[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]



  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

                                _______

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                    ------------------------------  

                    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 [email protected] 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 solicit applications for new TLDs to supplement the Internet's 
current TLDs. Application Instructions were first posted on ICANN's 
website on August 15, 2000 directing that applications in the 
prescribed format be filed by October 2, 2000 with an accompanying non-
refundable fee of $50,000. Applications were required to set forth in 
great detail the applicant's technical, financial and business plans 
with regard to the new gTLD being proposed. Some applications exceeded 
several hundred pages and included lengthy technical appendices.
    ICANN received 47 applications by the October 2 filing deadline and 
publicly acknowledged that it had not expected such a large number of 
submissions. This volume clearly overwhelmed ICANN which fell further 
and further behind its stated timetable over the following weeks. In 
the face of the increasing backlog in the process, ICANN chose to 
significantly abbreviate or abandon certain planned steps in the review 
and evaluation process rather than push back its self-imposed November 
16 deadline for completion of the process. Attached is a schedule 
outlining the review and evaluation timetable showing targeted and 
actual dates of each step in the process.
    The mere 6-week period allocated by ICANN for the entire review 
process was extremely ambitious and, in light of the number of 
applications filed, completely unrealistic.
                     6. the defects in the process:
    Mr. Chairman, I am not a lawyer, and I do not claim to be an expert 
on the subject of procedural requirements, but the methods employed by 
ICANN to select new TLDs fundamentally lacked fairness, and it does not 
take a lawyer to reach that conclusion.
    Many of the flaws in the process stem from the unrealistic 
timetable that ICANN imposed upon itself in evaluating and selecting 
successful applications. It is unclear to us why the Board should have 
been so motivated to conclude the process by November 16, though we 
note that by making its decision on this date the newly elected at-
large directors were prevented from being involved in the selection 
process.
    Mr. Chairman, we believe that the selection process was 
fundamentally flawed in the following three respects:
A. Vague and Unweighted Selection Criteria.
    The stated criteria for assessing new top-level domain proposals 
were vague at best and were not weighted in any manner to give 
applicants a clear idea of the relative importance attributed by ICANN 
to each of the criteria.
B. Lack of Due Diligence.
    Partly due to the unanticipated number of applicants (47) and the 
extensive nature of the application materials, ICANN found itself 
unable to review the proposals as planned and as the Internet community 
expected.
    ICANN's original instructions contemplated that ``ICANN staff may 
gather additional information by sending applicants e-mails asking for 
the information, by conducting telephone or in-person interviews with 
applicants, by attending (possibly with ICANN-retained experts) 
presentations by applicants or their experts, or by other means. These 
inquiries will be initiated by ICANN staff.'' The original timetable 
provided that such consultation would occur between October 18-21; 
however, on October 23 ICANN advised that it had abandoned this step 
stating that because ``the applications that have been submitted do a 
generally good job of explaining the nature of the proposals, [we] have 
concluded that real-time interviews are not warranted at this time.'' 
In reality, it appeared that ICANN's decision to dispense with this 
important step of the review procedure was entirely motivated by its 
desire to expedite the process, and that applicants were being denied 
due process so that ICANN's staff could meet their self-imposed 
November 16 deadline for concluding the selection process.
    In response to mounting criticism over the lack of opportunity for 
applicants to present their proposals in person and to respond to the 
staff report, the ICANN staff announced on November 14 that each of the 
remaining 44 applicants would be permitted to make a three minute 
presentation to the Board on the following day. Applicants who had 
invested tens if not hundreds of thousands of dollars and countless 
hours to prepare and file immensely detailed proposals incorporating 
financial, technical and operational plans, (in many cases comprising 
hundreds of pages), and paid a non-refundable fee of $50,000 now found 
that success or failure could hinge on a three minute ``pitch''. The 
Board heard approximately 40 of these three minute presentations back-
to-back on November 15.
C. Publication of and reliance on factually inaccurate Staff Report.
    Prior to the November 16 decision, the ICANN staff prepared a staff 
report, which though replete with errors about our proposal as well as 
others, profoundly influenced the final decisions by the Board of 
Directors. ICANN posted the staff report on its website on Friday, 
November 10, only one day before the start of the ICANN meetings at 
which the Board was to select the new gTLDs. Neither the TLD applicants 
nor the public had a meaningful opportunity to register objections or 
comments to the staff report prior to the inception of the ICANN 
conference. The preliminary assessments made in the staff report 
essentially amounted to the summary rejection of many of the 
applications and was formulated behind closed doors without any 
consultation with the public or the applicants. The staff report 
included serious factual errors and presented damaging misstatements to 
the Board and the public.
    The report also ignored or downplayed important positive elements 
of certain applications that it appeared not to favor. Specifically, 
with regard to the dotTV Consortium's applications, the report 
inaccurately assessed dotTV's technical capabilities and failed to 
discuss our proposed pricing structure that would have enormously 
enhanced competition in the domain name business for the ultimate 
benefit of the consumer. dotTV issued a letter to ICANN on November 12 
identifying and correcting several of the most glaring errors and 
misstatements contained in the report and urging the Board not to rely 
solely on the findings of the staff report, however, it appears that 
this letter was not seriously considered by the Board before their 
deliberations.
    The ICANN staff strongly urged the Board to rely on the staff 
report's findings and to adhere to its recommendations. This position 
was reinforced by the in-person presentation made to the Board by ICANN 
staff on November 15 which prompted Board member Vinton Cerf to comment 
``I must confess to a certain discomfort with the process because it 
feels like we're a venture capital firm''. During this presentation, 
staff members advised that many applications had failed to meet certain 
``threshold'' criteria including ``completeness'', though these 
criteria were not elaborated upon by the presenters. The presentation 
then went on to discuss only those applications which had satisfied the 
staff's undefined criteria and no reference was made to dotTV's written 
response which had challenged underlying assumptions contained in the 
staff report.
    On November 14, by a vote of 78 to 52, the General Assembly of the 
Domain Name Supporting Organization, a supporting body of ICANN, 
adopted a resolution that the Board ``should not decide upon new gTLDs 
until the applicants have had time to respond to the Staff Report.'' 
The ICANN Board ignored this resolution.
                7. questionable selections of new tlds.
    The gTLDs selected by the Board on November 16 include: .pro, 
.aero, .museum, .name, .biz, .info, and .coop. Given the inherently 
flawed nature of the process, it is not surprising that the wisdom of 
these selections is being seriously questioned by the Internet public. 
It is generally felt that few if any of the selected gTLDs meet the 
criteria by which ICANN purported to evaluate the applications and 
that, collectively, they offer little to enhance the utility of the 
Internet.
    It is our view that the proposals presented by the dotTV-led 
consortiums would provide a low-priced alternative, promoting 
competition and consumer choice within the domain name business. Owing 
to erroneous conclusions in the staff report, however, ICANN eliminated 
this proposal from consideration early in the selection process.
  8. congress must intervene in the icann selection process to ensure 
           fair and equitable method for approving new tlds.
    Mr. Chairman, dotTV strongly believes that the approval of new TLDs 
is an important matter for congressional review, and that the 
Department of Commerce should not be permitted to implement ICANN's 
recommendations until such a review takes place. We are concerned that 
the Department intends to treat ICANN's request for implementation of 
the new TLDs simply as a matter for technical review which we believe 
is inappropriate due to the fundamental flaws in the selection process. 
The United States government--and the American public--have a stake in 
ensuring that ICANN's procedures be as fair as possible.
    Mr. Chairman, we are not advocating that the United States attempt 
to dominate the management of the Internet, nor are we advocating that 
the U.S. or any government control the Internet. As long as the 
Department of Commerce maintains oversight authority of ICANN, however, 
the U.S. government has a responsibility to ensure that decisions 
affecting the Internet are reached fairly. In addition, it is important 
to establish correct precedents for similar decisions by ICANN in the 
future. The Department's White Paper contemplated that ICANN would 
engage in fair, open, and representative decision-making, and ICANN's 
approval of new TLDs is the first major test of its decision-making 
authority. Congress has an important role to play in establishing and 
enforcing these standards to guide how decisions will be made in the 
future.
    Through the urging of Congress, the Department of Commerce should 
direct ICANN to immediately suspend the current process and to 
reconsider all TLD applications--both those approved and those denied--
under a procedure that is fairer and more rational than witnessed in 
recent months. Only by doing so will ICANN assure that the first 
expansion of TLDs occurs in manner that is both deliberative and pro-
consumer.

    Mr. Upton. And I appreciated receiving your statement as 
well, which I was also able to read last night. Thank you.
    Ms. Broitman.

                   STATEMENT OF ELANA BROITMAN

    Ms. Broitman. Mr. Chairman, Mr. Markey, and members of the 
committee, thank you for inviting me to appear before you 
today. I commend the committee for holding this hearing, as 
your role is important to continuing the stable and innovative 
growth of the Internet.
    I am here representing register.com, an equity partner in 
RegistryPro, which, as you know, is one of the new registries 
selected by ICANN. I am here to provide the perspective of a 
company that was awarded a new TLD. Building on the restricted 
model of .gov, .edu, and .mil, RegistryPro proposed a .pro TLD 
to focus on professionals. I can also offer the perspective of 
a registrar, as we believe consumers will benefit significantly 
from new TLDs.
    To fully answer the question, please allow me to briefly 
review the growth of this market. As the committee knows, from 
1993 to as recently as 2 years ago, a single company was both 
the only registry and the sole registrar for .com, .net and 
.org. To introduce competition, ICANN has taken two major 
steps. Two years ago, ICANN launched a test bed of five 
registrars, and although NSI remained the sole registry, there 
are over 140 accredited registrars.
    With competition, the domain name market has grown 
dramatically, from 8 million in 1999 to about 29 million .com, 
.net and .org names today. ICANN took its second step with 
these new TLDs, and the market is projected to grow to over 140 
million in 4 years. The growth is key not only for registrars, 
but also other Internet-related businesses.
    This committee has endorsed competition in this sector 
knowing that it would deliver value to consumers, and it has 
been proven right. Competition among registrars has improved 
technology, customer support, introduced price competition, and 
fostered innovative new products. Competition among registries 
will similarly deliver value.
    First, there will be improved services; second, consumers 
can register for the Web address of their choice; they will 
also be able to distinguish their Web site, depending on the 
TLD they choose. Conversely, delay only serves to protect the 
sole global registry and deny consumer choice.
    While registry competition will not exist until these new 
TLDs are actually operational, this will take months of 
preparation and significant resources. Substantial 
technological facilities must be built, engineering protocols 
and applications written and tested, and highly skilled 
personnel located and retained.
    Competition is also critical to future innovation. New 
technology is on its way, but if new registries are not 
introduced rapidly, there will be only one registry in a 
position to shape and operate the new technologies.
    As for the process, we believe it achieved the fundamental 
of introducing successful new TLDs while protecting the 
stability of the Internet. On August 15, ICANN posted eight 
specific criteria relating to stability, proof of concept, 
competition, utility of the domain name system, meeting unmet 
needs, diversity, policy, and protecting the rights of others.
    RegistryPro worked hard to meet these requirements. We 
prepared a detailed description of state-of-the-art, innovative 
technology that would enhance the usefulness and dependability 
of the .pro Web sites. We proposed an innovative TLD that would 
add diversity and address the needs of consumers and 
professionals. We reached out to professional associations and 
credentialing bodies to work out a good trust and verification 
mechanism, and are establishing an advisory board to continue 
doing so.
    We also outlined a set of policies to address the needs of 
the various domain name system constituencies and guaranteed a 
level playing field for all accredited registrars. We have 
invested hundreds of thousands in research, analysis, and 
preparation of a thorough proposal, and the build out and 
operation of a secure registry requires a commitment of 
millions more. We believe that our application, like others, 
received substantial scrutiny by the independent panels of 
experts, by ICANN's staff, by the public during several public 
comment periods, and, ultimately, significant independent 
deliberation by the ICANN board. There was an opportunity in 
this process for applicants to clarify their documents on the 
public record.
    While no process is perfect, we believe a genuine effort 
was made by ICANN to provide notice, transparency and fairness. 
ICANN accomplished the ultimate goal of launching new global 
TLDs while minimizing risk. The variety of these TLDs paves the 
way for future development. As the chairman noted in the last 
hearing on this subject, ICANN is responsible for introducing 
competition. We hope that the committee's conclusion today is 
an endorsement of an expeditious launch of these new TLDs so 
that consumers can benefit from the resulting innovation and 
the availability of new domain names.
    Mr. Chairman, and members of the committee, it has been my 
pleasure to testify today. I appreciate the opportunity.
    Mr. Upton. And you yield back the balance of your time. 
That is terrific.
    [The prepared statement of Elana Broitman follows:]

   Prepared Statement of Elana Broitman, Director, Policy and Public 
                      Affairs, register.com, inc.

                              INTRODUCTION

    Mr. Chairman, Members of the Committee, thank you for inviting me 
to appear before you today. I commend the Committee for holding this 
hearing. Your role is important to continuing the stability and 
innovative growth of the Internet.
    I am here representing register.com, an equity partner in 
RegistryPro. RegistryPro, as you know, is one of the new registries 
that was selected by the Internet Corporation for Assigned Names and 
Numbers (ICANN) to operate a new global Top Level Domain (TLD) 
1. RegistryPro is a new company formed by register.com, one 
of the leading registrars on the Internet today, and Virtual Internet 
Ltd, a top European registrar.
---------------------------------------------------------------------------
    \1\ A TLD is the domain name address, such as .com, .net, and .org. 
The new TLDs would be .pro, .info, .biz, .name, .aero, .museum, and 
.coop.
---------------------------------------------------------------------------
    I am here to provide the perspective of a company that was awarded 
a new TLD, .pro. Building on the restricted model of .gov, .edu, and 
.mil, the .pro TLD focuses on professional registrants--such as 
doctors, lawyers, and accountants. I can also offer the perspective of 
a registrar. Based on our two years' experience, register.com believes 
consumers will benefit significantly from the introduction of new TLDs.
                           industry overview
    To fully answer the question about the new TLDs, please allow me to 
briefly review the structure and growth of the domain name market.
    Securing a domain name, or Internet address, is the first and 
fundamental step for businesses, individuals, and organizations that 
are building a presence on the web. Before setting up a website or 
launching e-commerce, a consumer contacts a registrar, such as 
register.com, to secure a domain name, such as www.house.gov. 
Registrars maintain contact with the consumer, invoice the customer, 
handle all customer services, and act as the technical interface to the 
registry on behalf of the customer.
    A registry, such as Verisign Global Registry Services for .com, 
.net and .org, maintains the list of available domain names within its 
TLD and allocates those names on a first come, first served basis. 
Registrars get the domain names for the consumer by purchasing them 
from the registry that manages that TLD.
    As this Committee knows, the Internet, and the domain name market 
in particular, has grown and expanded at a rapid pace. From 1993 to as 
recently as two years ago, a single company, Network Solutions 
(``NSI''), today owned by Verisign, was both the only registry and the 
sole registrar for .com, .net, and .org TLDs. Presently, these TLDs are 
the only globally available generic domain addresses.
    In determining the best manner to introduce competition and oversee 
the domain name system, the Department of Commerce called for the 
creation of a not-for-profit corporation. ICANN was recognized to fill 
that role.
    To introduce competition, ICANN has taken two major steps. First in 
April 1999, ICANN launched a test bed of five registrars. Register.com 
was the first registrar to go ``live'' and register .com, .net, and 
.org names. Although NSI remained the sole registry for the com, .net, 
and .org TLDs, today there are over 140 accredited registrars. 
Consumers have benefited from the competition in prices and services.
    In November 2000, ICANN took the second step toward competition by 
approving the introduction of seven new global TLDs to generate 
competition in the registry business. RegistryPro was selected to 
manage the .pro TLD, which is restricted to the professional business 
sector. Other new TLDs include unrestricted, personal, and non-profit 
domain name sectors.
    The domain name market has grown to about 29 million .com, .net, 
and .org domain names, and growth has increased dramatically since the 
days of the registrar monopoly, from 8-9 million in 1999, to more than 
20 million in 2000, the first full year of competition. This market is 
projected to grow to over 140 million registrations over the next four 
years. This growth is fundamental not only to the health and 
competitiveness of the registrar business community, but the 
introduction of new TLDs will also expand the opportunity for other 
Internet-related businesses
                      competition among registries
    This Committee has endorsed competition in this sector, knowing 
that it would deliver value to consumers. It has been proven right. 
Competition among registrars has improved technology and customer 
support, introduced price competition, and fostered innovative new 
products to better serve the needs of domain name holders and Internet 
businesses.
    Competition among registries will similarly deliver value. First, 
consumers will have a choice among competitive TLDs and registries, 
leading to improved services. For example, alternative registries may 
accelerate the launch of websites and make them more secure. Second, 
consumers can register for the web address of their choice, as the best 
addresses, in many cases, are already taken in the .com, .net and .org 
TLDs. Third, consumers will be able to distinguish their web address 
based on the TLD they chose--we believe, for example, lawyers would 
prefer .law.pro and accountants, .cpa.pro.
    Conversely, delay in launching new TLDs serves to protect the sole 
global TLD registry and deny consumer choice.
                    do not delay launch of new tlds
    While registry competition will not exist until these new TLDs are 
operational, this will take months of preparation and significant 
resources. Substantial technological facilities must be built, 
engineering protocols and software applications written and tested, and 
highly skilled personnel located and retained. In fact, substantial 
resources have already been spent and committed--both during the 
application process and since then.
    Not only is competition going to improve the registry sector, it is 
fundamental to future innovation. New technology is on its way ``if new 
registries are not introduced rapidly, there will be only one company 
in a position to operate the new technologies and determine the course 
of their evolution. For example, Verisign launched the worldwide test 
beds with respect to two recent developments--multilingual domain 
names, and eNUM, a convergence of telephony and domain names. There 
were no other competitive registries in place to create an alternative 
environment.
    Moving expeditiously to add these new TLDs to the domain name 
system is critical.
               registrypro's experience with the process
    As for the process, we believe it achieved the fundamental goals of 
determining whether an applicant had what it takes to run a successful 
TLD, and balancing the interest in new TLDs with the imperative to 
preserve the stability of the Internet.
    While notice of its plans to authorize competitor registries has 
been publicly available for about two years, ICANN posted a set of 
criteria for assessing new TLD proposals on August 15, 2000:

  1. The need to maintain the Internet's stability. ICANN analyzed:
    a. the prospects for the continued and unimpaired operation of the 
            TLD,
    b. provisions to minimize unscheduled outages due to technical 
            failures or malicious activity of others,
    c. provisions to ensure consistent compliance with technical 
            requirements,
    d.the effect of the new TLD on the operation of the DNS and the 
            root-server system,
    e. measures to promote rapid correction of potential technical 
            difficulties,
    f. the protection of domain name holders from the effects of 
            registry or registration system failure, and
    g. provisions for orderly and reliable assignment of domain names 
            during the initial period of TLD operation.
  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. Proposals were to be examined 
        for their ability to promote effective evaluation of
    a. the feasibility and utility of different types of new TLDs,
    b. the effectiveness of different procedures for launching new 
            TLDs,
    c. different policies under which the TLDs can be administered in 
            the longer term,
    d. different operational models for the registry and registrar 
            functions,
    e. different business and economic models under which TLDs can be 
            operated;
    f. the market demand for different types of TLDs and DNS services; 
            and
    g. different institutional structures for the formulation of 
            registration and operation policies within the TLD.
  3. The enhancement of competition for registration services. ICANN 
        noted that though the market will be the ultimate arbiter of 
        competitive merit, the proposals were to be evaluated with 
        regard to whether they enhanced the general goal of competition 
        at both the registry and registrar levels.
  4. The enhancement of the utility of DNS. Under this factor, TLDs 
        were to be evaluated as to whether they added to the existing 
        DNS hierarchy without adding confusion. For example does the 
        TLD's name suggest its purpose, or in the case of a restricted 
        TLD, would the restriction assist users in remembering or 
        locating domain names within the TLD?
  5. The extent to which the proposal would meet previously unmet 
        needs. Close examination was to be given to whether submitted 
        proposals exhibit a well-conceived plan, backed by sufficient 
        resources, to meet presently 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.
  7. The evaluation of delegation of policy-formulation functions for 
        special-purpose TLDs to appropriate organizations.
  8. Appropriate protections of rights of others in connection with the 
        operation of the TLD. The types of protections that an 
        application was to address included:
    a. a plan for allocation of names during the start-up phase of the 
            TLD,
    b. a reasonably accessible and efficient mechanism for resolving 
            domain-name disputes,
    c. intellectual property or other protections for third-party 
            interests,
    d. adequate provision for Whois service that balances personal 
            privacy and public access to information regarding domain-
            name registrations, and
    e. policies to discourage abusive registration practices.
                   registrypro met icann requirements
    We worked hard to meet these requirements. We prepared a detailed 
description of innovative state-of-the-art technology, which would 
enhance the usefulness and dependability of the .pro websites. The 
RegistryPro technology would:

 Allow for near real time posting of websites (as opposed to 
        today's 48-hour waiting period),
 Diminish the potential for system crashes,
 Protect consumers against potential registrar failures, and
 Provide better tools to protect against potential cyber 
        squatters or professional imposters.
    We proposed an innovative TLD that would add diversity to the 
current domain name space and address the needs of the marketplace. 
Based on our surveys of consumers and professionals, we determined that 
consumers were looking for a trusted way to identify professionals on 
the Internet, and professionals would be more inclined to register 
domain names if they had a designated address.
    In devising that trusted addressing system, we have reached out to 
professional associations, to work out the mechanisms for verifying 
professional credentials.
    We also outlined a set of policies to address the needs of various 
constituencies. We balanced intellectual property protections, which 
earned us one of the highest ratings by the intellectual property 
constituency, with personal privacy concerns. We also guaranteed a 
level playing field for all accredited registrars.
    We invested hundreds of thousands of dollars--including in market 
research, legal drafting, and financial analysis--to prepare the 
application. The build out and operation of a stable and secure 
registry requires a commitment of millions more.
    We believe that our application, like others, received substantial 
scrutiny--by the independent panels of international experts in 
technology, law and finance; by ICANN staff, by the public during 
several public comment periods; and ultimately by significant 
independent deliberation by the ICANN Board. There was an opportunity 
for applicants to clarify their documents, on the public record. While 
no process is perfect, we believe a genuine effort was made by ICANN to 
provide notice, transparency and due process.
                       ultimate goal accomplished
    ICANN accomplished the ultimate goal of launching new global TLDs 
while protecting the security of the Internet. These new TLDs offer a 
variety of business models and domain name addresses--from generic to 
non-profit. Incremental growth will protect stability and pave the way 
for future development.
    As the Chairman had noted in the last hearing on this topic, ICANN 
is responsible for introducing competition into the registration of 
domain names. We hope that the Committee's conclusion today is an 
endorsement of an expeditious launch of these new TLDs, so that 
consumers can benefit from the resulting innovation and the 
availability of new domain names.
    Mr. Chairman, Members of the Committee--it has been my pleasure to 
testify today. Thank you for the opportunity.

    Mr. Upton. Mr. Short, welcome.

                   STATEMENT OF DAVID E. SHORT

    Mr. Short. Thank you. Good morning, Mr. Chairman and 
subcommittee members. My name is David Short, and I am the 
legal director for the International Air Transport Association, 
IATA, based in Geneva, Switzerland. IATA appreciates this 
opportunity to appear today to share with the committee its 
experience in applying to ICANN to sponsor .travel as a new 
Internet TLD. Copies of IATA's written comments have been 
previously provided to the committee staff, and, before 
proceeding, may I ask that they be incorporated into the record 
of this hearing?
    Mr. Upton. Absolutely.
    Mr. Short. Thank you.
    First, let me say a word or two about my organization, 
IATA. IATA lies at the very heart of the world's largest 
industry, travel and tourism. Our members consist of 275 
airlines, which transport over 95 percent of the world's 
scheduled international air traffic.
    Travel is one of the largest segments of e-commerce today. 
There are really only two things holding travel back from 
realizing its full potential in the new economy. The first is 
the fact that in the .com environment there are no quality 
standards applied to domain name registrants. It is the first 
party to show up with $35 to claim a name not already taken by 
somebody else who gets it, without having to satisfy any 
integrity, consumer protection or quality assurance standards.
    And so while many consumers may research travel on the Web, 
they are understandably reluctant to actually book and pay for 
transactions on .com Web sites they have no reason or basis to 
trust in. And this makes it all the harder for new Web sites to 
compete with the existing dominant sites like Expedia and 
Travelocity.
    The second constraint is the depletion of commercially 
attractive .com names. As the committee is well aware, all the 
simple and obvious names, and virtually all of the common 
English language words, are already registered as .com domain 
names, thus erecting potentially insurmountable barriers to new 
entry and new competition.
    And so when ICANN announced it would entertain applications 
for new TLDs, IATA conceived .travel as a dedicated TLD for the 
entire travel industry, where quality criteria would be applied 
such that consumers would have a basis to trust in and more 
readily do business with .travel Web sites.
    The IATA application drew support on the record from 
individual commenters and associations representing over 1 
million travel industry businesses around the world. Our 
application and supplemental filings with ICANN demonstrated 
that we fully satisfied all of the nine criteria that ICANN had 
announced would apply to the new TLD applications, and ICANN 
never disagreed with that.
    What happened was the ICANN staff evaluation of our 
application decided to apply a new 10th criterion, which they 
called representativeness, and they erroneously concluded the 
IATA application did not reflect sufficient representativeness 
of the travel industry and threw it out based solely on that 
factor, without regard to all of its undisputed positive 
attributes or the widespread support it had attracted.
    Obviously, it was fundamentally unfair to judge our 
application according to something we had no notice we even 
needed to address. But even more troubling is the fact that 
when looked at objectively, our application is, in fact, one of 
the most representative of all of the applications, as 
evidenced by the broad support it attracted on the record.
    The ICANN staff conclusion was based solely on the fact 
that a relatively small number of comments had been filed on 
the comment form by a group of travel agents who have a record 
of opposing virtually everything proposed by the airline 
industry, not because it is a bad idea, but simply because they 
have an axe to grind against the airlines. No effort was made 
by the ICANN staff to assess the veracity of the statements 
made in these comments, nor to recognize that they were, in 
fact, prompted by ulterior motives rather than any valid 
objection to the .travel TLD.
    Moreover, IATA seeks only the opportunity to offer .travel 
as a new competitive alternative. Any of these dissenting 
commenters, or anyone else for that matter, who wants to stay 
in the .com world remains free to do so. So there is absolutely 
no reason to allow a tiny minority of travel agents to veto an 
innovative proposal to introduce a new competitive alternative 
so desperately sought and supported by the great majority of 
our industry.
    In summary, all IATA asks is that our application be given 
the fair shake we clearly were denied in November. One way to 
do so would be for ICANN to grant our pending request that our 
application be reconsidered. Another would be for the Commerce 
Department to exercise its responsibility to select the new 
TLDs in accordance with APA requirements.
    I see my time has expired. Thank you very much.
    [The prepared statement of David E. Short follows:]

  Prepared Statement of David E. Short, Director, Legal Services, The 
                International Air Transport Association

    Good morning Chairman Upton and subcommittee members:
    My name is David E. Short. I am the Legal Director of the 
International Air Transport Association (``IATA''), Based in Geneva, 
Switzerland. IATA appreciates this opportunity to share with the 
subcommittee IATA'S experience as an applicant for one of the new 
Internet Top Level Domains, or ``TLDs.''
    I am here today because IATA is committed to sponsoring ``.travel'' 
as a new Top Level Domain. Given that the travel industry represents 
one of the largest and most popular segments of e-commerce, ``.travel'' 
clearly is an obvious choice for one of the first new TLDs to be added 
to the Internet.
    The addition of ``.travel'' to the Internet would greatly enhance 
competition in the Domain Name space by offering suppliers and 
consumers of travel-related goods and services critical advantages that 
are not provided by the ``.com'' TLD. ``.com'' currently is the 
dominant TLD for all commercial industries, including travel. Unlike 
``.travel,'' which would be a restricted TLD, ``.com'' is an 
unrestricted TLD. A ``.travel'' TLD would have two competitive 
advantages over the unrestricted TLDs.
    The first advantage is that, as a restricted TLD, ``.travel'' would 
create a subdivision of the Internet which, by excluding non-travel web 
sites, would make it much more efficient and easier for consumers and 
businesses to locate the travel-related entity or information they are 
seeking.
    The second advantage is that, with a ``.travel'' TLD, consumers 
will know that when they access a Domain name ending in ``.travel,'' 
they will be in touch with a company that has shown itself to be a 
legitimate participant in the travel industry by satisfying certain 
objective and transparent quality standards. By contrast, unrestricted 
TLDs can offer no such indication.
    Whatever their respective merits, none of the seven new TLDs 
selected by ICANN provides these types of advantages. The seven new 
TLDs divide into two groups. Either they are just as generic in scope 
as the ``.com'' TLD, or they are substantially more limited in scope 
than ``.travel.'' What is missing is the critical middle area, 
exemplified by ``.travel,''--which adds value by being restricted to a 
particular industry, but is not so limited in scope that it provides 
effectively no competitive challenge in the Domain Name space. As long 
as ICANN excludes TLDs such as ``.travel,'' the true potential of e-
commerce will remain untapped.
    Unfortunately, because of the arbitrary and capricious manner in 
which it treated IATA's proposal, ICANN precluded itself from 
appreciating how ``.travel'' would significantly enhance competition in 
the Internet. The addition of new TLDs involves a critical asset 
financed and controlled by the U.S. Government--namely, the 
authoritative, or ``a'' root server. Consequently, the process for 
selecting new TLDs must comply with the U.S. Administrative Procedure 
Act.
    ICANN's treatment of IATA's application fell far short of the 
mandates of that law. Among other things, ICANN completely ignored the 
fact that our ``.travel'' proposal satisfied each and every one of the 
nine criteria which ICANN said it would consider in evaluating the 
proposals. Instead, ICANN summarily refused to select ``.travel'' based 
solely on a new and previously undisclosed tenth criterion--
``representativeness''--which ICANN applied to IATA's application in a 
discriminatory and otherwise unfair manner.
    Before going into more details regarding how our proposal was 
treated, I Would like to tell you a little more about IATA. IATA is a 
not-for-profit association that has played a leading role in the global 
travel industry since 1919. It has 275 member airlines (246 active and 
29 associate) in 143 countries. IATA has offices in 75 countries around 
the world.
    Among other things, IATA has developed standardized airline ticket 
formats that are recognized around the world and make it possible to 
buy a ticket from a travel agency in Tokyo, that will be recognized and 
accepted by a domestic airline in South Africa, for a flight from 
Johannesburg to Cape Town. Similarly, the IATA ``interline'' system 
makes it possible to purchase a single ticket, with a single payment, 
covering travel on a succession of different airlines. IATA has been 
entrusted by the industry, and by governments around the world, to 
design and equitably administer the coding systems essential for the 
smooth and efficient functioning of the travel industry. IATA also has 
developed standards for accreditation and endorsement of travel 
agencies, and it has a long-standing relationship with travel agents 
and travel organizations in an effort to improve both the business 
processes and the marketing and sale of transportation products.
    In addition to its airline membership, IATA counts among its 
customers approximately 90,000 IATA accredited or endorsed travel 
agents located in 209 countries; the operators of other modes of 
transportation such as railways and ferry companies; and numerous other 
suppliers of travel-related goods and services including hotels, travel 
insurance providers, etc.
    IATA is uniquely and ideally positioned to sponsor the ``.travel'' 
TLD because its core activities have always included the setting of 
industry standards to facilitate cooperation among suppliers of travel 
related services and goods, for the benefit of their customers. it is 
entirely logical that IATA exercise its traditional leadership role to 
enable the travel industry and its customers to fully exploit the 
potential of the Internet.
    It is important to highlight that IATA's vision for ``.travel'' was 
never limited to only a portion of the global travel community. Rather, 
businesses, other organizations and individual stakeholders from the 
entire travel industry, including the following, would be able to 
obtain Domain Name registrations ending in ``.travel'': Scheduled 
Airlines; Charter Airlines; Airports; Ferries; Train Operators; Bus and 
Coach Operators; Ground Handlers; Catering Companies; Car Rental 
Companies; Hotels and Resorts; Bed and Breakfast Houses; Camp Facility 
Operators; Tourist Boards/Associations; Tourist Facility Operators; 
Travel Guide Publishers; Travel Agents; Tour Operators; Consolidators; 
Internet Service Providers for Travel; Computer Reservation Systems/
Global; and Distribution Systems
    Critical decisions affecting ``.travel'', including setting 
objective and transparent standards for determining who qualifies to 
obtain a Domain Name, would be made not by IATA but, rather, by the 
``.travel'' Advisory Board, to be comprised of world-wide 
representatives of the travel industry. No individual sectors within 
the travel industry, including the airlines, would have ``veto'' rights 
over decisions approved by a majority of this board concerning the 
standards applicable for ``.travel'' Domain Names.
    ``.travel'' also would alleviate the problems that arise from the 
fact that many trade names in the travel industry have counterparts in 
non-travel related businesses. Consider the example of an entity called 
Southwest Insurance Company. In the current system dominated by the 
``.com'' TLD, Southwest Airlines would have no priority over Southwest 
Insurance for the Domain Name ``www.southwest.com.'' This situation 
limits the ability of travel-related businesses to utilize the internet 
to the maximum extent possible, and often causes confusion and 
frustration among consumers, who are unable to access a particular 
travel-related web site simply by typing in the trade name plus 
``.com.'' with respect to travel-related trade names, this problem 
would largely evaporate with the creation of the ``.travel'' TLD.
    While IATA believes that ``.travel'' is an ideal selection for the 
new generation of competitive TLDs, and that IATA is perfectly suited 
to sponsor this TLD, we are not here to ask Congress to deliver this 
result. But we do request that the committee exercise its oversight 
authority to ensure that the U.S Department of Commerce fulfills its 
obligations with respect to the selection of new top level Domain 
Names.
    Unfortunately, so far Commerce has given no assurance that it 
intends to fulfill these obligations. It has taken no measures to 
correct the fundamental shortcomings of the TLD selection process 
administered last fall by ICANN.
    The Commerce Department is inescapably tied to the TLD selection 
process, a process which boils down to the issue of which TLDs the 
Commerce Department will approve to be added to the authoritative ``a'' 
root server. The ``a'' root server is a critical asset financed by the 
U.S. Government and controlled by the Commerce Department. As a 
practical matter, a TLD must be added to the ``a'' root server in order 
to be accessible by the vast majority of Internet users. Both ICANN and 
the U.S. General Accounting Office recently have confirmed that it is 
Commerce, not ICANN, which ultimately decides which TLDs will be added 
to the root server.
    Because of the undeniable U.S. Government interest in and control 
over the root server, the selection of new TLDs to add to the root must 
comply with the mandates of the Administrative Procedure Act. However, 
neither ICANN nor Commerce has recognized that the APA applies, much 
less taken any action to redress the violations of U.S. Administrative 
Law which plagued the ICANN TLD selection process last fall.
    IATA's proposal for ``.travel'' was widely embraced by the travel 
industry, with more than 75 entities submitting comments to ICANN in 
support of the new TLD. Supporters included the American Society of 
Travel Agents (``ASTA'')--the world's largest association of travel 
professionals representing over 26,000 travel agent members (primarily 
in the United States); THE Universal Federation of Travel Agents' 
Associations (``UFTAA'')--the largest federation of travel agent 
associations worldwide, representing over 48,000 travel agent members 
in 97 countries; individual travel agents and other travel agent 
associations; airlines, airline associations, airline equipment 
manufacturers, airports and airport authorities; e-commerce firms, 
hotels, railways (including Amtrak and others), travel and tourism 
organizations, and individuals. In all, over one million travel 
industry businesses around the world, either directly or through their 
recognized associations, went on the record with ICANN in support of 
IATA's ``.travel'' proposal.
    The broader business community also gave its support to 
``.travel.'' in comments to ICANN, Citibank touted IATA's experience 
and reputation, and characterized IATA's application as perhaps ``the 
single best example of how the Internet community can benefit from 
independent management of a top level domain.'' In addition, IATA's 
proposal received a nearly perfect score of 26 out of 27 possible 
points, which tied it for first place, in a study of the TLD 
applications by the Berkman Center for Internet & Society at Harvard 
Law School. That study also recommended that ``.travel'' be one of six 
new TLDs selected by ICANN.
    Virtually the only opposition to the ``.travel'' TLD came from a 
small number of travel agents who have an agenda of opposing virtually 
everything the airline industry endorses--not because it is a bad idea, 
but just because it is something endorsed by the airlines.
    Unfortunately, the significant effort and expense that IATA 
dedicated to its application did not receive treatment by ICANN meeting 
even the most basic standards of equity. At a minimum, IATA was 
entitled to fair and comprehensive consideration of its proposal. It 
received neither.
    The Administrative Procedure Act prohibits decisions which are 
arbitrary and capricious. This requires (1) that decisions be based on 
a consideration of all the relevant factors, (2) that parties are not 
discriminated against, and (3) that decisions are not based on ex parte 
influences. In addition, APA-like requirements are found in ICANN's By-
Laws, which require ICANN to act consistently, fairly and in a 
transparent manner; and the ``Memorandum of Understanding'' between 
ICANN and the Commerce Department, which requires ICANN to act in a 
manner that is reasonable, justifiable and not arbitrary.
    ICANN's treatment of IATA's ``.travel'' proposal failed to consider 
all of the relevant factors in that ICANN gave no credit for the fact 
IATA's proposal met each and every one of the nine evaluation criteria 
that ICANN had stated it would apply in judging top level domain 
applications. Instead, weeks after the applications had been submitted, 
ICANN decided to invent a tenth and previously undisclosed criterion 
called ``representativeness.'' ICANN cursorily applied this new 
requirement to IATA's proposal and, without any real consideration of 
the issue, decided that it could not find that IATA was sufficiently 
``representative'' of the travel industry to sponsor ``.travel''.
    In making this decision, ICANN made no effort to place into proper 
context the relatively de minimis opposition to ``.travel.'' ICANN 
never weighed the negative comments against the overwhelming support 
for IATA's proposal. ICANN also did not consider the fact that 
rivalries among different travel agent associations meant that some 
agents were likely to make negative statements regarding IATA's 
proposal solely because the major travel agent associations were in 
favor of the new TLD. ICANN also appears to have been influenced by ex 
parte communications to which IATA was not given an opportunity to 
respond.
    In addition, because ``representativeness'' was not one of the nine 
announced evaluation criteria, IATA had no prior warning that it need 
even address this factor in its application. IATA was denied adequate 
notice that if opposition materialized this would be assumed to 
constitute conclusive proof of a lack of ``representativeness,'' 
regardless of whether there was any merit to the allegations made in 
such opposition, and regardless of the presence of the counter-
balancing and overwhelming support for the application from throughout 
the global travel industry. In addition, IATA's treatment was 
discriminatory because most of the other 43 TLD applicants, including 
all seven of the proposals selected by ICANN, were not even subjected 
to this ``representativeness'' criterion.
    In concluding that IATA was not sufficiently representative of the 
travel industry, ICANN, by its own admission, acted too hastily to be 
able to make a reasoned and rational decision. The ICANN staff conceded 
that it ``clearly struggled'' with ``how to evaluate'' ``.travel'', it 
lacked ``the tools to figure out'' how much opposition there was to 
``.travel'', and was unable to ``give [the ICANN] board much 
information about [the] representativeness'' of ``.travel''. In 
addition, one ICANN board member acknowledged in the deliberations that 
ICANN might have reached a different conclusion had it bothered to 
investigate the matter further. Nevertheless, ICANN passed over the 
``.travel'' application essentially solely on the basis of the 
conclusion that IATA was not sufficiently ``representative.''
    ICANN was clearly overwhelmed by the number of applications it 
received for top level domains. But this is not a legitimate excuse for 
treating IATA's proposal in such a capricious manner. Given that the 
Internet community had already waited ten years since the last generic 
top level domains were added, the Internet could have waited a few 
additional weeks if this was what was required in order for ICANN to 
conduct a comprehensive analysis and reach a thorough, well-informed 
and principled decision regarding the IATA proposal as well as the 
other applications, consistent with its obligations under the 
Administrative Procedure Act. Instead, ICANN rushed to judgment, 
placing its pre-ordained schedule for issuing its decision above its 
overriding need to make decisions which were well-considered, correct 
and in compliance with the APA.
    This improvident hastiness is exemplified by the fact that ICANN 
refused to allow applicants more than three minutes to make oral 
presentations in support of their proposals, and crammed every one of 
these three-minute sessions into a single afternoon meeting of the 
ICANN board. At a minimum, ICANN needed to have provided the applicants 
with sufficient time to allow the proposers to receive and respond to 
ICANN's concerns in a meaningful fashion.
    IATA is deeply concerned about the absence of fairness and due 
process in the selection of new TLDs. Either Commerce itself should 
undertake to evaluate the TLD applications in a way that complies with 
the Administrative Procedure Act, or Commerce should direct ICANN to do 
so. If Commerce accepts ICANN's decisions without scrutiny, then ICANN 
is acting like a Federal agency and must comply with the APA. If ICANN 
does not comply, then Commerce has unlawfully delegated to ICANN full, 
unchecked control to make critical policy decisions relating to the 
development of the domain name space on the Internet.
    To date, neither ICANN nor Commerce has provided any indication of 
a willingness to correct these fundamental shortcomings in the TLD 
selection process. On December 15, 2000, IATA sent a letter to ICANN 
requesting that it reconsider its decision regarding ``.travel''. To 
our knowledge, ICANN has taken no steps towards acting on this request. 
On December 26, 2000, IATA sent letter to Commerce requesting that it 
take the necessary measures to ensure that the APA is complied with in 
the addition of the new TLDs. Commerce has not responded to this 
letter.
    ICANN's failure to consider our proposal in a fair manner affects 
more than just our organization. ICANN's conduct towards ``.travel'' 
and other applicants can only serve to stymie the growth of competition 
in the Internet. The commercial side of the Internet is still extremely 
dependent on the generic ``.com'' top level domain. To increase 
competition in a significant way, consumers and businesses must be 
provided a compelling reason to move away from this behemoth. ICANN's 
current approach provides no such reason.
    Four of the seven new top level domains selected by ICANN last 
November--``.museum,'' ``.coop,'' ``.aero'' and ``.pro''--are limited 
TLDs that serve small groups. They may be useful to the insular fields 
they are intended to serve, but are much too restrictive in scope to 
offer any real alternative to ``.com'' for the vast majority of 
businesses seeking domain names. The same is true for ``.name.'' While 
this TLD has a broad scope in that all individuals may qualify to 
register a domain name in the TLD, such domain names are personal in 
nature, and this TLD is not intended as a competitive alternative for 
businesses to ``.com''
    The other two awardees of TLDs--``.info'' and ``.biz''--also do not 
provide much of a competitive choice vis-a-vis ``.com'' the TLD 
``.info'' seeks to be as widely available as ``.com'' and the TLD 
``.biz'' connotes business. But it is difficult to see how either 
offers much more than a duplication of the existing domain name space. 
There is little value-added by these TLDs relative to ``.com,'' and 
this naturally limits their competitiveness to ``.com.''
    The gaping hole in ICANN's selections is the lack of any value-
added top level domains that target large sections of the ``.com'' 
constituency. The new TLDs are either too broad or too narrow in scope. 
To have real competition you must have effective competition, which 
means alternatives that add value to the currently available choices. 
``.travel'' is a prime example of a TLD that would add such value. A 
``.travel'' TLD would provide businesses and consumers their own 
specialized subdivision of the Internet, but it would not be restricted 
to a relatively tiny section of e-commerce, such as museums or 
cooperatives. Rather, it would encompass the entire travel industry, 
which represents the largest segment of e-commerce today, and that 
would only grow larger with its own, dedicated Internet subdivision.
    However, as long as ICANN is only willing to add generic would-be 
clones of ``.com'' and limited TLDs designed to serve miniscule sectors 
of e-commerce, an incredibly important competitive opportunity in the 
Internet domain name space will continue to be lost.
    IATA thanks the members of this subcommittee for providing it with 
this opportunity to share its perspective, and hopes that the 
subcommittee will encourage the Department of Commerce and ICANN to 
make decisions regarding new top level domain names in a manner that is 
fair, transparent and designed to maximize competition on the internet.

    Mr. Upton. Thank you.
    Mr. Hansen.

                 STATEMENT OF KENNETH M. HANSEN

    Mr. Hansen. Good morning. Thank you, Mr. Chairman. My name 
is Ken Hansen, and I am the director of corporate development 
for NeuStar. NeuStar is a neutral third-party provider of 
clearinghouse and data base administration services. NeuStar 
serves as the number plan administrator and the local number 
portability administrator for North America. Our joint venture 
with Melbourne IT, a Melbourne, Australia-based provider of 
domain name services, was recently selected by the Internet 
Corporation for Assigned Names and Numbers to operate the 
registry for the top-level domain name .biz. During the 
application process, the joint venture was referred to as 
JVTeam and is now known as NeuLevel.
    I appreciate the opportunity to appear before the 
subcommittee to discuss the ICANN selection process. NeuStar 
has been following the potential introduction of new TLDs and 
attending ICANN meetings for over 2 years prior to the issuance 
of the August 2000 RFP. NeuLevel was selected to operate the 
.biz registry. As such, NeuLevel was one of seven selected to 
operate registries for the new top-level domains.
    The criteria and objectives utilized in the selection 
process represented the culmination of many years of well 
publicized industry debate and consensus concerning the 
introduction of new top-level domains, and not solely as a 
result of the most recent ICANN application process. Having 
been directly involved in over 100 requests for proposal 
processes during my 15 years in the communications industry, I 
can say with confidence that the manner in which ICANN 
conducted the application process far exceeds measures taken by 
private companies in conducting procurement activities for 
services of similar complexity. The process utilized by ICANN 
was conducted in an open and transparent manner.
    I would like to direct your attention to the attached 
exhibit which contrasts these differences. The open process 
described in the exhibit represents a process in which all 
competitors had equal access to information, had an equal 
opportunity to prepare their responses and compete with the 
other applicants. We believe that the TLDs selected are a 
direct reflection of the evaluation criteria identified by 
ICANN and communicated to all applicants and the public in 
advance on the ICANN Web site.
    The criteria is as follows: Maintain the stability of the 
Internet, the No. 1 priority; demonstrate an effective proof of 
concept concerning the introduction of new top-level domains; 
enhance competition for registry services; enhance utility of 
the DNS; meet currently unmet needs; enhance diversity of the 
Internet; evaluate the delegation of policy formulation 
functions for special purpose TLDs; ensure the appropriate 
protections of the rights of others; and require completeness 
of proposals.
    ICANN stated clearly that its intent was to select a 
limited number of TLDs initially and to proceed carefully in 
order to ensure that stability of the Internet was maintained. 
In the new TLD application process overview, which was posted 
to the ICANN Web site, ICANN stated that ``it is anticipated 
that only a few of the applications that are received will be 
selected for further negotiations toward suitable contracts 
with ICANN.'' this statement was consistent with the resolution 
of the ICANN board on new TLDs in which the board, ``adopted 
the Names Council's recommendation that policy be established 
for the introduction of new TLDs in a measured and responsible 
manner.''
    The selected TLDs are also consistent with ICANN's desire 
to create diversity. Specifically, ICANN stated that ``the 
diversity the proposal would bring to the program would be 
considered in selecting new TLDs.'' in addition, the criteria 
for assessing new TLDs included the following criteria: the 
feasibility and utility of the different types of TLDs, the 
effectiveness of different procedures for launching TLDs, and a 
number of others. Although the qualified TLDs were not 
selected, ICANN made it clear that additional TLDs were likely 
to be introduced in the future.
    The ICANN process described above will create effective 
competition where none exists. Competition will create new 
choices for individuals, for organizations and businesses in 
terms of name availability, pricing and functionality.
    The ICANN evaluation criteria and objectives in introducing 
new TLDs were the result of an open public debate and 
widespread Internet community consensus. The market 
participants created the ICANN process, and the ICANN process 
resulted in TLD and registry operator selections that are 
consistent with those criteria and the objectives stated in the 
introduction of the selected TLDs to proceed. It is in the 
interest of the Internet community as a whole for the 
introduction of the selected TLDs to proceed while other 
applications pursue appeals through the ICANN request for 
consideration process.
    I thank the subcommittee for giving me this opportunity to 
testify. I will answer any questions you have at this time.
    [The prepared statement of Kenneth M. Hansen follows:]

     Prepared Statement of Kenneth M. Hansen, Director, Corporate 
                       Development, NeuStar, Inc.

    Good morning: My name is Ken Hansen, and I am the Director of 
Corporate Development for NeuStar, Inc., a neutral third party provider 
of clearinghouse and database administration services. NeuStar serves 
as the Number Plan administrator and the Local Number Portability 
administrator for North America. Our joint venture with Melbourne IT , 
Ltd (MIT), a Melbourne, Australia based provider of domain name 
services was recently selected by the Internet Corporation for Assigned 
Names and Numbers to operate the Registry for the Top-Level Domain Name 
``.biz''. During the application process the joint venture was referred 
to as ``JVTeam'' and is now known as ``NeuLevel''.
    I appreciate the opportunity to appear before the subcommittee to 
discuss the ICANN selection process. NeuStar has been following the 
potential introduction of new TLDs and attending ICANN meetings for 
over two years prior to issuance of the RFP.
    NeuLevel was selected to operate the Dot-Biz Registry. As such, 
NeuLevel was one of seven selected to operate Registries for the new 
Top-Level Domains (TLDs). The criteria and objectives utilized in the 
selection process represented the culmination of many years of well-
publicized industry debate and consensus building concerning the 
introduction of new Top Level Domain Names (TLDs), and not solely the 
result of the most recent ICANN application process.
    The process utilized by ICANN was conducted in an open and 
transparent manner. Having been directly involved in over one hundred 
Request for Proposal processes during my fifteen years in the 
communications industry, I can say with confidence that the manner in 
which ICANN conducted the application process far exceeds measures 
taken by private companies in conducting procurement activities for 
services of similar complexity. I would like to direct your attention 
to the attached exhibit which contrasts these differences.
    The open process described in the Exhibit represents a process in 
which all competitors had equal access to information, and an equal 
opportunity to prepare their responses and compete with other 
Applicants. We believe that the TLDs selected are a direct reflection 
of the evaluation criteria identified by ICANN and communicated to all 
Applicants and the public in advance on the ICANN website. The criteria 
is as follows:

 The number one priority was the need to maintain the stability 
        of the Internet
 Demonstrate an effective proof of concept concerning the 
        introduction of new top level domains
 The enhancement of competition for registry services
 The enhancement of the utility of the DNS
 Meet currently unmet needs
 Enhance diversity of the Internet
 Evaluate the delegation of policy formulation functions for 
        special purpose TLDs
 To ensure the appropriate protections of the rights of others, 
        and
 Completeness of proposals
    ICANN stated clearly that its intent was to select a limited number 
of new TLDs and to proceed carefully in order to ensure that the 
stability of the Internet was maintained. In the New TLD Application 
Process Overview (which was posted to the ICANN website) ICANN stated 
that, ``It is anticipated that only a few of the applications that are 
received will be selected for further negotiations toward suitable 
contracts with ICANN''. This statement was consistent with the 
Resolution of the ICANN Board on New TLDs, in which the Board ``adopted 
the Names Council's recommendation that a policy be established for the 
introduction of new TLDs in a measured and responsible manner''.
    The selected TLDs are also consistent with ICANN's desire of 
creating diversity. Specifically, ICANN stated that, ``the diversity 
the proposal would bring to the program'' would be considered in 
selecting the new TLDs. In addition, the Criteria for Assessing TLD 
Proposals included the following criteria;

 The feasibility and utility of different types of new TLDs
 The effectiveness of different procedures for launching new 
        TLDs,
 Different policies under which the TLDs can be administered in 
        the longer term,
 Different operational models for the registry and registrar 
        functions,
 Different business and economic models under which TLDs can be 
        operated;
 The market demand for different types of TLDs and DNS 
        services; and
 Different institutional structures for the formulation of 
        registration and operation policies within the TLD.
    Although some qualified TLDs were not selected, ICANN made it clear 
that additional TLDs were likely to be introduced in the future.
    The ICANN process described above will create effective competition 
where none exists today. Competition will create new choices for 
individuals, organizations and businesses in terms of name 
availability, pricing and functionality.
    The ICANN evaluation criteria and objectives in introducing new 
TLDs were the result of an open public debate and widespread Internet 
community consensus. The ICANN process resulted in TLD and Registry 
Operator selections that are consistent with those criteria and 
objectives. It is in the interest of the Internet community as a whole 
for the introduction of selected new TLDs to proceed, while other 
Applicants pursue appeals though the ICANN Request for Reconsideration 
process.
    I thank the subcommittee for giving me the opportunity to testify. 
I will now answer any questions that you may have.
                                EXHIBIT

          TYPICAL PRIVATE COMPANY RFP PROCESS vs. ICANN PROCESS
------------------------------------------------------------------------
                                    TYPICAL PRIVATE
                                      COMPANY RFP
           DESCRIPTION               PROCESS  (for       ICANN PROCESS
                                  complex service or
                                        system)
------------------------------------------------------------------------
Announcement of RFP.............  Potential bidders   Notice posted to
                                   selected and        the Internet for
                                   notified directly.  public viewing
                                  No public notice..  Expressions of
                                                       interest
                                                       requested, but
                                                       not required
Who can submit a bid?...........  Limited number of   Any company
                                   selected            permitted to
                                   companies.          submit an
                                  Those bidders the    application
                                   company feels are  Forty-seven
                                   qualified and can   complete
                                   meet needs.         applications
                                  Number of bidders    received
                                   limited.
                                  Typically 3-5
                                   proposals
                                   accepted.
Publication of the RFP..........  Sent directly to    Posted to the
                                   limited number of   Internet for
                                   qualified bidders.  public viewing
Public posting of proposals.....  None..............  Posted to the
                                                       Internet for
                                                       public viewing
Confidential information........  Proposal            Posted to the
                                   considered          Internet for
                                   confidential        public viewing
                                   document.          Confidential
                                  Not to be            information not
                                   disclosed.          to be considered
                                                       by evaluators
Public comment..................  None..............  Comment forum on
                                                       the ICANN site
                                                      Public able to
                                                       submit a comments
                                                      Applicants able to
                                                       comment on
                                                       competitors
                                                       proposals
                                                      All comments
                                                       published on the
                                                       web for viewing.
Questions concerning responses..  Private             ICANN questions
                                   correspondence      and Applicant
                                   with bidders.       answers posted to
                                  Private meetings     the ICANN site
                                   with bidders.
Evaluation results..............  Not shared with     Written evaluation
                                   the bidders or      posted to the web
                                   any outside party.  for viewing by
                                  No opportunity to    bidders and the
                                   respond or          public
                                   comment.
Decision making process.........  Private decision    Board deliberation
                                   making process.     with access to
                                  No involvement or    the public
                                   access by bidders. Live broadcast on
                                                       the Internet.
                                                       Transcripts
                                                       published on
                                                       ICANN site
Decision announcement...........  Bidders privately   Announced during
                                   notified by phone.  public meeting
                                                      Broadcast on the
                                                       Internet
                                                      Published on the
                                                       ICANN site
------------------------------------------------------------------------


    Mr. Upton. Thank you.
    Ms. Gallegos.

                   STATEMENT OF LEAH GALLEGOS

    Ms. Gallegos. It is still morning, so good morning, Mr. 
Chairman. I would like to thank the committee for the 
opportunity to be here and present our reasons for believing 
that ICANN's process for selecting new TLDs to enter into the 
USG root is detrimental to our survival and to the continued 
survival of the TLDs outside the auspices of ICANN.
    I am the president of ARNI, AtlanticRoot Network, Inc., and 
I am the manager of the .biz TLD. This top-level domain resides 
in several of the inclusive name space roots which many people 
refer to as alternative or alternate roots. The inclusive name 
space roots are root server systems that operate in the same 
manner, but independently of the Department of Commerce root 
system.
    The title of this hearing indicates your desire to ensure 
fair competition. My question is how can this be accomplished 
with ICANN's usurping of the .biz TLD from ARNI, thus stealing 
its product? Under ICANN's policy, a competitor can pay a 
$50,000 fee to have ICANN usurp our business or any other at 
their whim.
    Talk about protecting the rights of others. That rather 
negates that.
    ARNI is a small company. Our entire business at this time 
is based upon domain name registrations in our TLD. With the 
announcement by ICANN that .biz was to be handed over to 
JVTeam, now New Level, e-mail began pouring in asking if we 
were going to be closed by ICANN or if ICANN was going to take 
our TLD.
    Why didn't we apply? For a small company, $50,000 is a high 
price to pay as a nonrefundable fee that could be much better 
spent on development and infrastructure, as opposed to a 
lottery, which we considered this to be.
    Why should we have to apply to keep a business that is 
already ours? It was well-known that the board considers our 
registrants to be illegitimate and registrations to be pre-
registrations even though they are live, many with published 
commercial websites.
    And we are real, we are a business. There was no need to go 
through the ICANN process to prove what has already been 
proven, that our registries are open to public, they work, that 
the roots which do recognize them have also proven themselves 
for well over 5 years.
    Stability of the Internet. There is no reason on earth to 
consider that it would hurt stability when they have added so 
many TLDs over the past 10 years and the roots themselves that 
I am talking about have been stable for many, many years and 
they are very robust. So stability is really not a technical 
issue at all.
    The .biz TLD was created in 1995 and first resolved in eDNS 
and later the ORSC and now the Pacific roots. We are recognized 
in all the major roots, except, of course, the USG root. We 
were delegated management of.biz in 2000 and reopened the 
registry to the public for registration in the spring. We were 
able to provide registrations manually until the launch of our 
automated web-based system which had been in Beta. By the way, 
there has been over a quarter of a million dollars spent in the 
ramp-up for our .biz. We have a good chance of losing all of 
that.
    The moment the applications to ICANN were lodged, we e-
mailed every applicant for our string and notified them, using 
the contact listed on the ICANN website, that.biz already 
existed and asked why they would choose an existing TLD. We 
also posted numerous comments on the ICANN board, as that was 
the only type of communication they would receive; and we 
received no responses. We were ignored by all recipients.
    We are now faced with a substantial loss due to ICANN's 
refusal to recognize that we are real, that we exist. It is 
baffling because they obviously recognize that Image Online 
Designs .web exists and decided not to the award that string to 
Afilias as a result. Vint Cerf, who is here, stated his 
discomfort and reaffirmed later, and I have a quote in the 
written submission testimony, saying that he was uncomfortable 
with giving the .web string to another entity since IOD already 
had a functioning registry and they had existed with that 
registry for 5 years.
    Later, Mr. Kraaijanbrink's outburst seemed to be the 
typical attitude of the board, saying that, knowing all of 
that, they still supported giving that string to another 
entity.
    It is important to note that while ICANN insists that it 
has its name space and we all have ours, that the DNS is truly 
only one name space and that we all must work within that name 
space. If ICANN is successful in duplicating a TLD string in 
its root, there will be duplicate domain names, thousands of 
them. No one will know which domain they will see when keying 
an address into a browser because more and more ISPs are 
choosing to point to the so-called alternative roots, and 
hundreds of thousands of users will be affected.
    Consider what would happen if AT&T summarily took New 
York's 212 number space away from Verizon. That would be 
considered an anti-competitive act, putting Verizon out of 
business. Certainly no one would consider suggesting that AT&T 
and Verizon issue mirror 212 numbers to different customers. 
The phone system wouldn't work.
    It would be just as foolish to suggest that ICANN and 
AtlanticRoot issue mirror .biz names to different customers.
    There is no reason why there cannot be new TLDs added to 
the roots, all of them, but there is ample reason not to 
duplicate existing ones. It is not a function of the government 
to deliberately destroy existing businesses nor is it a 
function of ICANN to facilitate that destruction. It is also 
not a function of ICANN to determine what business models 
should be allowed to exist or to compete, any more than any 
other root decides policies of TLD managers or, indeed, other 
roots. The market will decide which will succeed and which will 
fail.
    Mr. Upton. That is a good point to conclude.
    Ms. Gallegos. Thank you very much.
    [The prepared statement of Leah Gallegos follows:]

 Prepared Statement of Leah Gallegos, President, AtlanticRoot Network, 
                                  Inc.

    My name is Leah Gallegos, President of AtlanticRoot Network, Inc. 
(ARNI) The BIZ TLD Registry is an entity of AtlanticRoot Network, Inc. 
I am the manager of the dot BIZ TLD. This Top Level Domain resolves in 
several of the ``inclusive name space'' roots, which many people refer 
to as alternative or alternate roots.
    As a citizen of this country, I am fortunate to be able to defend 
my right to have a small business and to not have my product taken from 
me arbitrarily by a covetous entity under agreement with the 
government. I thank this committee for providing the avenue to present 
our reasons for believing that ICANN's process for selecting new TLDs 
to enter into the USG root is detrimental to our survival and to the 
continued survival of all the TLDs outside the auspices of ICANN.
    ICANN has selected seven TLD strings to enter into the USG root 
that is controlled by the Department of Commerce. The process used for 
this selection was ill advised, badly handled and ignored the very 
premise for which ICANN was established--to preserve the stability of 
the Internet and do no harm to existing entities.
    The title of this hearing indicates your desire to ensure fair 
competition. My question is how can this be accomplished with ICANN's 
usurping of dot BIZ from ARNI, thus stealing its product? Under ICANN's 
policy, a competitor can pay a $50,000 fee to have ICANN usurp our 
business, or any other, at their whim.
    As I said earlier, ARNI is a small company. Our entire business at 
this time is based upon domain name registrations. With the 
announcement by ICANN that dot BIZ was to be handed over to JVTeam, e-
mail began pouring in asking if we were going to be closed by ICANN or 
if ICANN was going to take our TLD. Others asked if there were going to 
be duplicates of each name and who would be the legitimate registrants. 
Even more asked if their names would even resolve if ICANN ``took'' the 
TLD. The public has indicated that they are afraid now to register 
names with us and we are losing business merely on the mistaken 
assumption that ICANN has the right to take it from us.
    Why didn't we opt for the $50,000 application to be included in the 
ICANN process?
    We have been asked that question many times. There are several 
reasons.
    1. For a small company, $50,000 is a high price to pay for 
consideration as a non-refundable fee.
    2. There was little, if any, chance that we would be selected. The 
application questions were stated in such a way that it was clear we 
would have to adopt a sunrise provision and the UDRP. Those who did 
not, were not in the running and we knew that.
    3. $50,000 could be much better spent on development and 
infrastructure as opposed to a lottery--worse than a lottery. There was 
bias with this one.
    4. It is obvious that the large dollar monopolies were favored. In 
fact, they are the ones who were selected. CORE, NEUSTAR, MELBOURNE IT 
. . . We did not have a chance.
    5. It was well known that the board considers our registrants to be 
illegitimate and registrations to be pre-registrations even though they 
are live registrations, many with published commercial websites. The 
comments made by Esther Dyson and others at past meetings and 
interviews made that very clear. At the MDR meetings, our 
interpretations were emphatically crystalized by Mr. Kraaijanbrink and 
Mr. Fitzimmons, especially, and by other members in general.
    6. We feel that ICANN should honor the IANA commitment to include 
these TLDs in the USG root as was promised. There was no need to go 
through this process to prove what has already been proven, that the 
registries are open to the public, they work and the roots which do 
recognize them have also proven themselves for over five years.
    As it turned out, several board members recused themselves, leaving 
less than the required number to successfully vote on this issue. They 
voted anyway. It is also interesting to note that the board members 
(except one) waited for this recusal until after the deliberations had 
been made regarding qualifications, business models, etc. They had 
definite conflicts of interest, yet they stayed in a position to render 
opinions on which applicants would ``make the cut.'' The bias was so 
thick, even with the remaining board members, that it was easily 
visible.
    Just as visible was the obvious lack of understanding of the basis 
for adding new TLDs and the content of the applications themselves. 
Choices were made with flawed and foolish reasoning.
    And lastly, the new at-large directors had no input in the 
selection of these TLDs. This is important since those directors are 
inclined to be more objective and are more concerned with domain name 
holders and small businesses.
    It is crucial to understand, at this point, just what the status of 
ICANN is versus the rest of the Internet with regard to TLDs. ICANN 
manages three TLDs at present--dot com, dot net and dot org. They are 
under an agreement with the government to make recommendations to the 
root manager, the Department of Commerce, regarding the entrance of new 
TLDs to the root.
    By comparison, ARNI is the manager of some TLDs which are homed in 
an inclusive name space (or alternative) root managed by another 
entity. The inclusive name space roots were developed with authority 
from IANA. If ARNI wishes to enter more TLDs into that root, then it 
must petition that root manager, etc. If there are no conflicts (pre-
exiting TLDs) and technical standards have been met, the root manager 
will then most likely enter the requested new ones. Both the root 
manager(s) and the TLD operators cooperate in determining the existence 
of any conflicting TLD strings. If the requested TLD string is found to 
exist in another root, then the prospective TLD manager could negotiate 
with the existing one or withdraw the request. Often, the root 
manager(s) will assist in facilitating potential negotiations. There is 
no charge to the potential TLD operator to make this determination. 
With the WHEREIS TLD Finder tool, it is not difficult to ascertain 
whether there are conflicts with a new TLD request. This tool can be 
found at http://www.pccf.net/cgi-bin/root-servers/whereis-tld. Requests 
for the entry of new TLDs are accepted on a first come, first served 
basis.
    In addition to the TLDs which ICANN manages, there are in excess of 
240 ccTLDs which are included in the root, but managed by other 
entities and under different policies. In other roots, there are TLDs 
included which are not homed in those roots, but included in order to 
allow users to see all known non-colliding TLDs. Therefore, ICANN 
could, and should, do the same thing and include all existing non-
colliding TLDs for the benefit of users world wide and still add new 
ones under their own overall management. Technically, it is a simple 
task that has been proven with the addition of the ccTLDs. There is 
absolutely no need to duplicate what is already in place.
    The dot BIZ TLD was created in 1995 and resolved in the eDNS and 
later in ORSC the (Open Root Server Confederation). We are recognized 
in all the major roots, except, of course, the USG root. We were 
delegated management of dot BIZ in 2000 and re-opened for registration 
in the spring. We had an automated registration system in beta at that 
time, but were able to provide registrations manually until the launch 
of the automated web-based system. That system was publicly launched in 
October. The re-delegation was made and the registry was open well 
prior to any announcement of applications for the characater string 
(BIZ) with ICANN. Again, dot BIZ has been in existence at least as long 
as dot WEB.
    The moment the applications to ICANN were lodged, we e-mailed every 
applicant for our string and notified them, using the contact listed on 
the ICANN webiste, that .BIZ already existed and asked why they would 
choose an existing TLD. We also posted numerous comments on the ICANN 
board, since they would accept no communication in another form 
regarding TLDs. We also posted to many public mail lists questioning 
why ICANN would consider duplicating existing TLDs, especially dot BIZ. 
We received no responses from anyone. We were ignored by all 
recipients.
    ARNI was doing just fine with dot BIZ registrations prior to the 
selection process for new TLDs by ICANN. There were no conflicts. We 
are now faced with a substantial loss due to ICANN's refusal to 
recognize that we exist. It is baffling because they obviously 
recognize that IOD's dot WEB exists and decided not to award that 
string to Afilias as a result. Current Chairman Vint Cerf stated his 
discomfort and reaffirmed later saying, ``I continue to harbor some 
concern and discomfort with assigning dot web to Afilias, 
notwithstanding the market analysis that they did, which I internally 
understand and appreciate. I would be personally a lot more comfortable 
if we were to select a different string for them and to reserve dot 
web.'' (See Appendix A, 2:17). Without his intervention, the board 
would have handed dot WEB over to IOD's competitor, Afilias, another 
900 pound gorilla, and IOD would be making the same arguments I am 
making today. The board did ``the right'' thing with dot WEB, but has 
ignored dot BIZ.
    The video clip maintained at the Berkman Center (http://
cyber.law.harvard.edu/scripts/
rammaker.asp?s=cyber&dir=icann&file=icann-111600&start=6-16-00) clearly 
illustrates the reluctance of Vint Cerf to award the TLD to any entity 
other than its current operator. It also illustrates the unreasonable 
attitude typical of most of the board to deliberately ignore any entity 
that is not within the ICANN framework. The video would be entertaining 
if it were not so important an issue at stake. In that sense, it is 
rather sad, and very frustrating to hear the ping pong ball going back 
and forth with people's futures at stake.
    Why, then, has ICANN decided that it would not usurp IOD's dot WEB, 
but would do so with our dot BIZ?
    Mr. Kraaijanbrink's outburst (Exhibit A 3:3): ``Well, I would not. 
I believe that we have discussed them considerably. The Afilias on 
.web. And, from their proposal, and from the discussions, I believe 
that we should award dot web KNOWNING that IOD has been in operation as 
an alternative root with dot web for some time. But I am reminded, and 
I fully support what Frank Fitzsimmons said a few minutes ago that 
taking account of alternatives should open an unwanted root to pre-
registration of domain names and domains. So I am fully aware of what I 
am doing in voting in support for Afilias dot web.''
    Note that this board member refuses to recognize not only the 
legitimacy of IOD's TLD registry, but even considers their registrants 
to be illegitimate, calling them pre-registrations. There are no pre-
registrations in any of our TLDs or in IOD's dot WEB. They are live and 
resolve. It is this very attitude that has prevailed throughout ICANN's 
deliberations and decisions regarding the selection and adoption of new 
TLDs. It is also due to this posture that ICANN will irreparably harm 
our business and that of any other TLD operator whose product it 
chooses to usurp.
    At these meetings in Marina del Ray, while attending via webcast, I 
posted questions to the ICANN Board of Directors, raising the issue of 
duplication and was ignored, even though one of the questions was read 
aloud to them. At the board meeting, the issue was never addressed at 
all. I did receive an acknowledgment from Board member, Vint Cerf, 
saying he would pass the message along. Others had been faxing him 
regarding this issue steadily during those meetings. If they did not 
``know'' that dot BIZ existed, even after the postings and email, 
something is wrong. They are supposed to ``coordionnate technical 
parameters'' and they haven't even found the technical parameters yet.
    It is important to note that while ICANN insists that it has its 
name space and we all have ours, that there is truly only ONE name 
space and that we all must work within it. If ICANN is successful in 
duplicating a TLD string in its root, there will be duplicate domain 
names--many thousands of them. No one will know which they will see 
when keying an address into a browser because more and more ISPs are 
choosing to point to inclusive name space roots. Hundreds of thousands 
of users will be effected. One TLD operator has indicated an increase 
of 30% per month in the use of one of his servers, which happens to be 
one of the ORSC root servers.
    As an analogy, consider what would happen if AT&T summarily took 
New York's 212 number space away from Verizon. That would be considered 
an anti-competitive move, putting Verizon out of business. Certainly no 
one would consider suggesting that AT&T and Verizon issue mirror 212 
phone numbers to different customers. The phone system wouldn't work!
    It would be just as foolish to suggest that ICANN and AtlanticRoot 
issue mirror dot BIZ names to different customers.
    How can this not harm us? Our TLD has been in existence for over 5 
years. Our registrants have e-commerce businesses operating using dot 
BIZ domains. We have approximately 3,000 registrants and growing daily. 
Those businesses will be destroyed because of the fracture ICANN will 
cause with this duplication. In addition, if ICANN is allowed to do 
this now, what will happen to all the other TLDs when ICANN decides to 
add more in the future? We will then be talking about hundreds of 
thousands of domain name holders and thousands of businesses and 
organizations being disenfranchized--ruined.
    Why do the inclusive name space roots not duplicate dot com, net or 
org? They could. They do not for a couple of reasons. One is that it is 
understood that duplication in the name space is not in the best 
interests of the Internet or its users. As a matter of fact doing so is 
detrimental. It is a cooperative effort to keep the name space uniform 
and consistent. The second is that they all recognize the prior 
existence of the USG and ccTLDs and include them in their roots. So why 
is ICANN doing the opposite?
    If there were over one hundred TLDs available to the public and 
included in the USG root, we would see not only a competitive free 
market, but the disappearance of many of the disputes and speculation 
present today. The so-called scarcity of domain names has been created 
by the delay in entering more TLDs into the USG root. The simplest 
solution is to recognize the existing TLDs before entering new ones. 
There is no reason why there cannot be new TLDs added to the root, but 
there is ample reason not to duplicate existing ones. It is not a 
function of the government to deliberately destroy existing businesses, 
nor is it a function of ICANN to facilitate that destruction. It is 
also not a function of ICANN to determine what business models should 
be allowed to exist or to compete, any more than any other root 
dictates policies of TLD managers. The market will decide which will 
succeed and which will fail.
    The MOU between ICANN and the government clearly states in its 
prohibitions, Section V:D:2. ``Neither Party, either in the DNS Project 
or in any act related to the DNS Project, shall act unjustifiably or 
arbitrarily to injure particular persons or entities or particular 
categories of persons or entities.''
    ICANN has acted both arbitrarily and unjustifiably in deliberately 
ignoring our existence as a viable registry offering legitimate, 
resolving domain names to the public.
    Whether ICANN/DoC chooses to include the pre-existing TLDs in the 
USG root or not is one thing. Whether they choose to ignore their 
existence and threaten them with destruction via abuse of power is 
another.
    By moving ahead with their process they have created dissension, 
confusion and harm to our business and our registrants. They are 
eliminating true competition by assuming authority over the world's 
name space rather than remaining focused on their own narrow 
responsibility. They have shown no respect for our existence or that of 
all the other TLD operators who have the right to operate their 
businesses or organizations and they threaten, by their actions today, 
to crush them as they appear to intend to crush us. We must also 
consider the effect this situation is having on countries around the 
world. More and more of them are considering alternatives to the USG 
root and some have already moved to create them or use the existing 
roots; all because ICANN will not recognize the fact that they manage 
just one set of TLDs in one root.
    Because ICANN currently enjoys the largest market share in terms of 
those ``pointing'' to the USG root, it has a commensurate 
responsibility to ensure fairness in a free market. It was the 
government that determined the Internet should be privatized, yet it 
has allowed ICANN to assume a governmental attitude toward the 
Internet. It was formed at the order of the government, and remains 
under the oversight of the government, yet it competes against small 
business in what should be a free market with the power to usurp the 
businesses it is competing against, without due process or 
compensation. It has invited applicants to do so.
    With regard to their so-called ``new'' TLDs, ICANN threatens not 
only small businesses, but, as a result of their arrogant, ill 
conceived actions, actually threatens the world's economy and the 
stability of the Internet--in direct conflict with the agreement they 
signed with the United States government.
    We feel that ICANN, under the oversight of DoC, has acted 
completely irresponsibly and probably illegally. DoC will do the same 
and has stated it will most likely rubber stamp any decisions made by 
ICANN. We feel they have breached their agreement by harming our 
business and will potentially do so with any other duplications placed 
in the USG root. In addition, we believe that DoC will, and ICANN has, 
abused their power and that this issue falls under the Administrative 
Procedures Act (APA). We have filed a Petition for a Rulemaking with 
the NTIA, which is attached as Exhibit B.
    It is our hope that this committee will intervene to ensure that 
there is fair play and consideration for existing businesses; that the 
entry of duplicate TLDs in the USG root will not be permitted and that 
the promises made by IANA will be kept.
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    Mr. Upton. Professor Froomkin.

                STATEMENT OF A. MICHAEL FROOMKIN

    Mr. Froomkin. Mr. Chairman and members of the subcommittee, 
my name is Michael Froomkin. I would like to thank the 
subcommittee very much for inviting me to appear here today.
    I am a law professor at the University of Miami, 
specializing in the law of the Internet. I have published more 
than 20 papers on the subject of Internet-related topics.
    Five points. No. 1, the shortage of gTLDs today is entirely 
artificial and easily curable. Experts including Dr. Cerf, as 
far as I know, agree there is no technical obstacle to the 
creation of at least thousands and possibly tens of thousands, 
hundreds of thousands, maybe millions of new TLDs. The only 
issue is rolling them out in some sequence where you don't do 
them all the same day.
    Removing the shortage would have competitive benefits in 
each of the three markets identified in my prepared statement, 
the registry, registrar and market for domain names. The 
spillover effects would benefit e-commerce and, thus, the 
entire economy.
    Now why do we have this shortage now? We have it because 
the people with the power to fix it, the Department of 
Commerce, has simply chosen not to do so, instead have 
delegated the question to ICANN which they see as a private 
body and they say is a standards body. I am going to explain 
that it is not.
    ICANN says it is a standards body, but in this case it is 
not acting as one nor as a technical coordination body. It 
justifies its very tentative approach by saying it is a proof 
of concept. But it hasn't told us what the concept is it is 
trying to prove. It hasn't told us when the test is going to be 
evaluated or how we tell if it is a success.
    The concept can't gTLD creation itself because we know 
there is no rocket science to the mechanics of that. You just 
type a few lines to a computer across the river here in 
Virginia and it just takes a few minutes and then it propagates 
naturally through the design of the Internet.
    Just how arbitrary ICANN was in this past process can be 
illustrated by two simple stories. One is it rejected the 
.union proposal based on unfounded last-minute speculation that 
maybe the international labor organizations that were part of 
the union movement somehow aren't democratic enough. It also 
rejected something called .iii because somebody on the board 
thought it was hard to pronounce. But that had never been a 
criterion and ever, ever mentioned before that very last 
minute.
    Now why is ICANN acting in this arbitrary fashion? Why did 
it put in this limit on there? Why did it rush? I think the 
reason is--and despite its very nice rhetoric and the very 
welcome presence of genuine Internet visionaries such as Dr. 
Cerf--that ICANN isn't a standards body. It isn't coordinating 
anything. It doesn't act by consensus of all the affected 
parties, just for the parties who get to have a seat at ICANN's 
table. It doesn't listen much to the public or end users. It 
welcomes their comments and then ignores them. In fact, what 
happened is ICANN skipped one of the goals in the white paper.
    In July 1999, then ICANN Chair Esther Dyson came before 
this committee's Subcommittee on Oversight and Investigation 
and assured that ICANN's highest priority was to elect nine at-
large board members, exactly as ICANN had committed to do to 
the Department of Commerce when it was set up. They didn't do 
it. They reneged. Instead, they decided to only have five 
elected. Then they decided to have another study and take those 
five away and maybe zero-base it, think it all over again. And 
who knows? Meanwhile, they amended their timetable to rush the 
selection of new gTLDs so all the decisions would be made 
before even those five elected people got to be at the table.
    The subsidiary organizations like the Names Council and 
domain name supporting organizations have charters right now 
that exclude the participation of individuals. As an 
individual, you can't be a member of any of those things. It is 
not surprising, therefore, that when ICANN defines its 
consensus it gets the view of only a narrow part of the 
Internet.
    In my prepared statement I have explained in some detail 
why it is that Commerce is going to have to act in conformity 
with the APA and the Constitution. You can say ICANN is 
private. Then there is a nondelegation problem. You can say it 
is public, and then the APA ought to apply. I am not going to 
repeat that here. I know your long-suffering staff has actually 
read that in detail, and I am real impressed with them.
    Let me talk about what ICANN ought to do and maybe you 
might do to help them. It seems to me the right thing for ICANN 
to do to maximize competition and to be fair is to accept all 
applicants who meet a preannounced, open, neutral and objective 
standard of competence. You can define competence in lots of 
interesting ways. Financial might be part of that. But it 
shouldn't be making case-by-case allocations decisions and 
amateurish comparative hearings. It is just not right, and it 
doesn't work, and they have shown us that.
    Let me also in my last minute suggest to you an alternate 
approach to gTLD creation, one that would certainly enhance 
competition and would take its inspiration from the fundamental 
design of the Internet and from major league sports. The 
Internet was designed to continue to function even if large 
parts of the network sustained damage. The Internet network 
design avoids, whenever possible, the creation of single points 
of failure. But when it comes to policy, ICANN right now is 
that single point of failure.
    The solution to the problem, therefore, would be to share 
out the policy function and leave in ICANN only the 
coordinating functions. What it would do then would be to keep 
a master list of TLDs to prevent collisions, make sure no 
registries ever try to run the same string, fix an annual quota 
of new gTLDs, run an annual gTLD draft, just like the pros do 
with the college athletes, and coordinate the new process so 
the gTLDs come on stream in an orderly way and not all at once.
    Each of ICANN's policy partners, and they could be groups 
from all around the world--government, civil society groups, 
corporations--you can have a real healthy mix, would get some 
draft choices, some would get one, some might get more, and 
then ICANN would randomly or otherwise assign them the picks 
and work the system.
    Thank you very much.
    [The prepared statement of A. Michael Froomkin follows:]

Prepared Statement of A. Michael Froomkin, Professor of Law, University 
                         of Miami School of Law

    Mr. Chairman and members of the Subcommittee, my name is Michael 
Froomkin. I would like to thank the Subcommittee for inviting me to 
appear today at this hearing on ``Is ICANN's New Generation of Internet 
Domain Name Selection Process Thwarting Competition?''
    I am a law professor at the University of Miami, specializing in 
the law of the Internet. I have published more than 20 academic papers 
on Internet governance, ICANN, e-commerce, cryptography, and privacy. I 
maintain a web site at http://www.law.tm where my articles on these and 
related topics can be found. I am co-director of ICANNWatch.org, an 
independent watchdog group that comments on ICANN policies. Two years 
ago the World Intellectual Property Association (WIPO) appointed me to 
serve as the sole public interest representative on its ``Panel of 
Experts'' that advised WIPO on its report on The Management of Internet 
Names and Addresses: Intellectual Property Issues. I am also a director 
of disputes.org which, in partnership with eresolution.ca, has been 
involved in dispute services provision under ICANN's UDRP.
    My role in ICANN's selection of new global Top Level Domains 
(gTLDs), however, is strictly that of an academic observer and 
commentator, and sometime participant in public comment fora. I have no 
past or present financial relationship with any gTLD applicant. My goal 
is to advance what I understand to be the public interest by advocating 
policies that increase access to the Internet by enhancing free speech 
and promoting competition. Vigorous competition makes for a healthy 
marketplace of ideas, and also for a healthy market, as it lowers 
prices and improves the quality of service - thus enhancing access to 
the Internet and to Internet-based information.
                          summary of testimony
    I have four basic points that I would like to draw to your 
attention:
    1. ICANN's decision to artificially restrict new gTLDs to a small 
number of arbitrary selections, further hemmed in by ICANN's insistence 
on anti-competitive terms of service, has negative consequences for 
competition in three markets: the market for registry services, the 
market for registrar services, and the market for second-level domains 
(including the aftermarket), with spill-over effects on e-commerce 
generally. Each of these markets would be more competitive if ICANN and 
the Department of Commerce were to lift their limit on new gTLDs and 
accept all competent applicants according to open, neutral, and 
objective criteria. It should be noted, however, that the negative 
consequences for competition I describe below would be even worse if 
there were no new gTLDs at all. This is, in summary, a situation where 
the ordinary rules of supply and demand operate. It is axiomatic that 
competition increases if one removes barriers to entry.
    2. The shortage of gTLDs today is entirely artificial, and easily 
curable. There is a great pent-up demand for short and attractive 
second-level registrations in new gTLDs but experts agree there is NO 
technical obstacle to the creation of at least thousands and possibly 
tens or hundreds of thousands of new gTLDs, or even more. The current 
shortage exists only because the body with the power to create new 
gTLDs--the U.S. Department of Commerce--has not yet chosen to do so. 
The Department of Commerce--in what I have argued is a violation of the 
Constitution and/or the Administrative Procedures Act \1\--has chosen 
to delegate the power to make an initial recommendation regarding new 
gTLDs and the registry operators to the Internet Corporation for 
Assigned Names and Numbers (ICANN). Commerce has also delegated to 
ICANN the power to negotiate restrictive contractual terms with these 
registry operators--negotiations that were due to conclude by Jan. 1, 
2001, but are currently continuing in secret.
---------------------------------------------------------------------------
    \1\ A. Michael Froomkin, Wrong Turn in Cyberspace: Using ICANN to 
Route Around the APA and the Constitution, 50 Duke L.J. 17 (2000), 
available online http://www.law.miami.edu/froomkin/articles/icann.pdf .
---------------------------------------------------------------------------
    3. ICANN purports to be a technical standards or technical 
coordination body, but it did not act like one in this process, as it 
made arbitrary allocation decisions. When it came to the creation of 
new gTLDs, rather than act as a technical standards body and promulgate 
a standard under which all technically and financially qualified new 
registry operators could qualify, ICANN instead decided to act like an 
allocation authority for its artificially limited resource. ICANN 
arbitrarily limited the number of new gTLDs it would approve to under 
ten. ICANN then solicited $50,000 applications from prospective 
registries. Instead of considering the applications solely on technical 
merit, or indeed on any other set of neutral and objective criteria, 
ICANN selected seven winners on the basis of a series of often 
subjective and indeed often arbitrary criteria, in some cases applied 
so arbitrarily as to be almost random.
    I have no reason to believe that the seven TLDs selected are bad 
choices; but given ICANN's arbitrary procedures I also have no doubt 
that many other applicants would have been at least as good. The 
striking arbitrariness of the ICANN decision-making process is 
illustrated by the rejection of the ``.union'' proposal based on 
unfounded last-minute speculation by an ICANN board member that the 
international labor organizations proposing the gTLD were somehow 
undemocratic. The procedures ICANN designed gave the applicants no 
opportunity to reply to unfounded accusations. ICANN then rejected 
``.iii'' because someone on the Board was concerned that the name was 
difficult to pronounce, even though the ability to pronounce a proposed 
gTLD had never before been mentioned as a decision criterion.
    4. The correct strategy for maximizing competition would have been 
to accept all applicants who met a pre-announced, open, neutral, and 
objective standard of competence, rather than to pick and choose among 
the applicants on the basis of the ICANN Board's vague and inconsistent 
ideas of aesthetic merit, market appeal, capitalization, or experience. 
As a result of its relationship with the Department of Commerce, ICANN 
is a state actor. Accordingly, its arbitrary and capricious decisions 
violate both the APA and the Due Process Clause of the Constitution. 
Rubber-stamping of its decisions by the Department of Commerce will 
only make these violations explicit, since the U.S. government would 
essentially endorse both ICANN's practices and its conclusions. 
Alternately, ICANN might be converted into a true technical 
coordination body, whose main functions were to set quotas for new gTLD 
creation, to prevent TLD name collisions by maintaining a master list, 
and to coordinate the management of parallel TLD creation processes by 
public and private policy partners around the globe.
 i. basic principles of supply and demand apply in the relevant markets
    Two principles should shape any analysis of the competitive effects 
of ICANN's gTLD selection process: (1) Careful definition of the 
relevant markets; (2) An understanding that each of these markets obeys 
the normal laws of supply and demand, and that despite attempts by some 
to obfuscate the issues, in each of these markets there are at most 
only very minor and easily surmounted technical obstacles to allowing 
normal market forces to operate.
    Terminological note: A ``registrar'' is a firm that contracts with 
clients (``registrants'') to collect their information and payment in 
order to make a definitive and unique entry into a database containing 
all domain names registered in a top-level domain (TLD). This database 
is maintained by a ``registry.'' Top-level domains are sometimes 
grouped into ``generic TLDs'' (gTLDs), which are currently three- or 
four-letter transnational domains, and ``country code TLDs'' (ccTLDs) 
which are currently two-letter TLDs. The ``root'' is the master file 
containing the authoritative list of which TLDs exist, and where to 
find the authoritative registries that have the data for those TLDs. 
Registrants typically register second-level domains (e.g. myname.com), 
but sometimes are limited to third-level domains (e.g. myname.
genericword.com).
The Three Relevant Markets
    There are at least three markets affected by ICANN's decisions 
relating to the creation of new gTLDs: the market for registry 
services, the market for registrar services, and the market for domain 
names (including the secondary market). This last market has spillover 
effects on e-commerce generally. In order to examine the overall 
competitive effects of ICANN's recent actions relating to gTLDs, it is 
important to understand what those three markets are and how the supply 
of new gTLDs affects them.
    (1) The market for registry services. For technical reasons, each 
gTLD has a single registry. A single registry can serve more than one 
gTLD, but under the current architecture having multiple registries 
serve a single gTLD creates potential problems that most internet 
engineers would prefer to avoid. A registry maintains the authoritative 
database containing registration information for a given TLD. This 
database includes the name of the second level domain (SLD) [e.g. the 
``miami'' in ``miami.edu''], the registrant's contact information, and 
the information about which nameservers carry the authoritative data 
that allows users to resolve the domain name to an IP number.
    Currently, pursuant to an agreement between NSI and the US 
Department of Commerce,\2\ NSI (Verisign) is the single monopoly 
registry for the lucrative .com, .org, and .net domains. That agreement 
also set a fixed $6/year price per registration that the registry may 
charge to registrars,\3\ which they then pass on to registrants. There 
is currently no competition in this market, although when Verisign's 
exclusive rights lapse there may be some sort of bidding process 
instituted to decide who will run the registry in the future. Verisign 
also runs a registrar, which has competitors. Under Verisign's 
agreement with the Department of Commerce, Verisign soon must divest 
itself of either its registry or its registrar business in order to 
benefit from a contractual opportunity to extend its registry monopoly 
by four years.
---------------------------------------------------------------------------
    \2\ DoC-NSI Cooperative Agreement, Amendment 19, Sec. I.B.10 (Nov. 
4, 1999), http://www.icann.
org/nsi/coopagmt-amend19-04nov99.htm .
    \3\ Paragraph 5.2(b) of the Registry-Registrar Agreement, required 
by ICANN of every registrar, states that ``Registrar agrees to pay NSI 
the non-refundable amounts of $6 United States dollars for each annual 
increment of an initial domain name registration and $6 United States 
dollars for each annual increment of a domain name re-registration 
(collectively, the ``Registration Fees'') registered by Registrar 
through the System.'' http://www.icann.org/nsi/nsi-rla-04nov
99.htm .
---------------------------------------------------------------------------
    Verisign has just announced a planned divestiture of its registrar. 
As a result of this divestiture, competition for registry services in 
.com, .org. and .net--and the legal wrangles over intellectual property 
rights it will engender--remains far in the future. Meanwhile, 
Verisign's monopoly registry will continue to require its $6 per year 
payment from every registration in .com, .org, and .net--a number that 
is probably well over the market-clearing price, and indeed is greater 
than the prices projected by many registry applicants to ICANN.
    Since the price charged to registrars by Verisign is fixed for the 
time being by an agreement that ICANN lacks the power to vary, ICANN's 
ability in the short and medium term to enhance competition in the 
market for registry services turns on its willingness to recommend that 
the Department of Commerce create attractive competitors to the exiting 
gTLDs. If enough gTLDs with attractive names are created, and if the 
registries are free to set prices and policies as the market demands, 
this should create pressure on the price charged to registrants. Given 
that there is already substantial competition among registrars and that 
the market price of domains in gTLDs is already as low as $9.99 per 
year, the $6 being charged annually by Verisign becomes a very 
significant part of the total cost of a registration in the TLDs for 
which it is a registry. It is almost certain that having multiple 
attractively named gTLDs would promote price and service competition 
that would work to the advantage of the end-user.
    As new gTLDs are created, each will have its own registry. Indeed, 
what ICANN really did at its LA meeting was to select registries from 
among the applications, in which the registry's proposed gTLD was only 
one of several factors that ICANN considered. ICANN, as the Department 
of Commerce's delegate, is currently negotiating contract terms with 
these registries. Despite ICANN's obligation under paragraph 4 of its 
Articles of Incorporation to use transparent procedures in conducting 
its affairs ``to the maximum extent feasible'' those negotiations have 
been completely secret, and we know only what was in the proposals 
submitted by the would-be registries. The absence of this information 
makes a precise discussion of the effect of the new gTLDs difficult. 
One can, however, make informed speculation based on the content of the 
proposals selected by ICANN.
    In order to produce maximum price and service competition in the 
registry market, ICANN and the Department of Commerce would have to 
approve a large number of attractively named gTLDs. The registries 
would have had to have the freedom to adopt pricing and registration 
policies of their own, based on market conditions, rather than having 
their business plans selected and enforced by ICANN. The proposals that 
ICANN has stated it intends to send to the Department of Commerce do 
not appear to be likely to create the optimal amount of competition 
with Verisign. The creation of the seven new gTLDs proposed by ICANN 
will introduce competition to the market for registry services, but 
this will be less than the optimal amount, probably substantially less, 
for three reasons: (1) the small number of relatively open new gTLDs, 
(2) the actual names selected, and (3) the restrictive conditions that 
the registries and associated registrars may be contractually obligated 
to impose on the public.
    Small Number. For technical reasons, each registry will have a 
monopoly over the gTLD(s) it controls. The seven gTLDs selected by 
ICANN are .aero, .biz, .coop, .info, .museum, .name and .pro. Of these 
seven proposed gTLDs, three--. aero, .coop, and .museum--will limit 
themselves to a very select group of potential registrants; their 
effect on the overall competitive market will therefore be quite 
trivial. The other four--.biz, .info, .name, and .pro--will have much 
broader charters, and their competitive impact should therefore be 
greater also.
    Names Selected. In the view of many observers, the gTLDs ICANN 
selected are not the ones most calculated to meet registrants' desires. 
Ted Byfield's comprehensive article, ``Ushering in Banality'' \4\ 
quotes BBC Online as saying ``The net's new domain names may do little 
to open up the internet and the range of names that people can pick.'' 
My personal guess, and it is only a guess, is that the pent-up demand 
for attractive names is sufficiently strong that there will be 
significant take-up in the new open gTLDs. That is not to say, however, 
that the take-up would not be greater, and registrant satisfaction 
higher, if there were a greater variety of choices available.
---------------------------------------------------------------------------
    \4\ Ted Byfield, Ushering In Banality, Telopolis, http://
www.heise.de/tp/english/inhalt/te/4347/1.html .
---------------------------------------------------------------------------
    Restrictive Conditions. Of the four relatively open gTLDs ICANN 
selected, both .pro and .name will restrict registrants to third-level 
domains, potentially lessening their attractiveness. As we do not know 
what conditions are currently being negotiated between the registries 
and ICANN, we can only speculate as to what conditions ICANN will 
impose on them. It seems likely that in general the registries will not 
be fully free to compete on terms of service, as they will be required 
to adhere to ICANN's controversial dispute resolution policy, by which 
ICANN requires every registrant to agree to an adhesive third-party 
beneficiary agreement promising to arbitrate disputes initiated by any 
trade or service mark owner in the world-before a tribunal chosen and 
paid for by the mark holder. It appears that both .biz and .info will 
be hampered by restrictive pre-registration policies that will give 
substantial preferences to trademark holders over start-ups and other 
potential registrants. Why the Australian makers of ``computer'' brand 
socks should have priority right to register computer.biz, or how this 
enhances competition for computers (or socks) is not evident.
    Additional competitive issues raised by ICANN's hostility to 
``alternate'' or ``non-legacy'' roots and registries. One other factor 
shaping the market for registry services is ICANN's apparently deep-
seated hostility to ``alternate'' or ``non-legacy'' registries. ICANN's 
discrimination against these very minor competitors (measured by market 
share) appears anti-competitive. It was striking that in the beginning 
of the first paragraph of its list of criteria for evaluating 
applications for the new gTLDs, ICANN warned applicants that any 
application which ICANN found could ``create alternate root systems'' 
would be rejected.\5\ Note also that in one of a series of agreements 
between Verisign (then NSI), the Department of Commerce, and ICANN, 
NSI--probably the only company then capable of deploying an alternate 
root with instant worldwide acceptance--promised the Department of 
Commerce that it would not deploy alternative DNS root server 
systems.\6\
---------------------------------------------------------------------------
    \5\ ICANN, Criteria for Assessing TLD Proposals para. 1 (Aug. 15, 
2000), http://www.icann.org/tlds/tld-criteria-15aug00.htm .
    \6\ DoC-NSI Cooperative Agreement, Amendment 19, Sec. I.B.4.E. 
(Nov. 4, 1999), http://www.icann.
org/nsi/coopagmt-amend19-04nov99.htm
---------------------------------------------------------------------------
    There are technical reasons why it is highly desirable, at least 
for most people most of the time, to have a single common root. 
``Splitting the root'' is indeed anathema to Internet traditionalists. 
On the other hand, the alternate roots currently deployed and in use by 
a small fraction of Internet users appear to harm no one. As a 
technical coordination body, ICANN's hostility to these small 
independent registries may therefore seem surprising. It is the case, 
however, that ICANN derives a major part of its current and planned 
revenue from registrars or registries that contract with it in order to 
be listed in the Department of Commerce's so-called ``legacy'' root, 
and that the creation of new ICANN-affiliated gTLD registries could 
increase this revenue stream. In the relatively unlikely event that the 
alternate registries were to acquire a substantial market share 
independent of the legacy root, they would not only compete with the 
registries that have contracted with ICANN, but would strike at the 
financial and political foundations of ICANN's continued existence. 
This financial interest may not be irrelevant to the legal consequences 
of ICANN's insistence that registries who deal with it abjure 
alternatives and competitors.
    (2) The market for registrar services. Where once there was a 
monopoly, there is now cut-throat competition in the market for 
registrar services. Prices have dropped very substantially as a result. 
A recent report stated that NSI's market share for last year had fallen 
to less than 60% of the total for the open gTLDs, with its next 
competitors, Register.com at 11.5% BulkRegister.com at 6.5%; 
Tucows.com, Inc. at 5.9%; and CORE Internet Council of Registrars at 
3.5%. More than 50 competitors shared the remaining 14% of the 
registrations business last year. (I have not considered whether there 
is cross-ownership of registrars by registries or others, and it is 
possible that this may cut against what appears on the surface to be 
healthy competition.)
    The introduction of new gTLDs, several of which will be available 
to be marketed by multiple registrars, should increase competition in 
this market further, although again competition might be enhanced even 
more by a larger supply. Registrars need product to sell, and the 
introduction of new gTLDs provides that. Furthermore, NSI's advantages 
in both branding and automatic renewal deriving from its former 
monopoly position, will be absent in the new TLDs.
    (3) The market for domain names (including aftermarket). It is an 
article of faith among Internet entrepreneurs that possession of a good 
domain name is a necessity for an Internet startup. Many traditional 
firms also consider the acquisition of a memorable or short domain name 
to be of strategic importance. Recently, for Internet startups, 
possession of a ``good'' name was seen as a major asset--reputedly 
enough in some cases to secure venture financing.
    For some time now, however, it has also been an article of faith in 
the Internet community that ``all the good names are taken'' Recently 
it has seemed as if simply all the names that were a single word were 
taken. This apparent shortage, especially in .com, has driven firms 
seeking catchy names into the aftermarket. There does appear to be a 
reasonably large stock of names in the existing gTLDs being held by 
domain name brokers for resale in the aftermarket. Prices are very 
variable. Although few firms paid millions of dollars like the 
purchasers of business.com, and loans.com, it appears that at least 
until the .com bubble burst, the shortage of attractive names in .com , 
and the resulting need to purchase them at high markups in the 
aftermarket created what amounted to a substantial ``startup tax'' on 
new businesses.
    In this respect, it might seem that the creation of new gTLDs can 
only be good for competition as it will increase supply and thus drive 
down prices. And indeed, supply will increase. Unfortunately, of the 
new gTLDs, only .biz and maybe .info are likely to be of attractive to 
the majority of startups and other Internet newcomers. Because there 
are only two such domains, and because there is no easily foreseeable 
date at which additional gTLDs might become available, there is a 
substantial risk of a speculative frenzy in which domain name brokers, 
cybersquatters, and amateur arbitragers all seek to register the catchy 
names that have not already been snapped up by trademark holders who 
took advantage of their pre-registration period.
    The surest way to drive down and keep down the price of domain 
names, thus eliminating the ``startup tax'' and enhancing the ability 
of new firms to enter new markets and incidentally greatly reducing, 
perhaps even almost eliminating, cybersquatting, is to create healthy 
expectations. As soon as participants in the market understand that a 
steady supply of new domain names in attractive gTLDs will continue to 
become available on a predictable schedule, the bottom will fall out of 
the after-market, and the incentive (albeit not the opportunities) for 
cybersquatting will be greatly reduced, thus helping e-commerce by 
making attractive names available on reasonable terms to a much greater 
number, and wider variety, of persons and firms.
  ii. the shortage of gtlds today is entirely artificial, and easily 
                                curable.
    I am not an expert on Internet engineering. However, my 
understanding is that although experts do not agree on precisely how 
many gTLDs could be created without adverse consequences to DNS 
response time, there appears to be a technical consensus that we are 
nowhere near even the lowest possible limit. ICANN At-Large Director 
Karl Auerbach, himself a technical expert, has suggested that the 
smallest technically-mandated upper level for the number of gTLDs might 
be as high as a million.\7\ Persons with long experience in DNS 
matters, including BIND author Paul Vixie, apparently agree.\8\ Others 
have performed tests loading the entire .com file as if it were a root 
file, and found that it works. In principle, this is not surprising, as 
there is no technical difference between the root file containing the 
information about TLDs and a second-level domain file. Given that there 
are currently about sixteen million registrations in .com, if this 
argument is right, then the maximum number of TLDs may be very high.\9\ 
Some experts worry, however, that a very large number of new TLDs, such 
as a million, might affect DNS response time.\10\ If so, that still 
means that with fewer than 300 TLDs in operation today (gTLDs + 
ccTLDs), we can afford to create tens of thousands, and probably 
hundreds of thousands, more.
---------------------------------------------------------------------------
    \7\ Posting of Karl Auerbach, karl71484CaveBear.com, http://
www.dnso.org/wgroups/wg-c/Arc01/msg00195.html .
    \8\ E-mail from Paul Vixie, BIND 8 Primary Author, to Eric Brunner 
(Dec. 15, 1999) (``A million names under `.' isn't fundamentally harder 
to write code or operate computers for than are a million names under 
`COM.' ''), http://www.dnso.org/wgroups/wg-c/Arc01/msg00203.html .
    \9\ See Quickstats, at http://www.dotcom.com/facts/quickstats.html 
(reporting twenty million registrations, of which 80% are in .com).
    \10\ See, e.g., E-mail from Paul V. Mockapetris, BIND Author, to 
Paul Vixie, BIND 8 Primary Author, & Eric Brunner (Dec. 15, 1999) 
(querying whether one million new TLDs would impose performance costs 
on DNS), http://www.dnso.org/wgroups/wg-c/Arc01/msg00202.html .
---------------------------------------------------------------------------
    Thus, the pre-ICANN moratorium on the creation of new gTLDs had no 
technical basis, and neither does the current go-very-slow policy 
adopted by ICANN. It is a purely political choice, a product of an 
internal deliberative process devised by ICANN that under-weighs the 
interests of the public at large and in so doing tends towards anti-
competitive, or competitively weak, outcomes skewed by special 
interests.
    The source of this tendency is the distribution of decision-making 
authority on the ICANN Board, and in ICANN's subsidiary institutions. 
In July, 1999, ICANN Chair Esther Dyson told this Committee's 
Subcommittee on Oversight and Investigation that ICANN's ``highest 
priority'' was to elect nine at-large Board members,\11\ exactly as 
ICANN had committed to do as an original condition of being approved by 
the Department of Commerce. Instead, ICANN reneged on its commitment to 
the United States government, and to the public, that half its Board 
would be elected by an at-large membership. Indeed, the Board amended 
its bylaws and rushed its timetable so that its selection of the new 
gTLDs would be complete before even the five elected at-large directors 
could participate. Similarly, the institutions that ICANN created to 
take the lead in domain name policy--the seven constituencies in the 
``Domain Name Supporting Organization''--were designed from the start 
to exclude individuals from membership.
---------------------------------------------------------------------------
    \11\ Testimony of Esther Dyson, Chair, ICANN, before the House 
Commerce Committee, Subcommittee on Oversight and Investigations, July 
22, 1999, http://www.icann.org/dyson-testimony-22july99.htm .
---------------------------------------------------------------------------
    The interest groups that acquired a voting majority in those 
institutions have shown relatively little interest in the rights and 
needs of small businesses, non-commercial entities, or individuals. 
They have shown considerably more interest in securing special 
protections for trademarks, above and beyond what is provided by 
statute, than they have in maximizing the competitive potential of the 
Internet.
    ICANN justifies its very tentative initial foray into gTLD creation 
as a ``proof of concept'' but it has not disclosed the concept that is 
believes it is trying to prove, nor described how one tells if the test 
is successful, nor even when one might expect ICANN to do the 
evaluation. The ``concept'' cannot be gTLD creation itself: There is no 
rocket science to the mechanics of creating a new gTLD. From a 
technical perspective, creating a new gTLD is exactly like creating a 
new ccTLD, and creating new ccTLDs is quite routine. Indeed, .ps, a TLD 
for Palestine, was created less than a year ago with no noticeable 
effect on the Internet at all.\12\
---------------------------------------------------------------------------
    \12\ See IANA Report on Request for Delegation of the .ps Top-Level 
Domain, at http://www.icann.org/general/ps-report-22mar00.htm (Mar. 22, 
2000).
---------------------------------------------------------------------------
     iii. icann purports to be a technical standards or technical 
 coordination body, but it did not act like one in this process, as it 
                  made arbitrary allocation decisions.
    ICANN usually justifies its processes by claiming to be either a 
technical standards body or a technical coordination body. In the case 
of the recent gTLD process, however, ICANN acted not as a standards or 
coordination body, but as if it were allocating scarce broadcast 
spectrum is some kind of comparative hearing process. ICANN created no 
standard. It `coordinated' no projects with running code being deployed 
by outside parties. Rather, ICANN acted like a foundation grant 
committee, trying to pick `winners.' In practice, ICANN's exercise of 
its gatekeeper committee role contributes to the artificial shortage of 
gTLDs. Worse, the selection processes ICANN employed were amateurish 
and arbitrary.
    In fairness, ICANN is not originally responsible for the gridlock 
in gTLD creation policy, which in fact long predates it. Indeed the 
Department of Commerce called ICANN into being because it wanted to 
find a politically feasible way to create new TLDs in the face of 
difficult political obstacles, not least a belief in the intellectual 
property rights holders community that new TLDs might add to the risk 
of customer confusion and trademark dilution.
    This fear, more than any technical consideration, explains why 
ICANN imposed a needlessly low limit on the number of new gTLDs it 
would recommend the Department of Commerce create in this first round, 
and why ICANN has as yet not been able to consider when if ever it will 
contemplate future rounds of gTLD recommendations. It does not explain, 
however, why ICANN went about selecting its seven finalists in the 
manner it did. Indeed, ICANN's gTLD selection procedures were 
characterized by substantial failures.
    First, although all applicants were charged the same non-refundable 
$50,000 fee, it appears not all received equal treatment. During the 
Los Angeles ICANN Board Meeting, it transpired that the staff had not 
subjected all the proposals to the same level of analysis. Thus, when 
Board members sought more detailed information about proposals that 
interested them, but which the staff had relegated to the second tier, 
that information sometimes did not exist, although it existed for the 
staff's preferred picks.
    Second, both the staff and the Board seemed excessively concerned 
with avoiding risk. Although true competition in a fully competitive 
market requires that participants be allowed to fail if they deserve to 
do so, there are reasonable arguments why it makes sense to have a body 
like ICANN require potential registry operators to meet some minimum 
standard of technical competence. One can even make a case for 
requiring a showing of some financial resources, and for requiring the 
advance preparation of basic registry policy documents spelling out who 
will be allowed to register names and under what terms. Perhaps there 
are other neutral criteria that should also be required and assessed. 
This is a far cry from ICANN's apparent tendency to tend to prefer 
established institutions and big corporations, and to downplay the 
value of experience in running code. If in 1985 the Internet itself had 
been a proposal placed before a committee that behaved as ICANN did in 
2000, the Internet would have been rejected as too risky. Risk aversion 
of this type is antithetical to entrepreneurship and competition.
    Worst of all, ICANN applied its criteria arbitrarily, even making 
them up as it went along. The striking arbitrariness of the ICANN 
decision-making process is illustrated by the rejection of the 
``.union'' proposal based on unfounded last-minute speculation by an 
ICANN board member that the international labor organizations proposing 
the gTLD were somehow undemocratic. (That this same Board member was at 
the time recused from the process only adds to the strangeness.) The 
procedures ICANN designed gave the applicants no opportunity to reply 
to unfounded accusations. ICANN then rejected ``.iii'' because someone 
on the Board was concerned that the name was difficult to pronounce, 
even though the ability to pronounce a proposed gTLD had never before 
been mentioned as a decision criterion. I am not in a position to vouch 
for the accuracy of each of the claims of error made by the firms that 
filed reconsideration requests after the Los Angeles meeting (available 
at http://www.icann.org/committees/reconsideration/index.html) but as a 
group these make for very sobering reading.
 iv. the correct strategy would have been to accept all applicants who 
     met a pre-announced, open, neutral, and objective standard of 
competence, rather than to pick and choose among the applicants on the 
 basis of the icann board's vague and inconsistent ideas of aesthetic 
          merit, market appeal, capitalization, or experience.
    The procedural mess described above makes it impossible for me, at 
least, to form an opinion as to which were the ``best'' applicants. 
That sort of decision is in any case one more properly made by markets 
rather than by ICANN or by academics. I have no reason to believe that 
any of the seven TLDs selected are bad choices; but given ICANN's 
arbitrary procedures I also have no real doubt that many other 
applicants would have been at least as good. But in any case these are 
really the wrong questions. Other than rejecting technically 
incompetent or otherwise abusive applications, e.g. a single registry 
improperly claiming a large number of gTLDs, ICANN should not be acting 
as a barrier to entry. The right questions, which ICANN apparently 
never asked, are

 What is the minimum standard of competence (technical, 
        financial, whatever) to be found qualified to run a registry 
        for a given type of TLD?
 What open, neutral, and objective means should be used to 
        decide among competing applicants when two or more would-be 
        registries seek the same TLD string?
 What are the technical limits on the number of new TLDs that 
        can reasonably be created in an orderly fashion per year?
 What open, neutral, and objective means should be used to 
        decide among competing applicants, or to sequence applicants, 
        if the number of applicants meeting the qualification threshold 
        exceeds the number of gTLDs being created in a given year?
    Today, reasonable people could no doubt disagree on the fine 
details of some of these questions, and perhaps on almost every aspect 
of others. Resolving these issues in the abstract would not necessarily 
be easy. It would, however, be valuable and appropriate work for an 
Internet standards body, and would greatly enhance competition in all 
the affected markets. A thoughtful answer would inevitably resolve a 
number of difficult questions, not least the terms on which a marriage 
might be made between the Department of Commerce's ``legacy'' root and 
the so-called ``alternate'' roots.
    Using a standards-based approach, rather than an ad-hoc comparative 
hearing or committee allocation approach, could only enhance 
competition in each of the affected markets.
    Once ICANN makes its formal recommendations, the Department of 
Commerce will have to decide how to proceed. As I have argued 
elsewhere, as a result of its relationship with the Department of 
Commerce, ICANN is a state actor. Accordingly, its arbitrary and 
capricious decisions violate both the APA and the Due Process Clause of 
the Constitution. Rubber-stamping of its decisions by the Department of 
Commerce will only make these violations explicit, since the U.S. 
government would essentially endorse both ICANN's practices and its 
conclusions. If, on the other hand, ICANN is private, then rubber-
stamping ICANN's decisions will amount to endorsing a deeply flawed 
procedure.
    The Department of Commerce has maintained that its relations with 
ICANN are not subject to the APA, or indeed to any legal constraint 
other than those relating to relations with a government contractor 
and/or a participant in a cooperative research agreement. This 
characterization twists forms to obliterate substance. But whatever the 
legal arguments, when contemplating decisions which will shape the very 
nature of the Internet naming system, Commerce should proceed with 
deliberation, and act only on the basis of reliable information. The 
need for reliable information, proper public participation, and 
transparent and accountable decision-making is even stronger when 
Commerce contemplates making the sort of social policy choices--as 
opposed to mere technical standard-setting--embodied in creating new 
gTLDs and imposing conditions on their use. Basic requirements of 
fairness, due process, and the need to make reasonable decisions 
counsel in favor of notice, public access, the making of an official 
record, and deliberation.
    There is no question but that if a federal agency had acted as the 
ICANN Board did, its decisions would not satisfy even cursory judicial 
review. In the circumstances, therefore, it would be unreasonable and a 
denial of due process for Commerce to rely on the outcome of such a 
flawed process without conducting its own review.
An Alternate Approach
    An alternate approach to gTLD creation, one that would most 
certainly enhance competition, would take its inspiration from the 
fundamental design of the Internet itself--and from major league 
sports. The Internet was designed to continue to function even if large 
parts of the network sustained damage. Internet network design avoids, 
whenever possible, the creation of single points of failure. When it 
comes to policy, however, ICANN is currently a single point of failure 
for the network. A solution to this problem would be to share out part 
of ICANN's current functions to a variety of institutions.
    In this scenario, ICANN would become a true technical coordination 
body, coordinating the activities of a large number of gTLD policy 
partners. ICANN's functions would be: (1) to keep a master list of 
TLDs, (2) to ensure that there were no `name collisions'--two 
registries attempting to mange the same TLD string; (3) to fix an 
annual quota of new gTLDs; (4) to run an annual gTLD draft; (5) to 
coordinate the gTLD creation process so that new gTLDs came on stream 
in an orderly fashion instead of all at once.
    Each of ICANN's policy partners would be assigned one or more draft 
choices, and then ICANN would randomly (or, perhaps, otherwise) assign 
each one their draft picks. As each policy partner's turn came up, it 
would be entitled to select a registry--imposing whatever conditions it 
wished--to manage any gTLD that had not yet been claimed on ICANN's 
master list. In keeping with the transnational and public/private 
nature of the Internet, ICANN's policy partners could be a highly 
diverse mix of international, national, and private ``civil society'' 
bodies.
    While I think this alternate solution would best achieve the ends 
of internationalization, competition, and diversity, it might well 
require legislation since it is unclear if the Department of Commerce 
has the will (or the authority) to implement such a plan, and it is 
quite clear that ICANN is not about to divest itself of any policy 
authority unless forced to do so.

    Mr. Upton. Very good.
    Mr. Davidson.

                  STATEMENT OF ALAN B. DAVIDSON

    Mr. Davidson. Good morning, Mr. Chairman, members of the 
subcommittee. I am Alan Davidson, Associate Director of the 
Center for Democracy and Technology, CDT. I want to thank you 
for the opportunity to testify today.
    CDT is a nonprofit, public interest organization dedicated 
to promoting civil liberties and democratic values on the 
Internet. We have been active in the domain name issues as 
advocates for open and representative governance mechanisms 
that protect basic human rights, the interests of Internet 
users, and the public voice, the appropriate public voice in 
these kinds of decisions.
    I have entered a statement for the record, but I would like 
to try to emphasize a few elements of it.
    We believe in the promise of ICANN, the possibility laid 
out in the white paper of a nongovernmental, bottom-up, self-
governance organization in the best traditions of the Internet. 
And, you know, we believe that that kind of mechanism is what 
is most appropriate for a global network that needs flexibility 
and rapid change in its organizational institutions and that 
the possibility of ICANN as the nongovernmental flexible 
organization is one that would maximize openness and 
competition and individual liberty online. So our comments are 
offered as a critique of the gTLD process and of ICANN and as a 
road map for fixing what we view as in many ways a flawed 
process, as you have heard today.
    Our bottom line, however, is that the Commerce Department 
and this Congress should not undo this decision that ICANN has 
made because, on balance, our belief is that the interests of 
consumers in the expansion of the gTLD space and the danger of 
the U.S. Government intervening in a heavy-handed way outweigh 
the benefits of redoing what is admittedly a flawed process.
    I would like to quickly make four points. The first is that 
ICANN's decisions and particularly its collection of new gTLDs 
do raise issues of public concern. In an ideal world, this 
would be a boring hearing, and this would be a boring issue. I 
guess some people in the audience might say we have succeeded 
in part of that. But I think there are many reasons to believe 
that ICANN is, in fact, an important institution that we should 
be paying attention to.
    There are at least two reasons. One is that there is a 
potential for ICANN to be much more of a central authority and 
a policymaking body for the Internet. In an otherwise 
decentralized world, ICANN sits on centralized functions of 
coordination for the Internet from which it can exert a much 
broader set of authorities. It has, to its credit, not done so 
to date, but a future more powerful ICANN might choose to do 
something differently.
    Even the technical decisions that ICANN makes can--quote, 
unquote, technical decisions--can have broader policy impact. 
The gTLD example is a very good one. There is a free clear 
speech interest in the creation of new name spaces. It affects 
the way that people navigate and find information on the 
Internet. And ICANN's decision, albeit, a good one based on the 
needs for stability and the interests of trademark owners and 
others to create a narrow test bed when in fact there are 
probably technical reasons to think that ICANN could have 
created many more TLDs, led it down a road of having to make 
what many believe were arbitrary decisions or at least policy-
based decisions to go from this objective set of people who 
could have created TLDs to the seven that ultimately ICANN 
chose.
    Second, the ICANN board, as you know--as a threshold matter 
we might ask, is this structure that made this decision 
appropriately representative? And I think there are many 
reasons to believe that the current ICANN structure is not 
broadly representative of the Internet community.
    I will just speak quickly from the experience of a 
nonprofit group who has tried to participate in ICANN. It is a 
community that is receptive to input but at the same time is 
very difficult to participate in with meetings all over the 
world. It is difficult for many organizations that are not 
represented there, and we have had a difficulty in creating a 
civil society, a meaningful active civil society community at 
ICANN to represent the public interest.
    Third, ICANN's process for selecting the gTLD's in fact was 
flawed. As we have heard today and is spelled out in our 
testimony, there are many reasons to believe the process could 
have done better. I think the $50,000 barrier to entry 
especially had a big impact on noncommercial players. That is 
not to say that no entry fee should have been required, but 
there could have a been a way to waive it, especially for 
nonprofit groups.
    Finally, as I have said, I think, on balance, our belief is 
that a rollback is not what is required here but that, moving 
forward, ICANN needs to reform its process to stay out of the 
policymaking game to create a prime directive of sorts that 
keeps it out of the policymaking business and that restores 
ICANN to its promise of being a bottom-up, technical, objective 
policymaking--nonpolicymaking body that is representative of 
the public interest and the domain name space.
    Thank you very much.
    [The prepared statement of Alan B. Davidson and Jerry 
Berman follows:]

  Prepared Statement of Jerry Berman, Executive Director, and Alan B. 
   Davidson, Associate Director, Center for Democracy and Technology

  1. icann's decisions, and particularly its selection of new gtlds, 
                 raise issues of broad public concern.
    Should the public and policymakers care about ICANN and its new 
gTLD decisions? The answer today is yes.
    There are two competing visions of ICANN. In one, ICANN is a new 
world government for the Net--using its control over central domain 
name and IP address functions as a way to make policy for the Internet 
globally. In the second, ICANN is a purely technical body, making 
boring decisions on straightforward technical issues of minimal day-to-
day interest to the public--like a corporate board or a technical 
standards group.
    In reality, ICANN is somewhere in between and is likely to require 
public attention for at least some time to come. There are at least two 
important reasons why ICANN is of public concern:

 ICANN's has the potential for broad policy-making--On the 
        decentralized global Internet there are few gatekeepers and a 
        great deal of openness--features that have contributed to 
        expression, competition, and innovation online. In this 
        decentralized world ICANN oversees a crucial centralized 
        function--the coordination of unique names and addresses. In 
        this role, ICANN has the potential to exercise a great deal of 
        control over Internet activities. For example, ICANN has 
        already required that all domain registrars impose a uniform 
        policy for resolving trademark disputes. Without a check on its 
        authority, ICANN could seek to impose other requirements or 
        even content regulations. While the current ICANN Board has 
        shown an admirable lack of interest in such policy-making, a 
        more powerful future ICANN might not be so restrained, 
        particularly without any checks on its authority.
 Even ICANN's narrow technical decisions have broader policy 
        impacts--``Technical'' decisions often have broader impact. 
        Expanding the gTLD space, choosing which registry is recognized 
        for a country code, or even selecting a method for recognizing 
        when new country-code domains get assigned (as .ps was recently 
        assigned to Palestine), for example, all have broader political 
        and social implications.
The Consumer and Free Expression Interest in New gTLDs
    Today, access to the domain name system is access to the Internet. 
Domain names are the signposts in cyberspace that help make content 
available and visible on the Internet. (For further explanation, see 
CDT's overview Your Place in Cyberspace: A Guide to the Domain Name 
System.) The domain name system may ultimately be replaced by other 
methods of locating content online. But for the time being, a useful 
and compelling domain name is seen by many as an essential prerequisite 
to having content widely published and viewed online.
    There is an increasing consumer interest in creating new gTLDs. The 
current gTLD name spaces, and the .com space in particular, are highly 
congested. The most desirable names are auctioned off in secondary 
markets for large sums of money. It is increasingly difficult to find 
descriptive and meaningful new names. Moreover, the lack of 
differentiation in gTLDs creates trademark and intellectual property 
problems: there is no easy way for United AirLines and United Van Lines 
to both own united.com.
    ICANN's decisions about new gTLDs can have other implications for 
free expression. If, in choosing among otherwise equal proposals, ICANN 
were to create a new gTLD .democrats but refuse to create .gop, or 
added .catholic but refused to add .islam, it would be making content-
based choices that could have a broad impact on what speech is favored 
online.
    In addition, CDT has some concern that the creation of 
``restricted'' domains that require registrants to meet certain 
criteria--such as .edu or the new .museum--risks creating a class of 
gatekeepers who control access to the name space. Today, access to open 
gTLDs like .com and .org does not require any proof of a business model 
or professional license. This easy access to the Internet supports 
innovation and expression. Who should decide who is a legitimate 
business, union, or human rights group? CDT has called for a diversity 
of both open and restricted gTLDs, and will monitor the impact of 
restricted domains on speech.
    There is increasing evidence of an artificial scarcity in gTLDs. It 
is now widely acknowledged that it is technically feasible to add many 
new gTLDs to the root--perhaps thousands or even hundred of thousands. 
Limiting the number of gTLDs without objective technical criteria 
creates unnecessary congestion; potentially discriminates against the 
speech of non-commercial publishers or small businesses who cannot 
compete for the most desirable spaces; and places ICANN in the role of 
gatekeeper over speech online by deciding which gTLDs to create and 
under what circumstances.
    There are many legitimate concerns that call for a slower 
deployment of new gTLDs. Some have expressed concern about stability of 
the Internet given a lack of experience in adding many new gTLDs. 
Trademark holders have also raised concerns about their ability to 
police their marks in a multitude of new spaces.
    CDT believes that these concerns support the notion of a phased 
``proof of concept'' rollout of new gTLDs. However, we believe that the 
consumer interest will be best served by a rapid introduction of the 
first set of new TLDs--followed quickly by a larger number of domains.
    The phased ``proof of concept'' adopted by ICANN, however, creates 
a major problem: Because ICANN could add many new gTLDs, but has chosen 
to add just a few, it has forced itself to make policy-based and 
possibly arbitrary decisions among legitimate candidates.
    In this environment, it is most important that gTLDs be allocated 
through a process that is widely perceived as fair, that is based on 
objective criteria, fair application of those criteria, and open and 
transparent decision-making. There are many reasons to believe ICANN's 
first selection process for new gTLDs has been highly flawed.
    2. the icann board and governance structure that made the gtld 
 selection is not appropriately representative of the public interest.
    A starting point for evaluating the gTLD decision is asking: Is the 
group that made this decision appropriately structured and 
representative? The governance of ICANN itself is an issue of ongoing 
debate. Despite efforts to make ICANN inclusive, there are many 
indications that ICANN has failed to be appropriately representative of 
all the interests affected by its decisions--casting doubt on the 
legitimacy of the gTLD decision.
ICANN organization underrepresents many interests.
    Members of the Internet user community and advocates for user 
interests have often been under-represented in ICANN. ICANN's physical 
meetings, where many major decisions are made, occur all over the 
world, pursuing an admirable goal of global inclusiveness. However, the 
expenses associated with physical attendance at such meetings place it 
out of reach for many NGOs and public interest advocates.
    CDT's own experience has been that the ICANN community is receptive 
to thoughtful input and advocacy, but that it requires a concerted and 
ongoing effort to be effective. In our case, that effort has only been 
possible through the support of the Markle Foundation, which early on 
committed to support efforts to improve the public voice in ICANN. We 
have received further support from the Ford Foundation as well. These 
grants provided CDT with the ability to attend and follow ICANN 
activities, which many other potentially interested organizations in 
the educational, civil liberties, or library communities cannot do.
    ICANN's bottom-up structures offer imperfect avenues for public 
participation. While ICANN explicitly provides representation to a 
number of commercial interests, it fails to properly represent the 
millions of individuals that own Internet domain names or have an 
interest in ICANN's decisions. The main outlet for individual 
participation-the General Assembly of the Domain Names Supporting 
Organization-appears increasingly ineffective. Non-commercial 
organizations have a constituency, the Non-Commercial Constituency, but 
it is only one of seven groups making up one of the three supporting 
organizations.
ICANN's Board of Directors fails to adequately represent the public 
        voice.
    In the absence of other structures for representation, the main 
outlet for public input is the nine At-Large Directors of the Board. 
These nine directors are to be elected from within a broad At-Large 
membership, but there has been a great deal of debate about the 
election mechanism and even the existence of the At-Large Directors. To 
date only five of the nine At-Large directors have been elected (the 
seats were otherwise filled with appointed directors), and even those 
five were not seated in time for the gTLD decision in November.
    CDT, along with Common Cause and the Carter Center, has strongly 
advocated for broadly representative and fair mechanisms to fill all 
nine At-Large seats as quickly as possible. Last March CDT and Common 
Cause prepared a study of ICANN's election system, concluding that the 
proposed ``indirect election'' would not adequately represent the 
public's voice. ICANN agreed to hold more democratic direct elections 
(held last October), but only for five of the nine At-Large Directors, 
to be followed by a study of the election process. CDT is currently 
engaged in an international research effort, the NGO and Academic ICANN 
Study (NAIS), examining last year's election, and in June will offer 
its suggestions to ICANN regarding future selection of Directors.
    In the meantime, serious questions remain about adequate public 
representation on the current board, and the future of the public voice 
in selecting the Directors who will make decisions about additional 
gTLDs.
ICANN has shifted away from bottom-up coordination.
    ICANN's founding conceptual documents, the Green and White Papers, 
called for ``private bottom-up coordination'' as the governance model 
for ICANN. Despite early attempts at consensus-based decision-making, 
authority in ICANN increasingly rests at the top, with the 
Corporation's nineteen-member Board of Directors. The Supporting 
Organizations have proven to have limited roles in policy generation 
and consensus-building. Increasingly, final ICANN policies are 
generated by ICANN staff and Board members. As a result the Board has 
moved away from the consensus-based, bottom-up practices which were 
originally a critical element of its conception.
         3. icann's process for selecting new gtlds was flawed.
    CDT has not taken a position on the merits of any particular gTLD 
or registry operator chosen by ICANN. Our focus has been on the process 
ICANN has used to select these domains and the potential rules it may 
impose on the use of domains. A different, better process might have 
yielded very similar results.
    We note also that ICANN and its staff undertook this final 
selection in a very compressed period at the end of a years-long debate 
about the addition of new gTLDs. They did so in the face of tensions 
between at least three competing goals: an open, inclusive, and fair 
process; rapid completion of that process, with less than two months 
between the submission of proposals and the selection by the Board; and 
a ``proof of concept'' goal of a small number of finalists. These often 
irreconcilable goals led to many of the problems with the process.
    ICANN staff made substantial efforts to conduct an open and 
accountable process in the face of these constraints, including the 
publication of hundreds of pages of applications and the creation of 
forums to discuss the proposals. Still, it is important to recognize 
features of the selection process that were flawed, that had anti-
consumer and anti-competitive impacts, and that should not be repeated.
    Initial Criteria--ICANN took the helpful step of publishing a set 
of criteria it would use in judging applications. In general, the 
substantive areas of the criteria reflected objective goals that had 
support within much of the ICANN user community. However, the criteria 
themselves were vaguely worded and their ultimate application was 
poorly understood. Most importantly, they were not purely technical in 
nature--reflecting policy goals as much as technical needs--and were 
not precise enough to be purely objective in their application.
    High Application Fee--ICANN required a $50,000 non-refundable 
application fee for all gTLD applicants. This high fee was a clear 
barrier to entry for many potential non-commercial applicants and 
biased the applicant pool in favor of large organizations that could 
risk the fee. This issue was raised by CDT at the Yokohama ICANN Board 
meeting, and the Board specifically refused to offer any form of lower 
application fees for non-profit or non-commercial proposals. 
Additionally, it appeared that the selection process would weed out 
applications without sophisticated business plans, legal counsel and 
technical expertise. These important qualifications for a strong 
application required access to large resources. Given the very short 
timeframe of the application period, non-commercial applicants were 
therefore put at an even greater disadvantage.
    Legitimacy of the Board--As noted above, policy-making at ICANN is 
still hampered by institutional challenges regarding its legitimacy and 
decision-making mechanisms. ICANN took the unorthodox step of seating 
newly elected At-Large Directors after the gTLD decision was made (even 
though in previous years new Board members had been seated at the 
beginning of meetings.) The argument that new Directors would not be 
sufficiently up to speed on the new gTLD decision is specious. The 
entire ICANN community was highly focused on the gTLD debate, the new 
Board members showed in public appearances that they were highly versed 
in the issue, and each of them had gone through an intense campaign in 
the Fall answering numerous questions that likely made them more expert 
on the nuances of the gTLD issue than many sitting Board members.
    Evaluation of Applicants--The ICANN staff attempted, with the help 
of outside consultants, to apply its criteria to the 47 applications 
received. The published Staff Report provided a useful guide to this 
evaluation, but was published just days before the Marina Del Rey 
meeting with little opportunity for public comment or debate. There was 
little time for public presentation by each of the applicants, or for 
each applicant to answer questions or misconceptions about their 
submissions. But beyond that, the staff report indicated that about 
half (23) of the applicants had met their objective criteria for 
technical competence and economic viability. Having met the objective 
threshold, the Board was left with only the somewhat arbitrary 
application of other criteria to narrow the number of applications to 
the desired low number.
    Final Selection Arbitrary--With a high number of objectively 
qualified applicants, and a commitment to a low number of final gTLDs, 
the final decision by the Board at Marina Del Rey was dominated by the 
arbitrary application of its remaining criteria as well as other new 
criteria--many of which had little to do with technical standards. 
Instead, Directors referenced conceptions about the ``sound'' of names, 
the democratic nature of the applicants, or the promotion of free 
expression--criteria to which CDT is sympathetic, but some of which 
were highly subjective and unforeseen review criteria.
    Reporting and Post-selection Accountability--There is currently a 
lack of any serious objective mechanism for evaluating or appealing the 
Board's decision. While CDT is not in a position to judge the merits of 
their arguments, the eight petitions for reconsideration filed by 
applicants after the Board meeting (see http://www.icann.org/
reconsideration ) raise concerns. Moreover, the final contractual 
negotiations between ICANN and the selected applicants are likely to 
include rules of great interest to the user community--yet are 
occurring with little transparency.
    Taken as a whole, the process for selecting new gTLDs contained 
serious flaws that at the very least need to be corrected before 
another round of selections. Importantly, the process shows how the 
line between a ``purely technical coordination body'' and a ``policy-
making body'' is easily crossed by ICANN. The selection made by ICANN 
was not a standards-making process or a technical decision. Even 
ICANN's ``objective'' criteria were based on social values like 
economic viability and diversity (values which CDT supports, but which 
represent policy choices nonetheless.) Once it applied these 
``objective'' criteria, the ICANN Board did not hesitate to engage in 
other policy-making approaches as well.
4. moving forward: suggestions for reforming icann and the gtld process
    The flaws in ICANN's process for allocating new gTLDs, as outlined 
above, are highly troubling. They point to a need for reform in both 
the ways the ICANN makes decisions about gTLDs, and ICANN's entire 
structure.
    CDT still believes that Internet users have an interest in the 
vision spelled out in the White Paper--in the creation of a non-
governmental, international coordination body, based on bottom-up self-
governance, to administer central naming and numbering functions 
online. Were the Commerce Department to substantially revisit and 
change ICANN's decisions on the new gTLDs, the global community would 
likely question the existence and utility of ICANN. We also believe 
that there is a dominant consumer interest in rapid rollout of new 
domains, which would be dramatically slowed by an APA-based rule-making 
on gTLDs by Commerce. Therefore, on balance, we do not support a major 
effort to roll back ICANN's decision on the initial domains, but rather 
would favor rapid creation of the new domains followed coupled with an 
investigation into the processes ICANN used to create gTLDs.
    Among our specific suggestions:

 ICANN must reform the method and process it uses for selecting 
        the next round of new gTLDs. A logical step would be to publish 
        an objective and specific set of criteria, and apply it in a 
        more open and transparent way with greater opportunities for 
        public comment. ICANN should stay away from policy-oriented 
        criteria, and attempt to promote criteria based on technical 
        merit and stability. Applicants that meet the criteria should 
        be given the opportunity to participate in new gTLDs.
 Barriers to diversity should be mitigated. In particular, the 
        $50,000 fee should be reduced or waived for non-commercial or 
        non-profit entrants.
 A study of the method of selecting domains should be set in 
        motion. In addition, careful consideration should be given to 
        the potential openness, competitiveness, and free speech 
        implications of creating a large number of ``chartered'' or 
        restricted domains that establish gatekeepers on access to 
        domain names.
    ICANN's governance itself is implicated in the gTLD process. Among 
the major structural reforms ICANN should pursue include:

 Limited mission--Steps must be taken to structurally limit the 
        mission of ICANN to technical management and coordination. 
        Clear by-laws and charter limitations should be created to 
        delineate ``powers reserved to the users''--much as the Bill of 
        Rights and other constitutional limitations limit the power of 
        the government under the U.S. system.
 Empower the public voice in ICANN--The internal study underway 
        of ICANN's At-Large membership and elections should be a 
        vehicle for ensuring that the public voice finds appropriate 
        ways to be heard in ICANN's decision-making processes.
 Expanded review process and bottom-up governance--ICANN should 
        build internal review processes that produce faith in the 
        ability to appeal decisions of the Board, and continue to 
        pursue the consensus-based governance model.
    While we do not believe the Commerce Department and Congress should 
intervene in the initial selection decision, they have a role in this 
reform. Just like any national government, the U.S. has an interest in 
making sure that the needs of its Internet users and businesses are 
protected in ICANN. While the U.S. must be sensitive to the global 
character of ICANN, it cannot ignore that at least for the time being 
it retains a backstop role of final oversight over the current root 
system. It should exercise that oversight judiciously, but to the end 
of improving ICANN for all Internet users. It is only by restoring the 
public voice in ICANN, limiting its mission, and returning to first 
principles of bottom-up governance that ICANN will be able fulfill its 
vision of a new international self-regulatory body that promotes 
openness and expression online.

    Mr. Upton. Thank you.
    Thank you all.
    I am going to be just as quick on the gavel on the members 
up here, I want you to know. So we will try to speak fast as 
well.
    Mr. Davidson, I appreciated your comments at the end of the 
panel here as well. I know I viewed this hearing as a 
constructive one from the get-go and tried to make things 
better, particularly when we hear a number of complaints not 
only from you all but others across the country and even the 
world.
    And I know, Mr. Cerf, as you embarked on this adventure you 
had to have known that you were going to be subject to 
criticism at the end. In fact, that was buried in your remarks 
as well in terms of the fee and what may come out in terms of 
the legal challenges later on.
    As I understand it, you have always reported that--at least 
ICANN has always reported that it has, in fact, a purely 
technical coordination policy. Maybe, to use Mr. Davidson's 
words, pretty boring, if it is just that. But it is not. We 
know that it is not. In fact, you play a very significant role 
in the policy side of things in the implications for the 
Internet as well.
    As you look back, I know you were aware of some of these 
criticisms before this hearing, how was it that you only chose 
seven? You indicated you felt that the process was overwhelming 
in terms of the comments and the numbers, the names that came 
in. But why was it that you only chose seven instead of 10, 12, 
15, 20?
    The complaint, of course, is on 3 minutes at the end, a lot 
of decisions were made before that. Even in this hearing 
process, with a full house, you get 5 minutes, not 3. Why is it 
that you took--in essence, I think it has been about 8 to 10 
years since we came up with our first domain names. Why 
couldn't it have lasted a couple more weeks so that in fact a 
variety of different players would be able to find out exactly 
what the criticisms were and you be able to respond to them and 
perhaps make some adjustments so that you weren't locked at 
seven?
    You know, as I began my preparation for the hearing--I 
helped chair the hearing back in 1999 as well. Personally, I 
think .travel would have made a lot of sense. I travel, too. 
Whether it is a rental car or place to stay, .travel makes more 
personal sense than maybe just .aero in terms of the entire 
need of the traveling public, whether they be on business 
travel or individual.
    So there are a lot of questions out there. And I guess if 
you had the chance 2 years ago to have heard a number of the 
complaints here, criticisms, some positive, some negative, 
where would you have changed things, particularly as you have 
looked to the future in terms of opening up that door again?
    Mr. Cerf. Mr. Chairman, I really like the boring idea a 
lot. If we could get to that state----
    Mr. Upton. The line outside the door still goes around.
    Mr. Cerf. First of all, I think it would be helpful to keep 
in mind what our objective was in this first go around. We have 
had, as you know, a great deal of discussion over a period of 
years about how many top-level domains should be increased, how 
many should be added to the system. We didn't come to any 
consensus. All the advice that we got was to start slow and 
start carefully. But there was no absolute numbers. So we 
weren't fixed at seven, particularly. That is where we ended 
up.
    Our objective, though, was to get a test case with a fairly 
broad range of different kinds of TLDs into operation and see 
what would happen. The current circumstances of the Internet, 
as you know, are heavily commercially oriented now, whereas 10 
years ago they weren't. So the conditions under which the first 
gTLDs were created was very different than 2001.
    So our objective was to simply start with a small number, 
selected from a set that were offered to us by the applicants. 
We never expected as a board to approve every single 
application which might be qualified to operate as a TLD. We 
anticipated, however, once we got the results of the first new 
TLDs in operation that we would use that to guide our next 
selections.
    Indeed, I think and hope that once we do get results from 
this first set we will be able to simplify the process and I 
hope make it a lot easier for the applicants.
    I might also mention that, about the $50,000 fee, we made 
estimates about how much time and energy would be required to 
evaluate the proposals, bearing in mind that we would 
scrutinize these pretty carefully given this is the first time 
we have done anything of this type. It turns out that in the 
long run one hopes that one could reduce that cost, assuming 
the process becomes very boring.
    The one thing I would point out is that had the fee been 
significantly lower, we might have gotten more than 47 
proposals in which case we would have had even more difficulty 
processing them. So in a funny sense there is a balance that 
was fortunately met. We have consumed about half of the funds 
that were made available, and we are not done with all the 
negotiations with the new applicants.
    Mr. Upton. So much for my 2 minutes. I think we will have a 
second round of questions, though.
    Mr. Markey.
    Mr. Markey. I thank you very much. We probably should have 
done this for 3 minutes just to get a sense of what it is like 
to try to get to the important issues. Just to get out one 
question is, you know, difficult in 5 minutes.
    Mr. Cerf, you and the others who developed DARPANET are 
clearly amongst the geniuses of our time, and we very much 
appreciate everything that you did to develop DARPANET which 
turned into Internet. It is true back in the old days you and 
the other founding fathers and mothers of the DARPANET were 
able to just get together and work out whatever standards were 
necessary and it worked very well, but we have now transitioned 
over the last 8 or 10 years into a commercial model and most of 
the people who were once with DARPANET are now in private 
sector jobs, not this university setting that was originally 
the basis for the development of it.
    So my first question to you would be, were the seven 
selected the only applicants that met the technical and 
financial standards?
    Mr. Cerf. No.
    Mr. Markey. How did you weigh the criteria, then, to 
whittle it down to seven? In other words, at MIT if 3,000 kids 
have 800's on their boards and there is only 1,000 seats, then 
of course all these kids with 800's who worked hard--but that 
is private sector. That is kind of the university setting. Here 
we are in kind of a quasi-public situation where the Department 
of Commerce has subcontracted this to you. So if more than 
seven actually had qualified applications, what did you then 
use to disqualify everyone but the seven?
    Mr. Cerf. Well, keep in mind, of course, that our intent 
was to establish a modest number for purposes of doing the 
experiment. So our objective was indeed to not have all 47 or 
whatever number qualified. There was discussion toward the end 
of the period of debate on which one should be accepted. And as 
each one of those was considered, the issues were raised that 
caused the board ultimately to form consensus around only those 
seven.
    Mr. Markey. Of the 47, how many actually met the technical 
and financial standards?
    Mr. Cerf. I am not sure that I remember exactly the number, 
but probably it was more than seven.
    Mr. Markey. But was it more like 10 or more like 20 that 
met the technical and financial standards?
    Mr. Cerf. It is very hard to say because there were a 
number of different criteria. Some of these proposals met some 
of the criteria.
    Mr. Markey. What I am saying is, did you reach a semi-final 
stage in your process whereby you whittled out of the 47 down 
to 20 or how did you get to the final seven?
    Mr. Cerf. The last discussions, as I remember them, were 
somewhere around 10.
    Mr. Markey. Ten. Ten.
    Now, let me ask you, Mr. Kerner, if you want to appeal this 
decision, what is the appeal process that you would use if you 
are unhappy with what Dr. Cerf and the others have decided in 
terms of whittling down from 10 to 7? Let's assume you are one 
of the three that was excluded. How would you appeal now?
    Mr. Kerner. Well, ICANN has a process for reconsideration; 
and we have applied to be reconsidered. According to ICANN's 
policy, they are supposed to respond to that in 30 days.
    Mr. Markey. What is the criteria which they have given you 
in order to file your appeal?
    Mr. Kerner. It is a very general reconsideration policy. It 
is not particular to the TLD selection process we just went 
through.
    Mr. Markey. Let me ask, Dr. Cerf, what criteria would you 
look at on appeal in order to expand the number----
    Mr. Cerf. The reconsideration process, as Mr. Kerner points 
out, is a very general one. It is for any actions taken by the 
board, and principally it looks to see whether the process was 
followed. It is not intended to reconsider decisions made by 
the board on, you know, on the merits. In fact, one of the 
things that allowed us to I think achieve consensus was the 
belief that any of the qualifying TLD applications would, in 
fact, be considered later once we had----
    Mr. Markey. Let me move to Professor Froomkin then.
    Let me ask you, Professor Froomkin, due process, it seems 
to me, isn't an analog or a digital concept. It is just an 
American concept of fair play. So as you look at the process, 
do you believe that--Dr. Cerf was saying he is not going to 
look at the merits, only whether or not the process was fair. 
Do you believe that the process was fair in the selection of 
the seven and the exclusion of the other 40?
    Mr. Froomkin. If we look by the standards that we apply to 
a Federal administrative agency, there is no question in my 
mind that a court would find they were not. In particular, I 
would like to point out----
    Mr. Markey. Let me ask you this: Was the criteria 
subjective or technical?
    Mr. Froomkin. There were clearly some technical criteria 
used to get rid of a few, and then they went to subjective 
ones. I watched the whole thing happen. I did not see a moment 
where they said, okay, here's the batch who meet minimum 
criteria. Now what do we do? They went after them one at a 
time. The criteria that were applied were--appeared to be 
applied erratically to different applications. So it was not 
this tiered process of here is the semifinalists and now let's 
have a beauty contest.
    Mr. Markey. Do you agree with that, Mr. Short, the process 
for appeal?
    Mr. Short. Absolutely. I would like to concur with what the 
professor said about the criteria being applied erratically.
    To give an example, in the category that ICANN placed the 
IATA application which was called a restricted commercial 
content, one of the other applicants was .pro, which was 
successful. They were not asked to and did not make any showing 
on the record of representativeness. We, on the other hand, 
were disqualified solely because ICANN found that we were not 
representative and, despite as I said earlier, the fact that 1 
million travel industry businesses around the world went on the 
record saying they agreed with our proposal.
    Mr. Markey. So you felt you were rejected on a subjective 
rather that a technical basis.
    Mr. Short. Absolutely. And I believe, sir, that the record 
bears that out.
    Mr. Markey. Thirty seconds for Mr. Davidson.
    Mr. Davidson. I think you are really on to something here, 
which is to say that--anyway, that----
    Mr. Markey. Even a blind squirrel finds an acorn once in a 
while.
    Mr. Davidson. ICANN published a detailed set of criteria. 
That was a very welcome move. Some of those criteria were 
technical and economic and objectively applied. Some of them, 
as much as we agreed on ideas like diversity and competition, 
they are not easily objectively applied. I think the boards, in 
retrospect, did not do so.
    Mr. Markey. Thank you, Mr. Chairman.
    Mr. Upton. I recognize the chairman of the full committee, 
Mr. Tauzin.
    Chairman Tauzin. Thank you, Mr. Chairman.
    First, Mr. Chairman, let me thank you for the hearing. This 
is an excellent first start for the subcommittee. And like Mr. 
Markey, Mr. Cerf, I also want to welcome you and thank you and 
our good friend Al for the pioneering work you did on the 
Internet.
    Second, let me say this discussion you just had is settled 
in Mr. Cerf's testimony, if you look on page 26. He indicates 
criteria he included in this experiment were in some measures 
suggestive. It is an admission that this was a subjective 
process. Which raises a question, Mr. Cerf. You also say that 
the effort was not a contest to find the most qualified or the 
most worthy or most attractive. Why not?
    Mr. Cerf. I think because we didn't believe that it was 
necessary to do that in order to conduct a credible experiment 
and in order to get the data that we needed to determine 
whether or not we could open this process up.
    Chairman Tauzin. You understand the concern of applicants 
who met all your criteria and then learned that your selection 
process was suggestive and it was not designed to find the most 
qualified, most worthy and most attractive applicant.
    Mr. Cerf. It was----
    Chairman Tauzin. In ordinary business practices, that would 
be considered rather unfair.
    Mr. Cerf. In this case, it was considered--what we needed 
was a sufficient set of candidates who we thought would likely 
successfully function so that we could then open this up to our 
test case.
    Chairman Tauzin. Well, I only make the point I am not sure 
that the relief some of these applicants are asking for is 
merited under the circumstances. But you will be doing this in 
the future, and one of the concerns I think of this committee 
is whether or not in the future as you go forward with 
approving new TLDs whether or not the criteria is going to be a 
bit more objective and a bit more designed to find the most 
qualified, most worthy and, for the consuming public, the most 
attractive TLDs.
    Mr. Cerf. In fact, what I hope is that the criteria can be 
so objective that we don't have to make any value judgments 
about the likelihood of business success of the applicants.
    Chairman Tauzin. I hope so, too.
    Let me quickly put on record something I put in my opening 
statement, Mr. Chairman. I believe it has already been made 
part of the record. That is, Mr. Cerf, I hope in the future you 
and your representatives will pay attention to our committee 
rule on testimony being submitted 48 hours in advance. The 
committee members read this testimony, need to prepare for 
these hearings; and I was a little disappointed that our staff 
was unable to get your testimony within the time of our rules. 
I hope all of you will follow those rules in the future.
    Let me conclude with an area that really intrigues me, and 
that is questions posed by Ms. Gallegos to this process. In 
selecting a TLD that is already currently being used, .biz, 
that raises several concerns. There is more than one root 
server. You obviously govern the USG domain name system root 
server, but there are others, the Open Root Server Council, the 
Pacific Root Server System, all of which have alternative and, 
you know, approved TLDs in their systems.
    In choosing a TLD that is already being used as in the case 
of Ms. Gallegos, recognizing that all the personal computers we 
buy today have a default system that points to the USG domain 
name system, did you not realize that you would be affecting 
her business and perhaps negatively financially if every one of 
her customers has to literally reroute their computer so that 
it doesn't automatically point to your own root system, root 
service system?
    Mr. Cerf. There is a serious problem with the notion of 
alternate roots. The original design of the system had a single 
root for a very good reason. It is to make sure there was no 
ambiguity as to what a particular domain name would translate 
into. The alternate roots were not introduced with the 
concurrence and agreement of the existing initial government 
root-based system, and if we were to allow any arbitrary entity 
to create alternate domain names in alternate roots we will 
have exactly the situation that we can see emerging right now. 
If you have anyone who can create an alternate root and then 
create a domain name which happens to be the name as some other 
domain name in an alternate root----
    Chairman Tauzin. What happens when they collide?
    Mr. Cerf. What happens is that you get one or the other of 
the translations, but you don't get both; and, worse, you have 
uncertainty as to who is the other end of the line.
    Ms. Gallegos made a very good point about the dangers of 
having ambiguity, but that is the consequence of even having an 
alternate root system. That is why ICANN continues to believe 
there should be only one root.
    Chairman Tauzin. You believe that. Have you received legal 
opinions regarding the selection of .biz as it relates to the 
use of .biz by alternate DNS root servers?
    Mr. Cerf. Yes, I did.
    Chairman Tauzin. Can you address Ms. Gallegos' complaints 
here today?
    Mr. Cerf. My understanding is that the creation of 
alternate routes, since it was outside of ICANN's purview, does 
not bind ICANN to any decisions made by the alternate root 
activity. We are responsible for a single root system, and that 
is the bounds of our responsibility.
    Chairman Tauzin. Do you have the authority, I guess is what 
I am asking, to overrun an alternate root server? Because, 
essentially, that is what you are doing. When you approve a 
.biz under U.S. Government domain system root server and all of 
our computers basically point to your system automatically in 
default, unless we adjust--are you not overrunning the 
alternate root and do have you that authority in law?
    Mr. Cerf. Let me turn this around for just a moment and 
point out for any alternate root to work you have to go and 
modify the customer's personal computer to point to the 
alternate root but not to the U.S. Government root. So already 
there has been some damage in some sense done to the 
architecture because now that particular customer has to be 
modified specially instead of what comes naturally from the 
manufacturers. Our responsibility, ICANN, as I understand it, 
is to manage the creation of top-level domains within that 
single root; and that is my understanding of the scope of our 
responsibility.
    Chairman Tauzin. Just to finalize, Mr. Chairman, that has 
the affect of overrunning, does it not, the alternative root 
still?
    Mr. Cerf. Yes. Although I would also turn this around and 
say the creation of the alternate root system has the effect of 
potentially overrunning the single root that ICANN runs. We 
have no control over someone who creates domain names which 
conflict with those that have been assigned within the ICANN 
purview.
    Chairman Tauzin. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman. This is, obviously, a 
great hearing.
    Dr. Cerf, pleased to have you back here. How many members 
are on the board?
    Mr. Cerf. Nineteen.
    Mr. Shimkus. It is established through a contract from the 
Department of Commerce. How are we assured that--are there any 
financial disclosure requirements on board members that are 
accessible to the public?
    Mr. Cerf. There are no financial disclosure requirements 
that I am aware of. However, we do ask the board members to 
advise us of any conflicts of interest that they might have in 
the conduct of their service.
    Mr. Shimkus. So if we have a subjective system, 
decisionmaking process with the public not having or the 
applicants not knowing through an open disclosure system 
possible conflicts of interest, that raises concerns, wouldn't 
you agree?
    Mr. Cerf. Yes. They certainly could.
    May I point out that during the course of the review of the 
TLD applications four of our board members voluntarily recused 
themselves on what proved to be fairly thin concerns over 
conflict.
    Mr. Shimkus. But--I applaud that, but I would say if there 
is a contractual arrangement with the Federal Government that 
is making business decisions that are affecting applicants who 
have a financial interest who may not know a possible conflict 
of interest of the board members, that is something that you 
ought to rectify.
    Mr. Cerf. Indeed.
    Mr. Shimkus. When you appear before us you are supposed to 
identify what government contacts that you all have, and we 
have to do it as Members of Congress. So I think that is an 
issue that you ought to look at.
    Mr. Cerf. Thank you. That is a good point.
    Mr. Shimkus. I am a West Point graduate and served as a 
recruiter for the academies. We have very qualified young men 
and women who apply to the service academies every year. It is 
not different from everyone meeting--47 people meeting the 
criteria established for the domain names.
    They have--what they do is develop a whole candidate. They 
do a scoring based upon some subjective issues. But there is 
still a score. And then the academies, based upon this score 
and the openings, choose those who get acceptance letters.
    Subjectivity without scoring raises some level of disputes 
which, if there is no quantitative possibility of analysis or 
even defense, that is why we are here. And, again, just another 
recommendation.
    Question. Politically, you would have had a stronger, 
favorable reception from this committee had you used your 
position to address pornographic material on the Internet. I 
understand that--and many of us feel that you have failed in a 
great opportunity. Especially us politicians, when we are 
addressing this, you invite us now to legislatively get 
involved in forcing this issue. Because of the cries of the 
public and those of us who understand first amendment 
principles, how do we protect the individual's right to free 
speech while ensuring that our children are protected?
    So I would like to ask--our understanding is it was 
rejected due to the controversy surrounding the idea. Again, it 
may be a subjective type of analysis. I am not sure. How is a 
.xxx avenue any different than current zoning laws or issues in 
which the public has kind of addressed this in other mediums?
    Mr. Cerf. There was discussion of xxx, and one of the 
problems that we encountered is not knowing how we would 
prevent any pornographic sites from registering in other than 
xxx. The principal question was enforcement. It wasn't clear 
how to do that and whether it could be effectively done. The 
sites which already exist presumably have established their 
brands, if you will--I guess that is the right word--and we 
don't know or were not clear at the time we were making these 
TLD decisions what mechanism would be available to move them 
away from where they are.
    Mr. Shimkus. Since my time has expired, let me go to the 
flip question. Since you didn't want to address that, why 
didn't you address the green light domain, an area of 
protection of kids? If you weren't going to do it on the 
punitive aspect, why not do something positive?
    Mr. Cerf. There was a lot of sympathy for the .kids domain, 
which I assume you are talking about.
    Mr. Shimkus. Correct.
    Mr. Cerf. And there was quite a bit of discussion about 
this. One of the things that kept returning to the theme of the 
discussion is that all of these are global domains, and there 
came a moment when many realized that it wasn't clear what 
.kids actually meant. In other words, what is a child? At what 
age--what is the age range for which this material would be 
considered appropriate?
    Given that .kids is global, it wasn't clear what criteria 
would be applicable globally for content that would be 
acceptable. In some countries, some things might be acceptable 
and other things they might not for the same age ranges. It got 
less and less clear as the discussion ensued how it would be 
possible to specify satisfactorily what those limitations were 
and how would they be enforced.
    Perhaps in the worst case, suppose that a parent sees 
something on .kids that he or she felt was inappropriate. Would 
that now come back to ICANN? Would we be sued for having 
permitted inappropriate content? We didn't see how we could 
enforce it.
    Mr. Shimkus. I know my time has expired. I would just say 
you are inviting us to have many more of these hearings to 
address some of these issues. I wish you would have solved 
them.
    I yield back my time.
    Mr. Upton. Mr. Pickering.
    Mr. Pickering. Thank you, Mr. Chairman. I appreciate this 
hearing and the importance of what we are discussing today.
    From the very beginning of this debate, I was fortunate 
enough to be a part, first on the Science Committee as the 
acting chairman of the basic research subcommittee as we went 
from the transition from a government-run, monopoly based 
policy in domain names to a nongovernmental, private 
competitive model; and my concern all the way through has been 
somewhat different but I think highlighted by this hearing 
today.
    Many I believe did not realize that, in essence, by setting 
up ICANN and what we are doing was fundamentally the 
Constitution of the Internet, just as our Founders set up the 
decisionmaking process of a representative democracy, the 
House, the Senate, the executive, the judicial, making sure 
that you had the openness and transparency, hopefully the 
credibility and the confidence in the integrity of the 
decisions being made and then the checks and balances of that 
process.
    What we have today is, as Mr. Davidson talked about, the 
great promise and the great potential of what we had hoped for 
at the very beginning; and that is a grass-root, bottom-up, 
inclusive, open international body that would be making the 
decisions as we govern the Internet and the use of the 
Internet. But as Mr. Davidson highlighted his concerns, and I 
would like to associate myself with his concerns, I think he 
captures where we are today and where we need to be.
    We do need immediate reform, and I hope it is done 
voluntarily. We still have the promise of a nongovernmental, 
private, open competitive model; and that is the objective in 
the policy that I want to see. But the way that this has 
occurred to date, I am concerned, as Mr. Davidson is, that the 
process was arbitrary, subjective. Decisions are being 
questioned. The confidence, the credibility, the integrity is 
in question. And that if we do not take our steps toward reform 
quickly that the promise and the potential of ICANN and what we 
are trying to do could be at risk.
    Mr. Davidson--let me ask the rest of the panel, how many of 
you have read Mr. Davidson's testimony or would agree with the 
reforms that he has laid out in his testimony? Mr. Cerf?
    Mr. Cerf. I am not sure that I am prepared to agree to all 
of them, but I absolutely accept the idea that we need to 
reexamine the procedures that we used. I certainly would like 
something simpler and less complicated than we had to go 
through in November. So I welcome Mr. Davidson's organization's 
inputs and others who have constructively commented today.
    Mr. Pickering. Mr. Short, Ms. Gallegos, you all were very 
critical of the process. Have you all had a chance to read Mr. 
Davidson's testimony?
    Ms. Gallegos. I have not had a chance to read his 
testimony.
    Mr. Pickering. Or his reforms?
    Ms. Gallegos. No, I have not had a chance to read them.
    Mr. Pickering. If I could ask you to respond to the 
committee in writing as we conclude the hearing today as to 
your comments with your views concerning his proposed reforms, 
that would be helpful to the committee.
    Mr. Davidson.
    Mr. Davidson. Well, Mr. Pickering, I very much appreciate 
those remarks. I do think that there is a sense here that we 
don't want to throw the baby out here, that there is a 
potential here. And I have tried to lay out some steps. I think 
there are things that many in the ICANN community agree with, 
especially the notion of really trying to focus on ICANN's 
mission of being as much as possible a technical and objective 
body. I think, unfortunately, the process that we have right 
now shows how easy it is to morph out of that world. I am 
hopeful that we can all work together and try and make it 
better and I think get the appropriate level of public input 
where it is needed to the extent it does engage in policy-
oriented activities.
    Thank you.
    Mr. Pickering. Mr. Short.
    Mr. Short. Thank you, Mr. Pickering.
    I have to say I have not had an opportunity to read Mr. 
Davidson's testimony yet. It was just provided to me this 
morning. But I would say that we feel all we are asking for 
really is a fair shake. We are not asking this committee or 
Congress to direct that we get .travel, but we feel the record 
makes it abundantly clear what has happened is not in 
conformity with the requirements of the Administrative 
Procedure Act or basic notions of due process, a point I think 
Professor Froomkin has confirmed; and any reforms that would 
take the process in that direction, which I think is essential 
for any asset funded by the U.S. Government, we would certainly 
support.
    Thank you.
    Mr. Pickering. Yes, Ms. Gallegos.
    Ms. Gallegos. In terms of the APA, we, of course, had a 
petition for rulemaking, you know, that was presented to the 
DOC. We haven't heard anything on that yet. We would really 
like to see that take place.
    I think that one of the problems that we have perceived is 
that there really is no public process. There is no due 
process. There is no appeals process. There is no transparency. 
And most of what is done by ICANN is done in secret. The 
deliberations and considerations over all of these gTLDs was 
done in secret. We knew nothing--we, the public, knew nothing 
until we saw the reviews that were published on the website, 
which were woefully inadequate.
    I think that the premise behind having an ICANN is a good 
one. I think that to throw it out is like cutting the head off 
of the monster, it grows back two. I think what we need to do 
is look at ICANN as something that needs to be reformatted 
perhaps, but it is a good idea.
    From our perspective, also we need to look at, as opposed 
to what Mr. Cerf had said, the alternative roots were formed 
for a reason. IANA did facilitate the first alternative root 
because they were supposed to be new TLDs entered into the 
root. They were promised and they were not given. The root was 
formed because of that. And it needed to be a test bed so IANA 
approved the formation of that root. Then it was scrapped. So 
all of that time, effort and money had gone into that, proved 
that the root was workable, proved that it could coexist, and 
then it was scrapped.
    So they said, well, we have it. Let's use it. And that is 
what they have been doing. This has been going on for many, 
many, many years. We do coexist. There is no reason for our 
government to take the posture that we can just wipe out a 
business because we can; and, basically, this is what has 
happened.
    I think there is a lot of merit in looking at the 
coexistence, and not only that but a very simple solution to 
having new TLDs, use the ones that are already there, are 
working and have been proving to work and are successful, and 
you might have a good avenue.
    Thank you.
    Mr. Pickering. I have some additional questions, but I will 
wait until the second round. Thank you very much.
    Mr. Upton. Very good. Thank you.
    Professor Froomkin, you indicated in your testimony you 
questioned or you raised the question how many are needed. How 
many do you think we need?
    Mr. Froomkin. I think that is a decision only the market 
can tell us. I think that if people are willing to take the 
trouble to build them and go through a modest application 
process and run them, do whatever other things we require them, 
maybe even a small bond, whatever it takes to meet a threshold, 
as long as we are willing to do that let's let the market 
decide. I couldn't begin to know how any human being would know 
the answer to that question.
    Mr. Upton. Dr. Cerf, your question--your answer to Mr. 
Markey that you thought about 10 or so were actually 
sufficient, passed all of the barriers to be approved, did you 
ever consider as a body whether you ought to move the number 
from 7 to 10 or 11 to 9? At what point did you lock in 7?
    Mr. Cerf. We locked in seven at the--in fact, we went down 
from a collection that looked like they might be adequate down 
to seven of them that we had full consensus on. The board did 
not uniformly agree on all 10. That is my opinion, that maybe 
that many were acceptable. But we were looking for full 
consensus on the board. We achieved full consensus on seven of 
them. Since that lay within the range that all the 
recommendations were to start with, we felt, I felt satisfied 
that the board had come to a reasonable conclusion, especially 
given the belief that we would add more of them once we could 
demonstrate that this first set in fact worked adequately and 
didn't cause any trouble.
    Mr. Upton. Is this process that you embarked on, is it 
pretty much over now? I mean, that is that and at what point 
are you looking for a second round?
    Mr. Cerf. Two things have to happen before I think we would 
be well-advised to proceed to a second round. First, we need to 
complete the negotiations with the applicants. Those 
negotiations are ongoing but not complete.
    The second, we need to get some experience with what 
happens as those new TLDs are introduced. I am sure you are 
familiar with terms like land rush or gold rush and so on. We 
don't know, quite honestly, what kinds of behavior we will see 
from the market as these new TLDs are introduced. Some of them 
are of the restricted type, like .museum. But others are quite 
open, like .info; and so we don't know what behavior will be. 
Until we can see that, I would say it was probably inadvisable 
to begin reconsideration of additional TLDs. I hope that we 
could do that with about 6 months of experience with the new 
ones.
    Mr. Upton. All ICANN-accredited registers currently adhere 
to this agreement which, among other things, requires registers 
to provide real time public access to registrant contact 
information, WHOIS data. Consumers, law enforcement, 
intellectual property owners, among others, rely on this public 
availability of WHOIS data.
    What is your sense as to whether you intend--this is a 
question for Mr. Kerner through Ms. Gallegos--what is your 
sense about embracing the policy as set forth in this register 
agreement in any new TLDs that you might operate? Mr. Kerner.
    Mr. Kerner. As the current operators of the .tv top-level 
domain, we in fact have a very robust, easily accessible WHOIS 
that we find is used quite frequently by trademark holders. And 
we are actually find that ICANN's GDRP resolution procedure is 
actually quite effective in enabling trademark holders to get 
back their trademarks.
    Mr. Upton. Ms. Broitman.
    Ms. Broitman. In the registry preapplication we designed a 
system that is slightly different from today's system. That was 
on the advice of a lot of consensus thinking, and that is what 
is known as a thick WHOIS data base where all of the 
information resides in a single place. So that a trademark 
owner, for example, could go to a single place to go searching 
for cybersquatters.
    Mr. Upton. Mr. Short.
    Mr. Short. Mr. Chairman, we are--our back-in provider 
actually is New Star New Level. Mr. Hansen can provide more of 
the technical information. But I would just say we are fully 
committed to protection of intellectual property rights. It is 
my understanding we were proposing to offer the highest level 
of WHOIS service as part of our proposal.
    Thank you.
    Mr. Hansen. The new technology that we have proposed 
creates the ability to create a centralized data base. This 
centralized data base, because of a new protocol that would be 
used to collect data from the registrars, allows for the 
collection of data that is of a much higher quality than you 
would find in today's very distributed model. The registrars 
today inconsistently collect data. Some collect data better 
than others. It is updated in some cases very rigorously; in 
other cases, it is not.
    The requirement the centralized data base can impose upon 
the registrars in terms of submitting a consistent set of data 
that will be contained in the data base will actually be an 
enhancement that the trademark and intellectual property 
community should embrace, partly because today they do have to 
go around to all of these various data bases to collect the 
data. The reliability of the data, consistency of the data is 
questionable.
    Mr. Upton. Mr. Davidson.
    Mr. Davidson. I would like to make a quick comment to say 
we should note that there are some privacy aspects to this 
whole question of the availability of WHOIS data and what 
exactly is included in there. These privacy concerns are being 
raised especially as many more individuals and small businesses 
get involved in registering domain names and finding certain 
kinds of information that might be personal being put into data 
base. I think it is a question for ongoing debate about how we 
balance those interests and find ways to give--you know, 
protect legitimate interests in getting in data while still 
protecting the privacy, especially of consumers and 
noncommercial interests.
    Mr. Upton. Ms. Gallegos.
    Ms. Gallegos. I think I would like to, if it is okay with 
you, relate just one story. When I started in my business it 
was a soho, small office home office. When I got my first 
domain name I had no choice but to put all the relevant 
information into the thick WHOIS; and, as a result of that, I 
was stalked. I had to change my phone number. I had to have 
security dogs. I finally got a post office box and started 
using that.
    There are some very serious privacy issues. With more and 
more businesses operating out of their homes now, that means 
that a person has to give up his personal information, put his 
family at risk. So I think that, you know, we need to consider 
that.
    I know that with the.biz, we have a thick WHOIS, and it 
does have all of the relevant information, but we are going to 
be instituting a situation where people can use a dummy contact 
that will show up in the WHOIS. And if there is a need for that 
information to be given to a person that has legitimate need 
for that information, it will be given but only with an order.
    As far as intellectual property is concerned, that act was 
designed for the consumer and not for the trademark holder. I 
think that we need to really protect the consumer and let the 
trademark holder police his marks.
    Mr. Upton. Thank you.
    Mr. Markey.
    Mr. Markey. Thank you, Mr. Chairman.
    Here's what I would like. I would like each one of you to 
give us your top-level recommendation, your one recommendation 
for improving the ICANN process. So we will go right down. One 
recommendation to improve ICANN process. Mr. Davidson.
    Mr. Davidson. Thank you.
    I just want to say, by the way, it has been our observation 
over the years that, in fact, sir, you are no blind squirrel, 
so I thank you for your earlier question.
    I guess my No. 1 recommendation would be the institution of 
a prime directive in the mind-set of ICANN that is to always 
stay out of policy-oriented decisionmaking as much as possible 
and stick as much as possible to the technical and objectively 
measured approach. It may not always be possible. But I think, 
for example, even in the gTLD context, if it turned out that 
you had, you know, 20 otherwise absolutely equal people and you 
felt compelled to only choose seven, do a lottery, do 
something, stay out of the business of--even as attractive as 
it may be to many of us, stay out of the business of trying to 
make policy.
    Mr. Markey. Thank you.
    Professor.
    Mr. Froomkin. I would put that slightly different but 
close. I think ICANN needs to be told it has got to take one of 
two roads and not try to mix the two. Either it becomes the 
true standards body and does the kind of things that Alan 
Davidson was just talking about, or it is going to have to 
recognize if it is doing policy, given its relationship with 
the Department of Commerce as a State actor, a governmental 
body, be subjected to the APA and the Constitution.
    This is heresy to say among Internet people, but this is an 
issue that is bigger than the Internet. This issue--what the 
Department of Commerce has tried to do with these strange zero 
cost procurement contracts, these research contracts where the 
research turns out to be running things and so on, is a 
blueprint for an end run around accountable government and the 
APA. And if ICANN can be put back in the standards body box 
where it probably could live very happily in a more modest 
vision I think a lot of people would be really happy, and that 
would be great. If it takes the other road, it has go to 
understand the consequences against, and those need to be 
applied to.
    Mr. Markey. By APA you mean the Administrative Procedures 
Act, which is kind of the constitution of all decisions that 
are made in all administrative agencies in terms of protecting 
due process and using a reasonable standard.
    Mr. Froomkin. When I get back to Miami I am going to tell 
my students that Congress gets it.
    Mr. Markey. Okay. Thank you.
    Excuse me, what was your final----
    Mr. Froomkin. When I go back to Miami I am going to tell my 
students that Congress gets it.
    Mr. Markey. Congress gets it. Some people define that 
Congress gets it by saying, well, you know Congress knows that 
it can never understand these issues, so they don't ask 
questions. But I would prefer to use your definition is that we 
get it when we do understand and we are asking relevant 
questions.
    Ms. Gallegos. Representative Markey, thank you.
    I think I would have to echo what the professor has said. 
We need to keep it technical. It is either going to be a 
standards body or a governmental body. Let's decide what it is 
going to be. While I disagree that it should be a governmental 
body, I think it should go to the private sector. It should be 
a standards body only.
    But I think the one thing that we really have to recognize 
from the get-go is that the board seated itself. It has never 
been elected. We have an interim board that has been an interim 
board since the beginning except for the five elected members. 
I think that the whole board needs to be elected appropriately, 
and maybe that is a start if we have the proper representation. 
Right now, we have a special interest representation except for 
the five elected members.
    Mr. Markey. By the way, I would recommend that we have a 
hearing with just the five members here and we just be allowed 
to ask them questions.
    Mr. Hansen.
    Mr. Hansen. Yes. The recommendation I would make, focusing 
on the process itself, is I think it would have been helpful 
had minimum qualifications for applications--the companies who 
were submitting applications, for instance, be established up 
front at the beginning of the process. That may have resulted 
in fewer applications but probably would have helped on the--
once the selections were made, people would understand that, 
you know--they wouldn't submit an application at the beginning 
if their company wasn't qualified based on the minimum criteria 
established by ICANN. So you would have fewer applications. 
That would enhance the assessment process, allow more time to 
focus on the fewer number of applications and would improve the 
quality of the applications as well.
    Mr. Markey. Mr. Short.
    Mr. Short. Thank you, Mr. Markey. Our principal 
recommendation would be that the Administrative Procedures Act 
principles should apply to decisionmaking in this area. What we 
would be looking for is fairness and an actual decision on the 
record.
    I would just add that before going off to join IATA, I 
spent many years hear in Washington as a regulatory lawyer and 
have some familiarity with proceedings under the APA. And while 
there are always going to be winners and losers, at least in my 
assessment the APA principles generally deliver results that 
are in the public interest, and that is all we are really 
asking for here.
    Mr. Markey. Ms. Broitman.
    Ms. Broitman. Thank you, Congressman.
    I think that one of the opportunities to reform the process 
in the future is to provide a bit more time during the entire 
process, and particularly between an intermediate 
recommendation and the final board decision.
    What was very helpful actually in the ICANN process is that 
there were questions and answers on the record as well as 
public comment periods on the record during the entire 6-week 
period. And in the future, having some more of that sort of 
opportunity beyond the staff report I think would be helpful to 
all.
    Mr. Markey. Mr. Kerner.
    Mr. Kerner. Mr. Chairman, I think, speaking as an 
applicant, what we would have most appreciated is an iterative 
open selection process where we could have had a dialog, ICANN 
could have had a dialog with all the applicants to address 
concerns that they had, and those decisions wouldn't have been 
reached by the board, but was based on factually inaccurate 
information provided by the staff report.
    Dr. Cerf indicated that seven final selections were made 
from what he estimated at 10 qualified applicants. I don't 
think he considered either one of our applications from .com or 
.pro to be qualified applicants because the staff had indicated 
that our consortium did not have the technical capabilities to 
run a top-level domain. And that was said even though, again, 
we had a proven robust technical infrastructure that was 
capable of resolving domain names at about 10 times the rate as 
currently experienced with .com.
    Mr. Markey. Dr. Cerf.
    Mr. Cerf. I think the most salient thing for us, apart from 
some very good suggestions that we have just heard, is, in 
fact, to find more objective ways of making these decisions 
wherever we can and, as I said before, to make them as boring 
as possible.
    Mr. Markey. And what would be the one recommendation you 
would make in order to make the process more clear?
    Mr. Cerf. I would like to see that the objective criteria 
are principally that the applicants simply be able to 
demonstrate technical capability to perform the function. The 
big concern in this first go-round was that if the applicants 
also didn't have the financial and other ability to execute, 
that we might not have a very good proof of concept because 
some of them wouldn't work at all. But in the long run, it 
would be nice to let the market decide that.
    Mr. Markey. Thank you, Doctor.
    Thank you, Mr. Chairman.
    Mr. Upton. Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Mr. Hansen, in your opinion, did the criteria posted and 
used by ICANN change along the way, or did ICANN act 
consistently throughout the process?
    Mr. Hansen. I believe ICANN did act consistently as it 
applies to the criteria that were laid out. We understood at 
the very beginning that stability of the Internet was the No. 1 
priority, and we focused on that in our application. We focused 
on the technical aspects of our proposal for that very reason 
and other ways in which we could support stability of the 
Internet in introducing a new top-level domain name.
    Mr. Shimkus. Thank you.
    Mr. Kerner, I always find it interesting on the disclosure, 
you have indicated that ICANN made poor choices in selecting 
these top-level domains, although you also submitted two that 
were accepted; is that correct?
    Mr. Kerner. That is correct. We were part of two 
consortiums, .nom and .pro.
    Mr. Shimkus. Why do you think you were successful in the 
two and not successful in the other?
    Mr. Kerner. I don't think that it is possible for me to 
address those individually. I just think by definition if you 
have a flawed process, by definition the results of that 
process are going to be flawed as well.
    Mr. Shimkus. But was it flawed in the selection of the two 
that got accepted?
    Mr. Kerner. Again, I think we believe that the entire 
process was flawed.
    Mr. Shimkus. So should we undo the two that were selected?
    Mr. Kerner. I think what we are proposing is that we 
basically start again at the beginning and we institute a fair 
and open process.
    Mr. Shimkus. I agree with that. This is always fun. It may 
not be fun for people on the panels, and I have been on the 
other side, too, but there is discrepancy in the testimony when 
you are attacking a system that you have also benefited by 
successfully.
    So in one part it has failed, but in the other part it was 
successful in two applications which you supported; is that 
correct?
    Mr. Kerner. I am sorry, let me just clarify to make sure we 
are both talking on the same page here.
    We made applications for, again, the .nom and .pro. Our 
applications were not accepted. Other applicants for the same 
top-level domains were accepted. Now, obviously, we think that 
those would be good choices for this first round.
    Mr. Shimkus. So your track record in this recent round is 
zero?
    Mr. Kerner. Correct; 0 for 2.
    Mr. Shimkus. Well, then, I can see why you are upset.
    Dr. Cerf, the last question is the $50,000 nonrefundable; 
you are a not-for-profit corporation. Obviously the basic 
financial records should be available, and this is an 
experimental round. I know you probably haven't done an after-
action review of cost-benefit analysis and the time effort. Are 
you expecting the cost to go up in the next round or the cost 
to go down?
    Again, I think there is an agreement there should be more 
transparency, and there probably should be transparency in the 
fee structure based upon Ms. Gallegos's testimony.
    Mr. Cerf. The fee structure is based almost entirely on 
what the costs turn out to be for evaluating proposals. That is 
the principal basis.
    Mr. Shimkus. But you have to set the fee structure before 
you accept the proposal.
    Mr. Cerf. Exactly. That is why this cycle is so important, 
because I hope in the end we get a simplified procedure which 
will be less strenuous and less expensive. But, again, all 
these costs do have to be borne somehow.
    Mr. Pickering. If the gentleman would yield just a second 
to clarify.
    ICANN has had difficulty in raising funds to support 
itself. They looked at a fee at one time that created a 
firestorm of controversy. They pulled back from the fee. In 
previous answers you said you still have half of the receipts 
that came in from the applications, which would indicate that, 
in fact, it was not a cost-based fee, but that you actually 
have double what it costs you to assess them, and that it could 
be a way for you to finance ICANN. Could you clarify that for 
me?
    Mr. Cerf. I understand your line of reasoning, Congressman 
Pickering; however, it turns out we have additional expenses 
associated with processing the applications. We now have to go 
through the negotiating process to actually come to agreements 
with each one of the seven applicants. That costs money as 
well. And so we expect there will be continued expenses 
associated with finally executing on all of the seven proposals 
that are under way.
    Mr. Shimkus. And I am going to end my period of time. I 
appreciate all your attention. I think we have learned a lot. 
Mr. Chairman, I yield back.
    Mr. Upton. Mr. Pickering.
    Mr. Pickering. Let me try to cover as much ground as 
quickly as possible. On your recommendations to Mr. Markey, you 
talked about ICANN performing just a standard or a technical 
role. But similar to the way budget in this place drives policy 
and policy drives budget, does not technical drive policy and 
policy drive technical in the Internet world? And how do you 
solve that dilemma?
    Mr. Davidson. It is difficult to draw that line, 
admittedly, and I think we are seeing the struggle that ICANN 
itself is having in drawing that line. And we may not be able 
to perfectly do it. There may be technical decisions that have 
policy implications. That is why actually I think the real set 
of recommendations here is that we really have to be thinking 
about a three-legged stool here.
    One is limitation to the technical objective of things as 
much as possible. The second is having appropriate governance, 
structure and policy to the extent there are other kinds of 
issues that get dealt with, and that means having a good 
representative board and having good structures internally. And 
the other is doing it in this bottom-up consensus way. As my 
statement says, the promise of ICANN is to go back to this 
bottom-up nature of self-organizing that the Internet has done 
best.
    Those are the three things I think ICANN needs to work on.
    Mr. Pickering. Is there a way to limit the mission of ICANN 
to strictly technical and standards setting better and more 
effectively than we currently have?
    Mr. Davidson. I believe there is. We have talked about it 
in our testimony, and I think it is an ongoing thing for ICANN. 
There are no real strong structural limitations like, to use a 
U.S. example, the Bill of Rights, which reserves powers for the 
people here in our constitutional system. Finding structural 
ways to do similar kinds of things for ICANN, I think, would be 
a major step forward.
    Mr. Pickering. How do you--or who, maybe more 
appropriately, would limit their mission and set up the 
structural safeguards and do the Internet bill of rights for 
Internet users? Who has the authority to do that, and who 
should do that? Should Congress? Should ICANN?
    Mr. Davidson. It is a tricky question. I think that on some 
level much of this is best if it comes from within ICANN, and 
if ICANN could itself find ways to do that.
    There is a role here for the U.S. Government just as, A, 
there is a role for other governments that are involved in 
ICANN and in watching what ICANN does. But we should note there 
is a special backstop kind of responsibility that the U.S. 
Commerce Department has in this area.
    Mr. Pickering. Dr. Cerf, would you be willing, as the Chair 
of the board of ICANN, to limit your mission to technical and 
standard? Would you submit a bill of rights, so to speak, for 
Internet users and provide the structural safeguards? Would you 
do that voluntarily?
    Mr. Cerf. I am a strong proponent, Congressman, of limiting 
the role of ICANN. In fact, I speak regularly about its 
unnecessary expansion; to use a phrase that is a buzzword, 
Internet governance, which I think is a very broad term that 
ICANN has no business trying to achieve.
    With respect to a bill of rights, it sounds good on the 
surface. I need to understand more about the substance of it 
before I would know what I was signing up for. But in principle 
the notion that we protect the users of the Internet from abuse 
and from technical failures and the like is really important, I 
think.
    Mr. Pickering. Mr. Chairman, one quick follow-up question.
    If we limit the role, if we establish safeguards, then the 
question is who does policy? If ICANN doesn't do policy, who 
should do policy?
    Mr. Cerf. I wonder if Mr. Froomkin----
    Mr. Froomkin. Well, I guess the question is what sort of 
policy do you mean? In a sense we all do policy when we turn on 
our computers and decide what we want to use the Internet for. 
The Internet is a set of communication standards. We don't do 
policies about the alphabet; we don't do policies much about 
pencils. And in a sense it is that kind of a tool. So those 
policy questions are probably left best to homes and families 
and individuals.
    Mr. Pickering. This is the dilemma for us and has been for 
the very beginning. The reason we have ICANN is to avoid APA, 
the Administrative Procedures Act, as much as any reason. We 
didn't want the APA to apply to ICANN.
    Now, the problem with due process and other rights is that 
you have a private body that is not subject to APA, that is 
making decisions that many feel like should have some due 
process or APA or some safeguard. So how do we ensure that it 
continues to be private, nongovernmental, but have the 
safeguards? What is the appropriate balance?
    In, for example, policy, when ICANN wanted to set a fee, 
the question was do they have in essence a taxing authority, an 
authority to tax people? Clearly they do not. But now they are 
running into a problem with questions of the $50,000 fee; is 
that the way to finance themselves. How will ICANN sustain 
itself financially? Those are all policy questions. Who will 
make those decisions? That is the dilemma we all have.
    Mr. Davidson. I think you have really hit the nail on the 
head here, and this is difficult. It is in some ways an 
experiment. One answer, in some ways also, is to see if there 
are ways to make ICANN a healthier organization; that to the 
extent that it is appropriate, to the extent that ICANN is 
getting into these other areas, that the affected user 
community feels like this is a legitimate organization. That is 
something that happens over time and we all need to keep 
working on. I don't think it has happened yet.
    There is a great deal of internal debate within ICANN, for 
example, about how its board is selected, especially a section 
of the board that is selected at large. And I think the outcome 
of those kinds of debates is going to have a lot to do with 
whether we can have faith in an ICANN-like body to make these 
decisions to the extent that they are not simply objective, 
technical standard decisions. So it is tough.
    And, again, this bottom-up consensus-oriented idea is very 
important in thinking about whether the user community that is 
affected by this can trust the organization.
    Mr. Pickering. Mr. Chairman, I know that my time is up, but 
I think that we are beginning to focus on the issues, and maybe 
this is just the beginning with this hearing to see if we can 
come up with the reforms and the steps that we need to take to 
make sure that the promise of the potential of the Internet, 
ICANN, and domain names does have the credibility and the 
confidence of the American people, and what we can do as a 
committee to be a catalyst to answer these questions.
    I look forward to working with all of you, Dr. Cerf and all 
of the others, to try to get the right reforms as quickly as 
possible, and hopefully done in a voluntary, private, 
nongovernmental way.
    Mr. Upton. Thank you.
    Mr. Cox.
    Mr. Cox. Thank you, Mr. Chairman, and I would like to 
welcome all of our panelists and thank you especially for your 
excellent testimony. We have covered a lot of ground in the 
last 14 months, and I think you have improved our knowledge 
base a great deal here this morning.
    The debate that has gone on this morning has included 
questions of the role that ICANN can or should play in the 
development of policy. One of the policy issues that I would 
like to use is the basis for furthering that discussion in just 
a few minutes, that we have discussed here in this committee 
and also throughout the House and the Senate, and that is what 
to do about pornography on the Internet.
    One of several ideas that has been discussed is the 
creation of a top-level domain that would essentially zone the 
Internet voluntarily. We rejected early on the idea of a 
government mandate for this to occur, but we have been very 
interested in whether the private sector might migrate in that 
direction, because if it did, it might then be possible for 
Congress to offer incentives, not penalties, which would run 
afoul of first amendment guarantees, but incentives for people 
to list on that adults only top-level domain.
    Obviously, the most primitive screening software, indeed no 
screening software at all virtually, would be needed, to the 
extent that this were successful in the marketplace, for people 
then to discriminate among content that they were seeking, and 
indeed, if you are an aficionado of pornography, probably 
simplify your life. But for everyone else who wished to avoid 
it, it would also simplify theirs.
    So I would begin by putting that question to you, Dr. Cerf, 
and I perhaps ought to know the answer to this question, but I 
haven't found it in what has gone by thus far, whether any of 
the 44 applications you reviewed was for such a top-level 
domain?
    Mr. Cerf. Indeed one of the applications did propose a 
.xxx. The discussions that ensued among the board on this point 
turned in large measure on our uncertainty of how to enforce 
movement or registration of those pornographic sites to that 
top-level domain.
    As we all know, you can reach literally every domain on the 
Internet by using the domain name system. So everywhere in the 
world, not just in the United States, one would need to create 
the incentives that you mentioned in order to persuade these 
purveyors to move over into this single global top-level 
domain.
    Mr. Cox. Let's pause just there for a moment, because there 
is an assumption there that I think is not empirically in 
evidence, and that is that there would not be an advantage to 
being registered in a place where people might expect to find 
you, and .com is crowded with all sorts of things that you have 
to sort through. One might expect rather rapidly to find what 
one was looking for on a domain that were--like the other top-
level domains--you expected were descriptive of its purpose.
    Mr. Cerf. I don't think that the board was able to conclude 
that we could guarantee that everyone would move over, even 
though, as you say, there might be some incentive. So in the 
absence of knowing for sure it could be guaranteed, we also ran 
into the question whether someone would then complain or, in 
fact, take legal action if, in fact, not everyone did move 
over. So enforcement was of principal concern there.
    Mr. Cox. I take it your process for evaluation of this was 
discussion at the board level?
    Mr. Cerf. It was discussed in public during the course of 
the GTLD evaluations, so it is documented on the Web site, in 
fact.
    Mr. Cox. And the participants in that discussion were?
    Mr. Cerf. The members of the board.
    Mr. Cox. Well, that tees up--and I know you are dying to 
get in here, too, but that tees up a question that I would then 
put to Mr. Davidson and Professor Froomkin about whether you 
think using this as an example of the kinds of policy decisions 
that ICANN is being called upon to make, whether you think this 
process is working and is workable for resolving such 
questions.
    Mr. Davidson. I would like to say two things. One is the 
Congressman has been one of the thoughtful commentators on this 
question of how we deal with the very compelling issue of 
protecting kids on the Internet. I would just say on the 
specific question of the .xxx and .kids as presented to ICANN 
right now, I really have to rise to ICANN's defense on some 
level and say I think they did exactly the right thing by not 
going there, as it were.
    There are a lot of reasons to believe these are difficult 
and troubling concepts. The Congressional Commission on Child 
On-Line Protection, in fact, which recently reported to 
Congress and came out of the COPA statute, raised a lot of 
questions about particularly .xxx, because, for example, it 
could be viewed as an attractive nuisance where people could go 
to find a collection of materials that were troubling. Or there 
is definitely an issue with the fact that these are binary 
labels; you are either in or you are out. They don't have any 
of the granularity that many of the other much more 
sophisticated tools out there for parents do. They do not scale 
well globally. What we think ought to be in .kids here in the 
United States might not be what they think ought to be in .kids 
in Europe or in Asia or in Germany or elsewhere. So it is not 
clear these are actually as useful solutions as many of us 
might have hoped.
    The second thing is that, given that they are highly 
controversial because of their impact on speech, in that 
respect ICANN did the right thing here by saying this is an 
area where there are major policy impacts. We should stay out 
of it. If ICANN were to create .dems but not .gop, we would 
say, gosh, there is a problem there, right? I think ICANN 
should stay out of making decisions in areas where there are 
very, very clear policy concerns that have been raised.
    Mr. Cox. Let me add that, as you know, but perhaps the 
other panelists or other Members don't know, the center has 
been very active on this, and I have been much reliant on your 
research and advice and guidance, and it is one of the reasons 
I have not introduced legislation on this topic.
    My question, however, is slightly different. Maybe I should 
give Professor Froomkin a chance to answer it. It is not so 
much whether at the moment you come down yea or nay on the 
question of whether you would have approved a particular 
application, but rather whether this, as emblematic of the 
kinds of tough policy questions that are getting put to ICANN, 
is something which is tractable within the current structure 
and whether there are structural changes that need to be made 
to address this; whether ICANN is the right body to address 
such questions and so on. I think you did answer that 
partially, but that is the nub of my question.
    Professor Froomkin.
    Mr. Froomkin. I will do my best to meet it head on, 
Congressman. I think for ICANN to get involved in any issue 
that smacks of content control will bring the whole thing 
justifiably crashing down, and they were very wise to run away 
from it.
    Now, that doesn't answer the implicit question, which is if 
not ICANN, then what? Let me just take a tiny crack at that, if 
I may, and everyone will hate me for this.
    There is the .U.S. domain. If we are trying to make rules 
that meet the needs of people in this country, we could create 
something with granularity for different age groups and so on. 
People wouldn't be required to use it, but it would be a 
resource that would be available.
    That would be one way to do something that didn't run into 
the transnational problem, and giving ICANN, which is supposed 
a technical standards body and not a speech regulation body, 
problems. That might be an avenue to approach. Again, if 
linking it to the U.S. brings it right to the fore of the 
problem of first amendment values, then that is where it 
belongs.
    Mr. Cox. I don't know if I have a moment. It seems the 
chairman is forbearing, and I will take advantage.
    I will just put it back to Dr. Cerf to wrap up for us. The 
two commentators have just opined that you made the right 
choice, and that one of the reasons that you made the right 
choice is that ICANN ought to--normatively ought to stay away 
from issues that carry this kind of policy controversy. Can you 
tell us your views on that general topic?
    Mr. Cerf. Well, I certainly hope that ICANN doesn't have to 
ever get into things like content control. We edge in that 
direction a little bit when we have the specialized domains 
that have restricted membership. But in the cases that we 
approved, it appeared to us that the restrictions were pretty 
objective; are you a museum or not a museum, are you a co-op or 
not a co-op, and so on. In the case of .pro, do you have a 
professional affiliation or degree or not? The notion of 
content control is such a slippery slope.
    We have seen some international debates on this subject. 
Perhaps you are aware of the court case in France against 
Yahoo. All of these matters are extremely complicated. And as 
was pointed out a little bit earlier, the top-level domain 
system is a very crude mechanism for describing content. It is 
an extraordinarily unsatisfying way of trying to imply what 
will be found in a particular top-level domain, and as a result 
it feels like that is not the place where ICANN should be 
trying to make decisions.
    We do have a problem if multiple parties propose the same 
top-level domains. We do have a policy question. How do we 
choose among them, even within the root that we are responsible 
for? That is hard. And it is the sort of thing that I am not 
satisfied that we understand how to deal with that, especially 
if qualified parties come with conflicting proposals. That is a 
very difficult thing.
    Mr. Cox. Well, I thank you, and I think what we have 
touched on here is something that is not only difficult for 
ICANN to handle, but also something that may be beyond the 
capacity of any top-level domain system to handle.
    It has been suggested, I might add, just for local color, 
that a better way to do this, in a purely voluntary fashion, 
would be for people to organize around the principle of 
including somewhere an Internet address, for example .adu, as 
an abbreviation for adult or age-appropriate material, and that 
way people could have any address they wanted, any domain they 
wanted, and still there would be some unifying theme that 
robots could notice. But that is a carol for another Christmas.
    Mr. Cerf. That is an interesting idea, in fact.
    Mr. Cox. Well, I thank the panel again, and my time surely 
has expired.
    Thank you, Mr. Chairman.
    Mr. Upton. Thank you, Mr. Cox.
    This finishes up and concludes the hearing. I would note 
for the record, particularly for those Members that were not 
able to come, and I know there are some other hearings taking 
place at the same time, that we may see some written questions 
come your way. You can respond to them on e-mail, if you would 
like. We look forward, if that happens, to a timely response.
    I would just offer this one conclusion to the hearing. 
Based on the questions of all Members here and the statements--
opening statements as well, we don't want a boring or exciting 
process. Our goal here is to make sure that it is fair and open 
in every way, particularly for those that are qualified parties 
with a qualified application, so that they may, in fact, 
succeed, and so that all of us users and businesses succeed as 
well.
    I have viewed this hearing as a constructive one. I hope 
all of you have taken that to heart. I think there is room for 
improvement as this process continues, and we will continue to 
oversee this process in the days ahead not only through my 
chairmanship of this subcommittee, but I know Mr. Greenwood 
would like to do the same as part of the oversight subcommittee 
as well. We look forward to that, and we thank you for your 
time and look forward to seeing you again.
    Thank you very much.
    [Whereupon, at 12:34 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]

                 Prepared Statement of Name.Space, inc.

    Over the past several years a widespread myth was that adding new 
Toplevel Domains to the internet would cause the net to break. The 
reality is and has been for five years now that the net is already 
broken by NOT adding the new TLDs that have existed since 1996. In a 
word, censorship by ``default''. There are places that exist on the 
internet that most of the world can't see because they are artificially 
and arbitrarily excluded from publication in the global ROOT--the top 
of the ``domain tree'' that identifies all the available top level 
domains to the rest of the internet.
    Many new toplevel domains have been added to the ROOT just as 
smoothly as any new ``dot-com'' domain is added to the ``COM'' domain. 
On a daily basis sometimes 10,000 or more new entries are added to 
``COM'' with no ill effects. At its most basic level, adding one or 
more entries into the ROOT domain database (or ANY level of the domain 
tree) is nothing more than a mundane administrative task, essentially 
copying or typing some lines into a file and saving it. With a simple 
``copy and paste'' the internet can be richly enhanced with these new 
domain extensions. A very simple and incredibly inexpensive operation 
that results in the enabling of vast economic opportunities, making the 
best use of the existing ubiquitous and essential DNS technology while 
at the same time extending the benefits of expanding the spectrum of 
expressive and uniquely descriptive names to support a growing, 
commercially and culturally diverse global network.
    What should be an everyday mundane administrative task has turned 
into the most expensive text edit in history, and one that is delayed 
more than five years!
    Name.Space has been working toward introducing new TLDs since the 
company was formed in 1996 predating ICANN by more than two years. 
Since that time Name.Space has been listening to its customers and 
users of the internet at large and responding to their desire for new 
domain names besides ``.com'' and over the years out of all the 
customer requests selected over 540 new extensions and published them 
on a distributed DNS infrastructure, (see attatched) available to all 
for free. We listened to our clients demands and have worked hard to 
bring them the services and quality of service that they were not 
getting elsewhere, building useful new tools as we needed them along 
the way to improve the security and capabilities of the Name.Space root 
domain registry. We would like to share our work with the rest of the 
world and of course profit by it so we can create jobs and spinoff 
opportunities. The barrier in front of us is a very expensive text edit 
that my company paid dearly for and which has yet to happen.
    To answer the question raised by this Committee, Is ICANN thwarting 
competition? The answer is unmistakedly yes.
    Name.Space has been ready to serve the internet with new domains 
since 1996 and has been repeatedly denied access to the market by an 
artifical and arbitrary exclusion from the ROOT. ICANNs decision to 
exclude Name.Space and other qualified applicants unjustly delays the 
introduction of true diversity of business model, competition and 
consumer choice to the domain industry. It directly harms our business 
at Name.Space by the loss of revenues that we have suffered over the 
years that most of the world could not resolve our domains, and it 
harms individual internet users and non commercial organizations by 
depriving them of free speech and consumer choice.
    I respectfully request that this Committee reject the ICANN board 
selection of 7 TLDs and their operators and ask that the NTIA 
reconsider all applicants who were excluded by ICANN and resolve the 
terms of inclusion of existing new TLDs into the global ROOT so this 
``most expensive text edit in history'' can finally bring about the 
logical evolution of the domain name system that is more than five 
years in the making--in ``internet time'' five years is an eternity.
                                 ______
                                 
                                         AtlanticRoot Network, Inc.

    Dear Representative Pickering: Thank you for inviting me to respond 
to the Center for Democracy and Technology testimony of February 8, 
2001.
    In order to respond in an organized manner, I have decided to 
follow the actual written testimony on a section by section basis. My 
comments will be enclosed in brackets [  ] and italicized. For the most 
part, Mr. Davidson and I agree. There are, however, some areas in which 
I would like to elaborate and some where we disagree.
Summary
    The Internet's great promise to promote speech, commerce, and civic 
discourse relies largely on its open, decentralized nature. Within this 
architecture, the centralized administration of the Internet 
Corporation for Assigned Names and Numbers (ICANN) is a double-edged 
sword that presents both the possibility of bottom-up Internet self-
governance and the threat of unchecked policy-making by a powerful new 
central authority. ICANN's recent move to create new global Top Level 
Domains (gTLDs) is a welcome step towards openness and competition. But 
the process ICANN used to select those gTLDs was flawed and 
demonstrates the need for ICANN to take steps to ensure greater 
transparency, representation, and legitimacy.
    The Center for Democracy and Technology (CDT) welcomes this 
opportunity to testify before the Subcommittee on this issue of 
importance to both competition and free expression online. CDT is a 
non-profit, public interest organization dedicated to promoting civil 
liberties and democratic values on the Internet. We have participated 
in ICANN as advocates for open and representative governance mechanisms 
that protect basic human rights, the interests of Internet users, and 
the public voice.
    We wish to make four main points in our testimony:

 ICANN's decisions, and particularly its selection of new 
        gTLDs, raise issues of broad public concern--While ICANN 
        purports to be a purely technical coordination body, it has the 
        potential to exert a great deal of control over the Internet, 
        and many of its ``technical'' decisions have broader policy 
        implications. The selection of new gTLDs--particularly in the 
        manner exercised by ICANN--impacts free expression and the 
        competitive landscape of the Internet. ICANN is not equipped to 
        make policy decisions, and does not even apparently want to. 
        But the gTLD selection process suggests that ICANN could be 
        engaged in broader policy-based decisions than its mission or 
        mandate should allow.
 The ICANN Board and governance structure that made the gTLD 
        selection is not appropriately representative of the public 
        voice--A starting point for evaluating the gTLD decision is 
        asking: Is the group that made this decision appropriately 
        structured and representative? The Directors that made the gTLD 
        selection did not include any of the elected members of ICANN's 
        Board, and there is an ongoing controversy within ICANN about 
        the appropriate structure and selection of the Board. Despite 
        efforts to make ICANN inclusive, non-commercial interests 
        continue to be underrepresented in its deliberations--casting 
        doubt on the legitimacy of the gTLD decision.
 ICANN's process for selecting new gTLDs was flawed.--A $50,000 
        non-refundable application fee and stringent criteria created a 
        high barrier for non-commercial applicants and skewed the 
        applicant pool towards large organizations. The ``testbed'' 
        concept for creating a small number of initial domains, while 
        not without its merits, also led to the uneven application of 
        vague criteria in order to reduce the number of applicants from 
        those who passed more objective criteria. ICANN has produced 
        little support for its final decisions--decisions that appeared 
        arbitrary. The appeals process is unsatisfying and post-
        selection transparency of the important final contract 
        negotiations is minimal.
 Nevertheless, on balance a rollback of the gTLD decision is 
        not in the consumer interest. ICANN should reform its selection 
        process and governance model, and Congress and the Commerce 
        Department should exercise oversight in this reform.--While the 
        selection process was flawed, new gTLDs are needed. CDT 
        believes that on balance the consumer interest in rapid 
        deployment of new gTLDs, and the violence done to the global 
        interest in ICANN by U.S. intervention, are not outweighed by 
        the benefit of the Commerce Department's reconsidering the 
        entire gTLD decision. Rather, Commerce and the U.S. Congress 
        should insist on a more objective process for gTLD selection 
        moving forward, and on reform of ICANN's structure and mission 
        moving forward to make it appropriately representative.
    ICANN's founding documents held out the vision of a new form of 
international, non-governmental, bottom-up, consensus-driven, self-
organizing structure for key Internet functions. The promise of that 
vision was to promote openness, good governance, and competition on a 
global network. Today, that promise is threatened. As the gTLD 
selection process demonstrates, serious reform is needed to limit the 
injection of policy-making into ICANN's technical coordination 
functions, reassert the bottom-up consensus nature of ICANN's 
deliberations, and ensure that the public voice is appropriately 
represented in ICANN's decisions.
    The Center for Democracy and Technology is a 501(c)(3) non-profit, 
public interest organization dedicated to promoting civil liberties and 
democratic values on the Internet. Our core goals include ensuring that 
principles of fundamental human rights and the U.S. Constitution's 
protections extend to the Internet and other new media. CDT co-authored 
ICANN's Global Elections: On the Internet, For the Internet, a March 
2000 study of ICANN's elections. CDT also serves in the secretariat for 
the ``NGO and Academic ICANN Study'' (NAIS), a collaboration of 
international researchers and advocates studying ICANN's governance and 
At-Large Membership structure.
  1. ICANN's decisions, and particularly its selection of new gTLDs, 
                 raise issues of broad public concern.
    Should the public and policymakers care about ICANN and its new 
gTLD decisions? The answer today is yes.
    There are two competing visions of ICANN. In one, ICANN is a new 
world government for the Net--using its control over central domain 
name and IP address functions as a way to make policy for the Internet 
globally. In the second, ICANN is a purely technical body, making 
boring decisions on straightforward technical issues of minimal day-to-
day interest to the public--like a corporate board or a technical 
standards group.
    In reality, ICANN is somewhere in between and is likely to require 
public attention for at least some time to come. There are at least two 
important reasons why ICANN is of public concern:
     ICANN's has the potential for broad policy-making--On the 
decentralized global Internet there are few gatekeepers and a great 
deal of openness--features that have contributed to expression, 
competition, and innovation online. In this decentralized world ICANN 
oversees a crucial centralized function--the coordination of unique 
names and addresses. In this role, ICANN has the potential to exercise 
a great deal of control over Internet activities. For example, ICANN 
has already required that all domain registrars impose a uniform policy 
for resolving trademark disputes. Without a check on its authority, 
ICANN could seek to impose other requirements or even content 
regulations. While the current ICANN Board has shown an admirable lack 
of interest in such policy-making, a more powerful future ICANN might 
not be so restrained, particularly without any checks on its authority.
    [The UDRP is horribly flawed .
    1. There is no avenue for non-trademark holders to file a 
complaint. It is designed strictly for the Trademark Lobby and large 
multi-national corporations to obtain domain names they did not have 
the foresight to register when they had the opportunity to do so. 
Further, it allows these interests to restrain fair use of domain 
names.
    2. Free speech has been curtailed as a result of the UDRP and the 
courts have now begun to use these flawed decisions to deny it. While 
it has been determined that names like  do not 
constitute free speech in some cases, others have ruled that it does. 
There is inconsistency and bias throughout. Does a name infer free 
speech or does it not?
    3. What is a bad faith registration? If Irving B. Matthews, CPA 
registers ibm.com or ibm.biz, does that mean a bad faith registration? 
It seems so in many decisions involving acronyms and other names. Who 
has the rights to Ford, Acme, Amex, clue, Barcelona and a host of 
others? Does a trademark holder ``own'' words? Does anyone own 
language? Is it proper to allow a claim to words such as ``easy'' in 
any form and to deny their use to others? This is currently one such 
claim. Another is a claim to ``my''--any use of the word!
    4. There is no appeals process, yet the complainant may supplement 
comments for a fee with one arbitration forum. The respondent may not. 
Either side may go to court, of course, but in most cases, the 
respondent does not have the resources to do so, and the complainant 
knows this. Many respondents simply give up, especially individuals. 
There is nothing to prevent a loop. A respondent went to court and won. 
The complainant then filed a UDRP claim. The UDRP does not have to 
honor a court judgment and ICANN accepted the claim. In case of a UDRP 
loss, the complainant could go back to court, and so on. There is 
nothing to stop the cycle, so a trademark holder with deep pockets 
could easily bully a respondent into giving up a legitimately held 
domain.
    5. Forum shopping is standard. WIPO has most applications because 
of its obvious bias. In my opinion, WIPO should not be a provider at 
all, given its mission as advocate for the IP industry.
    6. Respondents have no choice in which arbitration provider is 
used. In order to have any voice at all, he must choose a three member 
panel and pay for it. For most respondents, this is prohibitive. We 
must consider that most complaints are filed by established businesses 
against individuals or very small businesses. Many complaints are 
simply intimidation and theft by fiat, since they know the respondents 
many times simply cannot afford representation or the three member 
panel choice.
    There are many other areas of the UDRP that cry for reform. I am 
one of a great many who feel it needs total reform and that WIPO should 
be only an advisor for one interest group. There must be advisors from 
all stakeholders.
    It seems that the large commercial interests have little or no 
understanding of the DNS, or do not wish to recognize its hierarchal 
structure. Since there can be only one unique character string (name) 
at each level, trademarks do not fit the model at all. A domain name is 
just a locator for a numerical address.
    One solution may be to absolve trademark holders from the 
responsibility of policing their marks within the domain name system. 
Without that requirement, there would be no need for such a dispute 
resolution process. In addition, the ACPA language is so over broad, 
that it invites abuse--abuse that is already apparent.
    The term ``cybersquatter'' was meant to refer to those who would 
deliberately register a known trademark and then attempt to extort the 
trademark holder for large sums of money or sell it to a known 
competitor to direct customers away from it. Instead, it has been used 
to refer to domain name holders who have not used a name at all for the 
web or who wish to enter the secondary market--a perfectly legal 
activity. While it has been determined that free speech does not apply 
to a domain name in itself, the ACPA and UDRP allow a determination 
that one is a cybersquatter for registering a domain name. There is a 
great disparity here. Remember, a domain name is a locator, even though 
it uses what appears to be common language.
    I feel that the ACPA language requires change to a narrowly defined 
criteria and definition of ``cybersquatter.''
    The Lanham Act was written to protect consumers and has now been 
perverted to protect trademark holders against both small business and 
consumers. It is resulting in restrained trade and free speech.]
     Even ICANN's narrow technical decisions have broader 
policy impacts--``Technical'' decisions often have broader impact. 
Expanding the gTLD space, choosing which registry is recognized for a 
country code, or even selecting a method for recognizing when new 
country-code domains get assigned (as .ps was recently assigned to 
Palestine), for example, all have broader political and social 
implications.
    [The ccTLDs are not at all happy with proposed actions by ICANN. 
Tri-lateral contracts, involving governments in contracts where 
delegations belong to individuals or corporations within a country, 
forcing gTLD status on a ccTLD . . . These are areas where ICANN 
imposes broad policy and it should not.
    ccTLDs are and should be autonomous. In my opinion, I do not see 
why any of them should be forced into contracts at all. ICANN provides 
little or no services to them and there is little or no cost involved 
to maintain an entry in the rootzone. ICANN could, if necessary charge 
a nominal fee for making contact or nameserver changes, but this fee 
should be no more than a nominal administrative charge of five or ten 
dollars. If it is automated, there should be no fee at all. It is in 
the public interest to have a ``whois'' database for TLDs, but even 
this is a minimal cost.
    ICANN should not be engaged in policy making for any TLDs beyond 
those held by the DoC. Aside from basic technical requirements that 
ensure viability of a TLD (nameservers), ICANN should stand aside. 
Business models, dispute policies, payment policies, restrictions, 
charters should not be within their purview These are business 
decisions or decisions within the realm of national sovereignty.]
The Consumer and Free Expression Interest in New gTLDs
    Today, access to the domain name system is access to the Internet. 
Domain names are the signposts in cyberspace that help make content 
available and visible on the Internet. (For further explanation, see 
CDT's overview Your Place in Cyberspace: A Guide to the Domain Name 
System.) The domain name system may ultimately be replaced by other 
methods of locating content online. But for the time being, a useful 
and compelling domain name is seen by many as an essential prerequisite 
to having content widely published and viewed online.
    There is an increasing consumer interest in creating new gTLDs. The 
current gTLD name spaces, and the .com space in particular, are highly 
congested. The most desirable names are auctioned off in secondary 
markets for large sums of money. It is increasingly difficult to find 
descriptive and meaningful new names. Moreover, the lack of 
differentiation in gTLDs creates trademark and intellectual property 
problems: there is no easy way for United AirLines and United Van Lines 
to both own united.com.
    [Congestion has occurred due to the delay of introduction of TLDs 
to the USG root. It has created a perceived shortage of names and 
fostered speculation. If existing TLDs had been entered into the root 
years ago, the situation would have been very different today. While 
further delay will exacerbate the problem, imprudent decision now will 
have serious negative impact later.]
    ICANN's decisions about new gTLDs can have other implications for 
free expression. If, in choosing among otherwise equal proposals, ICANN 
were to create a new gTLD .democrats but refuse to create .gop, or 
added .catholic but refused to add .islam, it would be making content-
based choices that could have a broad impact on what speech is favored 
online.
    [There is no reason to refuse to enter a TLD into the root . . . 
All candidates with demonstrable technical capabilities should have 
been included, and should be included in the future.]
    In addition, CDT has some concern that the creation of 
``restricted'' domains that require registrants to meet certain 
criteria--such as .edu or the new .museum--risks creating a class of 
gatekeepers who control access to the name space. Today, access to open 
gTLDs like .com and .org does not require any proof of a business model 
or professional license. This easy access to the Internet supports 
innovation and expression. Who should decide who is a legitimate 
business, union, or human rights group? CDT has called for a diversity 
of both open and restricted gTLDs, and will monitor the impact of 
restricted domains on speech.
    [I disagree that there is a problem with creation of ``chartered'' 
TLDs. To the contrary, chartered or ``restricted'' TLDS should be 
desirable. It allows for consumers to search within categories and can 
provide an indication that they will find a bone fide organization, 
business, profession or individual within a specified TLD. However, for 
this to work well in practice there must be a multitude of TLDs 
available. And this is the point, is it not? ICANN/DoC have been 
reluctant to provide them and impose such measures that it is nearly 
impossible to do so for the vast majority of the world].
    There is increasing evidence of an artificial scarcity in gTLDs. It 
is now widely acknowledged that it is technically feasible to add many 
new gTLDs to the root--perhaps thousands or even hundred of thousands. 
Limiting the number of gTLDs without objective technical criteria 
creates unnecessary congestion; potentially discriminates against the 
speech of non-commercial publishers or small businesses who cannot 
compete for the most desirable spaces; and places ICANN in the role of 
gatekeeper over speech online by deciding which gTLDs to create and 
under what circumstances.
    There are many legitimate concerns that call for a slower 
deployment of new gTLDs. Some have expressed concern about stability of 
the Internet given a lack of experience in adding many new gTLDs. 
Trademark holders have also raised concerns about their ability to 
police their marks in a multitude of new spaces.
    [The fallacy of lack of experience is acutely apparent. There are 
TLDs such as .WEB and many others that prove it. There are also 
companies, such as Diebold Inc., that have been deploying ``new'' 
services successfully for many years.
    Other roots have been adding TLDS frequently with no problems and 
DoC has added ccTLDs in droves over the last decade, and during the 
most explosive growth period for the Internet. If failure or success is 
a criteria, it should be dropped, since the market will determine that 
issue.
    As for Trademark concerns, let us consider having 500 TLDs (they 
exist today) and then determine whether Trademarks have a place in the 
DNS. If, as I mentioned earlier, Trademark holders were absolved of 
having to police their marks in the DNS, the purpose of alleviating the 
scarcity of names would be accomplished. The trademark issue has become 
so over blown and powerful that it threatens to overshadow any 
advantage in introducing new gTLDs. What is the point if trademark 
holders get first choice before any other entity has a chance in every 
TLD? It makes no sense at all. With hundreds of TLDs, it is almost 
humorous. One possible solution would be to relegate Trademark holders 
to a .TMK or .REG for protection of their marks. However, to say they 
have first choice in all new gTLDs is ludicrous.]
    CDT believes that these concerns support the notion of a phased 
``proof of concept'' rollout of new gTLDs. However, we believe that the 
consumer interest will be best served by a rapid introduction of the 
first set of new TLDs--followed quickly by a larger number of domains.
    [I disagree strongly that there is need for ``proof of concept'' 
since it has already been accomplished by several TLDs, including .BIZ, 
.WEB, .ONLINE, ccTLDs and many others. It makes much more sense to 
introduce as many as possible (really simple) immediately, with one 
caveat. There should be no duplication in THE NAME SPACE.
    I have always advocated that DoC should simply include all known 
viable TLDs in their root, just as the other major roots include the 
DoC TLDs and ccTLDs in theirs. This is a common reciprocal arrangement. 
It provides a singular name space and enhances the stability of the 
Internet by providing a multiple system of networks for load balancing 
and avoidance of a single point of failure.
    What is generally not understood is that while THE name space is 
absolutely singular, root systems are not. There can and will be many 
roots. There is no way to prevent this occurrence. It is in the best 
interests of the global community for ICANN/DoC to recognize the 
phenomenon and cooperate with it. The alternative is apparent. ICANN 
refuses to acknowledge the existence of pre-existing roots and TLDs and 
then simply duplicates them. The potential result is chaotic with much 
of the innovation in new systems occurring outside of the US where our 
national law would have no effect in any case. Cooperation, on the 
other hand, would tend to bring these disparate groups to the table.
    This attitude and practice blatantly breaks the agreement with DoC 
(the ICANN-DOC MOU) and also the APA that ICANN was designed to avoid. 
Since the situation is not going to disappear, and will rear its head 
frequently, it is my considered opinion that ICANN/DoC move to 
cooperate with all existing entities rather than ignore them. One can 
choose to ignore warnings of an impending hurricane, but it will still 
make landfall. Once you feel the wind, it's too late to plan. In fact, 
once DoC introduces a collider and the registry for that collider is 
open to the public, the damage may be irreversible.
    We still have a chance to deal with impending chaos, but time is 
very short. No amount of US legislation will prevent the global 
problem. No one country can ``rule'' the Internet and certainly no 
single corporation can do so. ICANN could go a long way to mitigate the 
situation, but it must be reformed and focused in task in order to 
accomplish the task.]
    The phased ``proof of concept'' adopted by ICANN, however, creates 
a major problem:Because ICANN could add many new gTLDs, but has chosen 
to add just a few, it has forced itself to make policy-based and 
possibly arbitrary decisions among legitimate candidates.
    [ICANN made decisions based on business models, financials, ethics, 
mnemonics, and other arbitrary criteria that should not be within its 
purview. In addition, it relied on the sometimes grossly erroneous 
reports by staff to render decisions without a thorough personal 
understanding by board members of each proposal. Staff ran the show.]
    In this environment, it is most important that gTLDs be allocated 
through a process that is widely perceived as fair, that is based on 
objective criteria, fair application of those criteria, and open and 
transparent decision-making. There are many reasons to believe ICANN's 
first selection process for new gTLDs has been highly flawed.
    3. The ICANN Board and governance structure that made the gTLD 
 selection is not appropriately representative of the public interest.
    A starting point for evaluating the gTLD decision is asking: Is the 
group that made this decision appropriately structured and 
representative? The governance of ICANN itself is an issue of ongoing 
debate. Despite efforts to make ICANN inclusive, there are many 
indications that ICANN has failed to be appropriately representative of 
all the interests affected by its decisions--casting doubt on the 
legitimacy of the gTLD decision.
ICANN organization underrepresents many interests.
    Members of the Internet user community and advocates for user 
interests have often been under-represented in ICANN. ICANN's physical 
meetings, where many major decisions are made, occur all over the 
world, pursuing an admirable goal of global inclusiveness. However, the 
expenses associated with physical attendance at such meetings place it 
out of reach for many NGOs and public interest advocates.
    CDT's own experience has been that the ICANN community is receptive 
to thoughtful input and advocacy, but that it requires a concerted and 
ongoing effort to be effective. In our case, that effort has only been 
possible through the support of the Markle Foundation, which early on 
committed to support efforts to improve the public voice in ICANN. We 
have received further support from the Ford Foundation as well. These 
grants provided CDT with the ability to attend and follow ICANN 
activities, which many other potentially interested organizations in 
the educational, civil liberties, or library communities cannot do.
    ICANN's bottom-up structures offer imperfect avenues for public 
participation. While ICANN explicitly provides representation to a 
number of commercial interests, it fails to properly represent the 
millions of individuals that own Internet domain names or have an 
interest in ICANN's decisions. The main outlet for individual 
participation-the General Assembly of the Domain Names Supporting 
Organization-appears increasingly ineffective. Non-commercial 
organizations have a constituency, the Non-Commercial Constituency, but 
it is only one of seven groups making up one of the three supporting 
organizations.
    [The General Assembly has literally no voice in ICANN policy making 
decisions. Recommendations made at the Melbourne meetings were ignored. 
In addition, the board meeting was called to order a half hour early 
with no visible notification to the public (I attended via webcast) and 
important issues were discussed prior to the public's attendance at 
that meeting. Furthermore, the agenda did not include discussed items 
and public statements had been made that no decisions would be made 
regarding the gTLDs. The board then proceeded to resolve that final 
decisions would be made without further review and contracts would be 
negotiated and signed as well. At 9:00 am, the Chairman announced that 
he was leaving early to catch a flight to the US and he left at 10:00 
am. In addition, when there was an announcement by a local barrister 
that legal action had been instituted against ICANN, board members 
laughed openly and encouraged the audience then in attendance to laugh 
as well. Professional, open and transparent? No.
    As a typical example of ICANN's closed door procedures and 
exclusion of the majority of stakeholders, the ICANN/Verisign agreement 
was amended and approved within a twenty-four hour time frame with no 
allowance for input from the DNSO. As should be expected, this action 
has not been well-received by stakeholders. The GA, rightfully, feels 
disenfranchised and ,in fact, is disenfranchised. There was an 
inadequate time frame allowed for the entire process. Instead, 
negotiations were handled without public input for months and Verisign 
was permitted to dictate revisions to the original agreement and 
completely avoid the APA. The perception globally is negative. ICANN/
DoC could have avoided the negativity with openness and consideration 
for the Internet's users. It did not.
    With regard to new TLDs, if ICANN were to listen to stakeholders 
more, the resulting TLDs would be more likely to serve the public than 
those selected.
    It should be noted that one of the major objections to IOD's 
application was that it would run both registry and registrar for a 
period of time. Hans Kraaijenbrink was adamant in his objection to this 
stating , ``IOD goes against everything we ve worked on the last two 
years they join registrar and registry, and they have a high price.''
    An excerpt from a General Assembly post states:
--I still think that to be able to run (and now without time
--constraints and/or other future limitations) the Registry and the
--Registrar for the major generic TLD *is* giving to VeriSign
--unfair competitive edge. As I said, the matter may now be moot,
--but IMHO we have just witnessed the formalization of a change in
--policy by ICANN.
    I do not see a problem with a registry/registrar model, especially 
for a start-up registry. Our initial model is one such. It is in the 
best interests of the registry to bring on registrars, but there should 
be a ``breaking in'' period prior to adding such models. IOD's plan was 
practical and prudent. It allows development cost recovery in the 
initial months and a phase in of participating registrars. Jumping into 
an shared registration system (SRS) with no beta testing is detrimental 
to users. The objection to IOD's price is disingenuous since it is the 
exact price charged by Verisign.
    There was little consistency on the part of the ICANN BoD in the 
selection of new TLDs. There was obvious bias, Directors participated 
with definite conflicts of interest and did not recuse themselves until 
after that participation. In addition, there was not a legal quorum for 
the final votes. And this is in addition to the entire flawed process 
leading to the final selections. ]
ICANN's Board of Directors fails to adequately represent the public 
        voice.
    In the absence of other structures for representation, the main 
outlet for public input is the nine At-Large Directors of the Board. 
These nine directors are to be elected from within a broad At-Large 
membership, but there has been a great deal of debate about the 
election mechanism and even the existence of the At-Large Directors. To 
date only five of the nine At-Large directors have been elected (the 
seats were otherwise filled with appointed directors), and even those 
five were not seated in time for the gTLD decision in November.
    CDT, along with Common Cause and the Carter Center, has strongly 
advocated for broadly representative and fair mechanisms to fill all 
nine At-Large seats as quickly as possible. Last March CDT and Common 
Cause prepared a study of ICANN's election system, concluding that the 
proposed ``indirect election'' would not adequately represent the 
public's voice. ICANN agreed to hold more democratic direct elections 
(held last October), but only for five of the nine At-Large Directors, 
to be followed by a study of the election process. CDT is currently 
engaged in an international research effort, the NGO and Academic ICANN 
Study (NAIS), examining last year's election, and in June will offer 
its suggestions to ICANN regarding future selection of Directors.
    [ICANN has posted a notice on its website: ``At large Membership'' 
with a closed sign. There have been numerous statements and signs that 
there is no intention of having an ``at-large'' membership. One board 
member stated to Karl Auerbach (Melbourne BoD meeting) that board 
members who where there before him (Mr. Auerbach) saw no need for an 
at-large membership and were opposed to it. The white paper and MOU are 
being systematically ignored.]
    In the meantime, serious questions remain about adequate public 
representation on the current board, and the future of the public voice 
in selecting the Directors who will make decisions about additional 
gTLDs.
    [In my testimony on February 8, I stated that one major change 
should be the election of the board. Most have been ``squatting'' for 
over two years when they should have had an election within two 
months.]
ICANN has shifted away from bottom-up coordination.
    ICANN's founding conceptual documents, the Green and White Papers, 
called for ``private bottom-up coordination'' as the governance model 
for ICANN. Despite early attempts at consensus-based decision-making, 
authority in ICANN increasingly rests at the top, with the 
Corporation's nineteen-member Board of Directors. The Supporting 
Organizations have proven to have limited roles in policy generation 
and consensus-building. Increasingly, final ICANN policies are 
generated by ICANN staff and Board members. As a result the Board has 
moved away from the consensus-based, bottom-up practices which were 
originally a critical element of its conception.
    [The board is captured by special interests and even the elections 
for the at-large were tainted by ICANN's selection of candidates rather 
than completely open nominations by the at-large. community. It is 
anything but bottom up, open and transparent.]
4. ICANN's process for selecting new gTLDs was flawed.
    CDT has not taken a position on the merits of any particular gTLD 
or registry operator chosen by ICANN. Our focus has been on the process 
ICANN has used to select these domains and the potential rules it may 
impose on the use of domains. A different, better process might have 
yielded very similar results.
    [Perhaps it would not have. ICANN should not have accepted 
applications for existing TLDs. While CDT does not single out any 
applicant, it also does not take into consideration that many 
applications were for pre-existing TLDs. This should never have 
occurred. In addition, there is no reason why existing TLDs should have 
to be under contract to ICANN in order to be included in the root. 
Furthermore, the $50,000 fee is outrageous and unnecessary. It was 
arbitrarily chosen at the last moment and is designed to include 
litigation that ICANN knew would come as a result of its flawed plans. 
Why should losers fund ICANN's defense against them and also fund 
implementation of the winners of this lottery?
    In addition, the application questions themselves precluded 
applications by any entity that did not agree with sunrise or UDRP. 
ICANN states it was not a criteria, but the intimidation was there and 
all applicants for gTLDs who were selected had agreed to these terms. 
Another requirement was no involvement with other roots or having 
registrations. That also precluded application by all pre-existing 
TLDs. At first there was concern that .WEB registrants would be 
cancelled.
    We have been criticized for not applying to ICANN. Our response is 
that application for us would have been a waste of money that could be 
better spent for customer service, development and infrastructure, for 
one thing. For another, we feel that our existence as a viable business 
and registry should be sufficient as proof of concept. As many of the 
ccTLDs have no contract with ICANN and do not adhere to ICANN policies 
and rules, we have a viable business and should not be compelled to 
suddenly contract with ICANN for our existence or inclusion in the USG 
root. Had ICANN not selected .BIZ for award to a competitor, we would 
not have been placed in this position. Having done so, ICANN has 
indicated to the world that co-opting another's business product is 
okay as is duplication in the name space. One obvious result is 
New.net's introduction of 17 colliders out of the 20 TLDs they 
launched. They insist that since no one ``owns'' a TLD, they have every 
right to make those business decisions. They are correct, of course. 
There is nothing to stop them and the precedent has been set by ICANN. 
Neither New.net nor ICANN is considering the chaos this arbitrary 
decision is causing in the DNS. As time progresses, it will become more 
obvious. We are witnessing the tip of the iceberg.
    No amount of legislation will prevent the fracture and will 
certainly not cure it. Only reversing the precedent by preventing DoC 
from allowing it to occur in the USG root can assist in the global 
effort to maintain a stable, collision-free name space. It must be the 
responsibility of the caretaker of the largest market share to set the 
pace for the rest of the world. That caretaker is the U S government 
that assigned the task to the Department of Commerce. A wise president 
once said ``The buck stops here.'' So it does. ICANN's burying it's 
head in the sand is not the answer. It must take responsibility for the 
result of its actions and take the initiative to mitigate its stubborn 
refusal to cooperate. However, in the end, it is the U S Government 
that has the final authority to mitigate this problem since ICANN has 
shown it is not inclined to do so.]
    We note also that ICANN and its staff undertook this final 
selection in a very compressed period at the end of a years-long debate 
about the addition of new gTLDs. They did so in the face of tensions 
between at least three competing goals: an open, inclusive, and fair 
process; rapid completion of that process, with less than two months 
between the submission of proposals and the selection by the Board; and 
a ``proof of concept'' goal of a small number of finalists. These often 
irreconcilable goals led to many of the problems with the process.
    [Because both DoC and ICANN have been reluctant for many years to 
move forward with new gTLDs and because of lack of cooperation with 
existing entities, scarcity and pubic pressure were factors in ICANN's 
actions. However, there was no reason to accelerate this process to the 
detriment of all concerned or to avoid an open and transparent process. 
Had there been an elected board, a full at-large contingent and 
cooperation, very little of the controversy would have reared its head. 
In view of the white paper and MOU, it is more important to have a fair 
and open process than to meet an unreasonable time constraint.]
    ICANN staff made substantial efforts to conduct an open and 
accountable process in the face of these constraints, including the 
publication of hundreds of pages of applications and the creation of 
forums to discuss the proposals. Still, it is important to recognize 
features of the selection process that were flawed, that had anti-
consumer and anti-competitive impacts, and that should not be repeated.
    [There was inadequate notification to the public in all areas. Only 
those who were familiar with the ICANN website could find them. The 
majority of the public does not even know what ICANN is. It is the duty 
of ICANN to publicize their processes in order to invite the widest 
possible discussion. At the very least, all domain name holders should 
be notified via e-mail. The website should be re-designed to allow the 
public to find all documents and correspondence easily. Instead, much 
is buried and requires a sophisticated search to find anything.]
    Initial Criteria--ICANN took the helpful step of publishing a set 
of criteria it would use in judging applications. In general, the 
substantive areas of the criteria reflected objective goals that had 
support within much of the ICANN user community. However, the criteria 
themselves were vaguely worded and their ultimate application was 
poorly understood. Most importantly, they were not purely technical in 
nature--reflecting policy goals as much as technical needs--and were 
not precise enough to be purely objective in their application.
    [Again, the application criteria was intimidating at the very least 
and strayed quite far from technical issues. As for the user community, 
there was a great deal of concern regarding that criteria and some of 
it was expressed on the ICANN message boards. It was not objective and 
some have said it went as far as to restrain trade. ]
    High Application Fee--ICANN required a $50,000 non-refundable 
application fee for all gTLD applicants. This high fee was a clear 
barrier to entry for many potential non-commercial applicants and 
biased the applicant pool in favor of large organizations that could 
risk the fee. This issue was raised by CDT at the Yokohama ICANN Board 
meeting, and the Board specifically refused to offer any form of lower 
application fees for non-profit or non-commercial proposals. 
Additionally, it appeared that the selection process would weed out 
applications without sophisticated business plans, legal counsel and 
technical expertise. These important qualifications for a strong 
application required access to large resources. Given the very short 
timeframe of the application period, non-commercial applicants were 
therefore put at an even greater disadvantage.
    [I covered this earlier. The fee excluded not only non-commercial 
applicants, but small businesses as well. It was also meant to fund 
ICANN's litigation expenses against the very applicants who paid it, 
and to fund other ICANN activities. No small business could afford the 
requirements of the ICANN process. So once again, we are faced with big 
business ruling the Internet to the detriment and exclusion of the 
average user and small business.
    There is truly no reason to exclude the smallest organization or 
business from entering the TLD market. The public will determine the 
success or failure of any registry. While there should be contingencies 
for failure in place, there is simply no good reason to exclude any 
entity that can make a TLD ``live'' and accept registrations. Many 
ccTLDs do not have sophisticated systems in place, and they are not 
necessary. Registries will evolve over time.]
    Legitimacy of the Board--As noted above, policy-making at ICANN is 
still hampered by institutional challenges regarding its legitimacy and 
decision-making mechanisms. ICANN took the unorthodox step of seating 
newly elected At-Large Directors after the gTLD decision was made (even 
though in previous years new Board members had been seated at the 
beginning of meetings.) The argument that new Directors would not be 
sufficiently up to speed on the new gTLD decision is specious. The 
entire ICANN community was highly focused on the gTLD debate, the new 
Board members showed in public appearances that they were highly versed 
in the issue, and each of them had gone through an intense campaign in 
the Fall answering numerous questions that likely made them more expert 
on the nuances of the gTLD issue than many sitting Board members.
    [It is true that the public and especially the at-large community 
was irate at the decision of the board to exclude the elected directors 
from decision making for the new TLDs. The attitude of the remaining 
directors toward the newly elected directors at the Melbourne meeting 
was indicative of the disdain toward the at-large community. The 
Chairman cut them off almost every time they spoke. I felt it was an 
embarrassing display. There were many comments made on the ICANN 
forums, the domain-policy mail list maintained by NSI and many other 
mail list forums. The at-large community was generally incensed that 
their elected Directors had no input in these decisions. ICANN should 
have either delayed the selections for the next quarterly meeting or 
seated the elected Directors prior to the MDR meeting.]
    Evaluation of Applicants--The ICANN staff attempted, with the help 
of outside consultants, to apply its criteria to the 47 applications 
received. The published Staff Report provided a useful guide to this 
evaluation, but was published just days before the Marina Del Rey 
meeting with little opportunity for public comment or debate. There was 
little time for public presentation by each of the applicants, or for 
each applicant to answer questions or misconceptions about their 
submissions. But beyond that, the staff report indicated that about 
half (23) of the applicants had met their objective criteria for 
technical competence and economic viability. Having met the objective 
threshold, the Board was left with only the somewhat arbitrary 
application of other criteria to narrow the number of applications to 
the desired low number.
    [There was almost no time to deliberate the staff report, which 
was, itself erroneous and sorely lacking. Each applicant had only three 
minutes to respond and no face to face meetings to discuss errors or 
omissions. For $50,000, there should have been a great deal more 
consideration afforded them. The desired low number was also reached 
arbitrarily with no legitimate reason for so doing. If 23 applicants 
met criteria, there should have been no reason to exclude them, other 
than duplication, of course. However, other choices for TLD strings 
could have been made.]
    Final Selection Arbitrary--With a high number of objectively 
qualified applicants, and a commitment to a low number of final gTLDs, 
the final decision by the Board at Marina Del Rey was dominated by the 
arbitrary application of its remaining criteria as well as other new 
criteria--many of which had little to do with technical standards. 
Instead, Directors referenced conceptions about the ``sound'' of names, 
the democratic nature of the applicants, or the promotion of free 
expression--criteria to which CDT is sympathetic, but some of which 
were highly subjective and unforeseen review criteria.
    [After attending the meeting via webcast, I replayed the meeting 
several times attempting to find some reasonable explanation for the 
process used to select TLDs. I concluded there was none. It was 
subjective and unreasonable for the most part. Indeed, the only 
reasonable decision was concerning not awarding .WEB to Afilias because 
Vint Cerf felt ``discomfort'' with awarding it to anyone other than the 
existing registry (Image Online Design). Of course a new category was 
pulled out of a hat in order to hold .WEB ``in reserve.'' Director 
Kraaijenbrink actually raised his voice rather loudly in his opposition 
to this proposal, making it clear that the board was well aware of the 
duplication and the existence of registrations. He was insistent that 
this did not matter, indicating that ICANN was above it all and should 
award .WEB to Afilias. Of course, the ARNI .BIZ duplication and the 
existence of its functional registry was ignored. The iii TLD was 
dismissed because of its ``sound.'' Diebold Inc, a profitable $2 
billion public corporation, had their application dismissed in the last 
round because of ``a lack of financial commitment.'' Bias abounded and 
arrogance toward the rest of the community was obvious.]
    Reporting and Post-selection Accountability--There is currently a 
lack of any serious objective mechanism for evaluating or appealing the 
Board's decision. While CDT is not in a position to judge the merits of 
their arguments, the eight petitions for reconsideration filed by 
applicants after the Board meeting (see http://www.icann.org/
reconsideration ) raise concerns. Moreover, the final contractual 
negotiations between ICANN and the selected applicants are likely to 
include rules of great interest to the user community--yet are 
occurring with little transparency.
    [With the decision of the board in Melbourne, there is no 
transparency or further review by the public. At that time, there were 
still important documents not posted, yet the board empowered itself to 
complete negotiations and execute the contracts. Again, it had been 
announced that no decisions regarding the TLDs would be made in 
Melbourne because there was still a great deal of negotiating to do. It 
was suddenly reversed in that early unscheduled half hour discussion. 
The media was taken by surprise, as were the attendees. In addition, 
recommendations by the Names Council were ignored.]
    Taken as a whole, the process for selecting new gTLDs contained 
serious flaws that at the very least need to be corrected before 
another round of selections. Importantly, the process shows how the 
line between a ``purely technical coordination body'' and a ``policy-
making body'' is easily crossed by ICANN. The selection made by ICANN 
was not a standards-making process or a technical decision. Even 
ICANN's ``objective'' criteria were based on social values like 
economic viability and diversity (values which CDT supports, but which 
represent policy choices nonetheless.) Once it applied these 
``objective'' criteria, the ICANN Board did not hesitate to engage in 
other policy-making approaches as well.
5. Moving Forward: Suggestions for Reforming ICANN and the gTLD Process
    The flaws in ICANN's process for allocating new gTLDs, as outlined 
above, are highly troubling. They point to a need for reform in both 
the ways the ICANN makes decisions about gTLDs, and ICANN's entire 
structure.
    CDT still believes that Internet users have an interest in the 
vision spelled out in the White Paper--in the creation of a non-
governmental, international coordination body, based on bottom-up self-
governance, to administer central naming and numbering functions 
online. Were the Commerce Department to substantially revisit and 
change ICANN's decisions on the new gTLDs, the global community would 
likely question the existence and utility of ICANN. We also believe 
that there is a dominant consumer interest in rapid rollout of new 
domains, which would be dramatically slowed by an APA-based rule-making 
on gTLDs by Commerce. Therefore, on balance, we do not support a major 
effort to roll back ICANN's decision on the initial domains, but rather 
would favor rapid creation of the new domains followed coupled with an 
investigation into the processes ICANN used to create gTLDs.
    [I disagree that having a rulemaking on questionable practices is 
not in the best interests of the public. It is the avoidance of the APA 
that has led to many of the problems we see to date. However, I see no 
reason for it to be prolonged, nor do I see any substantial reason for 
retarding the completion of contracts for those TLDs that are not being 
challenged. I am naturally opposed to DoC entering a duplicate .BIZ 
into the root and would like to think that the legality and 
inadvisability of such a move would be considered. Our Petition for 
Rulemaking stands, of course, and we hope it will be honored by the 
DoC. I would truly hate to think that our government practice includes 
taking a business product from a small business and handing it to a 
competitor for a fee, thus damaging the business. The lack of 
protection under trademark law does not preclude IP rights in that 
product. ICANN was wrong in accepting applications for existing TLDs 
and DoC will be wrong in entering duplicates into the root for any TLD. 
]
    Among our specific suggestions:

 ICANN must reform the method and process it uses for selecting 
        the next round of new gTLDs. A logical step would be to publish 
        an objective and specific set of criteria, and apply it in a 
        more open and transparent way with greater opportunities for 
        public comment. ICANN should stay away from policy-oriented 
        criteria, and attempt to promote criteria based on technical 
        merit and stability. Applicants that meet the criteria should 
        be given the opportunity to participate in new gTLDs.
 Barriers to diversity should be mitigated. In particular, the 
        $50,000 fee should be reduced or waived for non-commercial or 
        non-profit entrants.
 A study of the method of selecting domains should be set in 
        motion. In addition, careful consideration should be given to 
        the potential openness, competitiveness, and free speech 
        implications of creating a large number of ``chartered'' or 
        restricted domains that establish gatekeepers on access to 
        domain names.
    [There is no reason for a $50,000 fee except to fill ICANN's 
treasury. If applications are limited to basic technical criteria, 
$1,000 is sufficient. The fees to be paid to ICANN are excessive as 
well, and should be seriously reviewed. In addition, if ICANN were 
reasonably structured and salaries reduced to appropriate levels, all 
fees could be reasonable.
    I also see no reason to exclude ``chartered'' TLDs. There are many 
areas where ``gatekeepers'' are advisable, such as .KIDS, .XXX, 
.MUSEUMS, .CLUB, .UNION, .REALESTATE . . . Others such as .INFO, .WEB, 
ETC need no gatekeepers. There is room for both. If there is a 
multitude of TLDs, there will be no barrier to free speech, commercial 
activity or a pressing need for intrusive IP interference for average 
users. It is not the nature of the TLDs that is causing the problem. It 
is the restriction in introduction of TLDs and duplication in the name 
space that is the problem. It is not difficult to solve these problems, 
but it will necessitate ICANN reform.]
    ICANN's governance itself is implicated in the gTLD process. Among 
the major structural reforms ICANN should pursue include:

 Limited mission--Steps must be taken to structurally limit the 
        mission of ICANN to technical management and coordination. 
        Clear by-laws and charter limitations should be created to 
        delineate ``powers reserved to the users''--much as the Bill of 
        Rights and other constitutional limitations limit the power of 
        the government under the U.S. system.
 Empower the public voice in ICANN--The internal study underway 
        of ICANN's At-Large membership and elections should be a 
        vehicle for ensuring that the public voice finds appropriate 
        ways to be heard in ICANN's decision-making processes.
    [It is my hope that the sentiments voiced at the Melbourne meeting 
will not hold true and that the at-large membership will be restored 
quickly. Without this input from the Internet community, ICANN will set 
itself up as a world Internet governing body that is not in the 
interests of anyone but a very small, select group of special 
interests. ICANN has done a great deal of harm and must now turn things 
around to benefit the community. I believe it can be accomplished, but 
will require continual oversight. In addition, ICANN must be held to a 
narrow mandate as stated by the CDT.]
 Expanded review process and bottom-up governance--ICANN should 
        build internal review processes that produce faith in the 
        ability to appeal decisions of the Board, and continue to 
        pursue the consensus-based governance model.
    While we do not believe the Commerce Department and Congress should 
intervene in the initial selection decision, they have a role in this 
reform. Just like any national government, the U.S. has an interest in 
making sure that the needs of its Internet users and businesses are 
protected in ICANN. While the U.S. must be sensitive to the global 
character of ICANN, it cannot ignore that at least for the time being 
it retains a backstop role of final oversight over the current root 
system. It should exercise that oversight judiciously, but to the end 
of improving ICANN for all Internet users. It is only by restoring the 
public voice in ICANN, limiting its mission, and returning to first 
principles of bottom-up governance that ICANN will be able fulfill its 
vision of a new international self-regulatory body that promotes 
openness and expression online.
    [I believe that the Department of Commerce should definitely 
intervene in the initial selection decision. Not just regarding .BIZ, 
but others as well. The Sarnoff application for iii and the Diebold 
application, should not have been discarded and there were other 
arbitrary decisions as well. If these decisions stand, the precedent 
for further arbitrary decisions is set. It is important to prevent 
arbitrary actions by ICANN. I also believe that Congress, in its 
oversight capacity, should intervene with the Department of Commerce to 
ensure that the APA is observed and the best interests of the entire 
Internet community are met. It is especially important, in my opinion 
to ensure that the terms of the green and white papers and the MOU are 
adhered to. Thus far, they are being greatly offended. Entities are 
being harmed and the stability of the Internet is about to be injured. 
Cooperation among all stakeholders is the most desirable method, of 
course, and can be accomplished. However, ICANN/DoC must show a 
willingness to do so.
    I think that one critical factor has been overlooked completely. It 
is the TLDs that are critical to the Domain Name System. Roots are 
simply the method of bringing those TLDs to the public in a 
comprehensive manner. TLDs can be accessed by anyone at any time, but 
would have to constantly change computer settings to do so and would 
have to know where to ``point.'' This is where the rootzones come into 
play. Exclusion of TLDs by the DoC simply makes it more difficult for 
users to access them. It does not mean they will disappear or that they 
are invalid. It does, however, mean that there should be a concentrated 
effort to not only include all known operational TLDs, but assist in 
the effort to cooperate and strive to attempt provide a collision- free 
name space.
    I would invite the participation of ICANN/DoC to participate in the 
efforts of TLD holders world-wide to cooperate in this effort. To that 
end the Top Level Domain Association (TLDA) was recently incorporated 
as a trade association. It is now in its formation stage and an initial 
board has been seated. Membership will be comprised of TLD holders and 
will strive toward cooperation on a global scale. ALL TLD holders will 
be able to join, including the Department of Commerce (which can 
appoint ICANN as its representative if it so chooses). The association 
will not be affiliated with any root, and will remain autonomous.]
    Thank you again, Representative Pickering for the opportunity to 
express my views of the current situation regarding ICANN and the 
introduction of new TLDs to the USG root.
            Sincerely,
                                              Leah Gallegos
                                         AtlanticRoot Network, Inc.