[registrars] VeriSign's Comments on the ERC Final Report

["Beckwith, Bruce" <bbeckwith@verisign.com>]

Members of the Registrar Constituency,

As discussed today at the Registrar Constituency meeting, VeriSign has been
very clear about it's position on ICANN's restructuring.  As a follow-up
reference, please see
http://forum.icann.org/reform-comments/implementation/msg00052.html, which
discusses our thoughts on the proposed modifications to the ICANN Bylaws.
The document is also listed below for your convenience.

Regards,

Bruce


>  <<...OLE_Obj...>> 
> 1666 K Street, NW, Suite 410
> Washington, DC 20006
> 
> 
> TO reform-comments@icann.org
> 
> VeriSign is pleased to have this opportunity to comment on the final
> report of ICANN's Evolution & Reform Committee (ERC or the Committee) and
> its recommendations to the ICANN Board for modifications to ICANN's
> Bylaws.
> 
> To begin, we would like to express our gratitude to the members of the ERC
> and the many people who have served on its advisory committees for their
> important volunteer efforts to improve ICANN.  ICANN is a unique
> experiment in the private sector's ability to internationally address the
> coordination of key technical functions of the Internet and this
> experiment would not be possible without these volunteer efforts.
> 
> We would also like to express our thanks to the ICANN Board, some of whom
> will be moving on over the next few months, for their interest in
> reforming ICANN to make it more effective in its assigned functions.  We
> are confident that our comments will be accepted by the Board in the
> spirit in which they are intended:  to make ICANN a success.
> 
> The Committee's October 2nd report follows seven months of intense debate
> over many aspects of the ICANN experiment and sets forth a series of
> proposals to modify both ICANN's Bylaws and its shape and direction.  We
> were pleased to have actively participated in that debate, both through
> our attached June 21st letter to the Committee and through our active
> engagement in the ICANN and related processes.  
> 
> As the Board now considers the Committee's final recommendations, we would
> like to focus on two areas that are universally recognized as being
> essential to the success of ICANN:  (1) ICANN's mission and functions; and
> (2) the accountability of ICANN for its actions.
> 
> ICANN's mission has been debated since the first proposal for a private
> sector successor to the National Science Foundation was raised.  Common
> throughout this lengthy debate, however, has been the theme that a central
> body to ensure technological coordination of some of the Internet's core
> technical functions is needed.  This technological coordination is
> universally recognized as a pre-requisite to the inter-operability that
> makes a network of networks successfully function.  
> 
> When the United States Government issued its White Paper on this subject
> in 1998, it identified as ICANN's future mission, four functions that it
> described as "The Coordinated Functions."  These are:
> 1. To set policy for and direct the allocation of Internet Protocol (IP)
> number blocks; 
> 2. To oversee the operation of the Internet root server system; 
> 3. To oversee policy for determining the circumstances under which new top
> level domains would be added to the root system; and 
> 4. To coordinate the development of other technical protocol parameters as
> needed to maintain universal connectivity on the Internet.
> When the U.S. Government entered into an experimental MOU with ICANN in
> 1998, that MOU added a fifth function to these four:
> 5.	Other activities necessary to coordinate the specified Domain Name
> System (DNS) management functions, as agreed by the Parties.
>  These remain the nearly universally-recognized and supported functions of
> ICANN today.  That support quickly breaks down, however, whenever ICANN
> attempts to go beyond these narrow, specific, an technical functions.
> 
> On May 6th, 2002, the ERC posted a public statement that included the
> Committee's view of ICANN's mission:
> 
> The mission of ICANN is to coordinate the stable operation of the
> Internet's unique identifier systems. In particular, ICANN:
> 1. Coordinates the allocation and assignment of three sets of unique
> identifiers for the Internet:
> 	Domain names (forming a system referred to as "DNS"); 
> 	Internet protocol (IP) addresses and autonomous system (AS) numbers;
> and 
> 	Protocol port and parameter numbers. 
> 2. Coordinates the operation and evolution of the DNS's root name server
> system.
> 
> Commenting on the Committee's May 6th proposed statement of ICANN's
> mission, and a May 31st ERC request for comments, VeriSign commented to
> the Committee on June 21st that ICANN "was designed and intended to
> provide technical coordination between operators in the domain name and IP
> addressing industries" and we concluded that (emphasis added):
> ICANN has neither the authority nor the resources to regulate services,
> rates, competition, operators, end-users or anything else in the domain
> name industry, the ccTLD segment or the gTLD segment.  Ideally, such
> regulation should be done by the marketplace, which causes the least
> political distortion and rewards value instead of lobbying.  Where the
> markets do not work, regulation is the job of governments, which are
> accountable and have the authority and the resources to do the job using
> due process.  This conclusion, in our view, is not a criticism of ICANN.
> It is a reaffirmation of the importance and value of the ICANN that was
> envisioned and is still needed.
> 
> On June 20th, the Committee issued its proposed "Blueprint for Reform" and
> it addressed the question of ICANN's mission of technical coordination.
> The ERC noted in part that "... the ERC carefully examined ICANN's Mission
> and Core Values, and received input on this subject from the broader
> community. After all, it is impossible to consider ICANN's future without
> a clear understanding of Mission we seek to accomplish."   Evidently, not
> being persuaded by VeriSign's comment that governments should-when
> necessary-and already do regulate the domain name industry, the ERC
> concluded that:
> The essence of the debate over ICANN's Mission lies in the nexus between
> ICANN's technical coordination role, its operational role, and its policy
> role. There are some who see ICANN as merely an agent to carry out
> technical, operational instructions. The ERC does not support this view
> because it leaves unanswered the question of responsibility for the
> policy-development work necessary to provide answers to precisely what
> instructions should be followed, that is, answering the question: "if not
> ICANN, then who?". We have not found any credible answers to that question
> offered by those who favor a purely technical operational ICANN, other
> than transferring such responsibilities to some international treaty
> organization, a direction that is viewed with disfavor throughout most of
> the community (as judged by the comments we received), or to a
> constellation of organizations that would again beg the question of who
> will coordinate these organizations.
> In its June 20th Blueprint, the ERC added the following phrase to the
> ICANN mission statement: ICANN "c. Coordinates policy-development as
> necessary to perform these functions."   This addition bore some
> similarity to the language of ICANN's MOU with the Department of Commerce:
> "Other activities necessary to coordinate the specified DNS management
> functions." 
> ICANN's Government Advisory Committee (GAC) reacted to the Committee's
> June 6th proposed mission statement and the ERC's June 20th Blueprint
> along lines quite similar to VeriSign's.  On June 26th, the GAC commented
> to the ERC that the GAC "...is satisfied with the proposed Mission
> Statement..." only "With the addition of the following italicized
> phrases...c. Coordinates policy-development as necessary to perform these
> technical functions."  The word "technical" had been added in part because
> the ERC's June 6th mission statement had substituted the rather vague
> phrase "these functions" for the more exact MOU phrase "the specified DNS
> management functions".
> The comments of the GAC and of VeriSign to the ERC that the Committee
> needed to narrow the proposed mission statement of ICANN to ensure that
> ICANN's exclusive technical competence and purpose were highlighted were
> echoed in numerous other comments to the ERC.  In fact, ICANN's mission
> creep is among the principle issues raised by most commentators.
> This issue, as VeriSign has noted elsewhere, is not academic.  ICANN was
> not ever designed to engage in economic and commercial regulation of the
> domain name industry and it has no competence -in every sense of that
> word- to act as a government regulatory agency.  Nearly every major
> problem that ICANN has faced and faces can be traced to its mission creep
> from technical coordination to attempts at economic and commercial
> regulation, including:
> 1	ICANN's inability to reach agreement with most of the major
> constituencies in the Internet's infrastructure; 
> 2	challenges to ICANN from inter-governmental organizations (many of
> whom are concerned that ICANN is attempting to act as if it were a
> government regulatory body); 
> 3	endless tug of wars among various interest groups (many of whom have
> little interest in ICANN's legitimate technical coordination role) that
> attempt to control ICANN's purported ability to regulate commercial and
> economic practices; 
> 4	ever-increasing budgetary stresses on ICANN, that result from the
> enormous costs of attempting to act as a government regulatory body over
> commercial activities;
> 5	failure to focus on the truly important technical coordination
> issues, such as the security of the root, that ICANN was designed to
> address.
> Not only has ICANN's mission creep away from technical coordination been
> harmful to ICANN as an institution, it has also been harmful to the
> industry and to consumers.  As a result of ICANN's attempt to
> comprehensively regulate the domain name industry, this young and fragile
> industry has grown up around the principle of "the winner in the
> marketplace is he who plays the game of ICANN politics most successfully."
> This is in stark contrast to the situation of customer and market-driven
> innovation and investment that would exist if market forces, with
> government intervention when needed, were permitted to drive the domain
> name industry.  
> Competition has shifted from the marketplace to ICANN committees and task
> forces where politics, not value, is the winner. 
> The real losers from ICANN's mission creep, of course, are consumers, who
> are deprived of the benefits of investment and innovation that would arise
> if market forces with government intervention, when necessary-instead of
> the politics of ICANN-were to drive the domain name industry.
> To be clear on one major point, however, VeriSign (and most other
> commentators on ICANN's mission creep into commercial regulation) does not
> object to ICANN' continued coordination role in WHOIS, UDRP or registry
> data escrow.
> In response to concerns that had been expressed by VeriSign, the GAC and
> many others, that ICANN's mission needed to be narrowed to "policy
> development as necessary to perform these technical functions", on August
> 1st the ERC responded that the GAC's changes to ICANN's mission were
> "useful".  But, in a careful legal maneuver, the Committee went on to
> dispute whether the previously un-challenged term "necessary" was itself
> "sufficiently flexible."  
> In a direct repudiation of the GAC recommendation and of the broad efforts
> to convince the ERC to narrow ICANN's mission statement to "policy
> development as necessary to perform these technical functions", the ERC
> concluded in its August 1st report that the ICANN mission should include:
> "c. Coordinates policy-development reasonably and appropriately related to
> its technical functions", in which the phrase "necessary to perform these
> technical functions" was replaced with "reasonably and appropriately
> related to its technical functions".
> The intent of the ERC's replacement of the qualification "necessary" with
> the term "reasonably and appropriately related" and the replacement of the
> term "these technical functions" with the term "its technical functions"
> was to give ICANN flexibility in its interpretation of its mission and to
> avoid the limitations that would be applied by the GAC phrase (emphasis
> added) "as necessary to perform these technical functions."  This
> seemingly legalistic-yet important-policy shift, is characteristic of the
> manner in which many of the changes in ICANN's core mission have been
> engineered. 
> On September 20th, the U.S. Department of Commerce commented on the ERC's
> revised ICANN mission statement and emphasized that "While ICANN is
> primarily a technical coordination body, it will of necessity need to make
> limited policy decisions to ensure that these technical functions are
> performed smoothly and stably," explicitly reiterating the importance in
> ICANN's mission statement of the GAC terms "necessary to perform" and
> "these technical functions."
> On October 2nd, the ERC issued its "Final Implementation Report and
> Recommendations" and in it the Committee responded once again to the
> concerns of many in the Internet community, including the Department of
> Commerce, that the new phrase "reasonably related to its technical
> functions" too broadly construed ICANN's mission.  
> While the ERC recognized that "The most significant difference is the
> substitution of the phrase 'reasonably and appropriately related' for the
> word 'necessary' in the part of the Mission Statement relating to policy
> development...the ERC concluded that 'necessary' was not the appropriate
> limiting phrase."
> The Committee focused on the narrow legal point of whether comments were
> made on the new, specific word changes, rather than on the substantive
> issue of widespread objections to ICANN's mission creep.  Using this
> approach, the ERC asserted, the views of the U.S. Department of Commerce
> and quite a few others to the contrary notwithstanding, that "There has
> been very little response to this" proposed change in ICANN's mission,
> "leading the ERC to conclude that this change" was "both acceptable and
> satisfactory."
> As a result, the ERC's proposal for changes to ICANN's Bylaws includes the
> addition of a new concept in ICANN's mission:  ICANN "3. Coordinates
> policy development reasonably and appropriately related to these technical
> functions."
> For the first time since the 1998 MOU (between the Commerce Department and
> ICANN) authorized ICANN to engage in "Other activities necessary to
> coordinate the specified DNS management functions", under this new
> language, ICANN's mission would not be tied to the limiting phrase
> "necessary to...technical functions." 
> We believe that this ERC language (Proposed Bylaws Article I; Section 1;
> Paragraph 3), and the concepts behind it, are seriously flawed and, if
> they are pursued, will prevent ICANN from becoming the successful
> technical coordination body that it was designed to be.  As a clear signal
> of ICANN's intention to avoid further drift into attempts to economically
> regulate the industry, and its intent to focus on its assigned technical
> mission, this proposed language should not be accepted.  The GAC language
> should replace it.
> Our second concern is more broad, but no less important.  In the ERC's
> final report, the Committee proposes the elimination of several of the
> safeguards built into ICANN's original structure that help ensure ICANN's
> accountability.  Among these are the current requirements that ICANN
> constitutes a permanent oversight review body that would develop the
> expertise needed to understand the complex technical and legal issues
> associated with claims that ICANN had acted arbitrarily or in violation of
> a variety of ICANN's legal safeguards.  Under the ERC's proposed plan,
> this permanent board would be replaced with an ad hoc arbitrator who would
> operate under rules determined by ICANN itself.  
> Similarly, ICANN is currently required to publicly elect some of its
> Directors, partly to ensure that some ICANN Directors are periodically
> required to publicly account for themselves and their-and the
> Board's-actions.  Under the ERC plan, this safeguard would be replaced
> with a fairly closed system in which no ICANN Director would have to
> account to the public for their-or the Board's-actions.
> We believe that the ERC proposal to replace the permanent ICANN oversight
> review board with an ad hoc arbitrator operating under rules set forth by
> ICANN, should not be accepted and that the current requirements should
> remain.  We also believe that some of the ICANN Board should stand for
> public election to ensure accountability.  
> We therefore propose that the Board not accept these changes to the ICANN
> Bylaws.
> Sincerely,
> 
> Roger J. Cochetti
> Senior Vice President and Chief Policy Officer
> 
> ATTACHMENT
> 
> June 20, 2002
> 
> 
> 
> 
> The Honorable Nancy Victory	
> Assistant Secretary of Commerce for Communications and Information
> Room 4898, HCH Bldg. 
> 14th St & Constitution Avenue
> Washington, DC  20230
> 
> Dear Nancy,
> 
> 	Per our conversations, I am pleased to provide you with VeriSign's
> comments on reform of the Internet Corporation for Assigned Names and
> Numbers (ICANN).   VeriSign is pleased to offer these comments because we
> view ourselves as among ICANN's major supporters.  We have been the
> largest contributor of dues to ICANN and we have been among the largest,
> if not the largest-donor of voluntary contributions to the organization.
> In addition, few, if any, companies or organizations anywhere have
> provided more support to ICANN to help it both organize and operate.  We
> consider ourselves among ICANN's most important and active supporters.
> 
> VeriSign has contributed to ICANN because we support it as an important
> experiment in international, private sector-based coordination of Internet
> technical functions.  These functions are important because they are, in
> part, what make the Internet work. 
> 
> The Need For ICANN Focus and the Threat of ICANN Mission Creep
> 
> In February of this year, ICANN's President issued an important report
> calling for a major reform of ICANN.  Since that time, we have been
> carefully and thoroughly evaluating the ICANN experiment in light of its
> accomplishments, focus, mission, structure and organization.  Dr. Lynn
> notes in his report that 
> 
> 		Despite all this, a candid assessment of ICANN's performance
> to date would have to conclude that it has fallen short of hopes and
> expectations. Despite a remarkably open policy process, needed
> participation has been lacking. Key participants that are essential if
> ICANN is to carry out its mission of global coordination - particularly
> most of the root name server operators, the regional IP address registries
> (RIRs), and the majority of ccTLD registries - have not yet entered into
> agreements with ICANN (although we may be close to an agreement with the
> address registries and certain of the root name server operators). 
> 
> 
> From its founding, we have believed that ICANN's foundation would rest on
> four sets of contracts with different and important segments of the
> Internet: (1) generic Top Level Domain operators; (2) country code
> Top-Level Domain operators; (3) the operators of the root servers; and (4)
> the operators of the IP Numbering Registries.   While ICANN does have
> contracts in place with nearly all of the major gTLD operators and some
> progress has been made in ICANN's dialogue with the numbering registries,
> after almost four years of dialogue, ICANN seems to have made little
> progress towards entering into contracts with the ccTLD segment and the
> root server operators.   We think it is essential that you consider the
> consequences and causes of these failures in evaluating need for ICANN
> reform.  Without all four sets of contracts in place, ICANN's legitimacy
> and viability are at risk, entirely regardless of its internal
> organization.
> 
> Similarly, as most informed observers have already noted, understanding
> with precision ICANN's purpose, mission and function is absolutely
> essential to any evaluation of its performance and optimal structure.  In
> this regard, ICANN's 1998 MOU with the U.S. Department of Commerce, which
> incorporates the language of an earlier U.S. Government "White Paper" on
> DNS management, describes the purpose of ICANN in five functions (emphasis
> on verbs added by me):	
> 	
> 1.	Establishment of policy for and direction of the allocation of IP
> number blocks; 
> 2.	Oversight of the operation of the authoritative root server system; 
> 3.	Oversight of the policy for determining the circumstances under
> which new top level domains would be added to the root system; 
> 4.	Coordination of the assignment of other Internet technical
> parameters as needed to maintain universal connectivity on the Internet;
> and 
> 5.	Other activities necessary to coordinate the specified DNS
> management functions, as agreed by the Parties.
> 
> 
> While the White Paper and the MOU between ICANN and the U.S. Government
> did not prohibit ICANN from engaging in any activities and it contemplates
> "...other activities necessary to coordinate the specified DNS management
> function...", it was not vague either.  ICANN's mission is to "establish
> policy", "oversee", and "coordinate"; all characteristics of an
> organization whose mission and functions are technical coordination.  
> 
> When we compare the specific functions assigned to ICANN in the White
> Paper and ICANN's 1998 MOU with DOC with the activities that are actually
> being conducted by ICANN as described in the paper issued by the ICANN
> itself on March 10, 2002 entitled "Toward A Statement of the ICANN
> Mission", we find the enormous differences to be quite disturbing.   ICANN
> was designed and intended to provide technical coordination between
> operators in the domain name and IP addressing industries.  And yet, over
> the past four years, ICANN has developed an extensive set of contractually
> based controls that it exercises over virtually every aspect of the
> business lives of the operators in the gTLD segment of the domain name
> industry.  These include ICANN's regulation of the gTLD segment's prices,
> services and information activities.  In a manner reminiscent of the kind
> of controls that were exercised over the telephone or broadcast industries
> in the 1960's, virtually every aspect of the services of the gTLD segment
> of the domain name industry is either regulated or subject to the
> regulation by ICANN - from prices to value-added services.  A very large
> portion of ICANN management's attention and resources are dedicated to the
> negotiation and enforcement of service agreements with gTLD operators that
> permit ICANN to control everything from their budgets to employee
> information sharing.
> 
>      ICANN's attempted evolution from a coordinator into a regulator has
> had adverse consequences both for ICANN and for the Internet.  This change
> of mission into an attempted role of regulator of prices and services of
> the gTLD segment of the domain name industry has cost ICANN a great deal;
> both in the real costs of supporting this unanticipated new role and in
> opportunity costs that occur when ICANN ignores its core mission.  Among
> the consequences of this "mission creep":	
> 
> 
> 	(1)	In its regulation of the gTLD segment's services and prices,
> ICANN has failed to provide due process.  As a non-profit organization,
> ICANN has neither the resources nor the mandate to employ due process in
> its efforts to exercise control over the services and prices of the gTLD
> segment of the domain name industry.  Moreover, many ICANN procedures
> involve a review of services and prices of one service provider by its
> competitors, hardly a practice that is likely to lead to procedural or
> substantive fairness.  Perhaps the worst consequence of the absence of due
> process, however, is the frequency with which arbitrary or inconsistent
> regulatory decisions are made by ICANN and its staff.  For those who might
> consider permitting ICANN to evolve into some form of supra-national
> regulator over the domain name industry, it is important to keep in mind
> that any even-handed effort to regulate domain name prices and services in
> a multinational environment with due process will require both government
> agreements and millions of dollars annually.  Even the current practice of
> regulating one segment of the industry without due process or fairness
> costs ICANN a great deal.  In such areas as consistency, transparency, and
> independence, ICANN's track record as a regulator of the gTLD segment has
> not been successful.  With its inherent limitations, ICANN's approach to
> regulation is rarely transparent, frequently arbitrary, and never
> incorporates due process. 
> 
> 
> (2) 	ICANN's efforts over the past few years to extend its role to the
> regulation of services and prices in the gTLD segment of the domain name
> industry have not resulted in any reduction whatsoever of national
> governmental regulation of the gTLD industry segment.  We do not know of a
> single governmental regulatory agency anywhere that has indicated that it
> lacks regulatory authority over the gTLD segment of the domain name
> industry because ICANN asserts regulatory authority over that industry
> segment.  The result is perhaps the most perverse consequence of the
> regulatory diversion in the ICANN experiment:  the gTLD segment of the
> domain name industry-uniquely among all of the industries involved in the
> Internet-has been subjected to two levels of regulation.  First,
> governmental regulation, which, under the best of circumstances, is
> extremely complex in the global Internet environment; and second, ICANN
> regulation, which is in no way coordinated with the regulatory activities
> of government authorities.  By singling out the gTLD segment of the domain
> name industry for two layers of regulation, ICANN has competitively
> disadvantaged that segment, and created a confusing situation in which the
> gTLD segment is subjected to both national regulation and ICANN
> regulation.
> 
> (3) 	By straying away from the technical coordination functions that
> ICANN was created to conduct, and expanding into regulation of the
> services and prices of the gTLD segment, ICANN has placed an enormous
> accountability burden on itself and generated great pressure for the
> public election of its Board.   Citizens of all countries normally see
> themselves as having a right to participate in the regulatory proceedings
> of their governments.  As a non-profit organization whose function is to
> provide coordination for the technical functions of the Internet, ICANN
> would attract relatively modest public and media interest and relatively
> little pressure for a publicly elected board.  However, if ICANN were
> permitted to evolve into a supra-national regulator over the domain name
> industry, then ICANN would, and should, attract enormous public pressure
> for a publicly elected board.  As ICANN was originally envisioned with a
> narrow set of coordination functions, it should probably always have some
> public participation in its governance to ensure accountability.  But if
> ICANN is allowed to expand into service and price regulation, then its
> accountability to the public should not be appreciably less than that of
> government regulatory agencies; with all of the costs and complications
> that are involved.  
> 
>  ICANN has neither the authority nor the resources to regulate services,
> rates, competition, operators, end-users or anything else in the domain
> name industry, the ccTLD segment or the gTLD segment.  Ideally, such
> regulation should be done by the marketplace, which causes the least
> political distortion and rewards value instead of lobbying.  Where the
> markets do not work, regulation is the job of governments, which are
> accountable and have the authority and the resources to do the job using
> due process.  This conclusion, in our view, is not a criticism of ICANN.
> It is a reaffirmation of the importance and value of the ICANN that was
> envisioned and is still needed.
> 
> In brief, at present course and speed, we share the ICANN President's
> concerns for the viability of the experiment.  Although we have different
> ideas about the reforms that are needed, we share both his optimism for
> the future of the experiment if reforms are implemented and his dedication
> to the need for ICANN reform.   Achieving success requires that we
> recognize the following, however:
> 
> The Internet, and most particularly, the domain name environment, has
> changed dramatically since 1998 and ICANN needs to change to reflect these
> environmental changes.  When the DOC-ICANN MOU was negotiated and ICANN
> was designed at the beginning of 1998, the Internet was a very different
> place than it is today and the more time that passes, the more different
> it becomes.  In the area of domain names, in early 1998, there were an
> estimated two and a half million domain names.  Almost 90% of them were in
> the well-known ".com", ".net" and ".org" TLDs and over 75% of the global
> market was served by ".com" alone.  All of the ccTLDs combined were
> estimated to have served little over 10% of the worldwide market; and
> there were no gTLDs of consequence other than ".com", ".net" and ".org".
> NSI was the registry and registrar for all three of them.  
> 
> Today, according to estimates provided by ICANN in its May 15, 2002 budget
> report, ".com" serves less than half of the global domain name market,
> while ".de" serves the second largest and ".uk" the third largest shares
> of the market worldwide.  ccTLDs as a group serve around a third of the
> market and a half dozen new gTLDs, such as ".biz", ".info" and ".names,"
> are active in the global markets and are serving growing shares of the
> market.  More importantly, every assessment of market trends shows that
> the ccTLD segment of the industry is growing far more rapidly than is the
> gTLD segment of the industry.  Today, ".com" serves less than half the
> market for domain names and its share is declining.  In the meantime, many
> ccTLDs, such as ".us", ".eu" and others are currently being revitalized
> and can be expected to be even more aggressive in the market in the future
> than they have been in the past.  At this estimated rate of growth, ccTLD
> registrations should exceed ".com" registrations sometime this year or
> next, soon after which, ccTLD registrations should exceed all gTLD
> registrations combined.   At the TLD level, the market is currently quite
> competitive and it is getting dramatically more competitive.  
> 
> Even while the share of the domain name market served by ".com" has shrunk
> and is shrinking dramatically, competition among gTLD registrars for
> ".com" retail registrations has grown enormously.  Whereas in 1998, 100%
> of all .com registrations were provided by one registrar (then called the
> NSI Registrar and today the VeriSign Registrar), today over one hundred
> registrars compete for ".com" registrations and no single registrar's
> share is more than 35%. Moreover, the largest single registrar currently
> accounts for less than 20% of new registrations, suggesting even further
> market fragmentation down the road.
> 
> At every level and in every segment, the domain name industry is fully
> competitive and increasingly so.  By its approach to the industry,
> however, ICANN appears stuck in a 1998 time warp and unable to recognize
> that the most effective regulator of prices and services is the
> marketplace; and if the marketplace fails, governments-which normally
> incorporate due process into their regulation-will continue to be active
> regulators of the domain name industry.    
> 
> While ICANN has done some useful things that support a competitive
> environment, such as the introduction of new gTLDs, ICANN's comprehensive
> regulation of the gTLD segment has created an un-level playing field in
> which the gTLD segment is subject to extensive ICANN contractual controls
> on its prices and services.  ICANN's evolution into a regulator has
> diverted significant resources that ICANN needs; discouraged innovation,
> particularly in the gTLD segment; replaced marketplace competition with
> competition among lobbyists to curry favor with ICANN; discouraged
> investment, particularly in the gTLD segment; and needlessly contributed
> to the growth of an alternate root movement, which proposes to offer an
> unregulated list of gTLDs that would, in some respects, compete with
> ICANN's heavily regulated list of gTLDs.  Unfortunately, the growth of
> ICANN's efforts to expand into service and price regulation of the gTLD
> segment has been at the expense of its ability to perform its core mission
> of technical coordination.
> 
> ICANN's experiment with regulation of the gTLD segment of the domain name
> industry has been partially successful in one area but unsuccessful in
> most others and needs to be dramatically reformed.    Although its
> delivery and follow up has been notably uneven, ICANN has been partially
> successful in one important area of the gTLD segment:  operators in the
> gTLD segment are nominally required to adopt three useful procedures.
> None of the three has been effectively pursued by ICANN, but all are
> important and, in some respects, working:
> 
> *	Escrow, under which registries and registrars are required to escrow
> their registration data in the event that one of them fails.  This is in
> place today for registries; and
> *	WHOIS, a pre-ICANN lookup service that often permits law enforcement
> and others with a legitimate need (and unfortunately some spammers without
> a legitimate need) to quickly find some information about the identity and
> location of a domain name registrant.  Currently, some but not all,
> registrars offer a WHOIS service; and
> *	UDRP (Uniform Dispute Resolution Procedure), a mandatory domain name
> dispute resolution procedure, designed by a WIPO committee, that is
> available to anyone who believes that a domain name registrant is using
> their trademark without a legitimate right to do so.  Under it, so-called
> "cybersquatters" with no rights to use a domain name that is, or closely
> resembles, someone else's trademark, can have that domain name
> registration transferred or deleted.
> 
> The unfortunate facts about these three accomplishments, however, are that
> they have not been fully pursued and they apply only to one segment of the
> market.   
> 
> A fourth ICANN procedure is worth noting, because it may be constructive;
> although the particularly intrusive approach taken to it by ICANN tends to
> offset any benefits.  ICANN requires that each gTLD registry offer equal
> access to all gTLD registrars accredited by ICANN.  On the one hand, this
> requirement benefits competition and confidence in the marketplace,
> although on the other, since only ICANN can accredit registrars and ICANN
> has established exceptionally low financial criteria for registrar
> accreditation, it has resulted in a large number of financially weak
> registrars that must be serviced by every gTLD registry.  It has also
> imposed ICANN regulations onto the lowest level of the gTLD
> segment-service arrangements between gTLD registrars and their millions of
> customers-which is several steps removed from ICANN's intended role as a
> technical coordinator at the network management level. 
> 
> ICANN's evolution towards the role of regulator of the services and rates
> of the gTLD segment was not planned or anticipated when the original MOU
> with the DOC was entered into.  The White Paper cites four fairly exact
> and narrow functions for ICANN.  For the most part, ICANN's expansion of
> its responsibilities into regulation was an accident of circumstances,
> including the unusual market conditions in 1998, the personal ambitions of
> key people involved with ICANN, and the effort of some entrepreneurs to
> turn what was supposed to have been an experiment in technical
> coordination into an experiment in the supra-national regulation of their
> competitors.  Almost everyone involved in ICANN's effort to regulate the
> gTLD segment of the domain name industry-from those who support it because
> they think that they can manipulate the process for their own ends to
> those who oppose ICANN mission creep-- sees it as a failed aspect of the
> ICANN experiment. No one has put forward a realistic plan for how ICANN
> could be made into a fair, effective, supra-national regulator of the
> entire domain name industry, equally and fairly regulating all segments of
> the industry, because it cannot be done without enormous expense and
> intergovernmental agreements.
> 
> ICANN has unintentionally drifted into the role of a network service
> operator, which has both distracted it from its critical mission of
> coordination and further diverted scarce resources.  When the DOC-ICANN
> MOU was negotiated, no one envisioned that ICANN might itself become a
> significant operator of Web server machines, since ICANN was created to
> provide technical coordination mostly among major operators of network
> facilities.  And yet, according to a recent ICANN report on ICANN's
> activities, by 2002, ICANN found itself operating a variety of important
> server machines, including the operation of registry servers; the
> "Internic" website; the reverse lookup services; and even a Root Zone
> Server.  Some assert that operating a variety of Internet server machines
> is a trivial task that consumes little of ICANN's time or resources.  But
> anyone involved in the operations side of the Internet knows better.  The
> Internet server machines operated by ICANN --particularly the Root Zone
> Server-- provide critical functions for the entire Internet.  Each of them
> needs to be operated in a reliable and secure environment with adequate
> support.  Attempting to do so successfully diverts resources away from
> ICANN's technical coordination tasks.  These Internet server machines
> should be operated and supported by organizations that are in the business
> of operating Internet servers.  Any such organization, business or
> non-business, could easily integrate these machines into their large,
> on-going, secure infrastructures.   Based on our experience with other
> aspects of the Internet's infrastructure, we are confident that businesses
> like ours, which are involved in the large-scale operation of Internet
> servers, would be willing to manage and operate, under contractual
> safeguards, the servers currently operated by ICANN.  This could easily be
> done at no charge to ICANN or the Internet community and with a
> significant increase in both security and quality of service. This would
> permit ICANN to focus its resources on its important, core mission of
> technical coordination.
> 
> After almost four years of attempting to do so, ICANN has made little
> progress in establishing relationships with the 243 country code domain
> name operators  (ccTLDs) or the 13 Internet Root Server Operators.  First,
> ICANN cannot continue to regulate the services and prices of the gTLD
> segment of the domain name industry and not the ccTLD segment; and second,
> creating a secure and predictable legal environment for the Internet's
> Root Servers is important for the security of the Internet.  We do not
> believe that there is a viable plan in place for ICANN to do either.   To
> become fully established, ICANN must establish contractual relationships
> with the ccTLD segment of the domain name industry and with the operators
> of the 13 Internet Root Zone Servers.  According to the ICANN President's
> February report on ICANN reform, "...most of the root name server
> operators...and the majority of ccTLD registries-have not yet entered into
> agreements with ICANN..."  
> 
> The principal risk created by the ambiguous legal environment surrounding
> the Internet's Root Servers is not necessarily at the operational level
> (e.g. VeriSign operates two Root Servers, for example, and we do so at
> what we think is the highest possible level of security and reliability).
> However, there is currently no legal environment that defines the security
> or other practices of the Internet Root Server Operators.  The risk of
> this ambiguous Root Server legal environment is in confidence and
> predictability.   ICANN can and should play a role in the coordination of
> the Internet's Root Servers, but it is not likely that they will
> effectively do so at present course and speed.  
> 
> As for ICANN's failure to establish contractual relations with most of the
> ccTLD segment of the domain name industry, this is critically important
> because the ccTLD segment of the industry is large, rapidly growing, and
> likely to continue growing more rapidly for the foreseeable future.  So an
> ICANN that has contractual relationships with, and exercises extensive
> controls over a shrinking gTLD segment; and that has no contractual
> relationships at all with the fast-growing ccTLD segment, is just not
> viable.  In our view, the principal cause of ICANN's failure to conclude
> agreements with the ccTLD segment of the industry lies in the same ICANN
> regulatory issue that I described earlier.  By their own statements,
> leaders of the ccTLD segment are prepared to conclude agreements with
> ICANN that recognize a limited role for ICANN.  We believe that most ccTLD
> operators want contracts with ICANN but that they will not recognize ICANN
> as having regulatory authority over them.  Most explain that, just like
> the gTLD segment, the ccTLD segment of the industry is already regulated
> by national governments and their local Internet communities.  As best we
> can tell, ICANN has refused to accept a limited role of technical
> coordinator in its relationships with the ccTLD segment, giving rise to
> four years of marginally-productive negotiations between ICANN and the
> ccTLD segment.  At present course and speed, we do not see any successful
> conclusion in sight.    The successful conclusion of the ICANN
> negotiations with the ccTLDs could be within reach, however, but that
> turns on the same approach to ICANN regulation that I described earlier:
> the principal regulator of the domain name industry should be the
> marketplace, which is highly competitive today and will be increasingly
> competitive in the future.  Where the marketplace fails, governments
> already provide - and will continue to provide-effective regulation.  Only
> if and when the marketplace and governments cannot adequately address an
> important need for Internet coordination should we turn to ICANN for that
> benefit.  We have noted elsewhere that, for the gTLD segment, ICANN's role
> in three areas should be continued and one should be carefully considered.
> For the ccTLD segment, ICANN should develop parallel voluntary programs
> that address UDRP, escrow, WHOIS and, perhaps, equal access.
> 
> ICANN needs to have a carefully and tightly defined mission and a set of
> safeguards to ensure that the organization is not led away from that
> mission.  Many of the problems that are described in this submission stem
> from the fact that ICANN's mission, while it is often described as being
> "focused," is in fact vaguely defined with no effective safeguards to
> prevent mission creep.  And the proof of this is that the various
> documents that make up ICANN's constitution, ranging from the MOU itself
> to ICANN's many contracts with registries and registrars permit vastly
> different interpretations of ICANN's fundamental function -- and generally
> do not prevent ICANN from extending its reach.  
> 
> From the beginning, ICANN's purpose and function has been among the most
> important of any organization dealing with the Internet:  provide a
> central depository for information about, and provide coordination among
> those who operate, the technical infrastructure of the Internet, most
> notably in the domain name system.  While the DOC MOU was quite clear on
> what ICANN should do, it neither specified what ICANN could not do, nor
> did the MOU provide guidance to ICANN on how ICANN was to pursue its four
> authorized and narrow tasks.   Its rededication to that mission and the
> establishment of safeguards to keep ICANN focused on its important, but
> narrow, mission will both place ICANN on a pathway toward success, and
> free it of the endless distractions, expenses, and controversies that have
> bogged it down so much during its first four years.  
> 
> We firmly believe that after four years of struggle, ICANN sits at a
> crossroad between pursuit of a narrow set of achievable and important
> technical coordination objectives with ample resources to accomplish them
> on the one hand, and the continued pursuit of unachievable and unnecessary
> objectives that generate enormous expense, market distortions and endless
> systemic stress on the other.
> 
> We hope that you will join us in placing ICANN on the pathway to success
> that is so important to the Internet's future.
> 
> 
> Thank you for considering our views, 
> 
> 
> Roger J. Cochetti
> Senior Vice-President & Chief Policy Officer
> VeriSign
> 
>