[107th Congress House Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:71484.wais] IS ICANN'S NEW GENERATION OF INTERNET DOMAIN NAME SELECTION PROCESS THWARTING COMPETITION? ======================================================================= HEARING before the SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET of the COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTH CONGRESS FIRST SESSION __________ FEBRUARY 8, 2001 __________ Serial No. 107-4 __________ Printed for the use of the Committee on Energy and Commerce Available via the World Wide Web: http://www.access.gpo.gov/congress/ house _______ U.S. GOVERNMENT PRINTING OFFICE 71-484 WASHINGTON : 2001 ____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 ------------------------------ COMMITTEE ON ENERGY AND COMMERCE W.J. ``BILLY'' TAUZIN, Louisiana, Chairman MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan JOE BARTON, Texas HENRY A. WAXMAN, California FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts CLIFF STEARNS, Florida RALPH M. HALL, Texas PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey NATHAN DEAL, Georgia SHERROD BROWN, Ohio STEVE LARGENT, Oklahoma BART GORDON, Tennessee RICHARD BURR, North Carolina PETER DEUTSCH, Florida ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois GREG GANSKE, Iowa ANNA G. ESHOO, California CHARLIE NORWOOD, Georgia BART STUPAK, Michigan BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York JOHN SHIMKUS, Illinois TOM SAWYER, Ohio HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland JOHN B. SHADEGG, Arizona GENE GREEN, Texas CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri Mississippi TED STRICKLAND, Ohio VITO FOSSELLA, New York DIANA DeGETTE, Colorado THOMAS M. DAVIS, Virginia THOMAS M. BARRETT, Wisconsin ROY BLUNT, Missouri BILL LUTHER, Minnesota ED BRYANT, Tennessee LOIS CAPPS, California ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana GEORGE RADANOVICH, California JANE HARMAN, California JOSEPH R. PITTS, Pennsylvania MARY BONO, California GREG WALDEN, Oregon LEE TERRY, Nebraska CHARLES F. BASS, New Hampshire David V. Marventano, Staff Director James D. Barnette, General Counsel Reid P.F. Stuntz, Minority Staff Director and Chief Counsel ______ Subcommittee on Telecommunications and the Internet FRED UPTON, Michigan, Chairman MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts JOE BARTON, Texas BART GORDON, Tennessee CLIFF STEARNS, Florida BOBBY L. RUSH, Illinois Vice Chairman ANNA G. ESHOO, California PAUL E. GILLMOR, Ohio ELIOT L. ENGEL, New York CHRISTOPHER COX, California GENE GREEN, Texas NATHAN DEAL, Georgia KAREN McCARTHY, Missouri STEVE LARGENT, Oklahoma BILL LUTHER, Minnesota BARBARA CUBIN, Wyoming BART STUPAK, Michigan JOHN SHIMKUS, Illinois DIANA DeGETTE, Colorado HEATHER WILSON, New Mexico JANE HARMAN, California JOHN B. SHADEGG, Arizona RICK BOUCHER, Virginia CHARLES ``CHIP'' PICKERING, SHERROD BROWN, Ohio Mississippi TOM SAWYER, Ohio VITO FOSSELLA, New York JOHN D. DINGELL, Michigan, THOMAS M. DAVIS, Virginia (Ex Officio) ROY BLUNT, Missouri ROBERT L. EHRLICH, Jr., Maryland W.J. ``BILLY'' TAUZIN, Louisiana (Ex Officio) (ii) C O N T E N T S __________ Page Testimony of: Broitman, Elana, Director, Policy and Public Affairs, register.com............................................... 31 Cerf, Vinton G., Chairman of the Board, Internet Corporation for Assigned Names and Numbers............................. 13 Davidson, Alan B., Associate Director, Center for Democracy and Technology............................................. 78 Froomkin, A. Michael, Professor of Law, University of Miami School of Law.............................................. 68 Gallegos, Leah, President, AtlanticRoot Network, Inc......... 45 Hansen, Kenneth M., Director, Corporate Development, NeuStar, Inc........................................................ 42 Kerner, Lou, Chief Executive Officer, .tv.................... 26 Short, David E., Legal Director, International Air Transport Association................................................ 36 Material submitted for the record by: Gallegos, Leah, President, AtlanticRoot Network, Inc., letter enclosing material for the record.......................... 107 Name.Space, Inc., prepared statement of...................... 106 (iii) IS ICANN'S NEW GENERATION OF INTERNET DOMAIN NAME SELECTION PROCESS THWARTING COMPETITION? ---------- THURSDAY, FEBRUARY 8, 2001 House of Representatives, Committee on Energy and Commerce, Subcommittee on Telecommunications and the Internet, Washington, DC. The subcommittee met, pursuant to notice, at 10:05 a.m., in room 2123, Rayburn House Office Building, Hon. Fred Upton (chairman) presiding. Members present: Representatives Upton, Stearns, Gillmor, Cox, Shimkus, Pickering, Davis, Ehrlich, Tauzin (ex officio), Markey, Gordon, DeGette, Harman, Brown, and Dingell (ex officio). Staff present: Will Norwind, majority counsel; Yong Choe, legislative clerk; Andrew Levin, minority counsel; and Brendan Kelsay, minority professional staff. Mr. Upton. The hearing will come to order. Today we are holding the first hearing in the 107th Congress of the Subcommittee on Telecommunications, where we will be discussing the Internet. I want to welcome all the members of the subcommittee, particularly Ed Markey, the ranking member, and our vice chair Mr. Stearns, good friends both. Today's hearing focuses on whether ICANN's new generation of Internet domain name selection process is thwarting competition. Our constituents may not know the term ICANN, top- level domain name, or root server, but they are definitely familiar with .com, .net, and .org. And every time they e-mail us, .gov, our constituents use these top-level domain names every single day, enabling them with a simple click of the mouse to communicate almost instantaneously all over the world. If ICANN gets its way, our constituents may also--should become familiar with seven new top-level domain names, like .biz, .info, .pro, .name, .museum, .aero, and .coop. These are seven new names selected last November by ICANN for potentially launching as early as later this year. However, 37 other applicants were not selected by ICANN. Moreover, we know that others could not even afford the $50,000 application fee or chose not to apply because, on principle, they question ICANN's authority to, in their minds, play God with respect to approving new names. Hence there is a great deal of controversy surrounding ICANN's selection process which has prompted us to have this timely hearing called by myself and Chairman Tauzin in a January letter to ICANN. At this point I would ask unanimous consent to put that letter into the record. [The letter follows:] Congress of the United States House of Representatives January 12, 2001 Mr. Michael M. Roberts President and Chief Executive Officer Internet Corporation for Assigned Names and Numbers 4674 Admiralty Way, Ste. 330 Marina del Rey, CA 90292 Dear Mr. Roberts: The Committee on Energy and Commerce is continuing its oversight of the Internet Corporation for Assigned Names and Numbers (ICANN). As you may recall, the Subcommittee on Oversight and Investigations of the Committee on Commerce held a hearing on July 22, 1999, to examine the issue of domain name system privatization. In connection with our continuing review, we have been monitoring the process by which ICANN arrived at its decision in November to approve seven suffixes: .aero, .coop, .info, .museum, .name, .pro, and .biz. There have been a number of reports that ICANN's process to create a new generation of Internet domain name suffixes may be thwarting competition in the registration and assignment of Internet domain names. As the Committee of jurisdiction over this issue, the Committee wants to ensure that this process is open and fair, and most important, successfully sparks competition. To that end, we are gathering facts in preparation for a Subcommittee on Telecommunications hearing in February to examine the process by which ICANN selects Internet domain name suffixes. Accordingly, we request that you contact Chairman Tauzin's telecommunications counsel, Jessica Wallace, to arrange a time to jointly brief committee staff at your earliest convenience. Sincerely, W.J. ``Billy'' Tauzin Chairman, Committee on Energy and Commerce Fred Upton Member of Congress Mr. Upton. The House Energy and Commerce Committee has jurisdiction over ICANN, and this hearing is the latest in a series of activities in which this subcommittee is engaged on this topic. Back in July 1999, I chaired an Oversight and Investigations Subcommittee hearing entitled, Is ICANN Out of Control? At the heart of that hearing were broad fundamental questions about the Commerce Department's decision to vest responsibility for the management of the domain name system in a private nonprofit corporation as the Federal Government moved to privatize this critical function. Much has transpired since July 1999, but important policy questions still linger about ICANN. Some continue to question its very legitimacy and the propriety of the Commerce Department's delegation of responsibility to it. Others support the Commerce Department's efforts to privatize management of the DNS, but remain vigilant as this relatively fledgling concept evolves to ensure that it operates openly and fairly. While I anticipate more hearings on ICANN later this year on a variety of other important substantive issues, this hearing will focus specifically on ICANN's selection process for new top-level domain names and whether it is, in fact, thwarting competition. On the one hand some view ICANN's approval of only a limited number of names as thwarting competition. On the other hand, others argue ICANN was prudent in selecting a number of--limited number of new names so that they can be test-driven to best hedge against harming the technical integrity of the Internet. It appears these principles need to be balanced. Today we will get a feel for how well or poorly ICANN is balancing these principles by examining its selection process. In my mind, legitimate questions have been raised by several of our witnesses about the fairness of the application and selection process, questions which must, in fact, be answered by ICANN. As such, today we will hear from ICANN, two businesses whose applications were selected, two businesses whose applications were not selected, one small business which did not apply at all, and two public interest advocates. Today's witnesses will greatly assist our subcommittee in answering the question of whether ICANN is thwarting competition. In addition, I have to say that as a parent of two young kids, I want to explore ICANN's rationale for not approving two particular top-level domain names, .kids and .xxx as a means of protecting our kids from the awful, awful filth which is sometimes widespread on the Internet. We should strongly encourage the use of technology to protect our kids, and special top-level domain names may be just exactly the dose of medicine that is needed. That is why many parents lie awake at night thinking about the ways we need to respond. These issues are too important to not have proper oversight. If ICANN can't, who can? [The prepared statement of Hon. Fred Upton follows:] Prepared Statement of Hon. Fred Upton, Chairman, Subcommittee on Telecommunications and the Internet Good morning. Today we are holding the first hearing in the 107th Congress of the Subcommittee on Telecommunications and the Internet. I want to welcome all of the members of the Subcommittee and tip my hat to our ranking member, Ed Markey, and our vice chair Cliff Stearns. Today's hearing focuses on whether ICANN's new generation of Internet domain name selection process is thwarting competition? Our constituents may not know the terms: ICANN, Top Level Domain name, or root server, but they are definitely familiar with: ``dot com'', ``dot net'', ``dot org'', and--every time they e-mail us--``dot gov''. Our constituents use these Top Level Domain names every day, enabling them--with a simple click of the mouse--to communicate almost instantaneously all over the world. If ICANN gets its way, our constituents may become familiar with seven new Top Level Domain names, like: ``dot biz'', ``dot info'', ``dot pro'', ``dot name'', ``dot museum'', ``dot aero'', and ``dot co- op''. These are the seven new names selected last November by ICANN for potential launching as early as later this year. However, thirty-seven other applicants were not selected by ICANN. Moreover, we know that others could not even afford the $50,000 application fee or chose not to apply because, on principle, they question ICANN's authority to, in their minds, ``play god'' with respect to approving new names. Hence, there is a great deal of controversy surrounding ICANN's selection process--which has prompted this timely hearing, called for by myself and Chairman Tauzin in a January letter to ICANN. I ask unanimous consent to put the Tauzin/Upton letter in the record. The House Energy and Commerce Committee has jurisdiction over ICANN, and this hearing is the latest in a series of activities in which this Committee has engaged on this subject. In fact, in July 1999, I chaired an Oversight and Investigations Subcommittee hearing entitled: Is ICANN out of control? At the heart of that hearing were broad, fundamental questions about the Commerce Department's decision to vest responsibility for the management of the domain name system in a private non-rofit corporation, as the federal government moved to privatize this critical function. Much has transpired since July 1999, but important policy questions linger about ICANN. Some continue to question its very legitimacy and the propriety of the Commerce Department's delegation of responsibility to it. Others support the Commerce Department's efforts to privatize management of the DNS, but remain vigilant as this relatively fledging concept evolves to ensure that it operates openly and fairly. While I anticipate more hearings on ICANN this year on a variety of other important, substantive issues, this hearing will focus specifically on ICANN's selection process for new Top Level Domain names and whether it is thwarting competition. On the one hand, some view ICANN's approval of only a limited number of new names as thwarting competition. On the other hand, others argue that ICANN was prudent to select a limited number of new names so that they can be ``test driven'' to best hedge against harming the technical integrity of the Internet. It appears as if these are principles which need to be balanced. Today, we will get a feel for how well, or poorly, ICANN is balancing these principles by examining its selection process. In my mind, legitimate questions have been raised by several of our witnesses about the fairness of the application and selection process--questions which must be answered by ICANN. As such, today we will hear from: ICANN, two businesses whose applications were selected, two businesses whose applications were not selected, one small business which did not apply at all, and two public interest advocates. Today's witnesses will greatly assist our Subcommittee in answering the question of whether ICANN is thwarting competition. In addition, as a parent of two young children, I want to explore ICANN's rationale for not approving two particular Top Level Domain names: ``dot kids'' and ``dot xxx'', as a means to protect kids from the awful smut which is so widespread on the Internet. We should strongly encourage the use of technology to protect our kids, and special Top Level Domain names may be just the ticket. This is what so many parents lie awake at night thinking about, and we need to respond. I look forward to hearing from the witnesses, and I thank them for their participation today. Mr. Upton. I yield to my ranking member Mr. Markey, the gentleman from Massachusetts. Mr. Markey. Thank you, Mr. Chairman, and welcome to the Subcommittee on Telecommunications, Trade, and Consumer Protection---- Mr. Upton. Welcome back. Thank you. Mr. Markey. [continuing] in your new role as the chairman of this prestigious panel. I think it is going to be a very exciting 2 years. This is my 25th year on the Subcommittee on Telecommunications, Trade, and Consumer Protection, and I think that the issues today are more exciting than we have ever had in the past as all of these technologies offer new public policy challenges to the Congress as they do to the private sector. So this is a very distinguished panel which you have brought with us here today. ICANN was specifically created to undertake certain administrative and technical management aspects of the domain name system and Internet address space. ICANN exists because the U.S. Department of Commerce and many corporate and civic entities believe that these functions should not be done by the government, but, instead, by a private sector entity. In its early stages of the Internet's development, things were much easier. Vin Cerf could contact Jon Postel, who in turn contacted a select group of Internet pioneers and elder statesmen, and they were largely able to determine amongst themselves what was best for the Net's development. Yet given the rapid commercialization of the Internet and the ardent desire of various public, private and civic voices to have their say on how the Internet develops from here forward, it is obvious that we must proceed with a different process. As we do so, it is important to keep in mind ICANN is not simply an international standards-setting body. Recent decisions creating new top-level domains demonstrates that ICANN is establishing Internet policy in its selections, not merely advising the global community of appropriate technical standards. This development in itself is neither good nor bad. It is perhaps somewhat inevitable. It only becomes problematic when ICANN starts to make policy judgments without an adequate policy process. There is no question in my mind that the current process is highly flawed. ICANN has made much of the fact that all applications and comments were posted on a Web site. That is very useful, but it is no substitute for a comprehensive policy process, especially for something as important to Internet competition and diversity as selecting new top-level domains. New top-level domains are quasipublic assets. Some of the people making these decisions were elected; some were not. There was a significant $50,000 fee assessed against applicants, although not all that money was actually spent analyzing the applications themselves. Not all technically qualified and financially qualified applications were selected. The winners, therefore, were chosen for other, more subjective reasons, although it is not apparent what criteria were used for these subjective judgments. To hear some of the participants explain it, both winners and losers, events at the Vatican are shrouded in less mystery than how ICANN chooses top-level domains. Let me be clear, however, that this does not mean that any of the new seven top-level domains selected are bad choices or should not have been chosen. ICANN would have done well to prohibit in this first round of applications any applications from the incumbent, Verisign, but at the end of the day, the new seven domain names chosen will increase competition and diversity somewhat. My concern is with those that were not selected and with the smaller, less powerful voices who feel they have no access to this process. We have a number of important questions to explore today. For those applicants that were not selected, what is the appeals process? To whom are the ICANN board members accountable, to the Internet community, to the Department of Commerce? Is the Department of Commerce performing adequate oversight? Is it simply an eyewitness to history? How can we make the subjective criteria for ICANN's policymaking more clear? Does ICANN have adequate resources to perform these policy functions? And how do we address ICANN's long-term funding needs? The future of Internet governance and Internet policymaking raise vitally important issues. I want to commend Chairman Upton for calling this hearing and, again, thank the witnesses for their participation this morning. I yield back the balance of my time. [The prepared statement of Hon. Edward J. Markey follows:] Prepared Statement of Hon. Edward J. Markey, a Representative in Congress from the State of Massachusetts Good Morning. I want to commend Chairman Upton for calling this hearing today on the Internet Domain Name System and issues related to Internet governance. I also want to thank all of our witnesses for coming to share their views with us on these important topics. Mr. Chairman, the Internet Corporation for Assigned Names and Numbers--or ICANN--was established to perform certain limited, but highly vital functions. It was created specifically to undertake certain administrative and technical management aspects of the Domain Name System and the Internet address space. ICANN exists because the U.S. Department of Commerce, and many corporate and civic entities, believed that these functions should not be done by the government but instead by a private sector entity. In its early stages of the Internet's development, things were much easier. Vint Cerf could contact Jon Postel, who in turn contacted a select group of Internet pioneers and elder statesmen and they were largely able to determine among themselves what was best for the Net's development. Yet given the rapid commercialization of the Internet and the ardent desire of various public, private, and civic voices to have their say on how the Internet develops from here forward, it is obvious that we must proceed with a different process. As we do so, it is important to keep in mind that ICANN is not simply an international standards setting body. Recent decisions creating new Top Level Domains demonstrate that ICANN is establishing Internet policy in its selections, not merely advising the global community of appropriate technical standards. This development in itself is neither good nor bad. It is perhaps, somewhat inevitable. It only becomes problematic when ICANN starts to make policy judgements without an adequate policy process. There's no question in my mind that the current process is highly flawed. ICANN has made much of the fact that all applications and comments were posted on a website. That's very useful, but it is no substitute for a comprehensive policy process--especially for something as important to Internet competition and diversity as selecting new Top Level Domains. New Top Level Domains are a quasi-public asset. Some of the people making these decisions were elected, some were not. There was a significant $50,000 fee assessed applicants although not all of that money was actually spent analyzing the applications themselves. Not all technically qualified and financially qualified applications were selected. The ``winners'' therefore, were chosen for other, more subjective reasons--although its not apparent what criteria were used for these subjective judgements. To hear some of the participants explain it, (both winners and losers,) events at the Vatican are shrouded in less mystery than how ICANN chooses new Top Level Domains. Let me be clear however, that this does not mean that any of the seven new Top Level Domains selected are bad choices or should not have been chosen. ICANN would have done well to prohibit in this first round of applications any application from the incumbent, Verisign, but at the end of the day the new seven domain names chosen will increase competition and diversity somewhat. My concern is with those that were not selected and with the smaller, less powerful voices who feel they have no access to this process. We have a number of important questions to explore today. For those applicants that were not selected, what is the appeals process? To whom are the ICANN board members accountable--to the Internet community?--to the Department of Commerce? Is the Department of Commerce performing adequate oversight or is it simply an eyewitness to history? How can we make the subjective criteria for ICANN's policymaking more clear? Does ICANN have adequate resources to perform these policy functions? How do we address ICANN's long term funding needs? This future of Internet governance and Internet policymaking raise vitally important issues. I want to commend Chairman Upton for calling this hearing and again, thank the witnesses for their participation this morning. Mr. Stearns [presiding]. I would also like to have a short opening statement to congratulate the new Chairman on his selection to this prestigious committee and his kindness in offering me the vice chairmanship, and I look forward to working with him shoulder to shoulder on the issues. This, of course, marks the first hearing of this subcommittee, and it is examining the Internet Corporation for Assigned Names and Numbers, ICANN, selection process of new Internet domain names. The Internet is not the unsettled Wild West it once used to be. Users have tamed this frontier, and both the Internet and the World Wide Web have become a stable facet for many Americans. Furthermore, estimates indicate the number of e- commerce Web sites to double in the next 2 years, up from 687,000 just 2 years ago. Of course, to ensure this continual prosperity oversight of how the Internet infrastructure is managed should be a key responsibility for us on this subcommittee. So I look forward to getting a report card from today's witnesses on ICANN, accountability and transparency throughout the process, and to learn more about what ICANN is doing to ensure competition and the integrity and stability of the Internet. And Mr. Dingell, the ranking member of the full committee, is recognized. Mr. Dingell. Mr. Chairman, I thank you. Mr. Chairman, I want to congratulate you on the accession to the responsibility of the chairman of this subcommittee, and I look forward to working with you on these matters. I also want to commend you for today's hearings. We are engaged in inquiring into a matter which a lot of people regard as being arcane, but that does not mean that it is irrelevant. To the contrary, the integrity of the process used by ICANN recently when it selected a handful of new top domain names is arguably one of the most critical issues affecting the Internet today. Domain names are the key to Internet commerce, and we must determine whether ICANN has a process which is fair and proper, and whether the outcome will lead to a more effective competition in the management of the global domain name system. We must also inquire as to whether the process has resulted in achieving a measure of public confidence by its fairness or, by grotesque unfairness, has achieved not just distrust, but active distaste. The questions, important as they are, are only going to address, however, narrow issues pertaining to domain name assignments. The larger question we must ask is whether this administrative process is emblematic of a larger problem with the overall system of Internet governance. This system set up by ICANN was initiated by the U.S. Department of Commerce and continues to be subject to the authority of that agency. As such, it falls squarely within this committee's oversight responsibilities. I hope and expect that we will be holding hearings to evaluate whether the mission of that agency is being soundly defined, properly executed, and whether, in fact, it is being fair. The signs I would observe are that it has not been behaving fairly, and that its behavior has left a lot of unanswered questions. I hope that we will hear from witnesses today who will be able to describe what is going on there. I gather many of them believe the system is broken. I have strong evidence to believe they are correct. Some suggest that ICANN has morphed from a nongovernmental, technical standards-setting organization to a full-fledged policymaking body. If that is true, there is cause for serious concern. ICANN was not given authority to assume that function, and it appears to be accountable to no one, except perhaps God Almighty, for its actions. Most important, if ICANN is making Internet policy decisions, then the people must know that they who are affected will have access to a reliable and transparent system to seek redress for harm. There is no question we are treading on uncharted territory. Bumps in the road are, of course, unavoidable, but while it may be desirable to keep the Internet unregulated both from a diplomatic and economic standpoint, we must not allow U.S. interests to be put at risk by blindly adhering to a hands-off approach, and we must see to it that the agency which we are constituting to act on behalf of the U.S. Government in these matters functions fairly, well, efficiently and in a fashion which is going to be in the broad overall public interest. I particularly commend you, therefore, for initiating this hearing. I believe that our oversight efforts have to be extremely diligent, and we have to be prepared to act quickly should it become necessary to do so. I would observe that we should follow this set of hearings vigorously and energetically to require the necessary answers from ICANN and from the Department of Commerce. I believe there is much to be justified here, and I believe that the task of justifying these things is going to be difficult, and I look forward to assisting those agencies that are responsible here in achieving a correct and a proper result. It may be painful for them. Thank you, Mr. Chairman. [The prepared statement of Hon. John D. Dingell follows:] Prepared Statement of Hon. John D. Dingell, a Representative in Congress from the State of Michigan Mr. Chairman, thank you for recognizing me. First, I want to congratulate and welcome you to the Subcommittee on Telecommunications and the Internet. I know you will do a wonderful job in charting the course of this Subcommittee, and in helping us navigate through the many complex issues associated with telecommunications. You are to be commended not only for your enthusiasm in scheduling the very first hearing of the 107th Congress, but also for your courage in tackling what may be the most arcane issue we have faced in years. I've familiarized myself with today's testimony, Mr. Chairman, and even reciprocal compensation is starting to look like a simple fix. Arcane, however, does not mean irrelevant. To the contrary, the integrity of the process used by ICANN recently when it selected a handful of new top-level domain names is arguably one of the most critical issues affecting the Internet today. Domain names are the key to Internet commerce, and we must determine whether the ICANN process was fair and proper, and whether the outcome will lead to more effective competition in the management of the global domain name system. These questions, however important they may be, still only address the narrow issue pertaining to domain name assignments. The larger question we must ask is whether this administrative process--if found to be deficient--is emblematic of a larger problem with the overall system of Internet governance. This system of governance set up by ICANN--was initiated by the U.S. Department of Commerce, and continues to be subject to the authority of that agency. As such, it falls squarely within the jurisdiction of this Committee's oversight responsibilities, and I hope and expect that we will hold ongoing hearings to evaluate whether ICANN's mission is both soundly defined and properly executed. We will hear from some witnesses today who believe the system is broken. Some suggest that ICANN has morphed from a non-governmental technical standards-setting organization to a full-fledged policymaking body. If that is true, I believe it is cause for serious concern. ICANN was not given authority to assume that function, and it appears to be accountable to no specific body for its actions. Most important, if ICANN is making Internet policy decisions, then those people directly affected must have access to a reliable and transparent system to seek redress from harm. There is no question that we are treading on uncharted territory and bumps in the road are unavoidable. But while it may be desirable to keep the Internet unregulated, both from a diplomatic and economic standpoint, we must not allow U.S. interests to be put at risk by blindly adhering to a hands-off approach. I believe we should be diligent in our oversight efforts, and quick to act should it become necessary to do so. Thank you again, Mr. Chairman, for holding this important hearing, and I also want to extend my appreciation to each of the distinguished witnesses for appearing today. Mr. Upton. Thank you, Mr. Dingell. I would make a motion at this point that all Members--the House is not in session with recorded votes today, so a number of Members I know have gone back to their districts, but I would make a motion by unanimous consent that all members of the subcommittee have an opportunity to put their--insert their full statement into the record. And with that I recognize Mr. Shimkus from Illinois. Mr. Shimkus. Mr. Chairman, I don't have an opening statement. Mr. Upton. Mr. Brown. Mr. Brown. Thank you, Mr. Chairman, brief opening statement. I am pleased to join the Subcommittee on Telecommunications and the Internet with you, Mr. Chairman, with Ranking Member Markey, and look forward to working with both of you on issues that are so important to the new economy. The subject of domain names is of interest to all of us. Recently I met with the vice president of Cuyahoga Community College in Cleveland, who stressed his frustration with his school's Internet domain. Cuyahoga Community College in Cleveland, Ohio, otherwise known as Tri-C, is the first and largest community college in Ohio. It is the fourth largest institution of higher education in the State. Despite the fact Tri-C is a large, well-established higher education institution, it has been locked out of obtaining the domain .edu. Only 4-year, degree-granting colleges and universities generally are allowed the .edu domain. Two-year colleges are not allowed that address even though they educate as many, if not more, students than 4-year students. www.tri- c.cc.oh.us is not an especially memorable address for its faculty and others. The Department of Commerce, in partnership with ICANN, oversees the .edu domain. While they have expressed interest in finding a solution, action has not been taken in an expedient manner. It is important for the Department and ICANN to move expeditiously so community colleges and their students can have easier access and equal access to important campus resources and the Internet. Mr. Chairman, I thank you. Mr. Upton. Mr. Davis. Mr. Davis. I ask unanimous consent my statement go in the record in deference to our witnesses so we can hear from them. [The prepared statement of Hon. Tom Davis follows:] Prepared Statement of Hon. Tom Davis, a Representative in Congress from the State of Virginia Mr. Chairman, I am pleased to be beginning my membership on the Subcommittee with a very timely oversight hearing on ICANN's selection of new generic DNS suffixes. Thank you to all of the witnesses for taking time from their work to be here today. I am particularly pleased to see Dr. Cerf whom I have had the pleasure of meeting previously, and Ms. Leah Gallegos who hails from my home state of Virginia. As the Internet continues to grow, not only in terms of electronic commerce but also with respect to global communication in general, the number of people, businesses, and nations with a stakeholder interest in the fair and competitive expansion of its perimeters is growing. At the same time, there is a legitimate expectation that the Internet will be a predictable environment that reflects the competitive marketplace. With that growth, it becomes even more important that there is confidence the ICANN is managing Internet functions in a manner that promotes competition, uses an open and transparent process that maintains the Corporation's neutrality, and does no harm to the future growth of the Internet. I have heard from a number of persons in Virginia who have expressed their dismay at both the format and the process by which ICANN selected the suffixes and the successful registry applicants in November of last year. I look forward to hearing our witnesses's testimonies and having the opportunity to determine whether or not Congress needs to take action that will assist ICANN and the Department of Commerce in improving the process for promoting competition in the selection of next generation Internet Domain Names. Mr. Upton. Thank you, Mr. Davis. Mr. Gordon. Mr. Gordon. I am ready to hear the panel. Mr. Upton. Ms. Harman. Ms. Harman. As the rookie on this committee who represents what is now called the digital coast of California, I just want to say how happy I am to be here and to be on the this subcommittee and to make one observation, which is that I believe we have in general a digital economy and an analogue government, and the challenge is to create a digital government to match the digital economy. We have to do this right, and we have to observe fairness, but it would be a shame if we imposed analogue procedures on this issue. And so I hope that we will be very creative and very digital in this subcommittee as we move forward. I yield back, Mr. Chairman. Mr. Upton. Thank you. Ms. DeGette. Ms. DeGette. Mr. Chairman, I will echo my colleague from California's pleasure at being on this committee. You may not be aware, but just in the past few years, the Denver metropolitan area has become one of the fastest growing telecommunications hubs in the country, and, as a matter of fact, is now in the top five. So even though it is onerous, I know, I would love to invite the chairman and the ranking member to come out there and see our industry at some point and to perhaps have some field hearings there. It is exciting what is going on, and I am excited to be on the telecom committee. Even though I am new to this committee, I am not new to the issue. When I was in the State legislature in Colorado, we passed one of the landmark laws that preceded the 1969 act, so I am delighted to get back with these issues and to hear from the witnesses today, and I yield back my time as well. [The prepared statement of Hon. Diana DeGette follows:] Prepared Statement of Hon. Diana DeGette, a Representative in Congress from the State of Colorado Good morning Mr. Chairman. A warm welcome to our witnesses. I am thrilled to be here today as a new member of this subcommittee. I am pleased as well, that my colleague Mr. Stupak has joined me as a fellow refugee from the now defunct Finance and HazMat subcommittee. As some of you may know, the Denver metropolitan area, which I represent, has one of the fastest growing telecommunications industries in the country right now. In fact, overall, I believe we are in the top five telcom hubs in the nation at this time. The growth of this dynamic industry has unbelievable growth in the Denver area over the past decade, and as one who is very interested in these issues, it has been exciting to watch the progress. Given this fact, I would like to take the opportunity to invite my Chairman and Ranking Member to come pay us a visit. I would be happy to host some field hearings in the near future on some of the pressing telecom issues that we will be dealing with in the 107th. While I was not yet in Congress when the Telecommunications Act of 1996 passed, I did work on this issue in the Colorado State House. In fact Colorado passed a landmark telecom reform act in 1995, which I was very involved in, and I look forward to continuing that work here at the federal level. I am pleased to attend my first subcommittee first hearing on such an interesting issue, that of new domain names and how the whole process of selecting them has unfolded. This issue couldn't be more timely, not only because of the where ICANN is in the process of selecting new suffixes, but because the Internet is still growing at an unbelievable rate and pressure continues to build on its capabilities. If you look at the rate at which registered domain names have grown over the past few years, it is clear that there is a huge demand to expand the number of domain names available for registrations by individuals, organizations and businesses. As the Internet has grown, the method of allocating and designating domain names has been fairly controversial. The issues that have caused to many headaches include transitioning to a single domain names system (DNS) registrars to many registrars, trademark disputes, the appropriate federal role and of course, the issues that brings us here today, the process of creating new domain names. Certainly, it is the responsibility of this committee to make sure that the process is as open and fair as possible. It is also our responsibility to make sure that ICANN is taking every step necessary to guarantee that the overall efficacy of the Internet is not disrupted. I will forward to hearing the testimony of our witnesses. Mr. Upton. Thank you very much. [Additional statements submitted for the record follow:] Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee on Energy and Commerce I would like to thank Chairman Upton for holding this important and timely hearing on the Internet Corporation for Assigned Names and Numbers (ICANN). As the Committee of jurisdiction over ICANN, it is imperative that we continue our oversight responsibilities in this area. The issues ICANN is grappling with will have a fundamental impact on the future vibrancy of the Internet. While I recognize that there are a number of important and interesting issues involving ICANN governance issues, funding, issues, root server competition issues, multilingual issues, dispute resolution issues, countrycode TLD issues, and significant trademark implications--this hearing is intended to focus on the discrete but critical issue of the process by which ICANN recently approved seven suffixes: dot areo, dot co-op, dot info, dot museum, dot name, dot pro, and dot biz. That said, it is my intention to, with Chairman Upton, actively monitor those issues I just mentioned. In that regard, I sincerely hope that ICANN--and its outside representatives--will respect this Committee's rules in the future and submit its testimony within 48 hours of a hearing. This rule really is for your benefit as much as it is for ours. Providing Members and their staff with sufficient time to review your written testimony enables us to better understand your position, encourages Members to be more engaged and generally makes for a more fruitful hearing experience. For being in existence for a little over two years--ICANN has been charged with a number of important tasks, one of which is to establish a process for the introduction of new top level domain (TLDs) names in a way that will not destabilize the Internet. On November 16th ICANN announced its selection of the seven new suffixes--doubling the number of global TLDs. There are many arguments both for and against new TLDs. Those in favor of a limitless number (or at least significantly more than seven) maintain that new TLDs are technically easy to create, will help relieve the scarcity in existing name spaces that make it difficult for companies to find catchy new website addresses, and are consistent with increasing consumer choice and a diversity of options. However, there are those who urge restraint and caution in the introduction of TLDs pointing to greater possibilities for consumer confusion, the risk of increased trademark infringement, cybersquatting and cvberpiracy. I am eager to hear from ICANN about how it arrived at the number seven. Equally important, many are questioning the very process by which the suffixes were selected. I am eager to hear ICANN's view of the process, the views of selected and set aside applicants, and the views of Professor Froomkin and the Center for Democracy and Technology. I encourage all panelists to offer, in addition to specific criticism--or praise depending on their point of view--their insights as to how to improve the process as we move forward to future rounds of suffix selections. On August 3rd ICANN posted an extensive process overview to assist those considering applying to operate a new TLD. The application materials were subsequently posted on August 15th. October 2nd was the deadline for submitting applications and ICANN announced it decision on November 16th. Some validly argue that the six week application review process seemed unacceptably short--making it extremely difficult for each application to enjoy a thorough review. Some are complaining that the criteria was vague and not followed: they were not provided an opportunity to correct errors in the staff recommendation on their applications: they were not provided with any meaningful opportunity for face-to-face consultations and that in fact, they were only provided with three minutes to make a ``last ditch'' pitch to the Board. With each applicant paying a non-refundable $50,000 filing fee, should the process have provided more? Notwithstanding these complaints others were happy with the process and maintain that the time has come to introduce new domain names onto the Internet, and urge that there not be any further delay. Our role should be to ensure that the process by which ICANN, a private, non-profit entity with global responsibilities, selected domain names was open and fair to all applicants. Were the procedures clearly articulated and consistently followed? To the extent we find shortcomings in this new process, and I already have, I hope we can provide some guidance that will serve as a roadmap in the future given that this is not expected to be the last round of domain name selections. With this hearing, our review will not end, we will continue to review this process. I look forward to hearing from this distinguished panel of witnesses. Thank you. ______ Prepared Statement of Hon. Eliot Engel, a Representative in Congress from the State of New York Thank you Mr. Chairman. Let me also welcome you to your new position. Like all of my Democratic colleagues I look forward to working with you and the other Republican members on these issues to ensure consumer protection and free and open competition. I also want to welcome back Mr. Markey to the Ranking Position--I have always admired your strong leadership and vocal support for America's consumers. Today's hearing will hopefully be illuminating to all of us here. Many questions have been raised about the process that ICANN employed to approve the first round of new Top Level Domains (TLDs). This hearing will give us an opportunity to learn about this process. I, for one, am interested in ensuring that the process was open, fair, and clear to all the participants and those who may have wanted to participate. This is one of my concerns--the $50,000 filing fee does seem at first glance to be rather high. This hearing being called is very timely as well because the Commerce Department has not yet approved the new TLDs. I do appreciate the difficulty ICANN had in organizing this process. There is just no precedent for doing this. And so even if there were fits and starts, so long as the process was open and clear to all involved, then I am hopeful that we can work with ICANN to improve and streamline this process for future determinations of TLDs. Mr. Upton. Our witnesses today are Dr. Vincent Cerf, Chairman of the Board for the Internet Corporation for Assigned Names and Numbers, ICANN; Mr. Lou Kerner, CEO of .TV; Ms. Elana Broitman, director of policy and public affairs, register.com; Mr. David Short, legal director of the International Air Transport Association; Mr. Ken Hansen, director of corporate development of NeuStar, Inc.; Ms. Leah Gallegos, president of AtlanticRoot Network, Inc.; Professor Michael Froomkin, professor of law, University of Miami School of Law; and Mr. Alan Davidson, associate director of the Center for Democracy and Technology. Welcome all of you to our first hearing of the year. Your statements are made part of the record in their entirety. We would like to limit your presentation to no more than 5 minutes. We have a relatively new timer here which will tell you exactly how much time you have left, and I am going to be fairly fast with the gavel. Following that 5 minutes, members on the dais will be able to ask questions for 5 minutes, and we will proceed that way. Dr. Cerf, welcome. STATEMENTS OF VINTON G. CERF, CHAIRMAN OF THE BOARD, INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS; LOU KERNER, CHIEF EXECUTIVE OFFICER, .TV; ELANA BROITMAN, DIRECTOR, POLICY AND PUBLIC AFFAIRS, REGISTER.COM; DAVID E. SHORT, LEGAL DIRECTOR, INTERNATIONAL AIR TRANSPORT ASSOCIATION; KENNETH M. HANSEN, DIRECTOR, CORPORATE DEVELOPMENT, NEUSTAR, INC.; LEAH GALLEGOS, PRESIDENT, ATLAN- TICROOT NETWORK, INC.; A. MICHAEL FROOMKIN, PROFESSOR OF LAW, UNIVERSITY OF MIAMI SCHOOL OF LAW; AND ALAN B. DAVIDSON, ASSOCIATE DIRECTOR, CENTER FOR DEMOCRACY AND TECHNOLOGY Mr. Cerf. Thank you very much, Mr. Chairman, Ranking Member Markey, ladies and gentlemen of the committee. I appreciate the opportunity to describe what I believe is an important accomplishment of what is a young and still maturing entity, the Internet Corporation for Assigned Names and Numbers. The introduction of new competition for global domain names at the registry or wholesale level of the domain name system is happening for the first time in 15 years. This is the third and the last of the significant initial goals set forth in the U.S. Government white paper that called for the creation of ICANN. ICANN has succeeded in opening the registrar or the retail portion of the domain name market to new competition, accrediting more than 180 competitive registrars of which about half are now operating, and seeing average registrar prices drop by more than a factor of two in the first year of this competition. ICANN's uniform dispute resolution procedure has successfully provided a quick, cheap and globally available way to resolve many domain name disputes. This last major initial goal, the introduction of new global top-level domains, is the most complex of these three efforts. The seven original global TLDs were created in 1985, and for at least most of the past decade there has been considerable debate about whether adding new TLDs is a good idea. The range of opinion is from zero to millions, literally, and, as a result, a number of past efforts have not reached a conclusion for lack of consensus. It has only been with the creation of ICANN and the use of the consensus development mechanisms it contains that we have finally been able to come to a sufficient consensus to allow us to move forward with enough TLD additions to the domain name system. On the other hand, all the advice that we have received from the technical and the policy bodies of ICANN have told us to move prudently and carefully to minimize any risk of destabilizing the domain name system. Many of us believe that we can add new TLDs without creating instability or other adverse effects, but the fact is it has never been done in the context of the Internet as its exists today, and thus, while our objective is to encourage new competition here, just as we already have in the registrar segment of the market, we want to do so without endangering the utility of what has become a critical global medium for communication and commerce. The consensus development process within ICANN has been extensive. This issue was first referred to ICANN's Domain Name Support Organization, an open advisory body, that recommended the introduction of a limited number of new TLDs as a proof of concept, with additional TLDs to be added only if it was clear that it could be done without destabilizing or otherwise impairing the utility of the Internet. A similar recommendation was conveyed by ICANN's technical support organization. The board accepted these recommendations and asked for proposals for new TLDs to be included in this first limited proof-of- concept phase. Because ICANN is a consensus development body, everything about this process was transparent. All the proposals were posted on ICANN's Web site for public comment. Both the proposals and roughly 4,000 public comments were reviewed by ICANN's staff and independent consultants retained for that specific purpose. The results of that evaluation, a 326-page analysis, were also posted for public comment, and another thousand comments were received. The board then held a public forum lasting 12 hours, where the applicants and the general public provided final input and then the next day selected a diverse group of seven proposals to carry out this initial proof of concept experiment in a public meeting that lasted about 6 hours. Since that time, negotiation of appropriate commercial agreements have been under way, and I hope we will see those final agreements soon. Because, as was clear from the beginning of the process, ICANN was only going to select a limited number of proposals for this initial proof of concept phase, a significant fraction of the 44 applications that went through the process were inevitably going to be disappointed at not being selected in this first proof of concept round. And they were disappointed. But the real news here is that finally, with the formation of ICANN and the development of this consensus, this long debate is actually producing new TLDs. If all those selected become operational, we will have immediately doubled the number of global TLDs available. This will immediately increase competition and consumer choice. I have a longer statement, Mr. Chairman. Mr. Upton. I know, I read it last night. Mr. Cerf. You are very kind to have done so, sir. I have a longer statement, with attachments, and I would ask these be entered into the record. I will be happy to answer any questions you may have, and I thank you for allowing me and ICANN to participate in this important proceeding. [The prepared statement of Vinton G. Cerf follows:] Prepared Statement of Vinton G. Cerf, Chairman of the Board, Internet Corporation for Assigned Names and Numbers My name is Vinton G. Cerf, and outside of my regular employment at WorldCom,\1\ I am the volunteer Chairman of the Internet Corporation for Assigned Names and Numbers (ICANN). I appreciate the opportunity to appear before this Committee to describe the efforts of ICANN to introduce additional competition into the Internet name space, while at the same time prudently protecting against possible disruption of this extremely important global resource for communications and commerce. --------------------------------------------------------------------------- \1\ My curriculum vitae is attached. --------------------------------------------------------------------------- The basic message I would like to leave with you today is that ICANN is functioning well, especially for such a young organization with such a difficult job. In fact, it has made substantial progress toward the specific goals it was created to meet, including the introduction of competition at both the wholesale and retail levels of the registration of names in the Domain Name System (DNS). The recent action to introduce seven new Top Level Domains (TLDs) into the DNS will double the number of global TLDs and at the same time will not, we believe, create serious risks of destabilizing the Internet--something I know none of us wants to see. The fact that ICANN, in just over a year, has been able to generate global consensus on this issue--which has been fiercely debated for most of the last decade--is a testament to ICANN's potential to effectively administer the limited but important aspects of the DNS that are its only responsibility.\2\ --------------------------------------------------------------------------- \2\ I have attached to this testimony a time line that describes the chronology of the debate over new Top Level Domains. --------------------------------------------------------------------------- a. what is icann? It is probably useful to first provide a little background about ICANN, which is a unique entity that may not be familiar to everyone. ICANN is a non-profit private-sector organization with a 19-member international volunteer Board of Directors drawn from a set of specialized technical and policy advisory groups, and through open, worldwide online elections. ICANN was formed in 1998 through a consensus-development process in the global Internet community, in response to a suggestion by the United States Government that the private sector create such a body. It was formed to undertake certain administrative and technical management aspects of the Domain Name System (DNS) and the Internet address space. Domain names serve as the visible face of the name and address mechanism of the Internet--in short, the way computers know where to send or receive information. ICANN performs functions that, prior to ICANN's creation by the private sector, were performed by contractors to the US Government (National Science Foundation and DARPA). ICANN is a young, and still maturing organization; it turns out that achieving global consensus is not so easy. But it has made great--and many would say surprising-- progress toward the objective shared by the vast majority of responsible voices in the international Internet community: the creation of a stable, efficient and effective administrative management body for specific technical and related policy aspects of the DNS and the Internet address space that is consensus-based, internationally representative, and non-governmental. b. what are the guiding principles of icann? There is nothing quite like ICANN anywhere in the world, and of course it will be some time before we are certain that this unique approach to consensus development can effectively carry out the limited but quite important tasks assigned to it. I am cautiously optimistic, but we are still at an early stage of evolution, and there is much work to do. The organizational work has been complicated by the fact that we have also been asked to simultaneously begin to accomplish the specific operational goals set out by the US Government in the White Paper.\3\ The situation is analogous to building a restaurant and starting to serve customers while the kitchen is still under construction; it is possible, but may occasionally produce cold food. --------------------------------------------------------------------------- \3\ The White Paper was a policy statement published by the Department of Commerce on June 10, 1998. See Management of Internet Names and Addresses, 63 Fed. Reg. 31741 (1998) --------------------------------------------------------------------------- The White Paper set forth four principles that it described as critical to the success of an entity such as ICANN: stability; competition; private, bottom-up coordination; and representation. 1. Stability is perhaps the easiest to understand. The US Government was seeking to extract itself from what it had concluded was no longer a proper role for the US Government--the funding of private contractors to manage important technical aspects of the global Internet name and number address system--but only in a way that did not threaten the stability of the Internet. As the White Paper said, and as seems obvious, ``the stability of the Internet should be the first priority of any DNS management system.'' If the DNS does not work, then for all practical purposes for most people, the Internet does not work. That is an unacceptable outcome, and thus everything that ICANN does is guided by, and tested against, this primary directive. 2. Competition was also an important goal set forth in the White Paper, which stated that ``[w]here possible, market mechanisms that support competition and consumer choice should drive the management of the Internet because they will lower costs, promote innovation, encourage diversity, and enhance user choice and satisfaction.'' Competition in the DNS structure as it stands today is theoretically possible at both the registry (or wholesale) level, and the registrar (or retail) level. Increasing competition at the retail level involves only adding additional sellers of names to be recorded in existing registries; as a result, it generates relatively minor stability concerns. For this reason, adding new competition at the retail level was the first substantive goal that ICANN quickly accomplished after its formation. On the other hand, adding new registry (or wholesale) competition--which is the subject of this hearing--requires the introduction of additional Top Level Domains into the namespace, and thus does raise potential stability issues of various kinds. As a result, and given its prime directive to protect stability, ICANN has moved forward in this area in a prudent and cautious way, consistent with recommendations from many constituencies interested in the Internet, which I will describe in more detail later in this testimony. 3. A third principle was private sector, bottom-up consensus development, and the entirety of ICANN's processes are controlled by this principle. ICANN is a private-sector body, and its participants draw from the full range of private-sector organizations, from business entities to non-profit organizations to foundations to private individuals. Its policies are the result of the complex, sometimes cumbersome interaction of all these actors, in an open, transparent and sometimes slow progression from individuals and particular entities through the ICANN working groups and Supporting Organizations to ICANN's Board, which by its own bylaws has the role of recognizing consensus already developed below, not imposing it from above. Like democracy, it is far from a perfect system, but it is an attempt, and the best way we have yet been able to devise, to generate global consensus without the coercive power of governments. 4. Finally, the fourth core principle on which ICANN rests is representation. A body such as ICANN can only plausibly claim to operate as a consensus development organization for the Internet community if it is truly representative of that community. The White Paper called for ICANN to ``reflect the functional and geographic diversity of the Internet and its users,'' and to ``ensure international participation in decision making.'' To satisfy these objectives, all of ICANN's structures are required to be geographically diverse, and the structures have been designed to, in the aggregate, to provide opportunities for input from all manner of Internet stakeholders. This is an extremely complicated task, and we are not yet finished with the construction phase; indeed, we have just initiated a Study Committee chaired by the former Prime Minister of Sweden, Carl Bildt, to oversee a new effort to find a consensus solution for obtaining input from and providing accountability to the general user community, which might not otherwise be involved in or even knowledgeable about ICANN and its activities. Other organizational tasks necessary to ensure that ICANN is fully representative of the entirety of the Internet community are also ongoing. This is hard work, and there is more to do to get it done right. c. what has icann accomplished so far? Obviously, ICANN is still a work in progress. Nevertheless, it has, in my view, already made remarkable progress in its young life. ICANN was created in November of 1998, and did not really become fully operational until a year later (November of 1999) with the signing of a series of agreements with Network Solutions Inc., then the sole operator of the largest and most significant registries--.com, .net, and .org. So ICANN really has only about 14 months of operating history. Still, even in that short span of time, some significant things have happened. 1. The Introduction of Retail Competition. As one of its very first actions, ICANN created an accreditation system for competitive registrars and, pursuant to its NSI agreements, gave those new competitors access to the NSI-operated registries. When ICANN was formed, there was only a single registrar (NSI) and everyone had to pay the single price for the single domain name product that sole registrar offered: $70 for a two-year registration. There are now over 180 accredited registrars, with more than half of those actively operating, and you can now register a domain name in the .com, .net, and .org registries for a wide range of prices and terms--some will charge zero for the name if you buy other services, while others will sell you a ten-year registration for significantly less than the $350 it would have cost pre-ICANN (even if it had been available, which it was not). While there are no precise statistics, in part because the market is so diverse, a good estimate of the average retail price today of a one- year domain name registration in the NSI registries is probably $10- 15--or less than half the retail price just 18 months ago. At the time of ICANN's creation, NSI had 100% of the registration market for the .com, .net and .org TLDs. Today, we estimate that NSI is registering less than 40% of new registrations in those TLDs--a market share drop of more than half in that same 18-month period. There are still issues that must be dealt with in this area; some registrars have not lived up to their contractual commitments, and ICANN needs to ensure that they do. And indeed, there may be too many registrars; 94% of all registrations come from the 10 largest registrars, with the other 80 or 90 active registrars sharing the other 6%. Name registration is quickly becoming a commodity business, and a commodity business, with commodity margins, will probably not support 100 vigorous competitors. We are already starting to see some companies wishing to leave the business, and we need to make as sure as we can that those departures do not impair the ability of consumers and businesses to rely on names they have registered, and that departures or even failures do not generate unreliability or other forms of instability in the namespace itself. So while there are still issues to be dealt with, I think it is widely recognized that ICANN has been very successful in changing the retail name registration market from a monopoly market to a highly competitive market. 2. Creation of a Cost-Effective, Efficient Dispute Resolution System. A second significant accomplishment has been the creation of the Uniform Dispute Resolution Policy, a way to quickly and cheaply arbitrate certain domain name disputes. While domain names themselves cannot be trademarked, it is certainly possible for domain names to be confusingly similar to a trademarked name, or in other ways to be inappropriately used by someone for illegitimate means. Since trademark and other intellectual property rules differ from country to country, enforcing those rights is complex and expensive. One of the policies that was generated from the ICANN bottom-up process early on was the need for a simple procedure to resolve the clearest and most egregious violations on a global basis. The result, after considerable work in a variety of ICANN forums, is the UDRP, which one commentator recently noted is ``widely viewed as a model of dispute resolution for the 21st Century.'' The UDRP is limited to certain very specific claims, is intended to require only about $1,500 in costs and 45 days to invoke, and is required to be included in all name registration contracts by all ICANN-accredited registrars, thus providing the basis for global uniformity in the resolution of this particular class of domain name disputes. Even though the UDRP is non- binding (either party may take the dispute to court after an unfavorable UDRP decision), it appears that has happened in only a few dozen out of over 2,000 decisions to date. The UDRP is, I would submit, another very positive accomplishment of ICANN during its short existence to date. As of this writing, parties interested in further refinement of the UDRP are already studying its design for possible revisions. d. the introduction of new global top level domains. That brings me to the subject of today's hearings, which is really the third major accomplishment of ICANN in its short existence: the creation of additional competition at the registry (or wholesale) level of the namespace. To understand how much of an accomplishment this was, and how difficult it has been to get to this point, we need to start with some history, after which I will walk through the general standard utilized, the criteria that were applied, the application process, the evaluation process, and the selection process. I will then bring the story up to date with a description of what has happened since the selections were made. Background. The Internet as we know it today was not created with all of its present uses clearly in mind. In fact, I can safely say (having been very much involved in the very earliest days of the Internet) that no one had any idea how it would develop in the hands of the general public, nor even that it would ever reach public hands. Certainly there was little appreciation of the increasingly critical role it would play in everyday life. In those days, we were designing a communications system intended for military application and used for experimental purposes by the research and academic community, and not a system for commerce. Internet addresses are numeric values, usually represented by four numbers separated by ``.'' (dots). This is sometimes called ``dotted notation'' as in 192.136.34.07. In the earliest days, computers (``hosts'') were known by simple names such as ``UCLA'' or ``USC-ISI''. As the system grew, especially after 1985 as the National Science Foundation began growing its NSFNET, it became clear that a system of hierarchical naming and addressing conventions would be needed. At that time, seven so-called ``Top Level Domains'' were created: .com for commercial, .net for networks, .org for non-commercial organizations, .gov for government users, .mil for the military, .edu for educational institutions, and .int for international organizations. All domain names since that time (with an important exception I will mention momentarily) have been subdivisions of those original seven TLDs. Thus, wcom.com, to pick an example, is part of the .com top level domain, and all messages sent to Vinton.G.Cerf@wcom.com are routed pursuant to the information contained ultimately in the .com registry's distributed database. In particular, that database resolves ``wcom.com'' into a 32 bit address, such as 192.136.34.07 [note, this is not the actual Internet address associated with the wcom.com domain name]. The exception mentioned earlier is the set of so-called ``country code'' (or ``cc'') TLDs. The original seven TLDs were once called ``generic'' TLDs and are now known as ``global'' TLDs, meaning that there are theoretically no geographic boundaries that constrain entries in those databases.\4\ In the early days of the Internet, one of the most important values to the scientists seeking to incubate and grow this new thing was the spreading of connectivity to as many parts of the world as possible. To help in that, individual countries (and some other geographic areas) were delegated their own TLDs, such as .au for Australia, or .jp for Japan, or .fr for France. Operation of the registries for these ccTLDs was delegated to a wide variety of people or entities, with the primary consideration being a willingness to agree to operate them for the benefit of the citizens of that geography. These original delegates were frequently academics, sometimes government agencies, and sometimes local entrepreneurs; the common thread was that they promised to use these TLDs to provide access to this new thing called the Internet for local constituents. In this way, the Internet, which started as a research experiment in American universities, slowly became truly global. It is worth noting that the Internet research project was international in its scope almost immediately. It started in 1973, and by early 1975, University College London and the Norwegian Defense Research Establishment were involved. Later, sites in Italy and Germany became a part of the Internet research effort. --------------------------------------------------------------------------- \4\Of course, in fact entries in .gov, .mil, and for the most part .edu relate only to the United States, but the other global TLDs are open to entries from all over the world. --------------------------------------------------------------------------- The original seven gTLDs were created in the mid- to late-1980s; no new global TLD has been added to the namespace since then. There are now some 245 ccTLDs, but as described, these were intended to be for localized use, not as alternatives for global TLDs. So as the Internet grew during the 1990s, demand for domain names grew as well, but as a practical matter the only global (i.e., non-national) TLDs in which businesses or individuals could freely register a domain name were .com, .net and .org--all administered by Network Solutions, Inc. under a contract with the National Science Foundation. There is a long history about how this came about, which I don't have time to tell, but suffice it to say that as demand exploded, NSI could not effectively operate the registry within the financial framework of its agreement with the National Science Foundation and sought to remedy this by obtaining permission to charge users for registration of names in the .com, .net and .org databases. Over time, there came to be dissatisfaction with the service offered by NSI. In addition (also for reasons too complicated to relate here), NSI was constrained by its contract with NSF to charge exactly $70 for a two- year registration with an annual $35 charge after the second year--no exceptions, no changes. As the number of name registrations climbed into the millions, many felt that the charge far exceeded the cost of accepting the registration and maintaining the database. This unhappiness of a significant portion of the Internet community was one of the driving forces behind a grass-roots attempt to institutionalize the function of the original ICANN, the Information Sciences Institute at the University of Southern California, a government contractor that performed a set of functions known as the Internet Assigned Numbers Authority (IANA). After almost three years of contentious debate, the grass-roots effort failed to gel and the US Government (after extensive public consultation) then called on the private sector to come forward with a new kind of organization. The private sector responded by creating ICANN, as a way to, among other things, encourage the addition of competition at both the retail and wholesale levels of the namespace. Standards for Introduction of New TLDs. As described above, ICANN was able to introduce retail competition relatively quickly after its creation, and this has produced the expected benefits--lower prices, more consumer choice, and innovation. But the introduction of wholesale competition, because it involves actually expanding the structure of the namespace, presented and continues to present more risks. While most Internet engineers believe that some number of additional TLDs could be added without serious risks of instability, there is considerable uncertainty about how many could be added without adverse side effects, and very few engineers have been willing to absolutely guarantee that there was zero risk of instability. Given the increasingly critical role the Internet now plays in everyday commercial and personal life, the almost uniform consensus in the community was to be cautious and prudent in this process. For example, the White Paper asserted that ``expansion of gTLDs [should] proceed at a deliberate and controlled pace to allow for evaluation of the impact of the new gTLDs and well-reasoned evaluation of the domain space.'' In addition to concerns about the technical stability of the Internet, many were concerned about potential costs that rapid expansion of the TLD space might impose on business and consumers. The World Intellectual Property Organization, which conducted a study of intellectual property issues in connection with the DNS at the request of the United States Government, concluded that new gTLDs could be introduced if done ``in a slow and controlled manner that takes into account the efficacy of the proposed measures in reducing existing problems.'' The Protocol Supporting Organization of ICANN (made up of the Internet Engineering Task Force and other Internet engineering and protocol development bodies) said it saw no technical problems with the introduction of a ``relatively small'' number of new TLDs. In fact, every entity or organization without an economic stake in the answer that has examined this question has recommended the same thing: a ``small'' or ``limited'' or ``prudent'' number of new TLDs should be tried first, as a sort of proof of concept or experiment. Once this ``limited'' number of new TLDs was introduced--and the suggested numbers roughly ranged from 1 to 10--and assuming there were no adverse side effects, then additional TLDs could be introduced if there was consumer demand for them. The ICANN Structure and Procedures. Because ICANN is a consensus development body that relies on bottom-up policy development, the issues of whether and how to introduce new gTLDs were first taken up by the Domain Name Supporting Organization (DNSO), the ICANN constituent body responsible for name policy issues. The DNSO organized a Working Group, which recommended that a small number (6-10) of TLDs be initially introduced, and that the effects of that introduction be evaluated before proceeding further. That recommendation was forwarded to the Names Council, the executive body of the DNSO, which reviewed the Working Group recommendation and public comments on it, and recommended to the ICANN Board that it establish a ``policy for the introduction of new gTLDs in a measured and responsible way.'' The Names Council suggested that ``a limited number of new top-level domains be introduced initially and that the future introduction of additional top-level domains be done only after careful evaluation of the initial introduction.'' Consistent with the ICANN bylaws, the ICANN Board accepts the recommendations of Supporting Organizations if the recommendations meet certain minimal standards designed to ensure that they truly represent consensus recommendations. Thus, the Names Council recommendation was published for public comments, and following the receipt of numerous public comments, the ICANN staff in June 2000 issued a Discussion Draft seeking public comments on a series of questions intended to lead to the adoption of principles and procedures to be followed in a ``measured and responsible introduction'' of a limited number of new TLDs.\5\ Following several thousand additional public comments, and considerable discussion at a public meeting in Yokohama in July 2000, the ICANN Board adopted a series of resolutions instructing its staff to begin the process of accepting applications for a ``proof of concept'' for the introduction of new TLDs.\6\ --------------------------------------------------------------------------- \5\ See generally ICANN Yokohama Meeting Topic: Introduction of New Top-Level Domains, at http://www.icann.org/yokohama/new-tld-topic.htm. \6\ See Resolutions of the ICANN Board on New TLDs, at http:// www.icann.org/tlds/new-tld-resolutions-16jul00.htm --------------------------------------------------------------------------- In early August, ICANN posted a detailed discussion of the new TLD process it proposed to follow,\7\ and in mid-August a detailed set of Criteria for Assessing TLD Proposals.\8\ These nine criteria have been constant throughout this process, and so they bear repeating here: --------------------------------------------------------------------------- \7\ See New TLD Application Process Overview, at http:// www.icann.org/tlds/application-process-03aug00.htm \8\ See Criteria for Assessing TLD Proposals, at http:// www.icann.org/tlds/tld-criteria-15aug00.htm --------------------------------------------------------------------------- 1. The need to maintain the Internet's stability. This speaks for itself. ICANN's overriding obligation is to protect the stability of the Internet, and all other objectives are secondary. Thus, any proposal that could be shown to threaten this stability (other than any risk inherent in any new TLD introduction) was obviously unacceptable. 2. The extent to which selection of the proposal would lead to an effective ``proof of concept'' concerning the introduction of top-level domains in the future. This too is largely self-explanatory. The effort here was not to find the ``best'' application, however that might be measured, but to ask the community to offer up a set of options from which ICANN could select a limited number that, taken in the aggregate, would satisfy the evaluation objectives of this proof of concept. This is exactly the same approach that ICANN had previously taken in the introduction of competitive registrars, and which had worked so well there. The addition of multiple registrars to the NSI registries required the creation of new interface software, since before this time only one registrar had been able to direct new entries in those registries. Thus, there was some experimental effort required to make sure that the software was ready for use by a larger number of simultaneous registrars. ICANN first created a ``test-bed,'' asked for expressions of interest from the community, and accredited only five new registrars for a period of a few months, while they and NSI worked out the bugs in the interface software. As soon as the test-bed was completed, ICANN accredited large numbers of registrars, now exceeding 180. Here, the concept is similar: from options offered up from the community, create a limited number of new TLDs to ensure that the DNS can accept, both technically and practically, these additions without impairing stability in any way. Once that is proven, additional TLDs can be created as appropriate. 3. The enhancement of competition for registration services. Obviously, this is the principal reason for adding new TLDs, so one criterion for determining which applications to accept initially is how effective they are likely to be in creating new competition for the NSI registries. Of course, competition takes many forms; here, one form would be analogous to .com--a global, unrestricted registry focusing on business. To compete in this way requires not only desire, but the capacity to effectively compete with a competitor with high brand awareness (.com has almost become a generic term), a very significant marketing budget, and a large installed base of registered names which will produce some level of renewals more or less automatically. To compete successfully on a global basis under these circumstances requires a significant capital investment, very significant technical expertise (running a database of several million names that gets hundreds of simultaneous queries every second is a complicated matter), and a substantial marketing budget to build the kind of brand equity that will be necessary to compete effectively with, for example, .com. Another way to introduce competition into the wholesale part of the market is to offer a different kind of product--not a global unrestricted domain, but various kinds of limited or restricted registries that might appeal to specific different sectors of the market. To use a television analogy, narrowcasting instead of broadcasting. Here, capital and marketing expenses may be lower, but other kinds of service characteristics may be more important. ICANN's purpose with this criteria was to invite a broad range of competitive options, from which it could select a menu that, taken as a whole, would offer a number of different competitive alternatives to consumers of domain name services. 4. The enhancement of the utility of the DNS. In addition to competition, one must reasonably consider the practical effects of the introduction of new TLDs. The names registered in the DNS are intended to be used by people, and sound engineering requires that human factors be taken into account. 5. The extent to which the proposal would meet previously unmet types of needs. If it is assumed that the DNS should meet a diversity of needs, it would be a positive value if a proposed TLD appeared to meet any previously unmet needs of the Internet community. 6. The extent to which the proposal would enhance the diversity of the DNS and of registration services generally. Here, what was sought was diversity of all kinds, in the hopes of creating the broadest possible--and thus most instructive--experiment within the limitations recommended (i.e., a small number of new top level domains). So, the published criteria encouraged the submission of proposals for different kinds of TLDs (open or closed, non-commercial or commercial, personal or business-oriented, etc.) The criteria also sought diverse business models and proposals from different geographic regions, for the same reasons. 7. The evaluation of delegation of policy-formulation functions for special-purpose TLDs to appropriate organizations. For those proposals that envisioned restricted or special-purpose TLDs, this criterion recognized that development of policies for the TLD would best be done by a ``sponsoring organization'' that could demonstrate that it would include participation of the segments of the communities that would be most affected by the TLD. Thus, with this class of application, the representativeness of the sponsoring organization was a very important criterion in the evaluation process. 8. Appropriate protections of rights of others in connection with the operation of the TLD. Any new TLD is likely to have an initial ``land rush'' when it first starts operations as people seek the most desirable names. In addition, every new TLD offers the potential opportunity for cybersquatting and other inappropriate name registration practices. This criterion sought information about how the applicant proposed to deal with these issues, and also how it proposed to provide appropriate mechanisms to resolve domain name disputes. 9. The completeness of the proposals submitted and the extent to which they demonstrate realistic business, financial, technical, and operational plans and sound analysis of market needs. Finally, this criterion simply emphasized that, since the effort was a ``proof of concept,'' the soundness and completeness of the application and the business plan would be important elements of the selection process. This was not intended to be an experiment in how well the DNS or the Internet could survive the business failure of a new TLD operator. Nor was it intended to be clairvoyant with regard to the outcome of any particular proposal. Thus, to the extent possible, those applications that appeared to have the soundest business plans, based on the most realistic estimates of likely outcomes. The Application Process. The application process required the filing of a detailed proposal speaking to all the criteria outlined above. It recommended that applicants retain professional assistance from technical, financial and management advisers, and lawyers. And perhaps most controversially, it required a non-refundable application fee of $50,000. A brief explanation of this particular requirement may be useful. ICANN is a self-funding organization. It has no capital, and no shareholders from which to raise capital. It must recover its costs from the various constituent units that benefit from ICANN's processes and procedures--today, those costs are borne by address registries, name registries, and registrars. Its annual expenditures to date have been in the $4-5 million range, covering employee salaries and expenses (there are now 14 employees), and a wide range of other expenditures associated with operating in a global setting. Thus, there was no ready source of funds to pay for the process of introducing new TLDs, and the ICANN Board determined that this, like all other ICANN activities, should be a self-funded effort, with the costs of the process borne by those seeking the new TLDs. At that point, ICANN estimated the potential costs of this process, including the retention of technical and financial advisers, legal advice, the logistics of the process, and the potential cost of litigation pursued by those unhappy with the results. While obviously all these elements were highly uncertain, based on its best judgment of how many applications were likely to come in and what the likely costs would be, and incidentally only after receiving public comments, ICANN established a $50,000 fee. As it turns out, there were more applications than expected, and thus the absolute costs of processing and reviewing them were higher than expected; about half the application revenues have already been used to cover costs of the process to date, with considerable work left to do and still with the potential for litigation at the end of the process. To date, it appears that the fact of more applications and higher costs of review and evaluation than expected have cancelled each other out, and so it appears that the fees adopted were about right in creating the funds necessary to carry out this process. I know there have been complaints by some that they were foreclosed from this process because they simply could not afford the $50,000 application fee, and I am sympathetic to these concerns. But there are three practical responses that, in my view, make it clear that this is not a fair criticism of the process. First, the process had to be self- funding; there simply was no other option, since ICANN has no general source of funds. Based on costs to date and those projected, it certainly does not seem that the fee was set too high. While there are still application fee receipts that remain unspent, the process is not over, and it has already consumed half of the fees collected. Second, and as importantly, it is highly unlikely that any individual or entity that could not afford the application fee would have the resources to be able to operate a successful and scalable TLD registry. The capital and operating costs of even a small registry are thought to be considerable, and especially if the goal is to operate a registry that charged low or no fees for name registrations (many of the persons and entities advancing this particular complaint are non- profit or public interest bodies), those fees would not likely cover the costs of operation, much less the necessary start-up and capital costs. Of course, it is possible that, if an organization that would otherwise have difficulty managing the costs of operating a TLD registry were in fact awarded a new TLD, it might be able to raise the funds through subsequent contributions or grants or the like, but this leads us directly to the third point. This effort was not a contest to find the most qualified, or the most worthy, or the most attractive for any reason of the various applicants. ICANN is not and should not be in the business of making value judgments. What ICANN is about is protecting the stability of the Internet and, to the extent consistent with that goal, increasing competition and competitive options for consumers of domain name services. Thus, what ICANN was doing here was an experiment, a proof of concept, an attempt to find a limited number of appropriate applicants to test what happens when new TLDs of various kinds are added to the namespace today--a namespace that is vastly different in size and in application than that which existed more than 15 years ago when the first seven global TLDs and the ccTLDs were created. Because this was a proof of concept, the emphasis was on diverse business models, technical capacity, and diversity of geography and focus--and not on some weighing of the relative merits, however measured, of the applicants. Indeed, a serious attempt was made to avoid otherwise normal business risks, such as limits on capital or other resources, so that forseeably likely business failures did not interfere with the data collection and evaluation process of this experiment. Thus, it would have been impossible to accept any application which relied on the mere hope of obtaining funding if an application was accepted, and indeed, several of the applicants not selected in the evaluation process were thought to be deficient just on that point. Under these circumstances, it was not appropriate to encourage applications by those with limited resources, since those limitations would almost certainly result in their not being selected. Thus, setting the fee to recover expected costs, without regard to the effect it had on applications, seemed then (and seems today) the logical approach. Once this experiment is over, and assuming it demonstrates that adding new TLDs in a measured way does not threaten the stability of the DNS or the Internet, I would hope that processes could be developed to both expedite and significantly reduce the cost of new TLD applications or, at a minimum, to deal with special cases of TLDs with very limited scope, scale and cost. The Evaluation Procedure. Forty-seven applications were submitted by the deadline established; three of those were withdrawn for various reasons, and the remaining 44 were then published on ICANN's website, open to public comments, and subjected to an extensive evaluation, applying the criteria set forth in the various materials previously published by ICANN. More than 4,000 public comments were received. The applications and the public comments were carefully reviewed by technical, financial and legal experts, and the result of that evaluation--a 326-page staff report summarizing the public comments and the staff evaluation--was itself posted on the ICANN website for public comment and review .by the Board of Directors of ICANN.\9\ Another 1,000 public comments were received on the staff report. The Board was provided with regular status reports, interim results of the staff evaluations, and of course had access to the public comments as they were filed. --------------------------------------------------------------------------- \9\ See Report on New TLD Applications, at http://www.icann.org/ tlds/report --------------------------------------------------------------------------- There has been some criticism of the fact that the full staff evaluation was not available to the public--and thus to the applicants--until November, only days before the actual Board meeting. Obviously, it would have been much better to produce this earlier, and we tried to do so. But in fact the timing of the release of the staff report was largely the product of the bottom-up process that ICANN follows to generate consensus. An important ingredient in the staff evaluations was the substance of the voluminous--over 5000--public comments produced in the month after the applications were posted. ICANN's job is to identify consensus, and thus input from the community is a critical part of any Board decision. Getting that community input, considering it, and completing the technical and financial evaluations was a massive job. It would have been preferable to have issued the staff report earlier. But on the other hand, in the six days between the posting of the report and the Board meeting, ICANN received more than 1,000 additional public comments on the staff report, many from the applicants responding to the evaluation of their particular application. The ultimate question is whether the Board got sufficient timely information on which to base its selection decisions, bearing in mind the objective of the exercise. I believe it did. At its Annual Meeting in Los Angeles in November 2000, the ICANN Board devoted most of the standard public forum day immediately preceding the Board meeting to the new TLD issue, with presentations by the staff of their findings, public comments, and short presentations from the applicants. Another point of criticism by some has been the short time--three minutes--allowed during this public forum for presentations by each of the applicants, but oral presentations were never intended to be the sole or primary source of information for the Board. Voluminous applications (with many hundreds of pages) had been filed by each applicant; many of them had received and answered clarifying questions from the staff; and many of them had provided additional material by filing material on the ICANN public comment page (every one of the 5,000+ comments was read by ICANN staff). The Board had access to the applications and to the staff evaluations well ahead of the public Board meeting at which the applications were reviewed. The opportunity to make a presentation at the public forum was simply the final step in an extensive process, available so that any last- minute questions could be asked or points made. Since there were 44 applicants, nearly all of whom wished to speak, and since the time available (given the other parts of the community who also wished to be heard) was limited to about two hours, three minutes was simply all the time available. Most used it wisely, pointing out the particular strengths of their applications. Some disappointed applicants have also complained that ICANN staff refused to talk with them, or let them respond to concerns raised by their applications. This is not accurate; what ICANN staff refused to do is have private conversations with the applicants, and this derives from the very nature of ICANN as an entity. ICANN is a consensus development body, not a regulatory agency; its decisions are intended to reflect consensus in the Internet community, not simply the policy preferences of those who happen to sit on its Board at any given moment. For this process to work, the vast bulk of ICANN's work must be transparent to the public, and so with very rare exceptions (such as matters dealing with personnel issues), everything ICANN does it does in public. (In fact, one of the three applications that were withdrawn resulted from the applicants' unwillingness to allow significant material in their application to be posted on ICANN's website.) If the public was going to have a real opportunity to comment on the applications, the applications themselves needed to be public, and any substantive discussion of them had to be public as well. In an effort to help this process, and still get questions answered, ICANN staff frequently took email or other private questions, reformulated them to make them more generically useful, and then posted them on the website as FAQs. In addition, staff encouraged applicants to post any information they wished on the public comment pages, where it would be read by ICANN staff, the ICANN Board and also by any interested observer. What staff would not do, and what was evidently very frustrating to many of the applicants that had not previously had any experience with the open structure and operations of ICANN, was to have private substantive discussions with the applicants. It is easy to understand this frustration, especially for those disappointed applicants who had not previously participated in the ICANN process and, as a result, did not understand what ICANN is and how it operates and thus were surprised at the transparency of the entire process. Still, it is hard to see how any other process could have been followed consistent with ICANN's consensus development process. Without access to the entirety of the information about each applicant and each application that was available to the Board, the Board would not have had the benefit of public comments on some (often significant) factors, and it would have been hard to justify its selections as deriving from a consensus development process. The Selection Process. To understand the selection process, we must go back to first principles. The goal here was not to have a contest and pick winners; it was not to decide who ``deserved'' to have a new TLD; it was not even to attempt to predict the kind or type of TLDs that might get public acceptance. The goal, articulated plainly from the beginning of the process more than a year ago, was to identify from suggestions by the community a limited number of diverse TLDs that could be introduced into the namespace in a prudent and controlled manner so that the world could test whether the addition of new global TLDs was feasible without destabilizing the DNS or producing other bad consequences. This was not a race, with the swiftest automatically the winner. It was a process that was intended to enable an experiment, a proof of concept, in which private entities were invited to participate if they chose to do so--and those who did choose to participate did so voluntarily, knowing that the odds of being selected were not high, that the criteria for being included in this experiment were in some measure subjective, and that the goal was the production of experimental information that could be evaluated. Of course, when many more applications were received than anyone had suggested should be prudently introduced at this stage, some evaluation was necessary to attempt to identify those suggestions that might best fit the experimental parameters that had been laid down. But this was never a process in which the absolute or relative merit of the particular application was determinative. Many applications with likely merit were necessarily not going to be selected, if the goal was a small number (remember, the entire range of responsible suggestions for introducing new TLDs was from one to 10 new ones). And since one objective was diversity--of business model, of geography, of type of registry--it was highly likely that some qualified applications would not be selected--both because prudence required the addition of only a small number of TLDs, and because our proof of concept required data from a diverse set of new TLDs. This was especially true of those applications seeking open, global TLDs; while two were selected, about half of the 44 applications sought such a charter. But it was also true of others; .geo received a very positive evaluation from the staff, but the Board felt that, at this proof of concept stage, there were in fact potential risks to the operation of the DNS that could not be fully evaluated without consultation with the technical support organization(s) associated with ICANN. Thus, the Board considered every one of the 44 remaining applications at its meeting on November 16, 2000, measuring them against their collective judgment about how well they would serve to carry out the test that was being considered. In a meeting that lasted more than six hours, the Board methodically reviewed, and either set aside or retained for further evaluation, application after application, until it was left with approximately 10 applications that seemed to have broad consensus support. After further, more focused discussion, that number was pared to the seven that were ultimately selected, and which had almost unanimous Board support: .biz, .info, .pro, .aero, .coop, .museum, and .name.\10\ In the aggregate, the Board concluded that this group provided enough diversity of business models and other relevant considerations so as to form an acceptable test bed or proof of concept. --------------------------------------------------------------------------- \10\ See http://www.icann.org/minutes/prelim-report- 16nov00.htm#00.89 --------------------------------------------------------------------------- The various TLDs have very different intended purposes, and that is the strength of the group in the aggregate. Two--.biz and .info--were advanced as essentially alternatives to .com--global, business-oriented registries aimed at capturing millions of registered names around the world. In order to compete with .com--which has a recognized brand, a large installed base that produces a regular stream of renewals, and a very substantial marketing budget--these particular applicants assumed they would need a significant investment in both capital equipment and marketing. The Board felt that these applicants seemed most capable of bringing the necessary resources to bear to test whether anyone can effectively compete with .com after the latter's significant head start. Two other TLDs--.pro and .name--were aimed at individuals rather than businesses, but in very different ways. .pro was aimed at licensed professionals, while .name was aimed at any individual. The other three--.aero (aerospace industry), .coop (for cooperatives), and .museum (for museums)--were all restricted TLDs, aimed at an industry or a business method or a type of entity, and added to the diversity of this experimental collection of TLDs. ICANN's objectives--and by that we mean to say the objectives of the general Internet community, which ICANN tries to represent--were to introduce a small number of various kinds of new TLDs into the namespace in a prudent fashion, see what happened, and then, if appropriate, based on those results, move forward with additional new TLDs. It is certainly conceivable that some different subset of the applications it had before it would have met that objective as well as those chosen, but the real question is whether the choices were reasonable, and likely to produce the necessary information on which future introductions could be based. It is also possible, as some of those not selected have complained, that those selected will have a head start (to the extent that matters) over future TLD applicants, but this would be an inevitable consequence of any selection of less than all applicants. Those who were not selected, no matter who they are, were predictably going to be unhappy, and those who were selected were predictably going to be glad, but neither was an ICANN goal. ICANN's goal, and its responsibility, was to find a limited collection of diverse new TLDs that could be prudently added to the namespace while minimizing any risk of instability. While time will tell, at this point we believe we faithfully carried out that responsibility. The Post-Selection Process. Since November, we have been in the process of drafting and negotiating agreements with the selected applicants. Since these agreements will hopefully be templates for future agreements, we are taking great care to make sure that the structure and terms are replicable in different environments. Since these agreements will contain the promises and commitments under which the applicants will have to live for some time, the applicants are being very careful. The result is slow progress, but progress. We are hopeful that we will be able to complete the first draft agreements within a few weeks. The Board will then be asked to assess whether the agreements reflect the proposals that were selected and, if so, to approve the agreements. Shortly thereafter, this great experiment will begin. We are all looking forward to that time. Of course, it cannot be stressed enough that no one knows for sure what the effects of this experiment will be. Since there have been no new global TLDs introduced for more than a decade, the Internet is a vastly different space than it was the last time this happened. Of course, there have been a number of country code TLDs introduced over that period, and since some of those have recently begun to function in a way quite analogous to a global TLD, it may be that we will be able to conclude that the DNS can readily absorb more new global TLDs. But there has never been an introduction of as many as seven new global TLDs simultaneously, with the possibility of a land rush that is inherent in that fact. There has never been a highly visible introduction of multiple new TLDs in the context of an Internet that has become a principal global medium for commerce and communication. We do not know whether the introduction of a number of new TLDs-- especially combined with the relatively new phenomenon of the use of ccTLDs in a fashion never intended (after all, .tv stands for Tuvalu, not television, no matter what its marketers say)--will create consumer confusion, or will impair the functioning of various kinds of software that has been written to assume that .com is the most likely domain for any address. In short, it is not absolutely clear what effects these introductions will have on the stability of the DNS or how to introduce new TLDs in a way that minimizes harmful side-effects, and that is precisely why we are conducting this experiment. The results will guide our future actions. e. conclusion One of ICANN's primary missions is to preserve the integrity and stability of the Internet through prudent oversight and management of the DNS by bottom-up, global, representative consensus development. Like location in real estate, the three most important goals of ICANN are stability, stability and stability. Once there is consensus that stability is not threatened, ICANN is then charged with seeking to increase competition and diversity, both very important but secondary goals. A competitive Internet that does not function is not useful. An Internet in which anyone can obtain the domain name of their choice, but where the DNS does not function when someone seeks to find a particular website, is also not useful. In its short life, ICANN has some real accomplishments--made more impressive by the inherent difficulty of developing global consensus on anything, but especially on issues as complex and contentious as those facing ICANN. It has achieved these accomplishments by hewing to its first and guiding principle--to maintain a stable, functional DNS--and within those limits by seeking to increase competitive options and efficient dispute resolution. This same principle has guided the careful, prudent way in which ICANN has approached the introduction of new global TLDs, really for the first time in the history of the Internet as we know it today. ICANN's processes are and have been transparent. The goals and procedures were derived from public comments, clearly laid out at the beginning of the process, and all decisions were made in full public view. Given the importance of care and prudence in the process, and the potentially devastating results of a misstep, ICANN has and will continue to err on the side of caution. This may mean slower progress than some would like, but it will also reduce and hopefully eliminate the potential for the catastrophic effects on business and personal use of the Internet that malfunction or other instability of the DNS would produce. Mr. Upton. All right. Thank you very much. Mr. Kerner. STATEMENT OF LOU KERNER Mr. Kerner. Good morning, Mr. Chairman and members of the committee. I am Lou Kerner, CEO of The .TV Corporation. Thank you for the opportunity to appear today and to share our concerns about the process by which ICANN proposes a new set of top-level domain names to the Internet. .TV is the registry for Web addresses ending in .tv. In 1999, we entered into a partnership with the sovereign nation of Tuvalu to commercialize its country code top-level domain, .tv, and in just 9 months we have registered over 250,000 domain names, establishing .tv as the fasting growing TLD in Internet history. We have invested millions of dollars to build a globally diverse technical infrastructure that is reliable, scalable, and secure. We come here as supporters of ICANN, but with serious concerns about its TLD selection process and its impact on the Internet community. The white paper which led to the creation of ICANN in 1998 envisioned an organization which would operate under a, ``sound and transparent decisionmaking process and be fair, open and procompetitive.'' Mr. Chairman, these worthy ideals were not evident in the TLD selection process implemented by ICANN, which can be described as unfair, closed, and anticompetitive. On August 15, 2000, ICANN solicited applications to operates new TLDs. Applicants were required to submit in great detail their technical, financial and business plan for the proposed TLD and to pay an unrefundable $50,000 fee. After paying the fee and spending hundreds of manhours preparing our applications, we were thrust into a selection process that was highly flawed. Our many concerns with the process are covered in greater detail in our written submission, but let me briefly outline three areas of glaring deficiency for the committee. First, there was very vague selection criteria. ICANN's criteria for assessing proposals were vague at best and were not weighted in any manner to give applicants a clear idea of the relative importance of each of the criteria. For example, the criteria included the enhancement of competition for registration services. Our consortium thus proposed a registry fee of $3.50 a name, substantially lower than the average of the winning applicant's, which was $9.68, and even the lowest fee among the winners of $5 is still almost 50 percent above our proposed registry fee. However, pricing never seemed to be addressed by ICANN in the selection process. Our second major area of concern is a lack of due diligence in the process. ICANN had intended that the evaluation process, ``not involve only reviewing what has been submitted, but also consulting with technical, financial, business and legal experts and gathering additional information that may be pertinent to the application.'' However, ICANN received 47 applications by its October 2 filing deadline, which overwhelmed its resources. It became apparent that the 6-week period allocated to the review process was completely unrealistic. ICANN fell behind its timetable, forcing it to abbreviate the review process. Most notably ICANN abandoned plans to conduct interviews with applicants. Due process was sacrificed for expediency in order to meet ICANN's self-imposed deadline of November 16. In response to criticism from applicants concerning the lack of opportunity to respond to the staff report, ICANN announced on November 14 that each applicant would be permitted to make a 3-minute presentation to the board on the following day. As decisions by the board appeared to have largely already been made, this was a disingenuous gesture; thus, we used our time to express our dissatisfaction with the process, and our message met with thunderous applause from the ICANN community members in attendance. Our final major concern is that the board decisions were based upon factually inaccurate staff reports. After conducting little financial, technical or operational due diligence, ICANN on November 10 released its staff report which, though replete with errors about our proposal, profoundly influenced the decision of the ICANN board. The report was posted just 1 day before the start of the ICANN meetings at which the new TLDs were selected, effectively eliminating the opportunity for public comment originally proscribed by ICANN. The report seriously misstated the technical capabilities of our consortium, which collectively offered a broad geographical reach, diverse Internet and technological expertise and the financial resources necessary. Our written response to the staff report, posted on ICANN's Web site per ICANN protocol, was not even read by the board. The erroneous findings of the staff report essentially limited our applications and many others from serious consideration by the board. Given the current situation, Congress must intervene to ensure a fair and equitable method for approving new TLDs. Mr. Chairman, the approval of new top-level domains is an important manner warranting congressional review, and the Department of Commerce should not implement ICANN's recommendation until such a review takes place. We are concerned that Commerce intends to simply rubber-stamp ICANN's implementation request, which we believe is inappropriate given the fundamental flaws in the selection process. We are not advocating U.S. Government control of the Internet. However, while Commerce maintains oversight authority of ICANN, the U.S. Government has a responsibility to ensure that decisions affecting the Internet are reached fairly and that proper precedents are established. This is the first major test of ICANN's decisionmaking authority, and Congress has an important role to play in establishing and enforcing the standards by which ICANN will make future decisions. Through the urging of Congress, the Department of Commerce should direct ICANN to reconsider all top-level domain applications in a manner that is fair, open, and rational. Mr. Upton. Mr. Kerner, I must beg that we have to stay on our schedule. Mr. Kerner. Mr. Chairman, in that case, I will stop there. Thank you. [The prepared statement of Lou Kerner follows:] Prepared Statement of Lou Kerner, Chief Executive Officer, .tv Corporation International Good morning, Mr. Chairman and members of the Committee. My name is Lou Kerner. I am Chief Executive Officer of The .tv Corporation International (``dotTV''). Thank you for allowing me the opportunity to appear today and to share our serious concerns with respect to the process by which the Internet Corporation for Assigned Names and Numbers (ICANN) proposes to introduce a new set of generic top level domains (``TLDs'') to the Internet. I want to emphasize at the outset that ICANN, a body that is largely unknown to the public, has enormous power over the Internet today. How it exercises that power has great significance for consumer choice, competition and the efficiency and viability of the Internet. Congress has an important role to play in making sure that ICANN carries out its responsibilities in the public interest. In July of 1998, the Department of Commerce issued a ``White Paper'' to create a private, non-profit corporation with broad responsibility to manage the policy and operation of the Internet. This entity, which subsequently became ICANN, was to be governed ``on the basis of a sound and transparent decision-making process'' that was to be ``fair, open, and pro-competitive.'' Mr. Chairman, this lofty ideal in no way resembles the events of recent months, which more accurately could be described as hurried, arbitrary and unfair. As a member of two bidding consortiums, the dotNOM Consortium and The dotPRO Consortium, it is our belief that the process prescribed and implemented by ICANN is fundamentally flawed and that due process and thoughtful decision making has been sacrificed for the sake of expediency. In reliance on this flawed process, critical decisions with irreversible and far- reaching consequences affecting the future of the Internet may soon be made. We come here as supporters of ICANN generally, but with serious concerns about its TLD selection process which we view as fundamentally flawed and lacking due process. We continue to recognize the enormous task and power ICANN holds over the Internet today and in the future. How it exercises that power has great significance for consumer choice, competition and the efficiency and viability of the Internet. As the U.S. Department of Commerce still has oversight authority over ICANN, the U.S. Government has an important role to play in making sure that ICANN carries out its responsibilities in a responsible manner. Following some brief background information, I first will describe the method by which ICANN selected a new set of TLDs and then identify some of the specific flaws in the TLD selection process. Finally, I will set forth the congressional action we believe is necessary to remedy ICANN's actions and to ensure that the deliberate and thoughtful process contemplated by the ICANN charter is followed in decision- making. 1. about top level domain names: The Internet domain name system (``DNS'') is based on a hierarchical structure of names. At the top of this hierarchy are top level domain names (``TLDs'') comprising ``generic'' TLDs (``gTLDs'') such as .com, .org, .net and the two letter country code top level domains (``ccTLDs'') such as .uk, .jp and .tv. Below the TLDs are the many millions of second level domain names that have been registered by individuals and organizations such as amazon.com, earthlink.net and npr.org. For some years consideration has been given to the introduction of new gTLDs, however, none have been added to the system since the mid 1980s. 2. about icann: Responsibility for the overall coordination of the DNS originally resided with the Internet Assigned Numbers Authority (``IANA'') under the oversight of the U.S. Department of Commerce. This responsibility was subsequently passed to ICANN which was created in 1998, however, ICANN continues to be subject to oversight by the Department of Commerce. ICANN is a not-for-profit corporation that operates under the direction of a board of 19 directors (the ``Board''); nine appointed by ICANN's supporting organizations, nine at-large directors and ICANN's President. As at November 16, (the date on which the Board decided upon the new gTLD which were to be approved) the nine at-large directorships continued to be held by interim directors appointed by the Department of Commerce. Five directors elected in October 2000 from the at-large Internet community did not assume their positions on the Board until immediately following the November 16 meeting and were therefore precluded from the evaluation and selection of applications for new gTLDs. This is a matter of significant controversy within the Internet community with many believing that the Board's haste to conclude the new gTLD review process was, at least in part, motivated by the desire to thwart the new directors from participating in the process. 3. about dottv: dotTV is a leading global provider of Web identity services and the exclusive worldwide source for Web addresses ending in .tv. In 1999, we entered into a partnership with the sovereign nation of Tuvalu to operate the registry for its assigned country code top-level domain name, .tv. In just over nine months we have registered over 250,000 domain names and have established ourselves as the fastest growing top level domain in the history of the Internet. To meet these increasing demands and the possibility of assuming the registry function for new TLDs, we have invested millions in building a globally diverse and robust technical infrastructure that is scalable, secure and reliable. 4. about the dotpro and dotnom applications: dotTV led a consortium of major international corporations including Lycos Inc., XO Communications, OnlineNIC, SK Telecom and 7DC which submitted two applications for ``.pro'' (for use by professional service providers) and ``.nom'' (for non-commercial use by private individuals). Information regarding the structure, operation and objectives of these proposed TLDs is contained in the attached executive summaries of the applications. The consortium offered many collective strengths including: broad geographical reach through its international partners based in the US, China, Korea and Europe; an impressive and diverse range of Internet and related technological expertise including registry services, wireless networking, web navigation, broadband, web-hosting and online services; financial resources and business relationships necessary to quickly establish an international distribution network and promote the worldwide recognition and adoption of new gTLDs. With the objective of promoting competition in the domain name industry and providing consumers with a low priced alternative, the dotTV-led Consortium proposed that both the .pro and .nom TLDs would be made available to registrars at an annual rate of $3.50. This price was significantly lower than that proposed by most other applicants including the successful rival application for .pro which proposed a price of $6.00. 5. the application process: In August of 2000, ICANN began its process by announcing that it would sol