August 28, 2004

Thoughts on the Verisign/ICANN decision.

ICANN won, Verisign lost.  Bret Fausett considers this a "broad victory" for ICANN.  I respect Bret and his opinions, however, I feel that the decision is not anything that can be construed as establishing "legitimacy" for ICANN.

I was mystified at Verisign's strategy, it seemed ill advised and weak from the outset.  Rather than squarely basing legal arguments on the irrefutable fact of ICANN's role as a private regulatory body, of limited membership, over all domain name related businesses Verisign took what I felt was the bizarre path of trying to demonstrate a conspiracy.  And I don't know what Verisign did to tick off the court, but in my reading of the decision I got the impression that the judge had come to have a very strong antipathy towards Verisign.

I have no love for Verisign, particularly after the "SiteFinder" mess.  However, when one gets past the bad taste of Verisign, one is left with an ICANN that reeks of restraint of trade, financial harm to the public, and impediments to innovation.

Some might read this decision to say that under US anti-trust law ICANN's role is not unlawful.  Perhaps.  However, I would not conclude that ICANN is now a vindicated white knight.  Rather I would conclude that US law is deficient and in need of modernization.

This decision is geographically limited.  It is based on US law.  And as ICANN likes to tell us, the US is but one nation among hundreds, each with its own laws.

This decision is based on an allegation that ICANN is a conspiracy.  While it is true that my experience on ICANN's board of directors informs me that  ICANN does have an inner circle, I do not believe that ICANN involves illicit collusion to manipulate the domain name industry to benefit those who are doing the colluding.

Rather I perceive ICANN as a club where those who want to make money from domain name gather to establish the rules and regulations, and set the terms of admittance, for the domain name marketplace.  To my mind ICANN is not that far away from J.D. Rockefeller's "trusts" where those who owned virtually all of the oil refineries gathered to allocate products and set prices.  I find the principle difference to be that Rockefeller was very overt in his purpose while ICANN not only wraps itself in fairy tales about internet stability and technical coordination but actually believes those fairly tales.

In my eyes ICANN is in a very practical sense the epitome of a "combination ... in restraint of trade or commerce".  However this is an accidental combination of those who are traveling in the same direction and who share common goals rather than a body intentionally formed to be a vehicle for restraining trade.

But the history of the combination that is ICANN really makes little difference to the fact that ICANN as it now exists is a means through which a small number of industrial actors dictate the rules and chose the participants in the marketplace of domain names.

Whether ICANN is a "combination" under US law is a nice point.  However in normal usage ICANN is most certainly a gathering of those who sell domain names, those who provide goods or services through the use of domain names, and those who claim intellectual property rights in domain names.  The intent of that gathering is to impose rules and regulations on the practice of selling domain names and to limit who may enter the business of selling those names.  Those who gather like to try to say that they are merely doing "technical coordination" in order to protect "internet stability".  Anybody who believes that probably also believes all the e-mails they receive saying that there is someone in Nigeria who will give them a nice fee for handling some money.

It is worth recognizing this gathering we call ICANN is a rather exclusive club.  ICANN has ejected those who articulate the voice of the community of internet users.  The voice of the buyer is absent from ICANN.  To the extent that the decision conjures an image of ICANN as a broadly based entity that incorporates all points of view that decision is based on fantasy.

Perhaps ICANN isn't a "combination" under US law.  On the other hand perhaps it is.  This case did not decide that question.  However, if one considers the reasons why we have anti-trust laws it seems that if ICANN is not a combination under the law then that law is defective.  Other countries may have anti-trust laws that look more to substance than to form.

Does ICANN restrain restrain trade or commerce? You betcha!

If ICANN does anything at all it is to determine who and who may not enter the business of being a domain name registry.  And ICANN imposes very rigid conditions on those who it admits to that marketplace.  Those conditions of entry and of business practices have no relationship whatsoever with the ability of the internet to function reliably, continuously, and accurately.

Those who ICANN denies admission to the domain name marketplace are, as a practical mater, utterly shut out.  ICANN controls the only real marketplace for domain names.

ICANN has acted to ensure that no marketplace for domain names develops outside of ICANN's control.  On more than one occasion ICANN has used means that I can best describe as "faux-technical excommunication" to hobble and diminish those who have tried to build domain name businesses outside of ICANN's marketplace.  Certainly nothing says "restraint of trade" more than the intentional crippling of those who try to buy and sell outside of the controlled market.

ICANN's gate keeping and rulemaking is entirely based on ICANN's decisions as to what constitutes proper business, economic, and social policies - there is no technical component to these decisions.  In other words, ICANN's decisions can not be justified on the grounds that they promote the technical coordination or technical stability of the internet.

Is the public harmed by this?  Yes, to the tune of several hundreds of millions of dollars per year.

Every person who buys a domain name domain name is paying fees that contain ICANN dictated cost components.  The bulk of that money flows directly into the pockets of domain registries.  Those fees are established by fiat and are unaffected by competition or actual costs.  Informed observers conclude that these fees, which cumulate to hundreds of millions of dollars per year, would likely vanish were ICANN to eliminate many of its arbitrary business rules and to create a business environment in which registries would find it in their interest to reduce their internal costs and to pass those savings onto consumers.

Sure, domain name prices to consumers have dropped a lot since the days when they were $35/year.  But ICANN's price support system has prevented the prices from going even lower.  This price support system benefits domain name registries as guaranteed profit margins and ICANN through its overrides on domain name transactions.  But ICANN's price support system does nothing for domain name consumers except to suck money out of their wallets.  But the latter have no way to complain - domain name consumers aren't allowed a real voice within ICANN.  (ICANN does have an illusory mechanism for the public to participate - the moribund ALAC.  But that mechanism gives the community of internet users approximately the same power to affect decisions as that of a French peasant observing Louis XIV at Versailles.)

As it is today, ICANN's system of imposed costs represents an industry price support system that guarantees registries a significant unearned profit at the expense of every person who buys a domain name.

ICANN  has levied a private tax on the internet.  ICANN takes a bite out of the revenues of all DNS operators.  This is a tithe that ICANN exacts from those who wish to participate in domain name businesses.  Of course, we all know that these costs are simply passed onto the consumer, that same consumer who ICANN has ejected from its forums.

It is these points that I wish the case had litigated.  However, Verisign is only one plaintiff among millions who have been harmed by ICANN.

Posted by karl at 12:58 AM

August 8, 2004

My talk at the PFIR Internet Meltdown Conference

Here's my notes from my presentation at the PFIR Internet Meltdown conference.

I didn't really give this particular talk; my laptop shut itself down (perhaps as an an editorial protest?) so I ended up winging it.  But this is what I would have said if the gods and goddesses of batteries been more agreeable.

Internet Governance: Something Important Is Missing

Internet Governance is a young art and we ought to expect it to have some problems.

However, Internet Governance seems to be a classic case of Satyandra's rule that those who do not remember the past are doomed to repeat it.

(My corollary: If you had a great time doing something then you should forget that it happened.)

As it has been practiced so far internet governance is missing some necessary elements:

  • A firm grasp of reality.
  • A framework of principles and procedures.
  • A foundation based on institutions rather than individual people.
  • A viable system of accountability to the entire community of internet users.
  • Civility

Let's take a look at some of these elements.

Internet Mythology

Let me first mention internet mythology:  The internet does have a mythology.

Here are a few examples of some often repeated internet myths:

  • "The Internet will route around it"
    (The same things was said about the world's seas until Alfred Mahan came along.)
  • ICANN engages in technical coordination.
  • Those who practice technology are more pure, virtuous, and wise than other people.
    (OK, is perhaps more of a perception than a myth, but no matter what we call it, it is something that has led to many of the problems we have encountered with internet governance. I'll come back to that in a bit.)

More important than the myths is that those who ought to be questioning these myths are not doing so.

The Myth That ICANN As Doing Technical Coordination

ICANN has relinquished control over nearly all technical knobs and levers.

We have been lucky that the real technical control is in the hands of some exceptional individuals.

ICANN has instead engaged on matters of economic, business, and social regulation that have no link to technical matters.

ICANN exercises powers of a sovereign.

Accountability of ICANN is virtually non-existent.

The Myth of Technology as Pure, Virtuous, and Wise

After WW-I technology was seen as an alternative to the kinds of political manipulations that gave rise to the Great War.

One of the best examples is the 1936 film "Things To Come", written by H.G. Wells.

The film glorifies technology and those who practice it as pure, virtuous, and wise. Those who practice "the old ways" are portrayed as inept and as the source of social ills.

What came with war dissolved in war - WW-II, Hiroshima, and the cold war that followed tarnished the glamour.

But the image of the disinterested scientist as statesman has not completely died and has, in fact, had a rebirth at least with regard to the science of the internet.

Today's bodies of internet governance have benefited and have been given a great deal of leeway, so far, because of this myth.

Internet myths are swallowed without a murmur by national governments (especially the US), international bodies, the press, and the public.

Internet governance will remain a sham until the myths are examined and replaced with facts and knowledge.

In addition, well-funded and determined business groups will find it easy to manipulate bodies of internet governance as long as the myths obtain.

(Discuss the Hush-a-Phone case.)

Regaining Our Grasp On Reality

How do we, and those who which to establish bodies of internet governance, look Internet mythology and see reality?

I do not know the answer to this question, but I submit that the first step is to recognize that there is such a mythology.

My experience with the ITU and UN, a rather limited experience so far, has led me to believe that another antidote to mythology is to improve the dialog between the technical and non-technical communities.

Frameworks of Principles and Procedures

Let me come to what I believe is the most important element that is missing from today's bodies of internet governance: the lack of frameworks of principles and procedures.

Innovation and a sense of justice can exist only if decisions are not merely fair when viewed alone but are also consistent and reasonably predictable when viewed together.

Let me suggest one such principle, something I call the First Law of the Internet:

First Law of the Internet

Every person shall be free to use the Internet in any way that is privately beneficial without being publicly detrimental.

The burden of demonstrating public detriment shall be on those who wish to prevent the private use.

Such a demonstration shall require clear and convincing evidence of public detriment.

The public detriment must be of such degree and extent as to justify the suppression of the private activity.

Institutions vs. Individual People

Stable systems of governance are constructed on institutions.

Individuals make poor long-term foundations

For example, the reign of Napoleon lasted about 15 years while the US Constitution is now 216 years old.

To me one of the more important reasons for preferring institutions over people is that I believe that it is very important to constrain bodies of internet governance.

It is emotionally easier to try to limit the powers of an institution than of an individual.

We tend to be more suspicious of institutions and more willing to forgive or overlook the flaws of an individual.

So What Do We Do?

So, how do we bring substance to these things I've been talking about?

Here's the roadmap as I see it:

  • Define basic principles of internet governance.
  • Create crystal clear descriptions of those aspects of the internet that need technical regulation.
  • Create bodies precisely tailored to those needs.
  • Each body should be obligated to be open, transparent, and accountable.
  • Legal means must be available for anyone to compel adherence.
  • This could mean that ICANN is left with nothing to do.
    • Most of ICANN's work belongs in the hands of national legislatures anyway.
Posted by karl at 4:36 PM