[Senate Hearing 108-984]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 108-984

                   INTERNET CORPORATION FOR ASSIGNED 
                       NAMES AND NUMBERS (ICANN)

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

                                HEARING

                               before the

                     SUBCOMMITTEE ON COMMUNICATIONS

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 31, 2003

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation






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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South 
CONRAD BURNS, Montana                    Carolina, Ranking
TRENT LOTT, Mississippi              DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas          JOHN D. ROCKEFELLER IV, West 
OLYMPIA J. SNOWE, Maine                  Virginia
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              JOHN B. BREAUX, Louisiana
PETER G. FITZGERALD, Illinois        BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  RON WYDEN, Oregon
GEORGE ALLEN, Virginia               BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire        BILL NELSON, Florida
                                     MARIA CANTWELL, Washington
                                     FRANK R. LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel
                                 ------                                

                     SUBCOMMITTEE ON COMMUNICATIONS

                    CONRAD BURNS, Montana, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South 
TRENT LOTT, Mississippi                  Carolina, Ranking
KAY BAILEY HUTCHISON, Texas          DANIEL K. INOUYE, Hawaii
OLYMPIA J. SNOWE, Maine              JOHN D. ROCKEFELLER IV, West 
SAM BROWNBACK, Kansas                    Virginia
GORDON H. SMITH, Oregon              JOHN F. KERRY, Massachusetts
PETER G. FITZGERALD, Illinois        JOHN B. BREAUX, Louisiana
JOHN ENSIGN, Nevada                  BYRON L. DORGAN, North Dakota
GEORGE ALLEN, Virginia               RON WYDEN, Oregon
JOHN E. SUNUNU, New Hampshire        BARBARA BOXER, California
                                     BILL NELSON, Florida
                                     MARIA CANTWELL, Washington





















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 31, 2003....................................     1
Statement of Senator Burns.......................................     1

                               Witnesses

Balogh, Aristotle, Senior Vice President, VeriSign, Inc..........    18
    Prepared statement...........................................    20
Davidson, Alan B., Associate Director, Center for Democracy and 
  Technology.....................................................    23
    Prepared statement...........................................    25
Stahura, Paul, President and Chief Executive Officer, eNom, Inc..    29
    Prepared statement...........................................    31
    Letter dated July 14, 2003 to ICANN Board of Directors from 
      Paul Stahura, Chief Executive Officer and President, eNom, 
      Inc........................................................    35
    Letter dated May 18, 2003 to Robin Layton, Associate 
      Administrator, National Telecommunications and Information 
      Administration, U.S. Department of Commerce from Paul 
      Stahura, CEO, eNom, Inc....................................    40
Twomey, Dr. Paul, President and Chief Executive Officer, Internet 
  Corporation for Assigned Names and Numbers (ICANN).............    10
    Prepared statement...........................................    12
Victory, Hon. Nancy J., Assistant Secretary for Communications 
  and Information, National Telecommunications and Information 
  Administration, U.S. Department of Commerce....................     3
    Prepared statement...........................................     5

                                Appendix

Pool.com, statement..............................................    55
Response to written questions submitted to Hon. Nancy J. Victory 
  by:
    Hon. Maria Cantwell..........................................    57
    Hon. Ron Wyden...............................................    56
Response to written questions submitted to Dr. Paul Twomey by:
    Hon. Maria Cantwell..........................................    58
    Hon. Ron Wyden...............................................    57

 
      INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS (ICANN)

                              ----------                              


                        THURSDAY, JULY 31, 2003

                               U.S. Senate,
                    Subcommittee on Communications,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:45 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Conrad Burns, 
Chairman of the Subcommittee, presiding.

            OPENING STATEMENT OF HON. CONRAD BURNS, 
                   U.S. SENATOR FROM MONTANA

    Senator Burns. We'll call the Committee to order. Are we on 
the air now? Can you hear me down there? I saw your ears fly 
out like that. I expect so. My voice kind of carries.
    Today's hearing concerns the operation and development of 
the Internet Corporation of Assigned Names and Numbers, 
otherwise known as ICANN. I'm convinced that this issue of the 
proper role of ICANN is most critical. It's one of the real big 
issues that come before this Subcommittee. And, broadly 
speaking, the future of ICANN will define the future of the 
Internet.
    In 1988, a decision was made to turn over the task of 
administering policy for Internet naming and addressing to not-
for-profit, private sector Internet stakeholders. The idea was 
to create a management structure that would preserve the domain 
naming system but would also adopt practices that would support 
competition and consumer choice in all decisions. The bottom-up 
management structure would have the ability to include public 
input, both national and international, as a basic guiding 
principle.
    Since its murky beginnings in 1998, however, ICANN has been 
an experiment which has lurched from crisis to crisis over 
issues ranging from its very legitimacy to the lack of 
transparency and due process, and whether it was engaging in 
mission creep.
    As this experiment is now over 4 years old and the Internet 
now underpins the very foundation of our economy, issues of 
accountability become preeminent. Given that ICANN has 
eliminated its five elected at-large board seats under its new 
structure, proper oversight by the Department of Commerce 
remains more important than ever in making sure that ICANN 
remains a technical and administrative body rather than 
straying into areas of core policy.
    I look forward to hearing from Mr. Twomey's testimony today 
about how the changes to ICANN board structure will result in a 
more responsive and responsible organization. I am particularly 
concerned that the lack of accountability for the quasi-
governmental organization poses serious dangers for American 
national security. While we have made great strides in 
combating terrorism, our Nation is still very vulnerable to the 
threat of a massive cyber attack. The denial-of-service attacks 
on nine of the 13 Internet root servers last October highlights 
these concerns even more.
    A particularly troubling area is the lack of uniform 
standards for the 13 root servers. Security of these systems is 
critical to the function of the domain name system. And I look 
forward to hearing what steps ICANN is taking to ensure that 
they gain the support of the operators to be full ICANN 
members.
    What must not be allowed to happen is for a dispute among 
the principals dealing with the management of the Internet to 
make this key instrument vulnerable to senseless acts of 
destruction. The bottom line is that ICANN must be a part of 
the security solution and not part of the problem.
    I'd also like to touch on the failure, so far, of ICANN to 
integrate other countries into the structure. As the chairman 
of the U.S./Asia network, this particularly concerns me, given 
the explosive growth of the Internet in Asia.
    Just this week, the Associated Press reported that a number 
of people in China who use the Internet increased by 15 percent 
in the past 6 months. Currently, 70 million people use the 
Internet in China, a number which will undoubtedly see 
continuing growth. Over half a million websites in China use 
China's ``dot cn'' domain, which has no agreement with ICANN. 
In fact, of the nearly 300 country-code top-level domains, 
ICANN has contractual agreements with only ten. Clearly, to say 
that there has been a lack of progress in this area is a 
massive understatement. I should add that Mr. Twomey has 
recognized this issue as a top priority for action, given the 
trillion dollars in trade across the Asian/Pacific region, and 
I recommend him to focus on this.
    ICANN certainly faces many difficult tasks. Its 
responsibilities are many. Primary, among them are making sure 
that the Internet's infrastructure is stable. It also must act 
to foster competition, rather than act as a supernatural 
regulatory body which picks winners and losers. To accomplish 
these goals, we must have greater global support and 
coordination. When looking at options, we should not impose 
strict governmental control, but look at an organization that 
allows for the greatest industry input and most effectively 
coordinates the development and practices that govern the 
operation and the conduct of the Internet industry.
    Ultimately, ICANN must focus on three operational areas if 
it is to be successful: improving the global support and 
coordination of the Internet domain name systems, strengthening 
standards and practices of these systems to ensure stability 
and security of the critical infrastructure, and promoting the 
growth and innovation for all users of the Internet.
    Today, I'm calling on the Department of Commerce to come 
back to the Committee by the end of August with its proposals 
of future ICANN and how the organization can accomplish these 
operational goals. With ICANN's memorandum of understanding up 
for renewal in September, it is imperative for the Department 
to lay out its plans in a timely fashion.
    I am considering offering legislation when we return from 
August recess to ensure ICANN is, indeed, becoming more 
accountable and that it is acting within its original 
memorandum of understanding with the Department of Commerce. In 
doing so, I'll be working closely with Senator Wyden and my 
colleagues on this Committee.
    The issues before the Subcommittee today are complex, and 
the stakes are high. I look forward to hearing from our 
witnesses about the best track forward to make the Internet 
stronger, more secure, and more reliable.
    Before we go to the testimony of you, Ms. Victory, I would 
like to apologize for being late. We're trying to get out of 
town. Everybody's got hay to cut at home. And it is time we be 
there. And so there's a conference today. We've made some 
progress on an energy bill. And so that's where I was.
    And we look forward--Ms. Victory, who is Assistant 
Secretary for Communications and Information, National 
Telecommunications and Information Administration of the United 
States Department of Commerce. Thank you for coming this 
afternoon.

         STATEMENT OF HON. NANCY J. VICTORY, ASSISTANT

         SECRETARY FOR COMMUNICATIONS AND INFORMATION,

          NATIONAL TELECOMMUNICATIONS AND INFORMATION

          ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE

    Ms. Victory. Thank you very much, Mr. Chairman. I'd like to 
thank you for inviting me here today to testify on this 
important issue.
    As you may recall, last year I testified before you on 
developments related to the Internet domain name and addressing 
system, specifically the memorandum of understanding between 
the Department of Commerce and ICANN. While the Department 
serves as the steward of critical elements of the domain name 
system, ICANN is the private sector entity responsible for day-
to-day management of this system.
    The Department continues to believe that the stability and 
security of this important global resource can best be achieved 
through privatization and global participation in the technical 
management of the domain name system. The Department, 
accordingly, supports the ongoing work of ICANN and its efforts 
to engage all critical stakeholders in the decision-making 
processes. The Department desires to see ICANN evolve into a 
stable and sustainable organization that is well-equipped to 
weather a crisis. We are encouraged that ICANN has recently 
been making some progress toward this end.
    Last year, when the Department of Commerce and ICANN chose 
to renew the MOU for a period of one year, both parties agreed 
that ICANN needed to focus its improvements in five major 
areas: clarifying its mission and responsibilities, ensuring 
transparency and accountability in its processes and decision-
making, increasing its responsiveness to Internet stakeholders, 
developing an effective advisory role for governments, and 
ensuring adequate and stable financial and personnel resources 
to carry out its mission and responsibilities.
    The Department believes that ICANN has made significant 
strides this year in these areas. ICANN has completed a 
comprehensive reform effort that has resulted in major 
structural adjustments and refinements in its decision-making 
processes. In addition, the organization has hired a new CEO 
with both management expertise and experience in dealing with 
this unique organization. ICANN has also implemented a new 
nominating process to ensure qualified, committed, and 
internationally representative board members. In short, ICANN 
has made progress in developing into a more stable, 
transparent, and responsive organization.
    I'm also pleased to note that the ICANN Governmental 
Advisory Committee, of which the U.S. is a very active 
participant, has undergone an evolution of its own. Among other 
things, the GAC has appointed liaisons to each of the ICANN 
supporting organizations to improve communications on public 
policy issues. It has also established working groups on 
particular issues to facilitate analyses and the development of 
recommendations.
    Now, while ICANN has made progress, both the Department of 
Commerce and ICANN recognize that much is still to be done for 
ICANN to evolve into the stable and sustainable DNS management 
organization that we would all like it to be.
    First, ICANN needs to solidify relationships with the root 
server system operators. While ICANN has worked with the root 
servers to complete a report on the current status of root 
server system security and recommendations for infrastructure 
improvements to enhance security, ICANN needs to establish a 
more concrete ongoing relationship with this critical 
constituency. The formation of ICANN's Security and Stability 
Advisory Committee, of which many of the root server operators 
are members, is an important first step in the right direction.
    Second, ICANN needs to formalize its relationship with the 
regional Internet registries. Securing agreements with the RIRs 
is essential, not only to ICANN's ability to perform its 
address-allocation responsibilities, but also to the overall 
stability of the Internet. I note the productive talks between 
ICANN and the RIRs are currently underway.
    Third, ICANN needs to complete actions it has initiated to 
develop transparent mechanisms that ensure accountability to 
all stakeholders. ICANN is in the process of instituting an 
international arbitration procedure to provide a 
reconsideration process for disputed decisions. It is also in 
the process of hiring an ombudsman to investigate grievances 
against the company. These tasks need to be completed.
    Fourth, ICANN needs to establish stable agreements with the 
country-code top-level domain operators. While we recognize the 
competing pressures surrounding this issue, it's imperative for 
ICANN to develop a framework agreement that would appeal to the 
majority of ccTLD operators and which takes into account the 
various national sovereignty issues. The establishment of a 
country-code-name supporting organization during the last year 
represents significant progress toward this end.
    And, finally, ICANN needs to define a predictable process 
for selecting new top-level domains. This strategy should use 
straightforward, transparent, and objective procedures that 
preserve the stability of the Internet. The ICANN board has 
recently taken steps in this regard by charging its CEO with 
providing a detailed policy-development plan and schedule for 
the introduction of new TLDs and preparing to issue a request 
for proposals for new sponsor TLDs.
    Now, the current MOU between the Department of Commerce and 
ICANN expires at the end of September. The Department is 
currently in the process of reviewing ICANN's accomplishments 
and assessing what actions remain. This review will underlie 
any decision to extend the MOU, and, if so, how best to modify 
the agreement to focus ICANN's and the Department's efforts 
going forward. The Department remains committed to working 
diligently with ICANN and all critical Internet stakeholders to 
preserve and enhance this critical global resource.
    Finally, I would like to thank you, Mr. Chairman and the 
Members of this Committee, for their support and cooperation 
during my tenure at NTIA. With your help, NTIA has been able to 
log a number of accomplishments, including helping to make the 
Internet more secure and accessible for a wide variety of 
users. And I particularly would like to commend Congress for 
its vision and leadership in passing legislation to establish 
the .kids.us space. I hope I can count on you and your 
colleagues to develop websites in this space, giving our 
Nation's children a better understanding of the workings of 
Congress and the issues before you.
    Thank you, again, for this opportunity to testify, and I'd 
be happy to answer any questions that you might have.
    [The prepared statement of Ms. Victory follows:]

 Prepared Statement of Hon. Nancy J. Victory, Assistant Secretary for 
    Communications and Information, National Telecommunications and 
        Information Administration, U.S. Department of Commerce
    Thank you, Mr. Chairman. I would like to thank you and the members 
of the Subcommittee on Communications of the Senate Committee on 
Commerce, Science, and Transportation for inviting me here today to 
testify on this important issue. I am Nancy J. Victory, Assistant 
Secretary for Communications and Information and Administrator of the 
National Telecommunications and Information Administration.
    The Internet and the variety of applications that it supports 
provide tremendous opportunities for economic and social development 
around the world. What started as a small-scale system of links among 
U.S. academic institutions is now a gigantic global network connecting 
individual users, companies and institutions from any access point, 
regardless of national or geographic borders. The Internet continues to 
expand in terms of size and scope and has become a significant and 
important means of doing research, communicating with each other, and 
conducting business. In fact, e-commerce sales by U.S. retail 
establishments reached $11.921 billion during the first quarter of 
2003--a 25.9 percent increase over first quarter 2002. Given the 
Internet's importance in all of these facets of daily life and the 
country's general economic well-being, it is essential that the 
Internet--and its underlying domain name and addressing system (DNS)--
remain stable and secure.
    This is the primary concern of the Department of Commerce, which 
currently serves as the steward of critical elements of the DNS. The 
Department believes that the stability and security of this important 
global resource can best be achieved through privatization of the 
technical management of the DNS and continued global cooperation, via 
appropriate public-private partnerships that reflect the international 
nature of the Internet. Innovation, expanded services, broader 
participation, and lower prices will arise most easily in a market-
driven arena, not in an environment that operates under substantial 
regulation.
    The Internet Corporation for Assigned Names and Numbers (ICANN) is 
the private sector entity responsible for day-to-day management of the 
DNS. ICANN performs this function pursuant to a Memorandum of 
Understanding (MOU) with the Department of Commerce. The Department 
supports the ongoing work of ICANN and applauds its efforts to engage 
all critical stakeholders in its decision-making processes. We are 
particularly encouraged by the progress ICANN has made over the past 
year towards implementing a number of structural and procedural 
reforms, as well as moving forward on several of the tasks set forth in 
the MOU. The Department desires to see ICANN evolve into a stable and 
sustainable organization that is well equipped to weather a crisis.
    Last year, when the Department of Commerce and ICANN chose to renew 
the MOU for a period of one year, both parties agreed that continued 
progress toward stability and sustainability required ICANN to focus on 
improvements in 5 major areas:

   Clarifying ICANN's mission and responsibilities;

   Ensuring transparency and accountability in its processes 
        and decision making;

   Increasing its responsiveness to Internet stakeholders;

   Developing an effective advisory role for governments; and,

   Ensuring adequate and stable financial and personnel 
        resources to carry out its mission and responsibilities.

    The Department believes that ICANN has made significant strides 
this year in developing into a more stable, transparent and responsive 
organization. ICANN has completed a comprehensive reform effort that 
has resulted in major structural adjustments and refinements to its 
decision-making processes that allow for greater transparency and 
responsiveness to all critical Internet stakeholders. Specifically:

   ICANN has refined its mission and restructured its 
        supporting organizations and advisory committees, including the 
        establishment of a new supporting organization for country-code 
        Top Level Domain (ccTLD) managers;

   ICANN has implemented new, transparent, constituency-driven 
        policy development processes;

   ICANN has established an at-large advisory committee and 
        regional at-large organizations to encourage greater global 
        public participation;

   ICANN has created liaisons between the Governmental Advisory 
        Committee (GAC) and the other ICANN supporting organizations 
        and advisory committees;

   ICANN has established a process for the ICANN board to 
        solicit and receive GAC advice on public policy matters between 
        meetings; and

   ICANN has restructured its staff to better respond to 
        ICANN's technical policy, DNS management and financial 
        responsibilities.

    In addition, the organization has hired a new CEO with both 
management expertise and experience in dealing with this unique 
organization. It has also implemented a new nominating process to 
ensure qualified, committed and internationally representative board 
members. It recently appointed eight new board members with impressive 
credentials and very relevant experience.
    I am also pleased to note that the ICANN GAC, of which the United 
States is an active participant, has undergone an evolution of its own. 
The establishment of GAC liaisons to each of the other ICANN supporting 
organizations is intended to encourage communications between the GAC 
and the relevant constituent groups with respect to public policy 
issues. In addition, the GAC has established internal working groups on 
relevant public policy issues to facilitate their analysis and to 
engage in dialogue with ICANN supporting organizations and committees 
as needed.
    While ICANN has made a great deal of progress, both the Department 
of Commerce and ICANN recognize that much is still to be done for ICANN 
to evolve into the stable and sustainable DNS management organization 
we would all like it to be. These include:

   Ensuring Root Server Security. The root server system forms 
        a critical component of the DNS by linking domain names to the 
        corresponding numerical addresses. Ensuring the security of 
        this function is therefore of the utmost importance. While the 
        request for specific information set forth in the Cooperative 
        Research and Development Agreement (CRADA) was met, ICANN needs 
        to continue to exchange views and ideas with the root server 
        system operators to solidify relationships that guarantee the 
        security of this resource. The formation of ICANN's Security 
        and Stability Advisory Committee, of which many of the root 
        server operators are members, is a first step in the right 
        direction.

   Securing Agreements with Regional Internet Registries. As 
        the entity responsible for the allocation of numbering 
        resources within their respective geographic region, the 
        Regional Internet Registries (RIRs) play a crucial role. 
        Although productive talks are underway, legal agreements 
        between the RIRs and ICANN have not yet been completed. 
        Finalizing these agreements to formalize the relationship 
        between ICANN and the RIRs remains essential not only to 
        ICANN's ability to perform its address allocation 
        responsibilities, but also to the overall stability of the 
        Internet.

   Enhancing Accountability Mechanisms. As the Internet 
        continues to play a significant role in our daily lives, 
        transparent mechanisms that provide accountably to all 
        stakeholders are important. While ICANN has initiated a review 
        of suitable international arbitration providers to constitute 
        an Independent Review Panel and has called for the 
        establishment of an Office of Ombudsman, these mechanisms must 
        be finalized to ensure appropriate accountability to all ICANN 
        stakeholders.

   Developing Agreements with ccTLD Operators. The fastest 
        growing segment of the DNS is within the ccTLD community. While 
        ICANN continues to make progress towards establishing stable 
        agreements with ccTLD operators, forward movement has been 
        slow. This is largely attributable to the complexities 
        resulting from the convergence of national sovereignty 
        assertions, international law considerations, and the general 
        concerns of global and local Internet communities. Despite 
        these competing pressures, ICANN must develop a framework 
        agreement that would appeal to the majority of ccTLD operators, 
        while recognizing the various national sovereignty issues 
        involved. The establishment of a country-code Name Supporting 
        Organization (ccNSO) during the last year represents 
        significant progress towards this end.

   Refining the Processes for Selecting New TLDs. Determining 
        the circumstances under which new top level domains (TLDs) 
        would be added to the DNS was one of the key functions 
        identified in the White Paper. While ICANN has approved the 
        addition of seven new TLDs, much work remains to be done in 
        this area with respect to developing an appropriate long-term 
        strategy. This strategy should use predictable, transparent and 
        objective procedures that preserve the stability of the 
        Internet. While the ICANN Board has recently taken welcomed 
        steps in this regard--charging its CEO with providing a 
        detailed policy development plan and schedule for the 
        introduction of new TLDs and preparing to issue a Request for 
        Proposals for new sponsored TLDs--this remains one of ICANN's 
        core yet-to-be-accomplished objectives.

    The current MOU between the Department of Commerce and ICANN 
expires at the end of September. The Department is currently in the 
process of reviewing ICANN's accomplishments and assessing what actions 
remain under the MOU. This review will underlie any decision to extend 
the MOU and, if so, how best to modify the agreement to focus ICANN's 
and the Department's efforts going forward. The Department stands ready 
to continue its stewardship obligations of critical elements of the DNS 
during the transition period and to assist the global Internet 
community in maintaining a stable and secure Internet. To this end, the 
Department remains committed to working diligently with ICANN and all 
critical Internet stakeholders to assist ICANN in its evolution and to 
preserve and enhance this global resource.
    Finally, I would like to thank the Members of this Committee for 
their support and cooperation during my tenure at NTIA. With your help, 
NTIA has been able to lob a number of accomplishments, including 
helping to make the Internet more secure and accessible for a wide 
variety of users. I particularly want to commend the Congress for its 
vision and leadership in establishing the .kids.us space. The Internet 
can be a wonderful resource for children, and soon we will be have a 
safe place for children under 13 where they can discover and explore 
educational, fun, and age appropriate content. I hope I can count on 
you and your colleagues to develop websites in the .kids.us space, 
giving our Nation's children a better understanding of the workings of 
Congress and the issues before you.
    Thank you and I would be happy to answer any questions that you may 
have.

    Senator Burns. Thank you very much.
    Madam Secretary, last year, I guess, about--or this year, I 
guess, last June, the GAO issued a report that was, sort of, 
critical of your Department not fulfilling the role of 
oversight with regard to ICANN. Since then, have you taken 
steps to help that situation? And cite a few for this 
Committee, if you could.
    Ms. Victory. Yes, sir. I believe that report came out in 
June 2002, and we did take the recommendations to heart. One of 
the recommendations was to issue some sort of a status report 
as to what was guiding our thinking as we were entering into 
the MOU every year. Last year, when we did extend the MOU for 
one year, the Department issued a separate statement that went 
through our rationale, that went through the progress that we 
had seen over the year, and that also laid out a road map for 
ICANN for the upcoming year, and had a number of things in that 
road map that were incorporated into the MOU.
    I think one of the most important tools that we implemented 
was a quarterly reporting mechanism that we imposed on ICANN 
that was supposed to serve a number of purposes; one, to let 
the Department know and to give it status updates on what was 
happening, but it was also supposed to be an encouragement tool 
for ICANN to recognize that it needed to make progress every 
quarter, not just at the end of the year.
    I believe that ICANN has been making those quarterly 
reports public. We've also asked ICANN to deliver an annual 
report to us that would inform our thinking as we're entering 
the end of this MOU term and considering whether to renew or 
modify or terminate the agreement, and we expect to receive 
that annual report next week.
    Senator Burns. Now, you've taken these actions. Based on 
what you know now and based on some of the progress that ICANN 
has made, would you recommend renewal of that MOU this year?
    Ms. Victory. We have not reached a decision on that yet. I 
think one of the--we are--certainly been very close to 
monitoring what ICANN has been doing through these quarterly 
reports and also through our participation in the Government 
Advisory Committee. But one piece of evidence that I think is 
going to be very important to us to assess will be this annual 
report, which we hope to receive next week.
    We've not reached a decision on what to do, but we have 
seen progress in each of the five areas that I outlined in my 
testimony, which were the five areas we told ICANN we would 
like to see improvement last year in the MOU.
    Senator Burns. You pointed out in your testimony developing 
agreements with country-code top-level domain operators such as 
.cn for China has been slow.
    Ms. Victory. Uh-huh.
    Senator Burns. What seems to be the problem there? What do 
you think the problem is, as not getting more cooperation out 
of the international community?
    Ms. Victory. I think there are a number of problems there. 
Actually underlying the difficulty with getting agreements with 
any of the constituencies is the fact that there were no 
agreements before, and the Internet was operating just fine. So 
for a lot of these entities, just the idea of entering into 
agreement is a new concept and a, sort of, a new philosophy to 
get used to.
    But I think with the ccTLDs, one of the most difficult 
issues has been resolving all of the different approaches to 
ccTLDs that you're seeing in each country. Not every country 
has a tight relationship with its ccTLD. In the U.S., we do. 
And, in fact, the Department has a contract with NeuStar, the 
U.S. operator. But, in many countries, there is no formal 
relationship between the Government and the ccTLD. We have 
significant sovereignty issues that we want to make sure are 
not impacted by the ccTLD agreement. Other countries may not 
have that concern. And, frankly, just the fact that you have so 
many different permutations, I think, has made it very 
difficult to develop either a central agreement or a number of 
variations of an agreement.
    But I think we're hopeful that with this ccNSO, which has 
recently been formed in the bylaws adopted at the June Montreal 
meeting, that that will be an appropriate forum to be able to 
make recommendations as to what some of the basic principles or 
outline of this contract should be. So I think that's a step in 
the right direction, that that group is organizing and 
organizing formally within ICANN. And then, hopefully, through 
their assistance, some basic forms of the contract can be 
drafted, and we can move forward.
    Senator Burns. In your estimation, when you look at those 
reports and those negotiations with the international 
community, what is the main concern of countries affiliating 
themselves and joining this organization?
    Ms. Victory. Well, I think that, in terms of the countries 
joining, the Government Advisory Committee has gone through its 
own evolution over the last year. We are seeing tremendously 
increased representation within the Government Advisory 
Committee, and a much more active group. And I mentioned in my 
testimony that we do have these working groups that have been 
formed under the leadership of the new Government Advisory 
Chair from Malaysia. That's enabled this to be a much more 
relevant organization. It's enabled a lot of concrete work to 
be done on particular issues.
    So I think in terms of attracting new members to the 
Government Advisory Committee, that's certainly been a help. 
And also, there's a strong interest in outreach, particularly 
to some developing countries, to educate them about ICANN and 
to educate them about the benefits of participating in the 
Government Advisory Committee, even if their participation is 
electronic, as opposed to physically attending the meetings. 
And that seems to have moved things along quite nicely.
    But, again, as far as the ccTLDs go, not all of them are 
affiliated with their country's government. We've been trying 
to educate some of the governments, and I think the Government 
Advisory Committee is very interested in taking up some of the 
issues of the ccTLDs to see if they can help advance the ball 
with respect to the contracts.
    Senator Burns. We've still got a lot of work to do.
    Ms. Victory. Yes, we do.
    Senator Burns. And ICANN does, too. And I want to 
congratulate you on your service down at the Department of 
Commerce. We wish you well in your next endeavor----
    Ms. Victory. Thank you.
    Senator Burns.--and in the work that you do. I would hope 
that you're leaving an office down there that understands what 
their duties are with regard to ICANN and our oversight 
responsibilities there. And, also, we look forward to that 
report coming out before the MOU is renewed.
    Ms. Victory. Thank you very much, sir.
    Senator Burns. So we thank you for coming today and sharing 
your thoughts with us, and--happy trails.
    Ms. Victory. Thank you very much, Senator.
    Senator Burns. Thank you very much.
    Our next panel is Mr. Paul Twomey, President and Chief 
Executive Officer of the Internet Corporation; Ari Balogh, 
Senior Vice President, VeriSign, here in Virginia; Alan 
Davidson, Associate Director, Center for Democracy and 
Technology; and Paul Stahura, Chief Executive Officer of eNom, 
Incorporated, in Belleview, Washington. Gentlemen, we welcome 
you here today. We look forward to your testimony and also some 
conversation that we might have with regard to ICANN.
    I want to call on Mr. Paul Twomey, and first of all I thank 
you for dropping by my office, we had a nice visit there, and 
we look forward to your report and some changes, and you said 
you were going to have good news today, and I believe you, and 
even though you may be from down under, I'll try a bit harder 
to understand you, and we welcome you here today.

       STATEMENT OF DR. PAUL TWOMEY, PRESIDENT AND CHIEF

          EXECUTIVE OFFICER, INTERNET CORPORATION FOR

               ASSIGNED NAMES AND NUMBERS (ICANN)

    Mr. Twomey. Good day.
    Thank you, Senator, and I'm very pleased to be here today 
and to give testimony to this Committee. I will make just some 
opening remarks. It's my first appearance here in the role as 
President and Chief Executive of ICANN. I assumed this 
responsibility about 4 months ago. I have been spending much of 
my time since then listening to the many constituency interests 
that in aggregate make up the ICANN. In addition, I and many 
others have been working very hard to finally implement the 
ICANN reforms that had just begun when my predecessor last 
appeared before this Committee. There's a lot of work been done 
in that timeframe.
    I've also published a comprehensive plan for the 
reorganization of the ICANN staff function, which is in the 
process of being implemented. I want to focus today on these 
reform and reorganization efforts.
    Senator Burns. You might want to pull that microphone a 
little closer to you.
    Mr. Twomey. Is that better? That is much better. Thank you, 
Senator.
    On specific accomplishments, it's hard to overstate the 
comprehensiveness of the ICANN reforms that have taken place 
over the last year. They include: restructuring the ICANN 
board, advisory committees, supporting organizations and other 
participatory bodies to build effective, transparent, 
responsive, and balanced participation by all stakeholders;
    Second, forming a country-code name supporting organization 
to further participation in ICANN by the almost 250 country-
code top-level domains around the world, and that's just a very 
recent event at our most recent meeting in Montreal;
    Establishing more effective processes for ICANN to solicit 
and receive advice on public policy and consumer policy matters 
from the Governmental Advisory Committee, other multinational 
expert agencies and supporting organizations;
    Creating new constituency driven policy development 
processes; monitoring and offering policy guidance on key 
upcoming technical issues facing the domain name system, such 
as implementation of internationalized domain names, and the 
transition to a new numbering protocol, IP v.6;
    Establishing accountability mechanisms, such as the 
creation of an ombudsman program and independent review process 
for board decisions;
    In response to consumer demand, adopting new policies 
relating to redemption grace period for at least deleted domain 
names, integrated Star transfers and Whois data protection and 
accuracy policies; and establishing an at-large advisory 
committee and organizing regional at-large organizations to 
encourage informed and productive public participation by 
individual Internet users.
    Now, there is a lot of progress there but I don't want to 
overstate the case. ICANN 2.0, as we call it, is still a work 
in progress, but in completing this reform and reorganization, 
the ICANN community has demonstrated that it can develop 
consensus on important and controversial issues. The various 
ICANN constituencies have learned to work together to 
compromise, to take account of the points that are important to 
others, just as they want the points important to them 
accounted for. The success of the reform efforts, and the 
changes it has produced, leave me optimistic that ICANN will be 
a more productive entity in the years ahead.
    I want to just address some consumer issues. 
Notwithstanding the fact that the participants in ICANN have 
been devoting significant time and attention to the reform 
effort over the past year, ICANN has also been able to respond 
to concerns and issues about the DNS that directly affect 
consumers and other users. Four examples of this are:
    First, the redemption grace period service, which protects 
against unintentional loss of a registered domain name.
    Second, our efforts to deal with the very complex Whois 
issues, where we need a balance of accurate information and 
privacy protection.
    Third, new procedures to enter registrar transfers which 
increase the already vigorous competition between the more than 
100 active registrars.
    And finally, the Wait List Servers have the most 
controversial of these efforts, which would offer a guaranteed 
registration for a currently registered domain name when and if 
the registration ever was allowed to expire.
    Other of our reforms has been staff reorganization. Given 
my business background, I came to office with some definite 
plans about how ICANN staff could be organized to enable more 
efficient and more effective performance, even working under 
what will always be significant financial constraints. These 
plans are now being implemented, and I believe will produce a 
more businesslike management structure, one that takes into 
account the increasing demand for and complexity of the work 
that ICANN undertakes to support the Internet community. My 
goal is to improve responsiveness and to streamline management 
processes.
    Finally, on security and stability. Let me state the 
obvious. Security and stability are very important issues for 
ICANN, as they are for everyone in the current environment. Two 
ICANN entities, the Security and Stability Advisory Committee, 
which is composed of operators of Internet infrastructure and 
other security specialists, and the Root Service System 
Advisory Committee, with members drawn from representatives of 
the organizations responsible for operating the world's 13 root 
name servers and other organizations focused on stable 
technical operation and the authority to root serve a system, 
concentrate on these issues.
    As part of the ICANN reforms over the past year, the chair 
of the Security and Stability Advisory Committee, Dr. Stephen 
Crocker, holds a liaison seat on the ICANN board, thus ensuring 
that body's constant attention to its critical subjects.
    In conclusion, I hope this brief overview of the immense 
changes that ICANN has been and is going through gives you a 
greater feel for the velocity of change, which is considerable, 
and a heightened sense of confidence that ICANN can, in fact, 
carry out its limited but important mission effectively. I 
believe that it can, or I would not have taken up this visible, 
and let me tell you not always popular, position as CEO.
    I took the job because I believe that ICANN's mission is 
important, and because I want to help establish that a public-
private partnership of the kind that ICANN has become is, in 
fact, a feasible and appropriate way to deal with the matters 
like the DNS, over which no single Government can claim 
sovereignty, but which all Governments and many private parties 
have important and legitimate interests in seeing function 
well.
    I will be pleased to take any questions you may wish to 
pose.
    [The prepared statement of Mr. Twomey follows:]

 Prepared Statement of Dr. Paul Twomey, President and Chief Executive 
  Officer, Internet Corporation for Assigned Names and Numbers (ICANN)
    Mr. Chairman and members of the Committee, thank you for the 
opportunity to make my first appearance before this Committee in my 
role as President and Chief Executive Officer of the Internet 
Corporation for Assigned Names and Numbers (ICANN).
    I assumed this responsibility about four months ago, and have been 
spending most of my time since then listening to the many constituency 
interests that in the aggregate make up ICANN, which has kept me on the 
road a very large portion of the last four months. In addition, I and 
many others have been working very hard to finally implement the ICANN 
reforms that were kicked off by Stuart Lynn's report to the Board in 
February of 2002, and I have published a comprehensive plan for the 
reorganization of the ICANN staff function, which is in the process of 
being implemented. This testimony will focus on these two aspects of 
ICANN reform.
Reform and Change at ICANN
    In the year since Stuart Lynn last appeared before you to discuss 
ICANN, the reform process that he described as underway has essentially 
been completed. Of course, we still have things to do; important parts 
of the reforms are still being implemented. But the basic and critical 
building blocks of the new ICANN--ICANN 2.0, if you will--are now in 
place. I would like to describe both the process and the results, since 
I think both are important signs of the continuing maturation of this 
still young entity.
    ICANN is a complex body with a complicated mission--developing 
consensus policies related to the technical coordination, at the 
overall level, of the global Internet's systems of unique identifiers, 
and in particular ensuring the stable and secure operation of the 
Internet's unique identifier systems, including the Domain Name System. 
Because it is intended to be a private sector consensus development 
body, it necessarily must permit, and indeed encourage, participation 
from all who have legitimate interests in the subject matter, from 
individuals to governments. But if it is to be effective in overseeing 
the management of this critical global asset, it must also be able to 
come to conclusions and to implement them efficiently when required. 
Finding the right balance of these two somewhat inconsistent objectives 
has been a constant learning experience for those involved in ICANN, 
none of whom had experience in such an entity, since no similar private 
sector entity has ever existed. ICANN is unique, for better or worse, 
and thus the learning curve has been steep.
    The good news is that I believe that the various interests and 
constituencies that make up the ICANN community have now moved very far 
up that steep learning curve. We have more than four years of 
experience in learning how to make this concept work, and with the 
benefit of that experience, we have essentially completed a thorough 
reform of ICANN structures, processes, and indeed its very 
constitutional documents.
    We have a new set of bylaws, a new mechanism for selecting the 
ICANN Board of Directors, a new mechanism for enabling and encouraging 
individual participation in a meaningful and productive way, and new 
procedures and structures for ensuring transparency, fairness and 
accountability. I don't want to overstate the case: ICANN 2.0 is still 
a work in progress. But I believe that, in completing this reform and 
reorganization, the ICANN community has demonstrated that it can 
develop consensus on important and controversial issues. The various 
ICANN constituencies have learned to work together, to compromise, to 
take account of the points that are important to others just as they 
want the points important to them accounted for. The success of the 
reform efforts, and the changes it has produced, leave me very 
optimistic that ICANN will be a more productive entity in the years 
ahead.
Specific Accomplishments
    It is hard to overstate the comprehensiveness of the ICANN reforms 
that have taken place over the last year. They include:

   Restructuring the ICANN Board, advisory committees, 
        supporting organizations and other participatory bodies to 
        build effective, transparent, responsive and balanced 
        participation by all stakeholders;

   Forming a Country-Code Names Supporting Organization to 
        further participation in ICANN by the almost 250 ccTLDs around 
        the world;

   Establishing more effective processes for ICANN to solicit 
        and receive advice on public policy and consumer policy matters 
        from the Governmental Advisory Committee, other multi-national 
        expert agencies, and its own Supporting Organizations;

   Creating new constituency driven policy-development 
        processes;

   Monitoring and offering policy guidance on key upcoming 
        technical issues facing the domain name system, such as the 
        implementation of Internationalized Domain Names and the 
        transition to a new numbering protocol, IPv6;

   Establishing accountability mechanisms, such as creation of 
        an Ombudsman program and an independent review process for 
        Board decisions;

   In response to consumer demand, adopting new policies 
        relating to a redemption grace period for deleted domain names, 
        inter-registrar transfers and Whois data protection and 
        accuracy policies; and

   Establishing an at-large advisory committee and organizing 
        regional at-large organizations to encourage informed and 
        productive public participation by individual Internet users.
New Structures and Policy Processes
    The reforms of the past year have completely transformed ICANN. A 
majority of the ICANN Board is now selected by ICANN's Nominating 
Committee, with the remainder being selected by ICANN's policy-making 
bodies--the Address Supporting Organization, Generic Names Supporting 
Organization and Country-Code Names Supporting Organization. Nominating 
Committee members are delegated to act on behalf of the global Internet 
community, and are guided by very specific and detailed criteria set 
out in the bylaws for qualifications, international representation, 
diversity, experience and eligibility. There is a Nominating Committee 
Code of Ethics, and mandatory disclosure of any potential conflicts of 
interest. In its initial experience of selecting eight ICANN Board 
members earlier this year, the Nominating Committee solicited ideas and 
statements of interest from the Internet community as a whole, and made 
its eight selections from over one hundred persons considered.
    In addition to the Board, the ICANN reforms of the past year 
created the Generic Names Supporting Organization and the Country-Code 
Names Supporting Organization as two new policy-making entities within 
ICANN. The GNSO replaced a similar body, but with a more balanced 
representation of those affected by generic domain names policies, and 
with a carefully crafted Policy Development Process designed to ensure 
the opportunity for participation by all relevant parties, a 
transparent process and a decision within a reasonable timeframe. The 
ccNSO, the formation and structure of which was agreed to by all 
involved parties at the recent ICANN meeting in Montreal, is emblematic 
of the recent progress. It reflects a judgment by the country-code Top 
Level Domains that they must be a part of the ICANN policy development 
process, and follows more than a year of detailed discussions between 
ICANN, ccTLD administrators and other interested parties. The ccNSO 
also includes a detailed Policy Development Process designed to ensure 
a balance of input from country-code Top Level Domains from all 
geographic regions, and an established process by which to deal with 
policies of global concern affecting country-code Top Level Domains.
    How to ensure informed and productive participation by individual 
Internet users has been a frustratingly difficult problem for ICANN 
since its creation. As part of the overall reforms adopted in the last 
year, we have established the At Large Advisory Committee, which will 
be the representative body of a supporting framework of local and 
regional entities made up of and representing individual Internet 
users. The At Large Advisory Committee will be responsible for 
generating and providing advice to ICANN policy bodies and the ICANN 
Board from the global user community. The At Large Advisory Committee 
also appoints delegates to ICANN's Nominating Committee, and liaisons 
to the managing Councils of the Generic Names Supporting Organization 
and the Country Code Names Supporting Organization, as well as other 
ICANN committees and participatory bodies.
Accountability and Transparency Mechanisms
    ICANN is as much a process as it is an entity--a place where those 
with legitimate interests in DNS operation and policies can come 
together to discuss, and hopefully reach consensus on, matters of 
common interest. To be successful, it must be open and transparent, and 
there must be appropriate accountability mechanisms. like all things, 
these goals must be balanced against the practical realities of 
reaching and implementing decisions, but we believe we have now arrived 
at an appropriate balance of all these factors.
    Potentially the most important innovation in this area is the 
Ombudsman Program. ICANN's new Bylaws provide for an Office of the 
Ombudsman to act as a neutral dispute resolution practitioner for 
matters not subject to reconsideration by the Board or eligible for the 
Independent Review Process (both described below). The Ombudsman's role 
is to serve as an objective advocate for fairness, tasked with 
evaluating and clarifying complaints from members of ICANN's various 
constituencies, and where possible, helping to resolve complaints about 
unfair or inappropriate treatment by ICANN staff, the ICANN Board, or 
ICANN constituent bodies, using the full range of conflict resolution 
tools. ICANN has recently retained an individual experienced in the 
establishment of Ombudsman Programs to provide assistance in developing 
and writing ICANN's Ombudsman program policies and operating practices, 
and in the identification of appropriate candidates to lead the Office 
of the Ombudsman.
    ICANN's new Bylaws also include a procedure by which any person or 
entity materially affected by an action of ICANN may request review or 
reconsideration of that action by the Board, to the extent that he, 
she, or it have been adversely affected by: (a) a staff action or 
inaction contradicting established ICANN policy or policies; or (b) one 
or more actions or inactions of the ICANN Board taken or refused to be 
taken without consideration of material information. All 
reconsideration requests are publicly posted on ICANN's website, and 
must be responded to in some fashion by the Board's reconsideration 
committee within thirty days of receipt. To date, ICANN has received, 
evaluated, and acted on a number of such reconsideration requests.
    ICANN's new Bylaws also mandate that ICANN establish a process for 
independent third-party review of Board actions alleged to be 
inconsistent with ICANN's Articles of Incorporation or Bylaws. Requests 
for review are to be referred to an independent review panel operated 
by an international arbitration provider with an appreciation for and 
understanding of applicable international laws, as well as California 
not-for-profit corporate law. Three arbitration providers have emerged 
as suitable candidates to operate the review panel, and the 
qualifications and attributes of each are being reviewed currently, 
with the intent for the organization to make a selection this Fall.
    Finally, the new ICANN bylaws also incorporate a specific 
articulation of ICANN's mission--to coordinate the allocation of the 
global Internet's systems of unique identifiers, and to coordinate 
policy development reasonably and appropriately related to these 
technical functions. After considerable discussion and debate, the new 
bylaws set forth in some detail the core values that underlie that 
mission statement, and thus should inform the performance of that 
mission by ICANN. ICANN 's bylaws also adopt policies to ensure 
balanced input and participation reflecting the functional, geographic, 
and cultural diversity of the Internet at all levels of policy 
development and decision making.
    Participation and a voice within ICANN is available to any 
interested participant. ICANN's Board and Board committees, Supporting 
Organizations, Advisory Committees, and other ICANN bodies all operate 
under principles which include striving for geographic and professional 
diversity. Each ICANN committee, Supporting Organization, and other 
constituent body is charged with adopting rules and procedures intended 
to ensure a balance of views within the entity.
Consumer Issues
    Notwithstanding the fact that the participants in ICANN have been 
devoting significant time and attention to the reform effort over the 
past year, ICANN has also been able to respond to concerns and issues 
about the DNS that directly affect consumers and other users. Four 
examples of this are described below.
Redemption Grace Period Service
    The Redemption Grace Period Service is a response to the increasing 
number of complaints made by holders of domain names that were 
unintentionally deleted (either because of unintentional failure to 
renew or for other reasons) and then registered by someone else, 
sometimes using the domain name to display content repugnant to the 
former registrant. Frequently the registrant experienced significant 
delays and costs in recovering the name and having the former services 
(web service, e-mail, etc.) restored.
    To address these unfortunate situations, it was proposed to 
institute a grace period after expiration of a name, during which the 
domain name would no longer resolve but the former registrant (and only 
the former registrant) could have the name restored in return for 
payment of any fees required. After favorable public discussion, the 
Board concluded that the idea should be further explored. A technical 
steering group was formed (including knowledgeable registry and 
registrar personnel and in consultation with the relevant Supporting 
Organization) to develop a concrete proposal implementing the 
Redemption Grace Period Proposal. This resulted in amendments to 
ICANN's agreements with registry operators designed to require the 
implementation of a Redemption Grace Period Service.
    To date, VeriSign has introduced a Redemption Grace Period Service 
in the .com and .net top-level domains, subject to completion of 
contractual documentation. Likewise, the Public Interest Registry has 
introduced a Redemption Grace Period Service in the .org top-level 
domain on a provisional basis. Neulevel has launched a Redemption Grace 
Period Service in the .biz top-level domain.· Other registry 
operators are expected to follow suit shortly. The decision of whether 
and how to implement a Redemption Grace Period Service in sponsored 
top-level domains has been left to the sponsors of those domains.
    The implementations mentioned above have incorporated the first 
phase of the Redemption Grace Period Service. The next step in 
implementation of the Redemption Grace Period Service is expected to 
occur this Fall, and will allow a registrant to move the renewed 
registration to another registrar if so desired
Whois
    ICANN is the leading global forum for discussion of Internet Whois 
issues. We are currently moving forward with implementation of four 
consensus policies related to Whois that were adopted at the ICANN 
Board of Directors meeting in March 2003 in Rio de Janeiro. One of the 
four recommended policies, the Whois Data Reminder Policy, was 
implemented in June 2003. The Whois Data Reminder Policy calls for 
ICANN accredited registrars to provide domain name registrants with an 
annual listing of their Whois data and to remind registrants of the 
need to correct inaccurate or out-of-date information. The other three 
policies, as to which the technical considerations of implementation 
are currently being considered, are expected to be implemented this 
Fall.
    ICANN also recently posted a ``Registrar Advisory Concerning the 
`15-day Period' in Whois Accuracy Requirements.'' The advisory was 
posted in order to promote a clearer understanding of registrar Whois 
data-accuracy requirements. As explained in detail in the advisory, 
registrars have the right to cancel a registration if a customer fails 
to respond within 15 days to an inquiry concerning Whois data accuracy, 
but registrars also have flexibility to decide when to use that right, 
depending on factors including whether the inaccuracy appears 
intentional and whether third parties are being harmed by maintaining 
the registration with inaccurate data. Registrars are obligated to take 
reasonable action to correct reported Whois inaccuracies, but are not 
bound to a fixed timetable or specific action.
    A two-day Whois Workshop held during ICANN's meetings in Montreal 
initiated a new phase of discussion within the ICANN community on Whois 
and related privacy and other issues. The Whois Workshop was held in 
response to a request from the GNSO, and in cooperation with the GAC's 
Whois policies program. The two-day workshop consisted of one day of 
tutorial-style presentations (with public comment and question/answer 
sessions) dealing with current Whois policy and practice, and one day 
of public policy-focused panel discussions on ``Balancing Public Policy 
Issues in the Current Whois System'' and ``New Approaches to Whois 
Policy and Practice.''
    Whois-related discussions will be a continued focus of ICANN's 
Whois Steering Group and the ICANN President's Standing Committee on 
Privacy.
Inter-Registrar Transfers
    ICANN is in the process of implementing another new set of 
consensus policies intended to improve inter-registrar transfers of 
domain names. Domain transfers (portability) allow consumers and 
business to freely select their domain registration service provider 
based on price and service levels.
    When competition was introduced into the domain registration market 
in 1999, there were initially only five accredited registrars. There 
are now more than 168 accredited registrars, approximately 100 of whom 
are active. Competition has been extremely successful, with prices 
having fallen approximately 80 percent, and widespread innovation and 
creativity in the domain registration market. However, transfer issues 
continued to be troublesome, and in 2001, ICANN's Domain Name 
Supporting Organization convened a Transfers Task Force to study the 
inter-registrar transfer system and recommend improvements. The 
Transfers Task Force worked for over a year in crafting twenty-nine 
(29) consensus policy recommendations set forth in its final report. 
The Task Force's recommendations were accepted unanimously by the GNSO 
Council, and were forwarded to ICANN's Board early this year. In March 
2003, ICANN referred the recommendations to its Governmental Advisory 
Committee (as is required for all proposed actions affecting public 
policy concerns.) The GAC's recommendation to ICANN was ``to support 
and implement the GNSO Task Force's recommendations, without 
amendment.''
    In April 2003, ICANN's Board unanimously adopted the 29 consensus 
policy recommendations on transfers, and authorized staff to take steps 
to implement the policy recommendations. ICANN has convened a Transfers 
Assistance Group, including individuals from the Transfers Task Force, 
the GNSO Council, the Registries and Registrars Constituencies, and the 
At Large Advisory Committee. This Group will work with ICANN staff in 
the coming weeks and months to draft notices and amendments to ICANN's 
contracts with registries and registrars in order to put these 
recommendations into practice.
Wait List Service (WLS)
    The WLS is a new registry service proposed by Verisign, the 
registry operator for the .com and .net. top-level domains. The 
service, if implemented, would allow potential registrants to subscribe 
to a ``wait list' that would guarantee they would be next in line to 
register a name if the current registrant lets it expire.
    Domain names ending in .com, .net, .info, etc. are registered 
through ICANN accredited registrars--of which about 100 are currently 
active. Generally, anybody can register any string of characters 
through any registrar on a first-come, first-served basis. Once 
somebody registers a particular name, no one else can register that 
same name until the current registrant lets the registration expire and 
the name is deleted from the registry. The WLS proposal is designed to 
offer consumers and businesses the opportunity to secure the next place 
in line to obtain the right to register a particular name should the 
current registrant decide not to renew it. (Approximately 800,000 names 
are deleted by the registry each year.)
    The WLS proposal generated considerable controversy within the 
ICANN community. In the absence of a registry service such as that 
proposed by VeriSign, various ICANN registrars had created products 
that purported to take reservations for names that might be deleted in 
the future. Those registrars then regularly queried registries in an 
attempt to be the first to learn of a deletion, in which case they 
would then seek to register the name for their clients. Obviously, no 
registrar could guarantee that any particular registration would be 
successful, and since there were commonly a number of registrars 
seeking to register any given deleted name, most people who signed up 
for those services were destined to be disappointed.
    The VeriSign proposal offered a significant improvement from a 
consumer perspective to the various services already offered by 
registrars. Because VeriSign operated two registries, it could 
guarantee that a reservation made in the WLS for names registered in 
those registries would always be successful IF the name was ever 
deleted. Obviously, such a guarantee can only be offered by the 
registry or its agent, since only the registry can guarantee such 
performance. This fact lead some registrars to conclude that the 
availability of the WLS (with its guarantee of performance) to 
consumers would reduce the demand for their services (which were not 
able to offer a comparable guarantee), and thus they strongly opposed 
approval of the WLS. While reaction from other parts of the ICANN 
community that did not have a direct competitive interest was more 
mixed, it would be fair to characterize the majority view as opposed to 
approval of the WLS proposal.
    After considering the full range of views expressed, the ICANN 
Board concluded that ICANN should act whenever possible in a way that 
promotes consumer choice and innovative services, and that its general 
goal to seek to increase competition when possible did not require it 
to prevent consumers from having the option of purchasing services they 
may decide are beneficial. It would be anomalous to ``protect'' 
competition between providers of non-guaranteed products by preventing 
the new competition of a guaranteed product that at least some 
consumers would likely prefer. Considering all these factors, the Board 
approved the WLS proposal with certain conditions that it felt 
appropriate under the circumstances to protect consumer interests. 
Among these were a limitation of the approval to a twelve month 
experimental period, after which time the Board would be required to 
review and make an independent decision on the continuation of the WLS. 
The Board authorized ICANN's CEO and its General Counsel to negotiate 
amendments to the registry agreements with VeriSign that were 
consistent with its approval.
    The Board's approval did not end the controversy over WLS. In fact, 
this issue is now the subject of two lawsuits, one filed in Canada and 
one in California. In the California litigation, the plaintiff 
requested a Temporary Restraining Order, which request was denied by 
the Court. Further proceedings will likely take place. The WLS will not 
be implemented until the registry agreement amendments that the Board's 
approval requires are completed, and the new agreement is approved by 
the Department of Commerce, as required by the Memorandum of 
Understanding between ICANN and the DOC.
Security and Stability
    Following the ICANN meeting at Marina del Rey in November of 2001, 
ICANN created a Security and Stability Advisory Committee focused on 
security and integrity of the Internet's naming and address allocation 
systems. The committee draws its membership from operators of Internet 
infrastructure and other security specialists, and presently continues 
work on several ongoing projects, including a recommendation regarding 
the layering of services on the DNS (for example, the Verisign ION 
Program and the domain name ``auctions'' of various registrars), an 
evaluation of the redundancy and resiliency of the major domain name 
servers to withstand distributed denial of service (DDoS) attacks, and 
an assessment of the status of DNSSEC, the forthcoming protocol to add 
cryptographically signatures to the domain name system and thereby 
prevent forgery and hijacking of domain names. The DNSSEC work includes 
building a road map outlining its deployment and identification of 
where further work is needed.
    The Committee is also assessing most of the significant security 
issues affecting the Internet; and is beginning an assessment of the 
transition to the new Internet addressing system, IPv6.
Root Server Systems
    ICANN's Root Server System Advisory Committee has a membership 
drawn from representatives of the organizations responsible for 
operating the world's thirteen root nameservers and other organizations 
focused on stable technical operation of the authoritative root server 
system. ICANN operates one of these thirteen root servers, which has 
given ICANN valuable insight into the issues involved in root server 
operations and enhancement.
    The RSSAC has spent considerable time examining and monitoring the 
deployment of more robust DNS infrastructure for the Internet. The 
Committee has also closely followed the efforts of root server 
operators to successfully expand the capacity of the system and its 
geographical diversity through the use of ``anycast'' systems. At 
present, the Committee is examining the implications of new 
technologies on the root server system, such as implementation of IPv6 
for the root.
Staff Reorganization
    One of the first things that I focused on when I assumed this 
position was the internal organization of ICANN. Since I had been 
involved with ICANN, one way or another, since before its birth, and 
because of my personal background in business and business consulting, 
I had some very definite ideas about how ICANN staff could be organized 
to enable more efficient and more effective performance, even working 
under what will always be significant financial constraints. After some 
consultation with various constituencies, I announced plans for 
evolving ICANN into a more business-like management structure--one that 
takes into account the increasing demand for and complexity of the work 
that ICANN undertakes to support the Internet community. My goal is to 
improve responsiveness and to streamline management processes.
    The new structure contemplates two Vice President positions (a Vice 
President of Business Operations, focusing on the day-to-day operation 
of ICANN, and a Vice President of Supporting Organizations and 
Committee Support, focusing on the need to support ICANN's constituent 
bodies). It also includes the reorganization of the various ICANN staff 
functions into four general groups, each headed by a General Manager; 
these will be the lANA function, the Public Participation function, a 
Global Partnerships function that focuses on our relationships with 
governments and multi-national bodies, and Technical Operations, which 
is self-explanatory. Finally, there will be a General Counsel 
responsible for the legal activities of ICANN, principally the 
negotiation of agreements and advising the Board and the CEO on various 
legal requirements. Recruitment for these new positions is now well 
underway.
    This new management structure is intended to clearly delineate 
internal and external operations; recognize important relationships 
that ICANN has with the community; and provide clear lines of 
accountability for key operational and strategic functions. While this 
will involve the addition of a small number of new positions, I am 
convinced that this structure will greatly assist in ICANN's efforts to 
enhance the responsiveness and transparency of its operations to the 
community.
Conclusion
    1 hope this brief overview of the immense changes that ICANN has 
been and is going through gives you both a feel for the velocity of 
change--which is considerable--and a heightened sense of confidence 
that ICANN can in fact carry out its limited but important mission 
effectively. I believe that it can, or I would not have taken on this 
visible (but not always popular) position. I took the job because I 
believe that the ICANN mission is important, and because I want to help 
establish that a public-private partnership of the kind that ICANN has 
become is in fact a feasible and appropriate way to deal with matters 
like the DNS, over which no single government can claim sovereignty, 
but which all governments and many private parties have important and 
legitimate interests in seeing function well.
    1 will be pleased to answer any questions you may have.

    Senator Burns. Thank you very much, Mr. Twomey. We 
appreciate your testimony here today, and we will have some 
questions. Mr. Aristotle--is that Balogh?
    Mr. Balogh. Balogh, yes.
    Senator Burns. Senior Vice President of VeriSign. Thank you 
for coming today.

STATEMENT OF ARISTOTLE BALOGH, SENIOR VICE PRESIDENT, VeriSign, 
                              INC.

    Mr. Balogh. Good afternoon, Mr. Chairman. My name is 
Aristotle Balogh. I'm Senior Vice President for Infrastructure 
of VeriSign, Incorporated, based in Mountain View, California. 
I have a prepared statement, which I would request be inserted 
in the record.
    VeriSign is pleased to have the opportunity to come before 
you to discuss the Internet and its coordination, its impact on 
our economic future, and the contribution ICANN might make 
going forward. Our role in providing the Internet's 
infrastructure gives us a unique perspective on the Internet. 
VeriSign operates two of the 13 authoritative root server 
operation centers that direct Internet traffic, including, at 
the request of the U.S. Department of Commerce, the A root 
server. In this server, we maintain the authoritative address 
list of all Internet top level domains. VeriSign also manages 
the .com and .net domain registries.
    Today, I come with the simple message. Although the 
Internet may have started as an interesting place to send e-
mails and check stock prices and sports scores, it is now part 
of the essential fabric of global economic activity. In a very 
short time, nearly every element of our global infrastructure 
and every key industry has come to depend on the Internet to 
function, to reach their customers and constituencies, to 
increase their efficiency, and to maintain their ability to 
operate, and that reliance will only grow.
    By 2010, the Internet will have nearly 2 billion users, 
serve as a platform for over $1 trillion in economic activity, 
handle roughly 25 percent of all telephone traffic, and connect 
billions of computer devices. This global dependency and its 
associated enormous risks make it imperative that we, the 
entire Internet community, evolve our notion of the Internet 
from a technology spawned by academia and the Government for 
their own use to the present reality, a system that is a 
critical tool for a global economy.
    VeriSign believes that any entity charged with assuring the 
stability, availability, and growth of the Internet requires 
the legitimacy, capacity, and authority necessary to accomplish 
those tasks. Before it can be a truly effective organization, 
ICANN has several steps to take. ICANN's legitimacy is hampered 
by the noninclusion and nonparticipation of key Internet 
constituencies. ICANN's capacity is questioned by those who see 
security and stability as essential for the Internet but find 
ICANN preoccupied with the minutiae of regulation. ICANN's 
authority is clouded by its ambiguous status as an 
international organization.
    There are three key functions where we believe ICANN can 
play a constructive leadership role in the next phase of the 
Internet. The first, stability and security. The 13 root 
servers are the nerve center of the Internet's addressing 
system. Their failure would be highly disruptive to the smooth 
functioning of the Internet. Last October's attacks that 
paralyzed nine of those 13 root servers underscored how those 
networks are increasingly under sophisticated attacks. We 
believe ICANN can play a constructive role by fostering 
information-sharing and serving as a forum that promotes 
industry best practices and uniform operating standards.
    The second, continued globalization of the Internet. The 
Internet's domain name system is no longer just about .com, 
.net, and .org. Besides other top level domains like .biz and 
.info, there are over 250 top level domains such as .de for 
Germany, .jp for Japan, and .br for Brazil. These country-
specific domain names today represent nearly half of all 
registered names on the Internet. Soon, they will account for 
the majority of domain names in the world, yet only a handful 
of these 244 country-code domain-name operators have executed 
agreements with ICANN. It is imperative that ICANN be 
streamlined into an organization that country-code operators 
can benefit in joining, rather than a burden or a risk.
    The third is innovation in services and processes. While 
the Internet has spawned many innovative services over the last 
decade, the blunt truth is that few new services have been 
added to benefit Internet users. For example, internationalized 
domain names provide a means for non-English users to type in 
domain names in their native language, but their introduction 
has been slowed by, at least in part, an internal ICANN debate 
in micromanagement.
    ICANN should be streamlined to enable industry to develop 
and offer new services in a timely fashion to meet the ever-
changing needs of the Internet. I've suggested a coordination 
body to be in a position to play a useful role in the important 
task of supporting effective growth of the global Internet. It 
needs a broader user community and Internet support. As I 
mentioned earlier, a good start in this regard would be for 
ICANN to recognize that Internet constituencies have the 
capacity for self-coordination, with ICANN serving as the 
umbrella organization for technical coordination. We believe, 
as do others in the community, that such a framework would 
strengthen standards of operation and conduct, improve the 
process for resolving critical issues, and promote information-
sharing and adoption of best practices that would make the 
Internet stronger.
    To summarize, for ICANN to be legitimate and effective, 
ICANN must bolster its legitimacy by ensuring that critical 
Internet constituencies that are responsible for the operation 
of the global networks and domain names are active and 
supportive members. ICANN must limit its attempts at 
micromanagement in a way that will invite the participation of 
key Internet constituencies as well as encourage innovation and 
new services. ICANN must abandon its aspirations to be the 
unchartered FCC of the Internet, and ICANN must sponsor the 
discussions regarding the Internet security and growth that 
will ratify a view among all constituencies that the 
institution is adding real value.
    Thank you, Mr. Chairman, for allowing me this opportunity 
to testify today.
    [The prepared statement of Mr. Balogh follows:]

    Prepared Statement of Aristotle Balogh, Senior Vice President, 
                             VeriSign, Inc.
    Good afternoon Mr. Chairman and distinguished members of the 
Committee.
    My name is Aristotle Balogh; I am Senior Vice President of 
Operations and Infrastructure for VeriSign, Incorporated, based in 
Mountain View, California. I have a prepared statement, which I would 
request be inserted in the record.
    VeriSign is the leading provider of critical infrastructure 
services for the Internet and telecommunications networks. Every day we 
support 10 billion domain name lookups and e-mails, provide Internet 
security for thousands of corporations, process 25 percent of all North 
American a commerce and help facilitate billions of daily phone calls 
and millions of daily SMS messages.
    VeriSign is pleased to have the opportunity to come before you to 
discuss the Internet and its coordination, its impact on our economic 
future, and the contribution the Internet Corporation for Assigned 
names and Numbers (ICANN) might make going forward.
    We strongly support the concept of a central coordinator of the 
administration functions of the Internet's address system.
    Our role in providing the Internet's infrastructure gives us a 
unique perspective on the Internet. VeriSign operates two of the 13 
authoritative ``root'' server operation centers that direct Internet 
traffic, including, at the request of the U.S. Commerce Department, the 
``A'' Root Server. In this server, we maintain the authoritative 
address list of all Internet top-level domains. VeriSign also manages 
the ``dot COM'' and ``dot NET'' domain registries. These are the 
central data bases that enable you as an Internet user to simply type 
in a domain name on your computer, such as ``verisign.com,'' and 
connect it over the Internet to the machine that hosts the proper 
Website.
    To support these functions, VeriSign has invested hundreds of 
millions of dollars into building a global network of computers that 
are a critical component of the Internet's infrastructure.
    Today, I come with a simple message: although the Internet may have 
started as an interesting place to send e-mails, and check stock prices 
or sports scores, it is now part of the essential fabric of global 
economic activity.
    Among other indicators of this growing, central, critical role for 
the Internet is the fact that in a little over two years, the daily 
traffic of domain name resolutions--``hits''--on our servers has 
increased tenfold (from 1 billion a day to over 10 billion a day).
    In a very short time, nearly every key element of our global 
infrastructure and every key industry--financial services and markets, 
education, manufacturing, transportation, electric power, broadcasting, 
government services--has come to depend on the Internet to function, to 
reach their customers and constituencies, to increase their efficiency, 
and to maintain their ability to operate.
    And that reliance will only grow. By 2010, the Internet will have 
nearly 2 billion users, serve as the platform for over $1 trillion in 
economic activity, handle roughly 25 percent of all telephone traffic 
and connect billions of computer devices. In short, the Internet no 
longer can be seen as just the means of adding e-commerce to the mix of 
retail activities, or providing a convenient set of e-government 
services. As much as coal and iron were the keystones of the Industrial 
Age, the Internet is the essential tool of the Information Age. That 
means an Internet failure--such as the one we came close to 
experiencing last October when nine of the thirteen root servers were 
disabled for several hours--will have a devastating effect on the 
global economy.
    This growing global dependency, and its associated enormous risks 
tell me that we--the entire community of governments, infrastructure 
stewards and users--obligates us all to evolve our notion of the 
Internet as a technology spawned by academia and the government for 
their own use, to the present reality: a system that is a critical tool 
for a global economy, in a manner that is historically without 
precedent.
    And so too, must evolve our institutions of Internet coordination 
into those which will have the legitimacy, capacity and authority 
necessary to assure the availability and growth of a reliable, secure 
Internet.
    For the past five years, ICANN has been the entity charged by the 
U.S. Government and a community of Internet interests with coordinating 
certain technical functions of the Internet's naming and numbering 
system. As the ONLY institution serving in a multi-national capacity in 
the Internet space--other than the professional technical standards 
bodies--ICANN has ``acquired'' some roles, and ``assumed'' others that 
have little to do with ``coordinating the administration of the naming 
and numbering system.''
    And this functional ``ambiguity'' for ICANN has led to significant 
debate around the nature of and proper scope of responsibility for any 
entity taking on responsibilities of Internet ``coordination.''
    In our capacity as a leading provider of key Internet 
infrastructure services relied on by the rest of the Internet, and 
consequently, a half a billion users, VeriSign believes that any entity 
charged with ensuring the stability, availability and growth of the 
Internet requires the legitimacy, capacity and authority necessary to 
accomplish those tasks.
    Today's ICANN cannot effectively do this. ICANN's legitimacy is 
hampered by the non inclusion/non-participation of regional numbering 
authorities, the collective community of root server operators or over 
200 country-code Top Level Domain registries. ICANN's capacity is 
questioned by those who see security and stability as essential to the 
Internet, but find ICANN preoccupied with regulation of registrar 
business practices and the minutiae of delegation of new generic 
registries. ICANN's authority is clouded by its ambiguous status as a 
contractor with the U.S. Department of Commerce, but a PR message 
espousing its ``international'' character.
    So, while a need clearly exists for a coordination body to take on 
the challenge of the 21st Century's Internet, a question exists as to 
how ICANN can evolve to be that body.
    If ICANN is to be that body let me suggest areas where important 
work must be done. There are three key functions where we believe ICANN 
can play a constructive leadership role in the next phase of the 
Internet:

  (1)  Stability and Security. The 13 root servers serve as the nerve 
        center of the Internet's addressing system. Their failure would 
        be highly disruptive to the smooth functioning of the Internet 
        addressing system. Last October's attacks that paralyzed nine 
        of the thirteen root servers underscored how these networks are 
        under increasingly sophisticated attack. These attacks come 
        from not only cyber terrorists with grand designs to disrupt 
        the U.S. critical infrastructure but from IT professionals who 
        might work in the cubicle next door. We believe ICANN can play 
        a constructive role by fostering information sharing of 
        information and serving as a forum that promotes industry best 
        practices and uniform operating standards.

  (2)  Continued Globalization of the Internet. The Internet domain 
        name system is no longer just about .com, .net and .org. 
        Besides other top-level domains like .biz and .info, there are 
        over 200 country-code top-level domains such as .de for 
        Germany, .jp for Japan and .br for Brazil. These country 
        specific domain names today represent nearly half of all 
        registered names on the Internet; soon, they will account for 
        the majority of domain names in the world. Yet only a handful 
        of these 200+ country-code domain name operators have executed 
        agreements with ICANN.

      This lack of true global support for ICANN limits ICANN's 
            legitimacy. It is imperative that ICANN be streamlined into 
            an organization that the country-code operators see benefit 
            in joining, rather than a burden or risk.

      A good first step would be ICANN adopting an approach that 
            respected sovereignty of the country-code operators and 
            their ability to govern themselves. In short, to operate 
            within an ICANN model without fear of ICANN dictates. Only 
            then will the majority of this important constituency 
            consider joining ICANN.

  (3)  Innovation in Services and Processes. While the Internet has 
        spawned many innovative services over the last decade, the 
        blunt truth is that few new services have been added to benefit 
        Internet users. For example, Internationalized (sometimes 
        called ``multi-lingual'') Domain Names (``ION'') provide a 
        means for non-English users to type in domain names in their 
        native language. But the introduction of IONs has been slowed--
        at least in part--by an internal ICANN debate--framed as an 
        almost FCC-like regulatory ``review'' process--with a current 
        implementation that falls short of the stated goal of providing 
        the end user the ability to navigate on the Web in his or her 
        native language.

    Far too often, new and innovative Internet technologies have been 
kept from the user community, bogged down and polarized in similar 
processes that are murky even to the most ardent ICANN watchers. ICANN 
should be streamlined to enable industry to develop and offer new 
services in a timely fashion to meet the ever-changing needs of the 
Internet.
    I have suggested that for a coordination body to be in a position 
to play a useful role in the important task of supporting effective 
growth of the global Internet, it needs broad user community and 
industry support. And for ICANN to have broad support, industry must 
see a benefit to being a member. For many--such as root server 
operators and country-code domain name operators--the ``pain'' of 
joining ICANN (onerous contracts, lengthy review periods, and the 
unfortunate politicization of ICANN's administrative functions) has not 
made membership a viable option. ICANN--if it is to be the organization 
that sets the tone for the Internet addressing system's future growth--
must be capable of instilling confidence in its actions among the 
global user community.
    As mentioned earlier, a good start would be for ICANN to recognize 
that Internet constituencies have the capacity for self-coordination, 
with ICANN serving as the umbrella organization for technical 
coordination. We believe, as do others in the Internet community, that 
such a framework would strengthen standards of operation and conduct, 
improve the process for resolving critical issues and promote 
information sharing and adoption of best practices that would make the 
Internet stronger.
    Invested with the support of these communities, an effective ICANN 
could educate the growing user community on shared obligations of 
security. An empowered ICANN could organize financial support for 
advanced research at leading universities on next-generation 
technologies to maintain the integrity of the Internet's assets, in the 
face of the hundreds of daily exploits directed against it. And, a 
visionary ICANN could serve as a forum that leads to innovative new 
services that enrich the user experience.
    To state again our road-map: We need a body that is legitimate and 
effective. If it is to be ICANN, ICANN must:

   bolster its legitimacy by ensuring that critical Internet 
        constituencies that are responsible for the operation of the 
        global networks and domain names are active and supportive 
        members;

   limit its attempts at business micro-management in a way 
        that will invite the participation of ccTLD registries, IP 
        numbering registries and root server operators and encourage 
        innovation and new services;

   abandon its aspirations to be the unchartered FCC of the 
        Internet; and

   sponsor the discussions and actions regarding the Internet's 
        security and growth that will ratify a view among all 
        constituencies that the institution is adding real value.

    Mr. Chairman, we are entering the next phase of the Internet--not 
born in a bubble era of the Internet but driven by society's increasing 
reliance on these networks for commerce and communications. VeriSign is 
mindful of the enormity of this challenge; we stand ready to play our 
part in the evolution of the present ICANN, or a successor 
organization, into the leadership role necessary to ensure the 
Internet's continued growth and role in supporting our global economy.
    Thank you, Mr. Chairman and members of the Committee, for allowing 
me this opportunity to testify today.

    Senator Burns. Thank you very much.
    Mr. Alan Davidson, Associate Director, Center for Democracy 
and Technology here in Washington, D.C. Thanks for coming 
today, Alan.

 STATEMENT OF ALAN B. DAVIDSON, ASSOCIATE DIRECTOR, CENTER FOR 
                    DEMOCRACY AND TECHNOLOGY

    Mr. Davidson. Thanks for having us. Chairman Burns and 
Members of the Subcommittee, on behalf of the Center for 
Democracy and Technology, I'd like to thank you for this 
opportunity to testify on what we believe are very important 
issues surrounding the management of the Internet's naming and 
numbering system.
    I have to say that testifying in the late afternoon on July 
31 in this Senate sort of makes us feel like we're standing 
between you and lunch, or at least between you and recess.
    Senator Burns. It's a very dangerous position to be in.
    [Laughter.]
    Mr. Davidson. So we'll try and make it brief, but that's 
particularly why we commend the Subcommittee and the Chairman 
for holding this hearing, because our belief is that continuing 
Congressional oversight is important if we are to ensure that 
the Internet's critical technical resources are being managed 
in the public interest.
    ICANN is important. I teach a course at Georgetown's 
graduate school in Internet technology and policy, and one of 
the things the students learn about is how this great 
decentralized network of networks has led to this incredible 
economic opportunity, civic discourse, free flow of 
information, and when we get to the part about ICANN, they 
always feel a little, I think, betrayed, because the fact is 
that there's a truth here which is that, in fact, this great, 
decentralized network of networks actually relies in a critical 
way on a few very centralized naming and numbering functions, 
and the way that those functions are managed actually could 
have a big difference in the life of Internet users if it's not 
done properly, and so we think it's extremely important that 
we're paying careful attention to how ICANN does what it does.
    I have a couple of key points here. First, ICANN is still, 
in our belief, the right idea. We strongly believe in the 
vision that was first articulated years ago by the Commerce 
Department and that underlies ICANN: that of a nongovernmental 
body--a sort of more-than nimble Government, bottom-up and 
consensus oriented body, taking into account all of the things 
that a broad community feels about this system, and narrowly 
focused. Not a big, broad government organization, but one 
focused on its mission, and globally representative, including 
diverse viewpoints from a lot of different Internet 
stakeholders. People have been working very hard to try to 
fulfill that vision, and we think that that vision is far 
superior to many of the alternatives.
    We are particularly alarmed by new calls in some quarters 
for a more governmental approach to managing these systems 
through the ITU or some other organization, and we think that 
kind of approach is to be avoided, because we think that the 
private sector can do it better, and is a more appropriate 
place and a better place to get the voice of the diverse 
Internet community heard, so it is essential to strengthen 
ICANN, because it's the best model that we have right now.
    Our second major point, though, is that ICANN faces serious 
risks if it does not make significant progress in meeting its 
public interest obligations. ICANN and its staff have worked 
hard, and there's a list of achievements now from the 
accreditation of new registrars, introduction of competition, 
completing a reform process, getting a new president who has 
been welcomed broadly by a lot of folks in the community, but 
at the same time, and I think the chairman alludes to this in 
his opening comments, there is a decidedly mixed record in 
meeting ICANN's public interest obligations.
    ICANN has in many ways departed from its bottom-up policy 
processes, which are so critical to making sure that 
stakeholders feel like they have a voice. The user community 
and noncommercial interests in particular are poorly 
represented in ICANN. The chairman alluded to the fact that 
ICANN has abandoned the election of at-large directors, which 
were originally a significant proportion of its board.
    That may be an OK decision for ICANN, but it is striking 
that so little has been done to replace that mechanism with 
other mechanisms to give the users a voice at ICANN. The 
accountability mechanisms are still lacking--the ombudsman, the 
independent review process that many people look to to provide 
accountability--and ICANN's leadership has acknowledged these 
challenges. The Department of Commerce has as well, but 
Congress should not be left with the impression that ICANN's 
reform effort has taken care of all of these concerns. The fact 
is that it has not. There's a tremendous amount of work to be 
done still.
    That list of concerns is a road map for progress at ICANN. 
ICANN needs greater accountability mechanisms, it needs a clear 
meeting of the minds about what its mission is, it needs better 
participation mechanisms for users. We are issuing a report 
today about assessing ICANN, metrics for measuring ICANN's 
success, and with the permission of the Committee we will 
attach it to our testimony as part of the record, and it lays 
out a set of goals or a set of metrics for assessing ICANN over 
time. I think it will hopefully be something that the community 
and the Department of Commerce can look at as it thinks about 
renewing ICANN's MOU.
    There are also several issues that are coming up in he next 
few months at ICANN that will tell us a lot about ICANN's 
responsiveness to the public and to the user community. The 
Whois privacy issue raises serious concerns for users. There 
are very legitimate reasons why we want to have data publicly 
available in this Whois database and there are awful serious 
privacy issues raised. We believe, CDT believes, that there's a 
great balance to be struck that lets legitimate users have 
access to information but also respects people's privacy. It 
will be very important for ICANN to help strike that balance.
    The selection of new top level domains is an issue of great 
concern to the user community, and there have been some very 
good ideas put out about how ICANN could do that better, but 
our final point, and I think it's the point about what can 
Congress and the U.S. Government do, is that we need to have a 
continued measure of oversight over ICANN by the U.S. 
Government, and I think it's particularly important that the 
memorandum of understanding between ICANN and the Commerce 
Department, it should be renewed, but it should be renewed 
along the lines of its last renewal a year ago, which was for a 
one-year term with some periodic reporting.
    There's a tremendous amount of change that's happened at 
ICANN, new leadership, massive internal reorganization, many 
checklist items that have not been completed. NTIA itself is 
undergoing major changes, and in that environment it is highly 
appropriate for the Department of Commerce to move forward with 
an MOU, but to move forward with one that asks ICANN to come 
back here and show us what's been done.
    Congress should continue holding hearings like this, and we 
particularly hope that NTIA can play a role in improving 
transparency and participation at ICANN, perhaps through public 
reporting, perhaps through the creation of some sort of public 
input or commission into what ICANN is doing. There are lots of 
ideas out there.
    In sum, we believe it is essential that ICANN succeed. If 
ICANN is able to show progress in its commitment to a limited 
mission, its commitment to public accountability, it will 
greatly strengthen its position among Internet users worldwide, 
and we look forward to working with ICANN and the Commerce 
Department and Congress and the broader community to help make 
this community-based vision of Internet coordination a success.
    Thank you very much.
    [The prepared statement of Mr. Davidson follows:]

      Prepared Statement of Alan B. Davidson, Associate Director, 
                  Center for Democracy and Technology
    Chairman Bums, members of the Subcommittee, on behalf of the Center 
for Democracy and Technology I would like to thank you for this 
opportunity to testify on the important issues surrounding the 
management of the Internet's naming and numbering systems. We commend 
the Subcommittee for holding this hearing, because continuing 
Congressional oversight is necessary if we to insure that the 
Internet's critical technical resources are managed in the public's 
interest.
    The Internet's great promise to promote economic opportunity, civic 
discourse, and the free flow of information relies largely on its open, 
decentralized nature. Yet even such a decentralized network of networks 
relies heavily on a small set of centralized mechanisms to coordinate 
the unique assignment of domain names and addresses online. These 
centralized naming and numbering systems are important because the way 
they are managed can affect Internet users around the world.
    The Internet Corporation for Assigned Names and Numbers (ICANN) is 
an unprecedented experiment in open management of these important 
global resources. The idea behind it--of global non-governmental 
bottom-up coordination--is sound. The current alternatives to ICANN are 
not attractive. But serious questions persist about ICANN's public 
accountability and its ability to fulfill its role as a steward of an 
important public trust. While CDT remains a believer in the ideal 
behind ICANN, close oversight by Congress and the Department of 
Commerce are essential to provide accountability for ICANN.
1. The vision underlying ICANN--private sector, bottom-up, technical 
        coordination--is still the right approach for administering key 
        Internet functions
    The vision of that a non-governmental body managing key 
coordination functions for the Internet--a vision first spelled out by 
the Commerce Department six years ago--remains a remains the approach 
most likely to reflect the needs of the Internet community. Key 
features of this original vision included:

   Non-governmental--to benefit from more nimble private sector 
        capabilities to handle fast-paced, complex Internet technical 
        decisions, and more likely to reflect the diversity of user 
        interests.

   Bottom-up and consensus oriented--making decisions in the 
        best traditions of Internet bottom-up processes designed to 
        account for broad interests

   Narrowly focused--to create trust that it would not exercise 
        undue power and to increase comfort in its non-governmental 
        character

   Globally representative--to ensure both public 
        accountability and to include the interests of stakeholders 
        affected by its decisions.

    CDT continues to believe that an institution with these 
characteristics--like the original conception of ICANN--is the best 
approach to managing the narrow set of functions necessary to 
coordinate the domain name and numbering systems. If it can do a better 
job of realizing these objectives, ICANN has the potential to provide 
flexible, representative coordination that will support the Internet's 
continued growth.
    Most of the alternatives to this vision of ICANN remain 
unattractive. The Commerce Department alone is likely to be an 
unacceptable global coordinator in the long run. Some envision a form 
of multi-lateral government administration of the Internet's critical 
functions. The private sector remains the most likely venue to provide 
technical expertise and flexibility for a rapidly evolving Internet. A 
bottom-up and globally representative private body is actually more 
likely to provide opportunities for participation and accountability to 
the richly diverse Internet community than a government-only treaty 
organization. So long as ICANN remains focused narrowly on its 
technical coordination mission, it is likely to have sufficiently.
    Despite serious shortcomings, interest in this multilateral 
approach appears to be increasing in some circles. For example, as part 
of its World Summit on the Information Society (WSIS), the 
International Telecommunication Union (ITU) has hosted several 
discussions of Internet management. But the case has not been made that 
a government takeover of ICANN functions is likely to better reflect 
diverse community interests, and such a takeover should be resisted at 
his time.
2. ICANN will fail unless it makes significant progress in meeting its 
        public interest obligations
    ICANN has had a number of significant accomplishments over the last 
few years. It has accredited nearly 200 domain name registrars, 
facilitating competition in the retail domain names market where none 
had previously existed. It has introduced seven new global Top-Level 
Domains (gTLDs), although many argue it should do more. It has 
introduced a procedure for resolving disputes over name registration. 
And it has recently established the framework for agreements with 
country-code Top-Level Domains (ccTLDs). Most importantly from a user 
perspective, ICANN has facilitated the assignment of names and IP 
address blocks with high degree of stability, and broadly enhanced 
competition.
    At the same time, ICANN has a decidedly mixed record in meeting its 
public interest obligations, which stem from its delegated authority 
over globally critical Internet functions.\1\
---------------------------------------------------------------------------
    \1\ These obligations, and ICANN's record in meeting them, are 
discussed more fully in ICANN, Legitimacy, and the Public Voice: Making 
Global Participation and Representation Work, NGO and Academic ICANN 
Study, August 2001, Available at . CDT was a partner in the NAIS effort.

   ICANN has in many ways abandoned the ``bottom-up'' and 
        ``consensus-based'' policy processes that were so critical to 
        giving stakeholders comfort that they would have a meaningful 
        role in policy at ICANN. Increasingly decisions are made top-
        down by ICANN's Board, sometimes clearly against the stated 
---------------------------------------------------------------------------
        views of much of the affected community.

   There are insufficient limits on ICANN's regulatory 
        authority, and no well-understood delineation of its powers. 
        For example, ICANN's detailed and massive contracts with the 
        gTLD registries lead many to be concerned about how far it can 
        go in regulating the DNS. They are a striking contrast to the 
        very limited ccTLD agreement framework, which may indicate how 
        little is really needed to insure stable coordination of the 
        domain name system.

   The user community and non-commercial interests are poorly 
        represented at ICANN. Last year ICANN eliminated its nine ``At-
        Large'' board members, viewed as a central element to 
        representing public interests. While the public election of At-
        Large directors was controversial, it is striking that ICANN 
        has done so little to replace that representation. An at-large 
        advisory council is still just forming, though welcome, and 
        there are few chances for user influence at ICANN.

   Accountability mechanisms are still lacking. For example, 
        ICANN's ombudsman--itself a pale shadow of the independent 
        review process originally part of ICANN's bylaws--has yet to be 
        appointed.

    ICANN's leadership has acknowledged many of these concerns, which 
is much appreciated, but it remains to be seen what concrete steps will 
be taken. Congress should not be left with the mistaken impression that 
ICANN's recent reform effort has taken care of these public 
accountability concerns. It has not.
    Unless ICANN does more to address those shortcomings, it risks 
failure. Without progress on these accountability issues, ICANN risks 
becoming little more than a sophisticated trade association--but one 
with substantial delegated powers. If ICANN continues to be viewed as 
unaccountable, non-representative, and without adequate limits on its 
powers, it will not be able to achieve the stability--political, 
financial, and otherwise--crucial to long-term success. If ICANN cannot 
earn the public trust, then users, companies, and organizations are 
more likely to undermine its activity than to embrace it.
    Moreover, if ICANN is perceived as an unaccountable organization 
whose activities impinge the rights of users worldwide, then powerful 
entities such as foreign governments, the ITU, or even the United 
Nations will accelerate their search for alternatives. Such approaches 
would likely include a vastly expanded role for governments, and could 
fuel efforts at multilateral regulation of the Internet--a costly and 
user-unfriendly environment that could constrain innovation 
substantially.
    If the goals of private, bottom-up coordination of key Internet 
functions are to be sustained, ICANN must do better at meeting its 
public interest obligations. Many at ICANN recognize this. We look 
forward to their efforts.
3. Benchmarks should be developed to assess ICANN's progress over time 
        and to identify areas for improvement
    How do we assess whether ICANN is succeeding? This question is 
especially relevant as the Commerce Department prepares to renew its 
Memorandum of Understanding with ICANN this September--and as people 
worldwide evaluate ICANN. Yet there is no widely agreed upon set of 
benchmarks for measuring how ICANN is doing--and it is unclear how 
ICANN itself measures success.
    Today CDT is releasing a new study, ``Assessing ICANN: Towards 
Civil Society Metrics for Measuring ICANN,'' designed to assist in this 
process. Our study is attached to this testimony and submitted for the 
record. In it, we review the literature and indicate key recurring 
themes or goals for ICANN. We then suggest ten ``civil society 
metrics'' for assessing ICANN from a public interest perspective:

   1.  Stable and secure coordination of key Internet functions.

   2.  Adherence to clearly defined scope of activities.

   3.  Accountability to affected stakeholders, including effective 
        independent review procedures.

   4.  Transparency, including procedural and financial transparency.

   5.  Representation of key Interest groups, including the public's 
        interests.

   6.  Acceptance by key stakeholders, ccTLDs, Regional Internet 
        Registries, etc.

   7.  Minimized impact on user rights, such as privacy and free 
        speech; consideration of impact on Less Developed Countries, 
        etc.

   8.  Support for competition and, when possible, reliance on market 
        mechanisms.

   9.  Increased security of the root server system.

  10.  Support for long-term evolution and innovation in information 
        and computing technologies.

    CDT believes that a set of commonly agreed metrics is critical to 
evaluating ICANN's strengths and shortcomings. Our hope is that other 
groups will use this list, or create their own, to develop a multi-
sectoral approach to assessing ICANN. We look forward to feedback of 
others interested in ICANN's evolution.
4. ICANN faces crucial tests over the next year on key issues of public 

        interest, including Whois reform and the selection of new gTLDs
    In the next year, ICANN is expected to undertake several issues of 
broad interest to the Internet community--including Whois database 
privacy, the selection of new top-level domains, root server security, 
and international domain names. The way it handles these issues will be 
a measure of its accountability and responsiveness after its reform 
process.
    Privacy and the ``Whois'' database--The Whois database--a public 
listing of contact information for millions of domain name 
registrants--has long raised significant privacy concerns. Currently, 
the registrant of a domain name in the public gTLDs and many ccTLDs 
must make certain technical and administrative contact information 
available in the ``Whois'' database accessible to the public online. 
Originally designed to allow contact in the case of a technical 
problem, the database is now also used by law enforcement, consumer 
protections agencies, and private groups including intellectual 
property holders.
    When individual Internet users register domain names, however, they 
can be forced to make their names, home addresses, home phone numbers, 
and home e-mail addresses publicly available to the world. Such 
potentially sensitive personal information, released publicly, can be 
used for unrelated purposes ranging from unwelcome marketing to 
identity theft, fraud, stalking, or other criminal activities. This 
exposure violates worldwide privacy norms and had put Whois on a 
collision course with national privacy laws, particularly in Europe, 
where is appears to violate the law of some countries.
    A move is underway at ICANN to reform Whois in ways that will 
address individuals' privacy concerns while maintaining legitimate uses 
for the data. Proposals include the creation of a ``tiered access'' 
system for viewing Whois data, providing notice to users when their 
data is viewed, and creating ``audit trails'' that could expose abuse 
or misuse of the database. CDT believes a balance can be struck that 
protects privacy and allows reasonable access to data for important 
public purposes. ICANN's ability to incorporate the privacy interests 
of the global user community in this debate will be closely watched.
    CDT strongly believes that recently proposed U.S. legislation 
criminalizing false Whois information is inappropriate.\2\ It is simply 
unfair to make an Internet user a potential felon for putting 
incomplete or inaccurate personal information into a public database 
where there is no guarantee that their privacy or security will be 
protected. If better accuracy is desired in the Whois database, the 
best way to achieve it will be to protect the privacy of registrants.
---------------------------------------------------------------------------
    \2\ H.R. 2572, introduced in July 2003, would make it a Federal 
felony to submit false Whois information ``with an intent to 
defraud''--a vague standard that could sweep in a great deal of 
relatively innocent behavior.
---------------------------------------------------------------------------
    Selection of new gTLDs--Three years after selecting a first set of 
seven new global top level domains (such as .biz and .museum) ICANN is 
now launching a process for the selection of new gTLDs. Since gTLDs are 
a primary means of expression for millions of users, this process is of 
substantial public importance.
    ICANN's process for selecting new gTLDs in 2000 raised procedural 
concerns that should be avoided in the future. Many observers 
questioned the ``beauty contest'' approach taken by ICANN, which relied 
heavily on relatively subjective and arbitrary criteria, and not enough 
on the technical merits of the applications. For many, this subjective 
approach was inappropriate, ripe for conflict and abuse, and corrosive 
to the technically-focused bottom-up vision of ICANN activity. ICANN is 
not a governmental body designed to make public choices about the 
allocation of property and wealth, nor should it want to become one.
    Thoughtful proposals have been put forward for improving this 
process. They propose more objective criteria for new gTLDs--including 
the selection of a fixed number annually by lottery or auction from 
among technically-competent bidders.\3\
---------------------------------------------------------------------------
    \3\ See, e.g., Mueller, Milton, and Lee McKnight, ``The Post-.COM 
Internet: A Five-Step Process for Top Level Domain Additions,'' March 
2003. Available at . 
Another excellent resource is Crawford, Susan, and David Johnson. ``Old 
Delusions and New TLDs.'' November 13, 2002. Available at .
---------------------------------------------------------------------------
    ICANN has not yet announced what process it will use for the next 
major round of gTLD selections--though for an immediate, smaller round 
it has declared its intention to use criteria similar to those used in 
2000. CDT strongly believes that ICANN should avoid any appearance of 
arbitrariness in its next selections of gTLDs, and should pursuer more 
objective systems consistent with its narrow technical coordination 
mission.
5. Congress and the Department of Commerce should continue their active 
        oversight, and should only renew ICANN's MOU for a limited 
        period
    The U.S. Government explicitly--and other nations implicitly--have 
delegated administration of critical public interests to ICANN. Many 
outstanding questions remain about how that delegated responsibility is 
being met. There are few ways to hold ICANN accountable for its 
actions. Continued government oversight of ICANN is badly needed. We 
urge that:

   ICANN's Memorandum of Understanding with the Department of 
        Commerce should be renewed for no more than one year. The MOU 
        is one of ICANN's few remaining tether to traditional notions 
        of public accountability. Today, ICANN has a new and untested 
        leadership and is undergoing massive internal reorganization. 
        Major checklist items from previous MOUs--on topics from 
        security to accountability to public representation--are 
        largely incomplete. NTIA itself is undergoing major changes. In 
        such an uncertain environment, it would be inappropriate to 
        renew ICANN's MOU for more than a year. The one year term 
        adopted last year, with interim reports to DOC, has worked well 
        and should be continued.

   Congress should continue its active oversight of ICANN. 
        While Congress should not be directing ICANN's activity--no 
        national government can if ICANN is to work--.., the U.S. 
        Government had a special relationship with the root server 
        system and ICANN. Congressional oversight has been an essential 
        force for improving ICANN's' transparency and raising public 
        awareness about domain name policy issues. We hope that 
        Congress will continue to monitor ICANN's work closely, either 
        on its own or through an appointed commission to explore ICANN 
        in depth.

   The National Telecommunications and Information 
        Administration should publicly report on ICANN's progress in 
        meeting the MOU and its other public responsibilities. A public 
        assessment of ICANN would greatly help to focus discussion on 
        improving ICANN for the future.

    If ICANN is able to show progress in its commitment to a limited 
mission, public accountability, and other goals, it will greatly 
strengthen its position among Internet users worldwide. If it is not, 
it risks rejection by the Internet community and the community of 
nations. We look forward to working with ICANN, the Commerce 
Department, and the broader Internet community to help make community-
based Internet coordination a success.

    Senator Burns. You bet, and thank you.
    Now we welcome Mr. Paul Stahura. Is that it?
    Mr. Stahura. Stahura.
    Senator Burns. OK. I'm not sure I'm pronouncing it right. 
Chief Executive of eNom, and we thank you for coming today, 
from Bellevue, Washington. Thank you.

             STATEMENT OF PAUL STAHURA, PRESIDENT 
            AND CHIEF EXECUTIVE OFFICER, eNOM, INC.

    Mr. Stahura. My name is Paul Stahura. I'm the President and 
CEO of eNom, a company I started in my garage in 1997, and that 
has grown into one of the largest domain name registrars in the 
world. I appreciate the opportunity to appear before the 
Committee today to discuss ICANN. I want to spend my time 
talking about an issue that I think clearly highlights the 
problems domain name registrars like myself have with ICANN, 
its lack of transparency and accountability.
    As you Senators may know, domain names are the central part 
of the addressing system for the Internet. Prior to 1999, one 
company had a Government-granted monopoly to register domain 
names. Then, the Department of Commerce and ICANN wisely 
introduced competition to the name space. Today, there is 
vigorous competition among hundreds of companies to register 
domain names for consumers. The Wait List Service, or WLS, was 
proposed by VeriSign over 2 years ago. I have described this 
service in more detail in my written testimony, and I am happy 
to answer your specific questions regarding WLS, but for the 
purpose of my oral testimony I'm going to try to keep it 
simple.
    WLS would replace today's fully competitive marketplace for 
domain name reregistration services with another Government-
granted monopoly, and, as currently passed by the ICANN board, 
it will tilt the level playing field among registrars that 
ICANN itself has painstakingly set up. A troubling aspect is 
that Verisign's own registrar, Network Solutions, would have 
the greatest advantage.
    My preference would be to stop WLS from going into effect. 
I think it is bad policy, and will result in higher prices for 
domain names, reduce consumer choice, and it will not solve the 
so-called problems it was designed to address.
    Despite opposition from consumers and registrars, 18 months 
of studying, meetings around the globe, and consensus-building 
that opposed WLS, ICANN has decided to go forward with WLS 
without consensus. For that reason, but especially because it 
will advantage larger registrars, I have joined with several 
other domain name registrars to oppose ICANN in going forward 
with the service, which was difficult for me, because I believe 
ICANN is the right organization to oversee the Internet's 
domain name system, though I believe it needs improvement.
    If WLS can't be stopped, then at a minimum it should be 
fair. This is not the case as WLS is currently drafted. The 
current WLS gives registrars with the most domain names an 
unfair advantage by allowing them to utilize their 
foreknowledge about which names are going to be deleted.
    This problem can be solved. Indeed, ICANN has recognized 
that the original name for WLS that Verisign proposed was not 
fair. ICANN attempted to correct the problem when the board 
approved the current form of WLS, but despite their intent, 
they failed to correct the flaw. Fortunately, because VeriSign 
asked ICANN to reconsider the current version of WLS, there's 
still a chance to get it right, because the ICANN board has 
authorized staff to, quote, tailor this particular provision of 
WLS.
    However, because there's no way within ICANN procedures for 
registrars like myself to participate in this, ``tailoring,'' I 
have no idea whether this problem is going to get fixed, 
ignored, or worse, tilt the playing field even more 
dramatically toward the largest registrar. The best way to 
describe my frustration over this process is to compare it to 
something with which you Senators are familiar.
    Imagine that you are considering a huge legislative issue 
like national energy policy. Instead of going through the 
regular order, bill introduction, hearings, Committee 
consideration, full debate in the Senate, and amendments before 
it becomes law, that instead the issue was generally debated 
without addressing specifics. Then, the President introduces a 
complicated bill that never goes through Committee but goes 
straight to the floor for a vote. It passes and becomes law.
    Later, you realize there's a major problem. There's no way 
to fix this problem easily. That's where we are with WLS. The 
issue was debated generally for a year and a half. Then a 
specific proposal, written without consulting companies like 
mine, was adopted by ICANN's board. It is law, even though 
registrars like me had no opportunity to amend that proposal or 
participate in a debate over any of its specific provisions.
    Now we have discovered a major problem, but there appears 
to be no way to have input over the solution. I call on Paul 
Twomey to sit down with registrars to work out this problem. If 
WLS is going to be become law, it is in everybody's interest to 
make sure we get it right, that it is fair, and does not give 
any registrar an unfair competitive advantage.
    I ask the Committee's help in solving this matter. Today's 
oversight hearing is a step in the right direction, and the 
Commerce Department must step in to ensure that justice is done 
in this case.
    Again, thanks for allowing me to testify before the 
Committee today. I'd be happy to hear any questions you have.
    [The prepared statement of Mr. Stahura follows:]

             Prepared Statement of Paul Stahura, President 
                and Chief Executive Officer, eNom, Inc.
    Good afternoon. My name is Paul Stahura. I am CEO and President of 
eNom. eNom is a domain name registrar. I started eNom in 1997 in my 
garage in Redmond, Washington with one small computer on an ISDN line, 
and now the company is one of the largest domain name registrars in the 
world with loads of servers in five locations and millions of domain 
names.
    eNom is part of the Domain Justice Coalition. The Domain Justice 
Coalition is comprised of domain name registrars and resellers who 
oppose the proposed Wait List Service (WLS) that has been approved by 
ICANN. Formed in March 2003, the Coalition shares the belief that the 
proposed WLS will: harm competition in the secondary market for domain 
names; increase the cost of acquiring domain names for consumers; and 
add an unnecessary layer of bureaucracy to the process of acquiring 
expiring domain names without adding measurable benefits to consumers.
    I want to thank the Committee for inviting me to testify today 
before the Communications Subcommittee and giving me an opportunity to 
share my views on ICANN.
    I want to state at the outset that I am a supporter of ICANN. While 
I may not agree with all of their decisions, many of which have been 
adverse to me--I do believe that ICANN is the correct organization to 
oversee the Domain Name System and that, for the most part, the 
organization has been doing a good job.
    The success of my company, and the hundreds of other competitive 
domain name registrars in existence today, is the result of ICANN 
policies that promoted competition in the registration of domain names. 
There is no question that competition has been tremendously beneficial 
for consumers and businesses. The cost of registering a domain name has 
dropped from a high of $70 for a minimum 2-year registration contract 
to as little as $7 per name per year today. Consumers today have 
choices that were simply not available to them when only one company 
registered domain names. Competition has brought a variety of business 
models, and improvements such as better customer service, more 
distribution channels, and complementary products bundled with the low-
cost registration. All of these choices and other advances in the DNS 
system are the result of competition.
    I was involved in the early stages with the formation of ICANN. 
What I want to communicate to the Committee today is that while ICANN 
is the correct model, there should be changes to increase ICANN's 
accountability to, and foster trust from, those they regulate:

  (1)  There must be assurances that those affected by ICANN's 
        decisions have some commitment or measure of comfort that they 
        are able to participate in the decision-making process. 
        Moreover, there should be some safeguards in place to ensure 
        that, ICANN's decisions are based on the facts and to remove 
        even the perception that the decisions are not the product of 
        behind the scenes, back room secret negotiations or funny 
        business.

  (2)  There must also be a way to challenge ICANN decisions and have 
        those decisions reviewed by an independent or objective 
        decision-making body.

  (3)  The way ICANN selects new TLDs and who will offer new services 
        should change from a ``beauty contest'' which is vulnerable to 
        decision-making based on favoritism to an objective standard 
        that would be free of potential bias.

  (4)  Finally, ICANN must have a higher degree of accountability. The 
        Department of Commerce must do a better job of overseeing ICANN 
        to ensure that the goals of the MOU, especially the goal of 
        increasing fair competition, are being fulfilled.

    There are two issues that illustrate my concerns with ICANN and not 
coincidentally also affect competition in the domain name space:

  (1)  Verisign's proposed wait-list-system (WLS)

  (2)  New top-level domains
WLS
    No issue better illustrates the problems with ICANN in my mind than 
WLS--the proposed Wait List Service. The WLS was proposed by VeriSign 
as a way to supposedly make the process of registering expiring domain 
names simpler for the consumer. Unfortunately, VeriSign's attempts at 
simplification come at the expense of competition and consumer choice. 
Since WLS is a monopoly service, to be only offered by Verisign, it 
completely destroys today's competitive marketplace. WLS replaces good 
old-fashioned free enterprise with a government-sanctioned monopoly.
    But, whatever your opinion of WLS, I think virtually everyone can 
agree that this issue has been badly handled by ICANN.
    Initially ICANN declared that WLS was a policy change and therefore 
a final decision would be handled through ICANN's consensus processes. 
ICANN established a Task Force to study the WLS proposal and report 
back to the ICAANN Board. For more than 18 months, many hundreds of 
people from all types of companies--domestic and international--
participated in the consensus process debating Verisign's controversial 
WLS proposal. Meetings were held around the globe . . . papers 
submitted, conference calls conducted and task forces organized. This 
effort took months to build what appeared to be a consensus--that ICANN 
should not go forward with WLS--and was surprisingly rejected by ICANN 
six months after a decision by the board on the grounds that a 
consensus was not necessary on this issue. To those opposed to WLS, 
this reversal appears, at best, extremely suspicious.
    When the consensus process resulted in consensus that was adverse 
to VeriSign, ICANN reversed its position and declared consensus was not 
necessary with little justification for the complete about face.
    This WLS situation highlights one of my principle concerns with 
ICANN: the lack of transparency in its decision-making processes. ICANN 
is a black box. You have what goes in, and you have what comes out, 
with no idea of how or why. Even now, only a very few insiders are 
privy to what the final WLS will be. This is significant because, in 
the details, the WLS is a very conceptually complicated proposal. A 
small change to the proposed WLS can make a big difference. Since I am 
not one of these insiders, I can only go by what has come out of the 
black box, I can only go by what the ICANN board has already approved, 
and that decision, unfortunately, takes a step backwards, competition-
wise.
    Besides that fact that WLS would replace today's competitive re-
registration system with a monopoly system and higher fees for 
Verisign, the problem is that WLS, as approved by the ICANN board, 
would tilt the competitive playing field among registrars, a, so-far, 
even playing field that has been setup by ICANN and the rest of the 
Internet community. Coincidently, the registrar that would gain the 
largest advantage is Network Solutions, which is owned by Verisign, the 
company proposing the WLS. The funny thing is that ICANN knew that a 
certain aspect of Verisign's proposed WLS would have this effect, so 
ICANN prudently modified Verisign's proposal in an attempt to remove 
the advantage. ICANN's board subsequently approved the WLS with the 
modification.
    Unfortunately, ICANN's modification does not remove the advantage. 
Again, as I am not inside the black box, I do not know why the form of 
WLS approved by ICANN still had the flaw. Thinking the best of ICANN as 
I usually do, I assume it was an oversight, or possibly ICANN needs 
more resources to fully understand the repercussions of their 
decisions, but since as far as outsiders can tell, these problems are 
not being corrected, I'm reluctantly beginning to think baser thoughts. 
So we are in a situation where it seems that the form of WLS that will 
come out of ICANN and will be implemented by Verisign is anti-
competitive, a flaw that can be removed with only a few words changed 
in the ICANN board's resolution on WLS.
    I have appended my testimony with a letter I sent to the ICANN 
Board outlining my concerns with WLS ``condition (c)'' and recommending 
a small, but important change. This change could be made as part of the 
ongoing, ICANN board authorized, WLS ``tailoring'' that, as far as 
outsiders can tell, is happening between ICANN and Verisign.
    As WLS is a controversial issue to many people, and there have been 
few recent decisions that affect competition in the name space, a 
competitively-neutral WLS output by ICANN is not just my test to 
determine if the reformed ICANN is advancing competition or taking a 
step backward, but many other people's as well.
    It doesn't matter that the initial WLS as originally proposed by 
Verisign or the final WLS that emerges out of the ICANN black box is a 
better product or worse product than the competitive re-registration 
system that exists today. At the end of the day, it doesn't matter what 
previous process was used to come to the output, though if a fair 
process was not followed, then that needs to be corrected. I know, as 
you Senators do, that as they say, making sausage isn't pretty. But 
what matters is the output. What matters is that whatever the final 
WLS, it not tilt the exactly fair, competitive, playing field that 
ICANN and the Department of Commerce have painstakingly put in place.
    Another concern with ICANN that is relevant to the WLS issue is the 
lack of independent review of ICANN decisions. Under the current 
process there appears to be no way to appeal ICANN's decision to an 
independent, objective third party, a process which is outlined and 
guaranteed in ICANN's own bylaws, but has yet to be enacted even once. 
In fact, one of the Domain Justice Coalition members requested such an 
independent review board but this request, was denied. ICANN's grounds 
for the denial is that only decisions made through the consensus 
process are entitled to be reviewed by an independent review board. 
Regrettably, the Domain Justice Coalition has had to resort to a 
lawsuit in an effort to resolve this issue. Even if ICANN were to have 
appointed an independent review panel, the so-called independence of 
this review panel must be seriously questioned since the ICANN Board 
determines who serves on the panel. The inability of complainants to 
get an objective, impartial review of ICANN decisions seriously 
undermines ICANN's credibility with the companies it regulates.
    Time does not permit me to go into greater detail on WLS. I have 
taken the liberty of including as part of my testimony a letter 
submitted to the NTIA which outlines my concerns with the proposal in 
greater detail. I have also included frequently asked questions, or 
``FAQ'' page, on WLS for the Committee's review..
New Top-Level Domains (TLDs)
    My company has had some experience with ICANN regarding TLDs. In 
2001, eNom participated in the ``.one'' TLD proposal. ENom did not win 
that beauty contest. That process resulted in many TLDs, if not all, 
that have not met their projections. I know its impossible to get every 
decision right, especially on the first time out, but many of the 7 
TLDs selected back then have fewer than 10,000 names, and one is not 
even live though it has been two years since its selection. The vast 
majority of Internet users have not even heard of some of the TLDs 
selected, TLDs such as ``.areo'', ``.coop'', and ``.museum''. Have you 
ever seen a domain with these TLDs in use, let alone the others? The 
proof of a successful test bed is in usage. The TLD round in 2000 was 
not only a test bed for each of the new TLDs but also a test of the 
selection process itself. Proof of a successful TLD distribution scheme 
is in whether or not it results in TLDs that are utilized. Why repeat a 
process that resulted in an allocation and expansion of the name-space 
resource if the resulting ``expansion'' is not utilized?
    In 2002, eNom participated in another proposal for ``.org''. 
Another group, as well, won that contest. Though the winners have 
successfully transitioned .org, which is good, I know that registrars 
are paying the exact same price for the same services as before the 
transition, while there were many others who had proposed the same 
service for substantially less, and that were equally qualified to 
perform the transition.
    Without clear, quantifiable criteria, it is really difficult for 
outsiders to tell if ICANN acted arbitrarily or with favoritism in its 
approval processes, let alone for those who submitted proposals. I do 
hope that there will be many more opportunities for ICANN to delegate 
many new TLDs in the near future. And that the knowledge gained in the 
past will be applied to make the selection incontrovertible.
    To that end, I support the following two-step process: (1) the 
ongoing accreditation of registry operators with objective technical 
criteria, and (2) an auction to determine who is delegated which TLD. 
Meanwhile; the issue of the remaining applicants from 2000 has to be 
addressed.
    First, accredit registry operators based on specific technical 
operational criteria. This would focus this part of the debate on what 
are the ``must have'' objective technical operational criteria, but at 
least after the debate had ended; everyone would know what they are. 
With a registry accreditation step, even if step 2 were a beauty 
contest, instead of an auction, the prospective registries would know 
with certainty that their selection of an accredited registry operator 
will not bias the decision. Without this step, most new TLD proposers 
will choose an incumbent operator to reduce the risk of ICANN having 
some issue about an unknown operator and denying their application, 
even if Step 2 was a more objective and impartial process, such as an 
auction. Adding a registry operators' accreditation step to the process 
will create more competition at the registry level and make for a more 
indisputable outcome
    Second, auction them, within limits. A suitable auction could be 
designed to distribute a small number of TLDs. Safeguards could be 
built-in to prevent the auction itself from weakening the proposers. 
The winning bidders would advance to the registry agreement negotiation 
stage with ICANN, with ICANN publicizing non-technical ``must have'' 
terms before the auction (such as adherence to the DRP and data escrow 
or whatever), Payment to ICANN would occur after actual agreement. 
Other terms that would be negotiated leave room for the prospective 
registry to innovate. This will constrain this part of the debate to 
what the ``must have'' terms should be. The who-gets-what-TLD 
machinations would then be removed entirely. The proceeds of the 
auctions would help fund ICANN. ICANN can use some of the funds to 
support less objectively chosen TLDs that may be proposed for specific 
interests, such as for public interest, or for non-profit groups. An 
auction will help insure that proposers put their money where their 
mouth is, and therefore that the TLDs delegated would actually be used. 
And if it turns out that the TLD is not utilized, at least ICANN has 
funding to make corrective action.
    The incumbent registries would rather not have competitors, so they 
will fight this 2-step process becoming policy. If I were a for profit 
registry, I'd advocate more ``.museums'' or ``.nonprofits'' to occupy 
ICANN's time. Its as if, in the early days of Television, CBS, NBC and 
ABC, seeing an expansion in television channels, advocate for all new 
channels to be PBS.
    With that said, there remains the single issue of the existing 
applications from the first beauty-contest round in 2000. These 
remaining applications, each of which paid a $50,000 application fee to 
ICANN, were specifically told by ICANN that their applications were not 
denied, but are, instead, ``still pending'' the results of the initial 
test bed. Clearly, these applications need to be addressed before 
moving forward to Step 2 of the process.
    With a beauty contest:

  (1)  There is incentive for the proposers to make wild projections to 
        get the TLD, while they are at no risk to losing the TLD if 
        those projections do not turn out. This has already happened.

  (2)  Much too much effort is spent in proposers lobbying the ICANN 
        board and other ICANN decision makers

  (3)  Insiders have an advantage

  (4)  With broad, subjective criteria, the proposers are forced to 
        attempt to read ICANN's mind, which results in ``hobbled'' 
        TLDs, or TLDs that are constrained by imagined criteria. As if, 
        in granting spectrum in the early days of radio, the FCC had 
        such subjective criteria that it could be interpreted that 
        you'd have a better chance to be granted spectrum if you wanted 
        to use the space to broadcast music, so the proposers attempt 
        to guess the director's favorite kind.

  (5)  Even if all intentions were honorable, due to subjective 
        criteria such as ``The prospects for the continued and 
        unimpaired operation of the TLD'', it is very difficult to know 
        with certainty that the output of the process was arrived at 
        without shenanigans.

    Finally, I urge the Department of Commerce to step up its level of 
oversight over ICANN. The Memorandum of Understanding (MOU) that ICANN 
signed with the Department of Commerce clearly envisions some oversight 
role. Department of Commerce oversight is particularly important in the 
WLS issue. Paragraph One of Amendment Three to the MOU, which was 
entered on May 25, 2001 (http://www.icann.org/general/amend3-spamou-
25may01.htm) requires prior Department of Commerce approval for any 
material amendments to ICANN's Registry Agreement with VeriSign. The 
Domain Justice Coalition believes WLS falls under this requirement. 
Yet, VeriSign began rolling out the WLS service on July 28th by 
releasing its WLS software development kit despite the fact that the 
Department of Commerce has yet to review, let alone approve, a single 
word of the agreement between VeriSign and ICANN making the necessary 
changes to the Registry Agreement for WLS to go forward.
    Moreover, because ICANN's procedures offer no real opportunity for 
review or reconsideration of ICANN Board decisions, the burden of 
ensuring that ICANN is adhering to the MOU and of preserving a 
competitive domain name registration system must fall to the Department 
of Commerce. The Department of Commerce should make it clear that WLS 
cannot go forward without the Department's review and approval.
    The extension of ICANN's MOU provides the Department of Commerce 
with a unique opportunity to make sure that ICANN is functioning as the 
government and the Internet community intended. It is also a chance for 
Commerce to review whether the reforms ICANN has recently adopted are 
having the desired effect.
    Congress must also continue to exercise its oversight jurisdiction 
by holding the Department of Commerce accountable for its activities 
regarding ICANN. Chairman Burns is to be commended for holding these 
hearings. There is no dispute of the importance of the Internet to the 
U.S. and global economy. Proper management of the Domain Name System 
(DNS) is one of the most important aspects of ensuring the Internet is 
a stable environment for business to operate.
    To improve both the Department of Commerce and the Congress' 
understanding of ICANN's operations, the Domain Justice Coalition has 
endorsed legislation that would place a moratorium on further ICANN 
activity until the GAO can conduct a review and report back to 
Congress. H.R. 2521, ``The Fair, Transparent, and Competitive Internet 
Naming Act'', introduced by Representatives Baird and Inslee, would 
provide a much-needed objective and independent evaluation of ICANN. 
The information contained in a GAO study could prove invaluable to 
Congress and the Department of Commerce during the MOU extension 
process and I urge the introduction of similar legislation in the 
Senate.
    ICANN has had many accomplishments in bringing competition to this 
industry. I hope the reformed ICANN will continue to promote fair and 
even competition and to bring more of it, not less.
    I thank the Committee for giving me the opportunity to testify. I 
am happy to now answer any questions that you may have.
                                 ______
                                 
                                                       eNom
                                                      July 14, 2003
ICANN Board of Directors
Internet Corporation for Assigned Names and Numbers (ICANN)
Marina del Rey, CA

Dear ICANN Board,

    I've already sent this letter \1\ to Esme Smith and to Dan 
Halloran, but on Friday they said it probably wouldn't get posted on 
the ICANN site, so I thought I'd just send it to you directly to make 
sure you at least have an opportunity to read it. The purpose of this 
letter is: a) to elaborate on a competition concern regarding WLS b) to 
show why the introduction of WLS, as currently approved by the ICANN 
board, does not maintain fair and even competition among registrars in 
registering domain names and c) to propose a modification to the WLS 
conditions \2\ already approved by the ICANN board to insure no 
preference is given to any registrar or group of registrars.
---------------------------------------------------------------------------
    \1\ Essentially this same letter was sent July 8th
    \2\ Specifically, condition ``c'' which, under the board's 
authorization, is currently being ``tailored''
---------------------------------------------------------------------------
    I will show that:

  (1)  ICANN must not advantage one registrar over another.

  (2)  WLS as originally proposed by Verisign would advantage some 
        registrars over others. Besides violating ICANN's bylaws, it 
        would be counter to the goals of the DOC since it would create 
        an un-level playing field among competitive registrars.

  (3)  ICANN attempted to fix this problem, which resulted in a WLS as 
        currently proposed and passed by the ICANN board of directors.

  (4)  The fix did not remove the benefit to some registrars over 
        others, thus the WLS as currently approved by the ICANN board 
        advantages some registrars more than others in the WLS market, 
        and therefore in the domain name market.

  (5)  The final WLS must have certain restrictions in order to provide 
        fair competition in selling WLS, and hence registering names. I 
        will explain what this restriction must be and why another 
        restriction may not be preferable to ICANN.

    Then I will make some comments regarding tailoring condition ``c'' 
of the board resolution [02.100].
(1) ICANN must not advantage one registrar over another.
    Introducing and promoting exquisitely fair competition in the 
domain name space, to which ICANN and the Department of Commerce have, 
in my opinion, so far been largely successful, is a major goal of both 
ICANN and the Department.
    ``ICANN shall not apply its standards, policies, procedures, or 
practices inequitably or single out any particular party for disparate 
treatment, unless justified by substantial and reasonable cause, such 
as the promotion of effective competition.'' From ICANN's bylaws see: 
http://www.icann.org/general/bylaws.htm#II
    From ICANN's agreement with DOC http://www.ntia.doc.gov/ntiahome/
domain
name/icann-memorandum.htm ``This Agreement promotes the management of 
the DNS in a manner that will permit market mechanisms to support 
competition and consumer choice in the technical management of the DNS. 
This competition will lower costs, promote innovation, and enhance user 
choice and satisfaction.''
(2) WLS as originally proposed by Verisign would advantage some 
        registrars over others.
    As originally proposed by Verisign, wait-list-service customers 
(via registrars) pay $24 \3\ per year to purchase a WLS subscription on 
a domain name. If the domain name is then deleted within the next year, 
the customer (again via a registrar) pays an additional $6 to actually 
register the name. If the name is not deleted within the year, the 
customer loses the $24. The word ``ripen'' is used to describe a name 
that has a WLS on it and the name actually becomes deleted and is 
assigned to the WLS holder.
---------------------------------------------------------------------------
    \3\ This was not the originally proposed price, but for consistency 
in this paper, is, I believe, the currently proposed price
---------------------------------------------------------------------------
    Any registrar who has knowledge that a name is to be deleted \4\ 
can offer a WLS on those names for lower risk than another registrar 
can. A registrar who does not have that knowledge must offer the WLS 
with the full $24 risk. In other words, a registrar who is about to 
delete a name can say ``if you buy the WLS on this name from me, I will 
immediately delete that name, and your $24 will not be wasted, and none 
of my competitors can make this no-risk offer to you''. Or the 
registrar can say ``buy the WLS for $0, and when it ripens pay 
$30''.\5\ No other registrar could make this offer since that registrar 
does not know that the name will be deleted or not deleted until the 
registrar-of-record deletes it or renews it.
---------------------------------------------------------------------------
    \4\ For example, each registrar, and only that registrar, has this 
knowledge of its own names that are in the 45-day auto-renew period and 
knows which of those names have not been renewed by registrants. Some 
names in the 45-day period (and before) are renewed and some are not. 
Only the registrar-of-record has foreknowledge of which registrants 
have renewed which names, and therefore only the registrar-of-record 
has certain foreknowledge of which names will be deleted.
    \5\ The prices leave the registrar's profit margin out, for 
simplicity.
---------------------------------------------------------------------------
    This advantage is proportional to the number of names for which 
each registrar is the registrar-of-record and also proportional to the 
number of names that are deleted by that registrar. Since most 
registrars renew about 60 percent of their names nowadays, this means 
that 40 percent of all names are deleted each year; therefore, any 
registrar with foreknowledge of those deletes would have an advantage 
in 40 percent of the market, if all those names were re-registered. 
About 20 percent of them get re-registered, so that means the advantage 
would exist in about 8 percent of the total name registration market.
    The registrar-of-record can also exploit the renewal and deletion 
foreknowledge by not renewing names until very far into the 45-day auto 
renew period. If the registry does not automatically advance the 
renewal date \6\ upon expiration (this information is available to the 
public via the registry's public Whois database), the public will think 
that the name was not renewed and therefore has a high likelihood of 
deleting, therefore registrars will attempt to sell the WLS at low 
risk, only to be find out on the 44th day of the auto-renew period that 
the name actually renews. Thusly the registrar of record tricked its 
competition into selling WLS on names that it knows will not be 
deleted.
---------------------------------------------------------------------------
    \6\ If it is advanced the registrar-of-record is at an advantage 
because no other registrar will know for which names it was advanced 
due to renewal or advanced due to the registry automating the date 
advancement, and if it is not automatically advanced by the registry, 
then the registrar of record can withhold renewals to the last day of 
the 45 day period in order to gain the same advantage or to fool the 
competition into selling worthless wait list subscriptions (worthless 
because they will definitely not ``ripen''). Some registries advance 
the date and some do not. Currently the Verisign registry automatically 
advances the renewal date even if the registrant has not renewed the 
name at the registrar of record.
---------------------------------------------------------------------------
    With the re-registration of deleted names system that exists today, 
there is are no advantages conferred based on the number of names the 
registrar has, what information they have, or for that matter, any 
other advantage. The competition is fair and equal with the current 
system.
    In the fiercely competitive domain name registration market, even a 
small advantage will sway most of the market toward the registrar with 
the advantage. Why would any rational customer pay registrar X $24 with 
the risk that it would be for naught, when they could buy the same 
thing from registrar Y, for the same $24, with a guarantee that the $24 
would pay-off and not be wasted? Or why would any rational customer pay 
$24, then $6 if the name is assigned to them, when they could pay $0 
and $30 after assignment? The registrar who knows for certain that the 
name will be deleted can offer the latter with no risk to the 
registrar, while other registrars cannot.
    NSI is the largest registrar and it deletes the most names (even 
more than its pro-rata share of the market represents, based on number 
of names under management), and it has foreknowledge of all those 
deletes and therefore would have the largest advantage, and, 
coincidentally, is also owned by Verisign, the company that is 
proposing WLS.
    If a registrar has an advantage in attracting WLS subscriptions, it 
will therefore have an advantage in performing domain name 
registrations when those WLS subscriptions fulfill (since the 
registration for each name that has a WLS subscription goes to the 
registrar that sold the WLS). Since a large part of the domain name 
registration market is in re-registering deleted names (due to the fact 
that 40 percent of all names become deleted), the registrar that has 
even a small advantage in WLS has a large advantage in a big part of 
the domain name registration market.
    It is true that, as proposed, with WLS all registrars would have 
the same price, and equal access to make wait list subscriptions on a 
first-come-first-served basis, and subscribers can move the WLS to 
another name up to 5 times, but, as originally proposed by Verisign, 
registrars cannot all offer them with the same fulfillment risk.
(3) ICANN attempted to fix this problem, which resulted in a WLS as 
        currently proposed and passed by the ICANN board of directors.
    See http://www.icann.org/minutes/minutes-23aug02.htm#02.100
    ICANN passed resolution [02.100]. Part (c) of that resolution says 
``No registrar sponsoring the registration of a domain name in the .com 
and .net top-level domains shall be permitted to obtain (in its own 
name or for another, directly or indirectly) a WLS subscription on that 
[emphasis added] name at any time after a date sixty days before the 
registration of the name is deleted;''
    ICANN passed this resolution to fix the unfair advantage problem, 
confirming that ICANN understands that there was a problem with WLS as 
originally proposed by VeriSign.\7\
---------------------------------------------------------------------------
    \7\ See: http://www.icann.org/committees/reconsideration/rc02-6.htm
    ``As noted in the 22 August 2002 General Counsel's Second Analysis 
of VeriSign Global Registry Services' Request for Amendment to Registry 
Agreement, the purpose of this condition is to avoid an incumbent 
registrar acquiring a preference through advance knowledge of the 
deletion of a domain name registration.''
---------------------------------------------------------------------------
    As written, the resolution [02.100] would prevent a registrar, for 
example, NSI, from selling WLS on their own names that are about to be 
deleted. This would presumably prevent NSI from using its foreknowledge 
on names it is about to delete to its advantage, but does not do so 
(for reasons explained in #4 below). Not only that, but prohibiting the 
registrar-of-record from selling WLS on some of its own names under 
management, while allowing the other registrars that ability, in-and-
of-itself, skews the competitive landscape among registrars, this time 
away from the larger registrars.
    Since registrars do not have foreknowledge of deletions for all of 
their names, presumably, if a registrar were to sell a WLS on its name 
\8\ that is subsequently deleted, the name would not be awarded to the 
WLS holder, but it would be deleted instead. In this case, presumably, 
the registry would still collect the $24, and the WLS holder would not 
be awarded the name. The name would become available for re-
registration even though it had a WLS on it. The WLS holder could then 
move the WLS to another name (up to 5 times). The fact that a consumer 
can have the WLS, but the name can still be deleted and it can wind up 
with another registrant means WLS will have less than 100 percent 
efficacy, so WLS is not ``better stuff '', but that's another issue. I 
do agree that this effect will lead to a bad customer experience as 
Verisign asserts in their request for reconsideration, and as ICANN 
also agrees with as shown in its response to that reconsideration 
request. More on this later.
---------------------------------------------------------------------------
    \8\ A name for which the registrar is the registrar of record
---------------------------------------------------------------------------
(4) The fix did not remove the benefit to some registrars over others, 
        thus the WLS as currently proposed advantages some registrars 
        more than others in the WLS market, and therefore in the domain 
        name market.
    ICANN mandates that a single entity cannot have more than one 
accreditation. This is to maintain fair competition among registrars 
when accessing the registry. Many registrars and most large registrars 
(or the shareholders of registrars) own, control, or have very friendly 
relationships with more than one other accredited registrar entity. 
Maybe ICANN thought this rule (resolution [02.100], part (c)) was 
sufficient to create fair competition, but it isn't, because the rule 
applies only to names for which a registrar is the registrar-of-record, 
and a registrar can simply give (or sell) the information (the 
knowledge of which names it will be deleting) to another ``friendly'' 
registrar and that registrar can sell the WLS for those names at less 
risk. For example, NSI can have another of its registrars (I believe 
Verisign controls more than five ICANN accredited registrars) sell WLS 
at lower risk on names for which NSI is the registrar of record. Either 
NSI benefits because it is paid for the information, or the other 
registrar benefits because it gets an advantage in selling the WLS 
subscriptions, or both.
(5) The final WLS must have certain restrictions in order provide fair 
        competition in selling WLS, and hence registering names.
    There are three solutions to this fair competition problem, two of 
which require an additional restriction to be placed on registrars.
    Either:

        Option A
        No registrar can sell WLS subscriptions for names that are 
        about to be deleted. Basically a one-word change to the 
        resolution passed by the ICANN board for it to read as follows: 
        ``No registrar sponsoring the registration of a domain name in 
        the .com and .net top-level domains shall be permitted to 
        obtain (in its own name or for another, directly or indirectly) 
        a WLS subscription on any [changed from the word ``that''] name 
        at any time after a date sixty days before the registration of 
        the name is deleted;'' By changing the word ``that'' to ``any'' 
        it prevents all registrars from selling WLS subscriptions 
        within the 60-day timeframe. Though this will still give the 
        advantage to registrars who do not sponsor names in .com and 
        .net top-level domains, therefore it must read:

        ``No registrar shall be permitted to obtain (in its own name or 
        for another, directly or indirectly) a WLS subscription on any 
        name at any time after a date sixty days before the 
        registration of the name is deleted;

        Or

        Option B
        Require registrars to keep the information confidential.

        Or

        Option C
        Disallow WLS altogether

    Option A is preferable because it does not require a change to all 
registrars' ICANN accreditation agreements (since any registrar who 
wishes to sell WLS subscriptions will need to enter into an agreement 
with the Verisign registry, and the restriction would be part of that 
agreement) whereas Option B requires all registrars ICANN accreditation 
agreements to change (because a registrar can disclose the information 
even though it is not selling WLS subscriptions, so therefore there is 
no mechanism to bind them except their accreditation agreement). Not to 
mention that it would be difficult to enforce Option B.
    I advocated the more restrictive version of the condition during 
the ICANN process, and I do not know why it was modified to be less 
restrictive, but maybe because ICANN thought that the less restrictive 
version was sufficient, maybe it was just an oversight. I do know that 
if the less restrictive one became policy, that Verisign would benefit 
more than if the more restrictive one became policy. If WLS is allowed 
to happen, I at least wish it to be offered fairly across registrars. I 
am not asking ICANN to promote ``competitors'', just ``competition''. 
Obviously, as eNom is one of the largest registrars, eNom would have 
more of an advantage than most other registrars, if condition c stands 
as-is. I am hoping that ICANN and/or the Department of Commerce will be 
an advocate for exactly fair and exactly equal competition in WLS, not 
just one that is still not fair, but yet slightly more fair than a 
really unfair earlier version.
``Tailoring'' Condition C
    Regarding the ongoing tailoring of condition c:
    ``. . . the reconsideration committee recommends that the Board 
give the staff flexibility to negotiate with VeriSign to tailor 
Condition c to result in a better customer experience, while still 
substantially achieving the goal of that condition. This should be 
accomplished by the Board's adoption of a new resolution restating 
resolution 02.100, with an appropriate revision of Condition c.'' \9\ 
The goal of condition c, is ``is to avoid an incumbent registrar 
acquiring a preference through advance knowledge of the deletion of a 
domain name registration'' \10\
---------------------------------------------------------------------------
    \9\ From http://www.icann.org/committees/reconsideration/rc02-6.htm
    \10\ Also from http://www.icann.org/committees/reconsideration/
rc02-6.htm
---------------------------------------------------------------------------
    The sixty-day period results in poor customer experience because 
registrars, and for that matter, registries, do not know whether or not 
some names will be deleted within 60 days. What is required is a 
blackout time period that is based on a date certain of which 
registries and registrars all have an equal knowledge. That date is the 
renewal date. The renewal date is known in advance of any deletion or 
renewal knowledge, and known at the same time, to all registrars and 
the public.
    Please refer to the following graph showing eNom's renewals vs. 
time relative to the expiration date.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    The VeriSign registry produced this graph for eNom and I believe 
eNom is a typical registrar in this regard. The graph shows eNom 
performs many renewals before expiration, therefore registrars know 
before expiration, (with a high likelihood, though not certain as we 
would after expiration) which of their names under management are not 
renewed, and therefore which ones will likely be deleted in about 45 
days hence.
    If a name is not renewed just before expiration, then the registrar 
knows that likely it will be deleted; therefore the period must include 
a period before expiration.
    Obviously the RPG period must be included in the blackout period as 
well, otherwise the registrar that deleted the name knows before anyone 
else that the name will not appear in the zone, therefore will have a 
time advantage in getting the WLS on it quickly (if allowed to do so at 
the very instant RGP begins, or any period beginning after RGP begins 
but before the name is available for re-registration). This WLS 
blackout period, which I propose be 30 days before the name expires 
through to actual deletion \11\ is easily calculated by the registry 
(and registrars) and so a registry could then easily implement the 
condition.\12\ Since the period is deterministic, the WLS customers 
would have a better customer experience because they would not be able 
to obtain a wait list subscription during the period, therefore the 
wait list subscriptions they did obtain would have a 100 percent 
efficacy rate.
---------------------------------------------------------------------------
    \11\ 30 days before expiration + 45 days during auto-renew + the 30 
RGP period + the 5 day pending delete period
    \12\ Since most if not all registrars also renew names before 30 
days before expiration (again, see graph), the larger registrar will 
retain an advantage on those names that are not renewed, which is why 
I'm still against WLS, because even with the black-out period 
modifications to rule c that I propose, the playing field that we have 
painstakingly setup will still be tilted, though only slightly.
---------------------------------------------------------------------------
    Therefore to maintain the intent of condition c, and to tailor it 
to result in a better customer experience, it must be changed as 
follows:

        ``No registrar shall be permitted to obtain (in its own name or 
        for another, directly or indirectly) a WLS subscription on any 
        name at any time during a period that starts 30 days before the 
        registration of the name expires and ends 80 days after the 
        registration of the name expires''

    There are other flaws in the WLS system, some of which also involve 
the competition issue, and most of which came out in the ICANN process, 
and for which the GNSO Council voted for Option C above (to not allow 
WLS). Why the ICANN board subsequently passed it, I do not know. Since 
the ICANN board ignored the consensus, I can only assume there was some 
legal, or other reason, for the board's decision. I do not know what 
this reasoning is. Since, in response to Dotster's reconsideration 
request, ICANN said that consensus was not required \13\, I've 
concluded that building a consensus is not the answer, and therefore 
the only targeted recourse is an appeal to you, or the Department of 
Commerce or the courts.
---------------------------------------------------------------------------
    \13\ See http://www.icann.org/committees/reconsideration/rc02-5.htm
---------------------------------------------------------------------------
    Please feel free to contact me if you have any questions or need 
clarification on any of the points I've made in this letter.
            Best regards,
                                              Paul Stahura,
                                                 President and CEO,
                                                             eNom, Inc.
                                 ______
                                 
                                                       eNom
                                                       May 18, 2003
Robin Layton,
Associate Administrator
Office of International Affairs
National Telecommunications and Information Administration
U.S. Department of Commerce

Dear Robin,

    Verisign has made WLS and re-registration of deleted names a 
complex issue. Their spin and the complexity they created works to 
their advantage. This letter answers some questions surrounding this 
issue and expresses eNom's support of those in opposition to WLS.

    Current situation

    All registrars currently register names at the registry on a first-
come-first-severed basis. This includes never before registered names, 
very recently available names and name that were once registered then 
were deleted and have been available for re-registration for long 
periods of time. The wait list service, or WLS, is a proposal that will 
change the way recently available names are re-registered. Currently, 
each registrar registers these names on a first-come-first-served 
basis. Without WLS, as soon as the name becomes available, the first 
registrar that attempts to register the name will actually register it.
    Many of the names that will become available are in demand, but are 
unavailable because they are currently already registered. To service 
this pent-up demand, registrars employ different models to register the 
names on behalf of consumers. The following are three examples of 
currently existing models:

  1.  One registrar employs an auction model, whereby the registrar 
        will devote its resources to registering a particular domain to 
        whichever customer pays the most money. If and only if the 
        registrar is successful at registering the name does the 
        registrant pay the registration fee, which in this case is the 
        top auction price.

  2.  Another registrar employs a ``club'' model whereby the registrar 
        will devote its resources to customers who pay a monthly 
        subscription fee ($100 per month) to be in the ``club''. If and 
        only if the registrar is successful at registering the name 
        does the registrant pay the registration fee, which in this 
        case is $6.95, or $.95 over the registry fee of $6.00

  3.  Another model is similar to the WLS model whereby customers 
        ``backorder'' a name. Once a name is backordered, no other 
        customer can back order it. The fee to backorder a name is $69 
        per year. There is no additional fee once the name is actually 
        registered. If the name is not registered on behalf of the 
        customer during the year, the customer loses the $69.
Q and A

    Q: What is the proposed pricing of the WLS, and will it be more 
than now?
    A: It is proposed that it will cost $24 for a WLS subscription, 
then an additional $6 to the registrar that purchased the subscription, 
but only when the name is registered. Additionally, the registrar will 
likely charge at least $1 for profit, for a total of $31 per name if 
the name is registered. At least $31 (with WLS) is more than $7-$10 on 
average (now, without WLS), so yes, it will cost more than now. The 
proponents of WLS spin the price by saying, ``hey, $24 less than the 
$40 we originally proposed, so its cheaper''. For a WLS to be the same 
price as today, it should cost $0, because 0+6=6, which is today's 
price to re-register a deleted name.

    Q: What if the name is not registered?
    A: If the name is not registered after a year, the customer loses 
all their money, or alternatively, they can change the WLS to another 
name for up to 3 times over the year. If none of those names are 
registered, the customer definitely lost their money. For example, if a 
WLS is sold for ``yahoo.com'', since that name will most likely not be 
deleted, that person ``lost'' their money, and the registry gained $24.

    Q: Will a WLS be sold for ``yahoo.com''?
    A: Most definitely yes, but not to a person who thinks they will 
actually one day be the registrant for yahoo.com. It will be sold to 
someone who wants to extract big money from the current registrant of 
yahoo.com, because whoever buys it, though knowing that it is likely 
never to be deleted, but would get it on the off-chance that it was 
deleted, and therefore could offer the WLS to Yahoo, Inc. at a price 
greater than $24, and in this case, much greater.
    Much like as if the real estate deed to Rockefeller Center in NYC 
transferred to someone if ever the current owners of Rockefeller Center 
were late in filing their property tax return, so some other relatively 
trivial event. The current owners of Rockefeller Center would not want 
to take such huge risk in losing their property, so they will therefore 
buy that right from the person for a substantial sum over the $24 the 
person paid.
    How would you feel if you were yahoo.com, or msn.com or apple.com, 
or aol.com, and some, heaven forbid, pornographer, out there definitely 
(100 percent remember?) gets the official rights to your name, if some, 
albeit low probability, event happened? You'd have to disclose this 
risk to your shareholders.
    There will be many, many companies, you name them, not just yahoo, 
which will not be at all happy about that situation once they find out 
about it.

    Q: Isn't WLS much like selling an option, for example, on shares of 
stock?
    A: No. Normally when you sell an option on shares, the shareowner 
gets the proceeds and has the choice to not sell that option. In this 
case the registry will get the proceeds and the registrant does not 
have the choice to not sell the option. The situation is as if the 
registered names are not the registrant's, but still the registry's to 
do with as it pleases.

    Q: Will people be duped to buying a WLS on their own names?
    A: Yes. In the currently proposed WLS, you cannot opt-out your name 
from having a WLS sold on it. Therefore every registrant:

  (1)  Is opened to the unscrupulous WLS holder saying (though not 
        exactly true, they'll say it anyway) ``I will get your name if 
        it is ever accidentally or maliciously deleted, so pay me $X 
        now''

  (2)  Will be fooled into ``buy the WLS for your name before someone 
        else does''

  (3)  Or will be fooled into the FUD (fear, uncertainty, and doubt) 
        pitch: ``buy the WLS as insurance incase your name is ever 
        accidentally deleted'', even though there are a number of 
        measures currently in place to already insure this does not 
        happen, including a) registrar-lock, b) 10-year registration 
        periods, and most importantly, c) the redemption grace period
    Q: Will the introduction of WLS limit the choice of consumers?
    A: Yes. Currently there are more than four competitive models to 
re-register recently available names from which consumers can choose. 
Due to this competition, prices to re-register deleted names have been 
dropping. If WLS is implemented there will be only one model (WLS) and 
the single monopoly registry will run it.

    Q: Will implementation of WLS preclude the other registrars from 
re-registering names that have been deleted?
    A: Yes and No. Any name that has a WLS subscription on it will not 
be available to be re-registered except to the registrar (on behalf of 
the registrant) that placed the WLS subscription. Other registrars will 
be able to re-register recently available names that do not have a WLS 
subscription using the first-come-first-served system in use today. 
Only names that are worth less than $31 will be able to be re-
registered in this manner, since ones that are worth more will already 
have a WLS on them.

    Q: Will WLS reduce the technical load on the registry?
    A: No. Since it costs nothing to submit a registration request, 
registrars will administer as many requests for low-value names as they 
do today for high-value names.

    Q: If WLS is implemented, who makes money?
    A: The registry will make $24 on names that are worth more than 
$31, even if the name is never actually registered. If the name is 
actually registered, the registry will make $30 on names that are worth 
more than $31. Currently the registry makes $6 on names, and then, only 
when they are actually registered. In both cases, and depending on the 
model, the registrar makes as little as $1, therefore the higher fees 
come directly from consumers.

    Q: So currently, where does the $25 go?
    A: In one model, $1 goes to the registrar and the consumer saves 
$24. In other models currently in use, the registrar makes more, but in 
most if not all models, the registrant currently saves at least $24 
when compared to the future WLS.

    Q: Of the registrars that are currently participating in this 
market, what will happen to them?
    A: Many will go out of business. About 15 are being paid by 
SnapNames to use their registry credentials, and for many of these, the 
SnapNames revenue is their only income. If WLS is implemented, 
Snapnames will not need those credentials and therefore those 
registrars will not receive any more revenue. The registry will make 
the money that these registrars were making, plus more that is 
extracted from registrants (consumers) due to the registry's monopoly 
position and the resulting higher overall fees paid by the public. The 
registry will then pay some of this revenue to its SnapName partner. 
The registry and SnapNames make more money, while the other registrars 
make zero, and most importantly, the public spends more for the same 
thing.

    Q: Will WLS be a new offering?
    A: Not really, SnapNames offers a similar model, albeit with less 
efficacy (note that its less than 100 percent efficacy proves that 
there is existing competition, and that there isn't already a monopoly 
currently in place).

    Q: Is WLS ``better stuff''?
    A: No, because:

  (1)  Once a WLS is taken, no other customer can have the rights to 
        that name if it becomes available.

  (2)  If a name never becomes available, the consumer (WLS subscriber) 
        will most probably lose their money and end up with no names.

  (3)  It un-levels the registrar playing field because the registrars 
        who delete the most names (the larger registrars) can offer WLS 
        subscription at lower risk for the names they know they will be 
        deleting. This is a subtle but important point since 
        competition at the registrar level is important to maintain. 
        Larger registrars can say ``if you buy a WLS for this 
        particular name from me, I will guarantee that I will delete 
        it, and you will therefore be guaranteed not to lose $24''. 
        Other registrars cannot make the same guarantee for the WLS for 
        that name and must then offer the WLS with a higher risk. Since 
        50 percent of names are deleted (on average) and become 
        available each year, WLS removes the fair competition that has 
        been painstakingly established for 50 percent of the 
        registration market. As an added aspect, it may be no 
        coincidence that the registry that wants to implement WLS owns 
        the largest registrar; in who's favor the competitive landscape 
        will tilt. The current implementation proposal, while it may 
        attempt to, does not eliminate this.

    Q: Is WLS less expensive?
    A: No. Recently deleted names are currently available for $6 from 
the registry and for as little as $7 to consumers. WLS will increase 
this to at least $24 (for WLS to registry) + $6 (for registration to 
registry) + $1 (to registrar) = $31. Just because WLS is priced at $31, 
which is less than SnapNames retail price of $69 does not mean it is 
less expensive than what already exists today. It is actually more 
expensive because it must be compared to the average price of $7-$10 
(and closer to $7) that, due to competition in the re-registration 
market, the price has been driven down to.

    Q: Doesn't WLS provide a better means to distribute re-registered 
names to consumers?
    A: No. The very first minute that WLS goes live, nearly all the WLS 
subscriptions for valuable names (such as those valued at more than 
$24) will be taken, and not by the average Joe consumer. The next 
minute, those registrants will be solicited to buy the WLS on their own 
names for more than $24. By the time the consumer knows what happened, 
it will be too late, all the WLS subscriptions for valuable names will 
be gone and more importantly (and ironically when comparing the current 
status quo to WLS) any name that does not already have a WLS 
subscription would have been available for re-registration anyway (and 
at a lower cost) if WLS was never implemented. At least in the current 
system, the average Joe consumer has as much chance at re-registering a 
deleted name as anyone else. With WLS, after the WLS is taken (which 
will happen very quickly after WLS go-live), Joe consumer has no chance 
at all.

    Q: Isn't WLS better than what exists now since the customer will 
definitely get the name?
    A: Not really. It is true that if there is a WLS on a name and if 
the name becomes available, then the WLS-holder will definitely get the 
name, but these two ``ifs'' do not always happen. If the name does not 
become available, then the customer lost at least $25, whereas now (if 
the consumer chooses one of the competitive models that is not WLS-like 
such as SnapNames' model) if the name does not become available the 
customer loses nothing. Additionally, if Yahoo, Inc. does not have the 
WLS on yahoo.com, and someone else does, there is no chance that Yahoo, 
Inc. will get the name if it ever becomes available, whereas with the 
current system, there is.
    It is true that 100 percent efficacy is more than 70 percent 
efficacy, but in this case, more is not better, since 100 percent of a 
bad (more expensive, monopoly, unfair competitive) model is worse than 
70 percent of the same bad thing.

    WLS:

  (1)  Brings a monopoly to 50 percent of the name registration market, 
        where there isn't one currently

  (2)  Increases prices to consumers

  (3)  Is not better, overall, for consumers, than what is available 
        today

  (4)  Makes for unfair competition, in favor of larger registrars.

  (5)  Removes choice by forcing the market to one model instead of the 
        diverse models available today.

    Q: If WLS is not a monopoly service, why not let the registry set 
any price it wishes, and let competition reign?
    If it is a monopoly service, why then introduce it, and eliminate 
the current competitive situation?
    A: Because it is a monopoly service. What better mechanism to set 
the price than true competition?

    Q: Why should my government or another authority choose one model 
over the others, especially when fair competition is in place now and 
working to bring choice and drive down prices? Why should it take the 
risk that WLS will make thousand, if not more, companies very unhappy 
with the risk in losing their names if someone else gets the WLS?
    A: It shouldn't
    WLS is not new stuff, better stuff, or cheaper stuff.
    WLS is a gussied-up, higher cost, monopoly service without even 
much of a disguise to those that follow this complex issue. This 
registry level service is not more attractive or convenient to 
consumers, unless you think that a monopoly is more attractive and 
convenient because there is only one place for consumers to go to pay 
more.
    eNom, one of the top-five largest registrars worldwide, supports 
Dotster, GoDaddy and the numerous other registrars, resellers, and the 
general public participants, and others who form a consensus and oppose 
WLS.
            Best regards,
                                              Paul Stahura,
                                                               CEO,
                                                             eNom, Inc.
                                 ______
                                 
WLS Frequently Asked Questions

    Q: Isn't WLS a better product offering because it has 100 percent 
efficacy?
    A: The WLS system will effectively replace the current system used 
to re-register deleted names that all registrars use today. There are 
many registrars who have innovated various business models to re-
register deleted names. Some offer a fair chance at the name for a low 
price, whereas others offer an exclusive chance at the name in an 
auction system, for example. In all cases the consumer has the choice 
of which competitive model to select. In the case of WLS, this choice 
is eliminated. The situation would be as if there were competition in 
the beef market, for example in selling t-bone, New York, and top 
sirloin. WLS may be the filet mignon in this case but it will be the 
only type of beef you can by, and at six times the price.

    Q: Does Verisign have the right to sell an option on someone else's 
property?
    A: Recently the 9th Circuit Court of Appeals affirmed that domain 
names are in fact property. I'm sure each of you Senators owns your own 
domain name. Does it surprise you to know that under the WLS system, 
Verisign may sell the option to purchase your domain name to someone 
else, should it be deleted? Or heaven forbid, should you accidentally 
forget to renew it. This applies to every domain holder from my Uncle's 
domain name to yours to your constituents' and to each and every 
corporation in your state. In short Verisign is selling options on 
other people's property. Is it a good idea to allow someone to sell an 
option to buy the Brooklyn Bridge, in the case that NCY decides it does 
not want it anymore, even if the chance of that is slim? Verisign is 
not the city; it is only the county hall of records.

    Q: Why doesn't ICANN's WLS ``rule c'', as it stands (with the 
registrar of record blocking condition), already prevent a tilting of 
the playing field?
    A: Because the registrar of record blocking does not prevent the 
registrar of record from disclosing the information to another 
registrar who is not the registrar of record, therefore it must extend 
to the other registrar, and since that registrar could be any 
registrar, it therefore must extend to all registrars.

    Q: So why not, instead of prohibiting WLS during the blackout 
period, simply forbid the registrar of record from marketing during the 
blackout period?
    A: Because:

  (1)  How would the registry or ICANN bind the registrar who has not 
        signed up for WLS (for example, eNom won't sign up, but one of 
        the little registrars we are friendly with will). This is why 
        any type of prohibition (marketing blackout or WLS no-sell 
        blackout) must extend to all registrars, not just the 
        registrar-of-record.

  (2)  Even if you could bind them, how would you enforce it?

  (3)  Or even know that they violated it?

  (4)  Though registrars would definitely care that a marketing 
        blackout was violated (since it gives an advantage to one over 
        the others), why would the registry (assuming they somehow 
        bound the registrars) care that the marketing prohibition was 
        violated?

  (5)  A registrar does not have to do any marketing to exploit the 
        advantage, it only needs to offer a zero subscription price (no 
        risk to the registrar), and delete names immediately after a 
        WLS is placed on them for the market to get the message.

    Q: Is WLS a new product offering?
    A: Not Really, because 1) there is already a system in place to re-
register deleted names, and 2) one of the existing competitors is 
currently offering a WLS-like service. What would be new would be the 
fact that all the current competitors would not be able to offer their 
current service to re-register a name if there were a WLS subscription 
on it. Since WLS is a monopoly offering that pre-empts all other 
current offerings, the registrars have no choice but to either sell WLS 
or not play in that game.

    Q: Isn't it true that if the underlying domain does not become 
available, you can switch the WLS to another name, so your money is not 
wasted?
    A: Lets say someone had a leased Lexus, and you go to the leasing 
company and say that you want that Lexus when the current owner turns 
it in. In the WLS model, the leasing company would sell you an 
expensive option to do just that: re-lease the Lexus if it were turned 
in. If it were not turned in, however, the leasing company keeps your 
money and offers you an option on a different car on their lot: perhaps 
that nice '79 Pinto hatchback. This is, in effect, part of the proposed 
WLS system.

    Q: Wouldn't WLS be a great insurance policy for your name?
    A: Within the first few minutes of WLS being offered, speculators 
will purchase the WLS for valuable names. For example, in my home state 
of Washington, companies such as Boeing, Microsoft and Amazon.com will 
see the WLS subscription for their domain names taken by speculators 
before those companies even have the chance to get them. So, in the 
unlikely event that you get the WLS on your own name, we recall the 
fact that WLS subscriptions only last one year. You will be forced to 
compete with the speculators for that subscription year after year.

    Q: Then why not allow the domain holder the first option on the WLS 
on their name?
    A: Protection racket. You mean to say that if I don't pay Verisign 
for the WLS on my own name, Verisign will sell it to Rocko down the 
street? Why don't I just renew my name every year, or register it for 
10 years, and why am I not able to ``opt-out'' my name from a WLS being 
sold on it?

    Q: The system is gamed by registrars now, and people will always 
attempt to game the system, so why try to prevent gaming of the system?
    A: The re-registration system of today is a fair competitive 
system. Of course competitors try to gain an advantage by innovating 
new technology, if you call that ``gaming'', fine. I call it 
innovating. All registrars are free to innovate. The crux is that today 
one registrar does not have an inherent advantage over the others as 
they would if WLS is implemented as the ICANN board has approved it. If 
WLS is implemented, no amount of innovations by a small registrar will 
overcome the advantage that a large, non-innovating registrar would 
gain.

    Q: Doesn't a large registrar already have an advantage over a small 
registrar, so that if WLS gives a large registrar an advantage it is no 
different than today? A: No, today a large registrar has the same 
advantages as a small registrar and does not have more of an advantage 
because of the registration system or any ICANN policy.

    Senator Burns. Thank you for coming today, and thank you 
for your testimony.
    There's one way to really get this dialogue heated up and 
going pretty good. I'd just ask Mr. Twomey if he would address 
the criticism that was just offered by Mr. Stahura. Is this a 
legitimate complaint?
    Mr. Twomey. Mr. Chairman, as Mr. Stahura pointed out, this 
is actually a matter which is before the courts at the moment, 
so my comments will be a little constrained, but let me just 
make some responses.
    First of all, I think as other people at the table have put 
to you, ICANN should not be in the business of trying to 
determine offerings in the marketplace. I don't think that's an 
appropriate role for the organization.
    VeriSign came to ICANN under its existing contract and put 
forward proposals for a new innovation, to put forward a new 
product offering to the consumer. That product offering may 
compete with product offerings put to the consumers by 
registrars, but I'm not certain it's the organization's role to 
say to one player in the market, you're not allowed to innovate 
for the benefits of consumers because other people already have 
a product in the marketplace, and that's--you know, we are an 
organization especially about competition.
    There is an issue here about people bringing a new product 
to the market, new innovations to the market. Should we be in 
the role of stopping that because other people have already got 
products in the market? That's a difficult thing for us to do.
    The question about process, this was before my time, 
obviously, but one thing I would make observation on is, this 
is not a question of ICANN policy in which we're very clear 
about the processes that followup. This is a proposition where 
one player under an existing contract comes into the discussion 
and says, we wish to implement something that we think we have 
the right to do anyway, you know. We wish to implement a new 
product, and so this is not the same thing as the usual policy 
process that we have internally.
    I mean, I do welcome Mr. Stahura's call for discussion, but 
perhaps I should leave it at that, considering issues are 
before the courts.
    Senator Burns. Would VeriSign like to make a comment on 
that, being as they were mentioned here?
    Mr. Balogh. Yes, Mr. Chairman. I'd like to begin by 
describing a little bit about the Wait List Service and its 
origins. Starting from the consumer's perspective, if a 
consumer is interested in 
getting a domain name that is already taken, and knows that 
that domain name will be deleted soon--for instance, 
SenatorBurnsForPresident.com, for example, and assuming that 
domain name is going to be deleted in about a month, what a 
consumer needs to do is figure out how to get the domain name.
    There are a couple of different methods. One of those 
methods is going with the backlist service that exists today 
from several registrars. What a consumer will generally do is 
pay somewhere from $9 up to hundreds of dollars for that kind 
of a backlist service, hoping for a chance to get that name.
    Now, what actually happens underneath, and how this 
actually works is, the various registrars, when those names get 
to be deleted--and by the way, those names are available via 
report. The registry provides those reports of which names are 
being deleted, and that is public record. You can look up the 
information.
    When those names are being deleted, registrars pound the 
registry system as hard as they can to get the name within a 
few milliseconds of when the actual delete occurs, so how some 
registrars have found that they can get more advantage, get 
more of their names over other registrars is by literally 
consuming as much of the system resources of the registry as 
possible with their ad stream, so you can imagine, if the 
capacity of the system is, let's say, 100, if a registrar can 
get 95 of their ads in while all the other registrars get only 
five, then there's a much better chance for that particular 
registrar to get more of those names.
    As it turns out, a very, very small number of the 800,000-
some domain names that are deleted per month fall into this 
category, and we did a study of about 2 weeks looking at all 
the ad activity. We averaged almost 1/2 million adds per single 
domain name that was actually acquired, just to give you a 
idea, so the way the system is set up now, the consumer has a 
very confusing experience.
    They may go with the particular registrar, not realizing, 
which the speculators, by the way, do, that you will want to go 
with several different registrars backlists, or wait, backlist-
type service, hoping that you might get the name, never 
knowing. The purpose of the Wait List Service is to take this 
system which encourages abuse--we literally get attacks of 
these ad storms. We had to shut down deletes for over a week 
several years ago, about a year and a half ago to try and deal 
with it, to take the chance out of it.
    The Wait List Service provides a registration for a domain 
name that may be deleted. That's deterministic. It's first-
come, first-served, and only one registration is allowed. What 
this service does is allow the consumer to know exactly what 
will happen, and by the way, this service is offered to all 
registrars. A registrar can choose to offer this service or 
not, and can continue to offer their Wait List Service as well.
    Senator Burns. Mr. Davidson.
    Mr. Davidson. I was afraid you'd say that.
    [Laughter.]
    Senator Burns. You know about this. You're aware of it.
    Mr. Davidson. We are, and I have to say, this is tough, 
because I think there are merits on both sides of this 
argument. We've been fortunate enough to spend some time 
discussing this with both sides of the folks who are working on 
this. I think the process issues that are raised by eNom and 
others have merit, and they resonate with a lot of people in 
the public interest community about how some things happen at 
ICANN.
    At the same time, I think there are some benefits for 
consumers from having a new service like this available. 
Clearly some people believe that that's true, and there is a 
certain nuttiness to a system where every time a domain name 
becomes available 300,000 hits are registered by the registry 
as people pound the registry servers to try and get it. I 
understand why people would want to change that system.
    Now, let me just add, you know, I think the bigger issue 
here is, I honestly don't think we would be here if we were 
talking about coming up with a WLS system for .museum, or 
.coop, or a different registry, and that sort of underscores 
the point that if there was a lot of competition among 
registries and TLDs, this wouldn't be as big an issue, because 
some of them would offer Wait List Service.
    And if it was really popular, then they would succeed, and 
consumers would go there, and if it was really stupid, then 
people wouldn't go there and it would fail, and I think part of 
what this underscores is that we do want registries to be able 
to innovate, but to do that you've got to make sure you've got 
a diversity of registries, and right now .com does have a very 
special place in people's hearts.
    Let me just say, as far as what Congress ought to do about 
this, I think it is kind of tough to say that Congress ought to 
be legislating about something like WLS, because if you believe 
in the ICANN idea, which is that you know, they're supposed to 
be doing this, it's very hard to have Congress going in there 
and micromanaging it, and we would have a hard time supporting 
a bill like that, but I feel the pain of those who are 
concerned about the process.
    Senator Burns. Yes, sir.
    Mr. Stahura. Can I say something, too?
    Senator Burns. You bet.
    Mr. Stahura. First off----
    Senator Burns. We may settle this whole thing right here. 
Who knows?
    Mr. Stahura. I doubt it. We've been talking about it for 2 
years. I doubt if this will settle it.
    I don't think Paul addressed the competitive part that I 
was--that's my main point, you know. We are tilting the playing 
field amongst registrars, which ICANN agreed with, the original 
WLS did tilt the playing field, so they decided to modify it to 
make it more even, but unfortunately that modification didn't 
work, so I'd like to talk to Paul about making that 
modification work.
    The second thing said was about slamming the registry. 
Well, that was debated a long time, too, and there were a 
number of other proposals that came up that would actually 
eliminate the slamming problem. Unfortunately, WLS is not one 
of them, because if you go to WLS, with the WLS system in place 
a name could still be deleted, so I and one of the registrars 
that pounds the registry to get dropped names along with 30 
other registrars, that's the system that they have in place.
    First of all, they limited our capacity to slam it maybe a 
year and a half ago, so that their systems don't take so much 
of a burden, but the most important thing is, even with WLS in 
place, some names will still be deleted, and so I will still 
have an incentive to pound the registry for those deleted 
names, and it's not like I'm going to pound it any less for one 
name versus 100 names. I'm still going to pound it just as 
hard, so their argument about WLS as a solution, so-called 
solution to the slamming problem does not hold water.
    I could go on, too.
    Senator Burns. All right. When you brought that up, I was 
going to say, Mr. Twomey, what changes to ICANN structure in 
your opinion now--you've been there for a while, where do we 
need to change the structure to reach these agreements with the 
international community?
    Mr. Twomey. Senator I was actually really interested in 
your list of three things, because it was actually very close 
to my list of three things, and I only wrote it down this 
morning, so I can't have sent this to you, because I actually 
do think the issue is around globalization, security, 
competition and innovation, as you have heard, and the other 
one I would add is putting in place a business-like structure. 
That is my mission. That is what I see I need to achieve.
    On the globalization issues, I think there are two 
important things that have happened just very recently showing 
progress there. One was the increasing attendance in the 
Governmental Advisory Committee, more and more Governments 
being involved, particularly from the developing world, and I 
think the other one, very importantly, was the formation of the 
country-code Name Supporting Organization.
    Mr. Chairman, that has a 4-year history. There's a 4-year 
debate that went on with country-code managers, as to whether 
they actually wanted to be part of a world forum, to come 
together with the world or not, and that actually came to a 
conclusion only a month, 6 weeks ago where they decided to do 
that, and that was a decision of some 65 country-code managers, 
the main country-code managers. The vast majority of them 
agreed to set this organization up.
    I think the consequence of that in terms of agreements 
changes the field a little bit. Here we have them agreeing that 
ICANN is a forum in which they want to participate, in which 
they want to be involved. We do need to talk to people more 
about how we actually put together some sort of accountability 
framework around their participation, but I think our approach 
might be a little different than it was previously, as we try 
to put that in place. I think that's very important.
    If I can make a further observation to yours, coming from 
the Asia Pacific, I fully appreciate the issues you raised in 
terms of growth and participation, and where it's taking place. 
I do foresee that as an organization we will need to be more 
engaged in those parts of the world, and supportive of the 
issues that those people have, and that will give us more 
value, and I think that's just a natural progression of the 
globalization of the Internet.
    The particular communities you referred to are communities 
that have a high target, if you like, in terms of my attention. 
I am very concerned about that.
    Senator Burns. I'm interested in your efforts to address 
interoperability between languages in the domain name system, 
particularly given what you have identified, and I have, too, 
is a surge of the Internet access in the Asian countries. Can 
you tell us about such interoperability and how it can be 
ensured?
    Mr. Twomey. Senator, I think it's incredibly important that 
we do have that interoperability, and we maintain it, and one 
of the key tests of the maintenance of a single Internet is the 
introduction of internationalized domain names, and the key 
test of that is severalfold. One is that we result in the main 
names that appear in the characters, or the on-ASCII characters 
for other languages around the world, but it's done in a way 
which does not harm several things, it strikes me.
    One is a single interoperable Internet, two, that we don't 
end up with a flood of cyber-squatting, and three, that we 
don't end up with quite a degree of linguistic confusion as to 
what equals a particular phrase, and if I can give you an 
example of the latter, the People's Republic of China uses 
simplified Chinese character sets. Taiwan uses traditional 
Chinese character sets.
    One of the two character sets of Korea is a derivative of 
the Chinese character set, and the Japanese character set is a 
derivative of the Chinese character set, so here we have at 
least 1.5 billion people accessing character sets that could 
potentially be confusing, and that's the reason why it's 
important in the way we move forward with internationalized 
domain names, that we don't just have a technical standard, but 
as the guidelines that were developed up in consultation with 
key registries addressed that there is a process for ensuring 
linguistic rules, and that there are guidelines.
    Now, we're very conscious at ICANN that that's a process 
that needs to be driven by those communities and by those 
people with linguistic issues. We're not trying to set a 
prescriptive language to do that. More, we're concerned about 
how to ensure that the registries involved actually develop up 
guidelines, and they themselves say, here's how we will address 
implementation in a way which does not result in those 
potentially bad things I said at the beginning, 
noninteroperability, cyber squatting, et cetera.
    Senator Burns. Well, are you geared up to deal with what 
could be a huge upsurge in Internet use in that area, to deal 
with that?
    Mr. Twomey. A key part of our--well, I think we are 
actually increasing resources this year, and part of it is to 
address both that and, importantly, the increased 
accountability and transparency mechanisms that we're putting 
in place. A key part of that succeeding is actually the 
engagement with the registries that actually deal with those 
communities.
    In other words, those registries are some of the generic 
registries, but also the country-code registries, so this is 
not an arena where an ICANN should be setting prescriptive--you 
know, go to 1.5 billion people and say, here's what you must 
do. Rather, it's about how we are an effective forum for those 
specific registries to do two things: (1) to engage amongst 
themselves to find a solution that works for their communities, 
but (2) to be held to some sort of accountability that they are 
accountable to the rest of the Internet so that it all works 
well.
    It is one Internet, Mr. Chairman. It's not several, it's 
one, and we have an accountability to each other to ensure it 
remains like that and operates like that, in an engineering 
sense as well as some of the more business aspects of it. Our 
true role is to be informed and help them come together and 
solve that, but also to be a voice of conscience, if you like, 
about responsibility to others on the Internet, and to ensure 
that we maintain just one single Internet.
    Senator Burns. Have you had dialogue with the Chinese, as 
an example?
    Mr. Twomey. The people who have been involved in--we have 
actually two committees of our board, one committee of our 
board and a working committee, plus some staff members, and 
they have active involvement in our board.
    I should make the point on China that one of our new board 
members is actually a senior member of the Chinese CCTLD, and 
so we actually do have strong linkages back into the Chinese 
NIC.
    Senator Burns. While we're along that, I would like to note 
submitted testimony of Carl Auerbach, who has been an 
incredibly thoughtful critic and participant in the ICANN 
process. Mr. Auerbach began his statement with a very simple 
and stark sentence: ``I am the only person in North America who 
will ever be elected by the public to the ICANN's board of 
directors.'' His term ran out last November, and after ICANN 
decided to eliminate the five at-large elected board members.
    If there's no electoral process involved, then it seems to 
me that the role of ICANN should be strictly limited to 
technical administrative functions. Can you please comment on 
this, on how you view the elimination of those at-large 
positions?
    Mr. Twomey. Mr. Chairman, originally, and the continuing 
motivation is that ICANN needs to be a balance, and at the 
heart of that balance must be the interests of the consumers. 
There are balances between country codes and generic codes, 
there are balances between registries and registrars, but I 
think very importantly there's a balance between the supply 
side and the demand side. The demand side is represented partly 
by intellectual property interests, partly by noncommercial 
interests, but a very important part of that demand side is the 
consumer.
    Now, in the first, if you like, ICANN 1.0 attempts to try 
to give voice to the consumer there was a process of elections, 
online e-mail elections, Internet elections. I think an 
objective analysis of that process--there were particularly 
some potential flaws about how that could be implemented. There 
were great difficulties, and you'd be very conscious, Senator, 
in the political process of the difficulties of capture, and 
how all those things worked.
    Probably much less so in an obvious place here, but in 
other parts of the world, I would say to you that you've got to 
be a little careful about how those things can work, but our 
commitment to giving a voice to the consumer, our commitment to 
giving a voice and representation to the users of the Internet, 
is undiminished, and our implementation of an at-large advisory 
committee, and then developing regional at-large committees, 
our response to that, to really put in place mechanisms for 
drawing attention of the consumer's interests and trying to put 
in place--we've identified some 325, I think it is, consumer 
and other organizations, indirect, and who deal with consumer 
interests and IT and Internet around the world.
    We've started a process of engaging with those, and we are 
also putting in place a general manager of public outreach and 
communications. Part of that person's role is going to be to 
continue to have engagement for the individual consumer.
    It's a very difficult process. We are not the Government of 
the Internet. We should not be put up as some sort of mechanism 
for global voting, or experiences or experiments in global 
Internet voting. I don't think that's our real role. Our role 
is to focus on how to really get that effective voice for 
consumers in this process.
    Mr. Davidson. Can I make a----
    Mr. Twomey. Shall I just make one----
    Senator Burns. I'd like to hear other comments with regard 
to that.
    Mr. Twomey. Absolutely. I'll just make a final comment.
    Mr. Auerbach has been a very active and vocal member of the 
board and critic, and I actually really value the critiques he 
offers, and he's had a very effective and positive input into 
the process.
    Senator Burns. Anyone else want to comment on that?
    Mr. Davidson. I'd like to, and I was going to say, I think 
the sentiment is welcome, but I think the problem is how do we 
implement this question of providing for a real voice for the 
user community at ICANN.
    I just want to read a quick quote: ``As the ICANN process 
develops, if it were simply to evolve into a series of groups 
and committees representing the supply side, it would lose 
legitimacy in the eyes of the Government in the sense it would 
simply become an international trade association and not have 
balance around end-users and public interests that governments 
think of as important.''
    I couldn't agree with that statement more, and it was made 
by Paul Twomey a year ago when he was spokesman for the GAC, 
and I think it's still a sentiment that a lot of people at 
ICANN have, but the problem is, it's not enough to talk the 
talk. We have to figure out how to walk the walk, and the 
original part of the bargain when ICANN was created was that 
half of the board was going to be selected at large from among 
the user community.
    There has been a great deal of debate at ICANN about how 
that ought to happen, and I understand why many people in the 
community did not feel comfortable going with some sort of 
election process, but it's not sufficient to simply abandon 
that idea and not put something that's powerful in its place.
    The jury is still out right now about the processes that 
have been place. The at-large advisory committee is a very 
welcome idea, but it has not fully materialized, there are a 
lot of questions, and I think the big problem is that for 
groups like my own or the other public interest groups that pay 
attention, it's very hard to get the resources to participate 
in something like ICANN, and it's extra hard when you don't 
feel like you have a voice.
    And simply saying, well, you're part of a little group that 
advises another group that advises the board is a big 
difference from saying, you've got half the board seats, or 
you've got a voice on this board, and I think that is the thing 
that ICANN has still got to struggle with. We've really got to 
find a way to get the user's voice in there and make it feel 
like we're accountable.
    A big piece of that is also going to be making sure that 
ICANN is this more narrow technical body that has a narrowly 
focused mission, as Mr. Auerbach has said. I don't think people 
on the ICANN board disagree with that, but we haven't come to a 
meeting of the minds about what that means.
    Thanks.
    Senator Burns. Ari, do you want to comment on that?
    Mr. Balogh. The comment I would make is that that issue is 
central to the relevance of ICANN. ICANN's mission needs to 
pull all the various constituencies of the Internet together, 
the root operators' groups, all the CCTLD's, the numbering 
registries, and the other industry and other organizations that 
can add benefit.
    The Internet is becoming more and more critical for just 
about everything, and as October 21 showed, an attack, a 
relatively straightforward attack, can have some critical 
implications about the availability of the Net and all services 
depending on it. That focus on the salability and security of 
the Internet, as well as creating an environment that fosters 
innovation around the basic services is absolutely critical, 
and it requires all those constituents to come together, and 
that is the challenge.
    Senator Burns. You'll have to beg my pardon for using this 
term, but it just sounds like to me, though, there's a real 
struggle here, or a tug of war on what ICANN wants to do, and 
does it have the wherewithal to do it? It's kind of like, 
showing up at a cowboy convention. There's nobody in charge. 
You've just got a lot of cowboys.
    [Laughter.]
    Senator Burns. And everybody is an individual, and 
everybody kind of wants to do it.
    Now, before they can get some things done they have to be 
empowered to set some rules, or standards, or a mechanism of 
which to--if it takes--to rule is to guide, and to guide is to 
rule, and I can see the internal struggle that would be, as the 
Internet grows, could be a humongous job. It would be almost--
it would be the most difficult one could think.
    How should they change? What would you recommend they 
change to bring all this together and to bring some order to it 
where they can write rules and regulations and then step back 
and everybody would say, well, these are high-handed, hard-
headed, rules we don't like, and so we're not going to join.
    What power has to be done and what power has to be 
delegated in order to ensure legitimacy, international 
acceptability, to ensure security, and all of these. How strong 
does it have to be written? Does anybody want to comment on 
that?
    I mean, it looks like they're charged with a mission here 
that says, OK, you go do that, but you don't have powers to 
organize. Is that a wrong assumption? I may have the wrong 
assumption.
    Mr. Balogh. I think it is a tremendous challenge. The 
constituencies are all over the place with their own needs and 
interests and desires. I think the key insight into this is, 
there are other models that actually do blend the interests of 
many varying constituencies. The insight is that we need to 
encourage the industry to regulate itself.
    Effectively, the industry can work itself to deal with a 
lot of these issues, with ICANN providing that umbrella 
coordination. It gets very tricky to write regulations and 
create regulatory processes on a medium that is so diverse, and 
so fosters innovation, so I think that the key issue here is, 
will ICANN be writing rules and regulations, or will it be 
coordinating an industry that has that capacity to coordinate 
itself in the first place, and fostering that coordination.
    Mr. Davidson. I'll just add, I think, I mean, you've hit 
the nail on the head in terms of, this is really where the 
central question is. I think there are a bunch of things, and 
some of them are the kinds of things that are on Paul Twomey's 
to-do list in his testimony, or they are things that, you know, 
amount to accountability methods.
    We've got to get a good independent review process in ICANN 
so people can trust that there's some recourse if the board 
does the wrong thing, an ombudsman within ICANN to provide an 
avenue for compliant, making sure that ICANN sticks to the 
bottom-up processes, that it's not a board that just rules 
imperiously from on high.
    Coming up in all of this with a really clear sense that 
there are times when ICANN is going to say no to things that 
people will want it to do, like the fact that ICANN's got to 
stick to a very narrow mission. The way that this works is, 
this isn't a Government for the Internet. It's not capable of 
it because we just don't have the legitimacy mechanisms to make 
people feel comfortable, with it being a Government from the 
Internet.
    ICANN's board has said, we don't want to be it, and we want 
to make sure that in the future it doesn't get pushed into that 
role, and so there has to be a clear understanding that there 
are some things that we just don't do, and there has to be a 
way of communicating that, a prime directive that says, we 
don't do this if it's not clearly in the scope of our mission, 
and that we're not going to be overly regulatory.
    I think a lot of people have had concerns because these 
detailed contracts that have been set up between different 
entities at ICANN worry people. They say, well, gosh, if you're 
supposed to be the guy that's keeping the trains running on 
time, why do I have to have a 4-inch thick contract to have a 
registry.
    And there are reasons why a lot of the things are in there, 
but I think we've got to find ways to send a signal that says, 
we are just as narrow a body as we possibly can be, the minimal 
that needs to get done to make sure that these major, these 
coordination functions happen, and we're going to stick to our 
knitting and we're going to come up with these accountability 
mechanisms, and I think it can be done. There's a path to doing 
that at ICANN.
    Senator Burns. Just as an outsider looking in, it looks 
like we've got to have very high--the lines have to be defined, 
and then we have to narrow our definitions, and that is a 
terrifically big job.
    I have no further questions. If any of you have a question 
for each other, I'd entertain those.
    [Laughter.]
    Senator Burns. Usually that's when we get the best dialogue 
here. We settle a lot of fights. We've started a couple that we 
couldn't end.
    But we look forward to working with each and every one of 
you, and especially with the new president of ICANN, and I'm 
very much supportive of their choice in you and what you're 
trying to do, and we're going to try to set up some private 
meetings, maybe one of your meetings one of these days. If we 
can possibly attend we'd like to do that.
    I think oversight is going to have to be a part of this, 
transparency of the organization, but we have tremendous 
challenges ahead, and I brought the one about the U.S.-Asia 
network. It was pretty obvious to me that even the parliaments 
of the countries involved in the Pacific Rim have not really 
grasped how large this can be in that particular part of the 
world. In fact, some cases, the Governments themselves are way 
behind the curve on the importance and the role that the 
Internet plays in their national life and their international 
life.
    So I look forward to working with you. I appreciate all of 
your testimony. There will be some Senators probably that will 
ask some questions later. They will do that in writing, and if 
you would respond to them and to the Committee on the same 
basis we would appreciate that, and the record will be left 
open for another 2 weeks, or when we get back in September.
    Thank you for coming today, and these hearings are closed.
    [Whereupon, at 4:05 p.m., the Subcommittee adjourned.]
                            A P P E N D I X

                                                   Pool.com
                                                        August 2003

Competition, Antitrust and Trade Concerns Arising out of ICANN-VeriSign 
            Plans to Create a New Wait Listing Service (WLS)

    This statement has been prepared by Pool.com. (www.pool.com), a 
member the Momentous (www.Momentous.corn) group of companies that 
serves consumers--including those in the United States--who want to 
purchase expired and deleted domain names.
Summary
    While it has been a divisive issue within the realm of the Internet 
community, ICANN's proposed Wait Listing Service (WLS) has not been 
thoroughly studied nor evaluated by those charged with monitoring 
ICANN's transition into a private administrator of the Domain Name 
System. Indeed, the issue at stake is one of competition and anti-
consumerism: Should ICANN allow a proposal that ensures that every name 
be routed through a company that was the original DNS monopoly, or 
should it maintain the system as it currently is--allowing consumers, 
through a system made more consumer-friendly by the innovations forged 
in a competitive marketplace, to purchase domain names on the backorder 
market for a price cheaper than what WLS would promote? Moreover, the 
WLS proposal would reverse the anti-monopolistic movement established 
by ICANN in 1999, when it forced the domain name market itself to 
introduce competition. The WLS proposal needs to be brought to a 
permanent halt or at least delayed for six to twelve months pending a 
thorough and independent review of the issues involved.
Background
    Based on its knowledge of consumers in the domain name marketplace, 
earlier this year Momentous.ca launched new venture Pool.com. Pool.com 
is achieving a high level of success in what is known as the 
``backordering'' market, where people compete for access to the roughly 
22,000 .com and .net names which are ``deleted'' (the industry term for 
non-renewals of registered names) each day. Unlike competitors, 
Pool.com features a unique consumer offering, allowing consumers the 
opportunity to backorder and register desired names on a risk-free 
basis in which no charge is levied unless and until a deleted name is 
successfully acquired for the customer. Pool.com is not a Registrar and 
operates through a Network of accredited Registrars.
    Currently, domain name registrars register names on behalf of 
customers on a first-come, first-serve basis. This includes customers 
seeking (i) previously-unregistered names, (ii) previously-registered 
names that become freshly available through imminent or just-occurred 
deletion, and (iii) previously registered names which have been deleted 
and available for re-registration for longer periods.
    With the maturing of the domain registration business, a thriving 
``backorder'' market has evolved to serve customers seeking access to 
the tens of thousands of previously-registered names which become 
freshly available through ongoing deletions of over 22,000 names daily. 
The re-entry of some of these names into the open marketplace meets 
pent-up demand, and over the last 18 months, a number of service 
providers have emerged to rapidly develop a highly competitive, 
innovative and efficient marketplace. At least half a dozen major firms 
participate as principals in this backorder marketplace, offering 
services directly and through networks of dozens of resellers.
    Prior to March 1, 2003, there were high barriers to entry for the 
domain backorder business. Registrars had difficulty competing, due to 
the lack of information available as to when a domain would delete.
    On March 1, 2003, a Redemption Grace Period (``RGP'') was 
implemented by theRegistry. As part of the RGP, the Registry was 
required to publish the deletion date of a domain name.
    As a result of this publication, the high barrier to entry into the 
backorder space was removed for all Registrars. Immediately, over 60 
Registrars began to enter this market and offer a wide variety of 
services and models, where few existed before.
    Competitive backorder service providers have developed at least 
four basic business models to serve backorder customers:

   The original--and until recently, dominant--business model 
        allows customers to backorder a name and pay an upfront fixed 
        fee, typically $69 per year (``normal'' brand new registrations 
        are typically retail at about $15 to $25 per year). Once a name 
        is backordered, no other customer can backorder it, at least 
        not from that vendor. There is no additional fee if and when 
        the name is actually registered. However, if the name is not 
        actually successfully registered on behalf of the customer 
        during the year, the customer loses the $69. Acquisition can 
        fail to occur, for instance, if the original name registrant 
        renews their registration, which approximately 60 percent of 
        name registrants do each year.

   Another offering is a ``club'' model, whereby the vendor 
        devotes its resources to customers who pay a monthly 
        subscription fee (e.g., $100 per month) to be in the . . . 
        [Editor's note: missing the remainder of the document.]
                                 ______
                                 
     Response to Written Questions Submitted by Hon. Ron Wyden to 
                         Hon. Nancy J. Victory
    Question 1. It seems that this hearing revisits some of the same 
issues brought up at the hearing last year--the scope of ICANN's 
mission, the transparency, of its processes, and so forth. So there 
appears to be some agreement on what some of ICANN's chief challenges 
are. Mr. Davidson of CDT has offered testimony recommending the 
establishment of a set of metrics for measuring ICANN's progress in 
addressing these challenges. Has NTIA given any thought to what sort of 
concrete measurements could be used to follow ICANN's progress?

    Question 2. In the last MOU extension it was stated that ICANN 
would collaborate with the Department to complete development of a 
proposal for enhanced root server security. Has such a proposal in fact 
been developed? Is there any concrete evidence as to whether the root 
servers are more secure, less secure, or about the same as compared to 
a year ago? Going forward, what specifically do you see as the 
Department's role in improving root server security, and what 
specifically do you see as ICANN's? What do you think could be 
accomplished, and how long might it take?
    Answer. The Department believes that ICANN has made significant 
strides this past year in developing into a more stable, transparent, 
and responsive organization. We remain committed to working diligently 
with ICANN and all Internet stakeholders to assist ICANN in its 
evolution and to preserve and enhance the Internet/DNS. In reviewing 
the Department's decision to extend and, if necessary, to modify the 
MOU to better focus joint efforts going forward, ICANN and the 
Department have discussed incorporating measurable objectives and time-
specific milestones as markers of progress over the next term.
    Amendment 5 to the MOU provided that ICANN and the Department would 
collaborate to complete development of a proposal for enhanced root 
server security. The enhanced architecture proposal on root server 
security was developed by ICANN and submitted to the Department in 
December 2002. The Department reviewed and accepted the proposal, which 
was followed by implementation of its recommendations. A public summary 
of the proposal is available on the ICANN website at www.icann.org/
general/crada-report-summary-14mar03.htm.
    While the root server operators have not developed specific metrics 
to measure the security of their systems, they continue to deploy state 
of the art software and hardware to ensure the highest levels of 
protection. For example, the root server operators have all agreed to 
employ a shared-secret Transaction Signature mechanism which supports 
the ability to authenticate the transactions between the root 
distribution source and each of the root nameservers.
    The Department and ICANN play important roles in ensuring root 
server security. The Department has established an intergovernmental 
working group to discuss security and stability issues and to 
facilitate policy development work in these areas. In addition, through 
the working group, we continue to consult with the managers of root 
name servers operated by the U.S. Government to address operational and 
security matters. ICANN has established a Security and Stability 
Advisory Committee on which the root server operators and various 
industry experts participate. This committee advises both the ICANN 
Board of Directors and the ICANN community concerning matters relating 
to the security and integrity of the Internet's naming and addressing 
allocation systems. Both the Department and ICANN continue to be active 
participants in the Root Server Security Advisory Committee, which is 
charged with, among other actions, considering and providing advice on 
the operational requirements of root name servers, including host 
hardware capacities, operating systems and name server software 
versions, network connectivity and physical environment.
    Root server security is an ongoing and ever-evolving process, 
involving constant monitoring of possible threats and updating of 
technologies designed to combat them. Through the continued cooperation 
among the Department, ICANN, and the root server operators, we can be 
assured of a secure and stable Internet infrastructure.
                                 ______
                                 
   Response to Written Question Submitted by Hon. Maria Cantwell to 
                         Hon. Nancy J. Victory
    Question. Pursuant to ICANN's MOU with the Department of Commerce, 
Department approval is required for any material amendment to 
VeriSign's registry agreement. Is it the Department's position that the 
WLS is a material amendment requiring approval and if not, why not?
    If the Department believes that approval is required, what is the 
current status of the approval process and when is it expected to be 
complete?
    Will an analysis or consideration of the competitive effects of the 
WLS on existing wait-list type services be a consideration in the 
approval process?
    Answer. At present, the Wait List Service (WLS) is not before the 
Department. I understand that ICANN and VeriSign are currently 
conducting negotiations on how to implement the WLS to take into 
account the modifications on which the ICANN Board of Directors 
conditioned its approval last summer. Once ICANN and VeriSign conclude 
negotiations and develop language to amend the .com registry agreement 
to incorporate WLS, I would expect ICANN to submit that language to the 
Department for approval, as this new service offering constitutes a 
material amendment to the .com registry agreement. Once the WLS has 
been submitted for approval, the Department would consult with 
appropriate U.S. Government agencies to review this amendment in light 
of competition concerns, among other issues.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. Ron Wyden to 
                            Dr. Paul Twomey
    Question 1. ``Whois'' information is needed for certain purposes, 
such as addressing technical troubles or fighting fraud. But since the 
information is globally and publicly available, it could also be used 
by spammers, stalkers, and others. ICANN policies now require this 
information to be accurate and updated at least annually, but do not 
give any sort of privacy protection. Do you have any thoughts about 
either what kind of privacy safeguards are needed, or about what kind 
of process is needed to develop appropriate safeguards? Since ``Whois'' 
privacy is an issue that can have a direct impact on many ordinary 
Internet users who do not attend ICANN meetings, how can the process 
ensure that their privacy needs are addressed?
    Answer. Registrants in generic top-level domains (such as .com, 
.net and .org) have historically been required to provide contact 
information associated with each registration. In the earlier days of 
the Internet, including prior to ICANN's creation, this information was 
used primarily for contacting operators of other Internet hosts to 
resolve technical problems. Now that the Internet has grown to be an 
important realm for commerce and other activities, Whois data also has 
crucial importance for law enforcement officials who use the data to 
trace criminal activity. Intellectual property holders use Whois data 
to identify and pursue trademark infringers and cybersquatters. 
Consumers also use Whois data to identify the source behind goods or 
services being offered over the Internet.
    Access to accurate contact data is important, however Internet 
users might innocently desire use of an Internet domain name without 
exposing personally identifiable information to the public. ICANN's 
current policies do provide protections for privacy interests. One 
example is Sec. 3.7.7.3 of ICANN's Registrar Accreditation Agreement, 
which specifically makes provision for users who want to maintain their 
privacy by allowing the registrant to elect to list a responsible third 
party as the registrant of record in the Whois database. ICANN-
Accredited Registrars are making use of this ``proxy'' registration 
provision today to offer privacy-protected domain registrations for as 
little as $9.00 per year in addition to the regular registration rate, 
which can be as low as $10.00 per year. (This is analogous to the 
nominal fee one might pay for an unlisted telephone number.)
    In addition, constituent groups within ICANN are involved in active 
discussions per ICANN's open and bottom-up policy development process 
for ways to further enhance safeguards for individuals while protecting 
important uses of Whois data. ICANN's recent meeting in Montreal inc 
luded a two-day ``Whois Workshop'' that was open to the public, 
including live streaming audio and video over the Internet. Speakers 
and panelists included law enforcement personnel (including 
representatives of the U.S. Department of Justice and the Federal Trade 
Commission), registries, registrars, ISPs, those representing 
intellectual property interests, and advocates for strong privacy 
safeguards (including Diana Alonso Blas of the Data Protection Unit of 
the Directorate General Internal Market of the European Commission, and 
also Alan Davidson from the Center for Democracy and Technology, a 
Washington based non-profit group working to promote civil liberties 
online.)

    Question 2. Right now, the activities of registries are governed by 
lengthy and complicated contracts with ICANN. If a registry wants to 
add a new service, it needs to make changes to numerous contractual 
appendices, which in turn requires ICANN approval. Please explain the 
evolution in the relationship between ICANN and the registries that led 
to such long and complex contracts. Should the contracts seek to set 
forth in comprehensive fashion the specific and exclusive things a 
registry is permitted to do, with anything outside the scope of the 
contract assumed to be prohibited--or should the contracts generally 
specify what registries may not do, so that any innovation or activity 
that is not prohibited would be permitted?
    Answer. At ICANN's meeting in Montreal, the ICANN board requested a 
report from ICANN's President entailing a detailed plan and schedule 
for development of an appropriate long-term policy for introduction of 
new gTLDs into the domain name system. This report will present for 
debate and community consideration a number of issues relating to the 
creation of new TLDs, intended to be distilled into a set of core 
principles. One of these issues is identifying the appropriate business 
model for the relationships between ICANN and TLDs on a forward-looking 
basis, and by relation the guiding principles for development of the 
contractual relationships. Historically, registry agreements were 
drafted conceptually within a start-up business model, and were 
intended to protect against unforeseen events and circumstances in 
light of the fledgling nature of the TLD industry. As the creation of 
new TLDs moves beyond the original proof of concept phase launched in 
2001, a re-examination of the structure of ICANN's relationships with 
registries should be forth-coming. This re-examination may include, 
following receipt of community input and expert analysis, a 
liberalization of the relationships allowing for more flexibility to 
registry operators.
   Response to Written Question Submitted by Hon. Maria Cantwell to 
                            Dr. Paul Twomey
    Question. The Memorandum of Understanding between the Department of 
Commerce and ICANN requires that ICANN must approve any amendments to 
the VeriSign Registry agreement.
    a. Is it ICANN's opinion that it must approve the VeriSign Wait 
List Service proposal (WLS) as an amendment to the Registry agreement 
before it can begin, and if not why not?
    b. What is the status of this approval?
    The ICANN Board at its most recent board meeting authorized the 
ICANN staff to conduct final negotiations on the plan to implement WLS. 
Please provide the status of those negotiations, the process of the 
negotiations, and an expected completion date.
    Answer. a.: Yes. The WLS requires ICANN's approval of the 
amendments to the .com and .net registry agreements to implement the 
WLS because: (i) WLS changes the functional specification under which 
those two registries are to be operated (it involves a change in the 
name-allocation algorithm) and (ii) WLS involves VGRS offering a new 
registry (sole-source) service for a fee. In addition, as has been 
previously stated, approval by the U.S. Department of Commerce is also 
required, as Amendment no. 3 to ICANN's Memorandum of Understanding 
with the DOC provides that ``ICANN will not enter into any material 
amendment of, or substitution for, [The agreements entitled ``.com 
Registry Agreement,'' [and] ``.net Registry Agreement,'' [. . .] 
between ICANN and VeriSign, Inc.], nor will said agreements be assigned 
by ICANN, without prior approval of the DOC.
    b.: Negotiations between ICANN and VeriSign concerning the 
definitive terms for VeriSign's implementation of the WLS service have 
been ongoing, and it is ICANN's hope that final resolution will be 
reached shortly. Under the conditions of ICANN's approval of the 
service, the WLS cannot be launched any earlier than 25 July 2003, but 
indications by VeriSign are to launch the service in October 2003. The 
WLS will not be implemented until the amendments to the .com and .net 
registry agreements that the ICANN Board's approval requires are 
completed, and the amendments to the agreements have been approved by 
the Department of Commerce, as required by the MOU between ICANN and 
the DOC.

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