The New IANA Needs Fiscal Controls

["J. William Semich (NIC JWS7)" <bsemich@mail.nu>]

The New IANA Bylaws: Who Controls the Money?

By J. William Semich
President and CFO 
.NU Domain Ltd
http://whats.nu
bsemich@mail.nu


The latest set of proposed bylaws (version 5) for the New IANA
Corporation (Internet Assigned Numbers Authority), released on September
29 at IANA's Web Site at http://www.iana.org/bylaws5.html, is seriously
flawed by its lack of fiscal accountability to all of us who will use
its services and pay its fees. 

If the bylaws are approved unchanged by the White House as the basis for
the Internet's first independent governance mechanism, the new Internet
Authority would be able to set a wide range of Internet-related fees of
any amount without constraint, float bonds of any amount which must be
funded by future revenues, as well as collect additional fees of any
amount to invest for undefined possible future needs, all such to be
paid for by you, me and our children, the Internet's users of today and
tomorrow, without their review, approval or control.

The new version of the proposed bylaws for the new Internet Authority
will likely be submitted today to Ira Magaziner of the White House,
under the terms of the White House "White Paper" released last January,
to create the replacement for the US Government's current contractual
arrangement for management of the Internet, which is set to expire today
( Sept. 30, 1998). 

But the new bylaws are completely devoid of any provisions to create any
type of fiscal accountability for this, the Internet's first
all-powerful, government-sanctioned independent Authority.

Although the new bylaws make it clear that the source of the new
Internet Authority's revenues will be the Internet's end users and
service providers, it leaves all spending, borrowing, investment and
other financial decision-making solely in the hands of the Corporation's
board of directors, who's members specifically "have the duty to act in
... the best interests of the Corporation and not as representatives of 
their Supporting Organizations, employers  or any other organizations or
constituencies."  (Article V, Section 8)

Nowhere in the bylaws is the Board of Directors required to consult with
any outside groups, experts, or other interested parties on how best to
set its fees or plan its budget. 

Nowhere in the bylaws is there any provision for any kind of independent
budget review or hearing mechanism or approval process for the budget,
borrowing, or any other fiscal decisions;

And nowhere in the bylaws is there any provision for any kind of
independent fee-setting review process or approval mechanism, either by
those who must pay the fees (the Supporting Organizations, who represent
the consumers of the services to be provided by the new Corporation) or
by any independent body of fiscal experts.

All these fiscal decisions are made solely by the new Internet
Authority's own Board of Directors. 

The relevant language in the proposed new bylaws makes this absolute
power of the Board clear:

FIRST, it gives the board absolute control over any spending or
borrowing decisions:

"Article IV, Section 1 (a)

"the  powers   of  the Corporation will be exercised, its property
controlled and its business and affairs conducted by or  under the
direction of the Board."
 
SECOND, it gives the board absolute control over the fee setting
decisions:

"Article IV, Section 2. FEES AND CHARGES

The Board shall set fees and charges for the services, rights and
benefits provided  by the  Corporation to  the Supporting Organizations 
and others, with the goal of  fully recovering the reasonable costs of
the operation of the Corporation  and establishing  reasonable reserves
for  future expenses and contingencies  reasonably related  to the
legitimate activities of the Corporation."

And THIRD, it gives the Board the sole authority and absolute control
over setting its annual budget, with no requirement that it actually
meet that budget or that the budget pass any kind of review process, all
this in one simple line of the new Bylaws:

"Article V, Section 25. ANNUAL BUDGET

The Board  shall prepare an annual budget, which  shall be published on
the Web Site."

These three phrases are the total extent of any language in the new
bylaws that might be construed as setting ANY spending, fee setting and
raising, budgeting, borrowing, investing or any other fiscal constraints
on the board of the new Internet Authority which will be the primary
manager of the single most important communications resource in the
world.

Such an all-powerful and fiscally unaccountable organization as would be
created by the new bylaws is a classic textbook "Public Authority" in
its structure, and that is the crux of my problem with the fifth set of
IANA bylaws released on Sept. 29. 

Look closely at any publicly-funded independent Authority in the US and
you will find a self-perpetuating, quasi-governmental organization whose
spending decisions cannot be challenged, who spends the public's money
like water, who has absolute power over its particular area of activity,
but no accountability to the public. 

In the present case of the bylaws for the new Internet Authority, there
is minimal accountability for its policy decisions, and that is cause
enough for concern. 

But there is NO accountability for its borrowing, spending and
fee-setting structure. 

There needs to be some kind of mechanism in the new entity that will
create a counter-force to the typical Public Authority's inevitable
desire to grow and to spend more and more money and increase its sway in
the world.

The counter-force to spending increases could be a Budget Review
Committee solely comprised of the groups that will fund  the new
Internet Authority. Or it could be a Finance Committee made up of
independent, world-renowned fiscal experts who have no vested interest
in the new Internet Authority or the Internet per se. Or it could be a
committee of government finance experts with experience bringing public
spending into line. Or it could be some combination of the above.

It would be a real tragedy if, in its first efforts at self-government,
the Internet community were to hand over management of the Internet to
yet another quasi-public Authority, who's essence is perhaps best
defined in an article I co-authored nearly ten years ago:
 
"Authorities constitute a permanent, expansionist government, collecting
and spending more and more public money, running up more and more public
debt, and making more and more critical decisions on the public's behalf
with each passing day. And because authorities do all this out of site -
and beyond the control - of the general public, they constitute,
finally, a Shadow Government."

"Inside the Shadow Government," by John Strahinich and J. William
Semich, cover article, Boston Magazine, November, 1989. 


About J. William Semich:

Currently:

President and Chief Financial Officer 
.NU Domain Ltd
http://whats.nu 
"One of the top 20 Top Level Domain Name Registries in the World"
(Source: Http://www.domainstats.com/iso.cfm) 


Formerly:

- Director of Financial Analysis for the City of Boston
- Chairman, Finance Committee, Massachusetts Bay Transit Authority
Advisory Board (The MBTA's Budget Review and Approval body)
- Financial Adviser to the Mayor of Boston for Tax Policy and Planning
- Assistant to Collector-Treasurer, City of Boston
- Deputy Director and Executive Secretary to the Board, 
Boston Economic Development and Industrial Commission

Achievements:
- Co-author, "Inside the Shadow Government," Boston Magazine, November,
1989, selected as one of  the "Top 10 Magazine Investigations of 1989,"
by Investigative Reporters and Editors, Inc. (IRE);
- Lead investigator and financial consultant, WBZ-TV Boston's "I-Team,"
in-depth 1995 investigative report on the Mass. Turnpike Authority's
actions over a ten year period to extend it's life using fiscal
manipulations;
- Co-author, "The Money Pit," Boston Magazine, September, 1986,
investigative article on abuses by the Mass. Convention Center Authority
in its redevelopment of the Hynes Convention Center