Internet Commerce Association -- Initial Response Regarding Development of Transparency and Accountability Management Operating Principles

["Phil Corwin" <pcorwin@xxxxxxxxxxxxxxxxxx>]

By E-Mail

 

 

                                                                                
                October 31, 2006

 

Board of Directors

Internet Corporation for Assigned Names and Numbers (ICANN)

4676 Admiralty Way, Suite 330 
Marina del Rey, CA 90292-6601

 

Re: Initial Response Regarding Development of Transparency and Accountability 
Management Operating Principles 

 

Dear Members of the ICANN Board:

 

This comment letter is submitted by the Internet Commerce Association (ICA) in 
regard to the notice, "ICANN Seeks Community Input on the Development of 
Transparency and Accountability Management Operating Principles", posted for 
public comment by ICANN on October 16, 2006. ICA is a new, not-for-profit trade 
association. Its membership is composed of individuals and companies that own, 
buy, sell, resell, host and manage Internet traffic emanating from search 
engines, domain names and Internet links. ICA's mission is to promote the 
values and benefits of Internet traffic, including the value of purchasing 
direct navigation traffic, to the press, advertisers, and governmental 
authorities on a global basis. ICA stands for Internet prosperity and 
entrepreneurship and for fairness among regulators and in the dispute 
resolution process, taxation, and treatment under other relevant laws, 
regulations, and agreements in the U.S. and other nations. ICA has been 
established to provide a unified voice for a membership with common interests 
and a diverse collection of experience in the Internet traffic marketplace. The 
website ownership community represented by ICA has risked large amounts of 
capital in order to develop domain names as the first new form of property of 
the virtual age. These professional registrants are the source of the fees that 
support registrars, registries, and ICANN itself.

 

The ICA appreciates the "Clarification of Consultation Process" relating to 
this matter that was posted on October 27, 2006. That clarification, responding 
to Internet community feedback that a 15 day comment period was woefully 
inadequate to thoughtfully and comprehensively address the questions posed by 
ICANN, makes clear that this is but an initial inquiry. That clarification also 
lays out a timetable that indicates that ICANN intends to issue a first draft 
of principles in November; that the ICANN Board will discuss that first draft 
and comments received thereon at the Sao Paulo meeting in December, and that 
the public comment period will terminate on December 31st. This timetable also 
proposes that a final draft of Management Operating Principles will be posted 
in February 2007, and that the Board intends to adopt Management Operating 
Principles at its Lisbon meeting at the end of March 2007. As ICA believes that 
ICANN has not been operating in a satisfactorily transparent and accountable 
manner, we welcome the Board's commitment to expeditious progress in this 
critical area. However, we would urge the Board not to lock itself into an 
inflexible timetable for adoption of guiding principles. It is far more 
important that these principles, which will likely guide ICANN's operational 
conduct for years to come, be done right than be done quickly. Therefore, if it 
develops that Management Operating Principles reflecting the consensus view of 
the broad Internet community can be finalized by the time of the Lisbon 
meeting, so be it - but if there is still broad concern that the principles 
being contemplated do not adequately address previous shortcomings and promise 
real reform, then ICANN should reserve the flexibility to delay final adoption 
until a later meeting.

 

The importance of getting this matter right is twofold: 

1.      First, there remains strong concern throughout the Internet community 
that ICANN has been operating in an opaque and cavalier manner -- that it fails 
to explain or even recognize the policy assumptions that underlie key 
decisions; that  it announces critical policy changes as fait accompli after 
agreeing to them in private contract negotiations; that it makes primarily 
cosmetic changes in response to strong and negative consensus feedback from the 
affected Internet community; and that it lacks an adequate administrative 
proposal and review process to permit meaningful community participation in 
policy development. 
2.      Second, the new Joint Project Announcement ratified by ICANN and the 
U.S. Department of Commerce (DOC) on September 29th identifies "greater 
transparency, accountability, and openness in the consideration and adoption of 
policies related to the technical coordination of the Internet DNS" as the 
leading priority for which the DOC will assess progress in the continuing 
transition of ICANN to the private sector. Similarly, the Affirmation of 
Responsibilities approved by ICANN's Board on September 25th commits ICANN to 
continuing improvements in transparency, accountability, and an improved policy 
development process. While ICA commends these priorities and commitments, they 
must move from the realm of mere rhetoric by being translated into genuine and 
indisputable progress in the manner in which ICANN conducts its operations and 
develops fundamental policy. We believe that substantial progress in these 
areas must be the precondition for any future termination of the MOU between 
ICANN and the DOC and completion of ICANN's transition to full privatization.

 

The ICA plans to provide extended commentary on guiding principles for 
transparency and accountability when the first draft of principles is posted by 
ICANN in November. At this time we will confine our comments to transparency 
and accountability shortcomings in the ongoing process of considering 
fundamental changes in the .Biz, .Org and .Info TLD agreements. We previously 
posted comments on this matter (under our former name of Internet Traffic 
Association, aka INTRAS) on August 28th (available at 
http://forum.icann.org/lists/biz-tld-agreement/msg00523.html 
<http://forum.icann.org/lists/biz-tld-agreement/msg00523.html> ). The executive 
summary of that statement was as follows:

 

INTRAS believes that consideration of the proposed agreements is premature and 
that the accelerated comment and decision process under which ICANN seeks to 
make a final decision on this matter fails to allow the affected Internet 
community sufficient time to consider the broad and fundamental changes to 
Internet governance that will result from adoption of the proposed agreements. 
In particular, INTRAS is strongly opposed to the provisions of the proposed 
agreements that allow for their perpetual renewal under almost any 
circumstance, and that not only remove price caps on domain name registrations 
but allow registry operators to, for the first time, implement tiered pricing 
on domain names. Registry operation is a natural monopoly and the only means by 
which to curb potential abuses of that monopoly is for ICANN to exercise a 
strong and continuing oversight role over registry operators and to allow for 
appropriate marketplace testing at the time of an agreement's renewal. 
Perpetual renewal as proposed in these agreements deprives ICANN of any 
meaningful control over the service quality or conduct of registry operators 
and makes a mockery of the potential discipline of arbitration or litigation 
concerning fundamental and material breaches of the registry agreements. 
Unrestrained pricing power, especially tiered domain name pricing, would effect 
a fundamental alteration of the role of registry operators from technical 
providers of ministerial services to unrestrained and unelected taxing 
authorities with the potential to extract extortionate and parasitic rents from 
entrepreneurs whose work and capital have built successful websites and 
associated businesses. Tiered pricing also creates a dangerous potential 
conflict between the power of registry operators and the intellectual property 
rights of domain name owners in regard to websites whose names constitute 
registered and valuable trademarks under the laws of the United States and 
other jurisdictions. INTRAS believes that there is virtually no support in the 
broad Internet community for such fundamental alteration in the powers and 
roles of registry operators and that the substance and timing of these 
proposals is directly contrary to the "bottom up" consensus Internet governance 
process that ICANN is charged with implementing. These proposed agreements 
threaten the free and unfettered flow of commerce and ideas on the Internet. 
Adoption of these proposed agreements by ICANN's Board at its upcoming 
September 13th meeting would further undermine support for ICANN's policies and 
procedures among major segments of the Internet community and would therefore 
be detrimental to efforts to assure that the long-term governance of the domain 
name system (DNS) remains centered within ICANN rather than in some new 
multinational entity subject to politicization.   

 

INTRAS therefore strongly opposes finalization of the proposed registry 
agreements at this time. INTRAS urges the ICANN Board to immediately withdraw 
these agreements and to republish them for comment only at an appropriate time 
after the Internet community has been afforded sufficient opportunity to fully 
consider their ramifications. When these proposed agreements are republished 
INTRAS urges that:

·        Perpetual renewal be replaced by a renewal process that affords ICANN 
sufficient power to discipline registry operators who have engaged in 
fundamental and material breaches, and that allows for vigorous marketplace 
testing of the service quality, conduct, and pricing regimes of existing 
operators through a competitive re-bid process.

·        Meaningful controls on registration price increases during the term of 
the agreements be incorporated within the agreements.

·        The revised agreements put out for public comment should specifically 
forbid differential pricing for domain names based upon the revenues or traffic 
of any domain site operator, the value of any trademarked term incorporated 
within a domain name, or any other factor.

·        The notice provided by ICANN should be accompanied by detailed 
explanations of and policy justifications for any proposed material changes in 
agreement terms, and the comment procedure should afford the broad Internet 
community sufficient time to fully consider their implications and develop 
responsive commentary for submission to ICANN.

 

As it turns out, we were hardly alone in these concerns. Comments received from 
the Internet community ran 200 to 1 against the proposals. As ICANN's own 
September 7th "Summary of Public Comments" memo notes, process concerns noted 
by commentators included:
·        Insufficient public information regarding ICANN's reasoning underlying 
both the timing and substance of the proposals.
·        A public comment period (30 days) that was entirely too short, given 
the permanent and fundamental nature of the proposed changes.
·        The premature nature of the proposals, given that the agreements in 
question do not expire for another one to three years.
·        The manner in which the proposals undermine the legitimacy of ICANN's 
own Policy Development Process 06 (PDP 06), in which the Generic Names 
Supporting Organization (GNSO) Council is addressing such core gTLD management 
issues as permanent assignment of domain names to registry operators, consensus 
policies, price constraints, and the use of traffic data.
 
In short, if ICANN was operating in a transparent and consensus-driven manner 
it would not have negotiated these proposed agreements in secret with incumbent 
registry operators, it would not have proposed them prematurely and without 
adequate policy justification, and it would not have given the broad Internet 
community insufficient time in which to fully digest their implications and 
prepare comprehensive commentary.
 
ICANN's own "Summary of Public Comments" lists the serious deficiencies of 
these gTLD registry agreement proposals that were readily apparent to the 
affected public but either went unperceived or ignored by ICANN staff:
·        Unrestricted, differential registration and renewal fees could be 
applied in a manner to suppress political and economic views disfavored by the 
registry operator, a power with chilling future potential should DNS governance 
ever be transferred to a politicized organization.
·        Unrestricted, differential registration and renewal fees could create 
significant barriers to entry, especially for small businesses; result in 
extortionate renewal fees, given the lock-in effect of the high cost and 
potential detrimental business fallout for registrants switching to an 
alternative gTLD; effectively constitute a "domain name tax" on successful 
e-businesses; and create conflicts with trademark law if a registrant was 
unable or unwilling to pay an extortionate initial registration or renewal fee 
and the registry operator auctioned its trademarked domain name to the highest 
bidder (including a direct competitor).  
·        The allowance of the use of traffic data for any commercial purpose 
could undermine data privacy, and allow the registry operator to, in effect, 
compete against its own registrants by engaging in "domain-tasting" in order to 
determine how high a price the market would bear for a specific new domain name 
registration. 
·        The presumptive renewal provision was tantamount to a grant of 
perpetual monopoly; would permit registry operators to commit multiple, 
fundamental and material breaches of their agreements and flaunt ICANN 
authority for extended periods without risking loss of the contract; and made 
inadequate utilization of market mechanisms, such as competitive re-bidding, to 
provide discipline and assure high levels of service and reasonable pricing 
policies.
 
It is apparent from these comments that adoption of the proposed agreements 
would fundamentally change the mission and character of the gTLD registries and 
of the Internet itself. Yet the only policy rationale provided so far by ICANN 
was after the fact, contained in its September 7th Summary of Public Comments 
document, in which it asserts that it "sought to strengthen the stable and 
secure operation of the Internet's unique identifier systems, while reducing 
any unnecessary entanglement in the economic regulation of the competitive 
market for domain registration services".  This explanation does not even begin 
to suffice.
 
Unfortunately, ICANN's response to the concerted outcry from the Internet 
community regarding these proposals is hardly encouraging to those who hope 
that transparency and accountability will move from rhetoric to reality. On 
October 24th ICANN published revised versions of these agreements in which, 
according to your own summary, 
               "The key changes to the document include a new restriction on 
the use of "traffic data" in the context of the operation of .BIZ, .INFO and 
.ORG as "thick" registries (meaning they publish additional registrant- 
supplied contact details in their public WHOIS services), and the acceptance of 
a 10% cap on price increases along the lines of the .NET and proposed .COM 
registry agreements. "
 
ICA intends to file additional comments on these proposed agreements by the 
comment deadline of November 14th. However, ICANN continues to fail in regard 
to both transparency and accountability by:
·        Failing to provide any rationale why registries should be entitled to 
any price increases absent cost justification, much less explain why price 
increases should even be anticipated when the prices of most Internet services 
continue to fall (including in the .Net agreement, by one-third, when its 
renewal was subjected to competitive bidding).
·        Failing to even address presumptive renewal - which is really nearly 
assured perpetual renewal under the proposed agreement terms - despite the 
broad consensus in opposition to this concept.
·        Failing to explain while it is still apparently rushing to finalize 
these agreements far in advance of their termination dates, and why it is 
undermining its own PDP 06 process by failing to wait on the forthcoming GNSO 
report on core gTLD management issues.
·        Failing to provide any detailed policy response and rationale to the 
concerns raised by more than one thousand commentators. 
 
 
If ICANN wants to demonstrate a true commitment to the implementation of 
transparency and accountability in its policymaking process it should begin by 
withdrawing these agreements, waiting on the submission and consideration of 
the GNSO report, and then soliciting input from the Internet community in 
regard to the fundamental issue at the core of the dissent over these proposals 
- the proper role and functioning of the TLD registries. ICANN has yet to 
explain why the registries should not be regarded as natural monopolies over 
which it needs to exercise some restraining supervision to prevent pricing 
abuses and assure service quality; or, in the alternative, why periodic market 
testing through a re-bid process is not required to assure that registries do 
not abuse their position. ICANN has also failed to articulate whether it 
believes that there is sufficient competition between registries, and that the 
domains they administer are largely interchangeable, and there is consequently 
no need for meaningful restrictions on their practices (while we fundamentally 
disagree with that viewpoint, we can think of no other policy explanation for 
ICANN's TLD proposals). Finally, ICANN should state whether it agrees or 
disagrees with the views of some parties who support presumptive renewal on the 
grounds that registries are entitled to quasi-property rights in the domains 
they administer (again, we strongly disagree with that viewpoint, but it is 
certainly deserving of vigorous and extended debate).
 
In sum, until ICANN begins to articulate and defend the policy assumptions that 
underlie the timing and content of these agreements, its rhetorical commitment 
to transparency and accountability must be viewed with utmost skepticism.
 
The ICA appreciates your consideration of our comments.
 
Sincerely,
 
Philip S. Corwin
Partner, Butera & Andrews, Washington, DC
Counsel, Internet Commerce Association
 
 
 

 

 

 

 

 

 
Philip S. Corwin 
Partner 
Butera & Andrews 
1301 Pennsylvania Ave., NW 
Suite 500 
Washington, DC 20004 
202-347-6875 (voice)/-6876 (fax) /202-255-6172 (mobile)
"Luck is the residue of design." -- Branch Rickey