Progress Snapshot
Release 1.20 November 2005 

By Thomas M. Lenard *

Coming on the eve of the UN World Summit on the Information Society (WSIS), the announcement that ICANN (the Internet Corporation for Assigned Names and Numbers) and VeriSign have agreed to settle their long-simmering legal differences is a good thing. At this critical moment, ICANN needs to focus its attention on the Summit, scheduled for later this month in Tunis, because its very existence is the central item on the agenda.

Since its formation in 1998 under a Memorandum of Understanding with the U.S. Department of Commerce, ICANN has been responsible for the critical function of administering the Internet domain name system. Because of its history, ICANN is viewed by much of the rest of the world as being a creature of the United States. As a result, the European Union, supported by many other countries, is proposing to replace ICANN with an (as yet undefined) international organization, presumably under the auspices of the United Nations.

VeriSign has also played—and continues to play—a central role in Internet operations. It was the parent company of Network Solutions, Inc. (NSI), which before 1998 performed many of ICANN's functions under contract to the National Science Foundation. VeriSign remains the official “registry” for the most important top-level domain (TLD)—.com—as well as for the .net TLD. VeriSign also runs the “a” (authoritative) root, which all other root servers scan to locate TLDs and thus web addresses.

While ICANN's record is far from perfect, it has achieved substantial success in its mission of promoting competition in the provision of domain names and associated services. There are now 11 approved generic TLDs (e.g., .com and .org) and another eight in the process of obtaining approval. There also are more than 240 country code TLDs in operation. All this makes it highly unlikely that any registry, even one as significant as VeriSign, could exercise undue market power.

On the other side of the ledger, ICANN has sometimes shown troubling tendencies toward regulatory mission creep, as evidenced by its effort to block the introduction of new services by VeriSign. This was the central subject of the recently settled lawsuit.

As with most legal settlements, the ICANN-VeriSign settlement is a compromise. From a public policy perspective, it is also a mixed bag. The provision that extends the .com registry agreement with VeriSign and provides for easier renewals is overall a good thing. More secure rights in their TLDs will give registries better incentives to make long-term investments that will yield better services to their customers—investments they might not make if under threat of losing the franchise every few years. Competition between TLDs is the key to disciplining this market.

On the other hand, the settlement institutionalizes a detailed new process for ICANN approval of new registry services. This significantly increases ICANN's regulatory authority. In addition, the settlement includes a significant increase in fees paid to ICANN—which is troubling since it is unclear how these new revenues will be spent.

While ICANN has its problems, there is good reason to believe that the European solution will be considerably worse. If recent history is a guide, putting an international organization “in charge” of the Internet will, at best, lead to more regulatory and politicized Internet governance and, at worst, to a corrupt and dysfunctional system. Given the importance of the Internet, this would be a very risky experiment.

Finally, the threat of UN governance can serve a useful purpose if it induces ICANN to look inward and reform itself. ICANN has had the reputation of being the plaything of a clique of Internet founders and visionaries. It has operated in a way that is far from transparent, without well-defined procedures or limits on its authority. ICANN would be well-advised to address these issues seriously.

* Thomas Lenard is Senior Fellow and Vice President for Research at The Progress & Freedom Foundation. The views here are his own and not those of the Foundation.