THE BELTWAY AND BEYOND

Internet privatization opens a can of worms

Stephen M. Ryan

Here's an irony for you. The Commerce Department struggles to carry out the administration's mandate to privatize the Internet and ends up incurring more congressional oversight than the Internet ever before received.

The Domain Name System has been crucial to order on the Internet. It lets every organization get and keep its unique Internet address and communicate with all the others. The federal government has been essentially running the system, with small grants and cooperative agreements to organizations such as the Internet Assigned Numbers Authority and Network Solutions Inc. of Herndon, Va. NSI operates the Internet's principal root server.

With the government intent on privatizing control of the Net, it created a new group called the Internet Corp. for Assigned Names and Numbers. ICANN is a California company, not part of any traditional intergovernmental organization.

ICANN came into existence via a curious and circuitous route. In July 1997, the White House called for a review of the DNS. The administration stated general principles such as industry self-regulation of electronic commerce. By January of last year, Commerce had proposed a plan to increase the number of registrars'groups that could bundle a variety of Internet services, including the creation of domain names. Names would go to a registry operated under a cooperation agreement with NSI. But by June, Commerce had backed off of the notion of rulemaking and issued a white paper, 'Management of Internet Names and Addresses.'

The white paper called for an organization that would preserve the stability of the Internet, provide for competition in name registration, improve private sector coordination and represent the various Net constituencies. By last November, ICANN was born.

ICANN's board soon ran into a buzz saw when, to support its $5.9 million annual operations budget, it proposed a fee of $1 per year on each .com and .net domain name. Many saw this as a tax falling disproportionately on U.S. businesses, the principal users of these domain names.

There are about 240 Internet country codes, such as .uk. Eighty countries will, for a one-time fee, accept anyone's registration. These country code top-level domain names work just as well as .com or .net, but ICANN proposed that its yearly tax apply only to the latter two.

Some members of Congress saw the ICANN proposal as unconstitutional. Meanwhile, a federal court recently affirmed Congress' authority over the Internet, finding that without congressional authority, the executive branch'and by implication, ICANN'could not impose a tax on Internet users. Was the fee really a tax? Before hearings started last summer, ICANN wisely announced that it would defer the tax until an unspecified future date.

ICANN has irritated netizens by developing its policies in closed-door meetings. Even if they were open, the meetings have occurred in locations such as Berlin, Singapore and Santiago, Chile, where most Internet users, particularly the small businesses that hold 90 percent of domain names, cannot afford to venture. Responding to congressional and user complaints, ICANN did open its August meeting in Santiago.

Reason to fret

U.S. companies engaged in e-commerce around the world are genuinely and rightfully worried that without global standards, the Internet could go through a disorderly and dysfunctional balkanization of statist regulation and control.

Indeed, this fear was a key reason why stakeholders around the world welcomed the creation of an entity responsible for holding the whole together.

But the worthy goal of creating an Internet that is not government-dominated cannot overcome concerns that groups such as ICANN will run roughshod over the Constitution and policies of the U.S. government.

ICANN was created for a legitimate reason: to be a consensus-based organization letting the Internet and its stakeholders and beneficiaries move forward in a streamlined and cohesive manner. ICANN should remain faithful to the politically unencumbered, universal nature of the Internet and the boundless possibilities it offers to users around the world.

Stephen M. Ryan is a partner in the Washington law firm of Manatt, Phelps and Phillips. He has long experience in federal information technology issues. E-mail him at SRyan@Manatt.com.

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