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<TITLE>Testimony of Esther Dyson - July 22, 1999</TITLE>
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<P align="center"><img
src="logos/icann-logo.gif" width="214" height="156"></P>
<FONT SIZE=5><P ALIGN="CENTER">Prepared Testimony</P>
<P ALIGN="CENTER">of</P>
<P ALIGN="CENTER">Esther Dyson</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER"></P>
</FONT>
<P ALIGN="CENTER">Interim Chairman of the Board of Directors<br>
Internet Corporation for Assigned Names and Numbers</P>
<FONT SIZE=2>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">July 22, 1999</P>
<P>&nbsp;</P>
<P>U.S. House of Representatives<br>
Committee on Commerce<br>
Subcommittee on Oversight and Investigations</P>
<P>Mr. Chairman and Members of the Subcommittee:</P>
<P>&#9;I welcome the opportunity to appear here today on behalf of the many, many
people around the world who are working together to create the global, non-profit,
consensus-development body called the Internet Corporation for Assigned Names
and Numbers (ICANN).</P>
</FONT>
<blockquote>
<p><FONT SIZE=2>I. <U>Introduction: The Challenge of Creating a Private Sector,
Consensus-Based Organization</u></FONT></p>
</blockquote>
<FONT SIZE=2>
<P>&#9;As you know, ICANN was formed by the Internet community in response to
the challenge set forth by the United States Government in its June 1998 Statement
of Policy on the Management of Internet Domain Names and Addresses, commonly
known as the White Paper. The White Paper called upon the global Internet community
to create "a new, not-for-profit corporation formed by private sector Internet
stakeholders to administer policy for the Internet name and address system,"
63 Fed. Reg. 31749, and specified that the new corporation should be dedicated
to community consensus and to promoting the stability of the Internet; competition
and market mechanisms; private sector bottom-up, coordination; and functional
and geographic representation. </P>
<P>&#9;ICANN is working hard to fulfill the mandate of the White Paper. Developing
global consensus is an elusive goal, especially when it must be generated entirely
within the private sector, with only the encouragement – but none of the money
or power – of the world's governments. Nevertheless, the various communities
around the world that make up and depend on the Internet have taken up the challenge,
and ICANN is the result: a work still in progress but substantially underway.
</P>
<P>&#9;Mr. Chairman, I regret that the title of today's hearing ("Is ICANN Out
of Control?") conveys an erroneous impression about what ICANN is and what it
is doing. Even more seriously, the title of the hearing tends to distract attention
from the truly fundamental issue before this Subcommittee: How will the Internet's
plumbing be managed? More to the point, will the coordination of the Internet's
key technical functions be administered (1) by the world's governments and bureaucrats,
(2) by a private company pursuing its own private economic interests, or (3)
by the global Internet community as a whole? ICANN represents a strong endorsement
of option (3), a consensus-based private-sector vehicle through which the Internet
community – engineers and entrepreneurs, businesses and academics, non-profits
and individuals alike – will coordinate Internet names and numbers. The fact
that these hearings are taking place today under this title, however, is stark
evidence that this issue – how will the Internet's plumbing be managed? – is
still in doubt.</P>
<P>&#9;The ultimate resolution of this issue is very important to the future of
the Internet, which owes its successful development in large part to a lack
of control by governments or private concerns. The Internet is perhaps the world's
most successful voluntary cooperative effort. It has developed based on a voluntary
consensus about the technical standards and naming system which allow it to
function, fostered by the unusual willingness of governments (especially the
United States Government) to leave it alone. It earned legitimacy because it
worked well and served its users. This voluntary cooperative environment has
produced a truly wonderful global resource, and the Internet community's creation
of ICANN is intended to allow that basic approach to continue, even as the Internet
becomes ever more complex, more important for commerce and society, and more
ubiquitous.</P>
<P>&#9;Because nothing like ICANN has ever been attempted before, its success
is not assured, but because it seeks to embrace and build on the consensus tradition
of the Internet, it has at least a chance to succeed. ICANN is intended to replace
a highly informal, unstructured system where a very few individuals made key
decisions about the future and direction of the Internet. Those individuals
were remarkably wise and unselfish, and the fact that the vast majority of their
decisions were in the public interest is evidenced by the very success and growth
of the Internet itself. But individuals are not immortal, as we are so frequently
reminded, and thus we need more permanent structures if we are to continue this
tradition of consensus.</P>
<P>&#9;ICANN is itself the product of what the Internet engineers call "rough
consensus," and its sole objective is to encourage the continued coordination
of some key technical and policy details of Internet management through the
development and implementation of community-wide consensus. As I have noted,
developing this consensus is not an easy task, and is inevitably accompanied
by contention and disagreement. Consensus, after all, is a result of disagreement
and debate followed by compromise among people of good faith. As those of us
intimately involved in this process have certainly seen, feelings can run deep
and the debates can be intense. But this already difficult task has been made
even more difficult by the fact that the creation of ICANN is happening simultaneously
with the transition from a monopoly to a competitive environment for the activity
most widely associated with the Internet's plumbing, the registration of domain
names.</P>
<P>&#9;Transitions from monopoly to competition are difficult and messy under
the best of circumstances, as this Committee is fully aware given its oversight
over the telecommunications industry. But in that industry, the transition is
being managed by federal, state and local governments, which ultimately can
rely on the coercive power only governments possess. Here, by contrast, the
transition from monopoly to competition is being attempted at the same time
that the United States Government's supervisory power over its contractors is
being replaced with a newly-created process for developing community-wide consensus
through a private-sector, non-profit entity.</P>
<P>&#9;I would like to speak directly to the issues relating to ICANN's relationship
with the current monopoly government contractor in this area, Network Solutions,
Inc. Network Solutions is an important member of the Internet community, and
participated very significantly in the process of forming ICANN and in its consensus-development
efforts to date. It has important management responsibilities for the domain
name system today, and has contributed to its growth over the last several years.
It is a voice that needs to be heard. But it is not the only voice, nor can
or should it be the decisive voice. Network Solutions was hired by the United
States Government to do a job, and in large part it appears to have done it
well. It has much experience and knowledge to offer.</P>
<P>&#9;Nevertheless, as Network Solutions's Senior Vice President for Internet
Relations noted recently (Inter@ctive Week, July 19, 1999), it has a "fiduciary
duty to [its] shareholders," and not to the global Internet community as a whole.
Its primary responsibility is to "make a reasonable profit," not to develop
and follow the community's consensus. Thus, while it should be an important
participant in the debates, and, one hopes, a constructive contributor to the
creation of consensus, it should not be permitted to unilaterally determine
how this important global resource will be managed.</P>
<P>&#9;Mr. Chairman, we need to be clear about this: there is no issue about ICANN
being "out of control." ICANN is nothing more or less than the embodiment of
the Internet community as a whole. It reflects the participation of a large
and growing number of technical, business, public-interest, academic, and other
segments of the Internet community. It is this collection of diverse interests
and experiences that produces ICANN policies and decisions, as a statement of
the consensus of the participants.</P>
<P>&#9;But consensus does not always or necessarily mean unanimity, and there
are certainly those in the community who disagree, for various reasons, with
particular consensus positions produced by this process. Some disagreements
are philosophical; some are cultural; some are economic. This is inevitable
given the diversity of interests involved and the cultural, political and economic
issues implicated by the matters that ICANN has dealt with. The fact of those
disagreements, however, is evidence of the process itself, not of any problems
with it.</P>
</FONT>
<blockquote>
<p><FONT SIZE=2>II. <U>Open Meetings, Board Elections, and the "Domain Name
Tax"</u></FONT></p>
</blockquote>
<FONT SIZE=2>
<P>&#9;Mr. Chairman, in your letter of June 22, 1999, you posed a series of questions
relating to ICANN's formation, its structure and policies. ICANN's response,
transmitted on July 8, 1999, encompassed forty-six pages and nine attachments.
Rather than repeat the extensive information detailed in our responses (attached
as Exhibit A), let me briefly address the four key issues that have attracted
the most attention and controversy in recent weeks:</P>
<UL>
<LI><U>Closed Board meetings</u> (or, "Is ICANN making secretive decisions in
the shadows?");</LI>
</UL>
<UL>
<LI><U>Elected Board members</u> (or, "When will the mysteriously chosen Initial
Board give up the reins of ICANN to Board members properly elected by the
Internet community?");</LI>
</UL>
<UL>
<LI><U>A permanent cost-recovery structure</u> (or, "How dare ICANN try to impose
a Domain Name Tax?"); and</LI>
</UL>
<UL>
<LI><U>Constraints on ICANN's authority</u> (or, "Is ICANN a new Internet regulatory
agency? What's to stop ICANN from taking away my domain name or censoring
my web site?").</LI>
</UL>
<P>These four areas of concern have been raised by a number of parties, including
you, Mr. Chairman, in your letter of June 22, and the U.S. Department of Commerce
in its letter of July 8, 1999. In response to specific suggestions made by the
Department of Commerce, the ICANN Board has agreed upon steps to address those
concerns.</P>
<P><B><I>&#9;Closed Board meetings</i>.</b> The Department of Commerce suggested
that ICANN open its Initial Board meetings to the public. In response, ICANN's
Initial Board has decided to hold the Santiago Board meeting as a public meeting,
and to deal with all pending issues publicly (except for personnel or legal
matters, if any, that might require an executive session). </P>
<P>&#9;Following Santiago, nine elected Board members will join the current complement,
and we will defer to that full Board any decisions on future meeting procedures,
since the experience in Santiago will then be available to inform their decisions.
ICANN's bylaws provide that the Annual Meeting (which will be held in Los Angeles
in November) must be a public meeting.</P>
<P>&#9;I should note that the Initial Board believes very strongly that it has
carried out its responsibilities openly and transparently, recognizing community
consensus when it exists and encouraging its development when it does not, and
all in full view of the global public. The agendas of all ICANN Initial Board
meetings are posted in advance of each meeting; at each quarterly meeting, the
agenda is open for full public discussion in advance; any resolutions adopted
by the Board or decisions taken are announced and released immediately following
those decisions; and the full minutes of every Board meeting are posted for
public review. The Board takes care to engage in public discussions of its efforts;
it both encourages and considers public input, and fully discloses its own decision-making
criteria. All public comments, Advisory Committee recommendations, and staff
proposals have been posted on the ICANN web site well in advance of Board meetings.
The only Board activity that has not (until now) been fully public is interaction
between it and its staff, and discussion among the Board members of staff recommendations,
at the exact time that they happen. Full minutes of decisions taken and the
reasons for them (including any formal actions of the Board), of course, are
posted publicly shortly after they occur. In short, the Board has made all the
inputs and outputs of its decision making process fully available to the world
at large.</P>
<P>&#9;In any event, the Initial Board has decided to open its next meeting, in
Santiago, to public observation.</P>
<B></B>
<P><I><B>&#9;Elected Board members.</b></i> ICANN's elected Directors will join
the Board in two waves: the first wave will consist of nine Directors chosen
by ICANN's Supporting Organizations; the second wave will be elected by an At-Large
membership consisting of individual Internet users. The Board expects the first
wave to be completed by November 1999, and the second wave as soon as possible
following that. In any event, the process of creating a fully elected Board
must be completed by September 2000.</P>
<P>&#9;As to the first wave of elected Board members, ICANN expects that the nine
Directors to be elected by its three Supporting Organizations (the Domain Name
Supporting Organization, the Address Supporting Organization, and the Protocol
Supporting Organization) will be selected and seated in time for ICANN's annual
meeting in November in Los Angeles.</P>
<P>&#9;As to the second wave, it is ICANN's highest priority to complete the work
necessary to implement a workable At-Large membership structure and to conduct
elections for the nine At-Large Directors that must be chosen by the membership.
ICANN has been working diligently to accomplish this objective as soon as possible.
The Initial Board has received a comprehensive set of recommendations from ICANN's
Membership Advisory Committee, and expects to begin the implementation process
at its August meeting in Santiago. ICANN's goal is to replace each and every
one of the current Initial Board members as soon as possible, consistent with
creating a process that minimizes the risk of capture or election fraud, and
that will lead to a truly representative Board.</P>
<B></B>
<P><I><B>&#9;Permanent cost-recovery structure.</b></i> ICANN has decided to defer
the implementation of its volume-based cost-recovery registrar fee (mischaracterized
by some as a "Domain Name Tax"), and to convene a task force to study available
funding options and recommend to ICANN and the Internet community a fair and
workable allocation of the funding required to cover ICANN's costs. </P>
<P>&#9;The task force will include representatives of the key entities involved
in the DNS infrastructure: the domain name registries, address registries, and
domain name registrars that have (or are likely to have) contractual relationships
with ICANN. Charged with reviewing the options for fair and workable cost-recovery
mechanisms, the task force will be asked to make its recommendations by October
1, 1999, with an interim report (if possible) prior to the Santiago meeting
in late August. ICANN will, of course, post those recommendations for public
comment, so that the Board (which will then consist of a full complement of
19) will be able to consider those recommendations at its November Annual Meeting.</P>
<P>&#9;Nevertheless, let me say a few words about ICANN's now-deferred cost-recovery
structure. The volume-based user fee that has been mischaracterized as a "Domain
Name Tax" – in which the competing registrars contribute to ICANN's cost-recovery
budget based on the volume of their registrations – seemed to be a fair and
workable way to spread the costs among the companies and organizations that
benefit from ICANN's DNS coordination and pro-competition activities. The registry
fee was adopted following a thorough process of public notice and comment, and
was broadly supported by an apparent consensus of the community. For example,
the Coalition of Domain Name Registrars, a group consisting of most of the registrars
that would actually be responsible for paying those fees, has written to Congress
indicating that they have no objections to paying their fair share of ICANN's
costs in this way. I understand that the Subcommittee will have an opportunity
to hear from three of the competing registrars later today.</P>
<P>&#9;In sum, we continue to believe that a volume-based fee is a fair and appropriate
way to spread ICANN's cost-recovery needs. Indeed, in its response to the Chairman's
questions, the Department of Commerce (which was fully apprised of the process
that produced this consensus position) agreed that this was a rational and appropriate
approach that (1) was the result of full notice and comment, (2) was consistent
with the White Paper, and (3) was fully authorized by ICANN's Memorandum of
Understanding with the DoC.<B> </B>Nevertheless, the DoC suggested that, because
it has become controversial, ICANN should suspend this approach until there
are elected Board members.<B> </B>ICANN has agreed to do so, pending the recommendations
of the new task force on funding options.</P>
<P>&#9;Obviously, ICANN must have a stable source of income adequate to cover
the costs of its technical coordination and consensus-based policy development
functions. The United States Government has asked ICANN to do an important job,
but it has not provided the means by which to carry it out, leaving the job
of providing funds to the Internet community itself. To date, ICANN has relied
on voluntary donations, and a number of people and organizations have been very
generous. But this is neither an equitable way to allocate the recovery of costs
nor a means to assure stability over the long term. Thus, if ICANN is to continue,
it is simply not possible to abandon the cost-recovery mechanism that has been
produced by the consensus-development process and replace it with nothing.</P>
<P>&#9;ICANN's goal is simple: to establish a funding structure for the technical
coordination of the Internet that is stable, effective, and equitable. Any proposed
method that would meet this goal will receive serious attention from ICANN and
the Internet community at large. If the members of this Committee have thoughts
about how ICANN should be funded, we would be pleased to hear them.</P>
<B></B>
<P><I><B>&#9;Constraints on ICANN's authority.</b></i> The ability of ICANN to
make policy is very carefully cabined, both by its bylaws and by the terms of
the White Paper. Nevertheless, as the Department of Commerce has noted, there
remain concerns about the effectiveness of existing restrictions and limitations
on the authority of the ICANN Board.</P>
<P>&#9;On this point, we certainly understand the concern, but it seems misplaced,
given the clear limitations in ICANN's bylaws and articles of incorporation
on the scope of its permissible activities. Nevertheless, ICANN is entirely
willing to incorporate in its contracts with registries and registrars (or perhaps
in its Memorandum of Understanding with the U.S. Government) language that says
that no ICANN policy is being agreed to in those contracts that is not fully
consistent with, and reasonably related to, the goals of ICANN as set forth
in the White Paper, which are replicated in ICANN's bylaws. Such language would
fully reflect both the original concepts that gave birth to ICANN and this Board's
understanding of ICANN's proper role.</P>
</FONT>
<blockquote>
<p><FONT SIZE=2>III. <U>Network Solutions, Inc., and the Transition to Competition</u></FONT></p>
</blockquote>
<FONT SIZE=2>
<P>&#9;I have already spoken directly about ICANN's relations with Network Solutions,
Inc. I will try to address in some detail a few of the more serious erroneous
contentions that Network Solutions has advanced with respect to ICANN.</P>
<P>&#9;Network Solutions has asserted in a number of forums that ICANN intends
to terminate Network Solutions as a registrar of .com, .net, and .org domain
names. Network Solutions has also claimed that ICANN's registrar accreditation
agreements (which registrars must sign to become accredited for the .com, .net,
and .org domains) grant ICANN the unrestrained authority to terminate a registrar
on 15 days' notice. Both contentions are unequivocally wrong.</P>
<P>&#9;ICANN has no statutory or regulatory &quot;authority&quot; of any kind.
It has only the power of the consensus that it represents, and the willingness
of members of the Internet community to participate in and abide by the consensus
development process that is at the heart of ICANN. </P>
<P>&#9;As you know, Network Solutions has held a government-granted monopoly in
the market for domain name registration services in the .com, .net, and .org
domains. In its October 1998 agreement with the Department of Commerce (Amendment
11), Network Solutions agreed that, once a competitive registrar system was
introduced, a level playing field would be established for all registrars and
that only properly accredited registrars would be permitted to provide domain
name services to the public. When Network Solutions becomes an accredited registrar,
it will continue to be able to offer domain name services as a competitor in
a fair and open market; if it refuses to become accredited, as it has to date,
its agreement with the US Government will prohibit it from offering domain name
services in the .com, .net, and .org domains. When Network Solutions applies
for accreditation from ICANN, ICANN will treat the application in the same manner
as it would any other application, as required by its bylaws.</P>
<P>&#9;If the Committee has been told that ICANN has the power to terminate Network
Solutions’ authority to register domain names, or has asserted that it does,
the Committee has been misinformed. To clarify this point, the following description
of the process for accrediting registrars may be helpful:</P>
<UL>
<LI>From January 1, 1993, until early June 1999, domain names in the .com, .net,
and .org top-level domains were registered exclusively by Network Solutions
under a Cooperative Agreement between it and the U.S. Government. As noted
in the White Paper, public comments showed "widespread dissatisfaction about
the absence of competition in domain name registration." Accordingly, in its
June 1998 White Paper, the U.S. Government stated its intention to "ramp down
[its] cooperative agreement with Network Solutions [then scheduled to expire
September 30, 1998] with the objective of introducing competition into the
domain name space."</LI>
</UL>
<UL>
<LI>To implement the "ramp down," Network Solutions and the U.S. Government
negotiated Amendent 11 to Network Solutions’ cooperative agreement, by which
Network Solutions and the U.S. Government agreed to extend Network Solutions'
registry monopoly for a two-year period (until September 30, 2000), during
which Network Solutions must create a Shared Registry System to allow competing
companies to register domain names in .com, .net, and .org. Since Network
Solutions was going to continue to be the sole administrator of the registries
for .com, .net, and .org for at least two years, while simultaneously acting
as one of the competitors marketing name registration services in those domains,
Amendment 11 stated that a neutral body to be formed by the Internet community
("NewCo," subsequently designated by the U.S. Government as ICANN) would carry
out the coordinating functions required to ensure a freely competitive registration
market. In Amendment 11, Network Solutions expressly acknowledged that NewCo
"will have the authority, consistent with the provisions of the Statement
of Policy and the agreement between the USG and NewCo, to carry out NewCo’s
responsibilities." On November 25, 1998, the Department of Commerce recognized
ICANN as the NewCo entity referred to in Amendment 11; this was specifically
reiterated to Network Solutions by letter on February 26, 1999.</LI>
</UL>
<UL>
<LI>To achieve the White Paper’s "objective of introducing competition into
the domain name space," Amendment 11 provided that Network Solutions would
implement a "Shared Registration System" to "create an environment conducive
to the development of robust competition among domain name registrars." The
schedule agreed to by Network Solutions and the USG provided for several phases,
beginning with a "test bed" in which Network Solutions agreed to "establish
a test bed supporting actual registrations in .com, .net and .org by 5 registrars
accredited by NewCo (Accredited Registrars)" and ending with a reengineering
of the overall system to "assure that Network Solutions, acting as registry,
shall give all licensed Accredited Registrars (including Network Solutions
acting as registrar) equivalent access (‘equal access’) to registry services
through the Shared Registration System."</LI>
</UL>
<P>Thus, Network Solutions agreed in Amendment 11 that, after the introduction
of competition into the registrar business, it would operate the registry to
give access to, <U>and only to</U>, ICANN-accredited registrars (including Network
Solutions). In this way, the level playing field necessary for effective competition
in a shared registry environment would be established.</P>
<P>&#9;In sum, ICANN neither has nor claims any "authority to terminate Network
Solutions' authority to register domain names." Instead, the requirement that
Network Solutions must be accredited by ICANN to act as a registrar after the
introduction of competition, so that it operates to the extent possible (given
its continuing operation of the registries for .com. .net, and .org) under the
same conditions as all other competing registrars, flows directly from Network
Solutions' own agreement with the USG.</P>
<P>&#9;To date, Network Solutions has not requested to be accredited by ICANN,
and certain individuals purporting to speak for Network Solutions have publicly
stated that it does not intend to be accredited. ICANN has received no official
communication on this issue from Network Solutions, and stands ready to treat
an accreditation application from Network Solutions in exactly the same way
it has responded to similar applications by others. </P>
<P>&#9;In fact, in the event Network Solutions chooses to seek accreditation,
ICANN is required by its agreement with the U.S. Government to perform its accreditation
function fairly, having specifically agreed in the MOU not to "act unjustifiably
or arbitrarily to injure particular persons or entities or particular categories
of persons or entities." This fairness provision, which parallels provisions
in Amendment 11, ICANN’s registrar accreditation policy, and ICANN’s own bylaws,
appropriately and effectively ensures against arbitrary denial of accreditation
to Network Solutions or any other registrar.</P>
<P>&#9;Likewise, the registrar accreditation agreement is a contract between ICANN
and its accredited registrars that provides a strong set of protections for
accredited registrars. First, the registrar accreditation agreement spells out
that ICANN can terminate accreditation only on the basis of a defined set of
causes – for example, bankruptcy of the registrar or uncured breach of the registrar
accreditation agreement. Second, the agreement provides for automatic renewal
of accreditation: an accredited registrar (such as Network Solutions) "shall
be entitled to renewal provided it meets the accreditation requirements then
in effect." ICANN Registrar Accreditation Agreement, Sec. III(B)(i). In the
event of an unresolved dispute over any company's renewal of accreditation,
the accredited registrar is entitled to fifteen days' notice <B><U>and</u></B>
the right to invoke neutral arbitration that will be binding on ICANN. Together,
the rights to automatic renewal and arbitration afford registrars (including
Network Solutions) the predictability that is needed for sensible business planning,
and the assurance that ICANN cannot treat a given registrar arbitrarily.</P>
</FONT>
<blockquote>
<p><FONT SIZE=2>IV. <U>Conclusion</u></FONT></p>
</blockquote>
<FONT SIZE=2>
<P>&#9;Mr. Chairman, let me conclude by noting that ICANN's July 8, 1999, response
to Chairman Bliley touches on a number of questions and issues that I do not
have the time to address in my opening statement, including the process by which
ICANN's Initial Board was selected, ICANN's relationships with country code
top-level domain managers, intellectual property rights in registry databases,
and ICANN's Transition Budget. Accordingly, I would ask that ICANN's response,
along with the exhibits, be made a part of the record of today's hearing.</P>
<P>&#9;I thank the Committee for the opportunity to testify, and I look forward
to answering your questions.</P>
<P>&nbsp;</P>
<P>&#9;&#9;&#9;&#9;&#9;Esther Dyson<br>
Interim Chairman of the Board of Directors<br>
Internet Corporation for Assigned Names and Numbers</P>
</FONT>
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