims of the ownership of the dot-
com registry and delay tactics by NSI to prolong its unique market 
position. Today, its chief executive officer was quoted in the 
Washington Post as saying ICANN is not necessary. In its testimony, NSI 
says that it does not have to recognize ICANN, although Commerce has 
directed them otherwise. NSI also appears to be saying that it alone 
will decide if ICANN's procedures for accrediting new registrars are 
legitimate or if there in industry consensus. On the other hand, 
without any industry input, NSI requires two-year registrations with a 
large penalty for transferring from one registrar to another. That can 
only benefit NSI. I am very concerned about this school yard bully 
approach, and I expect the Department of Commerce to take firm and 
appropriate steps to deal with these issues. I must say that I have 
seen no indication of that to date. I also expect to receive today from 
NSI their response and their unequivocal commitment to furthering full 
and open competition as soon as possible. It is one thing to bring 
forward legitimate issues; it is quite another for the dominant market 
player to refuse to participate in a process because it cannot fully 
control it. In a growing market, there should be room for everyone, but 
everyone is going to have to give.
    We also will hear from several witnesses today that they believe 
that ICANN has overstepped its authority as a non-representative 
organization with an unelected board. In this environment in which many 
parties have a vested interest in the outcome and eventual scope of 
ICANN's authority, it can be difficult for policymakers to determine 
which issues are legitimate and which are being raised to cause delay 
or confusion in creating a new competitive structure. However, some of 
them appear to be worth looking at. They include the alleged dominance 
of large corporations with significant trademark issues in ICANN. Who 
should determine the procedures for resolving trademark disputes? 
Should ICANN use its process for accrediting registrars to impose 
unilaterally an alternate dispute resolution process on every holder of 
a dotcom or dot-org address or to set jurisdictions for settling 
trademark disputes? Should ICANN limit the number of domains--and the 
resulting increase in competition--because trademark holders don't want 
to review large numbers of domains for possible infringements? In its 
White Paper, Commerce even suggested that ICANN should order its 
registrars to refuse to grant ``famous name'' domain addresses to 
parties not holding the trademark for those names. Many, many people 
may have legitimate claims to addresses that may be or become someone 
else's trademark. Who determines what a ``famous name'' is?
    The issue of accountability is a major one for both ICANN and NSI. 
If ICANN is not responsible to any government or governmental 
organization, to whom does an aggrieved party go when a decision by 
ICANN or one of its agents has damaged that party's business or other 
relationships? When the interim chairman of ICANN tells a consumer 
representative that proconsumer policies will never be adopted by the 
board, we must wonder exactly what type of organization we are setting 
up. ICANN's habit of holding part of its board meetings in closed 
sessions was also a mistake. On the other hand, to whom is NSI 
accountable in its pricing and contract conditions?
    Another very important question is how long NSI should retain its 
second monopoly as the administrator of the registry database without 
any competitive process to subject fees and services to market review. 
Already potential competitors are alleging that these fees are out of 
control. But NSI claims that it actually owns the database and can do 
whatever it wants with it.
    In the long run, the stability of the Internet is not dependent on 
a particular software configuration or the number of competing domain 
registries. It must be under the control of an organization that is 
perceived by all stakeholders to be completely trustworthy and fair. 
For an organization like ICANN to survive without governmental controls 
and rules, it cannot be perceived as being under the control of one 
interest group or another. Commerce must move expeditiously to ensure 
that full competition is commenced immediately; ICANN must move 
expeditiously to ensure that it is a representative organization and 
has some authority to carry out its mandate. But neither can do so 
without the full cooperation of Network Solutions. If this is not 
received, I predict that only the lawyers will benefit.
                 Masters of Internet Domains Go to War

                  [The Washington Post, July 22, 1999]

                        By Rajiv Chandrasedaran

    Quietly tapped by a Washington lawyer acting on the wishes of a 
reclusive university researcher, the 10 board members were meant to be 
the first trustees of the Internet: volunteer stewards who would assume 
technical control of the global computer network and break up Network 
Solutions Inc.'s lucrative monopoly in registering electronic 
addresses.
    It was a task that was almost universally cheered by Internet 
activists and businesses when the group was formed nine months ago. But 
not anymore. A growing number of critics contend that the group, dubbed 
ICANN, is stealthily morphing into a regulatory agency for the 
traditionally unregulated Internet.
    Leading the charge against ICANN--by underwriting activists and 
hiring lobbyists--has been one very self-interested party: Herndon-
based Network Solutions, which is refusing to participate in ICANN's 
plans for competition.
    The battle between ICANN and Network Solutions has the potential to 
disrupt the $150 billion flow of information and commerce on the 
Internet, as both sides engage in a tug of war over the network's 
master database of addresses. The fight also underscores how the 
Internet has graduated from being a creature of high-minded and free-
wheeling academics into a big business proposition that is struggling 
to establish some form of professional management.
    Technical control of the Internet has long rested with the U.S. 
government, which created the network in the 1960s. But in a coming-of-
age moment for the online world, the Clinton administration decided 
last year to transfer its authority to the private sector--through 
ICANN.
    ICANN is headed by Esther Dyson, an author and analyst who is one 
of the technology industry's best-known leaders. She has forcefully 
warned Network Solutions that it could lose its right to assign and 
manage addresses, its chief source of revenue, if it does not cooperate 
with ICANN. But Network Solutions has been unmoved, refusing to even 
recognize ICANN as a legitimate organization. ``They're not really 
necessary,'' said Jim Rutt, Network Solutions' chief executive.
    Dyson argues that Network Solutions' opposition to ICANN's plans to 
foster competition isn't based on principle, but out of a desire to 
``prolong its monopoly.''
    Administration officials have called Network Solutions' refusal to 
deal with ICANN ``extremely destabilizing for the Internet'' and 
``quite harmful to its development.'' Network Solutions, in turn, has 
warned that there would be ``serious security and stability issues'' 
for the Internet if the company is stripped of its ability to manage 
addresses that end with ``.com,'' ``.org'' and ``.net.'' Network 
Solutions warned such a move could result in ICANN and the government 
``disconnecting 5 million Internet addresses.''
    ``The risks are very high,'' said Harris Miller, the president of 
the Information Technology Association of America. ``The thought that 
these obscure techie issues are somehow going to affect the operation 
of the Internet is really a very scary proposition.''
    Network Solutions, ICANN and the administration all have incentives 
to reach an agreement without a bloody fight. For Network Solutions, 
not striking a deal with the other two and risking the chance it could 
lose its address-management role could worry many of its investors, who 
recently have bid the company's stock to record highs on the assumption 
that it will continue to dominate the address business. For the 
administration and ICANN, yanking away NSI's address-management 
function could open them to criticism that they are fracturing the 
network.
    ``I think we're all interested in making this work,'' Dyson said.
    At the same time, industry and government sources say the 
negotiations have not progressed significantly in recent weeks, 
creating a high possibility that no side might decide to take drastic 
action. ``The process,'' said one source close to the matter, ``is not 
moving forward the way it should be.''
    The roots of the current conflict extend back to 1992, when the 
Internet was the territory of academics and computer enthusiasts. 
Needing an organization to manage addresses on the network--known as 
``domain names''--the National Science Foundation entered into a 
cooperative agreement with defense contractor Science Applications 
International Corp., which eventually spun off the business as Network 
Solutions.
    As businesses began their frenetic rush to the Internet, Network 
Solutions' arcane agreement, which allowed it to charge $35 a year to 
register a domain, quickly turned into a lucrative government-
sanctioned monopoly. To date, the company has registered more than 5 
million domain names, helping it post an $11.2 million profit on 
revenue of almost $94 million last year.
    Soon, other firms began demanding a piece of the action, arguing 
that having a monopolist running the operation was impeding the growth 
of electronic commerce. After debating the issue for months, the White 
House decided last year to open domain registrations to competition and 
have a nonprofit corporation manage the process.
    It turned out to be easier said than done.
    There was no nonprofit group ready to assume the reins, so the 
government turned to Jonathan B. Postel, one of the Internet's 
founders. A Birkenstock-wearing researcher at the University of 
Southern California who had long been critical of NSI's monopoly, 
Postel set about soliciting suggestions from the Internet community for 
the corporation's board.
    Postel then drew up a list and had his Washington-based lawyer, Joe 
Sims, contact the prospective members. He included such industry and 
academic luminaries as Dyson and Linda Wilson, the president of 
Radcliffe College. But just as the group was readying its first meeting 
last fall, Postel died.
    The organization, formally named the Internet Corp. for Assigned 
Names and Numbers, eventually was pulled together by Sims. In April it 
picked five firms, including Dulles-based America Online Inc., to begin 
offering domain registrations on a test basis. ICANN has selected two 
dozen other firms to offer competing registration services, but they 
will not be able to until ICANN, Network Solutions and the Commerce 
Department can agree on pricing and other issues.
    Under the government's competition plan, Network Solutions would 
become one of several firms offering address registration services, but 
it would still have the sole right to run the master database of 
addresses. That database would tell firms if a certain address already 
is taken, preventing them from issuing a duplicate. The firms would pay 
a small fee to Network Solutions to keep track of addresses, but thus 
far, Network Solutions and the government thus far have been unable to 
agree on the size of the fee.
    Meanwhile, from almost the instant it was founded, ICANN has come 
under fire from many quarters of the Internet community. Activists have 
questioned the way the board was picked and its decision to meet behind 
closed doors. The board's subsequent decisions to charge a $1 fee on 
every domain to fund its operations and support a World Intellectual 
Property Organization plan aimed at resolving trademark disputes 
further enraged the activists, who worry that ICANN is moving well 
beyond its technical management mandate to more broadly regulate the 
Internet.
    ``The Internet has been successful because it never had any 
centralized management,'' said Tony Rutkowski, an Internet consultant 
in Northern Virginia who performs some work for Network Solutions. 
``ICANN appears to be out to change that.''
    ICANN officials deny they are moving beyond technical oversight and 
say much of the criticism reflects natural growing pains as the 
Internet moves to a self-governing structure. Nevertheless, Dyson 
admits it was a ``political and practical mistake'' to hold closed 
meetings and vows that future gatherings will be open. And on Monday, 
ICANN decided to abandon the $1 fee, which was called an ``Internet 
tax'' by critics.
    ``It became an issue that distracted from our mission,'' Dyson 
said. She said ICANN, which is essentially broke, instead will look for 
contributions from businesses and the government to keep the group 
afloat.
    Dyson and Sims blame Network Solutions for much of the opposition 
to ICANN, which Sims believes, is being used as a whipping boy for 
Network Solutions' disagreements with the government. ``We're an easier 
target than the government,'' said Sims, who contends that Network 
Solutions ``has put a lot of work into supporting, encouraging and 
actually paying for critics'' of ICANN. Network Solutions also has 
enlisted a team of high-powered lobbyists, led by Dan Dutko, whose firm 
also represents AT&T Corp. and the parent company of Federal Express, 
to press its case on Capitol Hill.
    Today, House Commerce Committee Chairman, Thomas J. Bliley Jr. (R-
Va.) plans to hold a hearing titled: ``Domain Name System 
Privatization: Is ICANN Out of Control?''
    Given the differences that remain among Network Solutions, ICANN 
and the administration, sources close to the negotiations believe there 
is a high possibility the Commerce Department either would strip the 
firm of its address-management function or the company would simply 
walk away from the agreement, opening itself to competition on more 
favorable terms and forcing the government to file a lawsuit if it 
wants to have someone else run the address database.
    Industry and academic experts following the debate worry that both 
sides are playing a high stakes game of political chicken with the 
Internet's critical infrastructure.
    ``There's an awful lot at risk here,'' said Michael Froomkin, a law 
professor at the University of Miami who recently helped start a group 
called ICANN Watch. ``And thus far, neither side seems to be doing much 
to minimize that risk.''
[GRAPHIC] [TIFF OMITTED] T8497.001

    Mr. Upton. Are you a lawyer?
    Mr. Klink. I am not a lawyer.
    Mr. Upton. I recognize the chairman of the full committee, 
Mr. Bliley.
    Chairman Bliley. Thank you, Mr. Chairman.
    I am glad you are holding this hearing today. The Internet 
domain name system is at a critical crossroads. It appears that 
there may be serious roadblocks to achieving a successful move 
to private control of this system.
    Consumers, teachers, and businesses have a stake in seeing 
that this system go from government control to the private 
sector. Today's hearing provides an opportunity for the 
committee and the public to question the administration's 
actions on this plan.
    We will hear from the key players on this matter, including 
ICANN, the Department of Commerce, and Network Solutions, as 
well as others with an interest in this process. Today also 
marks the first time that ICANN will appear in a public forum 
since it was selected last October to run the day-to-day 
mechanics of the Internet.
    As part of our larger E-commerce initiative, the committee 
has focused on the domain name system. In June of last year, 
the subcommittee on Telecommunications, Trade, and Consumer 
Protection held a hearing on the future of the domain name 
system.
    As I said at the start of that hearing, ``we must see to it 
that the transfer of the domain name system ensures stability 
and continuity. The failure of the domain name system could 
have a profoundly negative impact on electronic commerce.''
    Given the popularity of the Internet for business, 
learning, and entertainment, I believe that this statement is 
even more true today than it was in June of last year. That is 
why, since last June, the committee has investigated the 
transition of the domain name system to the private sector.
    We wrote last October to the administration to inquire 
about the selection of ICANN. Most recently, last month we 
asked ICANN and the Department of Commerce to explain in more 
detail the reasons for some of ICANN's actions and the 
Department's view of these actions.
    We asked ICANN about the notion that board meetings may be 
held in private, and the notion of a $1 per domain name fee. 
Think about that; $1 collected for each name, as millions of 
names come online. I believe this is an unauthorized tax on the 
American people. Since my inquiries, ICANN appears to be 
backing down on both of these misguided ideas.
    Needless to say, the impact that ICANN's actions could have 
on the Internet and E-commerce is huge. The committee is 
obligated to ask questions. Indeed, failure to ask them would 
have been a lapse of duty on our part. There has been much 
finger-pointing between ICANN, Network Solutions, and the 
Department of Commerce about who is to blame for this morass 
and, in particular, the failure of Network Solutions and ICANN 
to reach an agreement on the transfer.
    I believe the Department of Commerce needs to answer a few 
questions on whether they had a well thought-out plan. I must 
say that, at least to this observer, it does not appear some 
basic issues were adequately considered by the administration 
before it adopted and implemented its privatization plan.
    Therefore, I urge the Department of Commerce to redouble 
its efforts in this very important area, in order to ensure 
that the Internet's stability is not threatened by continuing 
disagreements related to the transfer.
    I have said on many prior occasions that I fully support 
the goals of the administration's White Paper, which calls for 
the privatization of the domain name system. However, my 
support for this process does not mean that I, or this 
committee, will turn a blind eye when confronted with troubling 
developments during this transition. The Internet is too 
important to this Nation, and the world at large, for this 
committee to stay on the sidelines.
    Thank you, Mr. Chairman for your work on this hearing. I 
want to thank all the witnesses today for their appearance. I 
look forward to their testimony.
    Mr. Upton. Thank you, Mr. Chairman. Ms. DeGette.
    Ms. DeGette. Thank you, Mr. Chairman.
    Mr. Chairman, I am eager to get to testimony, so I will not 
make a long opening statement. I would ask unanimous consent to 
put my full statement and also for other committee members who 
are not here to put their opening statements in the record.
    Mr. Upton. Without objection, all members of the 
subcommittee and the committee will be allowed to put in their 
remarks.
    Ms. DeGette. Thank you, Mr. Chairman.
    As in many parts of the country, my home State of Colorado 
is participating in the boom associated with the rapid 
expansion of the Internet and Internet-related services. 
Sometimes the pace change is breath-taking and so are the 
economics, I think as evidenced by our audience here today.
    A key component of this economic marvel is that after the 
Federal Government provided funding and then developed much of 
the Internet in its early day, the free market was allowed to 
voluntarily invest capital, assume risk, and usually to reap 
the reward of its investment, often with spectacular results. 
Today I think we are addressing another very important piece of 
the Internet, the domain name system and our attempts to 
privatize the registry. Without this system, the Internet would 
be like an international highway system without any road signs. 
Obviously, a central, standardized, internationally recognized 
registry is necessary for success.
    In reviewing the written testimony submitted in advance by 
some of the witnesses today, I am concerned, as others have 
expressed, about the progress that is being made in moving the 
domain name system registry into the open market where 
competition can benefit the consumer in the way it has in so 
many other Internet-related services by adding value, 
significantly reducing cost, and spurring innovation.
    I am also concerned that while we await this expected 
progress, there appears to be a private contractor reaping 
significant benefits from an apparent monopoly over the domain 
name system registry. I am told that the number of domain names 
registered is doubling every 9 months. Thus, we should be 
experiencing a tremendous economy of scale.
    I look forward to hearing from the Commerce Department 
witnesses, ICANN and NSI, as to why we are keeping these 
expected benefits from consumers and why competition is being 
hindered in this service. I expect the issue of the apparent 
monopoly is, itself, the heart of the matter and it could 
easily consume this hearing, a well as other hearings. I am 
aware there are many issues of concern regarding the 
establishment of ICANN. We have heard many of them here today. 
I believe it would be difficult for this committee to flesh out 
and address all of those issues in just one hearing, but I do 
believe they are worthy topics.
    I want to thank you, Mr. Chairman, for taking this step 
forward. I look forward to additional hearings on this topic, 
if we need. Thank you, Mr. Chairman. I yield back the balance 
of my time.
    Mr. Upton. Thank you. Mr. Bilbray.
    Mr. Bilbray. Yes, Mr. Chairman.
    I want to thank you for convening this hearing today on 
this complex and critical issue. Mr. Chairman, I would say that 
I think this hearing is important for a number of reasons. 
There are a number of what I see as primary questions that need 
to be examined here and now, such as the status of the 
continuing progress toward competition in the NSI, the past 
activities and future intentions of ICANN, and the question of 
administrative oversight of the entire process.
    Those are important discussions that we need to make. I 
think that this hearing will shed a good deal of light on these 
questions. From reading the testimony of the first panel of 
witnesses, it would appear that a heightened level of 
understanding, and perhaps communication, now exist between the 
committee, NSI, and ICANN.
    This is beneficial for the purpose of this hearing and more 
for the broader discussion of the bigger issues. The continuing 
positive growth of the of the Internet is at stake. Mr. 
Chairman, I hope this is what we will keep in mind as we hear 
the testimony of witnesses.
    We are in a unique position of being able to profoundly 
influence the continuing development of the Internet and 
clearly it is essential that we carefully consider all of the 
information and scenarios before us so that we can proceed in a 
wiser manner.
    At the end of the day, we need to be assured that the 
Internet and the infrastructure that operates it is available, 
understandable, and accountable, not to us or any one entity, 
but to the public at large, the student, the businessman, and 
the consumer.
    We have much to learn and to understand about how the 
future of the Internet will be shaped. We have a responsibility 
to do what we can in order to see that it is done as 
appropriately as humanly possible.
    Thank you again for holding this hearing, Mr. Chairman. I 
look forward to the testimony of the witnesses. I yield back.
    Mr. Upton. Thank you, Mr. Bilbray.
    Does the chairman of the Telecommunications Subcommittee 
wish to make an opening statement? Mr. Tauzin.
    Mr. Tauzin. Mr. Chairman, if I did make an opening 
statement, it would almost be exactly word-for-word what the 
chairman of our full committee has already delivered. I want to 
tell him, make it ditto. I deeply appreciate his statement 
today.
    I would only add that just a few months ago, if anyone 
asked what ICANN was, they would have guessed it was some sort 
of support group for the work of Dr. Normal Vincent Peale. It 
is only sort of newly arrived on the scene. It is obviously 
something we need to learn a great deal more about.
    I can also tell you that I have met with a number of the 
witnesses who are here today from the Commerce Department, Ms. 
Burr, in particular, I can assure I have learned that she is 
not related, as some have claimed, to the infamous trader Aaron 
Burr.
    Mr. Upton. I thought that was Richard Burr.
    Mr. Tauzin. And neither is she related to our great patriot 
Richard Burr. Again, I want to thank you and the Oversight 
Committee for doing this work. This is critical to the 
Internet. The work you do in this Oversight hearing we will 
follow closely, the Telecommunications Committee, because of 
course it is critical to our work in ensuring that all of us on 
the Commerce Committee that commerce is not only protected, but 
enhanced in this process.
    Thank you, Mr. Chairman.
    Mr. Upton. Thank you. Welcome, witnesses.
    For the audience, I would note that Ms. Becky Burr is the 
Acting Associate Administrator for the Office of International 
Affairs of the National Telecommunications Information Agency 
at the Department of Commerce; Ms. Esther Dyson, Interim 
Chairman of ICANN; Mr. Mike Roberts, Interim President and CEO 
for ICANN; and Mr. Jim Rutt, CEO for Network Solutions, and Mr. 
Pincus, General Counsel of the Department of Commerce.
    We have a long-standing practice in this subcommittee of 
taking testimony under oath. Do any of you have objection to 
that?
    [Chorus of nays.]
    Mr. Upton. Also, under House Rules, you are allowed to have 
counsel, if you wish to have it. Do any of you wish to have 
counsel here?
    [Chorus of nays.]
    Mr. Upton. I am just checking. We are not lawyers up here.
    If you would stand and raise your right hand.
    [Witnesses sworn.]
    Mr. Upton. Thank you. You are now under oath.
    We will start with Ms. Burr.

TESTIMONY OF ANDREW J. PINCUS, GENERAL COUNSEL; ACCOMPANIED BY 
   BECKY BURR, ACTING ADMINISTRATOR, OFFICE OF INTERNATIONAL 
   AFFAIRS, NATIONAL TELECOMMUNICATIONS INFORMATION AGENCY, 
    DEPARTMENT OF COMMERCE; ESTHER DYSON, INTERIM CHAIRMAN, 
     INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS, 
   ACCOMPANIED BY MIKE ROBERTS, INTERIM PRESIDENT AND CHIEF 
EXECUTIVE OFFICER, INTERNET CORPORATION FOR ASSIGNED NAMES AND 
    NUMBERS; AND JIM RUTT, CHIEF EXECUTIVE OFFICER, NETWORK 
                     SOLUTIONS INCORPORATED

    Ms. Burr. I am here with the General Counsel.
    Mr. Pincus. Thank you, Mr. Chairman.
    Ms. Burr and I appreciate the opportunity to testify before 
this subcommittee on behalf of the Commerce Department 
regarding management of the domain name system. Continuing the 
dialog, as Chairman Bliley mentioned, that has been going on 
now for more than a year with the committee on this subject, we 
certainly welcome the interaction and hope it will continue as 
this process moves on into the future.
    It has by now become a cliche to observe that the Internet 
is a totally new phenomenon, born global, growing at a rate 
unprecedented for a new medium of communications and commerce, 
and changing rapidly as technology evolves. We believe that 
this new phenomenon requires a new approach from government, in 
particular, the administration has made private sector 
leadership and minimal government involvement the keystone of 
its electronic commerce policy. Ultimately, of course, it is 
the role of government to ensure that the public interest is 
protected.
    If the private sector cannot accomplish that, then 
government must act. We believe we must give the private sector 
a reasonable chance to do the job. Unlike many aspects of the 
Internet, domain name management has not been a private sector 
function.
    It has been conducted entirely under the auspices of the 
Federal Government. For example, as several of the committee 
members have mentioned domain name registration services have 
been available from only one company, Network Solutions, that 
operates pursuant to an agreement with the government.
    In July 1997, the President directed Secretary Daley to 
make the governance of the domain name system private and 
competitive. Following two rounds of notice and comment, and 
consideration of more than 1,000 comments, as the chairman 
mentioned, the Commerce Department in June 1998 issued a 
Statement of Policy, the White Paper, that is the blueprint for 
this transition process.
    The White Paper set forth substantive conclusions with 
regard to domain name management policy, and also laid out a 
process for the transition to private sector management and the 
transition to competition. The first step in the privatization 
process came at the end of November 1998 when, after another 
public comment process, the Commerce Department entered into a 
Memorandum of Understanding with ICANN.
    The terms of that MOU are important. It did not confer 
immediately upon ICANN responsibility for domain name system 
management. Rather, it is an agreement, ``to jointly design, 
develop, and test the mechanisms and procedures that should be 
in place to transition domain name system management 
responsibility from the U.S. Government to a private sector 
not-for-profit entity.''
    Once testing is successfully completed, the MOU states ``it 
is contemplated that DNS management will be transitioned.'' 
Obviously if the project is not successful, that transition of 
responsibility will not occur. The MOU also incorporates a 
number of protections.
    It bars, for example, singling out one party for disparate 
treatment, prohibits unjustified or arbitrary actions, and 
requires that this private sector management operation be setup 
in accordance with the principles that are laid out in the 
White Paper.
    ICANN agreed to do something that was literally 
unprecedented; create a private sector organization that 
encompasses all of the many and varied Internet constituencies, 
to do that on a global basis, and to create a process that 
would allow for consensus-based decisionmaking with respect to 
domain name management issues.
    Given that tall order, it is not at all surprising that 
ICANN is not finished yet. It also is not surprising that mid-
course corrections have been necessary. It would have been 
amazing, I think, if ICANN had done everything perfectly right 
along in this process that no one has ever carried out before.
    For example, we have advised ICANN to eliminate the $1 fee, 
open its board meetings to the public, and make certain other 
changes. Surely, additional other corrections will be 
necessary. ICANN is now, as it was supposed to be at this 
point, along the road to completion, but still a work in 
progress.
    I would like to make one last point about ICANN. The White 
Paper recognized that at the same time that ICANN was creating 
its structure for consensus-based decisionmaking, the interim 
board would be required to make specified, initial decisions; 
particularly, those relating to establishing competition.
    We simply could not postpone the introduction of 
competition until ICANN's structure was finalized. As several 
members of this subcommittee have mentioned, getting 
competition into the system was just too important.
    Therefore, the process of introducing competition has moved 
forward. It is also important to note that ICANN is not the 
only entity with work to do. A fundamental principle of our 
domain name policy, as I have said, is ensuring competition. 
That means that Network Solutions, which operates the central 
registry of names for the commercially significant domains, 
.com, .net, and .org must agree to principles that will produce 
real competition between it and other registrars.
    Network Solutions now provides both its registry, central 
registry, and retail registrar services pursuant to its 
agreement with the government and therefore it operates under 
government oversight. For that government oversight to be 
eliminated, it must be replaced by principles that will ensure 
competition.
    That means that Network Solutions, and other providers of 
registration services to the public, must operate under the 
same rules so we have a level playing field for competition. It 
means that Network Solutions must not be able to use its 
position as the sole operator of the central registry in which 
all names must be placed for the system to work.
    It cannot use that position to advantage its own 
registration operation or disadvantage competing registration 
providers; some of which, as the chairman mentioned, will be 
testifying before this subcommittee later today. We have laid 
out in some detail what we see are the relevant issues in the 
response to Chairman Bliley's letter. Our discussions with NSI 
are ongoing, but as yet none of these issues have been resolved 
satisfactorily.
    Thank you again for the opportunity to appear before this 
subcommittee. Ms. Burr and I look forward to answering your 
questions.
    [The prepared statement of Andrew J. Pincus follows:]
Prepared Statement of 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.
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    Mr. Upton. Thank you very much.
    I would note for all witnesses that your full statement is 
made a part of the record. If you could limit your remarks, as 
you did, to about 5 minutes, that would terrific. We have this 
fancy Internet time clock available for all. Ms. Dyson.

                   TESTIMONY OF ESTHER DYSON

    Ms. Dyson. Thank you very much, Mr. Chairman.
    I welcome the opportunity to appear here today on behalf of 
the many people around the world working together to create the 
global, non-profit consensus development body called the 
Internet Corporation For Assigned Names and Numbers. Like 
everybody else, I am going to try and just give an opening 
statement, and then address specific questions later.
    As you know, ICANN was formed by the Internet community in 
response to a challenge set forth by the U.S. Government in the 
so-called White Paper issued in June of last year. Global 
consensus is an illusive goal, especially when it must be 
generated entirely within the private sector with only the 
encouragement, but not the money or the power of the world's 
governments.
    Nonetheless, 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. Thus, the fundamental issue here is not 
ICANN and its admitted imperfections, which we are continuing 
to try to correct.
    The real issue is whether the coordination of these 
important technical aspects of the Internet will be done by the 
world's governments, or by private companies pursuing private 
economic interests, or by the Internet community as a whole, 
which includes of course governments and private economic 
interests, but also many individuals and technical people, all 
of whom increasingly rely on the Internet for information, 
communication, and commerce.
    ICANN is a vehicle for these various communities to carry 
out the coordination tasks. It has no will of its own, but the 
fact that these hearings are taking place today under this 
title is evidence that this issue, how it should be done, is 
still in doubt. The ultimate resolution of this question is 
very important to the future of the Internet, which owes its 
development in large part to the non-neglect from governments 
and from big business.
    The Internet is in fact the world's most successful, 
voluntary, cooperative effort based on consensus about 
technical standards and the naming system, which allow it to 
function so well. It has earned legitimacy because it has 
worked well and served its users. People can rely on it. They 
are not told to rely on it. They can.
    The Internet community's creation of ICANN is a 
continuation of that approach, even as the Internet becomes 
ever more complex, more important for commerce, and more 
ubiquitous. ICANN thus replaces a highly informal, unstructured 
system where very few individuals make key decisions about the 
future and direction of the Internet.
    Those individuals were remarkably wise and unselfish, which 
is why everybody went along with their decisions. The vast 
majority of those decisions were in the public interest as is 
proved by the success of the Internet. As the net grows, 
however, we need more permanent, more explicit, and more 
accountable structures to continue this tradition of consensus.
    ICANN is, itself, the product of what Internet engineers 
call ``rough consensus.'' Its sole objective is to encourage 
the continued coordination of some key technical and policy 
details of Internet management, through the development of 
community-wide consensus, and then implementation of those 
policies by contract. These are the key words: consensus and 
contract.
    As I have noted, developing such consensus is not an easy 
task. It inevitably involves contention and disagreement, 
followed by compromise among people of good faith. As those of 
us involved have seen, feelings can run deep and debates can be 
intense. Right now, this difficult task is being made even more 
difficult by the fact that one of ICANN's first tasks is to 
manage the transition from a monopoly to competition for a very 
visible and significant activity, and a lucrative one: the 
registration of domain names.
    Transitions from monopoly to competition are difficult and 
messy under the best of circumstances, as this committee fully 
knows from its oversight over the telecommunications industry, 
and as I personally know from my experiences in Eastern Europe. 
In telecommunications, the transition is being managed by 
Federal, State, and local governments which ultimately can rely 
on the course of power only governments possess.
    Here, by contrast, the transition is happening even as the 
government's supervisory power over its contractor is being 
replaced with a newly created process for implementing 
consensus. Mr. Chairman, we need to be clear about this. There 
is no issue about ICANN being out of control or off-track. 
ICANN is nothing more or less than the embodiment of the 
consensus of the Internet community as a whole.
    Consensus does not always mean unanimity. The disagreements 
you see are evidence of this process. They are not problems 
with it. Therefore, I have submitted a lengthier text with 
various attachments that I hope will be included. I welcome the 
opportunity to answer any questions you may have.
    Thank you very much.
    [The prepared statement of Esther Dyson follows:]
 Prepared Statement of Esther Dyson, Interim Chairman of the Board of 
     Directors, Internet Corporation for Assigned Names and Numbers
    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:

 Closed Board meetings (or, ``Is ICANN making secretive 
        decisions in the shadows?'');
 Elected Board members (or, ``When will the mysteriously chosen 
        Initial Board give up the reins of ICANN to Board members 
        properly elected by the Internet community?'');
 A permanent cost-recovery structure (or, ``How dare ICANN try 
        to impose a Domain Name Tax?''); and
 Constraints on ICANN's authority (or, ``Is ICANN a new 
        Internet regulatory agency? What's to stop ICANN from taking 
        away my domain name or censoring my web site?'').
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:

 From January 1, 1993, until early June 1999, domain names in 
        the .com, .net, and .org top-level domains were registered 
        exclusively by Network Solutions under a Cooperative Agreement 
        between it and the U.S. Government. As noted in the White 
        Paper, public comments showed ``widespread dissatisfaction 
        about the absence of competition in domain name registration.'' 
        Accordingly, in its June 1998 White Paper, the U.S. Government 
        stated its intention to ``ramp down [its] cooperative agreement 
        with Network Solutions [then scheduled to expire September 30, 
        1998] with the objective of introducing competition into the 
        domain name space.''
 To implement the ``ramp down,'' Network Solutions and the U.S. 
        Government negotiated Amendent 11 to Network Solutions' 
        cooperative agreement, by which Network Solutions and the U.S. 
        Government agreed to extend Network Solutions' registry 
        monopoly for a two-year period (until September 30, 2000), 
        during which Network Solutions must create a Shared Registry 
        System to allow competing companies to register domain names in 
        .com, .net, and .org. Since Network Solutions was going to 
        continue to be the sole administrator of the registries for 
        .com, .net, and .org for at least two years, while 
        simultaneously acting as one of the competitors marketing name 
        registration services in those domains, Amendment 11 stated 
        that a neutral body to be formed by the Internet community 
        (``NewCo,'' subsequently designated by the U.S. Government as 
        ICANN) would carry out the coordinating functions required to 
        ensure a freely competitive registration market. In Amendment 
        11, Network Solutions expressly acknowledged that NewCo ``will 
        have the authority, consistent with the provisions of the 
        Statement of Policy and the agreement between the USG and 
        NewCo, to carry out NewCo's responsibilities.'' On November 25, 
        1998, the Department of Commerce recognized ICANN as the NewCo 
        entity referred to in Amendment 11; this was specifically 
        reiterated to Network Solutions by letter on February 26, 1999.
 To achieve the White Paper's ``objective of introducing 
        competition into the domain name space,'' Amendment 11 provided 
        that Network Solutions would implement a ``Shared Registration 
        System'' to ``create an environment conducive to the 
        development of robust competition among domain name 
        registrars.'' The schedule agreed to by Network Solutions and 
        the USG provided for several phases, beginning with a ``test 
        bed'' in which Network Solutions agreed to ``establish a test 
        bed supporting actual registrations in .com, .net and .org by 5 
        registrars accredited by NewCo (Accredited Registrars)'' and 
        ending with a reengineering of the overall system to ``assure 
        that Network Solutions, acting as registry, shall give all 
        licensed Accredited Registrars (including Network Solutions 
        acting as registrar) equivalent access (``equal access'') to 
        registry services through the Shared Registration System.''
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.
IV. Conclusion
    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.
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    Mr. Upton. Thank you. Mr. Rutt.

                     TESTIMONY OF JIM RUTT

    Mr. Rutt. Good morning, Mr. Chairman and members of the 
subcommittee. My name is Jim Rutt. I have recently become the 
Chief Executive Officer of Network Solutions. While new to 
Network Solutions, for the last 19 years I have been involved 
in building Internet and other online businesses.
    I come out of the Internet culture and cherish the delicate 
balance between freedom and voluntary cooperation that have 
allowed the Internet to flourish. Thank you for this 
opportunity to testify, and I might add further that this is 
the first time I have had the honor of testifying before the 
U.S. Congress. Again, I thank you for this opportunity.
    NSI is a public company that registers domain names in the 
.com, .net, and .org domains. It is headquartered in Herndon, 
Virginia and has 500 employees. NSI got into this business in 
1992 when it competed for and won a cooperative agreement, not 
a contract, with the National Science Foundation. The 
cooperative agreement was designed to encourage a private 
company to build a business that would handle domain name 
registrations.
    When the Internet took off, the National Science Foundation 
asked NSI to make the tens of millions of dollars of private 
investment that became necessary to handle this growth. NSI's 
shareholders also took the risk and paid the very large costs 
of the litigation that were inevitable in the context of this 
unsettled yet important area.
    We think NSI is a great Internet success story; a small 
company that took risks and, like many other Internet pioneers, 
has done very well; though it did not always do well. A little 
known fact: for the first 3 years, NSI lost money on its DNS 
management business. We took a risk to build a business.
    We pledge we will continue to do everything we can to 
provide stable and reliable service to our current 5 million 
registrants who have legally binding contracts with NSI, and to 
help formulate practices that encourage continuing rapid growth 
of electronic commerce in this country and around the world.
    This hearing asks whether ICANN is ``out of control?'' 
Perhaps a better way to put it is that ICANN is off-track. Let 
me give you some examples of particular kinds of approaches and 
activities that do not fit with the original idea of ICANN as 
an open standard setting body.
    First, ICANN took a request to provide simple accreditation 
for some new registrars and turned it into an opportunity to 
impose a mandatory tax of $1 on every domain name every year, 
but only for the domain names in .com, .net, and .org, levied 
as a requirement for entry into the business.
    Second, despite protests from the Internet community, ICANN 
has made its decisions in closed board meetings and has failed 
to engage in a deep and continuing basis with the industry and 
the stakeholders they purport to regulate.
    Third, ICANN's proposed Registrar Accreditation Contract 
would grant ICANN the right to put registrars out of business 
on 15-days's notice.
    Fourth, ICANN, without having even formed its policy 
developing apparatus, is attempting to regulate business 
arrangements between registrar and registry, and even to set 
detailed terms of end user contracts, interfering in matters 
that ought to be the subject of market competition.
    Fifth, the ICANN Board proceeded to make critical policy 
before it was even composed of elected members, before the 
supporting organizations that are supposed to develop and 
demonstrate the existence of widespread agreement were fully 
formed.
    An ICANN that operates this way is off-track. In short, 
ICANN should be in the business of setting standards by 
consensus, as originally envisioned in the White Paper, not 
attempting to evolve into a bureaucracy that interferes with 
the growth of the new economy.
    We have been engaged constructively in this process for a 
long time. NSI has done everything required of it under the 
cooperative agreement, including those requirements set forth 
in Amendment 11 to open competition. NSI supports putting ICANN 
back on track and remains more than willing to work with ICANN, 
and to continue working with the Department of Commerce to 
bring this about.
    First, we need to establish a fund-raising mechanism for 
ICANN that all agree is fair and reasonable. NSI will pay its 
fair share.
    Second, ICANN needs to open its processes more fully and 
abide by its own bylaws.
    Third, as the Department of Commerce recognizes in their 
response to this committee, we need to limit by contract the 
subject matters that may be addressed by ICANN policies.
    Fourth, ICANN must become committed to equal treatment of 
all open registries that are in competition with one another, 
creating a level, global playing field.
    Fifth, ICANN should be required, as a pre-condition for 
making policy, to demonstrate that there really is widespread 
support for its standards.
    Let me thank this committee again for bringing sunlight to 
bear on a set of issues of great consequences for the growth 
and stability of electronic commerce. We believe there is need 
for continued Congressional oversight to ensure this transition 
process is a success.
    No matter how intense the debate, there is no need for 
actions that threaten the stability of Internet operations. You 
have our commitment to work constructively to help create a 
private sector system consistent with good public policy in the 
interest of the American people and the people of the world, an 
ICANN that is on-track.
    That would be an accomplishment which all of us, not least 
this committee, could be very proud of indeed. Thank you. I 
will be happy to answer any questions you may have.
    [The prepared statement of Jim Rutt follows:]
      Prepared Statement of Jim Rutt, CEO, Network Solutions, Inc.
    Good morning Mr. Chairman and Members of the Subcommittee. My name 
is Jim Rutt. I've recently become the CEO of Network Solutions, Inc. 
(NSI) Thank you for this opportunity to testify.
    NSI is a public company that registers domain names in the com, org 
and net domains. It is headquartered in Herndon, Virginia, has 500 
employees and is traded on the NASDAQ Exchange. NSI got into this 
business in 1992 when it competed for and won a Cooperative Agreement 
with the National Science Foundation. When the Cooperative Agreement 
first began, it was designed to encourage a private company to build a 
business that would handle domain name registrations. US Government 
funding was capped at $1 million per year. When the exponential growth 
of registrations took off, NSF asked NSI to make the tens of millions 
of dollars of private investment that became necessary, on a continuing 
basis, to handle this volume. NSI's shareholders also took the risks 
and paid the very large costs of the litigation that were inevitable in 
the context of this unsettled yet important area.
    We think NSI is a great internet success story--a small company 
that took risks and, admittedly, has done very well. In the context of 
that success, I hope you share my view that it is remarkable that NSI 
has agreed to build a Shared Registration System and to open up an 
opportunity for competition by a large number of new competitors. We 
pledge that we will continue to do everything we can to provide stable 
and reliable service to our current five million registrants, who have 
legally binding contracts with NSI--and to help formulate policies and 
practices that encourage continuing rapid growth of electronic commerce 
in this country and around the world.
    We've all been discussing such policies for quite some time. NSI 
and many other parties provided comments over several years in the 
process that led to the Department of Commerce Statement of Policy 
(often called the ``White Paper''). That key document called for a 
private not-for-profit entity that would facilitate open, transparent, 
bottom up, consensus-based standard setting for the domain name system. 
The choices Congress, the administration and the internet community 
make now with respect to ICANN will determine for a long time, if not 
forever, whether the domain name system will benefit from having such a 
body.
Off Track
    This hearing asks whether ICANN is ``out of control.'' My answer to 
that is that ICANN is off track. Let me give you some examples of the 
particular kinds of approaches and activities that don't fit with the 
original idea of ICANN as an open, standards setting body.
    First, ICANN took a request to provide ``accreditation'' for some 
new registrars and turned it into an opportunity to seek to impose a 
mandatory tax of one dollar on every domain name, but only for names in 
the com, org and net domains, levied as a requirement for entry into 
the business. Even now, despite Department of Commerce recommendations 
to the contrary, ICANN has only agreed to ``defer'' this tax. NSI will 
agree to pay its fair share of the costs of a true standard setting 
body, but we think Congress should object to the idea that a private 
non-profit corporation can fund itself by requiring involuntary 
payments as a condition of being in a lawful business. ICANN's plans 
for its funding mechanisms have gone off track.
    Second, despite widespread and continuing protests from the 
internet community, ICANN has made its decisions in closed board 
meetings and has failed to engage on a deep and continuing basis with 
the industry and stakeholders they purport to regulate. Again, even in 
response to Department of Commerce recommendations, they have declined 
to open their next scheduled telephonic board meeting (on July 26) to 
observers or to commit to amendment of their bylaws to require open 
board meetings on a continuing basis. A standard setting body, 
supporting organizations and advisory boards must hold open meetings to 
create a record regarding what all stakeholders agree upon. Until there 
is a mechanism to open all of ICANN's deliberations to the net and to 
accurately test the views of all stakeholders--ICANN will remain off 
track.
    Third, ICANN's proposed registrar accreditation contract purports 
to grant ICANN the right to put registrars out of business. As if the 
proposed contract did not adequately convey this notion, an ICANN Board 
member threatened that NSI would not be in business if it did not sign 
the mandatory accreditation agreement. An ICANN that makes such 
potentially destabilizing threats, which if implemented would derail a 
major portion of Internet infrastructure, is off track.
    Fourth, ICANN, without having even formed its policy-development 
apparatus, is attempting to set detailed terms of end user contracts, 
interfering in matters that ought to be the subject of market 
competition among registries and registrars. It has intervened to 
regulate business models and to prevent the kind of diversity that made 
the Internet grow in the first place. An ICANN that micro-manages by 
imposing top down rules that reduce the breadth of service offerings is 
off track.
    Fifth, the ICANN Board was not selected to govern the Internet but 
only to put in place the processes that will allow consensus policies 
to develop. The absence of widespread agreement about proposed 
standards should lead a standard setting body to make no rules--not to 
impose its own ungrounded conceptions of law. An ICANN Board that 
proceeds to make policy before it is even composed of elected members, 
before the supporting organizations that are supposed to develop and 
demonstrate the existence of widespread agreement are formed, is off 
track.
    In short, ICANN should only be in the business of setting standards 
by consensus, as originally envisioned in the White Paper--not 
attempting to evolve into a bureaucracy that interferes with the growth 
of the ``new economy.''
Solutions
    We have been engaged constructively in the process for a long time. 
NSI has commented extensively on every US Government policy paper on 
this topic. An NSI employee was even responsible for creating the name 
ICANN. We have suggested large portions of what became ICANN's bylaws, 
drafted structures for ICANN supporting organizations, commented on 
virtually all proposed ICANN policies, attended countless meetings all 
over the world and sought over the last six months on numerous 
occasions to enter into a reasonable contract with ICANN.
    NSI has done everything required of it under the Cooperative 
Agreement,including those requirements set forth in Amendment 11, to 
open competition. In particular, we developed a Shared Registration 
System architecture which was approved by an industry technical 
advisory group under procedures designated by the Department of 
Commerce.
    In implementing the Shared Registration System called for in 
Amendment 11, we have and will spend tens of millions of dollars. The 
Shared Registration System was deployed on schedule. Delays were 
necessitated by entirely predictable registrar development tasks 
coupled with designation of test bed registrars only five days before 
the test bed was to begin. NSI and the test bed registrars notified the 
Department of Commerce as far back as December 1998 that 60-90 days 
should be set aside to allow registrars to resolve interface and back 
office issues before the test bed activities began. So, it should come 
as no surprise that the test bed which was scheduled to run from March 
21, 1999 through May 1, 1999 has been extended through August 6, 1999. 
What is disappointing is that ICANN, which did not identify the test 
bed registrars until five days before the test bed was to begin, would 
be blaming the delay on NSI.
    Amendment 11 also required that ``[f]ollowing the finalization of 
an agreement between the US Government and NewCo, NSI will recognize 
NewCo pursuant to a contract between NSI and NewCo.'' While there is 
significant doubt as to whether the ICANN-USG agreement has been (or 
should be) finalized, I want to make it clear that NSI is willing to 
recognize ICANN as the NewCo if ICANN is required to operate in 
compliance with the original Statement of Policy. Indeed, we have 
proposed such terms on several occasions, asking (we think reasonably) 
that ICANN policies, to be binding, be based upon a true industry 
consensus and apply to all competing registries and registrars. ICANN 
has, unfortunately, refused to negotiate on the terms of any such 
contract and has insisted, instead, that we accept their 
``accreditation agreement,'' which would require NSI to give ICANN the 
unilateral right to terminate our business with 15 days notice and take 
over the ownership of our intellectual property, substituting the 
unaccountable judgments of ICANN's unelected board for those of an NSI 
Board which owes fiduciary duties to some 20,000 investors and five 
million registrants.
    NSI supports opening the Shared Registration System to additional 
competitors as rapidly as possible. NSI supports putting ICANN back on 
track--and we remain more than willing to work with ICANN and to 
continue our working with the Department of Commerce to bring this 
about. Let me provide you with some specific suggestions regarding how 
we can achieve the original goal of establishing an open standards 
setting process--and put ICANN back on track.
    First, we need to establish fund raising mechanisms for ICANN that 
involve those who are asked to pay the bill in the establishment of any 
such fees. We need to allocate fees fairly among all those whose 
activities produce the costs ICANN incurs--namely everyone who 
registers names or numbers on the Internet. A standard setting body 
raises money from those who find its services valuable, not from those 
it can threaten to put out of business. NSI is prepared to do its fair 
share to support an ICANN that is on track.
    Second, ICANN needs to open its processes more fully and abide by 
its own bylaws. Indeed, because a board can amend its own bylaws, it 
needs to promise in binding contracts to develop policies in an open 
manner and to take steps to prevent capture by special interests. If 
ICANN could only enforce policies that are developed in the open--
because that is all its contracts would allow it to enforce--then it 
will have an incentive to remain open. This is just one of many areas 
in which sound contracts between ICANN and all registries can help put 
ICANN back on track.
    Third, as the Department of Commerce itself seems to recognize, we 
need to limit by contract the subject matters that may be addressed by 
ICANN policies. No established business can or should agree to turn 
over control of its business practices to another board--and risk 
termination of its business if it fails to comply with any and all 
future policies that other board might one day adopt. But that is what 
the ICANN accreditation agreement now requires. In contrast, 
responsible domain name registries should be willing to commit by 
contract to adopt policies that have been demonstrated to have 
agreement from most other registries. Such policies should, of course, 
apply to all on a fair basis. They should deal only with issues the 
uniform resolution of which is necessary. That is the kind of contract 
an ``on track'' ICANN would ask for--and the kind of contract NSI has 
offered to sign.
    Fourth, ICANN must become committed to equal treatment of all 
registries that are in competition with one another, creating an open 
and level global playing field. It is easy for others to envy US 
leadership in establishing the internet--and all too easy for ICANN to 
claim that it is ``promoting competition'' by singling out com, org and 
net as the target of regulatory rules that, if sound at all, ought to 
apply to all registries. A contract that allows enforcement of ICANN 
policies only if those policies apply to all registries would help to 
put ICANN back on track.
    Fifth, ICANN should be required, as a pre-condition for enforcement 
of any of its policies, to demonstrate that there really is widespread 
support for these standards not just among some self-appointed group of 
``stakeholders'' but also among those who are required to implement the 
policies. ICANN should be developing standards, not making laws or 
regulations. The goal is to make sure that ICANN has concrete 
procedures for testing the views of impacted parties--and, here is that 
concept again, that contracts with registries require compliance only 
when the procedures have developed demonstrable consensus support both 
among Internet stakeholders and among those who must implement the 
rules. Given such contracts, it wouldn't be possible for an ``off 
track'' ICANN to simply declare itself the voice of internet consensus 
and, thereby, impose its will.
    In short, the interim ICANN Board should return its attention to 
what should have been its main mission all along--getting a real board 
elected, which could then put in place the more permanent institutional 
mechanisms that would lead to the development of real (not just 
declared) consensus. NSI will cooperate with ICANN to achieve that 
goal.
Conclusion
    We should all always remember that the Internet is a network of 
networks--a collaboration among independent private parties who own 
their own equipment, make their own decisions, and are free to adopt 
their own policies to govern their operations. Most of the reliability, 
and value, and growth, of the network stems precisely from the fact 
that there is no one who owns it or governs it. Its success is vivid 
testimony to the genius of private sector innovation and 
entrepreneurship, following essential government research, development 
and nurturing. As the most successful registry among some 250 
competitors, based on its significant investment and marketing efforts, 
NSI can nevertheless tell you that there is some need even for the most 
successful players for coordination to create an orderly, competitive 
playing field. But there is no need for a new global government for the 
Internet. As I've discussed, voluntary, standardized, contracts between 
all concerned, with consensus development procedures and forcing 
mechanisms that prevent any holdouts from imposing costs on others, 
provide the best means to empower such coordination but also keep it 
under control.
    Let me thank this Committee again for bringing sunlight to bear on 
a set of issues of great consequence for the growth and stability of 
electronic commerce. We believe there is a need for continued 
Congressional oversight to ensure this transition process is a success. 
No matter how intense the debate, there is no need for actions that 
threaten the stability of Internet operations. You have our commitment 
to work constructively to help create a private sector system 
consistent with good public policy and the interests of the American 
people, and the people of the world--an ICANN back on track. That would 
be an accomplishment of which all of us--and not the least this 
Committee-could be very proud indeed.

    Mr. Upton. For the first round of questions, I am going to 
recognize the chairman of the full committee, Mr. Bliley, for 5 
minutes.
    Chairman Bliley. Ms. Burr, I expected that an 
administration that has devoted a significant amount of time 
and resources to this matter should have been better prepared 
to successfully address the challenges related to the 
privatization of the domain name system. However, we are 
confronted today with a situation that apparently does not 
reflect such thoughtful deliberation.
    As I indicated in my opening statement, I question whether 
the administration anticipated and addressed issues, such as 
how ICANN is funded, whether an unelected board is credible, 
and whether there would be problems with Network Solutions and 
ICANN reaching agreement on critical issues.
    Ms. Burr, when you were setting up this process, did you 
anticipate the problems we have today? If you did anticipate 
them, why have they not been better addressed?
    Ms. Burr. Than you, Chairman Bliley.
    I think the critical piece of the White Paper is our 
reliance on private sector leadership. When you move to private 
sector leadership, it is a new process. There are going to be 
some new things that need to be done. We did anticipate that 
ICANN would need to go to the private sector for bridge funding 
for its operations as it has done.
    We also anticipated in the White Paper that ICANN funding 
would be based on fees, user fees, collected from registries 
and registrars. With respect to the issue of the board, we in 
fact specifically expected that there would need to be, at the 
beginning, an unelected board, but that one of the priorities 
of this unelected board would be to move toward creating the 
processes and election procedures to elect that board.
    In order to move forward with competition, we also said 
however that the interim board should move forward in certain 
areas, certain specific areas, related to the introduction of 
competition. With respect to decisions that needed to be made 
in those areas, we had developed over the process of a year a 
very large record, over 1,000 comments, that formed the basis 
for the consensus that we thought was there.
    We also anticipated the need for Network Solutions' 
cooperation. That was one of the reasons that Amendment 11 
obligates. In Amendment 11, Network Solutions agreed to 
recognize this new corporation, once it was recognized by the 
United States.
    Now, having anticipated all of those things, have they been 
perfectly executed? I am afraid not. I think we are moving 
forward to getting them straight. I would like to ask Mr. 
Pincus if he has additional comments.
    Mr. Pincus. No.
    Chairman Bliley. Did ICANN consult with you, or the 
administration, or any other administration official regarding 
the advisability of imposing a $1 fee?
    Ms. Burr. As our responses to the chairman indicated, we 
did review and comment on a draft accreditation agreement, 
which included the notion that ICANN would charge up to $1 per 
domain name registration. We discussed whether there were other 
ways of collecting funding from registrars. ICANN put that 
issue up for comment.
    In fact, there were really very few comments, although I 
should note that Network Solutions did object at that point. 
Other than Network Solutions, there were not a lot of comments 
opposing that funding mechanism.
    Chairman Bliley. Mr. Chairman, I thank you. With your 
permission and with the cooperation of the witnesses, I would 
like to send some written questions to you that you can answer 
later.
    Mr. Upton. Without objection.
    Mr. Klink.
    Mr. Klink. Thank you.
    Mr. Rutt, I was taken by your optimism in coming before the 
subcommittee today. We do not usually have witnesses that are 
so happy to be here.
    Mr. Upton. If I might just interject, it was almost like 
that voice ``You have mail.''
    Mr. Klink. There you go. That was very nice. I hope that it 
is a good experience for you. It always is for us to be here. I 
do want to ask you though, to start off and I mention this in 
my opening statement. I was reading the Washington Post this 
morning. This was not in your testimony. This was attributed to 
you. I just wanted to find out if this was accurate.
    It was talking about ICANN and whether or not you all are 
going to cooperate. It said, ``Network Solutions has been 
unmoved; refusing to even recognize ICANN as a legitimate 
organization. They are not really necessary,'' said Jim Rutt, 
Network Solutions, Chief Executive. Are they quoting you or 
portraying your feelings accurately, Mr. Rutt?
    Mr. Rutt. I am very glad you asked that question. I am sure 
that is not an experience that is unknown to some of the people 
on the panel. My quote was taken fairly severely out of 
context. Let me tell you what the context actually was. We had 
a pretty wide-ranging discussion about ICANN.
    We said we thought that a good ICANN was a good thing, et 
cetera. Then we got into discussion of competition and about 
how we were introducing competition, going ahead doing so under 
our requirements under Amendment 11. The reporter then asked, 
``Is ICANN necessary for the introduction of competition?'' 
specifically that question, and I said no. They are not 
necessary. That is indeed our position.
    We could go ahead and introduce competition under Amendment 
11, whether ICANN existed or not. ICANN can help in the 
process. It can be a central clearing house for certain 
necessary functions and we think would add value to the 
Internet community, but I do believe it is a true statement 
that the introduction of competition to .com, .net, and .org 
does not require ICANN. I am glad I got a chance to clarify 
that.
    Mr. Klink. Thank you.
    Mr. Pincus, what is your reaction to that?
    Mr. Pincus. Well, as I said in my statement, Congressman, 
the problem right now is that NSI exclusively operates the 
registry, which is necessary for competing--if you are a 
competing registrar, your registration has to get into the 
registry for it to work.
    Unsupervised control of that critical facility for these 
critical domains, which are the commercially valuable domains, 
means that, for example, I think it is NSI's position, as we 
laid out in the letter, that after the expiration of the 
cooperative agreement on September 30, 2000, NSI believes that 
it can charge whatever it wants and set whatever terms it wants 
for accepting names into that registry.
    So, that would obviously give it quite a lot of control 
over whether there will be any competition at all in 
registration. We need to have oversight over that, either by 
the government or by ICANN transitioning that responsibility to 
the private sector to make sure there is real competition. 
Otherwise, there just will not be.
    Mr. Klink. Mr. Rutt, I mean a lot of people have been in to 
see us. I think Mr. Pincus really laid out what the bad rap has 
been in the industry on NSI. I would like to give you the 
chance to react to what Mr. Pincus just said.
    Mr. Rutt. Sure. I think I would start with something that 
may be a misconception in a lot of people's minds that somehow 
NSI is the only company that operates a registry, gives out a 
domain name, et cetera. The truth of the matter is we are in 
what is already a fiercely competitive business. There are 248 
other registries in operation around the world.
    Mr. Klink. If you will hesitate for a second. You are the 
only one that operates .com; is that correct?
    Mr. Rutt. Yes. Let me clarify what we believe that means. 
This is very important. This is very important.
    Mr. Klink. If you will just hesitate for a second. You are 
throwing out the numbers of how many there are, but you control 
about 80 percent of that market.
    Mr. Rutt. Something less than that.
    Mr. Klink. Seventy-eight, 79, 7.4?
    Mr. Rutt. Somewhere around 75, as I recall.
    Mr. Klink. All right, continue please.
    Mr. Rutt. Let me start again. There are 248 other 
registries. There about 2 million registrations from these 
other registries. At least 80 of them will take on all comers, 
and compete with us for business in the United States. It is 
also very important to keep in mind, and a lot of people do 
not, that 30 percent of NSI's business today is outside of 
North America.
    Mr. Klink. The other statement that you make here today, 
when you talk about ICANN, you say that ``ICANN has failed to 
engage on a deep and continuing basis with the industry and 
stakeholders that they purport to regulate.'' That is a pretty 
serious allegation. Will you explain that?
    Mr. Rutt. There are a lot of people who ICANN has not 
talked to that are not necessarily representing their 
interests.
    Mr. Klink. Who would that be? Who have they not talked to 
that they should be talking to?
    Mr. Rutt. Let me get back to you on that on the record.
    Mr. Klink. Mr. Pincus, do you find that to be an accurate 
portrayal of ICANN, one of their failings?
    Mr. Pincus. I think ICANN's outreach has been tremendous. 
There have been a series of public meetings around the world 
for them to give input. They have a website, which the accept 
comments from all comers. I think in terms of opening 
themselves up to input, it is hard for me to see how they are 
not doing that.
    Mr. Klink. Mr. Rutt, my time has expired. I would be very 
interested, on the record, in knowing specifically whom it is 
that ICANN has not spoken to and what damage has been done by 
them not doing so. If you could do that, that would be 
appreciated.
    Mr. Rutt. We will certainly take care of that for you.
    Mr. Klink. Thank you, Mr. Rutt. I appreciate that.
    Mr. Upton. Thank you. Mr. Rutt, we all appreciate your 
testimony, particularly the number of examples where you found 
some shortcomings in terms of how the operation has progressed 
at this point. I guess, Mr. Roberts, how many board members are 
there on ICANN's board and where are they from?
    Mr. Roberts. There are 10 members on the initial board.
    Mr. Upton. Where are they from? What areas?
    Mr. Roberts. There are five who are non-U.S. There is a 
director from Australia, from Japan, from Spain, France, and 
the Netherlands. There are four from the U.S. I am an ex 
officio member of the board.
    Mr. Upton. What is your sense as we look at expanding the 
board to include the elected board members, it is my 
understanding that the timeframe is to try and get it done by 
September of next year, I believe. Where are you on progressing 
along that timetable?
    Mr. Roberts. The bylaws of ICANN, which were developed in 
response to the White Paper, have created four bodies that will 
elect members of the board. There are three supporting 
organizations and there is an at large organization or cohort. 
We have endeavored, since I think Christmas time last year, to 
in parallel, advance the organization of each of those areas so 
that they might elect their directors in as timely a manner as 
possible.
    Mr. Upton. Is it your feeling then that you will make the 
deadline without too much difficulty?
    Mr. Roberts. Well, I cannot speak for the entire Board, 
sir, but we have recognized two out of the three support 
organizations. We expect to recognize the third within the next 
few weeks. We expect the board to deliberate on the creation of 
the mechanisms for electing the at-large directors 
substantively at our next two meetings.
    Ms. Dyson. If I may add.
    Mr. Upton. Go ahead.
    Ms. Dyson. What that amounts to in terms of numbers is that 
we hope to have nine newly elected directors by our annual 
meeting in November.
    Mr. Upton. November of?
    Ms. Dyson. November of this year; whatever it is, 4 or 5 
months.
    Mr. Upton. Okay.
    Ms. Dyson. Then we hope to bring on the new at-large 
directors probably in two clumps. The first would be in the 
spring or summer of next year. Then the final would be by 
September of 2000.
    Mr. Upton. As we look at sort of the funding stream of 
ICANN, it is my understanding, from an e-mail, Mr. Roberts, you 
had sent earlier this year dated June 17, 1999, that ICANN will 
have a negative net worth of $727,000, as of June 30. Is that 
an accurate reflection of where ICANN is?
    [The e-mail referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T8497.204
    
    Mr. Roberts. Well, our financial statement of June 30 has 
not been audited, but that number I think is very close to the 
final figure.
    Mr. Upton. One of the concerns that a number of us have, 
particularly as we have looked at the board meetings, and some 
of the expenses that have been there, I mean, as you talk about 
the ten members that are now on your committee, and where they 
are from, I note that your next board meeting in August, I 
believe it is, is in Santiago, Chile. Is there a reason why 
Chile was picked when you do not have members from there?
    Mr. Roberts. Well, the absence of representatives from 
Latin America in our structure has been a matter of concern to 
the board and to many people in our constituency. We have had 
discussions with the administration about that. Latin America 
is, from both an economic and for other reasons, an important 
part of the total ICANN picture. We believe it is entirely 
appropriate that the board meet there.
    Mr. Upton. Mr. Pincus, did you all have a role--I do not 
know how you manage, micro or macro, on these decisions? Ms. 
Burr.
    Ms. Burr. We do not participate in the decisions about 
where board meetings are held. I think there is an important 
piece of the puzzle that is missing here. In addition to the 
fact that the board meets, there is and has always been with 
respect to the ICANN meetings, an open full day of open public 
participation.
    So, one of the good things about moving around the world is 
when you are trying to create a global organization and create 
consensus globally, you need to reach out to the Internet 
stakeholders, not just the board members.
    Mr. Upton. Just to follow-up on that statement, until now 
the meetings have not been open. Is that not correct?
    Ms. Burr. There have been preceded by a full day public 
open meeting.
    Mr. Upton. My time is expired here. So, I will go to Ms. 
DeGette.
    Ms. DeGette. Thank you, Mr. Chairman.
    The first thing I would like to ask everyone on the panel--
--
    Mr. Upton. If I might just add, because of the camera, they 
have asked that we try and speak a little closer to the mike. I 
will restart your time.
    Ms. DeGette. Thanks. I needed that.
    I would like to ask all of the panel if they can tell me 
who they believe owns the intellectual property that is the 
domain name registry system? I think I will start with Mr. 
Pincus.
    Mr. Pincus. Our view is that those are rights that the 
government has as a result of the cooperative agreement.
    Ms. DeGette. Ms. Dyson.
    Ms. Dyson. I would say ultimately that it is public 
property. There are issues about how it is used, and the 
privacy of information where either someone like the U.S. 
Government or ICANN should decide what the proper policies are 
for its use. But I do not think it belongs to any particular 
company. To some extent, it belongs to the domain name holders, 
but it is important for it to be publically available for 
various public interest purposes.
    Ms. DeGette. Mr. Rutt.
    Mr. Rutt. It is our view that, under the cooperative 
agreement, the intellectual property, at least in its compiled 
form, transferred to us under the cooperative agreement as in 
all other cooperative agreements. We do believe that there is 
need for the Internet community to have access to this data 
through the traditional WHOIS service so that people can find 
people to make claims for trademark or copyright infringement.
    It can also be used to contact people to purchase a domain 
name, et cetera. So, we do provide access to it because the 
community has definite legitimate use interests in the WHOIS 
data.
    Ms. DeGette. But you believe the intellectual property 
right goes to your company?
    Mr. Rutt. We believe that it is quite clearly under----
    Ms. DeGette. What is the legal basis for this?
    Mr. Rutt. [continuing] the cooperative agreement and the 
terms----
    Ms. DeGette. That is spelled out? See, these guys like to 
bash lawyers, but I actually am a lawyer.
    Mr. Rutt. I am not a lawyer, but I was very interested in 
this topic. So, I had some of our people go through the 
regulations. I do not know what the right term is, the things 
that apply to cooperative agreements and the history of the 
hundreds of cooperative agreements that have been entered into 
by the National Science Foundation over the years.
    It appeared to me, a simple old country boy, real clear 
that the intellectual property, created under any cooperative 
agreement of this sort, transfers to the person who executed 
the agreement.
    Ms. DeGette. If you could, Mr. Rutt, following up, if you 
could provide this committee for the record any legal opinion 
that your company has that might back this up, because the 
concern I have is because the contents of the data base are 
nothing more than simple facts, it would be difficult to 
copyright that information, for example.
    Mr. Rutt. Of course we all know there are lots of different 
forms of ownership of intellectual property. I will be very 
happy to give you that.
    Ms. DeGette. If you can get me that information from your 
lawyers.
    Mr. Rutt. We will actually do it.
    [The information referred to follows:]
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    Ms. DeGette. Counsel just pointed out to me that what you 
are basically saying is that because of these cooperative 
agreements, you view your company's ownership rights as a 
monopoly. Would that be a fair characterization?
    Mr. Rutt. I would say again that the business we are in is 
a fiercely competitive business. We are not the only registry 
in town. They all work exactly the same.
    Ms. DeGette. Sir, yes or no works with that question.
    Mr. Rutt. I would guess I would say that it is a question 
that I cannot answer yes or no.
    Ms. DeGette. Okay. Let us move along then. Mr. Rutt, as a 
publically held company, your primary fiduciary duty is to your 
shareholders, not the Internet industry, not to the U.S. 
Government, or ICANN, or some kind of big public interest like 
some of the folks down at this end of the table have talked 
about. Would that be accurate?
    Mr. Rutt. Clearly, as an officer of a public company, my 
first responsibility is to the shareholders of the corporation. 
Let me say that it has been the position of Network Solutions 
all along that what is good for the Internet is good for 
Network Solutions. It is our goal, our plan, and our business 
plan to growth with the Internet.
    Ms. DeGette. Yes. I can understand why that would actually 
be your company's motto. I am wondering if the rest of the 
industry shares that view as well?
    Mr. Rutt. I do not know. Why do you not ask them?
    Ms. DeGette. I will. Let me ask you then, is it your 
company's position that there should be full and open 
competition in providing domain name registration and that this 
will benefit your shareholders?
    Mr. Rutt. Yes, we do.
    Ms. DeGette. Well, I think that is great.
    Mr. Chairman, if I may just for an additional 30 seconds. I 
have to leave.
    Mr. Upton. Go ahead, even though you are a lawyer.
    Ms. DeGette. Thank you.
    You know, it surprises me to hear you say that because in 
your testimony and in some of your press statements, you 
indicate that NSI questions the very existence of ICANN's 
authority as spelled out in your agreement with the Commerce 
Department. So, I find it interesting, but we can follow-up on 
that. Thank you, Mr. Chairman.
    Mr. Rutt. If you do not mind, I would not mind addressing 
that.
    Ms. DeGette. Sure.
    Mr. Rutt. We believe the issue of introducing competition 
is good for Network Solutions, because as the new entrants come 
in, they are going to spend a lot of advertising time in the 
usual tradition to the Internet, develop new ways to use domain 
names, make our friends at AOL come up with some new ways to 
use domain names that we have never thought of.
    It will cause other people to say they want to use domain 
names the same way and we will sell some to those people. So, 
we believe, truly sincerely believe, that the stimulation that 
will come to domain name business by new business models, new 
entrants, additional advertising dollars is a good thing for 
Network Solutions.
    Ms. DeGette. Well, I am glad to hear that, and thank you, 
Mr. Chairman, for your indulgence.
    Mr. Upton. Mr. Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman.
    On just a point of clarification of my colleagues, when we 
talk about NSI and the mother company, SAIC, when we talk about 
the stockholders, we are actually talking about the employees 
themselves. It is an employee-owned business. So, they are not 
faceless investors. They are actually people out there 
performing the services.
    I have a question straight over, and I ask either one of 
the members of the Department of Commerce representatives here. 
Do you have a plan if NSI does not sign the contract with UCAN? 
Are you planning to re-bid the competitive agreement? What is 
your strategy?
    Mr. Pincus. Our first hope is that we can reach an 
agreement. If we do not reach an agreement, we have not made a 
firm conclusion about exactly what course we will pursue. We do 
believe that we have the authority to recompete the cooperative 
agreement and to assign those responsibilities to whomever were 
the winner of that new competition.
    Obviously, as I think Congressman Klink said in his opening 
statement, going down that road will benefit a lot of lawyers, 
since there probably will be a lot of litigation, since I know 
NSI has the view that we cannot do that. So, our hope is that 
we can reach agreement and we do not have to go down that road.
    Mr. Bilbray. You know it is there, but you have not 
developed that contingency plan yet.
    Mr. Pincus. Well.
    Mr. Bilbray. The possibility is there.
    Mr. Pincus. We have talked to the lawyers who work for me 
and to the Justice Department about what the steps are, and how 
one would go about doing it, but we have not firmly decided 
that is exactly how we would do it. People thought after the 
White Paper came out, the first was to negotiate Amendment 11 
with NSI.
    A lot of people said NSI would never negotiate an Amendment 
11 because that was going to require the creation of a test bed 
process and the introduction of competing registrars. We did 
successfully negotiate that agreement. So, I am not ready to 
give up. I do not think we are up against the wall time wise on 
the possibility that we will reach agreement.
    Frankly, I think if we have to go down the recompetition 
road, it will not be good for the Internet. There will be a lot 
of instability in the short term. So, I really want to exhaust 
every possibility of resolving this amicably. As somebody said, 
even if everyone is not completely happy, at least we have an 
agreement. The alternative, I think, has some very, very 
significant costs.
    Mr. Bilbray. You mentioned the ranking member. I want to 
compliment the ranking member and the line of questioning that 
was just performed by the ranking member. I think that I would 
like to get the video and show every Member of Congress a very 
productive way of getting the facts out and getting the dialog; 
allowing both sides time to articulate the positions, even if 
the individual member may not agree.
    Mr. Klink. I thank the gentleman.
    Mr. Bilbray. Very, very commendable question series.
    Let me turn around on the other side and ask NSI, you talk 
about developing a competitive environment. What are you doing 
to move toward that competitive environment?
    Mr. Rutt. We have invested tens of millions, or we will 
eventually invest tens of millions of dollars. We spent pretty 
well over $10 million today to introduce competition in .com, 
.net, and .org.
    We already have five companies up and running today. We 
have a considerable list that once we come to resolution on 
some of the outstanding business matters, we are going to move 
expeditiously, as fast as is practical, to bring in the 
competition. We have said that we are capable of bringing on at 
least five a month. That comes out to 60 a year.
    A year from now, if all goes well, we will have 60 people 
out there competing with us in .com, .net, and .org. There are 
not too many companies that have 60 competitors. We are going 
to aggressively bring competition to this business.
    Mr. Bilbray. Now you said how much money has been spent?
    Mr. Rutt. It is in the tens of millions of dollars.
    Mr. Bilbray. Tens of millions. It would be nice if you 
could get to this committee a little closer estimate than that.
    You state that the competition is out there. Can you give 
me the time line again? When do you think you are going to see 
this actually bloom?
    Mr. Rutt. Five are actually in business right now able to 
register domains in .com, .net, and .org. So, it is actually in 
production now. The first one went online on the 5th of June. 
The rest of them have come online since then. They are all 
ready to go. As soon as the test bed is over, and we have 
agreements on how to move forward, we will start bringing them 
on no slower than five a month.
    Mr. Bilbray. Okay. Thank you very much.
    Mr. Rutt. We are in competition right now.
    Mr. Bilbray. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Stupak.
    Mr. Stupak. Mr. Rutt, it seems to me that NSI questions the 
very existence of ICANN's authority as spelled out in its 
agreement with the Commerce Department. For example, you claim 
that NSI has agreed to recognize ICANN, only if it has a final 
agreement with Commerce, which you doubt exist.
    It sounds like to me it is a classic delay tactic. The 
Commerce Department told you in writing that this agreement had 
been finalized. Has it been finalized or not?
    Mr. Rutt. I will leave that question to the lawyers. I will 
leave that question to the lawyers. I am not a lawyer.
    Mr. Stupak. I am sorry. Lawyers are not here. I am asking 
you.
    Mr. Rutt. Let me ask my lawyer.
    Mr. Stupak. Okay.
    [Pause.]
    Mr. Rutt. I think a better way to talk about this issue----
    Mr. Stupak. No, no, no. I want my questions answered.
    Mr. Rutt. I do not think it is really relevant because we 
are working with them right now to negotiate a recognition of 
them as anticipated in Amendment 11 under the contractual term 
which calls for Network Solutions to recognize ICANN pursuant 
to a contract.
    Mr. Stupak. Mr. Rutt, like I said, it sounds like delay 
tactic to me. Sir, yes or no? Is there a final agreement?
    Mr. Rutt. We will get back to you for the record.
    Mr. Stupak. For the record. When will that be, Mr. Rutt?
    Mr. Rutt. Let me ask my lawyer. Hope he is not on the 
clock.
    [Pause.]
    Mr. Rutt. He says tomorrow.
    Mr. Stupak. Okay.
    Have you ever told the Department of Commerce or ICANN 
that, in your opinion, there is no final agreement?
    Mr. Rutt. Probably yes.
    Mr. Stupak. Okay. And that Amendment 11 is not yet 
operative?
    Mr. Rutt. No. I have definitely said that. We absolutely 
believe Amendment 11 is operative, and we have been going 
forth.
    Mr. Stupak. But there is no final agreement.
    Mr. Rutt. That is true. The recognition of ICANN by Network 
Solutions, pursuant to a contract between Network Solutions and 
ICANN, has not yet taken place. That is the moment that is 
important. That is what we are working toward. That is the 
thing you should focus on.
    Mr. Stupak. No. I think I am focusing in the right area. 
Let me ask Mr. Pincus and Ms. Dyson, do you believe that your 
agreement has not been finalized and therefore NSI is off the 
hook for following Amendment 11 in any of ICANN's directives? 
Do you believe they are off the hook and do not have to follow 
directives?
    Mr. Pincus. No. Our interpretation of Amendment 11 is that 
the obligation of NSI to recognize ICANN is due and has come 
due. Now it is true, it has to be done pursuant to a contract.
    Obviously there is no agreement--in terms of the 
obligation, we think it is due now. It is quite clear that the 
system would not have worked if we had to wait until the end of 
the line.
    Mr. Stupak. Ms. Dyson.
    Ms. Dyson. The short answer is yes, and we are moving 
forward to fulfilling the provisions of it.
    Mr. Stupak. Well, we seem to have some disagreement here. 
So, who is the final arbitrator here, the Courts?
    Mr. Pincus. I think our view, Congressman, is since 
Amendment 11 says that NSI must enter into a contract that does 
not have the terms, there is no way, as a practical matter that 
we can force NSI to enter into a contract against its will. I 
think the ultimate conclusion of an inability to reach that 
agreement is what we were talking about before, going down the 
road of recompeting these obligations, and assigning them to 
the winner of that free competition.
    Mr. Stupak. So, you are in favor then of putting it back 
out for recompetition?
    Mr. Pincus. If we cannot reach agreement, I think that is 
appropriate.
    Mr. Stupak. Is there some time line when this agreement 
should be reached?
    Mr. Pincus. Well, the outside limit is the expiration of 
the current agreement, which is September 30, 2000. Obviously, 
we want to move forward as soon as we can. We want to keep 
having discussions if they are productive, because clearly that 
is the best way to solve the problem. If we hit a stonewall, 
then we have got to do it another way.
    Mr. Rutt. I would like to make a point too, Congressman 
Stupak, that we are engaged right now in active negotiations to 
reach agreement. Now, we look forward to reaching an agreement 
that----
    Mr. Stupak. Well, how long have those active negotiations 
been going on?
    Mr. Rutt. Since I have been here, I think back, when was 
it, late June, yes. So, I would say a month.
    Mr. Klink. Would the gentleman yield to me for a moment?
    Mr. Stupak. Sure.
    Mr. Klink. What is the impetus for NSI to conclude these 
negotiations? This is what everyone else is saying. The longer 
you drag it out the more money you are making. So, what 
stimulus is there for you to wrap these negotiations up and to 
negotiate in good faith.
    Mr. Rutt. Real simple answer to that. As the new CEO of 
Network Solutions I did not come here to run border wars with 
lawyers and try to squeeze two extra pennies out of the current 
business. I came here to grow a much more interesting business 
in various other segments of the Internet. I will be 
introducing some new products in the next few days indeed, 
which will be showing some of the moves that we are doing to 
diversify our company.
    I would much rather spend my time, the management focus of 
the corporation, et cetera, working on how to grow our business 
and compete, and be a ferocious competitor in a fair and open 
market, rather than waste my time and everybody else's in this 
industry about, frankly, small change matters. We think we can 
make a lot more money growing a big Internet company than we 
can figuring out how to, you know, two little few pennies off 
of the current user.
    Mr. Klink. If the gentleman will continue to yield.
    Are you saying that the kind of money that NSI has been 
making off of a virtual monopoly is small change?
    Mr. Rutt. I am saying that the money we are going to make 
off our other businesses is larger than we will lose by what we 
are giving up in coming to an agreement.
    Mr. Klink. But you are walking away from a sure thing which 
has bought a lot of value and a lot of wealth to your 
corporation. The longer you hold that, that gravy is running 
all over your plate.
    Mr. Rutt. Interesting that you think of it that way. I do 
not. I think that going out and becoming an aggressive, 
interesting, innovative, fast-moving Internet company is a much 
better way to grow value for our shareholders.
    Mr. Stupak. I think members here, and I do not mean to 
speak for everyone, but if the government had the authority to 
enter into a cooperative agreement, then we certainly have the 
authority to put in new competition for these services, and 
that is what we want to see.
    Mr. Rutt. And we agree with you.
    Mr. Stupak. Yes, but not in a monopolistic way.
    Mr. Rutt. Of course, we are not a monopoly.
    Mr. Stupak. Seventy-five percent.
    Mr. Upton. The gentleman's time is expired. Mr. Cox is 
recognized for 5 minutes.
    Mr. Cox. Thank you.
    I was just asking the staff the exact status of this dollar 
fee. I would just like Ms. Dyson, perhaps, to clarify for us. 
The dollar fee is off; right?
    Ms. Dyson. The dollar fee has been--we have deferred it 
until November when we have an elected board. That was partly 
in response to Commerce's suggestion.
    Mr. Cox. What is your recommendation; yes or no on the 
dollar fee?
    Ms. Dyson. My recommendation is that it makes sense. It is 
a very practical way of covering our costs. As you are going to 
hear this afternoon from the registrars who are in fact the 
people who are paying it, they approved of it. This was not, 
again, a decision taken in a vacuum or in a closed room. We 
posted it for comment. We received comments. Commerce thought 
it made sense. Most of the Internet community, with the 
exception of NSI, thought it made sense.
    Mr. Cox. Is that a one-time fee or is it perpetual?
    Ms. Dyson. It is per domain name per year.
    Mr. Cox. Is it perpetual?
    Ms. Dyson. It is perpetual. It compares just as when you 
get a domain name fee, you get it for a period currently of 2 
years for $35.
    Mr. Cox. What you are talking about though is on top of the 
fee.
    Ms. Dyson. Yes.
    Mr. Cox. Just paying for the domain name is an extra 
dollar.
    Ms. Dyson. Right. It is an extra dollar, but the impact to 
consumers, just to make it clear, the net impact is the fee 
that NSI charges as going from $35 a year down to $9. So, in 
the context of that it is a dollar on top of the $9 NSI still 
charges for its registry services.
    Mr. Cox. What about the World Intellectual Property 
Organization, which was going to be funded with this dollar?
    Ms. Dyson. No, they are not funded through it. ICANN is 
funded through it. The WIPO is looking at the issue of domain 
names vis-a-vis trademarks, but they are not funded through 
ICANN or through a fee on registrars.
    Mr. Cox. I am sorry. What I mean to say is what about the 
WIPO role that is going to be funded through that dollar. Is 
that something that you still----
    Ms. Dyson. No. WIPO's role is not funded through that 
dollar.
    Mr. Cox. No, no, your WIPO role.
    Ms. Dyson. I am really sorry. I do not understand the 
question.
    Mr. Cox. My understanding is that the purpose of the dollar 
is to get you in the business of looking at trademark 
infringement.
    Ms. Dyson. That is one thing we have asked WIPO to do, and 
that our DNSO will be considering their recommendations. But 
the dollar is for funding ICANN's operations overall.
    Mr. Cox. So, the trademark aspect is something you 
recommend in November that ICANN pursue or no?
    Ms. Dyson. Sorry. What is happening now, WIPO made a set of 
recommendations. Some of them de facto we already took into 
account in terms of the registration agreements with the 
registrars. Things like requiring pre-payment for domain names 
so that cyber-squatters would be deterred from reserving 
thousands of names and then not paying for them.
    Some of them related to the idea that there should be some 
common dispute resolution procedure adopted by the registrars. 
We accepted that recommendation, but sent it on to the domain 
name supporting organization to consider the details of 
implementation.
    Then the third large set of recommendations which concerned 
the famous names and trademarks, frankly we are not sure 
whether that recommendation makes sense. We have deferred that 
to the domain name supporting organization for them to 
consider, again, through an open process, soliciting comment 
and input from all affected parties.
    Mr. Cox. The reason I ask the question is that in the July 
22, Thursday, today's Washington Post their description of this 
is, ``the board's subsequent decision to charge a $1 fee on 
every domain to fund its operations and support a World 
Intellectual Property Organization Plan aimed at resolving 
trademark disputes further enraged activists who worry that 
ICANN is moving well-beyond its technical management mandate to 
more broadly regulate the Internet.''
    You are probably familiar with that. You probably read that 
in the paper today. You know what I am asking.
    Ms. Dyson. With all due respect, I now have some sympathy 
for Jim Rutt because it kind of just puts together a whole lot 
of different things we are doing. To the extent that we accept 
the recommendations of WIPO, that will fund the things that we 
do.
    Mr. Cox. So, the answer, in short, is that the $1 fee is 
something that you want to pursue for the very purposes just 
described.
    Ms. Dyson. Either something that we believe is the correct 
thing, but given the criticisms, we are again putting it out 
for comment and soliciting opinions on it. Then the elected 
board, rather than just the initial board, will be voting on it 
in November.
    Mr. Cox. Thank you.
    Ms. Dyson. Thank you.
    Mr. Upton. Okay. I think all members have had a chance to 
go through the first round. We will start a second round of 
questions. A number of members have a couple more questions. I 
want to follow-up on some of the funding. It is my 
understanding that ICANN was partially subsidized at the 
beginning through donations from a number of high-tech 
companies, whether it be Microsoft or IBM.
    We have some e-mail correspondence, I guess, I would like 
to be made part of the official record. All members here on 
both sides have had access to this before. So, with unanimous 
consent, I will make that as a part of the record.
    [The e-mails referred to follow:]
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    Mr. Upton. As you indicated, there has been somewhat of a 
shortcoming, in terms of the funds, for the deficit that ended 
at the end of the fiscal year, as you commented earlier. I 
notice that this e-mail summarizes a meeting between Mr. Simms 
and Ms. Dyson that they had with Tom Kalil, who is presently 
listed as on the White House website as a Senior Director to 
the National Economic Council, with the responsibility for 
Science and Technology issues.
    In that e-mail, it says, ``Esther and I met with him,'' 
referring to Tom Kalil, ``today, and he promised to do what he 
could to encourage private donations on the scale necessary to 
make it clear that we are not going to be financially starved 
for the foreseeable future.''
    Mr. Roberts, do you think that it is appropriate for a 
private corporation that is supposed to be managing a global 
medium to seek assistance from the White House? What is your 
reaction?
    Mr. Roberts. Mr. Chairman, We have a number of 
conversations with constituencies about raising funds. As the 
White Paper set forth, it expected the private sector to 
identify and obtain funds on both the short-term and a 
permanent basis. You have testimony from the Department of 
Commerce in this regard. The obligation to assist us with 
funding is a very important one.
    Mr. Upton. Has there been some follow-up by the White House 
in terms of what they have done in the last 6 weeks?
    Mr. Roberts. Both Ms. Dyson and I have had conversations 
over a long period of time with the White House people who are 
endeavoring to promote the President's E-commerce Initiative.
    Mr. Upton. Has there been any concrete results; any checks? 
Have they been received? Any pledges?
    Mr. Roberts. Well, the manner in which these sorts of 
things proceed is that some phone calls are made. If there is 
interest and a willingness to provide us funds, those of you 
who have had an opportunity to look at our contributions page, 
understand that this is a tax-exempt, charitable deduction with 
no strings whatever involved with that.
    Then the responsibility for making the contacts and 
arranging for the funding falls to me. We have indeed had 
direct conversations about contributions, and we continue to 
receive contributions.
    Mr. Upton. Is it a tax-exempt contribution?
    Mr. Roberts. ICANN is organized as a California non-profit 
corporation and is going to apply for a 501(C)3 tax exemption. 
The IRS reviews the entire record of those submissions and 
either grants it or does not grant exemption, depending on the 
facts that are before it.
    Mr. Upton. So, the IRS has ruled on it then?
    Mr. Roberts. No. In fact, the application, due to the 
shortness of time and our startup organizational activities, it 
has not been filed yet.
    Mr. Upton. Okay.
    Mr. Roberts. In some part because the IRS likes to see a 
financial statement and we have not had a financial--we have 
not concluded a financial period until June 30, which was some 
3 weeks ago.
    Mr. Upton. But you are anticipating on filing those papers.
    Mr. Roberts. Yes, sir; within the next 30 or 40 days.
    Mr. Upton. In one of the e-mails also included in this 
packet produced for the committee by ICANN, ICANN's Counsel, 
Joe Simms, recounts a conversation with a DOJ attorney. In that 
e-mail, Mr. Simms refers to the DOJ attorney as the, ``DOJ 
senior person focused on NSI's ICANN issues.''
    As you no doubt are aware, the Department of Justice is 
actively investigating NSI for possible anti-trust violations. 
A part of that e-mail reads, ``I suggested that one thing DOJ 
could do is to increase the level of pressure on,'' referring 
to the Department of Commerce, ``by some form of formal 
communication or a higher level contact.''
    Ms. Burr, were you aware that ICANN's attorney attempted to 
influence your agency's management of the transition of the 
domain name system through another agency?
    Ms. Burr. We have not been following the Justice Department 
investigation. We know that it is ongoing, but we have not had 
continuing conversations with the Justice Department about it. 
I do not regularly follow the discussions between ICANN's 
lawyers and other people in the government.
    Mr. Upton. Mr. Klink.
    Mr. Klink. Ms. Dyson and Mr. Roberts, I see that you all 
have a problem. You are in a Catch-22 when it comes to finance. 
You put $1 on and you are accused of an illegal tax. If you go 
out and look for donations, then you have got a problem. Look 
at page 3 of the memo that my dear friend, the chairman, just 
put in.
    It is a memo from Joe Simms. It says, ``collecting small 
donations from a large number of companies is going to take 
much too long. A few big companies throwing money in creates a 
problem of big U.S. companies trying to dominate control of the 
Internet. Loan guarantees might be an angle. They present 
complexities for companies to provide them.'' I suppose you 
could print your own money or hold up a liquor store, but that 
would provide some problems too. My question is, I mean, have 
you solved this problem yet? You obviously cannot continue to 
run without some income.
    Ms. Dyson. What is actually happening right now is that Mr. 
Simms very kindly is providing his services on credit. The 
directors who are not paid have not received money for their 
expenses.
    Mr. Roberts' family company, with which we have a contract, 
has also not been paid in the last few months. So, we are doing 
what everybody does. We are managing our cash-flow. We are 
hopeful. Let me say this. I am persuaded----
    Mr. Klink. What cash-flow is there? Is there any money at 
all coming in?
    Ms. Dyson. There is some money coming in.
    Mr. Klink. From what?
    Ms. Dyson. It is on our website. It is primarily donations 
from some of the companies you mentioned; IBM.
    Mr. Klink. You could start your own church.
    Ms. Dyson. Pardon?
    Mr. Klink. Never mind.
    Ms. Dyson. Yes; the First National Church of ICANN.
    We are encouraged by the support we have received from the 
Internet community, including the registrars, two of whom have 
volunteered to pay this $1 per name fee, even though it is not 
required. That is the depth of their commitment to the 
activities we are undertaking. So, we are convinced we will 
prevail, but it is a challenge, short-term.
    Mr. Klink. I can understand it would be. Mr. Rutt, in your 
testimony you proposed another condition that would be met 
before you would accept ICANN's authority. You say that NSI is 
not going to recognize ICANN unless it operates in compliance 
with the White Paper.
    I would just ask you, who would make that determination 
whether they were complying with the White Paper? Is that a 
decision that NSI would make or would you depend on some other 
consensus or Commerce Department consensus? Who would make that 
determination?
    Mr. Rutt. Would you point me to the language where I said 
we would not recognize ICANN with respect to the White Paper. 
We did say that was one of the reasons they were a little off-
track.
    Mr. Klink. It was in your testimony. We will proceed on and 
I will come back to that. We will dig it out for you. We will 
get back to it. I read it in your testimony. Again, I would 
have hoped that you would be familiar with your own testimony.
    On page 7, about half-way down the middle of the paragraph 
it says, ``If ICANN is required to operate in compliance with 
the original statement of policy, indeed we have proposed such 
terms on several occasions asking, we think reasonably, that 
ICANN's policies be binding based upon a true industry 
consensus applying to all competing registries and registrars. 
ICANN has unfortunately refused to negotiate on the terms of 
such a contract,'' et cetera, et cetera, et cetera.
    Mr. Rutt. Yes. Basically, this is a comment about the 
contract discussions going on between Network Solutions and 
ICANN, through intermediaries, about how NSI will come to a 
contractual relationship to recognize ICANN. Those are some of 
the issues that are on the table.
    Mr. Klink. Let us get back. If you have a problem, whether 
it is whether or not they are in compliance with the White 
Paper, whether it is whether Amendment 11 is being adhered to 
correctly, who do you think makes that determination? Is that 
something that NSI decides itself or do you look for an 
industry consensus of some sort? Is that something you look for 
direction from the government on?
    Here is the question. It boils down to this. Did NSI ever 
get a consensus from anyone within the community when you set 
the rules or the fees for domain name registration? My sense, 
from your testimony, is that NSI can make objections whenever 
you do not think the amendment is being interpreted correctly, 
or if you do not think the White Paper is being adhered to 
correctly.
    You all got in business and who had input as to what the 
rules were that you established when you got into that 
business? Now you turn around, and it appears to me, and I am 
asking a question. I am not trying--you appear to want to hold 
ICANN to a completely different standard than NSI was held to 
when you began to do this.
    Mr. Rutt. Well, actually the rules of pricing and how we 
operate our business were developed in cooperation with the 
National Science Foundation. So, we did not set the price out 
of thin air ourselves. It was done by mutual agreement with the 
NSF. Further, you have to read carefully this part of the 
testimony.
    What we are talking about is reaching the agreement to 
recognize ICANN. Amendment 11, which is the basis for the 
framework for us to negotiate an agreement to recognize ICANN, 
does call for the White Paper policy to be the framework from 
which we are all operating. That is all this says.
    Mr. Klink. But who makes that determination, whether or not 
that policy is being adhered to? That is simply, Mr. Rutt, what 
I am asking. How do you make that determination?
    Mr. Rutt. We have two parties here attempting to negotiate 
a contract. When we both agree that the contract is mutually 
acceptable and within the context of the framework in which it 
is being established, we will have a contract.
    Mr. Klink. But Mr. Rutt, and again I am not trying to be 
argumentative. We are just trying to get to the bottom of this. 
A lot of people have said that NSI, again, that you have the 
fatted calf. The allegation is whether you are in the room or 
whether you are out of the room, everybody is coming and 
telling us that you are reluctant to give that up and that all 
you have to do is stall.
    So, the question is you have got to parties in the room. 
The cash-flow is coming in. If all you have to do is sit there 
and stonewall and say they are not adhering to this White 
Paper, if all your attorneys have to do is keep saying that, 
and while they are saying that, you are not divesting. You are 
not letting other people come in and compete with you.
    That is what those who want to compete with you are saying 
that NSI is doing. We are simply here in an open hearing trying 
to give you the opportunity to respond to that, that we are all 
hearing in our offices, and that we are all hearing in the 
hallways here. We are trying to do it, no in an offensive way, 
but just to give you the opportunity to tell us what that is 
not happening. Thus far, I do not think we have gotten there 
yet.
    Mr. Rutt. I think you may not realize we are negotiating in 
good faith at a pretty good clip to try to move these issues 
about clarification, about what things mean, what does the 
White Paper mean which, frankly is a little bit more like the 
Bible than it is like the Constitution, in terms of a very 
broad statement of where we are going. I think we are all 
working in good faith to get there. When we all agree that we 
have a contract entered into voluntarily, but within a 
framework called Amendment 11, we will shake hands and go 
forward. I really expect that we will do that and do it soon.
    Mr. Klink. Mr. Pincus, who do you think would make that 
determination, whether or not the White Paper was being 
complied with? Where is that decision made?
    Mr. Pincus. Ultimately, we will not approve a contract 
between NSI and ICANN and go forward with the transition 
process if we do not think elements of that agreement satisfy 
the White Paper. So, our view certainly is we are going to make 
that determination.
    Hopefully, we will get to that agreement. If we do not, 
then we will have to go down another road. We have been 
entrusted--the White Paper lays out our view of what the public 
interest is. We have to make sure that is satisfied.
    Mr. Klink. Can either party, either ICANN or NSI, scuttle 
that before it gets to you by them not agreeing?
    Mr. Pincus. Absolutely. The problem that we have is the 
September 30 deadline and the need to have a replacement in 
place if we are going down the road to that deadline. So, under 
the cooperative agreement now, it is true competition is moving 
forward and registrars are being added, but again under NSI's 
view of the world, on October 1st, everybody can be cutoff and 
there is no oversight, and NSI is in complete control.
    Mr. Klink. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman.
    You know, let me just say as a layman that has been 
involved with regulatory agencies for the last 25 years, the 
dynamics of this field, it is hard for us on the government-
side to comprehend. We always think in, you know, two-
dimensional fields. This goes into cyberspace. I mean it just 
moves into so many dimensions. It is hard to comprehend.
    I appreciate the fact that NSI is talking with our 
colleagues about this issue of your right, there is a funding 
source here in this dimension, but you have got to comprehend 
the fact, you know, once we break out of this, we go into 
cyberspace.
    It was much like a company in my District that sold its 
stock. It quadrupled in 1 day, and they give away free CDs. Try 
to explain that to those of us who went to business school in 
the 1960's, and 1970's, and 1980's, and then function at what 
is going on. It boggles my mind.
    Let us get into this. I would ask the Commerce people, even 
with the dollar fee or tax, the talk about moving from a $35 a 
unit down to a $9 or $10 unit, extraordinary reduction. I mean, 
I do not think I can place anywhere in government, be it local, 
State, or Federal that I have seen this kind of reduction. Can 
you comment on that proposed reduction?
    Mr. Pincus. I should comment that those two numbers are not 
exactly comparable.
    Mr. Bilbray. Okay. Here we get into the multi-dimensional.
    Mr. Pincus. So, I apologize that it is a little 
complicated. The $35, $70 for 2 years, is for both. It is paid 
to NSI and to the cooperative agreement, and covers both 
management of the registry, the central data base for that 
name, as well as the processing and taking in at the retail 
level of the name of Pincus.com.
    The $9 is the interim fee that we negotiated with NSI that 
it could charge itself as a registry/retail registrar and other 
registrars for the central purpose, the maintaining of the 
central registry alone. So, on top of that fee, unless it is 
part of a zero-cost business because the registrar is doing 
something else, presumably different registrars will charge 
different amounts for the retail half of the business.
    I think it is anticipated the combination of those two 
things together will still be less than $35. We do not know 
what the final registry fee that is now $9 will be for the 
post-test bed period. There is a reasonable chance that when we 
get to a cost-plus profit number it will be less.
    Mr. Bilbray. Let me go over and ask Ms. Dyson, the 
attorney's bill that we are talking about that is being 
defrayed, how much is that? How much is hanging out there? I 
mean, it is one thing to say we do not have to pay for it, but 
we do not have to pay for it right now.
    Ms. Dyson. We do need to pay for it. I am not sure, but I 
think it is on the order of----
    Mr. Roberts. Congressman, our payables at June 30 were 
approximately $800,000.
    Mr. Bilbray. That is the total attorney bill?
    Mr. Roberts. That is for all categories of credit that has 
been extended to us and includes half a dozen different 
categories.
    Mr. Bilbray. But that is your total legal fees for ICANN?
    Mr. Roberts. The current outstanding amount unpaid to our 
counsel is approximately $500,000.
    Mr. Bilbray. So, it is at $800,000 or $500,000?
    Mr. Roberts. Of the $800,000 total, approximately $500,000 
is attributable to credit that has been extended to us from our 
counsel.
    Mr. Bilbray. Okay. And that is total for the whole ICANN 
attorney fees across the board?
    Mr. Roberts. That is correct.
    Mr. Bilbray. Now, the issue of the openness of ICANN, 
something very sensitive to Californians. We have a thing 
called the Brown Act. I might not have voted for him. We have 
to follow his laws. It says, if you are either public or quasi-
public, if you have been appointed or working under that, you 
have got to be out in the open.
    There has been a big concern about that openness and how 
people get involved in ICANN. Ms. Dyson, how were you initially 
contacted to participate in this program?
    Ms. Dyson. Personally, I was initially talked to about it 
in the summer of 1998, both by Ira Magziner and by Roger 
Cochetti who is with IBM. They both said to me, separately, 
something along the lines of we are not asking you this, but if 
someone were to come and ask you to join a board that would 
oversee this process, would you be interested?
    I knew that this was going on. I was not following it very 
closely. Is said, sure. That sounds interesting. I think it is 
a worthwhile thing to do. I would have to know more details, 
but probably I would say yes.
    Mr. Bilbray. So, you were contacted by the private sector.
    Ms. Dyson. Yes, but I was actually asked to join the board 
by Joe Simms in September.
    Mr. Bilbray. Joe Simms represents?
    Ms. Dyson. He was representing, at the time, IANA which 
then de facto became ICANN.
    Mr. Bilbray. I am just saying, the private sector who 
contacted you, no one from the government, any government 
agency, had any contact at all?
    Ms. Dyson. No. The formal request to join the board came 
from Joe Simms.
    Mr. Bilbray. What about the first informal contact?
    Ms. Dyson. The informal contact was with Ira Magziner who I 
was very----
    Mr. Bilbray. So, the White House had contacted you and said 
would you be interested.
    Ms. Dyson. It was--Ira Magziner, whom I ran into at a 
conference. He did not actually bother to call me, but he saw 
me and said, if we did this and you were asked to do it, would 
you do it, and I said probably yes. But he was very careful not 
to ask me, which I did not understand at the time, but I do 
now.
    Mr. Bilbray. I appreciate that.
    Mr. Chairman, I would ask for unanimous consent for just 
one follow-up here because I do not want to just leave her 
hanging. There has been concern about openness of the 
procedure. When can we look forward to the Brown Act being 
followed. In other words, the light of day shining into the 
operation of ICANN?
    Ms. Dyson. In Santiago. We have made the decision to open 
our board meeting, in addition to, as Becky mentioned, before 
every board meeting, not only do we post what it is we are 
going to be talking about and the comments on the various 
agenda items, we also hold an open meeting.
    Openness consist of two parts, as you know. One is being 
open to suggestions, criticism, comments, taking into 
consideration all of these people who need to get together to 
come to consensus. The second part of openness is having people 
see us, the board, seeing how we think, determining for 
themselves, do we seem to be unduly----
    Mr. Bilbray. Figure out where you are coming from.
    Ms. Dyson. Yes.
    Mr. Bilbray. How you got to the conclusion.
    Ms. Dyson. Yes.
    Mr. Bilbray. Is this going to be the policy from now on? 
Are all the meetings going to be open from now on?
    Ms. Dyson. That is going to be determined by the vote of 
the half-elected, half-appointed board in November.
    Mr. Bilbray. So, we do not know that yet. So, the openness 
of the procedure will be determined in November.
    Ms. Dyson. But we are listening very carefully to your 
comments here today.
    Mr. Bilbray. I am glad.
    That is why we have an open process so you understand where 
we are coming from and why we come to the conclusions.
    Thank you very much, Mr. Chairman.
    Mr. Upton. Mr. Stupak.
    Mr. Stupak. Well, thanks.
    Ms. Dyson, the way I understood it earlier on a question 
asked about the meetings was that while you may go into open, 
but then you reserve the right to go into a closed or a private 
session.
    Ms. Dyson. Dealing with things such as personnel matters, 
or maybe proprietary negotiations with NSI.
    Mr. Stupak. So, just those areas that was often found or 
where there are exceptions to it then.
    Ms. Dyson. The usual exclusions.
    Mr. Stupak. Right; litigation, personnel matters, and 
things like that.
    Ms. Dyson. Yes.
    Mr. Stupak. So, we can take it by your assurances, at least 
you will be advocating in Santiago that you have open meetings 
here on through, except those common exceptions found in law.
    Ms. Dyson. That is correct. The board is not of one mind on 
this. Being Chairman, I do not make the decisions, even within 
the board. There is a requirement for consensus.
    Mr. Stupak. Sure. That is what we could expect your 
advocacy would be down there.
    Ms. Dyson. Yes.
    Mr. Stupak. Open meetings. Mr. Rutt, with the increased 
competition, you say there will be increased innovation and 
domain names sold by your competitors. As the registry, you 
will still be paid $9 per domain for your registry duties; will 
you not?
    Mr. Rutt. There will be some price agreed upon as a part of 
these contacts.
    Mr. Stupak. When the cooperative agreement expires in the 
fall of 2000, is it your view that NSI will own the registry or 
do you support competitive bidding for the registry.
    Mr. Rutt. It is and remains our view that the operation of 
our business transferred to us, under the cooperative 
agreement. I will say that in the discussions we are having 
right now, we are anticipating quite likely that we would agree 
to terms that considerably last beyond September 30.
    Mr. Stupak. So, what are you saying? Are you saying that 
the monopoly goes on beyond September 30? That is what you are 
saying; are you not?
    Mr. Rutt. No.
    Mr. Stupak. Okay.
    Mr. Rutt. I am saying our business will continue to 
operate.
    Mr. Stupak. Is it your view then that NSI will own the 
registry or are you going to put it out for open bids on 
September 30?
    Mr. Rutt. We believe the business transferred to us, under 
the cooperative agreement, and we are going to continue to 
operate our business through September 30 and beyond September 
30.
    Mr. Stupak. So, you are saying .com belongs to you?
    Mr. Rutt. That is a metaphysical question I will leave to 
the lawyers and philosophers. The business that we are in today 
belongs to us.
    Mr. Stupak. And you expect after September 30 it is going 
to remain with you?
    Mr. Rutt. Yes.
    Mr. Stupak. And that business is .com?
    Mr. Rutt. The registration of names in .com, .net, and .org 
domains.
    Mr. Stupak. So, you do not plan on putting it out for open 
bid after September 30, 1999.
    Mr. Rutt. Had not thought about it.
    Mr. Stupak. So, the Commerce Department could do that; 
right?
    Mr. Rutt. We do not believe they have the legal right to do 
so, no.
    Mr. Stupak. You know, it seems like when I ask a question, 
you have not thought about it, or you do not have an answer. 
So, let me ask you this. Your testimony seems to indicate that 
you accept the decision of a ``true industry consensus 
concerning accreditation.'' Tell me, Mr. Rutt, should I assume 
that only NSI will determine if a ``true industry consensus'' 
has been obtained?
    Mr. Rutt. Not necessarily. When in our discussions on a 
framework for a contract, we put on the table some suggestions 
for, excuse me, super majority means of defining consensus that 
do not allow one obstructionist player, even if it is NSI, to 
stop the process going forward.
    Mr. Stupak. Have you proposed your definition of ``true 
industry consensus to ICANN or to the industry so they can 
review it?
    Mr. Rutt. We are working through our friends at the 
Department of Commerce on a framework that we think makes sense 
for everybody.
    Mr. Stupak. So, in other words, you then, as you indicate, 
this true ``industry consensus'' is something you have decided 
and you are now going to share it with other people in the 
industry.
    Mr. Rutt. It will be part of a negotiation of a contract 
between ICANN and NSI. Both sides will agree.
    Mr. Stupak. But you have already said that in your 
testimony, you determined this ``true industry consensus.'' So, 
what is it? What is your ``true industry consensus?'' What does 
that mean? They do not meet your standards and that is it?
    Mr. Rutt. I will get back to you on that one. I do not have 
an answer for that one, what it exactly is. It is an 
interesting philosophical question.
    Mr. Stupak. Mr. Chairman, if I may, could I ask Mr. Pincus 
if he has an answer to that ``true industry consensus?''
    Mr. Pincus. Our view, Congressman, is that the result of 
the shuttle diplomacy that we are performing between NSI and 
ICANN, were there to be an agreement, has to be put out for 
comment pursuant to ICANN's procedures, because that is 
obviously going to be very significant. Policy determinations 
will be made about what the rules are for registries.
    So, our view is that will have to happen. We have not been 
able to discuss those terms with anyone because they have been 
stamped proprietary when we have been given proposals.
    Mr. Stupak. Proprietary by NSI?
    Mr. Pincus. By NSI, yes.
    Mr. Stupak. NSI.
    Mr. Klink. Would the gentleman yield for 1 minute?
    Mr. Stupak. Yes.
    Mr. Klink. Could I ask both Mr. Pincus and Mr. Rutt, since 
it is admitted that NSI controls 75 or 80 percent of that 
market, is it what NSI says is that the consensus? Since you 
control 75 or 80 percent of the market, is your opinion the 
consensus for industry and is it proprietary?
    Mr. Rutt. Sir, the answer to your question is no. A 
consensus is a consensus.
    Mr. Stupak. Well, a consensus by one is not a consensus.
    Mr. Rutt. I do not agree with that. A consensus is like 
pornography. You know it when you see it. If we are the only 
hold-out on a term, that is probably not enough to stop 
consensus.
    Mr. Pincus. One of our concerns with the system that would 
require consensus among separate elements of the Internet 
community, is that if that were interpreted to require a 
consensus, for example, among registries that were overseen by 
ICANN, there might only be one of those for a time because the 
addition of others depends upon decisions by other governments.
    So, we would obviously be troubled by a rule that required 
segment-by-segment consensus, where there was only one person 
in the segment.
    Mr. Klink. We would be troubled also.
    Mr. Upton. Mr. Cox.
    Mr. Cox. Thank you.
    Ms. Dyson and Mr. Roberts, I understand that the GAC, the 
Government Advisory Commission, is setup under your bylaws. Is 
that right?
    Mr. Roberts. Yes, sir.
    Mr. Cox. Your bylaws and your charter provide that the 
bylaws can be changed by the board of directors.
    Mr. Roberts. That is correct.
    Mr. Cox. So, essentially what the GAC is, is a function of 
ICANN's policy. Is that right?
    Mr. Roberts. Well, I think that the background to this is 
that it was felt during the open process last summer that there 
ought to be a mechanism for governments to convey their views 
to the new corporation. These bylaws and these bylaw provisions 
were created before ICANN existed.
    As I think you are aware, the White Paper is quite 
definitive on the issue that there should not be active 
involvement by any governments in the ICANN structure. So, we 
have a committee. It is self-organizing. Its role is limited to 
providing the board of ICANN with its recommendations on issues 
that are before us from time-to-time.
    Mr. Cox. Now, we are going to hear from witnesses later on, 
including a representative of the Consumer Project on 
Technology who are concerned about ICANN becoming a quasi-
government. That is really why I asked where you are headed 
with WIPO.
    Having read the White Paper and not noticed a lot of 
direction where you might go in the work you pick up with WIPO, 
I just wonder what your response is to the concern that while 
we are as a government policy trying to promote competition, we 
have put an umpire in there that is going to stand in the place 
of a government and get the government out of it. That is you. 
That you are now conducting liaison with governments. How much 
policy should we expect to come out of this?
    Ms. Dyson. Let me try to clarify a few points here.
    First of all, we very specifically, or the people who 
originally created the bylaws very specifically, created a 
Government Advisory Committee as opposed to a supporting 
organization. Those three supporting organizations elect 
members to the board. The Government Advisory Committee gives 
us advice, which we need to listen to, but not to follow. It is 
a means of governments coming together and being clear and 
specific about what they want and conveying that to us.
    Mr. Cox. Are you listening to the right people?
    Ms. Dyson. That is always a question. That is part of the 
challenge of determining consensus.
    Mr. Cox. No. I mean on GAC.
    Ms. Dyson. The governments themselves.
    Mr. Cox. For example, I have been working for 11 years with 
the Democracy movement in the People's Republic of China. We 
hope that the Internet is a means of spreading freedom. We also 
observe that the People's Republic of China is putting in jail 
people like Lynn High for distributing e-mail addresses to 
anti-communist groups in the United States. Our hope for the 
Internet is profound.
    What we see GAC doing is admitting the PRC as a member, 
which is trying to build an intranet to keep out foreign 
information, excluding Taiwan, even though our government's 
policy is that in any organization that does not require 
sovereignty as a pre-condition, we have no objection to Taiwan 
being a member.
    Surely ICANN does not need to limit itself to sovereign 
states. Ms. Burr obviously wants to talk about this. I will be 
happy to let her do so. I just want Ms. Dyson to answer the 
more general question about whether we should not be concerned 
about policy being made without any oversight by anybody at 
ICANN. It is a different question than creating competition, 
which we are all for.
    Ms. Dyson. ICANN is extremely limited in what it can do.
    It manages technical infrastructure. It does not deal with, 
for better or worse it does not deal with, content, freedom of 
speech, privacy beyond what happens with domain names.
    Mr. Cox. It deals with architecture. What the PRC is trying 
to do is construct an architecture to keep out information.
    Ms. Dyson. Yes.
    We, unfortunately or fortunately, cannot control what the 
PRC does. We can control whether we listen.
    Mr. Cox. I guess what I am getting at with this specific 
example is that if the object is to create an intranet, that 
requires plumbing. You are in the plumbing business. I observe 
that the commission that you have setup under your bylaws to 
deal with this issue is listening only to the Communist part 
and not to the Democratic part of China.
    Ms. Dyson. I believe Taiwan is actually admitted to GAC.
    Mr. Cox. Is that correct now? Are they in there? My 
information was that they are not.
    Ms. Dyson. The Government Advisory Committee, which the 
members are not constituted by ICANN, but the governments of 
the world send their members. The original by law provision in 
ICANN said governments. Our first recommendation, when the 
Government Advisory Committee met, was to amend those by laws 
to include governments and distinct economies as recognized in 
the international, specifically for the purpose of inviting 
Hong Kong and Taiwan to join as full members of the GAC.
    Mr. Cox. That will happen next month in Santiago?
    Ms. Dyson. My understanding is that they will be there as 
full members in Santiago.
    Mr. Cox. I appreciate that.
    I know the chairman has been generous with the time.
    Mr. Upton. Unless another member has a pressing question, I 
would like to ask that we may submit questions in writing. All 
of members of the subcommittee will note that a number of us 
are on other subcommittees and they are also meeting at this 
time.
    So, with that being understood, thank you for appearing 
before us today. We look forward to seeing you in the future. 
Thank you.
    The second panel will include Ms. Mikki Barry, who is 
President and the Director of the Domain Name Rights Coalition; 
Mr. Jamie Love, Director of the Consumer Project on Technology; 
Mr. Grover Norquist, President of Americans for Tax Reform; Mr. 
Harris Miller, President of Information Technology Association 
of America; Mr. Johnathan Weinberg, Professor of Law, Wayne 
State University; and Mr. Jonathan Zittrain, Executive Director 
of the Berkman Center for Internet and Society, Harvard Law 
School.
    We are going to have votes soon as well. Mr. Norquist, I 
know that you are testifying at 1:30 p.m. someplace else. So, 
we may be submitting questions to you in writing.
    Before we start, I think most of you were here as we opened 
up panel one. As you may know, we have a long tradition of 
testifying under oath, if any of you have objection to that. 
Also, under House Rules they allow you to have counsel, if you 
so seek. Do any of you need or desire counsel?
    [Chorus of nays.]
    Mr. Upton. Therefore if you rise and raise your right hand.
    [Witnesses sworn.]
    Mr. Upton. You are under oath.
    Mr. Love, you had a quick question.
    Mr. Love. Yes.
    Mr. Upton. Are you also pressed for time?
    Mr. Love. I was surprised at different hearings--90 minutes 
the last minute. So, I would just say that I would enjoy going 
early if possible. I apologize.
    Mr. Upton. We will do this sort of like as we all leave for 
our respective States. I have a 6:45 p.m. flight tonight to 
Michigan. Is your hearing before or after 1:30 p.m.
    Mr. Love. The hearing has already started.
    Mr. Upton. You may go first.
    By the way, all of your statements are a part of the 
record. You are welcome to summarize. We will try to, for sure, 
limit this to 5 minutes. Go ahead, Mr. Love.

    TESTIMONY OF JAMES LOVE, DIRECTOR, CONSUMER PROJECT ON 
   TECHNOLOGY; GROVER NORQUIST, PRESIDENT, AMERICANS FOR TAX 
REFORM; MICHAELA M. BARRY, PRESIDENT AND DIRECTOR, DOMAIN NAME 
  RIGHTS COALITION; HARRIS N. MILLER, PRESIDENT, INFORMATION 
TECHNOLOGY ASSOCIATION OF AMERICA; JONATHAN WEINBERG, PROFESSOR 
    OF LAW, WAYNE STATE UNIVERSITY; AND JONATHAN ZITTRAIN, 
  EXECUTIVE DIRECTOR, BERKMAN CENTER FOR INTERNET AND SOCIETY

    Mr. Love. Thank you. I am not going to repeat my statement. 
I assume everyone has a copy of it. My name is Jamie Love. I 
work for a consumer group that was started by Ralph Nader. I am 
active in a lot of issues that have to do with things that are 
related to the Internet. I am the company-Chair of the Trans-
Atlantic Consumer Dialogue Committee on the Working Group on 
Electronic Commerce.
    I do a lot of work under Microsoft-type anti-competitive 
monopoly issues. We have been interested in Network Solutions 
and the ICANN issue because we are interested, particularly, in 
the institution of ICANN and what it represents in terms of 
future of a governance-type structure for the Internet.
    I think that, from our point of view, NSI is a monopoly. 
They charge too much money. They are trying to do a grab on 
intellectual property of the domain. They want to say that they 
own actually the domain and they can set prices. I guess if 
they were down the road, I mean you can imagine the nightmare 
of them telling Amazon.com what their registration is. They 
told us if we wanted to change, you know, if they charge too 
much, we could get a different domain. The value of the domain 
is really the fact that people link to you. Your people know 
where you are.
    On the Internet, you just cannot pickup and walk away. You 
are locked in basically to where you are. So, somebody has to 
deal with the NSI monopoly and fix that. Now, that said, we are 
also highly critical of some aspects of the ICANN thing, the 
way we see it.
    Not about ICANN, per se, not about the personalities of 
ICANN, not even about particular decisions that have been made 
by the board at ICANN, but more about the way that the 
organization is taking off without any, what we consider to be, 
a charter or any kind of limiting structure as to what it can 
do.
    To understand why this is important, trademark policy which 
is policy-oriented, and it is stuff that we expect governments 
to make decisions about or it is what we have a Patent and 
Trademark Office for such things. There is only one thing that 
could be addressed by this new organization.
    It asserts that it will have the control over all the IP 
numbers that are used for connecting to the Internet, and it 
will have this authority over all of the domains of the 
Internet. It will be able to attach conditions upon people who 
want domains and possibly conditions on people that want 
numbers.
    It is an authority in power which is unique, broad, 
extensive, and limited only by the ability of people to 
organize around that thing, if it was started in a bad way. In 
other words, for example, if ICANN went crazy or if NSI went 
crazy, I mean people could try and do work around some things 
like that, but it is difficult. So between crazy and not so 
crazy, there is a big gradation. So, there is power there.
    So, people look at this control of the route servers, the 
control of the IP numbers, the control of domains as power. So, 
they want to know who has the power and how does this work? The 
fact that ICANN has been slow to define how you get elected to 
the board has been a source of problem.
    As those things become defined and people, maybe they can 
have a better understanding of it, maybe they will feel good 
about it. Maybe they will not feel good. But not knowing 
anything is a difficult thing for people. I am glad that they 
say they are going to try and define that.
    The fact it is a non-profit organization means next to 
nothing. They change their bylaws all of the time. I work for a 
non-profit organization and it does not mean anything that we 
have bylaws and Articles of Incorporation. What we were hoping 
is that ICANN would accept to have a charter from the 
government that said, look, we are going to do domain names. We 
are going to do numbers and that is all we are going to do.
    It would limit it in some way so that we would have some 
assurance that it would deal with strictly technical issues, 
and not get involved in the broader policymaking about 
electronic commerce. ICANN says to us they will not sign such a 
charter. That their idea is you give them their route server. 
You give them the IP numbers. You give them the domains and you 
say good-bye.
    At the end of next year, they are free agents and you will 
have less control over them than you ever had over NSI, which 
is already a problem because of the lousy legal work that was 
done on the cooperative agreement, not by the Department of 
Commerce. In any event, that is what I think you have to do 
with them.
    What are you creating? How much power does it have? What 
could you do down the road if it starts doing things that you 
do not like? Is there a better alternative?
    Thank you.
    [The statement of James Love follows:]
    Prepared Statement of James Love, Director, Consumer Project on 
                               Technology
    My name is James Love. I am the Director of the Consumer Project on 
Technology (CPT), an organization created by Ralph Nader in 1995. I am 
involved in a number of issues related to electronic commerce, 
intellectual property rights, software, computers, telecommunications, 
and the Internet. The CPT web page is http://www.cptech.org. CPT is a 
non-profit organization. We have no financial relations with any 
company or non-profit entities that are involved in domain 
registration.1
---------------------------------------------------------------------------
    \1\ About two years ago my wife worked as a subcontractor for SAIC, 
the majority investor in NSI, on a distance education project for a 
client in Malaysia.
---------------------------------------------------------------------------
    I am here today to discuss proposals for the Internet Corporation 
for Assigned Names and Numbers (ICANN), as well as our concerns about 
the role of Network Solutions, Inc. (NSI) in the management of internet 
domains.
    On June 11, 1999, Ralph Nader and I wrote to Esther Dyson, the 
Chair of ICANN, asking a series of questions about its mission, the 
degree to which ICANN could or would use its control over IP addresses 
or domain names to set policy on trademarks or other (unrelated) 
issues, the source and scope of authority to levy fees on the use of 
internet domains, what those funds can be used for, and the role of the 
interim board in making substantive policy decisions. Ms Dyson wrote 
back on June 15, 1999, in a letter that began with a rather lengthy 
``scene-setting'' discussion about the efforts of NSI to protect its 
monopoly, and then offered often incomplete answers to the questions we 
raised. We have subsequently engaged in a number of discussions with 
persons representing ICANN, NSI and other persons who are interested in 
issues relating to the management of domain name registrations and 
other Internet governance issues.
    There is a sense among some that the controversy over ICANN is 
about NSI and NSI's attempts to retain its monopoly over the .com, 
.org, .net and .edu domains. For certain interests, this is indeed the 
key issue. However, our concerns over ICANN are much broader, and go to 
more basic questions of how key internet resources are managed and 
controlled. Before discussing ICANN, however, I would like to make a 
few comments about NSI, to make it clear that our concerns about ICANN 
should not be misread as a defense of the NSI monopoly.
    In our view, NSI is a government contractor performing a service 
for owners of particular domains. We do not believe that it is 
appropriate for NSI to assert ownership or control over the .com, .net, 
.org or .edu top level domains. Nor do we think it appropriate for any 
top level domains to be ``owned'' by a private firm. The prices for 
domain registration are excessive. We are alarmed that NSI is making 
claims that it ``owns'' certain databases that are essential for the 
operation of the network. We are concerned that NSI is using the 
profits from its current monopoly to lobby the government to extend its 
monopoly. We are concerned about these and many other issues, and we 
want the NSI contract for .com, .net, .org and .edu to be subject to 
periodic competitive bids.
    That said, we remain very interested in the fundamental issues 
about ICANN itself. What is ICANN? Who will control the board of 
directors? What will be the legally binding limits of ICANN's power? 
What recourse do people have if they are unhappy with ICANN's actions 
or policies?
    As I have said elsewhere, we don't view ICANN as a substitute for 
NSI, but rather as a potential substitute for the Department of 
Commerce, or more generally, as a substitute for governments. ICANN is 
poised to control key internet resources, and to impose private forms 
of taxation and regulation on the Internet. However, it will not be 
accountable in the same ways that governments are. Some persons 
perceive this as a positive feature, while others view the lack of 
accountability as a serious problem.
    The July 1, 1999 Presidential Directive on Electronic Commerce 
directed the Secretary of Commerce:
        to support efforts to make the governance of the domain name 
        system private and competitive and to create a contractually 
        based self-regulatory regime that deals with potential 
        conflicts between domain name usage and trademark laws on a 
        global basis.
    For many persons, this Directive, and the subsequent Commerce 
Department's Statement of Policy on the Management of Internet Names 
and Addresses (the ``White Paper''), were highly technical matters that 
did not appear to have broader practical significance. However, as the 
ICANN proposal has become better understood, there are concerns about 
the scope of issues that may be addressed by ICANN, the many 
limitations and problems of the ``self-regulatory'' and governance 
structures that are based upon private contracts, and the uncertainly 
over how ICANN itself will be governed.
    What exactly is ICANN, and why does anyone who is not in the domain 
registration business care? ICANN seeks to control Internet domains, IP 
numbers and root servers that are essential for anyone who wants to be 
connected to the Internet. David Post refers to this as ``life-or-death 
power'' over the Internet. The Australian competition authorities 
referred to it has the ``God power'' for the Internet.
    What exactly will ICANN do with this power? In her June 15, 1999 
letter to Ralph and Myself, Esther Dyson said:
        The White Paper articulates no Internet governance role for 
        ICANN, and the Initial Board shares that (negative) view. 
        Therefore, ICANN does not ``aspire to address'' any Internet 
        governance issues; in effect, it governs the plumbing, not the 
        people. It has a very limited mandate to administer certain 
        (largely technical) aspects of the Internet infrastructure in 
        general and the Domain Name System in particular.
    However, this statement is far too modest. As Professor Froomkin 
and David Post have pointed out, ICANN has already proposed mandatory 
contract terms for firms that register (and own) domains, making 
substantive and non-trivial policy regarding the use of trademarks and 
personal privacy. ICANN has also proposed a mandatory fee of $1 per 
domain to finance its activities, and some persons associated with 
ICANN are considering asking for a fee on IP numbers, in order to cut 
down on the current hoarding of IP numbers.
    I asked ICANN what else it could do, in terms of putting conditions 
on domain registrations or spending the mandatory fees it collects. To 
put this in a positive light, for me, I asked, if the ICANN board of 
directors could legally require .com domains to post privacy policies 
on their home pages, or use the money from the $1 fee to fund the use 
of computers in Russian libraries. The purpose of this inquiry was to 
get a better idea of the limits of ICANN's authority.
    I was told that, yes, if the ICANN board wanted, it could do both 
of these things. But Ms Dyson did not think that this would ever 
happen. At best, less than half the ICANN board members will be elected 
from the general public. An equal number of board members will come 
from business consistences that are ``stakeholders'' in various 
Internet and ecommerce functions, such as the companies involved in 
domain registration. The ICANN President, who is an employee of ICANN, 
is given a vote on the board. Pro-consumer measures like requiring the 
.com domains to post privacy policies would never receive board 
support, Ms Dyson reckoned.
    Indeed, it isn't clear if there will be any meaningful consumer 
representation in ICANN. Board meetings are held in places like Berlin, 
Santiago, and Singapore, in fancy hotels, and it is difficult to 
participate in such events without corporate sponsors who can pay the 
travel expenses.
    And, having been told that it will be impossible to get support for 
pro-consumer policies, one wonders about policies that are supported by 
big ecommerce firms. Could ICANN become a mechanism to promote 
intrusive schemes for surveillance of copyright on the Internet, for 
example? If not today, what about 10 years from now when ICANN will be 
run by an entirely different board of directors elected by a different 
group of ``stakeholders?''
    Our guess is that if ICANN succeeds, it will become a magnet for 
policy making on a wide range of issues. ICANN will have power, money 
and a dynamic staff. If it can ``solve'' trademark disputes, will it be 
surprising if ICANN is later asked to ``solve'' the SPAM problem? Or to 
set standards for digital signatures, or any number of ecommerce issues 
that benefit from harmonization? Indeed, ICANN has recently been asked 
to address new and novel issues that are associated with Internet 
searching and navigation services, raising even now the possibility of 
engaging ICANN in important content areas.
    In fact, persons associated with ICANN are already setting their 
sights on issues far beyond IP numbers and domain names. One of the 
arguments for ICANN is that it will be quick and non-bureaucratic, and 
thus able to move faster than government agencies to solve new 
problems. This may indeed be true. But who will ICANN really be 
accountable to? What are the differences between ``self governance'' 
and government?
    One model that has apparently been rejected is for the ICANN board 
to be elected directly by the people who use the Internet. If this is 
too hard to manage, given the difficulty of figuring out who is real 
and who is virtual, ICANN's board could be elected directly by domain 
owners, who are a known group. (A modern day version of letting 
property owners vote, albeit a system where people who own lots of 
property can vote more than once.)
    Instead, ICANN (and the White Paper) proposes a structure that 
elects some board members from the general public, under a system that 
has yet to be announced, and gives seats on the board to groups like 
the ``Address Supporting Organization,'' the ``Domain Name Supporting 
Organization'' or ``The Protocol Supporting Organization.'' Later on 
ICANN can and probably will add additional ``Supporting 
Organizations,'' each with seats on the ICANN board of directors. The 
idea that this is ``self'' governance depends entirely upon who is 
considered ``self.''
    Many of the current discussions regarding ICANN concern the nature 
of contractual agreements between ICANN and the organizations, like 
NSI, that manage domain registrations. These contracts are held out as 
models for governance. The problems with this approach are many. For 
one thing, consumers are not part of this bargaining process. Neither 
are new entrants part of the process, thus giving too much power to 
established firms.
    There is also a question regarding bargaining power, as ICANN 
becomes more firmly in control of the ``plumbing'' of the Internet. 
Contracts that may be negotiated today will likely become ``take it or 
leave it'' propositions in the future, if indeed this is not the case 
already.
    It would be helpful if the government could begin to identify the 
range of issues and decisions that it expects ICANN to resolve, even in 
the short run, and then consider whether ICANN is truly the appropriate 
body to be making the decisions.
    Many of our concerns about ICANN would be mitigated somewhat if 
there was some plan for future accountability, some way to rein ICANN 
in if it goes crazy.
    We asked Esther Dyson if ICANN would be willing to enter into a 
charter with the US government or with an international 
intergovernmental organization (existing or new) that limited ICANN's 
powers in ways that were legally binding. Ms Dyson said that was not 
acceptable. While ICANN did not want to be accountable to any 
government or governments. ICANN is happy to receive the US government 
backing to get control over key Internet resources, it just doesn't 
want to ever look back once it gets those resources.
    As someone who works for a non-profit organization, I am not moved 
by the suggestion that ICANN is seriously constrained by its Articles 
of Incorporation or bylaws. The ICANN Articles of Incorporation are 
very brief and don't say much, and the bylaws, which are pretty general 
to begin with, can be changed by a \2/3\ vote of the board of 
directors.
    We asked NSI if it was in favor of ICANN having some type of 
government charter that limited ICANN's powers. David Johnson, a lawyer 
representing NSI, said no. NSI apparently prefers to deal with an ICANN 
that has no official charter. What NSI does want is greater bargaining 
power with ICANN. And as noted, NSI wants very badly to become the 
``owner'' of .com, .net and .org top level domains, at least at the 
registry level.
    I asked NSI how consumers would be protected from over charging for 
registry services. NSI said that if .org was over priced, we could 
register a different top level domain. This of course is a ridiculous 
remedy. CPT has spent enormous resources to create our web pages, and 
the value and usefulness of the web page is based upon the internal and 
external hyperlinks to the web page content. We are in a ``lock-in'' 
situation where it would be extremely costly and inconvenient to 
abandon www.cptech.org.
    NSI also suggested that if it was required to charge everyone the 
same price, it would not gouge consumers, because it wanted to sell 
more domains, or that prices would be moderated by competition between 
top level domains. We don't find this persuasive, given the importance 
and economic value of the top level domains currently managed by NSI. 
NSI is clearly opposed to the idea that the contract for the registry 
would be re-bid, but this would be our preferred solution, to have 
periodic competition for the registry services.
    It does appear that NSI, through its management of approximately 
three quarters of registered domains, has too much power. Both the 
government and ICANN seem to need cooperation from NSI to accomplish a 
smooth transition from the current monopoly to a competitive system. 
This raises questions in our mind about the wisdom of permitting any 
single firm to control so much of the critical infrastructure 
resources. We have suggested it might be appropriate to have redundancy 
at the registry level, so that a contractor would not become so 
essential that it could make it impossible to re-bid a contract 
(arguably the position we are in today). It is not at all clear that 
ICANN will have the authority to solve this problem as a purely private 
party.
    We would very much like to see the Department of Commerce become 
more pro-active on the issue of new top level domains, to address the 
contrived scarcity of domain name space. We recognize there is growing 
international interest in participation in these policy decisions, and 
we urge the Department of Commerce to identify suitable forums for 
discussing these issues, including the creation of new special purpose 
agreements among interested countries on this topic. Policy makers, 
whoever they are, should explore mechanisms for putting restrictions on 
the registration of the same name in different top level domains, in 
order to truly expand the availability of the name space (as opposed to 
creating a situation where persons simply register all available top 
level domains.)
    With respect to ICANN, we are opposed to ICANN's current proposal 
to take control of key Internet resources without any clear 
understanding of the limits of ICANN's powers and without any ongoing 
oversight by government bodies.
    The concerns that we have discussed regarding ICANN are not about 
its present leadership, or about any particular policy decision that 
ICANN has undertaken. We are concerned about ICANN as an institution, 
and about the ramifications of current proposals for the future of 
democracy in cyberspace.
    Finally, I would like to thank the Commerce Committee for holding 
this important hearing.

    Mr. Upton. Thank you. Mr. Norquist.

                  TESTIMONY OF GROVER NORQUIST

    Mr. Norquist. Thank you. Grover Norquist for Americans for 
Tax Reform. We do not receive any Federal money, or State or 
local government money. I wear two hats. I represent Americans 
for Tax Reform. I also serve on the Electronic Commerce 
Commission, which is discussing, in the wake of the legislation 
that you passed on the Internet Tax Freedom Act, how or why we 
ought to tax Internet commerce.
    There are an awful lot of States and local governments out 
there that have sort of one thing in mind on the Internet. They 
think it is really interesting and they want to tax it. I was 
concerned when ICANN started discussion of a $1 tax, not that 
$1 is a lot of money, but my question is where is ICANN getting 
the authority to levy a tax?
    If they have the authority to levy a tax, to announce that 
they are not going to take it until November, in November can 
they come back and put it in and make it $2 or $10? I would 
urge Members of Congress not to hand over to any third party 
the ability to levy taxes, either on the Internet or on 
anything in the United States.
    We have seen the United Nations recently announce they 
wanted to tax e-mail. They wanted to have a one penny tax on 
100 lengthy e-mails. I am not sure what constitutes lengthy. It 
is not a lot of money, one penny, but they think it will raise 
$70 billion.
    I understand Pete Sessions has introduced legislation to 
explain to the United Nations that they do not have this 
authority, and the Congress does not agree that they do. That 
is necessary to do. Three years ago, the U.N. did the same 
thing, wanting to tax electronic transfers of money.
    We saw the FCC announce recently and implement that they 
are allowed to levy taxes, the Gore Tax, on everybody's phone 
bill. Then they passed a law to tell the phone companies that 
you are not allowed to tell anybody what this is or what it is 
going to. You just hid it in their phone bill.
    This idea of setting up third parties to levy taxes outside 
of Congress, outside of your authority, I think is extremely 
dangerous because it is one more step away from representative 
government. An institution that can raise $1, why not $2? Why 
not $10? I do not understand quite how they got that authority, 
but if they got it for $1, why do they not have it for $10?
    Last, I would just like to agree with the gentleman who was 
talking before. I think you need to be very careful what 
ICANN's authority is. There are an awful lot of people who 
would like to get in there and rewrite the rules on the 
Internet.
    If you are going to hand over to ICANN some sort of blank 
check to have taxes or rewrite the rules, I think that is quite 
problematic. I agree with the earlier comments. ICANN's meeting 
should be open. I think that the authority should be set, not 
by their own internal bylaws, and not by something that 
Commerce hands them, but by Congress.
    Thank you.
    [The statement of Grover Norquist follows:]
  Prepared Statement of Grover Norquist, President, Americans for Tax 
                                 Reform
Introduction
    Mr. Chairman, my name is Grover Norquist. I am President of 
Americans for Tax Reform (ATR).
    Americans for Tax Reform is--in simple terms--a government spending 
watchdog, with deep concerns regarding the breadth of government 
generally. ATR, as I noted last month in a letter to Congress, opposes 
all tax increases as a matter of principle. We believe in a system in 
which taxes are simpler, fairer, flatter, more visible, and lower than 
they are today. The individuals of the taxpayer's movement believe that 
the government's power to control one's life derives from its power to 
tax. That power should be minimized.
Americans for Tax Reform and ICANN
    These aforementioned principles have required that Americans for 
Tax Reform become involved in the growing controversy over the domain 
name system. On its face, an issue as complex technically and 
politically cumbersome as the domain name system may seem like an 
unlikely place to find Americans for Tax Reform, however very few 
issues are as fundamentally important to America's economic well-being 
as the future of the Internet.
    Last year I was appointed to the Advisory Commission on Electronic 
Commerce, a commission tasked by congress to make recommendations 
regarding the allowance of Internet taxation and issues related to 
electronic commerce. I take this role seriously and want to make sure 
that every tax that impacts electronic commerce is carefully 
scrutinized. Also, as President of ATR I wanted to ensure that 
taxpayers were not increasingly burdened by new taxes.
    So, when the Internet Cooperation for Assigned Numbers and Names 
(ICANN) proposed the world's first global tax--an Internet tax--to 
support its own $5.9 million operating budget, I was concerned. Under 
their proposal, each registration of a domain name (the familiar 
Internet addresses ending in suffixes such as .com and .org would be 
taxed $1.) I was caused greater concern when I learned that ICANN, 
while created to be a consensus-based organization that only set 
standards, was now reaching well beyond that express purpose.
    Perhaps at first glance, a $1 tax may not seem like much, but 
that's just the tip of the iceberg. Complying with ICANN's regulations 
and participating in the organization's bureaucratic processes will 
cost governments and corporations (and thus taxpayers and consumers) 
around the world at least another $20 million to $30 million annually. 
Of course, to cover these costs ICANN can always decide to hike the tax 
or impose more regulations in the future, just as the Gore Tax has been 
doubled without any representation.
    Reportedly, ICANN has maintained that the $1 tax on domain name 
holders is merely a user fee and not a tax. User fees are charged at 
times for the provision of a service, but what service is ICANN 
providing to users? ICANN provides no service. This is an arbitrary 
cost imposed on a business transaction that is used to fund regulators, 
administrators and bureaucrats mostly based in Europe. That sure sounds 
like a tax--of course King George probably didn't really believe that a 
``fee'' placed on tea was a tax either.
    Humorously, I found, ICANN attempted to defend itself by asserting 
that the National Park Service raises fees on admission to parks 
without a cry of taxation. Well, first, those so called fees are merely 
a tax by another name, admittedly aimed at those who use the park 
system, but a tax nevertheless. Second, ICANN's response causes me even 
greater concern in that again we find the organization using a 
governmental agency as a role model. On the one hand they say they have 
no governmental power and yet, on the other hand, they continuously 
assert their ability to take actions that at least appear quasi-
governmental. In fact, in this defense we see that the best example 
they can give to justify their actions is of a governmental agency. 
From where does this power derive? And did the congress approve of the 
handing out of this congressional power to tax?
    As you investigate the remarkable quasi-governmental reach of 
ICANN, please also consider that this tax is the camel's nose. Always 
keep firmly in mind that this new Internet tax has not been approved 
much less reviewed by congress. This combination is damaging to 
taxpayers and ultimately to the fundamental guarantees, constitutional 
guarantees, of citizenship.
    Now, I have read that ICANN has finally responded to the many 
concerns that have been raised by many who have been following the 
domain name issue. I, for one, am not impressed. We should all 
carefully consider what they have said, which is not much. ICANN has 
stated that it would ``defer collection'' of the $1 tax it imposed on 
new domain name registrations. The message has clearly not been 
received by this organization--defer collection does not equate in any 
way to a statement that they will not collect. Moreover, they 
apparently have yet to realize that only Congress has the power to tax, 
yet they plow forward.
    One other issue causes me some concern as ICANN has continued its 
activities. Some will raise the alarm of international interests 
invading the U.S. to the detriment of our best interests. In this case, 
those voices may be correct. ICANN boasts that it is made up of several 
international interests as the domain name is an international issue. 
What has been lost in the rhetoric is the simple fact that it was in 
the U.S. that the domain name got used as a way to direct web users. 
Why do we want to arbitrarily export our ideas so that foreign 
interests begin controlling a U.S. invention? More importantly, why 
would we allow foreign interests to decide how a totally privatized 
domain system is to be developed? Worse, why are foreign interests 
having a deciding voice in how to tax U.S. citizens?
Reason for Optimism?
    Despite my noted skepticism of the ICANN process Mr. Chairman, 
notably I am somewhat encouraged by the recent Department of Commerce 
response to the Chairman Bliley suggesting the following changes to the 
ICANN structure:

 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. (Page 11 of the response)
 ICANN should eliminate the $1 per-year per domain name tax. 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. 
        (Page 11 of the response)
 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. (Page 12 of the response)
 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. (Page 17 of 
        the response)
Reason for Pessimism
    As I noted, I am encouraged by each of these suggestions. Each of 
these issues is a critical first step to making ICANN work. However, 
they are just suggestions. Nothing has been changed. In order to 
implement these modifications into the process then ICANN must adopt 
them into their bylaws.
    Despite my optimism over the Department of Commerce's suggestions, 
I am deeply troubled by the following section of the Department of 
Commerce's response to Chairman Bliley:
          The White Paper stated that the new not-for-profit 
        corporation should be funded by Internet stakeholders, 
        including registries and registrars. ICANN concluded that it 
        should initially finance its operations through a payment by 
        registrars of a user fee of $1 per year per domain name 
        registered. This payment obligation was included in the 
        accreditation agreement formulated by ICANN after notice, 
        opportunity to comment, and a public meeting. (12)
          In recent weeks the user fee has become controversial. 
        Although the $1 fee may be determined to be an appropriate 
        method for funding ICANN activities, and we believe such a fee 
        would be lawful, (13) we believe that ICANN should eliminate 
        the fee. Adopting a permanent financing system is an important 
        step that, we believe, should await the addition of the nine 
        elected Directors in November. That will ensure that this 
        important decision is made through a representative, bottom-up 
        process.
          To date, ICANN has been funded through corporate 
        contributions and extensions of credit. In the short term our 
        recommendation means that ICANN must receive government 
        funding, continue to rely on corporate contributions, or 
        finance itself through some combination of both sources. We 
        pledge to work with ICANN and the entire Internet community, to 
        the extent permitted by law, to secure interim resources for 
        ICANN.
    Americans for Tax Reform resistance of the proposed ICANN taxation 
without representation pales in comparison to our opposition to ANY 
plan by the Department of Commerce to use federal funds to support this 
organization. I am deeply troubled by the Department's pledge to use 
``government funding.'' That taxpayer money be used to support ICANN is 
an anathema. A portion of our taxes may legitimately be called an 
Internet tax at that point as everyone in the country would be taxed to 
support an organization of questionable authority, that adamantly 
defends its power to meet without the taxpayers gaining the benefit of 
sunshine. Americans for Tax Reform will work diligently to block any 
such initiative and urges each of you to voice your concerted 
displeasure with this approach.
    ATR's concern over any effort to fund ICANN with taxpayer money is 
amplified by a report release last Friday on CNN on ICANN. The report 
located at http://cnn.com/TECH/computing/9907/16/icannt.idg/ spells out 
what I think each Member of Congress should find shocking. In this CNN 
article, ICANN announced that it was one (1) million dollars in debt. 
In fact, the original funds raised from the Internet industry around 
$500,000 were gone almost instantaneously. ICANN's General Counsel Joe 
Simms said in the article ``The $421,000 that came in the door ran out 
a long time ago,'' Simms stated. ``We're well over $1 million in the 
hole.''
    Now it should come as little surprise that Americans for Tax Reform 
would be opposed to a government bailout of an organization that in the 
course of seven months has spent a million and half-dollars and 
essentially done nothing. In fact the suggested modifications from the 
Department of Commerce are as clear an indication as any that ICANN 
deserves serious Congressional scrutiny. However before the full light 
of day can be shed on this process, ICANN is passing the hat once 
again. Only this time the Department of Commerce has indicated it may 
be willing to pick up the tab.
    The proposed ICANN 5.9 million dollar annual budget, to be 
collected from domain name registrants for the limited technical 
oversight of the domain name system, strikes me as excessive. Now comes 
the idea that tax payer dollars should be spent to host lavish 
receptions and secret board meetings in five star hotels in Singapore, 
Berlin and Santiago for nine un-elected and unaccountable ICANN Board 
members is a travesty. ICANN has now agreed to open its next board 
meeting in Santiago, Chile. However, a decision on future meetings has 
been deferred. This organization really wants to live by its own 
rules--have the power to tax, fly around the world at taxpayers 
expense, grant foreign interests the power to determine, in part, the 
direction of the U.S. electronic economy, and still meet in secret.
    The fact that the Department of Commerce is signaling a willingness 
to fund the ICANN jet setters is a disturbing indication that its 
intent may not match the will of American taxpayers, Internet citizens 
globally and, increasingly, the U.S. Congress. The expectation that you 
or I would be on the hook to pay for a dubious organization's member's 
room service would be laughable if it weren't happening before our very 
eyes. The American taxpayer footing the bill for an organization that 
portends to be the rightful heir to control over the Domain Name system 
but yet cannot seem to control its own financial responsibilities is a 
seriously flawed premise.
    Americans for Tax Reform are committed to ensuring that any further 
discussion or debate concerning the expenditure of taxpayer funds of 
ICANN be fully examined in Congress so that the various constituencies 
and public may have appropriate inspection. We call for your committee 
to fully explore the expenditures of ICANN and demand a full accounting 
of these activities.
    It is this exact spirit that Americans for Tax Reform led the 
effort last week to overturn the United Nations proposed Internet tax. 
The UN recognized that Internet users will likely grow from 150 million 
this year to roughly 700 million in 2001 and is looking to find a 
taxing mechanism to fund its agenda. Unfortunately, Vice President 
Albert Gore has a record of supporting such commerce taxes for his 
agenda, i.e. the Gore tax. This has legitimized the most recent United 
Nations decree. We continue to urge Vice President Gore to join 
Congress and act decisively in rejecting his liberal tax and spend 
history, and for that matter to sign the Taxpayer's Protection Pledge 
and make the promise to every citizen that he will not raise taxes. 
1ATR's efforts involving the UN Internet Tax and ICANN are consistent. 
Any effort to globally apply taxation without representation and fund 
an already bloated bureaucracy and an unaccountable secretive board are 
troubling to say the least. By some accounts the Internet will support 
nearly a trillion dollars of electronic commerce within a few short 
years and it is clear that American ingenuity and technological prowess 
has driven the Net's explosion. To suddenly turn the keys of control 
over to an organization that seeks to burden the very people 
responsible for its growth is preposterous. ATR seeks to have all the 
issues surrounding ICANN fully vetted before the U.S. Congress and the 
court of public opinion. Too much is riding on the decisions made by 
this body and the Congress needs to understand fully not only what will 
happen but what has happened.
About Americans for Tax Reform
    Since 1986, ATR has sponsored the Taxpayer Protection Pledge, a 
written promise by legislators and candidates for office that commits 
them to oppose any effort to increase the federal income taxes on 
individuals and businesses. At present, 207 U.S. Representatives and 42 
U.S. Senators have signed the pledge.
    ATR also works with state taxpayer coalitions in all 50 states to 
ask candidates for state legislature and governor to sign the STATE 
TAXPAYER PROTECTION PLEDGE which reads: ``I (name) pledge to the 
taxpayers of the (district #) district, of the state of (state), and to 
all the people of this state, that I will oppose and vote against any 
and all efforts to increase taxes.'' So far, 1,136 state legislators 
and eight governors have signed the pledge.
    ATR leads the fight against the Value-Added Tax (VAT), a European 
style national sales tax that can raise revenue while being mostly 
hidden to taxpayers. The VAT has been instrumental in the growth of the 
European-style welfare state. Today, 178 members of Congress are 
members of the Congressional Anti-VAT Caucus, co-chaired by House 
Majority Leader Dick Armey and House Majority Whip Tom DeLay.
    Americans for Tax Reform strongly supports the concept of a single 
rate flat tax, such as that introduced by Rep. Dick Armey as the 
``Freedom and Fairness Restoration Act.''
    In addition to the above activities, ATR sponsors the calculation 
of Cost of Government Day, the day on which Americans stop working to 
pay the costs of taxation, deficit spending, and regulations by federal 
and state governments. The cost of federal regulation alone comes to 
nearly $700 billion, $5,000 per household per year, more than the 
revenue raised by the personal and corporate income taxes combined.1ATR 
serves as a national clearinghouse for the grassroots taxpayers' 
movement by working with approximately 800 state and county level 
groups. ATR is a non-profit, 501c(4) lobbying organization. 
Contributions to Americans for Tax Reform are not tax deductible. The 
Americans for Tax Reform Foundation is a 501c(3) research and 
educational organization. Memberships begin at $25.07 and all 
contributions to the Foundation are tax deductible.

    Mr. Upton. Thank you. Ms. Barry.

                 TESTIMONY OF MICHAELA M. BARRY

    Ms. Barry. Thank you, Mr. Chairman.
    I have to admit here that I am an attorney. Please make no 
mistake about ICANN's role. It goes far beyond that of 
technical management and enters into the realm of the 
regulatory body. It is not just about plumbing, but it is also 
about the codes and the licensing for that plumbing.
    ICANN's policy will affect commerce, freedom of expression, 
and likely stifle the very medium it seeks to regulate. We 
spent years fighting communism and its vision of planned 
economies. Let us not let that vision happen to the Internet. 
Competition is paramount, but not at the cost of free 
expression, sacrificing small business, and individual 
interests, and without accountability.
    ICANN is now trying to execute a policy agenda before it 
has created the participatory structures that would allow its 
decisions to be accepted and trusted by a broad spectrum of 
stakeholders. ICANN does not now, nor has it ever had 
legitimacy by consensus of the Internet community. ICANN is the 
classic top-down organizational structure without 
accountability. Most of the ordinary participant's in ICANN's 
activities thought that they were participating in an 
institution-building process. They thought that ICANN was a 
level playing field where all competing groups could come 
together to work out a consensus approach.
    They thought that they would have an opportunity to create 
membership structures, representational mechanisms, and policy 
development procedures first, and that actual policymaking 
would happen second. These include imposition of dispute 
policies from the World Intellectual Property Organization, 
WIPO, which even the U.S. Small Business Administration says 
are discriminatory.
    There is no consensus in the Internet community, even as to 
whether there should be a central domain name dispute policy. 
At every step of the way, participants have been completely 
frustrated in the goal of participation. ICANN's CEO and 
interim board have been driving the organization into making 
irrevocable, substantive policy decisions as quickly as 
possible.
    Imagine what would have happened to the U.S. Government if 
the first meeting of the U.S. Congress had tried to pass laws, 
impose taxes, and regulate commerce before half of its elected 
Representatives had arrived Philadelphia, and even before some 
of the States had elected Representatives.
    The country would have been torn apart and Congress would 
have lost legitimacy. This will give you a good sense of what 
it has been like to participate in ICANN. The sad fact is that 
ICANN has been captured from the beginning. The Department of 
Commerce gave control of the interim board to one partisan 
group in the DNS wars, even though three sets of bylaws were 
provided by three different organizations. That group was 
intent on enacting its own agenda, regardless of what the rest 
of the community told it. Competition is, of course, very 
important to the future of the Internet. We agree with ICANN 
that there is indeed consensus on this issue. However, we do 
not agree with ICANN's implementation.
    This is what is actually slowing competition. ICANN is 
requiring registries to agree to an owner's contract, which 
includes provisions that will stifle small business, 
individual, and free speech interests. Worse yet, they are 
doing this without the consensus of the Internet community and 
under unbelievable criticism.
    Without a membership in place, which was supposed to be the 
interim board's first task, and without appropriate 
representation for individuals, small businesses, and others, 
clearly the contemplated guidelines for registries, which are 
required prior to entrance into the marketplace controlled by 
ICANN, go far beyond the technical management contemplated by 
the White Paper, including creation of a mode whereby ICANN 
claims ultimate ownership over all names in the domain name 
space.
    For example, the accreditation agreement, in its current 
form, requires registrars to agree that ICANN can confiscate a 
domain name for any reason it sees fit. Domain name registrants 
must certify to the best of their knowledge that their choice 
of domain name does not interfere with anyone else in the 
world.
    Even those nations with vast experience in intellectual 
property laws would have trouble meeting this requirement. 
Congress authorized the NRC Study, authorized the Commerce 
Department to begin the NRC Study to study the interaction 
between domain names and trademarks. This has not been done, 
yet we see these onerous aspects of the agreement, and the wish 
that the WIPO process be put into place.
    ICANN's Advisory Committees are another serious bone of 
contention in the Internet community. For example, the GAC, 
Government Advisory Committee, is headed by Paul Twoomey of 
Australia. Mr. Twoomey, during the Berlin meeting of ICANN in 
May, made a point of threatening the Internet community that if 
it did not support ICANN, something even worse would take its 
place. This was again mentioned today by Ms. Dyson.
    In closing, as a result of all of this, ICANN has all of 
the power, but none of the oversight that a government group 
would have.
    Thank you.
    [The statement of Michaela M. Barry follows:]
Prepared Statement of Michaela M. Barry, President, Domain Name Rights 
                               Coalition
                             introduction:
    Thanks to the Committee for providing the opportunity to provide 
feedback to Congress regarding the role of ICANN and the Commerce 
Department in the ongoing battle for Internet governance. Although you 
have received letters from others who attempt to downplay ICANN's role, 
make no mistake; it goes far beyond that of technical management and 
enters the realm of a regulatory body. ICANN's policy will effect 
commerce, freedom of expression, and likely stifle the very medium it 
seeks to regulate. ICANN has not provided an accurate picture of the 
Internet world to the Committee. We felt it was necessary to correct 
and explain much of what they reported to you in response to your 
questions.
                        personal qualifications:
    I have been participating in Internet issues since 1984 and am 
currently President of the Domain Name Rights Coalition. I am a 
consultant with Internet Policy Consultants, a member of the Boston 
Working Group, a member of the Open Root Server Confederation, former 
steering committee member of the IFWP, steering committee member of the 
Individual Domain Name Supporting Organization (which is still waiting 
for confirmation by ICANN), member of INTA, and a trademark attorney 
and member of the Virginia Bar. I am co-founder of InterCon Systems 
Corporation, the first commercial Internet software applications 
developer on the Macintosh platform.
                                summary:
    ICANN is now trying to execute a policy agenda before it has 
created the participatory structures that would allow its decisions to 
be accepted and trusted by a broad spectrum of stakeholders. Further, 
ICANN has delegated domain name policy decisions to the Domain Name 
Supporting Organization (DNSO). This group is disproportionately large 
corporations, and is moving forward on its expansionist trademark 
agenda even before the non-commercial community has even elected its 
representatives!
    Most of the ordinary participants in ICANN's activities thought 
that they were participating in an institution-building process. They 
thought that ICANN was a level playing field where all the competing 
groups could come together to work out a consensus approach. They 
thought they would have an opportunity to create membership structures, 
representational mechanisms, and policy development procedures FIRST, 
and that actual policy making would happen SECOND.
    At every step of the way, however, they have been completely 
frustrated in this goal. ICANN's CEO and interim board has been driving 
the organization into making irrevocable, substantive policy decisions 
as quickly as possible.
    Imagine what would have happened to the United States government if 
the first meeting of the US congress had tried to pass laws, impose 
taxes, and regulate commerce before half of its elected representatives 
had arrived in Philadelphia, and even before some of the States had 
elected representatives. The country would have been torn apart and the 
Congress would have lost legitimacy. That will give you a good sense of 
what it has been like to participate in ICANN.
    ICANN cannot be an organization that executes the agenda of the 
gTLD-MoU (one small faction in the DNS wars) and at the same time be an 
organization that builds the procedures and representational structures 
for developing a policy agenda that commands broad consensus. Either it 
already has a policy and executes it, or it is designed to allow the 
Internet stakeholders to formulate policy. Right now it is doing the 
former while claiming to do the latter.
    The sad fact is that ICANN has been ``captured'' from the 
beginning. NTIA gave complete control of the interim board to one 
partisan group in the DNS wars. That group was intent upon enacting its 
own agenda, regardless of what the rest of the community told it.
History:
    I have personally been involved with Internet governance issues 
since the early 1980s. The Domain Name Rights Coalition was formed in 
1996 directly because of the NSI domain name dispute policy which we 
thought stifled the rights of individuals and small businesses to 
choose domain names. The development and growth of the World Wide Web 
brought with it a significant interest by the business community. It 
soon became clear that IANA, a US government contractor run by Dr. Jon 
Postel, would be unable to continue its management of domain names and 
numbers without significant help. The first attempt to transfer control 
occurred in 1994 when Dr. Postel attempted to place IANA under the 
Internet Society (ISOC.) This failed, but something else grew from that 
union. The IAHC (International Ad Hoc Committee) was created, and tried 
to take over Internet governance via a document called the gTLD-MoU. 
Comments were solicited by the IAHC from the Internet community, but 
the responses were largely ignored. It is not coincidental that many of 
the members of CORE, POC (the Policy Oversight Committee) , ISOC (an 
original IAHC advocate), WIPO, and the ITU are now heavily involved 
with the ICANN process, and have in a sense ``captured'' that process.
    The gTLD-MoU was stopped by the Internet community when it became 
clear that the process was closed, unaccountable, and non-transparent. 
Various people appealed to the Department of Commerce and the State 
Department for help. Through significant work and effort, the IAHC 
plans were thwarted, and the Commerce Department produced the ``Green 
Paper'' as a roadmap for technical management of names and numbers. The 
Green Paper was truly a pro-competitive solution, one that was hotly 
contested by many European Governments, and the previous supporters of 
the MoU. In fact, it was right around this time, that Jon Postel 
redirected over half of the world-wide root servers to his server in 
California. While we may never know, this combination of events 
apparently derailed the Green Paper, and started the process that 
resulted in the White Paper.
    Thousands of comments were submitted by a large cross section of 
the Internet community, although many questioned (and still question) 
under what authority the Department of Commerce was taking control of 
Internet functions. Many of these comments were incorporated in the 
``White Paper'' which provided a framework for considering these 
issues. Using the White Paper as a foundation, the IFWP (International 
Forum on the White Paper) was created in 1998 to discuss these issues 
and attempt to reach the consensus that was required to move forward 
with the plans envisioned in the White Paper for an open, transparent 
and accountable organization, Newco, to manage domain names and 
numbers. Please note that even with the White Paper, significant 
numbers of people still ask under what authority Commerce is operating 
in choosing one company over another, mandating that company's bylaws, 
mandating that company to be non-profit, and assisting in choosing the 
unelected board members of that company.
    The IFWP steering committee consisted of members of the Internet 
community who were involved with not-for-profit enterprises. These 
included CORE, the Commercial Internet Exchange (CIX), Educause, the 
Domain Name Rights Coalition (DNRC), and various other groups. It was 
chaired by Tamar Frankel, a respected law professor and expert on 
corporate structure and process from Boston University. The IFWP held 
meetings around the world, and worked to come to consensus on various 
issues. In the midst of this process, Joe Sims, attorney for Dr. 
Postel, prommulgated a set of by-laws for Newco. He did this in closed 
meetings with no public input. These by-laws were presented to the 
IFWP, but did not gain consensus, largely because the points on which 
the IFWP had already garnered agreement were not included. Various 
further drafts followed, but still none of them achieved consensus.
    In late August of 1998 after the final IFWP meetings, the steering 
committee met telephonically to plan the final or ``wrap up'' meeting 
in which the consensus points would be memorialized, and further 
concessions would be provided by all sides. Although there had been 
multiple votes already taken that clearly supported a wrap up meeting, 
yet another vote was called at that time. Mike Roberts vehemently 
opposed a wrap up meeting, and was supported in this by Barbara Dooley 
of the CIX. There is speculation that Mr. Roberts had already been 
contacted at that time regarding serving with the ICANN board in some 
capacity. Further, around the time of the wrap up meeting, Esther Dyson 
says that she was approached by Roger Cochetti of IBM and Ira Magaziner 
in Aspen, Colorado and asked if she would be interested in joining the 
ICANN Board. The IFWP wrap up was finally completely derailed by 
ICANN's refusal to participate in the meeting.
    Some of the members of IFWP continued their work to create an open, 
transparent and accountable Newco. Two major groups, the Open Root 
Server Confederation (ORSC) and the Boston Working Group (BWG) 
promulgated by laws for Newco through open process. DNRC officers play 
a major role in both groupings of Internet leaders. Three sets of by-
laws were provided in a timely manner to the Department of Commerce. 
Although the Commerce Department had long stated that they would not 
choose one set of by-laws over any other, they chose the ICANN's bylaws 
as a starting point
    The Commerce Department directed ICANN to consult with the BWG and 
the ORSC regarding areas of concern to Commerce but there was little 
reason for them to do so since their bylaws and structure had already 
been chosen. ICANN did meet telephonically with BWG and ORSC, but 
failed to make substantive changes in its bylaws to accommodate the 
diversity of opinions towards fundamental issues such as openness of 
board meetings, voting on the record, voices for individuals and non-
commercial entities, limitations on ICANN's powers to strictly 
technical issues, etc. Both BWG and ORSC warned that the concept of 
constituencies would lead to capture by corporate interests at the 
expense of expression. BWG wanted to do away with constituencies 
altogether. ORSC wanted constituencies structured so that everyone 
would have a voice. The ICANN constituency structure has, as predicted, 
become the catalyst for capture by the old gTLD-MOU crowd, and a large 
and powerful group of trademark interests. These trademark interests 
are currently pressing non legislative expansion of rights for 
trademark holders, at the expense of free speech and expression.
                               substance:
The IANA Function.
    ICANN received a sole source award to take over the IANA function. 
In December of 1998, the Commerce Department through NIST quietly 
attempted to give official authority to ICANN over the IANA functions 
in December of 1998. There were many discrepancies surrounding the 
transfer of the IANA functions. First, Mike Roberts announced at the 
ICANN Meeting in Boston in November that the IANA staff then reported 
to him. When questioned about that, Becky Burr stated he had been 
mistaken. Then, quietly at the end of December, Commerce tried to sole 
source the transfer to the IANA.
    The ORSC (Open Root Server Confederation) appealed and it was rebid 
sole source in January or February of 1999. ORSC and others informed 
the Commerce Department that they were ready, willing and able to bid 
for this contract, yet it was still sole sourced. No explanation for 
this action has been provided. It is certainly not because there was 
consensus that ICANN would be best able to provide these services. On 
the contrary, ICANN states that it expected that all major participants 
in the global Internet community would ``rapidly come together to make 
ICANN an effective vehicle for global consensus development (...).'' 
There is a reason that this did not occur. It was not an oversight. 
ICANN is not receiving financial backing from most of the key players 
in the Internet community because ICANN does not represent them, and 
does not fulfill the mandate of the ``open, transparent and 
accountable'' 'Newco' envisioned by the White Paper. It also raises 
questions of ICANN finances, which for the most part, remain hidden 
from the Internet Community. It has been estimated that ICANN has 
expended more than 1.5 million dollars, and at most, has raised 
$500,000. It is unknown where the remaining financing is coming from, 
who is funding this deficit, why, and how is ICANN paying for the IANA 
staff since January.
Creation of a Competitive gTLD Registry-Registrar System.
    Competition is, of course, very important to the future of the 
Internet. We agree with ICANN that there is indeed consensus on this 
issue, however, we do not agree with ICANN's implementation. ICANN is 
requiring registries to agree to a very onerous contract which includes 
provisions that will stifle small business, individual, and free speech 
interests. Worse yet, they are doing this without consensus of the 
Internet community, without a membership in place (which was supposed 
to be the Interim Board's first task), and without appropriate 
representation for individuals and others. For example, the 
accreditation agreement in its current form, requires registrars to 
agree that ICANN can confiscate a domain name for any reason it sees 
fit. Domain name registrants must certify to the best of their 
knowledge that their choice of domain name does not interfere with 
anyone in the world. Domain Registries must be run by non-profit 
entities eliminating incentive for competition and market checks and 
balances. Clearly, these contemplated ``guidelines'' which are required 
prior to entrance into the marketplace controlled by ICANN, go far 
beyond the ``technical management'' contemplated in the White Paper, 
including creation of a model whereby ICANN claims ultimate ownership 
over all names in the Domain Namespace.
    It is ironic in that in the midst of all the controversy over 
competition, ICANN has hesitated to take the single step that would 
introduce the most competition: creating new TLD registries. Indeed, it 
was the question of new registries that moved Jon Postel to begin this 
entire process in 1995. Instead, ICANN has delayed on the question and 
has passed it on to the DNSO for a recommendation that the ICANN board 
has already stated that it is free to ignore. It is difficult to 
imagine that any new discussion can resolve this issue that has been 
the subject of a distinct lack of consensus for over 4 years. An 
observation of the leadership of the quickly-constituted (and, it 
should be noted, distinctly incomplete) DNSO and the membership of the 
working group tasked to examine this issue shows a clear predominance 
of IAHC, CORE and ISOC leadership. It is no great surprise that the 
early discussions in the DNSO center around the very concepts and 
requirements outlined in the gTLD-MoU and CORE's operational documents, 
as its proponents attempt to manufacture consensus as quickly as 
possible.
Coordination of the Root Server System.
    First, and most importantly, we question the authority or rationale 
for a CRADA. Professor Jun Murai was appointed to be chair of the 
CRADA. While Professor Murai is clearly a distinguished individual in 
the Internet community, he is also a member of CORE, the Counsel of 
Registrars formed by the IAHC process. Professor Murai's involvement, 
while not a direct conflict of interest, is questionable, especially as 
to the process by which he was appointed. Professor Murai became chair 
by ``fait accompli'' without any debate, other candidates offered, or 
any type of open process. The public was not informed of his 
nomination. In fact, it was accomplished at an ICANN meeting of the 
Interim Board that was closed to the public. As there is no record of 
voting, the Board cannot be held accountable. As there is no 
membership, no elected Board members exist.
The Process of Consensus Development and Implementation.
    ICANN is correct in that its formation was an unprecedented 
experiment in private sector consensus decision-making. Unfortunately, 
that experiment has failed. ICANN's claim of ``openness and 
transparency, based on Internet community consensus, bottom-up in its 
orientation and globally representative'' is far from the reality of 
the situation. ICANN's Interim Board meetings are closed. Voting is not 
on the record. In nearly all documents that ICANN promulgates, it 
speaks of consensus, however no such consensus is apparent. ICANN is 
the classic top-down organizational structure without accountability. 
When its by-laws are inconvenient, they are changed without discussion.
    Board of Directors--Without a membership or even a plan for the 
construction of a membership, it is misleading for ICANN to suggest 
that the Board will be expanding ``in the very near future.''
    ICANN Staff--A small executive staff seems rather extravagant given 
ICANN's already admitted lack of funding. This is especially so, given 
that they are paying their President $18,000 per month. Please note 
that the position of President was not contemplated by the White Paper 
and was added as an afterthought by ICANN's by-laws. There was no 
notice and comment on his appointment, or even for the addition of a 
new and costly position. The position of President, has thus far been 
of no benefit to the ICANN, and has instead caused public criticism of 
the organization because of the conduct of Mr. Roberts towards ICANN's 
critics. As an example, Mr. Roberts referred to those who disagree with 
him as ``arrogant juveniles'' in a public e-mail message.
    ICANN Meetings--ICANN has been holding periodic meetings in 
differentregions of the world. However, the regions picked have been 
among the most expensive in the world to travel to, and to obtain 
accomodations in. Further, ICANN Board members have to date stayed in 
expensive hotels and have held their meetings there. This, of course, 
drives the cost up further for anyone who wishes to participate in 
person. While ICANN had provided real-time broadcasts through the 
Berkman Center of Harvard University at their last meeting in Berlin, 
remote participants were acknowledged only on the first day. Very few 
of the hundreds of real-time comments from around the world were read 
on the second day. This was, of course, very frustrating to those of us 
attempting to participate remotely.
    Advisory Committees and Supporting Organizations--ICANN's Advisory 
Committees are a serious bone of contention in the Internet community. 
Of special note is the GAC or Government Advisory Committee. Beckwith 
Burr appointed herself to this committee. None of the other committee 
members have provided any indication as to their qualifications, 
reasons for inclusion, or any other information on their backgrounds. 
Further, at the ICANN meeting in Berlin, representatives chosen by 
sovereign nations were excluded from the closed meeting by spontaneous 
``rules changes.'' Citing this as an ICANN funding issue seems suspect.
    Further, the GAC itself is headed by Paul Twoomey of Australia. Mr. 
Twoomey, during the Berlin meeting of ICANN in May, made a point of 
threatening the Internet community that if it did not support ICANN, 
something even worse would take its place, run by international 
governments. These same types of threats were used throughout the IFWP 
process. Unfortunately, the result, ICANN, has all of the power but 
none of the oversight that a government group would have.
    A further committee, the DNSO or Domain Name Support Organization, 
is probably the most misconceived part of the ICANN process. To a group 
dominated by commercial interests, with a double representation given 
to large businesses through the Trademark and Businesses Constituency, 
have been entrusted decisions regarding the delicate balance between 
free speech rights and intellectual property protections. No bounds or 
limits have been placed on what this Supporting Organization may 
demand. No scope has been placed on what ICANN may approve. No mandate 
to operate in the public interest, to protect the communication (non-
commercial and commercial) of all Internet users has been provided by 
the US Department of Commerce or adopted by ICANN. We know of no 
precedent for entrusting American's vital free speech interests to a 
group of largely commercial players, and we know of no precedent for 
bypassing the US court system's traditional protection of minority 
speakers, popular and unpopular political speakers and human rights 
speakers in favor of a commercial arbitration system where corporate 
rights prevail (according to the WIPO rules proposed).''
    Corporate and Office Expenses--ICANN's budget is far more expansive 
than many start-up companies that many of us have been involved in. One 
of the first expenses that ICANN took on was the hiring of an outside 
public relations firm. There has never been an adequate explanation of 
why this would be necessary for an open, transparent and accountable 
organization. Also of note is the enumerated ``basic legal services.'' 
At a proposed budget of what is estimated at $65,000 x 9 months or 
$585,000, these legal services seem far from ``basic.'' Please note 
that despite numerous requests, we have been unable to obtain exact 
figures from ICANN or from Joe Sims.
    Possible Cost Recovery Mechanisms--It is disingenuous for ICANN to 
claim that many supported their creation throughout the USG policy 
development process. The creation that was supported was that of 
``Newco,'' an open, transparent and accountable entity with bottom-up 
representation, a membership structure, elected officials, and fair 
hearing panels. ICANN is none of these things.
    ICANN further states that it is desirable for the name AND ADDRESS 
registries to participate in the funding of the costs of consensus 
policy development (. . .) [emphasis added]. ICANN's role in charging 
for address allocations was not contemplated by any of us who were 
involved in the process. We feel this is a very dangerous tack to take, 
and could be even more detrimental to the further development and 
growth of the Internet than the current plans for domain names. The 
power to ``charge'' (even if not directly called a tax) is the power to 
destroy. There is no widespread dissatisfaction with the current IP 
registries (which are arguably representative of the Internet Service 
Providers in their respective geographical regions),
Conclusion:
    The Internet is the single most significant communications medium 
ever created. Its power goes well beyond that of shopping malls and e-
commerce, and empowers individuals in a way never before imagined. It 
is thus a national as well as an international resource. The ability to 
control important aspects of this technology cannot be underestimated. 
It is up to all of us to remain vigilant when organizations are given 
special privilege by a branch of the US Government to control this vast 
means of expression. Safeguards must be put into place whereby 
individuals, non-profit entities, churches, tribal governments, and 
other disenfranchised groups may provide unencumbered input and opinion 
to an open, transparent and accountable entity. This entity is, 
unfortunately, not ICANN. ICANN must either be restructured, with all 
current Board members and policy decisions rescinded, to be replaced 
with a new and elected Board, forced into acceptance of irrevocable 
bylaws changes that ensure these fundamental rights, or should be 
replaced with an organization that will be chosen from and by the 
Internet community.

    Mr. Upton. Thank you.
    The audience will refrain from applause. Mr. Miller.

                 TESTIMONY OF HARRIS N. MILLER

    Mr. Miller. Mr. Chairman and members of this subcommittee, 
I feel badly because I do not have another hearing to run off 
to, but it is a great honor to be before this subcommittee.
    I am Harris Miller. I am President of the Information 
Technology Association of America. I want to commend you, Mr. 
Chairman, and this subcommittee for holding this hearing 
because I think this hearing is shedding a lot of light on a 
subject which has been clothed in darkness, inadvertently 
perhaps, and has confused a lot of people.
    In addition to being President of ITAA, I also serve as 
President of the World Information Technology and Services 
Alliance, which consist of 38 information technology 
associations from around the globe. Because this is a global 
issue, as members of this subcommittee have indicated, we are 
very interested in this topic from the international, as well 
as the domestic perspective.
    We have been actively involved since the beginning of the 
process of developing ICANN, seeking solutions, developing 
strategies, and working with both the private and public sector 
to setup a global mechanism to establish a competitive, self-
supporting, industry-led, market-driven approach to the 
Internet domain name system.
    We formed with eight other organizations and submitted an 
application to the Board of ICANN laying out an organizational 
structure to be recognized as ICANN's domain names supporting 
organization. An ITAA senior staff member serves on the DNSO 
board of directors.
    Let me be clear. ITAA supports ICANN. We do not agree with 
every decision the interim board has made, but we believe that 
ICANN represents a comprehensive, sensible, and practical 
approach to the domain name registration process. ITAA's 
support of ICANN is based on three principles.
    One, there must be an open and transparent process for the 
organization. We are pleased with Ms. Dyson's announcement that 
the meetings will be open in the future.
    Second, there must be a new era of competition for domain 
name registration, and it must be set in place.
    Three, government involvement at all levels must be 
reduced.
    Clearly, as this subcommittee hearing indicates, 
transitioning from government control to industry-led Internet 
governance, which ITAA strongly supports, will produce some 
bumps, especially given the number of stakeholders committed to 
the future of the Internet.
    The magnitude of the challenge should not divert us from 
pursuing the proper course: building a domain name system that 
preserves the need for competition, requires minimal government 
intervention, and commands broad stakeholder support, all 
without disruption to the fundamental operations of the 
Internet.
    Because of this debate, our board recently adopted a 
resolution reaffirming these points. Is ICANN perfect? No. But 
there is a parallel between what Churchill said about democracy 
and ICANN. Churchill said that democracy is the worst form of 
government, except for all the others. Clearly, there are some 
out there who are less supportive of ICANN's principles than I 
am being today.
    Those who attack the fundamental legitimacy of ICANN may be 
inadvertently and unintentionally undermining the Internet 
itself, because unless we have an alternative that is viable to 
ICANN, and I do not consider turning us back over to the U.S. 
Government or to other governments to be a viable alternative, 
I think what we really need to do is to focus on improving 
ICANN, rather than try and undermine it.
    Clearly bringing competition to the domain name system is 
very important. We believe that it is important that the gTLD, 
which is currently administered by one company, be opened to 
multiple registrars who will compete with one another in 
providing services to new and existing domain name registrants.
    This will promote a stable and robustly competitive DNS and 
provide benefits to all users of the Internet. ICANN's top 
priority must be to put into place an elected board of 
directors and assure they begin as soon as it is reasonable. As 
Ms. Dyson said in her testimony, ICANN is well on the way to 
that. We want to do everything possible to move that quickly.
    It is also important that ICANN be as transparent as 
possible. Understandably, a certain amount of suspicion reigns 
about this new organization. Sunlight on the operations is the 
simplest way to reduce unwarranted and unsubstantiated 
conjecture about hidden motives or goals.
    The introduction of competition to create the shared 
registration system is welcome. Transition of DNS management to 
the private sector can succeed only if all DNS participants 
subject themselves to the same set of consensus rules.
    We believe that ICANN has already demonstrated that it is 
sensitive to and can respond to the needs of the Internet 
community with respect to the domain names and trademark issue, 
and can help reduce the inevitable friction between trademark 
owners and domain name holders. ICANN must be permitted to 
continue to proceed promptly to establish a uniform dispute 
resolution procedure for cyber-squatting.
    One last issue I want to address is the issue of how to pay 
for ICANN's operations. Mr. Klink made the point well. They are 
caught between a rock and a hard place. At the end of the day, 
I do not think we want government paying for it. I do not think 
we want a few rich corporations paying for it. So, there must 
be some kind of a user fee established that will have people 
across the board pay for it. We need to move to that as quickly 
as possible.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Harris N. Miller follows:]
    Prepared Statement of Harris N. Miller, President, Information 
                   Technology Association of America
    Mr. Chairman, and distinguished members of this sub-committee--on 
behalf of the over 11,000 direct and affiliate member companies of the 
Information Technology Association of America (``ITAA''), I thank you 
for inviting me to participate in this morning's hearing, which focuses 
on the Internet Corporation for Assigned Names and Numbers (``ICANN'') 
and its relationship to the transition to privatized management of the 
Internet Domain Name System (``DNS''). ITAA has been actively involved 
since the beginning of this process--seeking solutions, developing 
strategies, and working with private and public sector officials across 
the globe on how best to develop an unfettered, equitable, competitive, 
self-supporting, industry-led, market-driven approach to the Internet 
domain name system.
    We are involved in this often times contentious process because we 
must be; the future of our industry demands nothing less. Our members 
are at the forefront of the revolution called ``Electronic Commerce.'' 
ITAA members provide enterprise software, information services, 
telecommunications, and network and systems integration. In short, ITAA 
members represent the stakeholders in the Internet at every level--
content providers, trademark name and copyright holders, and 
transmission products and services. We are the architects, builders and 
providers of the facilities and systems that are utilized to ensure 
that the digital revolution realizes its bright promise--delivering new 
levels of productivity and prosperity to countries around the world. We 
are also users of this revolutionary medium.
    In addition to serving as ITAA President, I am President of the 
World Information Technology and Services Alliance (WITSA), consisting 
of 38 information technology associations around the world. Because 
electronic commerce is a global issue, ITAA is interested in the topic 
of today's hearing from both a national and international perspective. 
WITSA joined eight other international organizations to submit an 
application to the ICANN Board laying out an organizational structure 
to be recognized as ICANN's Domain Names Supporting Organization 
(DNSO). An ITAA senior staff member serves on the DNSO Names Council. 
We have also been closely affiliated with the Private Sector Working 
Group (PSWG), an ad hoc industry working group, which initially formed 
to respond to the issues first identified in the transition of the 
Internet into private sector management. This group has raised 
significant concerns about the growing problems related to consumer 
fraud and confusion, and the need to ensure that protection of 
trademarks, prevention of consumer confusion, and the stability of the 
Internet are primary considerations as the Internet moves toward a 
private sector governance model. Members of the PSWG include AT&T, Bell 
Atlantic, Disney, Viacom, Warner Lambert, Microsoft, AOL, and other 
famous brand holders.
    Let me make it clear at the beginning: ITAA supports ICANN. We do 
not agree with every decision the Interim Board has made. But we 
believe ICANN represents a comprehensive, sensible and practical 
approach to the management of the central administrative functions of 
the Internet.
    No one said the transition of the Internet from its original 
defense research beginnings into a global vehicle for education, 
commerce, communication and social interaction would be easy. 
Transitioning from government control to industry led Internet 
governance--which ITAA strongly supports--will produce some bumps, 
especially given the number of stakeholders committed to the future of 
the Internet. But the magnitude of the challenge should not deter us 
from pursuing the proper course: building a globally recognized, 
private sector-based, financially self-sufficient, institutional 
foundation for the permanent management of such vital Internet 
functions as the allocation of IP addresses, the maintenance of the 
system of root servers, and the management of the domain name space--
all without disruption to the fundamental operations of the Internet 
and with undiminished protection to intellectual property rights 
holders.
    If the Internet is to continue to prosper and grow, the development 
of an independent, legal and credible framework that will supply 
uniformity and certainty to cyberspace must exist. In light of the 
continuing debate surrounding the formation and support of ICANN, 
ITAA's National Board recently reaffirmed its position through a 
Resolution embracing a number of important principles:

(1.) private sector creation and organization of the Internet 
        Corporation for Assigned Names and Numbers (ICANN)--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.
    Through this resolution, ITAA's leadership clearly restates its 
belief that successful implementation of ICANN's charter is the best 
available means to achieve the objectives articulated by the Department 
of Commerce and to ensure the future stability of the Internet.
    ITAA's support of ICANN and its ability to succeed has been based 
on three principles:

 that there must be an open and transparent process for the 
        organization;
 that a new era of competition for domain name registration 
        must be set into place; and
 government involvement at all levels must be reduced.
    We agree with many of the essential points raised in the Department 
of Commerce letter from General Counsel Andrew Pincus to Chairman 
Bliley on July 8, 1999. Particularly with respect to transitioning DNS 
management responsibility to a new, not-for-profit corporation 
``governed on the basis of a sound and transparent decision making 
process, which protects against capture by a self-interested faction.''
    I do not want to be apocalyptic, Mr. Chairman. But I do want to 
point out that if we lose this opportunity to create a workable, 
globally recognized organization that will help supervise a competitive 
and robust administrative structure, we will also lose the opportunity 
to realize the full value of the Internet. We have looked at this 
closely and have found no practical alternative to ICANN--and I do not 
consider having either the US government, or other governments run the 
Internet a viable option. As a result, I respectfully suggest that 
those who find fault with it work to improve ICANN's operations.
    The very principles articulated in the Commerce Department's 
Statement of Policy on the Management of Internet Names and Addresses 
(the ``White Paper''), issued more than a year ago, parallel those of 
our industry--particularly:

 Private sector creation and organization of a new, not-for-
        profit corporation to conduct DNS management;
 Rapid introduction of competition in the provision of domain 
        name registration services; and
 Adoption of policies to reduce conflicts between trademark 
        holders and domain name registrants
    One of the principal short-term goals identified in the White Paper 
is the introduction of competition in the provision of domain name 
registry and registrar services. Under a series of documents executed 
by DOC and agreed-to by all the parties, the gTLDs currently 
administered by one company are to be opened, on reasonable terms, to 
multiple registrars who would compete with one another in providing 
services to new and existing domain name registrants. The opening up of 
both registry and registrar services will promote a stable and robustly 
competitive DNS.
    Access to the ``WHOIS'' database of domain name registrant and 
registration information is a critical building block to insuring the 
development of competition in the registration services. In addition, 
this resource, which historically has been considered to be a critical 
public resource--widely and freely available--is critical to trademark 
and copyright holders, of all sizes, as they seek to protect their 
legitimate intellectual property rights. We recognize that this is a 
controversial issue, but even the Department of Commerce pointed out in 
its letter, and I quote: ``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 . . . 
[the] WHOIS data had been freely available to the Internet community 
for years. Numerous people have built legitimate businesses that 
enhance the Internet using WHOIS and zone file data . . . The White 
Paper specifically endorsed the continued availability of that data to 
`anyone who has access to the Internet.' ''
    ICANN's top priority must be to put into place an elected board of 
directors, and ensure that they begin serving as soon as possible. I 
have talked to Interim Chairwoman Esther Dyson, and, while everyone 
understands that some parts of this are quite complex and perhaps even 
unprecedented, I know she is strongly committed to this goal.
    ICANN should be as transparent as possible. It is not surprising 
that a certain amount of suspicion might reign about this new 
organization. Sunlight on its operations is the simplest way to reduce 
unwarranted and unsubstantiated conjecture about hidden motives or 
goals.
    We support the existence and authority of ICANN, as articulated in 
the DOC Memorandum of Understanding. We should not confuse a gradual 
transition of parts of the DNS system, e.g. the root server, to a 
private sector management system with an underlying grant of authority 
to manage and administer the overall process. The letter Chairman 
Bliley received on July 8 from DOC outlines the legal authority we 
believe permits the Secretary of Commerce to enter into such 
agreements.
    The introduction of competition to create the Shared Registration 
System (SRS) is welcome. And while new registrars have been accredited 
under guidelines established by ICANN and the new registrars have been 
licensed on an interim basis, significant work still remains to be done 
in order to establish robust competition. Transition of DNS management 
to the private sector can succeed only if all DNS participants subject 
themselves to the same set of consensus rules.
    ICANN has already demonstrated that it is sensitive to and can 
respond to the needs of the Internet community with respect to the 
domain names and trademarks issue and can help to reduce the inevitable 
friction between trademark owners and domain name holders. ICANN, for 
example, must be permitted to continue to proceed promptly to establish 
a uniform dispute resolution procedure for cybersquatting.
    One contentious issue that remains unresolved is how to pay for 
ICANN's operations. To date, ``paralysis by analysis'' has created a 
major short-term financial hole for ICANN.
    My own position, and that of most companies that I have spoken 
with, is that a broad-based user fee is the best solution. We do not 
want to fall back to US government funding, which inevitably will lead 
to the reintroduction of government controls. Neither do we want to 
have a few major Internet players be the funding source, for that will 
lead to suspicions related to the financial golden rule: those that 
have the gold rule.
    Last but not least, ICANN should not attempt in any way to go 
beyond its fundamental charter of managing the administrative functions 
of the Internet. Attempts by ICANN or any organization to ``run the 
Internet'' are anathema to ITAA's members. We do not believe the 
Interim Board has any intention of doing so, but all stakeholders must 
be vigilant against possible future ``mission creep'' by ICANN.
Summary
    Few historical precedents help guide us with a social, economic and 
technical phenomenon that is largely without precedent. We glimpse the 
potential. Now we must avoid the pitfalls. The Internet is a global 
medium. We need a global solution, free of parochial interests and 
public posturing. We call on all ICANN critics to channel their energy 
towards constructive solutions that truly serve the common good. ITAA 
and our member companies are committed to the successful transition of 
the management of the central administrative functions of the Internet 
to a competitive, globally recognized, private sector-driven, 
transparent, beneficiary-based mechanism. We applaud the progress made 
thus far by ICANN and appreciate the willingness of the U.S. Congress 
and, particularly, this Subcommittee to review the steps undertaken to 
date. I thank you, Mr. Chairman, for the opportunity to testify today, 
and will answer any questions you might have.

    Mr. Upton. Thank you. Mr. Weinberg.

                 TESTIMONY OF JONATHAN WEINBERG

    Mr. Weinberg. Thank you, Mr. Chairman.
    My name is John Weinberg. I am a law professor at Wayne 
State University. I was approached about testifying at another 
hearing today and I told them I could not because I had to be 
at this one.
    Mr. Upton. Good for you. We will give you 6 minutes.
    Mr. Weinberg. In 1997-1998, I was a scholar in residence at 
the Federal Communications Commission and I worked on some of 
the issues that are before the subcommittee today. I am not 
appearing here on behalf of either Wayne State University or 
the U.S. Government. I speak only for myself.
    In my view, ICANN suffered a bunch of self-inflicted 
wounds. They should not be fatal. ICANN needs to implement 
mechanisms for choosing new board members who will be drawn 
from and who can represent the Internet community.
    Second, it needs to learn to act like a part of the 
Internet community.
    Finally, it needs to find an adequate way of defining and 
limiting its own policy mandates.
    If ICANN can do these things, it will be able to fulfill 
the roll that the White Paper laid out for it. ICANN has taken 
a number of wrong turns so far. It started under a big handicap 
since the board members, for the most part, did not have, and 
do not have a lot of background in Internet technical issues.
    Their selection was shrouded in secrecy. That secrecy was 
exacerbated by the board's closed meetings. ICANN demonstrated 
a tin ear when it came to the Internet traditions of openness 
and communication. I mean, for the most part ICANN still 
communicates to the outside world through its PR firm and its 
lawyers.
    Those channels are fine for a commercial firm, but they are 
not going to win ICANN acceptance as an organization, as a part 
of the Internet technical community. ICANN has mis-stepped in 
other ways. It has brokered the creation of a structure for its 
domain name supporting organization that is arbitrary, that I 
think will give business and trademark interests 
disproportionate influence.
    It has not seemed to understand the importance of limiting 
its policy role. It seems to lack humility, notwithstanding 
that there is a great deal to be humble about. All that said, 
though, at the same time not all of the criticisms of ICANN are 
justified.
    I think the criticism of its proposal for the $1 per 
registration year fee has been sharply over-blown. It has been 
criticized on the ground that it is seeking to impose over-
bearing requirements on NSI, but the fact is that conflict 
between ICANN and NSI is inevitable.
    NSI is enjoying an unparalleled monopoly in domain name 
registration services. It is earning huge profits from that 
position. ICANN's task as set out in the Green and White Papers 
is to eliminate NSI's monopoly by introducing competitive 
registrars to .com and NSI's other domains, by authorizing new 
generic top level domains to compete with those.
    It should not be surprising that NSI, which has 
consistently sought to forestall competition and to leverage 
its control over the generic, top level, domain databases would 
be and has been an opponent of ICANN. Some of ICANN's problems 
should dissipate as mechanisms are put in place to enact new 
board members, although there are some questions that still 
remain there.
    So, where do we go from here? What is the most important 
issue. ICANN is beginning to enter into contractual agreements 
with all firms. They are seeking to register domain names in 
.com, .net, and .org under which those entities would agree to 
terms, beginning with the financial and business qualifications 
designed to implement DNS policy goals.
    Later on, it is going to enter into contracts with all 
entities seeking to operate top-level domain registries. This 
approach is going to allow ICANN to enter into registry 
contracts requiring the registries to enter into specified 
contracts with the registrars, the registrars to enter into 
contracts with domain name holders, and so on.
    This web of top-down contrasts could give ICANN the power 
to impose a bunch of rules on domain name holders, and in turn, 
on the Internet population at large, that do not have a lot to 
do with Internet technical administration and domain name 
policy. That would be really bad.
    ICANN should not be a world Internet government. Its role 
should not be to enact good policies and impose them on the 
rest of us. It should not be to make the Internet safe for 
electronic commerce. It needs to be limited to the structure 
and stability of the domain name system and the administration 
of other Internet identifiers.
    Ironically, as Mikki Barry noted, one of ICANN's biggest 
current tasks in fact lies outside the boundaries I have just 
defined, that is trademark domain name dispute resolution. 
ICANN announced its intention to quickly adopt new rules to be 
imposed on all domain name holders through a web of top-down 
contracts, potentially requiring their participation in dispute 
resolution proceedings brought by trademark owners.
    Resolution of those trademark disputes has no technical 
components. It is not necessary to administration of Internet 
identifiers. It could be handled through ordinary trademark 
litigation, as it has been to date, without any threat to the 
stability of the domain name system. It is precisely the sort 
of issue that IANA would never have dreamed of taking on, and 
one would have thought ICANN should not be engaged in.
    I will stop there since my bell is rung. I am glad to 
answer any questions.
    [The prepared statement of Jonathan Weinberg follows:]
   Prepared Statement of Jon Weinberg, Professor of Law, Wayne State 
                               University
    Mr. Chairman, my name is Jon Weinberg and I'm a law professor at 
Wayne State University. In 1997-98, I was a professor in residence at 
the Federal Communications Commission and I worked on some of the 
issues that are currently before the Subcommittee. I am not appearing 
here, though, on behalf of either Wayne State University or the U.S. 
government; rather, I am speaking only for myself.\1\ In my view, the 
largely self-inflicted wounds that ICANN has suffered to date need not 
be fatal. ICANN must move quickly to implement mechanisms for choosing 
new Board members who will be drawn from, and who can represent, the 
Internet community. Second, and relatedly, it must learn to act like a 
part of the Internet community. Finally, it must find an adequate way 
of defining, and limiting, its own policy mandate. If it can do all of 
these things, it will be able to fulfill the role that the White Paper 
laid out for it.
---------------------------------------------------------------------------
    \1\ I am currently participating in Working Group C of ICANN's 
Domain name Supporting Organization, Discussing the addition of new 
top-level domains. It goes without saying that I am not speaking for 
that group either.
---------------------------------------------------------------------------
Background--IP numbers and domain names
    Every computer connected to the Internet must have a unique 
Internet Protocol (IP) address in order to receive information, just as 
every telephone on the public switched network must have a unique 
telephone number. A stable and reliable IP addressing system is crucial 
to the proper functioning of the Internet.
    IP addresses (such as 149.59.6.22), however, are opaque and hard to 
remember. It would not be practical for a user to have to remember, and 
type in, a different IP address for every Web site he sought to visit 
or electronic mail message he wished to send. Accordingly, under the 
current Internet architecture, each IP address maps to a more or less 
easy-to-remember domain name such as www.house.gov or 
www.law.wayne.edu. The domain name system (DNS) makes it easier for 
ordinary people to use the Internet.
    The domain name system is hierarchical. That is, the domain name 
space is divided into top-level domains, or TLDs; each TLD is divided 
into second-level domains, or SLDs; and so on. The currently-available 
TLDs include .com, .net, .org, .edu, all administered by Network 
Solutions, Inc. (NSI),\2\ and the so-called ``country code'' top-level 
domains such as .us, .uk and .fr. At the outset, it was thought that 
.com would used by commercial entities, .net by entities involved with 
the Internet networking infrastructure, .org by nonprofit 
organizations, and .edu by educational institutions. NSI, though, does 
not enforce any such restrictions on registrants in .com, .org and 
.net. Indeed, NSI urges businesses to register their preferred second-
level domain names in all three of those top-level domains.
---------------------------------------------------------------------------
    \2\ Other top-level domains include .gov, administered by the 
General Services Administration; .int, administered by the University 
of Southern California's Information Sciences Institute; and .mil, 
administered by the U.S. Department of Defense and DISA.
---------------------------------------------------------------------------
How we got where we are
    In the early days of computer networking, there was no need for a 
hierarchical domain name system. Until 1984, after all, there were 
fewer than 1000 ``host'' computers connected to the Internet. That 
number, however, quickly grew. It soon became clear that the Internet 
needed a new addressing structure. Scientists including Jon Postel and 
Paul Mockapetris of the University of Southern California's Information 
Sciences Institute (ISI) developed the current domain name system, and 
the first domains were registered in 1985. ISI assumed responsibility 
for oversight of the domain name system, including oversight of the 
root servers, which sit at the apex of the domain-name system and 
effectively determine which top-level domains will be recognized by the 
system. These and other coordinating functions, performed by Dr. Postel 
and his staff at ISI, came to be known as the Internet Assigned Numbers 
Authority, or IANA. The Defense Department, which had bankrolled almost 
all of the early development of the Internet, entered into a series of 
contracts with ISI under which the U.S. government paid for the IANA 
functions.
    The Defense Department in 1985 assigned SRI International, a 
nonprofit Silicon Valley research institute, the job of registering 
second-level domains in the generic (non-country code) top-level 
domains. Later on, the National Science Foundation (NSF) assumed the 
lead from the Defense Department in funding basic Internet 
infrastructure. In 1992, NSF established a new structure known as the 
InterNIC, or Internet Network Information Center. It entered into 
cooperative agreements with AT&T to provide Internet directory and 
database services; General Atomics to provide certain Internet 
information services; and NSI to perform the registration services that 
had been handled by SRI. NSI agreed to register second-level domains in 
the generic TLDs and to maintain those top-level domains' master 
databases. Those services were free to users; they were underwritten by 
the National Science Foundation. NSI had physical control of the AA'' 
root server, from which all of the other root servers get their 
information, but it operated that root server on instructions from 
IANA.
    By 1995, the Net had come of age. It had been more than 25 years 
since the initial establishment of the Internet's predecessor, the 
Arpanet. Business were beginning to use the Internet for commercial 
purposes. The U.S. House and Senate were online. More than 100 
countries were now connected to the Internet backbone, and operated 
their own top-level domains. The World Wide Web, which had become the 
dominant Internet application, was now thus truly world-wide. NSI 
negotiated with the National Science Foundation an amendment to the 
cooperative agreement under which NSI would begin charging a $50 annual 
fee to domain-name registrants.
    The NSI fee was unpopular, and crystallized growing unhappiness 
with the structure of the domain name system. Registrants wondered why, 
in seeking to registering names in the generic TLDs, they were stuck 
with the service provided by, and the fees charged by, the NSI 
monopoly. NSI also generated considerable animosity with its domain 
name dispute policies, under which it asserted the right to (and did) 
suspend any domain name upon complaint from a trademark owner, without 
regard to whether the trademark owner had a superior legal claim to the 
domain name. Finally, there was growing consensus in the technical 
community that the architecture would support many more top-level 
domains than had so far been authorized.
    Accordingly, Jon Postel floated a suggestion that IANA authorize up 
to 150 new generic top-level domains, to be operated by new registries. 
As the proposal went through successive iterations, IANA and the 
Internet Society formed an elaborate, internationally representative 
``Internet Ad Hoc Committee'' (IAHC) to consider the question of adding 
new top-level domains, with representation from, among others, the 
International Telecommunications Union, the International Trademark 
Association and the World Intellectual Property Organization. The 
trademark lawyers urged that the number of new domains be cut 
considerably; the group ultimately generated a proposal for the 
addition of just seven new top-level domains. Would-be domain-name 
holders, under the IAHC plan, could go to any of a large number of 
competing ``registrars'' to register names in those new domains; the 
actual master databases for all of the new domains would be controlled 
by a single nonprofit corporation known as CORE, to be run by the 
registrars. When Jon Postel requested that NSI insert the new CORE top-
level domains into the ``A'' root server, though, NSI declined to do so 
absent authorization from the U.S. government. The U.S. government, in 
turn, instructed NSI to wait; it was still in the middle of its own 
analysis of the domain-name situation.
    In 1998, the Commerce Department issued a ``Green Paper,'' followed 
by a ``White Paper,'' expressing its views on Internet identifiers. The 
White Paper emphasized that with the changing role of the Internet in 
the modern world, IANA's functions needed to be transferred to an 
entity, not funded by the U.S. government, with a more formal and 
robust management structure and more formal accountability to the 
international Internet community. While Dr. Postel had the loyalty and 
respect of a wide consensus of the community, his informal leadership 
was no longer enough--``What happens,'' the question ran, ``if Jon 
Postel gets hit by a beer truck?'' The new entity, the White Paper 
continued, should have fair, open, transparent and pro-competitive 
decisionmaking processes that protected it against capture by a narrow 
group of stakeholders.
    The White Paper made clear that there was an urgent need for 
greater competition in domain name registration. That competition, it 
explained, should come in two ways. First, customers should be able to 
register domains in any top-level domain, including those currently 
operated by NSI, using any of a number of competing registrars. The 
U.S. government contemplated that NSI would continue to control the 
``registry,'' or master database, for .com, .net and .org, but that it 
would have to offer equal access to competing registrars seeking to 
enter names in that database. Second, the White Paper continued, IANA's 
successor should add new top-level domains to the root zone, operated 
by new domain-name registries, so as to expand the name space and 
maximize consumer choice.
    The actual establishment of ICANN was clouded by tragedy. Jon 
Postel had agreed to serve as Chief Technical Officer of a new 
corporation, to be known as the Internet Corporation for Assigned Names 
and Numbers, to perform IANA's technical management functions. The 
corporation's Board of Directors were chosen from a group of 
distinguished personages who had had little involvement in (and, for 
the most part, little knowledge of) the ``DNS wars'' of the previous 
few years. The facts that not all of the Board members had extensive 
technical expertise was not considered to be a problem, since Dr. 
Postel could provide that technical background and guidance. On October 
16, 1998, though, Postel died at 55 of post-operative complications 
from heart surgery. In figurative terms, he'd been hit by a beer truck. 
The Department of Commerce nonetheless, six weeks later, entered into a 
memorandum of understanding with ICANN, agreeing to work together to 
develop mechanisms and procedures so that the nascent ICANN could 
administer Internet technical identifiers in a transparent and fair 
manner.
    Before the Internet took on its current economic importance, the 
substantive questions confronting ICANN could have been resolved within 
the Internet Engineering Task Force, a technical standards body 
composed of scientists and engineers interested in Internet 
infrastructure, with little attention paid by the outside world. By the 
mid-1990s, though, those questions had too much money riding on them to 
allow such mundane resolution. Those with money or prestige at stake--
NSI, trademark interests, international standards organizations and 
others--all brought their lawyers to lobby in favor of their preferred 
models. The high-profile White Paper process, indeed, probably 
encouraged any entities with economic stakes that had not yet 
``lawyered up'' that it was high time they did so. To an increasing 
degree, it was lawyers and lobbyists, rather than technical experts, 
who were demanding seats at the Internet architecture table.
Where we are now
    In its quest for legitimacy, ICANN has taken several wrong turns. 
It started out under a considerable handicap since its Board members, 
for the most part, have little background in Internet technical issues. 
They were chosen on the theory that it would be helpful for the Board 
members to be new to the DNS debates, so that they were not tainted by 
identification with past controversy. The newness of most of the 
members to Internet technical issues, though, greatly complicated the 
task of securing the confidence of the Internet community. The Board 
members' selection was shrouded in secrecy, and that secrecy was 
exacerbated by the Board's early penchant for closed meetings, so that 
the Internet community knew neither who these people were nor how they 
were reaching their decisions. ICANN demonstrated a tin ear when it 
came to the Internet traditions of openness and communication. For the 
most part, ICANN still communicates to the outside world through its 
public relations firm and its lawyers. Those channels are all very well 
for a commercial firm, but they are insufficient to win ICANN 
acceptance as an organ--and thus a part--of the Internet technical 
community.
    Nor have the structures ICANN created been the most representative. 
ICANN has brokered the creation of an arbitrary structure for its 
Domain Names Supporting Organization, which will have a lead role in 
the development of DNS policy, under which business and trademark 
interests will have a disproportionate role. ICANN, further, lacks 
humility, notwithstanding that it has a great deal to be humble about. 
I was bemused to read Esther Dyson's explanation, in her July 19 letter 
to NTIA Associate Administrator Becky Burr, that the public need not 
worry that ICANN will use its authority to impose inappropriate 
requirements on Internet actors. Since ICANN, Dyson explained, is by 
its nature ``nothing more than the reflection of community consensus,'' 
by definition it cannot do anything improper. If this message is 
sincere, it reflects previously unimagined depths in ICANN's lack of 
understanding of others' concerns.
    ICANN has seemed not to understand the importance of limiting its 
policy role. The matter of domain-name dispute resolution provides one 
example. The White Paper had urged that the World Intellectual Property 
Organization explore recommendations for a uniform dispute resolution 
approach for ``trademark/domain name disputes involving cyberpiracy''--
that is, abusive registrations of a domain name string identical or 
closely similar to another firm's trademark, solely for the purpose of 
reselling the domain name to that firm or one of its competitors. 
``[I]t should be clear,'' the White Paper noted, that any dispute 
resolution mechanism put forward by ICANN should be limited to that 
category of disputes. WIPO, after extensive deliberations, issued a 
report recommending such a dispute-resolution mechanism, limited to the 
cases described in the White Paper. ICANN referred the WIPO report to 
its Domain Names Supporting Organization. It then issued a press 
release expressing its view that the mandatory dispute resolution for 
domain name registrants imposed through ICANN-sanctioned contracts 
should not be limited to abusive registrations, and indeed should 
``ultimately cover all commercial dispute issues linked to Domain Name 
registrations'' (emphasis mine). This suggests that ICANN fundamentally 
misunderstands its role. We do not need a world Internet government, 
imposing such policies as seem to it good. We need a technical 
coordinator to perform the limited tasks of expanding the name space, 
protecting the stability of the domain name system, and policing bad 
actors who threaten competition and consumer welfare.
    At the same time, though, not all of the criticisms of ICANN are 
justified. ICANN has been much criticized for its proposal that it 
collect a fee to defray its own costs, from registrars registering 
domain names in .com, .net and .org, for each domain name they 
register, not to exceed $1 per registration-year. ICANN recently 
decided to table this fee for the time being, and to rethink it in 
conjunction with the directly affected entities. This was a wise 
decision. The fee was controversial, and ICANN's spending choices have 
not been beyond criticism. Nonetheless, the White Paper contemplated 
that IANA's successor--unlike IANA itself--would be free from 
government support precisely because it could be funded by ``domain 
name registries, regional IP registries, or other entities identified 
by the Board.'' The problem with the ICANN fee was not that there is 
something wrong with such a funding mechanism in principle, but that 
the Board went ahead with it without first securing the sort of 
community support that would make such a fee sufficiently broadly 
acceptable.
    ICANN has been criticized on the ground that it is seeking to 
impose overbearing requirements on NSI. Conflict between NSI and ICANN, 
however, is inevitable. NSI currently enjoys an unparalleled monopoly 
in domain name registration services, and is earning huge profits from 
its position. NSI's .com, .org and .net top-level domains include the 
overwhelming majority of domain-name registrations. (NSI has over 5 
million registrations in .com alone. The largest top-level domain not 
administered by NSI is the country-code domain .de (Germany), with 
fewer than 400,000 registrations.) ICANN's task, as set out in the 
Green and White Papers, is to destroy NSI's monopoly in two ways: 
first, by introducing competitive registrars to .com and the other top-
level domains now administered by NSI, and second, by authorizing new 
generic top-level domains to compete with those domains. It should be 
unsurprising that NSI opposes ICANN implacably.
    NSI has sought to forestall competition, and to leverage its 
effective control over the generic top-level domain master databases, 
in a variety of respects. It has aggressively and unjustifiably 
asserted intellectual property control over the contents of the .com, 
.net and .org databases, and is seeking to market the information 
contained in those databases through such devices as its upcoming ``dot 
com directory.'' It has been recalcitrant in its relationship with the 
Department of Commerce, dragging its feet on registrar competition and 
imposing barriers in the way of the testbed registrars. It now 
professes that because of ``personnel resource limitations,'' it will 
be able to enable new registrars to access its databases only at the 
rate of only five per month. It has arbitrarily and without notice 
blocked public access to sources of registration information, and has 
insisted on receiving a fee for maintaining the master database that 
unreasonably exceeds its costs.
    It is plain that somebody needs to ride herd on NSI. The DNS 
controversy was sparked in the first instance, after all, by user 
concerns over the monopoly franchise NSI was exercising under its 
cooperative agreement with the National Science Foundation. Four years 
later, NSI continues to exercise tremendous market power. The White 
Paper gave the job of supervising NSI to ICANN (with backup from the 
Department of Commerce). In turn, the White Paper directed that NSI 
must recognize ``the role of the new corporation [that is, ICANN] to 
establish and implement DNS policy and to establish terms [applicable 
to NSI among others] under which registries, registrars and gTLDs are 
permitted to operate.'' NSI's economic interests lie in its acting to 
obstruct that process.
    Some of ICANN's problems should dissipate as mechanisms are put in 
place to elect new Board members. As new Board members drawn from the 
Internet community take their seats, ICANN's task of winning legitimacy 
should become easier. Important questions, though, still remain. The 
voting mechanism for ICANN's at-large Board members, to be elected by 
the global membership, remains unsettled. Other aspects of ICANN's 
governance structure are already skewed. Many observers have expressed 
concerns (which I share) that ICANN's Domain Name Supporting 
Organization, which has the lead role in initiating policy concerning 
the DNS, is structured in a manner that is arbitrary, haphazard, and 
systematically tilted towards trademark and business interests. These 
aspects of ICANN's structure deserve continuing close attention.
Where we go from here
    ICANN is seeking to enter into contractual agreements with all 
firms seeking to register domain names in .com, .net, and .org, under 
which those entities agree to terms (beginning with financial and 
business qualifications) designed to implement DNS policy goals. Later 
in the process, it will seek to enter into similar contracts with all 
entities seeking to operate top-level domains as registries. This 
approach will allow ICANN to enter into registry contracts requiring 
the registries to enter into specified contracts with their registrars, 
and the registrars to enter into specified contracts with domain name 
holders, and so on. Indeed, the WIPO report on domain-name dispute 
resolution contemplates exactly that: all domain-name holders, in order 
to register names in top-level domains included in the ICANN root, will 
have to agree to particular contractual terms related to dispute 
resolution. This web of top-down contracts could give ICANN the power 
to impose a variety of rules on domain name holders (and in turn, the 
Internet population at large) that have little to do with Internet 
technical administration and domain name policy.
    Such a result would be disastrous. ICANN must not be a world 
Internet government. Its role should not be to enact good policies, and 
impose them on the rest of us. In particular, its role should not be to 
make the Internet safe for electronic commerce. That effort, although 
much prized by business, would require a wide range of policy and value 
judgments that lie far outside ICANN's limited role. Rather, it should 
limit its task to the structure and stability of the domain name system 
and the administration of other Internet identifiers.
    Ironically, though, one of ICANN's biggest current tasks lies 
outside the boundaries I have just defined. I have already referred 
twice to trademark-domain name dispute resolution: ICANN has announced 
its intention to quickly adopt new rules, to be imposed on all domain 
name holders, potentially requiring their participation in dispute-
resolution proceedings brought by trademark owners who feel that the 
domain names Apirate'' their trademarks. Yet resolution of such 
trademark-law disputes between trademark owners and domain name holders 
has no technical component. It is not necessary to administration of 
Internet identifiers. It could be handled through ordinary trademark-
law litigation, as it has been to date, without any threat to the 
stability of the domain name system. It is precisely the sort of issue 
that IANA would not have dreamed of taking on, and that ICANN should 
not be engaged in.
    ICANN is involving itself in domain-name dispute resolution for 
three reasons. First, as a matter of pure practical politics, trademark 
holders have made clear that they will fight vehemently against the 
addition of any new top-level domains, in Congress and other fora, 
unless ICANN first implements a trademark dispute resolution mechanism. 
Second, NSI already has a trademark dispute resolution Amechanism'' in 
place--it will suspend any domain name upon complaint from a trademark 
holder with the same mark--and nearly all parties agree that that 
mechanism must be replaced. Finally, the current ICANN structure gives 
business and trademark-owning interests extensive influence, and the 
Board members are sympathetic to their concerns. At least the first two 
of these reasons may make the enactment of some sort of trademark 
dispute resolution mechanism inevitable at this point. But this should 
be the last of ICANN's forays outside of issues relating to the 
structure and stability of the domain name space, and the 
administration of other Internet identifiers.
    ICANN, in short, has three tasks before it. It must move quickly to 
formulate, and to implement, mechanisms for choosing new Board members 
who will be drawn from, and who can represent, the Internet community. 
Second, and relatedly, it must learn to act like a part of the Internet 
community. Finally, it must find an adequate way of defining, and 
limiting, its own mandate. (It will not suffice for it to declare 
piously that, because it is impelled by community consensus, it is 
incapable of overstepping its bounds.) If ICANN can do all of these 
things, it will be able to fulfill the role that the White Paper laid 
out for it.

    Mr. Upton. Thank you. Mr. Zittrain.

                 TESTIMONY OF JONATHAN ZITTRAIN

    Mr. Zittrain. Mr. Chairman and members of the committee, 
Counsel, my name is Jonathan Zittrain. I am the Executive 
Director of the Berkman Center for Internet and Society at 
Harvard Law School where I teach several classes on Internet 
issues as a lecturer on law.
    As the materials I have submitted for the record describe, 
the Berkman Center has sought to document the process of 
ICANN's creation and the underlying debates, identify important 
social issues at stake, present advice to ICANN, especially on 
structures for openness and accountability, and develop systems 
for broad-based participation in ICANN-related activities and 
deliberation.
    We thank the committee for giving us the opportunity to 
webcast today's hearings which, at least in the earlier 
session, over-flowed the physical capacity of the room. I want 
to touch quickly on three things.
    First, the historical context behind what ICANN has been 
asked to do. Second, why it is so hard for ICANN to do it. 
Third, walk through some of the scenarios that might unfold if 
ICANN were to fail.
    First, what ICANN has been asked to do. It takes awhile to 
come to understand that the way this system used to be run, at 
least the apex of it, of the domain name system, prior to 
ICANN, was by a series of handshakes, traditions, and maybe a 
couple of cooperative agreements with incredibly vague terms.
    Government involvement was limited primarily to simply 
subsidizing it, much as the NEA might subsidize art, although 
perhaps slightly less controversial at the time. These 
subsidies made it then, in some sense, a public effort. Indeed, 
the people who received the subsidies, Dr. John Postel, not the 
least among them, worked on something called the IETF, the 
Internet Engineering Task Force, to develop the actual 
protocols by which the Internet, as we know it today, would 
work.
    They do so in open meetings. Anybody can show up. The IETF 
is not incorporated. You do not pay dues to the IETF because 
there is no one to whom to give the dues. They do not take 
votes. In fact, their motto is we reject kings, presidents, and 
voting. We believe in rough consensus and running code.
    The closest they come to voting actually is a hum. They 
will actually call for a hum in the room and see if those 
assembled, again mostly engineers, appear to be humming more 
one way or the other. At least, that is how they identify 
consensus and know it when they see it.
    This is a wonderful system. It makes for a great story, but 
it is one that obviously cannot withstand the kind of pressures 
that have been evident in the crucible of the earlier panel. 
There are serious amounts of money at stake and serious demands 
from now very powerful parties.
    The engineers, from what I can understand, really want no 
part of it. They do not want us at their meetings. It will 
disrupt the humming. As a result, John was wanting to get this 
out of his lap. As Professor Weinberg said, IANA never dreamed 
of some of the things that ICANN is contemplating doing.
    In that sense, what ICANN is being asked to do does have a 
regulatory or governance dimension. It is because it goes 
beyond the technical and it involves things in the political 
realm; things such as trademark arbitration within the 
architecture of domain name registration.
    I am not here to say whether that is a good or bad idea. 
Personally, I think it is a bad idea, but it is one that there 
are very powerful interests calling for. They want a forum in 
which it can be aired. ICANN is meant to be that forum and it 
is not clear to me that you have decided which way it will go 
on that issue.
    It is also governance in the sense of if it ultimately does 
have power over what we are calling the route, and that is the 
thing to which most people subscribe in order to get their 
domain name information, it is something that if you do not 
play by the rules and get access to the route as a registrar or 
a registry, you are really left out in the cold.
    It is a market power. It is not an outright regulatory 
power in that sense. It's governance. That is why it is so 
important to want to have many of the forms of governance 
present in ICANN.
    What do these forms include? They include openness, 
representation, due process, and funding. Openness has been 
spoken to a lot. I just want to add a footnote to it. Open 
board meetings are not the be all and the end all. I am totally 
in favor of them. I am glad they did it, but I think we all 
know that is just the beginning of what really is a much deeper 
process that has to be done in order to be truly open, in the 
sense of having the issues in a room, covered by media, 
discussed openly, rather than simply happening in the hallways.
    My belief is that if ICANN were not around to have it, 
somehow those discussions are still going to be had. Somehow 
power is still going to be brought to bear. Better to have a 
forum through which it happens as openly as possible, than no 
forum at all.
    Representation is another issue. Somebody pointed out 
earlier today that we want ICANN to be accountable and 
therefore to be representative of the Internet at large. That 
is so difficult to do. If we had the FCC have members from 
AT&T, Bell Atlantic, and several radio stations, that might be 
representative of stakeholders, but it might still not be a 
commission in the public interest. Facing that challenge has 
been very difficult. I see my egg is ready. Let me just read 
one concluding sentence, if I may. I am aware that the Berkman 
Center's participation in ICANN activities such as webcasting 
the meetings, developing remote participation systems, 
conducting a membership study, and giving other advice is 
itself a form of support to the organization.
    If we thought ICANN were corrupt, or renegade, or out of 
control, we would cease such support in a heartbeat. So far as 
I know, ICANN is none of these. It is making its share of 
mistakes in a territory that is uncharted. With that, I guess, 
if somebody wants to hear about scenarios if ICANN fails, maybe 
you could ask me in a question.
    Thank you.
    [The prepared statement of Jonathan Zittrain follows:]
 Prepared Statement of Jonathan Zittrain, Executive Director, Berkman 
          Center for Internet and Society, Harvard Law School
    Mr. Chairman, Members of the Committee: My name is Jonathan 
Zittrain. I am the Executive Director of the Berkman Center for 
Internet and Society at Harvard Law School, where I teach several 
courses on Internet issues as a Lecturer on Law.
    The Berkman Center's research falls roughly into five categories. 
We look at the way in which the increasing use of the Internet and open 
networks generally is affecting the openness of code, commerce, 
education, security and government, and the relationship of law to 
each. Our research is active--we build out into cyberspace as a means 
of studying it. The development of the debate over domain names and IP 
numbers has thus been of great interest to us, and we have developed a 
perspective both as observer and participant.
    In an important sense, these names and numbers are the foundation 
upon which the Internet as we know it is built. The fact that key 
elements of the system were developed and managed with little more than 
a series of handshakes and a set of traditions for so many years speaks 
to the spirit that built the Internet, kept it running, and ultimately 
attracted the rest of us to it. The Net is no longer just a convenient 
means to share research results or a large-scale experiment in applied 
computer science, but an increasingly important foundation of commerce, 
social activity, and information exchange.
    As the materials I have submitted for the record describe, the 
Berkman Center has sought to document the process of ICANN's creation 
and the underlying debates; identify important social issues at stake; 
present advice on structures for openness and accountability; and 
develop systems for broad-based participation in ICANN-related 
activities and deliberation. The latter presents major challenges when 
the people who have an interest--the so-called stakeholders--are 
dispersed around the world, and indeed may have little in common except 
a link to the Internet and a desire to have some say in its future. In 
addition, individual Berkman faculty have published their respective 
views on ICANN, and two Berkman fellows have been drafted as advisors 
to ICANN.
    The Department of Commerce White Paper of last summer is in essence 
a call for a barn-raising by the Internet community. With a clear sense 
of the distinctly informal, bottom-up way in which the domain name and 
IP numbering system was semi-privately, semi-publicly developed, the 
White Paper called for the Internet community to produce a coordinating 
organization--a ``newco''--that has since been recognized as ICANN. By 
now you are aware of some of the tugs-of-war that took place in its 
formation, and competing proposals that to widely varying degrees were 
reconciled with the ICANN proposal.
    My supplemental materials try to give a sense of the few planks 
we've tried to lift ourselves for the ICANN ``barn,'' the documentary 
pictures we've taken as it has been assembled, the windows we have 
tried to encourage in it so that one can see inside once it has been 
completed. To be sure, as you will hear today, there are plenty of 
people who wish there were a different barn or only an open field, and 
I would like to speak to some of those issues generally.
    I want to quickly touch on three things. First, reflect on the 
context behind what ICANN has been asked to do. Second, discuss why it 
is difficult for ICANN to do it. And third, review some of the 
scenarios that might play out if ICANN fails.
What ICANN has been asked to do
    First: the context behind what ICANN has been asked to do. As may 
be clear from today, there was nothing really like it before. A natural 
question may be: ``If we did not need it then, why do we need it now?'' 
What we had before was something called IANA, the Internet Assigned 
Numbers Authority. IANA was not incorporated; it had no legal 
personality. At its core was one figure, Dr. Jon Postel. Jon did 
pioneering work on domain names and personally managed key aspects of 
the domain name system, including the vaunted ``root.'' He was also the 
steward for the ``.us'' domain--the country code designated for the 
United States--until the day (which has not yet arrived) when the U.S. 
government would seek to manage the domain itself. To many, Jon was a 
Solomonesque figure who could apply an engineering talent to the 
various issues that would come up, think hard, and simply do the right 
thing to keep things running smoothly.
    Jon did much of his work with government grants, and, from what we 
can tell, he put them to good use. In addition to taking the lead in 
developing the system of domain names as we know it, he was the leader 
of a process to document standards as they were decided. These 
standards include the specifications for how domain names can work, 
along with manifold other aspects of Internetworking. The standards 
aren't formally enforced by any commission or governmental entity; and 
thus in some sense are voluntary. However, each computer on the 
Internet deviates from these accepted protocols at the peril of 
incompatibility and thus dysfunction. The protocols have become the 
lingua franca of the Net thanks to the sum of thousands of individual 
decisions by network administrators and software designers to hew to 
them. In this sense they are quite binding.
    These standards are actually written down somewhere. They are 
available online in documents called RFCs (``Requests for Comment,'' 
though often they're final drafts). No one owns the RFCs in the sense 
we normally think of as ownership--no private company has a patent on 
them, and they are open to adoption by anyone without license. In this 
sense they are public. Yet they are not developed by governments. In 
this sense they are private. An organization called the IETF, the 
Internet Engineering Task Force, itself unincorporated, with no legal 
personality, for which there is no particular membership fee to join 
since there is nothing explicitly to join, comprises a group of 
engineers, most of whom participate in their spare time. These 
engineers discuss the protocols on email lists with each other. 
Occasionally they gather in a city for a meeting. They try to develop 
consensus around what will work best.
    Indeed the IETF motto, such as it is, was coined by a colleague at 
MIT, Dave Clark. He says: ``We reject kings, presidents and voting. We 
believe in rough consensus and running code.'' How does the IETF know 
consensus when it sees it? Well, in a meeting they will actually call 
for a hum. Since it is difficult to hum particularly loudly no matter 
how passionately one feels about the issue, it seems a rough way of 
seeing the room is in agreement.
    This is not to say there isn't leadership. RFCs are shepherded by a 
leader of some sort. Someone takes it upon himself or herself to help 
own the document and to manage proposals for revisions to it. That 
editor, of course, has a lot of power in how the protocol that the 
document describes will ultimately turn out.
    I digress into this area because I think it's critical to give a 
picture of how this all used to work--and in most ways, still does. The 
design of the Internet was accomplished by a bunch of people with a 
common goal to make the Internet bigger, faster, louder, as it were; 
people who came from relatively similar backgrounds and had little 
patience for highly formalized structures (and even less for lawyers). 
This informal system works best--i.e. it comes to consensus--when the 
issues under discussion are incredibly boring to everyone but the 
engineers who have gathered to discuss them, and when any political 
ramifications of designing a network one way versus another are ignored 
or forgotten.
    In the IETF setting, there are no clear competing interests at 
stake, at least not competing interests outside the realm of 
engineering. But I will give two examples of interests that have 
catapulted the domain name system out of the sleepy meetings of the 
IETF and into the public eye. These are exactly the kinds of issues 
beyond the technical that led Jon to want to see a new, much more 
structured IANA come about, and which are echoed in the White Paper as 
a reason for trying to go beyond the status quo.
    First, there is significant concern about trademark. Domain names 
have become the primary way to reach something on the Internet. They're 
written on buses and coffee mugs, and the easier they are to remember, 
the more valuable they are when the audience in question is the public 
at large.
    Thus there are fights over what domain name belongs to whom. The 
old system of ``First come, first serve,'' indeed, for awhile, ``First 
come, first serve, with no fee per name'' has come under some fire, as 
major trademark holders, somewhat late to the Internet themselves, 
found that hertz.com (taken by a domain name speculator) and mci.com 
(taken by Sprint!) had already been registered at the time they were 
wanting to take up shop online. A major company is not afraid of 
initiating a lawsuit to claim what it thinks it's entitled to--and I 
don't mean to suggest today that the law says that every trademark 
holder pre-emptively owns her own mark plus a ``.com'' or ``.net'' at 
the end of it--but would prefer a simpler way to get to the bottom of 
the issue, or perhaps a form of dispute resolution whose results are 
more generous than the results of respective courts. Finally, those who 
think they deserve a domain name held by another may want to know 
simply who's behind the name--without solid contact information for the 
defendant, it's not easy to start a lawsuit. As you might guess, some 
cheer this fact (if only for privacy protection reasons) while others 
lament it. Decisions about domain name system architecture, and the 
handling of domain name registrations, can bear on whether famous mark 
holders and others can easily try to assert claims over names; this is 
a good example of a desire by powerful interests to have a means of 
proposing changes to the architecture of the Internet with 
justifications that are other than technical.
    A second example of pressures on the system beyond the technical is 
simply the entrepreneurial forces that want to provide domain name 
registration services. The ministerial act of registration of domain 
names--associating a holder with a name, and inserting the holder's 
desired destination address into a table that helps converts these 
names to the ultimate IP numbers required to really find a site on the 
Internet--is itself a lucrative business. When a lot of money is 
directly at stake, it is very difficult to have IETF-like informality 
at the apex of the pyramid. The power of the root of the domain name 
system is the power to designate who can register the names under a 
given ``top-level domain'' like .com or .org, and it's also the power 
to designate what top-level domains there are. The root of the system 
that nearly all of us use declares that there exists a ``.com'' and 
that a computer in the custody of Network Solutions will fill in 
registrations under it. It has no data on a ``.biz,'' and thus for 
almost all of us there is no .biz domain.
    Given the money to be made registering names in existing domains 
like .com, and the possibility of new territory like .biz, control over 
the root is more than just a technical function. Those who want a piece 
of the domain name registration action--and among them there are 
competing claims to slices of it--may only support ICANN if they think 
it'll generate policy that is responsive to them. At the very least, 
people trying to build or maintain a business like to know where they 
stand, they like to have it in writing, and they like to have what one 
would call ``calculable rules,'' so that they can build a business on 
predictable forces rather than whether a hum happens to be heard one 
way or another. Thus the authority to modify the root file or veto 
attempted changes to it is something that everyone agrees has to be 
handled more systematically than it had been.
    As the White Paper tells it, decisions like these are to be one of 
newsco's--now ICANN's--primary goals: developing policy about things 
like .biz in a fair and open way, so that decisions aren't arbitrary. 
Anyone with an interest ought to be heard, and policies that promote 
competition would presumably lower the cost of domain name registration 
and spread what surplus there is to be had on the supply side among 
multiple competitors. Furthermore, the White Paper structure provides 
an opportunity to take into account concerns that go beyond the 
technical--trademark, for example. ICANN is supposed to act in the 
public interest, not to be beholden to any one stakeholder, and it is 
supposed to come to closure on these issues, to develop policies that 
can be implemented and that put a given debate to rest.
Why ICANN's job is hard to do
    Why is this so hard for ICANN to do? First, ICANN needs to be open. 
The easy part of openness perhaps is the ability of people to have a 
sense of what is going on, and if decisions are rendered, to know why 
they were made. Open board meetings seem a good idea, of course. But 
there will be tendencies still to have private consultations with 
staff, and perhaps even informal meetings where board members discuss 
things with each other. After all, there cannot be a microphone 
everywhere, and it may not even be desirable to have a microphone 
everywhere all the time. In any event, openness goes far beyond open 
board meetings. It is an ethos, a way of conducting business, that 
strives in good faith to be inclusive, clear, and genuine. ICANN here 
has been somewhat saddled with the baggage of a typical private 
corporation. After all, in form at least it is a private corporation. 
To call ICANN's chief policymaking body a ``board'' already endangers 
the spirit of openness--and obscures the fact that, indeed, ICANN is 
``governing'' in some important sense. ICANN is a private company with 
a public trust; its contracts are ``voluntary'' just as much or as 
little as the IETF's RFC standards are. It makes policies that are 
explicitly meant to go beyond the technical--even a policy that 
considers and then refuses, say, to adapt the domain name architecture 
to be more beneficial to famous mark holders at the expense of other 
interests is still a political decision.
    A second area that is difficult for ICANN is representation. The 
White Paper calls for ICANN to be a broadly representative body, both 
geographically and with respect to the interests involved. But how does 
one weigh the different interests? Consensus defined in this 
environment as ``there does not appear to be any one complaining that 
much'' or ``most people seem to agree, with a few outliers'' will mean 
that consensus is going to be elusive at times. After all, contested 
issues may often be a zero-sum game, and in such cases someone will 
``lose'' on a given policy decision. When they do, they might say: 
``There is not consensus. I do not agree with this.'' And yet, ICANN 
cannot be paralyzed when consensus does not exist; maintaining the 
status quo is itself a decision that may upset some stakeholders. The 
first goals must be to make sure that the openness and deliberative 
processees are in place, then to try to forge consensus and compromise 
wherever possible. But when consensus is impossible ICANN really does 
have to make a decision, and just how to weigh the different interests 
will be a difficult challenge.
    We tried to help address the question of representation through the 
Membership Advisory Committee, which laid down possible parameters of a 
membership for ICANN, mandated to elect half of its board through an 
electorate largely open to anyone who wants to sign up. A fear is that 
the only people who will sign up are the people who have direct stakes 
in the process, and therefore the process might become a race to the 
ballot box to see who can get the most votes in. In some sense, that is 
a normal election. But, in another sense, it is a recipe for capture if 
a number of the interests that ICANN should be looking out for--perhaps 
the greater interest of the public at large--are not joining ICANN by 
becoming members.
    Jim Fishkin of the University of Texas is fond of telling the story 
of what happened when a question was put to the Internet at large 
through a poll open to anyone (this excerpted from the Guardian):
          TIME magazine's prestigious Man of the Century should be a 
        global figure, a person of calibre and distinction whose fame 
        transcends frontiers, a Gandhi, perhaps, or a Mao. A man whose 
        influence has shaped the world and whose name is known from 
        Ankara to Zanzibar.
          Step forward . . . Mustafa Kemal Ataturk. A household name in 
        Ankara he certainly is--as founder of the Turkish republic 74 
        years ago--but who knows who he is anywhere else?
          TIME magazine, which asked readers to nominate the key people 
        of the century, appears to be falling victim to Today's 
        Programme Personality of the Year Syndrome: intense lobbying on 
        behalf of an underdog for political purposes. In Turkey the 
        prime minister, Necmettin Erbakan, and President Suleyman 
        Demirel have joined a frenzied media campaign to have their man 
        win. Offices and banks provided voting forms which members of 
        the public could sign.
          Ataturk was streets ahead of the opposition. Diane Pearson, a 
        Time magazine official, said that TIME had received between 
        500,000 and 1 million votes. ``Our fax lines have been tied up 
        for hours.''
          Ataturk led Bob Dylan in the Entertainers and Artists 
        category. He is more of a Hero and Adventurer than Nelson 
        Mandela or Martin Luther King, Jr. Einstein isn't even close in 
        Scientists and Healers, while Henry Ford and Bill Gates were 
        fighting it out for second place in Builders and Titans. Only 
        in the Warriors and Statesmen category did Ataturk have work to 
        do. Winston Churchill (Man of the Half-Century 50 years ago) 
        led. But one Turkish newspaper claimed many Churchill votes 
        came from Greece in a vain attempt to stop the Ataturk 
        bandwagon.
    Assuming the vote wasn't fraudulent--i.e. no one voted twice--was 
Ataturk deserving of the best ``entertainer and artist'' mantle, or had 
there been ``capture'' in the election? In the end, of course, ICANN 
will have to move forward with some form of electorate, and being 
accountable in part to an open membership is a way of ensuring a 
tethering for ICANN that could lessen the need for direct government 
intervention. (ICANN's most direct form of accountability right now is 
to the U.S. government, whose memorandum of understanding phases in 
responsibilities slowly, and makes those responsibilities provisional 
for the duration of the MoU. Another source of accountability, or 
perhaps simply control, is the Internet technical community, which has 
been allotted several seats on the ICANN board through its ``supporting 
organizations,'' and which in any event could be hypothetically roused 
sufficiently to make the current popular, authoritative root file a 
pariah.)
    We see the same phenomenon with due process. Due process is 
something cherished in Western legal traditions--to make sure that 
people really do have a formal opportunity to be heard, to meaningfully 
protest if they think their rights are being trampled upon. The process 
developing within ICANN right now is one that struggles to adopt 
internal structures for due process and deliberation. For instance, 
once a policy proposal is made, it may be referred to one of ICANN's 
supporting organizations. In the case of the domain name supporting 
organization, the proposal goes to one or more ``constituencies'' or 
cross-constituency working groups; the constituencies think about it, 
come up with views, and put it back to the DNSO, which in turn makes 
recommendations to the ICANN Board. The ICANN Board takes a vote and 
comes to a decision. At that point an internal reconsideration process 
can be invoked by someone who feels that the decision is contrary to 
ICANN's structure and bylaws. If it gets past that, there is a 
structure emerging--still not here, to be sure--for an independent 
board of review, which then looks at a disputed issue and has the power 
to require the Board to explicitly come to a new judgment on the 
subject.
    One sees the same dilemmas arise in civil and criminal litigation, 
under the Federal Rules of Procedure, balancing the need for due 
process with the need to create and empower an ultimate closure--
preventing abuse by those who might make frivolous claims and simply 
tie up a policy within a structure for a long time. ICANN faces similar 
tradeoffs, and it must choose a structure to reach an appropriate 
balance.
    Funding is another issue. Somehow ICANN has to pay for itself. I 
think the domain name tax is a bad idea because it reinforces the 
notion that the right structure for domain name registration renewal is 
to pay by the name, and on an odd installment plan at that. (I'd be 
curious if anyone present today has any idea, apart from historical 
accident, why it makes sense to rent names by the year instead of 
``have'' them indefinitely--or at least renew without paying.) However, 
any entity that pays ICANN more directly could be thought of as having 
undue influence over the organization, and every funding model will 
involve trade-offs.
If ICANN fails
    So what are the scenarios if ICANN fails? I see three rough 
possibilities.
    First, one can imagine the creation of a ``Son of ICANN'' which 
would simply try to reconstitute a new organization to do better that 
which ICANN has not done so well. I am skeptical about the success of a 
second attempt because it may be difficult to energize increasingly 
cynical parties to this debate to try again for a new ICANN, and also 
because I am not sure it would be any better. The ICANN we have has 
plenty of flaws, but has also shown considerable progress since its 
inception under demanding conditions.
    Further, if someone feels he or she is going to lose out as a 
result of the actions of ICANN or its possible replacement, a perfectly 
rational approach may be to attempt to undermine the whole organization 
rather than live under what the person considers an undesirable 
decision. Therefore, there may always be attempts to destabilize, to 
restart the process leading to ICANN from scratch, to throw the dice 
again and see what might come out. This is not to say that any 
criticism of ICANN is the result of sour grapes; rather, that in a 
healthy environment there will always be criticism, and indeed some of 
it will call for ICANN's end.
    A second possibility is that ICANN's functions would be assigned to 
an inter-governmental entity. It is hard to imagine the US government 
alone trying to continue DNS management responsibilities solo for the 
very reasons stated in the White Paper. An international treaty 
organization is one possible way that governments could come to 
agreement on how this particular aspect of the Internet should be run. 
My personal guess is that this would be the likely outcome if ICANN 
were to fail. It's not clear to me that such an organization would make 
policies any more in touch with the Internet at large than a well-
function ICANN can. More important, as the historical context suggests, 
the power of the root derives from the fact that a critical mass of 
system administrators and ``mirror'' root zone server operators choose 
to follow it. A drastic turnaround in the management of Internet top-
level functions--either through a sea change in favor of much more 
aggressive government involvement, or one that purports to literally 
privatize the whole system (imagine auctioning it off to the highest 
bidder)--could result in abandonment of the network by the technical 
community.
    A third possibility is that the market is simply left to its own 
devices. In an important sense, this is already happening. For example, 
we have heard ICANN's claim that the only reason that root file 
dictates who gets to run .biz is because everyone chooses to look to 
the ``official'' root file--the ``IANA legacy'' root file intended for 
ICANN's custody--for the answer to that question. By everyone I mean 
network providers like AOL, and potentially even you and me. In the 
network control settings on almost every computer, there is a dialog 
box which we can edit, and there is software to make it especially easy 
to edit that box, that says: ``This is the computer from which I will 
get my domain name information.'' It need not be one that has any 
allegiance to ICANN or to Network Solutions, for that matter.
    The problem is that there is such benefit in interoperability that 
it is difficult to switch out of a system that everyone now has bought 
in to. To the extent that it was done, addressing on the Net would 
become more confusing (``You can reach me at 
[email protected]@icannroot, but not at 
[email protected]@competing root''). That's why the prospect of so-
called multiple roots strikes me as a remote one. What would ultimately 
happen is ``tipping behavior'' through which one naming scheme would 
predominate and somebody would end up with control of a new root--a 
private actor answerable only to itself or its shareholders--and then 
antitrust or other mechanisms would have to apply to keep that private 
actor in line. This is indeed what will happen if current private 
naming schemes take off.
Conclusion
    Is ICANN out of control? If by this one means a bull in the china 
shop, rampaging this way or that, unaccountable to anything but its own 
inexplicable motives, the answer is no. I worry about the opposite 
problem: ICANN has inherited an extraordinarily difficult situation, 
with high expectations all around, and with almost no discretionary 
room to move. The set of realistic options for substantive policymaking 
and procedural structure is quite small: for better or worse, ICANN 
faces swift dispatch if it strays too far from the desires of any of 
the mainstream Internet technical community; the United States and 
other governments (including executive, legislative, and judicial 
branches, which in turn may not agree); and powerful corporate 
interests. Indeed, those representing the ``little guy'' and/or those 
wanting a maximally unregulated Net--one where political concerns have 
no place in technical management--are quick to worry about capture of 
ICANN by one or another of these interests.
    The key in this critical transition period is to give ICANN enough 
rope to either demonstrate that it can heft what it needs to in order 
to foster trust and respect among disparate interests (the kind of 
respect that has even the ``losers'' in a given policy question know 
they got a fair shake), or to show a conclusive inability to rise to 
the challenge. Better that we know now rather than later.
    For the Berkman Center's part, we want to continue to be one voice 
among many pushing ICANN towards openness, and recognition of public 
interests that may not be well represented or fully aware of the true 
stakes of some of the architectural decisions that ICANN--and other 
elements of the technical community--are coordinating.
    I am aware that the Berkman Center's participation in ICANN--
activities such as webcasting its meetings, developing remote 
participation systems, conducting a membership study--is itself a form 
of support to the organization. If we thought ICANN were corrupt or 
renegade, we would cease such support in a heartbeat. So far as I know, 
ICANN is neither. It is making its share of mistakes, in a territory 
that is uncharted. Our own faculty have joined others who are pointing 
out its deficits as they materialize. Oversight of its work is 
critical, and indeed hearings like these are an important way of 
helping it identify and correct them. But there will be inevitable 
letdowns as we shift from the lofty rhetoric of possibility to the hard 
facts of building an organization that works--retaining or rebuilding 
the spirit of openness, representation, and trust among stakeholders 
who have differences that did not materialize yesterday and which will 
not disappear tomorrow.

    Mr. Upton. I appreciate your eggs being done.
    A couple of questions, and sadly we are going to have a 
series of votes very shortly. Normally, we would have started 
this hearing earlier, but in deference and certainly out of 
respect for the two Officers that were slain, there was a 
memorial service in the Capitol today. That is why we could not 
start until 11 a.m. I have a couple of questions. I am going to 
raise them and let each of you maybe make a quick comment, and 
then move to Mr. Klink.
    One of the things that I have been concerned about always 
is the current makeup of ICANN's board; whether or not it fully 
reflects the diversity of the Internet community. What major 
voices are missing and who should they approach as they look to 
expand the board in the future?
    The other question that I have that I would like each of 
you to answer, we will go down, is do you believe that it is 
appropriate for ICANN to in fact develop the policies to 
eliminate cyber-squatters? Where should we head in that 
direction? If you would like to comment, Ms. Barry, that would 
terrific, on both of those. We will just move down.
    Ms. Barry. Okay. My first comment to the first part of the 
question is that individuals are not appropriately represented 
by ICANN, in my opinion. There is no individual constituency 
where individual domain name holders have any kind of say 
whatsoever in the ICANN procedures. I have just been elected to 
the Steering Committee of what is trying to become the 
individual domain name owners constituency to the domain name 
supporting organization, but it has not yet been given the go 
ahead by ICANN to be one of the constituencies.
    Regarding cyber-squatting, first, there is no definition of 
cyber-squatting. You can ask 20 different attorneys or 20 
different law makers and they will have 20 different 
definitions to cyber-squatting. There have never been any cases 
won by so-called cyber-squatters in any court in the world; the 
U.S. included.
    Any time that something even approaching cyber-squatting 
has come up, there have been some rather creative meanderings 
by the Judiciary to make sure that this is not allowed. I think 
it is a judicial issue. I do not think that it is an issue that 
should be addressed by a non-governmental organization or a 
non-Judicial organization.
    Mr. Upton. Other than the Congress.
    Ms. Barry. Other than the Congress, of course.
    Mr. Upton. Thank you. Mr. Miller.
    Mr. Miller. Mr. Chairman, I believe that the current people 
on the board are doing an excellent job, but I would agree to 
some extent with Ms. Barry's comments that we need to figure 
out how to get the user community broadly defined. I think the 
interim board is trying very hard to work with various groups 
to figure out how to do that systematically. It is not an easy 
task. It is something that I think will be achieved.
    Also, as was said on the earlier panel, I think there are 
certain regions of the world which are not adequately 
represented areas, such as Latin American and Africa. I think 
there is going to be a conscientious effort, to the extent 
possible, to reach out to those regions of the world because 
this is a universal medium.
    We need to make sure that all parts of the world are 
included. I commend the interim board for moving their meetings 
around the world and trying to get maximum input from other 
regions of the world, other than North America and Western 
Europe.
    Second, on the issue of cyber-squatting, I think that this 
in fact is an important issue. ICANN is appropriately trying to 
address it. There has been a lot of effort put in by WIPO. 
While one could argue whether it is a technical issue or a 
policy issue in terms of the operations of the domain name 
system, it is appropriate for ICANN to address it.
    Mr. Upton. Mr. Weinberg. Do you have any comments?
    Mr. Weinberg. ICANN's current board is not representative 
of anyone. I think it would be hard to argue that it is. With 
the formation of the constituencies, I can look at 
representatives from the protocol supporting organization who 
are essentially engineers, what has been referred to as the 
geek aristocracy; representatives from the address supporting 
organization who are, for the most part, engineers; both of 
which I firmly approve of; representatives from the domain name 
supporting organization who will be people involved in the 
business of or interested in the business of registering domain 
names.
    None of that will suffice to make it representative either. 
On the other hand, ICANN has announced its intention to have 
members elected at large by the general membership. I am 
hopeful that will give it much more of a broad-based electoral 
constituency.
    On cyber-squatting, I have expressed my views why I think 
this, in a perfect world, would be outside ICANN's brief. In 
fact, ICANN action on cyber-squatting is going to happen. The 
reason it is going to happen is because business and trademark 
interests have made it clear that they will vehemently oppose 
the addition of any new generic top level domains, unless they 
get a trademark dispute mechanism they can live with.
    Various others of us, myself included, really want new 
generic top level domains. An agreement is going to be reached 
there. It is going to include new generic top level domains. It 
is going to include the trademark dispute resolution, even 
though I would prefer not to have that last part.
    On Congress, I just want to say there is a God-awful cyber-
squatting bill that was marked up on the other side of the Hill 
this morning. They know this body will be sensible enough not 
to have anything to do with it.
    Mr. Upton. I will not provide editorial comment on the 
other side. Mr. Zittrain.
    Mr. Zittrain. First, on the issue of major voices missing. 
On the current board, since we do not know how they were 
picked, it is hard to say whether each is meant to represent a 
distinct interest. So far as I can tell, that is not the case. 
It is meant to be a collective; just sort of a commission-like 
structure.
    Going forward you say well, what structures would help the 
board to have a broadly representative set of people? As 
Professor Weinberg described, this is kind of a bi-cameral 
structure to the board. The supporting organizations met to 
represent the technical community. Of course, participation 
there is to the extent that it is open. Also, whether it 
welcomes others who have an axe to grind.
    Then the other half is the at-large membership. The key 
there is how to make it grassroots. How to actually have it 
represent a good cross section of all of us, rather than sort 
of the astroturf just sort of minded by the various interests 
that have clear interests at stake, and who are not bored to 
tears by this stuff, and then load the membership that way.
    That is a difficult decision. The Advisory Committee on 
Membership has put forward some recommendations. I understand 
there will be a motion in Santiago taken to make that happen. 
On cyber-squatting, it is too bad that many American businesses 
woke up to the Internet a little bit later than others, and 
when they got there, found their names were taken.
    Hertz.com was originally in the hands of a speculator. 
MCI.com was in the hands of Sprint. They managed to work it 
out, through legal means, as Ms. Barry was describing. I am 
generally against heavy-handed ways in which ICANN would walk 
into that morass. There may be pressures to put them there. 
Somehow, they are going to have to sort it through.
    Mr. Upton. Thank you. Mr. Klink.
    Mr. Klink. Let me start off, in the previous panel, I 
suppose you all were in the room. Everybody else was. The 
Commerce Department and Network Solutions seemed to kind of 
agree on the fact that there would be an unacceptable 
instability if NSI did not maintain the monopoly on the 
registry and did not allow other companies to be able to come 
in and act as registrars and compete.
    A lot of people have suggested to us, prior to today's 
hearing, that there is a game of chicken going on here. That 
NSI is kind of playing a game. My question is what do you think 
would happen? Would the Internet come crashing down if NSI were 
to walk away and say, we are not getting what we want? We are 
going to pull out. We decided we are going to go invent a 
competing type of system. Let me start with Ms. Barry and work 
down.
    Ms. Barry. There has been an old adage on the Internet that 
the Internet will route around censorship. I believe that it 
will also route around instability. There have been several 
occasions where NSI has had significant difficulties with their 
operations. The Internet did not come crashing down. There were 
some difficulties while people were figuring out what was 
happening.
    Even when large trunk lines going to large carriers like 
Sprint, UUNET, or whomever go down, the Internet does not end. 
People route around it. One popular misconception is that 
running a route server is something that is magical, and 
difficult, and all of that. As a matter of fact, there have 
been several route servers that have been in operation besides 
the ones that are running the .com, .net, and .org matrices.
    There have been several alternative route servers and 
alternative route structures that have been up and operational. 
So, I think that it might take a little bit of time, but the 
Internet would prevail over any single company.
    Mr. Klink. Mr. Miller.
    Mr. Miller. I guess a couple of points, Mr. Klink.
    No. 1, I think there has been an unfortunate tendency to 
demonize ICANN and NSI. I do not think either of them are bad 
guys. I think they are both trying to make the system work 
because it is, as Professor Zittrain said, a relatively fragile 
system with a lot of it based on consensus.
    I was thinking this morning before I came to the hearing if 
John Postel were still alive and he were running the Internet 
all by himself, which he was trying to transition out of that, 
what kind of hearing would we have here today? People worry 
about consensus now. That really was, in some sense, a strange 
one-man consensus.
    To answer your question specifically, I do believe that 
there is a lot at stake here. This is not an easy system to 
run. I have been to Network Solutions' operations in Herndon. I 
have met with Mr. Rutt. Mr. Daniels is the chairman and was the 
acting CEO before that. It is getting more difficult and more 
sophisticated every day because of the growth.
    Is it going to be the end of the Internet? I do not want to 
be apocalyptic, but it would be terribly disruptive if the 
chicken game ended up either in court, or in the Commerce 
Department trying to remove NSI, against its own will, from 
running the registry. Yes, I think it would be terribly 
disruptive. I am optimistic. I believe that Mr. Rutt and his 
leadership team wants to work with ICANN. I believe ICANN wants 
to work with Mr. Rutt.
    I believe the Commerce Department is playing a very good 
shell diplomacy role, as Mr. Pincus said. I do not want to be 
Pollyannaish about it, but I do not think it is going to do 
anybody involving the Internet any good to sit here and to try 
to demonize either side.
    I commend this subcommittee because I think this hearing 
this morning probably gave both sides a little more impetus to 
move a little more quickly.
    Mr. Klink. I hope that it does not come across that the 
members here are demonizing either ICANN or DNS. We are just 
trying to figure out if there are checks and balances, and what 
is the stimulus for everybody to do the right thing as this is 
invented? As everybody knows, we are all on new ground here. 
Mr. Weinberg.
    Mr. Weinberg. NSI would like full control over the .com 
registry and the .com data base, preferably with a fig leaf of 
somebody else's control. If they say we are going to walk away 
and accept nobody's control whatsoever, the U.S. Government has 
two choices.
    They can either say fine, we concede, in which case NSI 
gets that control. I think that would be bad from a perspective 
of consumer welfare, because we would have a monopolist 
controlling 75, 80 percent of the global market, much more, 
much, much more of the U.S. markets, perhaps over 95 percent, 
acting like a monopolist and doing the things that monopolists 
do. That would be a problem.
    Commerce's other alternative is that Commerce could seek to 
recompete the competitive agreement, or Justice could bring a 
prosecution. That would lead to litigation. Litigation would 
take several years--which is to say in Internet time several 
centuries--and sure would be a mess.
    Mr. Klink. Mr. Zittrain.
    Mr. Zittrain. There are definitely forces on each of the 
parties who want to try to come to an agreement, no doubt at 
the 11th hour, because indeed it is a game of chicken. On the 
Commerce Department's half, as they have explained, they do not 
want a lawsuit.
    A lot of what has been going on has been improvisation of a 
sort; improvisation I think in good faith. It is difficult for 
me to second-guess, but improvisation none the less. On ICANN's 
part, a big lawsuit would be quite difficult, even from just 
the financial end of having to deal with it.
    Third, from NSI's part, I agree, they are not to be 
demonized. They are a rational profit maximizing corporation 
with duties to shareholders to gouge every cent they can to the 
limit of the law. God bless them for doing it, but you need a 
structure around them, that then cabins their behavior 
appropriately with respect to the public interest. There exists 
a public interest.
    Anti-trust law generally tries to get at it when there are 
market failures or only one person having great market share 
that is not easily contested. That is the situation we have 
here. It is one for which NSI will play out its hand and the 
other hands will play. I believe this committee has a role to 
play at that table and has been doing so today.
    Mr. Klink. Do we find ourselves in the position where 
government has created a monopoly and now does not know what to 
do with it? I always get that sense to that.
    Mr. Zittrain. I characterize it as a position where 
government allowed a contractor to do what was thought of as a 
chore, did it on a 5-year contract, eons in Internet time, and 
it is somewhat, if I may use the reference like the Beverly 
Hillbillies. You find yourself on top of a gold mine.
    Mr. Klink. Gold; Texas tea.
    Mr. Zittrain. Exactly.
    Mr. Klink. Does anyone else have a comment on that?
    Mr. Miller. Mr. Klink, like in a concession situation, if 
the government says we are going to let somebody come into 
Yosemite Park and manage the food service, well they cannot 
allow a true competitive situation because Yosemite is not 
going to be suddenly filled with Burger King, next to a 
McDonald's, next to a Kentucky Fried Chicken.
    You are only going to have one food service there, but you 
need to have a high quality food service, who has to be able to 
make a profit. So, at the end of the day, there still has to be 
the possibility that, that has to turn over. So, I do not think 
anybody sat there and said when we opened this operation, as 
Professor Zittrain said, we were going to do it in perpetuity.
    I do think that the government realized that obviously NSI 
was going to be a for-profit corporation and was going to 
behave accordingly.
    Mr. Weinberg. I just wanted to note here, by the way, the 
whole DNS controversy began in 1995, when NSI went from cost-
plus reimbursement to actually charging a fee to the public, 
which was in the amendment negotiated with the National Science 
Foundation to the cooperative agreement.
    This, No. 1, gave NSI the beginnings of the gold mine that 
later accrued. No. 2, immediately sparked calls for the 
addition of new global top level domains, because all of a 
sudden, people all over the world started saying, well, why 
should we be stuck with them, and the prices they are charging, 
and the service they are offering?
    Mr. Klink. Let me just compliment the majority. This was an 
enlightening panel. I think you put together a good hearing. 
They have given us a lot to think about.
    Mr. Upton. I appreciate working with all staff.
    I would just like to say at this point, that you all may 
have heard these buzzers and beepers. We do not have a lot of 
time left on this vote. Without objection, I am going to 
certainly allow all members of this subcommittee to pose 
questions in writing. If you could respond to that, that would 
be terrific.
    I am going to excuse this panel.
    I am going to ask unanimous consent. I have not had a 
chance to clear this with Mr. Klink that Mr. Pickering is here, 
though not a member of this subcommittee, that he be allowed to 
ask some questions and then we will adjourn until I get back.
    Mr. Pickering Good afternoon.
    As many of you may know that in my previous committee 
assignment on the Science Committee, I have served as the 
Acting Chair on the Basic Research Subcommittee, which had the 
jurisdiction and the primary role, as were trying to debate and 
look at the transition of domain names and the work that NSI 
was doing, at that time, under the contract with NSF, to 
private sector competition.
    It was my hope, at that time, that we would see our hopes 
realized. That it would be a transition through a voluntary 
private sector, non-profit or profit organization that would 
setup the governance, as well as the structure that would lead 
us to competition.
    However, my concerns at that time that I hope would not be 
realized, I am fearful are being realized, and that is how do 
you have the accountability for the governance for ICANN or 
whatever entity, and how do you ensure that NSI goes to 
competition? It appears that we are running into the problems 
and the concerns.
    I hope that we will be able to work those out. My concern 
is do we need additional authority for NTIA to ensure that we 
reach the competitive goals? Do we need to ensure some type of 
ongoing oversight to ensure the accountability of ICANN.
    I have said it before and continue to believe that this is 
of enormous importance. This is, in essence, the Constitutional 
Convention, or the equivalent of what we saw in Philadelphia at 
the beginning of our country. This is the constitution of the 
int.
    It establishes the governance, the checks, and the 
balances. I am concerned as to where we are today; so concerned 
that I might recommend to the members of this committee and to 
the full committee that when we look at NTIA reauthorization, 
that perhaps we need to put a moratorium or a freeze on any 
further action until these issues are sorted out.
    Until we are adequately convinced that the issues raised in 
the two panels today can be worked out, where we have both the 
accountability, the right governance structure, that we avoid 
regulation, whether it is by government or by some elite group 
hand selected, and not open to accountability, and that we 
ensure that NSI goes to a competitive policy.
    So, I want to ask, one, Dr. Weinberg, I believe you had 
some additional recommendations or steps that we should take in 
your testimony that you did not get to. If you could, what 
recommendations would you make? Do we need to step in just to 
have a holding period until these issues are resolved and 
adequately addressed, in an open forum, and an open discussion?
    Mr. Weinberg. My bottom line, ultimately, is that you do 
not need to step in. That I think ICANN has a long way to go. I 
think NSI surely has a long way to go. But right now when I 
look at the Commerce Department, it seems to me that the 
Commerce Department is basically doing all of the right things.
    From time to time, I think the Commerce Department is being 
a little too timid in its relationship with NSI, but that is 
the kind of backseat driving that is easy to do if you are not 
actually there in negotiator seats. I think the best thing this 
committee can do is throw its support behind the Commerce 
Department, which is grappling with a difficult situation, and 
I think doing the best that can be done with it.
    Mr. Pickering. The question would be does the Commerce 
Department or does NTIA have adequate authority to ensure the 
objectives that they have set forth? One of the reasons that we 
went this route, one, I have no greater confidence that 
Congress will sort these things out any better than NTIA or I 
can.
    By going this route, we could avoid the Administrative 
Procedures Act, a lot of the bureaucratic delays of trying to 
have this transition work as quickly as possible, and also from 
the from the private sector. The concern is though that we are 
reaching an impasse.
    It appears that there is a conflict or a dispute over 
intellectual property; who owns or controls the data base? Did 
we, by trying to go this route, also leave us open to not 
having the authority or the accountability that is necessary to 
have a successful transition and a successful constitution?
    Mr. Weinberg. I think that to the extent there are gaps in 
Congress' authority, they may not be reparable now. Let me give 
you an example. NSI claims intellectual property rights over 
the contents of the .com registry. I personally think that is a 
silly argument. Indeed, of course they do not, as a matter of 
straight intellectual property law.
    If they are right, if they do, then it is not open to this 
Body to pass a law saying you do not have it. If they in fact 
own these property rights, then Congress cannot divest them of 
it.
    So, one way or another, that is something that may have to 
be resolved in court as opposed to by legislation, unless 
Commerce and NSI can come to some sort of negotiated agreement 
to that question. So, I have trouble thinking of exactly what 
action by the Congress would in fact solve the problems 
currently on the table.
    Mr. Pickering. Well, it could be simply a freeze in action, 
freezing action. It would not be to prescribe, but to force the 
negotiations that we would hope would resolve the issues, but 
to do it in a way that would have accountability and openness 
in that process.
    Mr. Miller. Mr. Pickering?
    Mr. Pickering. Yes, Mr. Miller.
    Mr. Miller. It seems to me, to some extent, the most 
important thing this subcommittee could do is plan to hold 
another oversight hearing in or about November. I think 
November is important for two reasons. No. 1, by that time the 
interim board is committed to try to have at least the first 
nine elected members on the board, which s very important in 
terms of the representation issue, which has taken some of the 
time of this subcommittee hearing today.
    No. 2, the issue of openness will have been dealt with or 
not dealt with, depending on whether the interim board does 
actually open the meetings or not. So, you will have a lot of 
those questions answered or perhaps dissatisfaction if in fact 
they have not opened the meetings.
    Third, the issue of funding will have to be dealt with 
because, even though Ms. Dyson is optimistic, they cannot 
continue to operate running up hundreds of thousands of dollars 
of debts each month. Something is going to have to be done in 
the near future.
    Fourth, you heard commitments during the subcommittee 
hearing from both sides, from ICANN and NSI, to try to work 
quickly to resolve these issues of dispute, which are of such 
concern. You will have by that time, I think the subcommittee 
will have the right to say, you promised this 4 months ago. You 
were going to make a lot of progress, or maybe even complete 
the contract negotiations, that there be real competition.
    I think at that point in time, if you still were not 
getting any satisfaction in those four areas, then you have a 
lot of questions to ask about perhaps the need to step in. I 
think it would be premature at this time to do so.
    Ms. Barry. Can I make a comment to that?
    Mr. Pickering. Yes, Ms. Barry.
    Ms. Barry. I just wanted to mention that it is a very 
common mistake to think that the Internet is all about Commerce 
or about E-commerce. It is essentially one of the best 
communications mediums that has ever been created.
    To have the Commerce Department overseeing, as it were, the 
Internet leaves out a vital component which is the expression, 
the freedom of expression, the free speech interests, and all 
of that. As you can tell, most of the testimony, and most of 
what people have been saying about the Internet have revolved 
strictly around commerce, commercial interests, trademark 
interests, and things that should frankly be legislated; 
expansion of the--Act in ways that were never contemplated when 
it was passed by Congress. So, in my opinion, a freeze might be 
the right thing to do while all of these aspects are looked at.
    Mr. Pickering. Mr. Zittrain.
    Mr. Zittrain. In some sense, seeing the proceedings unfold 
as they have over the past year or so has been watching a 
faucet drip. Nothing that drastic has happened in any one 
quantum. What existing accountability there is for ICANN, given 
that we are still in the stage prior to its own bi-cameral 
structure coming into places, and working out a membership 
scheme, et cetera for internal accountability, really rests 
with the Commerce Department and the U.S. Government, 
generally.
    There is a contract between ICANN and the government. I 
understand that expires in October 2000. At any time prior to 
that, I could imagine that the Congress could weigh in, in some 
way, and the Commerce Department would be able to take back any 
crown jewels that one was thinking were being handed over 
through the process of that MOU.
    So, it is not as if you are missing a chance now, if you do 
not seize it to do something about it. With respect to NSI 
accountability, I suppose some big stick is needed by the 
government if it is to be a respectable negotiator at the table 
over such things. I agree with Professor Weinberg that it is 
not a very compelling legal argument to assert intellectual 
property control over the data base by NSI.
    If it does end up in a lawsuit though, that again could 
stretch things on and, in effect, would be a moratorium of 
sorts. I just want to leave with the thought that I am not 
sure, it is not just a gold mine. I do not know why it is a 
renewable resource.
    Oddly, we pay by the year for these names, even once they 
are registered. Just every year you come back and you put more 
money into the hopper. Exactly what relationship that has to 
the underlying economics of the system has never been clear to 
me. It is one reason why ownership of that data base is such an 
issue.
    You heard NSI today say we have over 5 million registrants 
as our customers. I take it that is no accident. They are 
claiming all existing registrations, prior to this only recent 
test bed period, as their own, and therefore as their customers 
to handle the renewal each year.
    Mr. Miller. With all due respect to that last comment, it 
is important to realize, as Mr. Rutt said, that the pricing is 
going to be changing. Maybe NSI is not moving quite as quickly 
as some of us would like, but the pricing model is going to be 
changing fairly quickly, both the fee that NSI is able to 
collect for its registry function as long as it is permitted to 
do that, as well as more importantly as Mr. Pincus said, the 
retail side of what the competing registrars are going to 
charge.
    We could find ourselves within literally weeks being down 
to $15 to $20 with no renewable fee, or down to $9 or even 
less. So, I think we should not get too hung up on that. Again, 
I think that is a short-term phenomenon and it is clearly going 
to change in the near future.
    Mr. Pickering. It also strikes to the heart of our dilemma 
here. Does ICANN have the authorization to charge a fee that 
some would interpret to be a tax without Congressionally 
granted authority? The same if they were to be setting policy 
now from a regulatory perspective.
    So, these are the dilemmas in going the route that we did. 
I understand why we did, in the hopes that it could be private 
sector-driven. That it would expedite and speed the transition. 
It would give the community affected, hopefully, the Democratic 
process to make the decisions for themselves.
    I still support those objectives and want to help any way 
that we can. The question is can we serve as a catalyst or to 
facilitate the resolution of the current disputes that we are 
seeing, and the resolution of some of the authority issues, and 
accountability issues that we are now confronting.
    Again, I believe it is very important that we get it right. 
This is the framing of the constitution, in my view, of the 
Internet. So, we cannot just sit back and have no role. I think 
it would be an abdication of Congressional authority. Again, 
having said that, I want a very limited role for government, 
and Congress, and the Department of Commerce, and a going 
forward role.
    I do think we are at a critical point. We do have these 
disputes that are outstanding. We have authorization issues 
that are outstanding. Perhaps we do need to find a way that we 
can play a role as a catalyst and a facilitator to make sure 
that it is done right, and that we get it right.
    I would appreciate any further input or insight that you 
all have as we go forward as we make decisions, as with the 
NTIA reauthorization, or any other mechanisms that we have 
through additional hearings.
    That we play a constructive role to make sure that all 
parties feel like, one, it is an open accountable system, and 
that the objective of competition is going to be realized. With 
that, I have no other questions, unless you have any closing 
statements that you would like to make.
    [No response.]
    Mr. Pickering. Mr. Upton, thank you very much.
    Mr. Upton. Thank you for your answers.
    We are going to have a series of votes in about 10 minutes. 
I appreciate your indulgence with us. Again, you may see 
something coming via your mail carrier. If you would respond 
fairly quickly, that would be terrific. You are now excused.
    The last panel includes three individuals, Mr. Richard 
Forman, Chief Executive Officer of Register.com; Mr. Kenyon 
Stubbs, Chairman of the Executive Committee of Internet Council 
of Registrars; and Mr. James Bramson, Counsel of America 
Online, Inc.
    We are going to get started fairly quickly. You all, I 
think, were here for some if not all of the earlier two panels. 
You know of our long-standing practice for taking testimony 
under oath. Do any of you have objection to that?
    [Chorus of nays.]
    Mr. Upton. If not, we also, as a part of the House Rules 
you are allowed to have counsel. Do any of you desire to have 
counsel with you?
    [Chorus of nays.]
    [Witnesses sworn.]
    Mr. Upton. You are now under oath. Mr. Forman, we will 
start with you before we get interrupted. Again, your comments 
will be made a part of the record; as will your entire written 
statement. If you could summarize it in 5 minutes or less, that 
would be terrific.

   TESTIMONY OF RICHARD D. FORMAN, CHIEF EXECUTIVE OFFICER, 
REGISTER.COM; KENYON T. STUBBS, CHAIRMAN, EXECUTIVE COMMITTEE, 
INTERNET COUNCIL OF REGISTRARS; AND JAMES R. BRAMSON, COUNSEL, 
                      AMERICA ONLINE, INC.

    Mr. Forman. Thank you, Mr. Chairman and members of the 
committee. I appreciate your inviting me to testify because my 
company and I, personally, are concerned about the rate of 
transition in the industry as it was laid out in both the White 
Paper and Amendment 11 to the cooperative agreement.
    We are very interested in ensuring that there is fair and 
equitable governance, and management of the Internet domain 
name system. As has been discussed today, NSI has maintained 
exclusive rights for the .com, .net, and .org top level domains 
up until recently.
    ICANN was created with the Internet community and a 
consensus in order to oversee the management of names. We have 
benefited from that process. We were the first registrar, the 
first competitive registrar, to go live along side Network 
Solutions.
    Just to try and give some brief background on the market, 
many projections are that the market is going to grow over 20-
fold over the next 4 years to approximately 32 million new 
names, 32 million new registrations, for a total market of 
about 100 domain names by the year 2002, 2003. Competition is 
going to help fuel that growth.
    It is also going to introduce new products and services 
built around a domain name. We are one of the leading 
registrars in the world. Our business model is geared toward 
trying to help small and medium-sized businesses grow, using 
the Internet, and by putting a domain name to work.
    The subcommittee hearing regarding Is ICANN Out of Control, 
we believe that there are three main issues that frame the 
issue of ICANN.
    One, participation in ICANN's processes by interested 
parties. What is the progress made to-date and with their fees? 
In terms of ICANN participation, I think that we all need to 
demand accountability from ICANN. We have personally been 
involved with every ICANN meeting. There is an open meeting at 
every ICANN session where there are public comment periods.
    Anyone who can get to the meeting is welcomed to go up to 
the microphone and testify. If you are unable to make it to a 
meeting, they have facilitated the Internet to provide remote 
participation. In fact, in the Singapore meeting where I was 
unable to attend, I was able to participate in that meeting 
remotely using Real Audio.
    In fact, questions that I had were asked during that 
session. So, I feel as though ICANN is an inclusive 
organization that encourages participation worldwide. There are 
many news groups that are out there. I think that one thing 
that ICANN can do in order to show that it is very interested 
and involved in some of the discussions is that it can take a 
more active role in some of the news groups, rather than just 
Esther Dyson or Michael Roberts participating.
    I think that the entire board would benefit by getting 
involved in some of the discussions. To-date, we think that 
ICANN has been very successful. They have accredited 52 post-
test bed registrars. That is in a period of, I guess the MOU 
was signed back in November. So, in a period of about 9 months.
    They have authorized 52 registrars. It has taken the U.S. 
Government about 2 years to put all of these plans together. 
So, I think that ICANN has moved aggressively to try and 
deregulate the market. ICANN's solutions are not perfect, but 
there are open meetings and an open interest in trying to solve 
those problems.
    In terms of their fees, I know that there has been a great 
deal of controversy over the $1 fee. It may not be the best 
solution, but ICANN needs to find some way to recover its 
operating costs. As discussed in Amendment 11, the fees for 
ICANN are to be provided by the registry and/or the registrar. 
So, we are comfortable with that $1 fee, just as we are 
obligated to pay Network Solutions a $9 per name fee.
    In terms of competition in the market, we believe that as 
this market grows and in order to help it grow and mature, we 
believe that all registrars must be on an equal level. There 
are two major issues regarding that. No. 1 is the domain name 
Internet .net and the contractual obligations that exist in 
this industry.
    The data base Internet .net has caused us major problems. 
Approximately 20 percent of all the customer service requests 
we get are a function of the fact that NSI controls the domain 
name Internet .net, which is making it very hard for us to 
offer our customers service that they demand.
    In terms of contractual obligations, we believe that all 
registrars, including NSI, should be obligated to sign the same 
contract with ICANN. We believe that the next step for the 
industry is that the Department of Commerce should be allowed 
to finish the process that it started out approximately a year 
ago.
    I do believe that there is a substantial risk if the 
current process is derailed, that foreign governments may not 
continue to want to ascribe to the U.S. Government's management 
of Internet domain names. So, I hope that Congress and the 
committee support the current efforts as a road toward 
deregulation.
    Thank you.
    [The prepared statement of Richard D. Forman follows:]
       Prepared Statement of Richard D. Forman, CEO, register.com
    Mr. Chairman, Members of the Committee: It is my pleasure to appear 
before you today as a representative of register.com, inc. 
(``register.com''). I commend the Committee for holding this hearing to 
spotlight the issue of Internet Domain Name System Privatization--an 
issue of vital importance as the Internet moves into an era of massive 
growth and increased commercial use.
    I appreciate the Committee inviting me to testify because I am 
concerned about the pace and the process by which the industry is 
transitioning to a more competitive and open environment. My testimony 
is organized into the following sections: Overview; Industry and 
Company Background; ICANN's Process and Procedures; Fair Competition; 
and Next Steps for the Industry
                                overview
    One of the interests of register.com is to ensure fair and 
equitable governance and management of the Internet's domain naming 
system. Network Solutions, Inc. (``NSI'') (Nasdaq:NSOL) has maintained 
exclusive rights under a government contract 1 to serve as 
the sole provider of generic top level domain names (``gTLDs''), 
primarily with suffixes .com, .org, and .net, since 1992. The majority 
of domain names that are issued fall under this classification. In 
April 1999, the Internet Corporation for Assigned Names and Numbers 
(``ICANN''), a not-for-profit entity recognized by the Department of 
Commerce to oversee the management of Internet names and addresses, 
selected register.com as one of five companies worldwide to be a test-
bed registrar. My Company, register.com, was the first of these five 
registrars to successfully begin registering gTLDs alongside Network 
Solutions, Inc.
---------------------------------------------------------------------------
    \1\ The Cooperative Agreement originally executed between the 
National Science Foundation and NSI
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    By way of introduction, please allow me to present some information 
about the growth of the Internet marketplace and my Company, 
register.com.
                    industry and company background
    The market for domain names is projected to grow at least 20 fold 
over the next four years, reaching more than 32 million new 
registrations and achieving revenues in excess of $2 billion annually 
by 2002 2. According to SEC filings by Network Solutions, 
Inc., new generic top-level domain registrations were averaging 
approximately 1,000,000 names during the first quarter of 1999. This is 
a dramatic increase from the average quarterly volumes during previous 
years. I believe this high level of growth will be sustained as 
Internet use continues to penetrate all aspects of society and I 
believe we will see the market grow to over 100 million domain names in 
the coming years.
---------------------------------------------------------------------------
    \2\ register.com company estimates
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    The recent introduction of competition by way of new registrars 
into the industry will facilitate (i) new products and services built 
around a domain name (ii) improved levels of service and (iii) an 
acceleration of the overall growth of the market. Register.com 
currently offers domain name registration services along with technical 
name services capabilities 3, effectively the same service 
package as NSI, for approximately one-half the price ($70 for 
register.com versus $119 for Network Solutions, Inc.).
---------------------------------------------------------------------------
    \3\ DNS services
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    My company, register.com, is one of the leading domain name 
registrars on the Internet. We estimate that we have captured a 
substantial portion of the global domain name market since launching 
our registration service. Our business model is geared towards helping 
small and medium sized companies worldwide establish and grow their 
business by using the power of the Internet.
    Register.com has twice been ranked as a Top 100 Web Site by PC 
Magazine, a Ziff-Davis publication, and we were recently named one of 
Fortune Magazine's Top 25 Products to Watch. The Company has also been 
featured in numerous publications and news services such as the Wall 
Street Journal, the New York Times, CNBC, CNNFn, Bloomberg, Fox News 
and WABC-TV.
      ``is icann out of control?'': icann's process and procedures
    The Committee is meeting to review the facts regarding the 
transition of the management of Internet names and addresses from the 
U.S. Government to ICANN, an industry led not-for-profit corporation. 
The interests of ICANN and NSI will undoubtedly be inconsistent given 
that ICANN is trying to reduce NSI's monopoly power and create a level 
playing field for all registrars.
    There are three main issues that must be discussed to fully 
understand the debate:

 Participation in ICANN's process
 Progress made by ICANN
 ICANN's proposed fees
    ICANN has achieved widespread recognition and participation from 
various individuals, interest groups and commercial enterprises 
worldwide. It has also demonstrated significant progress in 
deregulating the domain name registration market and created the 
foundation for a more permanent management structure. Despite some 
growing pains and a very limited budget, ICANN is indeed moving in the 
proper direction.
ICANN Participation
    Among the criticisms leveled against ICANN has been that board 
meetings, as well as several organizational and policy development 
meetings, have been closed. ICANN's board cannot realistically operate 
and make difficult decisions in an open environment with hundreds of 
participants. Some of the most vocal critics of ICANN have, in fact, 
been deeply involved in the process but have been unhappy with the 
results. We should all demand accountability from ICANN for its 
decisions and, thus far, the board has showed its responsibility in 
this regard. While it is true that board meetings are closed, ICANN has 
fostered widespread participation in the deregulation process and the 
changing environment through a variety of means, including the 
innovative use of technology.
    I personally participated remotely (from New York) in one of the 
ICANN meetings held in Singapore by linking up electronically via the 
Internet. My comments were duly noted and my questions were indeed 
asked and answered by the meeting's organizers and attendees, 
respectively. In fact, to my pleasant surprise, my question sparked a 
further discussion at the conference.
    ICANN's board has also been criticized for their lack of 
participation in the various Internet domain name related newsgroups. I 
believe that these members should be more assertive and involved in 
these newsgroups. Over the past two months alone I have received over 
8,000 e-mail messages as a participant in these various groups. Many of 
these messages come from individuals or businesses that have an 
interest in the evolving market and want to express their opinions. 
Periodically, Esther Dyson 4 and Mike Roberts 5 
contribute to the newsgroups; however, few, if any, of the other board 
members participate. This lack of participation creates an impression 
among many of the involved parties, mainly concerned commercial 
entities and individuals, that ICANN board members do not care or do 
not appreciate the issues being raised. I do believe that they care, 
but their lack of participation sends the wrong message.
---------------------------------------------------------------------------
    \4\ Interim Chairman of ICANN
    \5\ Interim President & CEO of ICANN
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ICANN Progress
    ICANN has been relatively successful in the short time it has been 
in existence. ICANN grew out of a U.S. Government mandate and the grass 
roots efforts of many parties, in effect, an industry consensus that 
was painstakingly reached over a period of years. The White Paper, 
published by the Department of Commerce, took into account the thinking 
of the entire industry. In only nine months from inception ICANN has 
accredited five test bed registrars and 52 post test bed registrars and 
has introduced competition into the market. At the same time, the 
Internet community and ICANN conceived of and recognized constituencies 
to help influence the evolution of the industry. While perhaps not 
providing perfect solutions, ICANN did indeed reflect workable 
compromises acceptable to a large majority of the interested parties 
representing individuals, corporations, industry trade groups and not-
for-profit organizations.
ICANN Proposed Fees
    There has been considerable controversy over ICANN's proposed $1.07 
fee per registered domain name. Given ICANN's status as a not-for-
profit entity, there must be some mechanism for ICANN to recover its 
operating costs, without which it will be unable to continue its work. 
Its funding should come from the registry and registrar community as 
clearly written in Amendment No. 11 to the Cooperative Agreement. I 
view the proposed $1.07 fee as part of the cost of doing business 
similar to the registry fee.
                            fair competition
    As the industry grows and matures, it is becoming increasingly 
important for the governing bodies to create a level and equal playing 
field for all registrars. Until a few weeks ago, NSI had maintained a 
monopoly over domain name registrations. Going forward, NSI, in spite 
of being a legacy operator, must be obligated to comply with the same 
terms and conditions as all other registrars. I strongly believe that 
the following issues will greatly impact the introduction of fair 
competition into the domain name market:

 internic.net
 Contractual obligations
 Prepayment
The internic.net domain name
    A key issue in this debate is NSI's claim of ownership to the 
internic.net domain name. Internic.net and its corresponding trademark 
are owned by the U.S. Government. For the past seven years, 
internic.net has been considered a public resource for the entire 
Internet community. All public documents, programming books, marketing 
links and pre-programmed computers refer to the government owned 
internic.net as the authoritative source for all registration services 
and domain name registration data. In terms of registration services, 
NSI has mis-appropriated the internic.net domain name and is 
redirecting traffic to its own registrar site networksolutions.com. In 
doing so, NSI has provided itself with a clear, unfair and unauthorized 
competitive advantage. In terms of domain name registration data, the 
internic.net database and corresponding WHOIS 6 services now 
refer only to domain names registered by NSI, not to those of any other 
registrars. NSI has thereby caused confusion for consumers, ISPs and 
many other industry players.
---------------------------------------------------------------------------
    \6\ WHOIS is a term that describes both a program and a database 
used to look up domain name registration information
---------------------------------------------------------------------------
    A significant number of customer service issues my Company handles 
are caused by this issue alone. Twenty percent of all customer 
inquiries we have received since the launch of our service have been 
about this issue. Following is a recent example of customer inquiry to 
my Company regarding this confusion:
        ``I registered my domain name with register.com very soon after 
        they became able to handle such registrations themselves. I 
        found their service to be very good. The one problem I had is 
        that while their site showed my domain in their whois directory 
        immediately, if you searched through Network Solutions (which 
        is where you get if you start with Internic), they did not show 
        it. Thus, we had problems for our first week with some smaller 
        ISPs not showing our site at all (and blaming it on this 
        directory problem) and (at first) even our web host being leery 
        of this new procedure. However, everything seems to be 
        straightened out now, and I would hope this procedure will get 
        smoother as we go along.''
Contractual Obligations
    An inequity among registrars revolves around the ICANN 
accreditation agreement, which all accredited registrars are obligated 
to sign. The 57 accredited registrars have already signed or have 
agreed to sign this agreement. To date, NSI has refused to do so, 
asserting that it does not agree with ICANN's terms. It is imperative, 
however, that all registrars, including NSI, work under the same 
contractual rules and obligations.
Prepayment
    A major requirement incorporated in the ICANN agreement is that 
``registrars shall not activate any registration unless and until it is 
satisfied that it has received payment of its registration fee.'' I 
support this prepayment requirement and believe it will control 
cybersquatting (registering names with the intent to sell them for a 
much higher price) among abusive registrants who can register, at no 
cost, a domain name that infringes another party's trademark rights. 
NSI, because it has not yet signed the ICANN contract, does not require 
pre-payment. As a result, NSI can give better payment terms to its own 
resellers (not requiring prepayment from them) thereby giving NSI a 
significant and unfair competitive advantage over other registrars who 
are playing by the rules laid out by ICANN.
                      next steps for the industry
    Mr. Chairman, the process laid out in the White Paper, including 
the recognition and authorization of ICANN, was intended to create 
competition in the generic domain name space and to transition the 
management of Internet names from the U.S. Government to a neutral, 
not-for-profit, industry developed third party. While we have made 
great strides, the Department of Commerce must be allowed to finish the 
deregulation process they have begun. NSI must formally recognize ICANN 
and its authority. Without such action, the entire process and the 
further growth, development and stability of the Internet may be in 
jeopardy.
    By empowering the Department of Commerce to authorize ICANN to take 
responsibility for transitioning the management of Internet names and 
addresses from the government to industry, the U.S. Government is 
allowing the Internet to grow and mature into a global resource. If, 
however, this Committee delays or impedes the process, rather than 
supporting and correcting its minor flaws, I fear that the U.S. will 
lose the competitive and economic edge it currently has in the Internet 
space. For the benefit of the U.S. interests, I believe we should 
follow our present course, which will accelerate deregulation, 
innovation and competition.
    Mr. Chairman, Members of the Committee--it has been my pleasure to 
share my thoughts on this subject with you today. I hope it is clear 
that I have both a professional and personal interest in this vital 
issue.
    Thank you for the opportunity to speak with you today.

    Mr. Upton. Thank you. Mr. Stubbs.

                 TESTIMONY OF KENYON T. STUBBS

    Mr. Stubbs. Thank you very much, Mr. Chairman.
    My name is Ken Stubbs. I am the Chairman of CORE, the 
Internet Council of Registrars, and I really appreciate the 
opportunity to appear before you today.
    For more than 2 years, we have been intimately involved in 
the entire governance process. We have collaborated closely 
with the Department of Commerce, the Internet community, and 
contributed extensively to the White Paper, as well as a myriad 
of meetings and conferences bringing the creation of ICANN.
    I will begin by addressing the issue that is central to 
this hearing. Is the ICANN completely fulfilling its 
responsibility to open up the Internet domain name system to 
competition? The answer, in my view, is right now it cannot. 
The reason it cannot accomplish the goals set forth is a cause 
for great concern, especially for those of us who are directly 
involved in the transitioning effort.
    It is certainly a concern to many businesses and 
individuals hoping to get more involved in the Internet as well 
as the domain name registry field. ICANN's ability to 
accomplish its responsibilities are conditioned upon the 
cooperation of the company that has held a complete monopoly on 
domain name registrations, Network Solutions. Despite a clear 
mandate for ICANN to be the consensus Internet governing body 
with a mission to create a level playing field to ensure fair 
and open competition, the incumbent still continues to make the 
process more difficult than it really needs to be.
    Let me share an observation drawn from my involvement in 
the effort. We are at a point in the process where critical 
decisions must be made if we are to realize the full value of 
the great promise the Internet holds for us. We are at this 
critical juncture, not because we have gotten off track, but 
because we followed two tracks.
    One track we followed involves having the U.S. Government 
purposely decide not to get involved in dictating how the 
Internet must evolve. The key challenge government faced was 
finding a way to ensure that as the Internet environment became 
more complex, there would be a structure in place that we 
continue to coordinate this consensus-driven approach that has 
propelled the Internet to its present height.
    The second track we followed springs from a misguided 
notion that to-date we are all in it together. When the DOC 
determined it was necessary to end the monopoly that had been 
conferred upon Network Solutions, in the spirit of cooperation 
it sought to use the incumbent contractor to help orchestrate 
the transition. The incumbent was given the opportunity to 
develop a structure for divestiture and to create the 
operational structure under which other competitors could enter 
the Internet domain name system. It is clear that NSI has taken 
advantage of the opportunity by creating a structure that is 
inordinately self-serving.
    Based on the experience we gained while participating in 
the test bed, it also appears the structure is inherently 
inequitable toward obtaining new registrars and competitors. 
ICANN setup a system to accredit the new registrars in 
accordance with the charter. ICANN's guidelines were intended 
to provide stability and facilitate for fair and open 
competition.
    We ended up with something of a hybrid process though, in 
which all of the new registrars must do business with the 
incumbent under the terms that ICANN sets, while the incumbent 
competes with the new registrars without regard to the 
operational guidelines that are intended to be a stabilizing 
force.
    First of all, I believe that there are some ways that we 
can resolve some of these issues. There must be a better way of 
facilitating choice. Customers must be allowed to choose their 
registrar without having to pay excessive transfer fees. That 
is the case under the current license agreement we operate 
with.
    We also must facilitate the transitioning through a 
competitive environment by ensuring that all competitors and 
their customers have the same relevant information to properly 
interact with the domain name system. I realize in discussing 
domain name registration, we are dealing with issues that are 
complex, but I think it is possible to come to well-reasoned 
judgments about the focal point of this hearing and that is 
ICANN.
    Let us remember that ICANN is roughly 8 months old. Its 8 
months of existence have been difficult. Its progress has been 
sometimes uneven, but make no mistake, ICANN is the 
infrastructure we need to make this transition work. Taking 
these principles into order, it is clear that the domain name 
system itself, is basically stable and fully functional, 
contrary to assertions of impending catastrophe that the 
competition has been introduced where a monopoly reigned.
    The last principle to govern the transition of domain name 
management is representation. The concept is one that is 
fundamental in making progress in an increasingly difficult 
global economy.
    That, in my opinion, is ICANN's management structure and 
why it basically must reflect functional and geographic 
diversity of the Internet. Basically, there are quite a few 
other issues here that hopefully we might be asked questions 
about in terms of how we feel we can compete more equitably. 
Maybe we will have these issues brought forth.
    Thank you.
    [The prepared statement of Kenyon T. Stubbs follows:]
   Prepared Statement of Ken Stubbs, Chairman, Executive Committee, 
                     Internet Council of Registrars
    My name is Ken Stubbs, and I am the Chairman of the Executive 
Committee of CORE, the Internet Council of Registrars. I appreciate the 
opportunity to appear before you today.
    May I start by providing you with some brief background on CORE. 
CORE is a not for profit membership association comprising more than 50 
domain name registration companies of all sizes, including my own and 
many others like it. CORE's member companies come from more than 20 
different countries. Reflecting the strength of America's influence in 
the Internet, the largest share of CORE registrars are U.S. companies 
with a presence in many American cities.
    For more than two years, CORE has been intimately involved in the 
entire Internet governance process. We have collaborated closely with 
the Department of Commerce and the entire Internet community, and 
contributed extensively to the Green and White Papers, as well as the 
myriad of meetings and conferences leading to the creation of the 
Internet Corporation for Assigned Names and Numbers (ICANN). In 
addition, CORE was chosen last April to be one of the original five 
test bed registrars, and has recently ``gone live'' actively 
registering domain names.
    I'll begin by addressing the issue that is central to this 
hearing--is the Internet Corporation for Assigned Names and Numbers 
(ICANN) completely fulfilling its responsibility to open up the 
Internet Domain Name System to competition? The answer, in my view, is 
that right now it cannot.
    The reason that it cannot accomplish the goals set forth for it--
goals that were the product of years of deliberation and negotiation 
among people who see the Internet as the single greatest force in the 
global economy--is cause for grave concern. It is a concern for the 
people who have invested themselves heavily in the process of helping 
shape the future of the Internet. It is a concern for those of us who 
are directly involved in the transitioning effort. And it is certainly 
a concern of the many businesses hoping to enter the domain name 
registry field.
    ICANN's ability to accomplish its responsibilities is conditioned 
upon the cooperation of the company that has held a complete monopoly 
on domain registration. That company is Network Solutions Inc. Despite 
a clear mandate for ICANN to be the consensus Internet governing body 
with a mission to create a level playing field to ensure fair and open 
competition, the incumbent continues to thwart the process.
    Let me share with you an observation drawn from lengthy involvement 
in the effort to open the Internet's naming system to competition. We 
are at a point in the process where critical decisions must be made if 
we are to realize the full value of the great promise the Internet 
holds as a powerful and unifying force throughout the world. We are at 
this critical juncture not because we have gotten off track, but 
because we have followed two tracks.
    One track we have followed involves having the United States 
Government purposefully decide to avoid dictating how the Internet must 
evolve. To its credit, the government recognized that, to this point, 
the Internet has evolved in remarkable fashion, thanks in no small 
measure to the voluntary efforts of individuals who shared a global 
vision. The key challenge the government faced was finding a way to 
ensure that, as the Internet environment became ever more complex, 
there would be a structure in place that would continue to coordinate 
the consensus driven approach that has propelled the Internet to its 
present heights.
    The second track we have followed springs from a misguided notion 
that we are all in this together. When the Department of Commerce 
determined that it was necessary to end the monopoly that had been 
conferred upon Network Solutions, in the spirit of cooperation it 
sought to use the incumbent contractor to help orchestrate the 
transition. NSI was given the opportunity to develop a structure for 
divestiture and to create guidelines under which other competitors 
could enter the Internet domain registration system. It is clear that 
NSI has advantaged the opportunity by creating guidelines that were 
self-serving. Based on the experience we have gained while 
participating in the test bed, it also appears the guidelines are 
inherently inequitable toward new competitors.
    ICANN set up a system to accredit new registrars and developed 
operational guidelines. In accordance with its charter, ICANN's 
guidelines were intended to provide stability and facilitate fair and 
open competition. Unfortunately, these goals became illusory when the 
incumbent refused to recognize ICANN's authority. We ended up with 
something of a hybrid process, in which all of the new registrars must 
do business with the incumbent under the terms it has set, while the 
incumbent competes with the new registrars without regard for the 
operational guidelines that are intended to be a stabilizing force. 
That must change.
    I believe we must resolve the following issues:

There must be a way to facilitate choice. Customers must be allowed to 
    choose their registrar without having to pay excessive transfer 
    fees as is proposed by the current NSI Registrar License Agreement.
All registrars must formally recognize ICANN's authority. To date NSI 
    has not signed ICANN's accreditation agreement, which would bind 
    them to the same terms and conditions as all other registrars.
NSI must withdraw its claim of ownership of the government's Internet 
    name contact database. The database must continue to be held in the 
    public domain and protected from abuse.
We must facilitate the transition to a competitive environment by 
    ensuring that all competitors have the relevant information to 
    properly interact with the name registration system. The incumbent 
    has currently implemented an inefficient and proprietary Shared 
    Registry System (SRS).
There must be a payment policy that is the same for all registrars.
    I realize that in discussing domain registration, we are dealing 
with issues that are complex, and working in a field that is not always 
easily understood. But I think it's possible to come to well-reasoned 
judgments about the focal point of this hearing--ICANN. Let's remember 
that ICANN is roughly eight months old. Its eight months of existence 
have been difficult, its progress sometimes uneven, but make no 
mistake--ICANN is the infrastructure we need to make this transition 
work.
    The fairest way to judge how ICANN is doing is to look at its 
progress in light of the bedrock principles that were established to 
guide the transition of domain management from the government to the 
private sector. Those principles are stability, competition, private-
sector, bottom-up coordination, and effective representation.
    Taking these principles in order, it is clear that the domain 
system is stable and fully functional, despite ever increasing demand 
for domain-name services and despite the fact, contrary to assertions 
of impending catastrophe, that competition has been introduced where 
monopoly reigned.
    In the interest of competition, five new registrars have been 
accredited, and four are up and running. ICANN has provisionally 
accredited 50 plus more competitors, who in turn will be followed by 
even more as we make the transition to full and open competition.
    The third principle under which the transition to full competition 
in the Internet name and address system is to proceed is reliance on 
the private sector, and to the extent possible, incorporation of the 
kind of bottom-up, grass-roots kind of management that has been typical 
of the way the entire Internet has developed.
    Here ICANN has been required to participate in a process that 
vaguely resembles the sentiment Bismarck expressed about the making of 
laws and sausage--yet, the process, while not pretty, should be judged 
by its results. Three supporting organizations have been formed, and 
each of these has been organized through a democratic and constituent 
driven process.
    The last principle to govern the transition of domain management is 
representation. The concept, and it is one that is fundamental to 
making progress in an increasingly global economy, is that ICANN's 
management structure must reflect the functional and geographic 
diversity of the Internet, and should ensure international 
participation in decision-making.
    Here again, because of the bottom-up sort of approach ICANN has 
followed, progress has been uneven. But if progress has been slower 
than desirable, it is due to the fact that the democratic process is 
certain to take more time than the autocratic process--some time ago, 
this country decided that the democratic process, whatever its faults, 
was vastly preferable.
    Mr. Chairman, the process of creating a world-wide, non-profit 
consensus driven organization to manage domain registration on the 
Internet has been difficult, contentious, and occasionally acrimonious. 
But even the adversarial positions taken by competing entities may, in 
the long run, be helpful, for they bring into the open and cause us to 
examine differing views of how the Internet should evolve. For the 
process we are going through to be most helpful, we must carefully note 
what we have learned. At this point a number of lessons have emerged.
    First, we know that the business of being a registrar must be 
wholly separated from the business of being a registry. We have seen 
the incumbent take advantage of the fact that all newly accredited 
registrars must do business with it to create structural advantages 
that, if left intact, would seriously undermine competition in the 
future.
    Second, we have learned that pricing polices must be on an equal 
footing. All newly accredited registrars must be paid in advance before 
accepting a name for domain registration. In contrast, the incumbent 
offers credit terms and refunds. As a result, speculative buyers 
continue to flock to the incumbent. If we want to dampen domain name 
speculation, it is clear that advance payments must be required.
    We must also see NSI withdraw its specious claim of ownership of 
the government's Internet name contact database. These claims violate 
established intellectual property law and anti-trust law and will both 
restrict and damage competition, and ultimately, in my opinion 
destabilize the governance process.
    And we must know that any arguments presented that warn of the 
instability of the Internet brought about by ICANN's governance of the 
system are wholly unfounded. We must keep in mind the root server 
remains under the direct management of the U.S. government. There is no 
technical impact on the Internet brought about by competition on the 
business end. There are no stability issues, contrary to what is 
constantly being claimed by NSI as reason for continuing their policies 
and control.
    Most of us here understand that new choices in domain names, and 
choice among registrars, will create increased efficiencies, lower 
prices, and better service for millions of Internet users worldwide. 
But we need to have the playing field leveled. We need to get to the 
point where we can have certainty in our business plans, and that 
requires that the incumbent formally recognizes ICANN and accepts that 
it must be treated on an equal basis with all other registrars. NSI 
will still be the big kid on the block, but it must allow the new kids 
to play.
    Speaking as a newly accredited registrar, we have to reach the 
point where we have a sense of stability and confidence. Reaching that 
point is less a function of what ICANN does, than what NSI does. If the 
incumbent will work with us to facilitate the transition to a 
competitive environment, and acknowledge the role of ICANN, the focus 
of our activities can return to where they properly belong, on 
continuing to build what has become perhaps the best man-made resource 
of our time.
    Thank you for the opportunity to appear. I look forward to 
answering your questions.

    Mr. Upton. Thank you. Mr. Bramson.

                 TESTIMONY OF JAMES R. BRAMSON

    Mr. Bramson. Thank you, Mr. Chairman.
    America Online appreciates the opportunity to contribute 
its own views on this very important issue. As you have already 
heard a fair amount of, and as the subcommittee has already 
shown their appreciation of, we are engaged in an extraordinary 
transition event right now, which is also very exciting because 
it will bring competition to a unique and important corner of 
the Internet environment, which is one of the most fiercely 
competitive industries that we have seen up until now.
    The domain names and the assignment of IP addresses are 
core building blocks for the success of all of the things that 
we have come to rely on, on the Internet. In order to be able 
to ensure this transitionary process, we need to make sure that 
there is stability, predictability, scale-ability, and an even 
playing field for new entrants into this market. ICANN is 
currently the only process that has provided any structure for 
this transition.
    Therefore, we think in a very short time it has 
accomplished a fair amount. We think it needs to continue down 
that road. As you have already heard and discussed somewhat 
today, ICANN has a broad range of issues that it is going to be 
focusing on, involving domain name governance, involving 
protocol numbers, and treatment of the introduction of generic 
top level domains and other issues. The core function that we 
want to focus on is the test bed itself, which we think is the 
critical avenue toward introducing competition here. The goal 
of the test bed is to do several things.
    One is to allow the registrars to understand the technical 
issues of being able to communicate with a relatively new 
shared registry system.
    Second, to allow the community of registrars to understand 
what is involved in moving to a multi-player system which has, 
up until now, been a single player system.
    Third, to be able to identify procedures that will be 
necessary to maintain reliability and predictability as we grow 
the competitiveness in this field, while maintaining usability 
for consumers, and give consumers more choice.
    We think there has been a relatively ambitious timeframe 
for the test bed, but even so, four out of the five tested 
registrars are already beginning to accept registrations. 
Nevertheless, we still lack some fundamental functionality for 
all of the test bed registrars that will be necessary for there 
to be true competition that meets consumer expectations.
    The learning that is going on in this test bed is, 
nevertheless, very important. We think it will help to improve 
the transition to additional registrants who will come after 
the test bed. AOL, for its part, has not yet gone live with 
accepting registrations, but has obtained the technical 
certification from NSI necessary to do that.
    We are continuing to work diligently to complete the 
internal systems that are necessary to launch this new business 
for us, while still maintaining our members' expectation of 
privacy of information, and controlling the data base that will 
need to be kept in accordance with the ICANN accreditation 
agreement. We expect we will be able to launch also our 
services by the end of the extended test bed period.
    We still think there are some hurdles that need to be 
overcome before this competitive process will really result in 
a true competitive environment that is user-friendly for 
consumers. That, at the very core, will require NSI, which is 
an important player, and will continue to need to be an 
important player for sometime to come, in our estimation.
    They will need to work with the Department of Commerce and 
with ICANN, collectively, to try to resolve what is a very 
important issue. As a community, we really cannot afford not to 
have this process work. The WHOIS data directory is another 
issue that needs to be addressed.
    Currently, or up until while there was a single player 
system, the directory was easy to use by consumers and it was 
effective for that reason. As we move into a multi-player 
system, WHOIS data bases will need to be coordinated in such a 
manner that we can ensure that consumers will be able to have 
their expectations met, and that this can really be a viable 
consumer oriented competitive business.
    Finally, we do think that there is a need for some 
standardization of voluntarily accepted standards for the 
registrar community in order to make sure that we can cooperate 
in having equal access opportunities to new entrants in the 
space, that treatment is consistently uniform among all the 
entrants, and that dispute policies are enacted in such a 
manner that it will meet the very real and conflicting 
interests of many members of the Internet community. The 
question that has been asked is whether or not the ICANN 
process is something which needs to be re-thought?
    We do not think so at this point. We do think that they 
have made a lot of headway in a relatively short period of time 
on a very difficult track. We think there are things that need 
to be done and we hope that they are. They have expressed today 
that they are listening to the criticisms and taking those 
criticisms to heart.
    We certainly appreciate the role of this subcommittee and 
the committee at large in helping to facilitate some of those 
changes we have heard today, at least one example of an adopted 
policy by ICANN that has been affected by the letter-writing 
and the involvement of the House.
    We look forward to having Congress continue to watch this 
process closely, and having this process continue to its 
successful conclusion, because we really cannot afford for it 
not to.
    Thank you very much.
    [The statement of James R. Bramson follows:]
 Prepared Statement of James R. Bramson, Counsel, America Online, Inc.
                              introduction
    Chairman Upton, Ranking Member Klink, and members of the 
Subcommittee, thank you for the opportunity to share the perspective of 
America Online, Inc. (AOL) regarding the ongoing transition of 
management responsibilities for the domain name system (DNS) from a 
single company--Network Solutions, Inc. (NSI)--under government 
contract to a competitive marketplace that more fully embodies the core 
principles that drive our burgeoning Internet economy. As one of the 
five initial testbed registrars in the development of a Shared 
Registration System (SRS), AOL believes that Congressional review and 
support at this juncture in the transition process is timely and 
appropriate to further facilitate this unprecedented migration from 
government-sanctioned monopolistic control to the private sector.
            the importance of the dns privatization process
    The DNS is not merely one off-shoot component of the Internet. 
Rather, it is the underpinning of global Internet commerce from which 
all on-line communications and on-line transactions originate. This 
critical, technical link allows families to stay in touch, information 
to be disseminated, and products to be marketed and purchased.
    Much of the impetus for transitioning to a competitive DNS system 
derives from the core belief that a competitive, open, and democratic 
Internet community model will yield greater consumer choice, value, and 
innovation at lower cost. Since publication of Department of Commerce's 
(DOC) ``White'' Paper, the Department and the Internet Corporation for 
Assigned Names and Numbers (ICANN) have been proceeding to complete 
this challenging transition to a competitive marketplace according to 
an ambitious timeframe. DOC and ICANN, the entity empowered by DOC to 
oversee the transition, are to be commended for moving the registration 
system in a few short months much closer to this competitive reality.
    In line with the themes expressed in the Department's ``Green'' and 
``White'' Papers, which served as the blueprint for ICANN, the global 
electronic commerce framework should strive for a private system that 
ensures competition and universal access, allows for the protection of 
intellectual property and privacy, minimizes consumer fraud, and 
fosters transparency and broad based participation so as to provide a 
stable basis for commercial activity.
    While there have been frustrations and technical difficulties, and 
their remain problems to overcome, AOL's central message to the 
Subcommittee is that the move into this unchartered territory is 
generally proceeding in the right direction. However, this fragile, 
forward progress could be easily corrupted if the transition is not 
completed in a manner that ensures competition in a stable, reliable, 
and predictable manner. Just as any new highway design requires an 
aggressive test-drive before driver confidence can be earned, so too is 
it imperative to ensure that the registration transition completely 
unfolds--both in policy direction and in technical accomplishment--in a 
manner that builds on and extends consumer expectations for Internet 
reliability. We believe the testbed is committed to achieving this 
goal.
    We share the view expressed by DOC and, more generally and 
emphatically, by the Internet community, that DNS competition that 
emerges in a structured manner will continue to bring growth to this 
new medium. AOL believes that ICANN is the proper coordinating vehicle 
for accomplishing this structured privatization. The alternative to 
privatization--a return to a government-regulated monopoly--is not 
compatible with the goal of enhanced access, choice, and value. And 
within the transition process, we believe that an untried, yet-to-be 
determined alternative to ICANN's leadership would merely slow down a 
train that has not only left the station, but is nearing its 
destination. That ICANN is the best of all compromise alternatives is 
reinforced by the unimplemented efforts of the International Ad Hoc 
Committee (IHAC), a short lived, independent effort of the Internet 
community to accomplish what now has proved possible only through 
ICANN. A reversion to governmental control or acceptance of instability 
and chaos in the DNS--which would certainly result were a departure 
from the ICANN structure now demanded at this late date--are equally 
unsatisfactory.
                            icann's progress
    Overall, ICANN has accomplished a great deal in a very short time. 
It is important to remember that ICANN is not even one year old. Only 
in late 1998 did ICANN and DOC negotiate the agreement that has led to 
ICANN's role in the transition to a competitive registration system. In 
its managing role for the DNS transition and DNS governance generally, 
ICANN has provided needed structure. It is a credit to this process 
that the ambitious schedule set by ICANN has generally been met.
    With no DNS actor able to operate in isolation, the key to a 
successful testbed, and ultimately an open DNS, is cooperation among 
the registrars. ICANN has facilitated communication among the testbed 
registrars to ensure that AOL and others have access to information 
necessary to operate in a commercially viable manner.
    It is clear that NSI--an important participant in the stability and 
success of the DNS system--must continue to be an integral part of the 
DNS transition, not only as the registry, but also as a registrar. Even 
after full DNS registrar competition is a reality, a DOC-sanctioned 
monopoly will likely remain as NSI retains its role in maintaining the 
registry for .com, .org, and .net generic top level domains (gTLDs). 
NSI will also likely continue to act as one of many DNS registrars in 
the new marketplace. A challenge facing ICANN, DOC, and NSI is to bring 
NSI into the evolving system as a registrar on equal footing with the 
other registrars.
    ICANN has overcome many initial doubts about its ability to pave 
the way into a competitive marketplace. Given the time and money 
invested in reaching this point in the DNS transition, there are many 
well articulated but conflicting interests within the Internet 
community that will be impacted by any change in the status quo. 
Despite these inherent conflicts, ICANN has filled a necessary role in 
trying to build a system that is open to divergent interests in a 
manner that can ensure stability and robustness in the final DNS 
transition.
                          the testbed process
    ICANN's formation of a testbed is a crucial step in the DNS 
transition, as it provides the framework for technical evaluation of 
multi-user access to a previously untested SRS. The ongoing stability 
of the transitional DNS system depends on such careful, incremental 
stress on this infrastructure. The testbed project commenced on a very 
tight application and decision time line. The testbed schedule was 
ambitious to ensure that the full DNS transition takes place 
expeditiously. As the process has unfolded, testbed registrars--
including AOL--have greatly enhanced their knowledge about building a 
registration business in a SRS environment which, by necessity, 
involves coordination among registrars. This learning curve will prove 
invaluable in bringing additional accredited registrars in a structured 
way into a competitive DNS.
    In commencing registration operations, there are internal technical 
issues that a registrar must overcome, as well as collaborative 
synergies that must be identified and developed among the registrar 
community and the registry to keep the system robust and valuable to 
registrant users. As it turns out, the original sixty day time frame 
set for the testbed was overly ambitious. Due to technical hurdles 
associated with starting up a new registrar service and the issues 
involved in launching what is essentially an entirely new business 
operation for some of the testbed registrars, only one testbed 
registrar became operational within the original sixty days. Even in 
the hyperspeed Internet world, sixty days can be a very short time, 
particularly when transitioning a five-year old government-controlled 
enterprise to the private marketplace. During the extension of the 
testbed period, three more testbed registrars have now commenced 
operations. Since selection as a testbed, AOL has diligently pursued 
its own implementation strategy, and has passed the required NSI 
registration test that ensures compatibility between the registry and a 
testbed registrar. This is a technical hurdle to becoming certified as 
a registrar. AOL has worked closely with NSI's technical personnel and 
has found them to be cooperative during the testbed. We are continuing 
efforts to build the internal systems necessary to launch our own 
registration service. We currently expect to have AOL registration 
services functional and on-line by the end of the evaluation extension, 
August 6, 1999.
    AOL believes that the experience of the testbed registrars, which 
will be publically shared at the end of the testbed period, will help 
to create a solid, competitive foundation for the DNS system.
            remaining hurdles to creating a competitive dns
    While there are a number of challenges to confront before the 
competitive DNS market is fully open for business, at least the 
following four important issues must be addressed: NSI's integration 
into the competitive system, coordination of the WHOIS database system, 
refinement of domain name transfer procedures, and finalization of 
dispute resolution procedures.
NSI Integration
    NSI has an unusual role in the ongoing DNS system. The Internet 
community assumes that NSI will emerge from its historical role as a 
government-regulated monopoly into a dual-function entity: 
administrator of the DNS registry, under contract with DOC, as well as 
a competitor registrar in the open DNS model. DOC, ICANN, and NSI must 
mutually determine the course in which the NSI evolution will occur.
    Because of NSI's dual role, it is likely that DOC will continue to 
negotiate the agreement to be used by NSI, in its role as registry, 
with the competitive registrars. While industry often thinks that it is 
better positioned than government to negotiate private sector 
contracts, there is a role in this instance for DOC participation. 
However, it is necessary that any agreement reached between DOC and NSI 
ensure two fundamental results: that the Registrar License Agreement 
used by NSI as registry will be a commercially viable framework under 
which the competitive registrars can operate, and that NSI as registrar 
will be subject to the same rules of the road as its competitors. The 
Internet community is carefully monitoring the status of the ongoing 
DOC-NSI contract negotiations.
    DOC has been dealt a challenging role in this transitionary period 
and has delicately navigated the process as well as could be expected. 
It is our expectation that the natural result of the DNS transition 
will entail a diminishing level of DOC supervisory involvement until 
such time as there is a stable, competitive environment that ensures a 
fair playing field among registrars.
WHOIS Database
    ICANN and NSI, in consultation with the testbed registrars, must 
determine how best to construct a coordinated database of domain name 
registration information. Under an effective DNS, consumers and 
intellectual property owners must have the ability to determine in a 
timely manner whether a specific domain name has been registered and by 
whom. If this information is difficult to obtain, there is a real risk 
that consumers' confidence in the DNS may be shaken and the integrity 
of the DNS will be compromised. The Internet is a medium where 
consumers have come to expect real-time information and readily 
available access. To be successful, a competitive DNS must fully meet 
this consumer demand. When only one registrar is in play, as was 
previously the case with NSI, the need for coordination among 
registrant names was not at issue. In the multiple registrar 
environment, where each maintains a separate database of registrants, 
it is critical that there be coordination among all registrars so that 
the introduction of a competitive DNS system does not take customer 
service a step backwards.
    Whether the chosen WHOIS database model in the competitive DNS 
world is a single database, or as is technically feasible, multiple 
databases that ``call'' each other when a user performs a single query, 
the key is to secure a cooperative, coordinated system that best serves 
the registrars' customers and preserves the integrity of the registry.
Domain Name Transfers
    The testbed registrars have been working with NSI to develop 
procedures on how best to facilitate transfer of domain names between 
competing registrars. Discussions are ongoing for determining transfer 
parameters and protocols. Irrespective of the final technical design of 
the transfer procedures, it will be essential to preserve uniformity 
and ease of transfer without allowing an unscrupulous registrant to 
employ transfers as a means to undermine dispute resolution systems. 
The Internet community will be ill-served if registrants are able to 
game the DNS system to circumvent established dispute resolution 
mechanisms.
Dispute Resolution
    While many have found fault with NSI's dispute resolution 
procedures, it is essential that a replacement process be constructed 
that will satisfy registrars' need to minimize their exposure, maximize 
registrant protection, and allow intellectual property owners to 
enforce their rights. As the open DNS marketplace continues to evolve 
and innovate, there is significant room for improvement in the current 
dispute resolution arena. WIPO has accelerated and aided this effort 
already. AOL is committed to working with others in the Internet 
community to continue efforts to accomplish this much needed 
refinement.
                             congress' role
    At this stage in the DNS transition, AOL believes that Congress can 
be most helpful by continuing to keep informed about the transition 
process. Mr. Chairman, hearings such as you are holding today provide a 
needed forum for continuing oversight of this important devolution of 
government control. While legislative action is presently unneeded to 
further facilitate the transition, it is important for Congress to 
provide the necessary assistance for DOC to ensure that the task at 
hand reaches competitive closure. At the same time, with much progress 
already made, Congressional support of a registration playing field 
among equals--NSI, the testbed registrars, and entrants yet to emerge--
will further facilitate forward motion and, ultimately, one of the most 
exciting and expeditious free market transitions of recent time.
    AOL appreciates the opportunity to assist the Subcommittee in its 
review of this important process.
    Mr. Upton. Again, we all appreciate your fine testimony 
today. Again, as you hear these buzzers and bells, we have a 
series of votes coming. I think in the interest of time, and 
your time particularly, knowing you have been here all day, 
that I will certainly allow all members of the subcommittee to 
correspond with some questions, which I certainly have a list 
of them here, but rather than go through them, we will use the 
Postal Service to get back to you.
    We look forward to certainly working with your groups and 
interests in the future as we look at this very intriguing 
question. As things go forward, we appreciate your comments.
    This hearing is now adjourned. Thank you.
    [Whereupon, the hearing was adjourned.]
    [Additional material submitted for the record follows:]
                           The Internet Corporation
                             for Assigned Names and Numbers
                                                     August 4, 1999
The Honorable Thomas J. Bliley, Jr.
Chairman
The House Committee on Commerce
2125 Rayburn House Office Building
Washington, D.C. 20515
    Dear Chairman Bliley: I am writing to answer your letter of July 
28, 1999, asking for information about communications between ICANN and 
the Department of Justice. As several members noted during the recent 
hearing of your Committee at which I was privileged to testify, the 
creation and operation of ICANN is a complicated undertaking, and we 
appreciate any opportunity to better educate and inform the Congress 
and the public about what ICANN is doing and what we hope to achieve.
    Your inquiry apparently was prompted by an e-mail message that was 
one of many provided to the Committee by ICANN in response to your 
earlier letter of June 22. Your statement that the conversation 
reported in this e-mail ``appear[s] to be highly inappropriate'' is 
puzzling, and appears to be based on a misunderstanding about the 
nature of the conversation described in this message. The right to 
petition government is constitutionally protected, and indeed is one of 
the freedoms that has distinguished the American form of government. 
Members of the Board, staff and counsel of ICANN have had a number of 
discussions with various members of the executive and legislative 
branches of government since ICANN's formation in late 1998. The common 
focus of those conversations has been ICANN's mission and objectives, 
and the obstacles that remain to accomplishing those objectives.
    In this particular case, ICANN's counsel was urging the Department 
of Justice, which as part of its official mission is the principal 
advocate for competition within the Executive Branch, to urge the more 
rapid transition of domain name registration services from a single 
monopoly government contractor to a competitive market. The 
Department's representatives listened to this request, and agreed to 
consider it; that was the entire sum and substance of the conversation. 
We do not believe that this exercise of the constitutionally-protected 
right to petition government could even arguably be considered 
inappropriate. Indeed, I assume you and other members of this Committee 
receive regular requests to consider various actions, perhaps even 
related to this same subject.
    As the e-mail in question indicates, this discussion did not 
involve the pending antitrust investigation of NSI, which had been 
ongoing for some time. But if it had, that would certainly also have 
been completely appropriate. ICANN is charged, both by its Memorandum 
of Understanding with the Department of Commerce and by a clear 
Internet community consensus, with replacing the current non-
competitive domain name registration system with a competitive system, 
where price, quality of service and other important criteria relating 
to domain name registrations are determined by the marketplace, not by 
a monopoly provider. The Department of Justice is charged with 
enforcing the antitrust laws. One possible avenue from monopoly to 
competition in domain name registration services is through enforcement 
of the antitrust laws. Thus, it is appropriate for ICANN, through its 
counsel, to discuss with representatives of the Department of Justice 
ICANN's views of the antitrust enforcement issues associated with the 
current monopoly name registration situation, and for ICANN to advocate 
antitrust enforcement action if it believes such would be appropriate. 
ICANN is entitled to express its views on such subjects, just as any 
other person or entity may.
    With this background, let me respond on behalf of the Initial Board 
of Directors of ICANN to your specific questions.
    1. Provide a listing of all communications between the Department 
of Justice and ICANN.
    We are unable to provide such a listing. We are not aware of any 
records of such communications other than the e-mail message previously 
provided. Nevertheless, we can state that there have been a number of 
discussions between counsel for ICANN and Department of Justice lawyers 
over the several months of ICANN's existence. Those conversations have 
generally concerned the antitrust and competitive policy issues 
relating to domain name registrations. We are aware of no other 
substantive conversations between a representative of ICANN and any 
official or employee of the Department of Justice.
    2. Provide all records relating to such communications.
    The Committee is already in possession of all such records.
    3. Discuss the ICANN Board's knowledge of, or subsequent 
authorization of, the communication by counsel reflected in the e-mail 
message previously provided.
    To the best of my knowledge, the ICANN Board was not aware of this 
particular communication prior to its occurrence. Such communications 
are part of the ordinary activities of ICANN's counsel and would not 
require nor normally generate prior notification or approval. Questions 
about the ICANN Board's reaction to the conversation after the fact 
appear to be based on the premise that this communication, or others 
like it, was somehow inappropriate; since we do not believe this is the 
case, we had no reason to instruct counsel to avoid such communications 
in the future. In fact, the Board expects its counsel, in the ordinary 
course of carrying out his responsibilities to ICANN and the ICANN 
Board, to continue to communicate with Executive Branch agencies, 
members of the Legislative Branch and their staffs, and any others with 
whom such communications are, in his judgment, useful to support the 
efforts of ICANN to carry out its responsibilities.
    I hope this is responsive to your inquiry. On behalf of ICANN, let 
me reiterate that we are committed to carrying out our responsibilities 
with respect to the transition of the management of certain aspects of 
the Domain Name System from government control to the private sector 
through a process that is open and transparent. As a part of this, we 
are eager to work with this Committee and its staff to ensure that you 
have all the information required to fully understand how this 
transition is proceeding. As you know, we have offered to provide 
periodic briefings to Committee staff on a bipartisan basis, in the 
hope of avoiding misunderstandings such as the one that apparently 
prompted this particular inquiry. I look forward to working with the 
Committee and its staff to ensure that all Members of the Committee are 
fully informed about this difficult but important undertaking.
    Please let me know if we can provide any further information.
            Sincerely,
                                               Esther Dyson
                                                   Interim Chairman
cc: The Honorable John D. Dingell, Ranking Member



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