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Budget, Lawsuit Spotlight ICANN's Evolution
by William New
What would Jon Postel think? That is a familiar refrain when big-picture questions arise regarding the organization with technical oversight of the Internet's addressing system.
The late Postel is a revered creator of the Internet Corporation for Assigned Names and Numbers (ICANN), and with last week's release of ICANN's fiscal 2004-2005 budget and a court decision in a case challenging ICANN's authority, those questions have resurfaced.
ICANN Budget Rethought To Reflect New Priorities
ICANN, which oversees activities related to the system of domains such as .com and .org, proposed to double its budget for the year beginning in July, from $8.3 million to $15.8 million. The budget proposes a $2 million increase to handle the half-dozen or more lawsuits ICANN is facing, a figure based on the current year's legal expenses. It also proposes several new sources of revenue, and notably, contains an ambitious program for resolving a number of outstanding issues.
"For the first obvious time, ICANN has tried to map its functions and people's expectations to its budget," said Miriam Sapiro, president of Summit Strategies International. She said the budget newly emphasizes three areas: compliance with contracts, contingency planning for problems and expansion of the domain-name system.
Sapiro oversaw the selection of an independent team of evaluators for a new round of "sponsored" top-level domains expected to be named within two months. Sponsored domains are open only to those fitting a certain category, such as .museums for museums. There are 10 applications for this new round, which will be the first set of new domains since November 2000. A new round of unsponsored domains is expected later this year.
Some Voice Concerns With Budget Doubling
Others in the Internet community view the budget as a sign that ICANN is trying to reach beyond its mandate. Some think Postel would be surprised that ICANN said it needs $16 million to operate when the budgets in his time were relatively very modest, in the single-digit thousands by one account. But he might not be surprised to see legal fees as a significant part of doing business.
University researcher Postel recognized the need for legal help, and was the first person to contract with the Jones Day law firm still retained by ICANN. That firm agreed to do the work on a pro bono basis, and the practice is now worth millions through its relationship with ICANN.
In the 1980s, Postel managed a list of names on the fledgling Internet and worked on technical parameters for Internet protocols under a Defense Department research grant. He later became responsible for the Internet Assigned Numbers Authority (IANA), which is responsible for the allocation of the numerical addresses of every computer connected to the Internet (every computer has its own, unique Internet Protocol number). ICANN now oversees IANA. Postel helped launch ICANN, but died in October 1998, shortly before its board formally met for the first time.
Is Litigation The Cost Of Doing Business?
Current ICANN leaders, such as president Paul Twomey and board chairman Vint Cerf, say litigation is a cost of doing business and that it should be expected since the Internet is based on a series of contracts. Contractual disputes are often settled through litigation. One official predicted that legal costs would drop after next year.
As the Internet moved from a U.S. government research tool to a commercial phenomenon, it was generally agreed that government should not manage it any longer. The private-sector ICANN was established in 1998 along four principles: Maintaining stability and security in the handoff of Internet authority from government to the private sector; promoting competition and innovation; bottom-up coordination; and representation that reflects the diversity of the Internet.
The addition of a dispute settlement mechanism to resolve differences about domain names under ICANN contributed to the legal focus of the organization.
One long-time ICANN observer said that in creating it, "there was some recognition that there would be litigation." This was especially the case since it was a new model for governance that established a non-profit corporation on a path to independence from the U.S. government, while retaining the underlying security of government authority if necessary.
Some critics argue that the appointment of Jones Day partner Joe Sims as outside counsel to the board and Jones Day patent litigator Louis Touton to be ICANN's first in-house general counsel set the course for the current level of litigation. ICANN felt it was under attack by Network Solutions Inc. (NSI) -- later acquired by VeriSign -- which had a monopoly on domains.
Sims and ICANN officials took challenges head-on with a tough litigators' approach. Sims estimated that two-thirds of ICANN's legal expenses over the years have been related to NSI and VeriSign.
"I'm not very apologetic for [the head-on approach]. Our job was to make this happen. If someone is trying to prevent that, it doesn't leave you much choice," Sims said.
New General Counsel Ushers In Reform
While Sims and Touton worked with ICANN, written contracts were detailed, hundreds of pages long in some cases. Experts see new General Counsel John Jeffrey, whose arrival coincides with the "reformed" ICANN under Twomey, as more of a dealmaker.
Antitrust concerns continually have been a legal threat facing ICANN. "Antitrust law has always been the curb to overreaching by ICANN," the long-time observer said. A case brought by VeriSign earlier this year and ruled on last week in Los Angeles federal court put that to the test. ICANN won round one. VeriSign said ICANN had inhibited its ability to innovate and compete outside of its contract, but the judge said VeriSign would need to provide more information in order to make its case.
The lawsuits also have a negotiating element to them. For VeriSign, the lawsuits may be a bargaining chip, sources noted. For ICANN, companies eventually have to renew their existing contracts, and officials have hinted that lawsuits against the renewing agency are not helpful.
Also in the new budget proposal, several other areas account for increases, such as new personnel, travel and outreach, new equipment, and committee meetings. But one thing has not changed: ICANN still cannot meet its target of revenues from the more than 200 domains that correspond to individual countries, such as .jp for Japan.
Deals Remain Deadlocked Over Domains
This year, ICANN signed a deal with a handful of the so-called country-code top-level domains (ccTLDs), but remains deadlocked with most of the biggest domains over the amount of control they would have. One effect of this is to irritate managers of the other "generic" top-level domains, not associated with countries, which continue to provide a significant source of ICANN's revenue while getting similar services.
Winning over ccTLDs is part of an important challenge for ICANN, which is to spread its influence globally. There is danger that large numbers of users, such as those in China - on track to surpass the United States as having the most users in one country - might be cordoned off from ICANN's reach in the future. And several important developing countries are pushing for greater involvement of the United Nations or other international bodies in Internet governance issues. For them, ICANN is a U.S.-centric body, still located physically in nearly the same offices out of which Postel once worked when associated with the University of Southern California, in Marina del Rey.
In another sign of change in the Internet community, traditionally apolitical Tim Berners-Lee, creator of the World Wide Web, has this year become outspoken on Internet issues. Last week he argued against the creation of any new top-level domains, especially .mobi, which has been proposed for mobile phones.
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