Governing Cyberspace: ICANN, a Controversial Internet Standards Body

By Stephen Ryan *


The Internet - one of the greatest innovations of this or any century, is now crucial to tens of millions of individuals and organizations for commerce and communications. As commercial transactions revolve more and more around the Internet, its reliability and stability is becoming not only more important, but at the same time, more taken for granted. Yet, unknown to many, the very structure of the Internet's reliability is currently undergoing a pivotal transition. The structure, developed and overseen by the U.S. government and a group of computer geeks, is now about to pass into a private-sector self-governance system that poses incredibly challenging legal and policy concerns for all Internet users. The handling of this delicate transition holds enormous implications for the future of the Internet, e-commerce, and U.S. law.


The Internet's stability is based on the Internet Protocol system, which is a complicated system of transferring information through circuits and addresses referred to as the Domain Name System.(1) The Domain Name System ("DNS") was developed in 1969 through a grant from the U.S. Department of Defense and was expanded by Congress in 1987 and 1992 when Congress permitted the U.S. National Science Foundation to extend the system to commercial uses. Currently, the United States government oversees the DNS, which performs crucial functions that keeps the Internet connections flowing and in good working order.

As a result of the expansion of the DNS, the Internet has seen unfettered vitality in the 1990s and has propelled technological growth and free-market prosperity on a worldwide scale. Recognizing that this engine of prosperity should not be jeopardized, the U.S. government concluded there was a need to establish global standards and consensus-based policies for the Internet. This policy decision, currently being implemented by the Clinton Administration and a private company called the "Internet Corporation for Assigned Names and Numbers," or "ICANN," has raised concerns by figures as politically diverse as Grover Norquist and Ralph Nader. The government's decision, as well as the formulation and activities of ICANN, demonstrate ample reasons for concern.

The White House and Internet Stability

On July 1, 1997, the Clinton Administration issued a policy paper entitled, "A Framework for Global Electronic Commerce."(2) The White House paper set forth a number of principles to guide the Administration's policy toward electronic commerce and the Internet. At that time, the White House paper outlined the Administration's policy toward electronic commerce and the Internet. Among other things, the paper appropriately suggested that governments "should encourage industry self-regulation."

Regarding management of the Domain Name System, the White House paper suggested that: "Governance of the Domain Name System (DNS) raises other important issues unrelated to intellectual property. The Administration supports private efforts to address Internet governance issues including those related to domain names and has formed an interagency working group under the leadership of the Department of Commerce to study DNS issues. The working group will review various DNS proposals, consult with interested private sector, consumer, professional, congressional and state government and international groups. The group will consider, in light of public input 1) what contribution government might make, if any, to the development of a global competitive, market-based system to register Internet domain names, and 2) how best to foster bottom-up governance of the Internet. (Emphasis added).

The Department of Commerce Takes Action

While the White House statement was a policy document only, with no claim to be backed by legislative authority, the Department of Commerce ("DOC") adopted it as a mandate to privatize the Internet and "promote international participation in the Domain Name System."

On January 30, 1998, the DOC issued a "Proposed Rule," requesting public comments on plans to bring competition to the domain name registrar process.(3) This document mirrored traditional agency administrative law procedures. This Proposed Rule is now commonly referred to as the "Green Paper." The Proposed Rule requested public comments on a detailed plan to privatize all current government functions regarding the Internet by authorizing a new private, non-profit organization to perform those functions. The Proposed Rule set forth initial Regulatory Flexibility Act, Paper Reduction Act and Executive Order analyses. DOC purported to have authority to issue the Proposed Rule based on the White House's July 1, 1997 policy statement, described above.(4) Specifically, the DOC interpreted that vague statement of policy as a direct presidential directive for "the Secretary of Commerce to privatize, increase competition in, and promote international participation in the domain name system." DOC also purported to have authority to issue the Proposed Rule under general statutory language granting DOC the authority to conduct studies and coordinate interagency telecommunications activity. See, id., citing 15 U.S.C.§§ 1512, 1525 (general DOC authority to conduct studies and enter into joint projects), 47 U.S.C. §§ 902(B)(2)(1); (2)(m), 904(C)(1) (general authority to coordinate executive branch telecommunications policies).

But on June 5, 1998, the DOC backed off from the notion of regulation and issued a new policy document, the so-called "White Paper,"(5) or more formally known as "Management of Internet Names and Addresses," which authorizes the transition of all government functions on the Internet to a new, nonprofit entity.(6) Lawyers will note that the decision to not promulgate regulations probably reflected a belief that issuance of regulations would lead to a challenge that could not be sustained.

Indeed, there is a real question whether the DOC has the statutory authority to issue these types of rules.

At its heart, DOC's White Paper calls for an ICANN-type organization that would achieve four things: 1) preserve the stability with the Internet; 2) provide for competition in the registration of names; 3) provide for private sector bottom-up coordination; and 4) election and representation of the various constituencies.

As a result, DOC drafted a plan to create a new private entity that would oversee the transition of the Internet to private governance. Activists in the Internet community agreed this "new company" would be an Internet consensus and limited standard-setting body and stipulated that any new policies or standards must:

  • evolve from the voluntary consent of Internet stakeholders and innovators
  • be applied even-handedly to all domain name registrars; and
  • be subject to public oversight.

ICANN Created

In the fall of 1998, a 501(c)(3) California-based company, ICANN, was created to meet the goals of the DOC's White Paper. Pursuant to DOC's mandate, ICANN's primary task was to coordinate technology issues for the global Internet so that the DNS and the Internet community could move forward in a coherent fashion. ICANN was supposed to reach these goals democratically and by consensus. It is important to note that ICANN was not created by a world body such as the United Nations, nor was it created by multilateral agreement among the nations that use the Internet. Instead, ICANN was and is a private, nongovernmental organization. In addition, ICANN, with no government oversight, may end up with more power over the Internet than the Congress of the United States. In fact, ICANN'S initial activities indicate that it may be destined to grow into an international bureaucracy with unchecked powers to tax, spend and create policies over the entire Internet system. One example is ICANN's flow chart, which contains more acronyms than one would experience in a week at the Pentagon (See chart on pages 10-11.)

In fact, at a November 2, 1998 public hearing regarding the ICANN proposal, Mr. Ira Magaziner, then Senior Assistant to the President for Policy Development, assured the international participants that although the US Government has legal authority over the DNS, it was seeking to hand it over to the private sector. Mr. Magaziner also stated that although the new nonprofit corporation would contain largely international officers, it would have to be incorporated in the U.S. in order to prevent domestic political opposition. He assured the participants that after an initial period of time, the corporation could become more international. Specifically, Mr. Magaziner stated that although the new private sector corporation would initially be incorporated in the U.S. "the organization can always be moved outside the US once it has formed." He also stated that the "[t]he structure of the new corporation will change and evolve over time."

The Power of ICANN's Bylaws

On November 23, 1998, ICANN promulgated Bylaws giving itself broad authority over the Internet. ICANN's Bylaws and Articles of Incorporation do not contain reliable limitations on its future authority or powers, as required by the DOC's White Paper. For example, the Bylaws permit ICANN's Board a considerable amount of discretion in fiscal matters. The Board is authorized to (1) make all budgetary decisions, (2) set any fees at any time it deems are "reasonable" and (3) to reimburse all staff, administrative and travel expenses, without limitation. The Board is also empowered to set any fees or taxes to be charged predominantly to U.S. citizens who use the .com, .org, .net in order to recover "reasonable" operating costs and establishing "reasonable reserves" "reasonably related to the legitimate activities of the corporation." No other limitations on fees are provided. On November 25, 1998, two days after ICANN filed its Articles of Incorporation with the State of California, DOC and ICANN entered into a Memorandum of Understanding ("MOU") in order to fulfill the "administration's Framework for Global Electronic Commerce." Under the MOU, the parties agreed to "jointly design, develop and test the mechanisms, methods and procedures to carry out a number of DNS management functions." Those functions included the four functions listed in DOC's Proposed Rule and White Paper, as previously discussed. Subsequently, DOC speedily awarded a sole-source contract to ICANN authorizing it to take over the Internet Domain Name System. It only made the contract public in early January 1999. Also, this contract provides that by September of 2000, at the latest, all government functions related to the Internet will be converged to ICANN. DOC also noted that after a two-year "transition," the corporation would have no government oversight. Although Congress held hearings on the status of the Domain Name System, it never specifically authorized DOC to transfer U.S. government interests in the management of the Internet to a private entity.(7)

ICANN's "Interim" Board of Directors

Controlling ICANN is an "interim" board of directors whose selection process is shrouded in mystery. Approximately half of the board's 9 members are non-Americans, and many are the product of regulatory type government whose approach to the future of the net differs from that of most U.S. business or policy officials.

According to the DOC White Paper, the interim ICANN board was supposed to establish, in short order, a permanent board consisting of netizens from around the world and selected from a series of `net communities. However, though it has completed its first year of tenure, the current unelected, interim board has not as yet relinquished control or held elections. A vote has been promised beginning in November, but not completed until late in 2000.

Instead of holding elections to establish a duly elected Board, ICANN's interim Board's first activities demonstrated its belief that its most important mandate was to complete what DOC and NSI had agreed, the introduction of competition into the registration of domain names (known to the layman as online addresses). Previously, Network Solutions, Inc. (NSI) had been the sole registrar of .com, .net and .org domain names under a cooperative agreement with the U.S. government. Under a 1992 development agreement with the National Science Foundation, NSI pioneered the branding of the .com, .org, and .net top-level domain. NSI also performed other critical technical functions for the Internet, including managing the "A" root server _ the definitive directory for all addresses on the Internet _ which makes it possible for users to find one another in cyberspace and not someone else.

In just its first year of tenure, there is now ample evidence that this interim ICANN Board's agenda has turned out to be different from first conception. In fact, critics have accused ICANN of exceeding its authority and attempting to impose a regulatory will on the worldwide Internet community.

Who are ICANN's Interim Board Members?

Key White House aide, Mr. Magaziner, and Professor Postel, one of the founders of the Internet, appear to have been involved in initial contacts and selection of some of the Board members. Postel is one of the fathers of the Internet. He performed critical roles in the Internet's formation through the Internet Assigned Numbers Authority (IANA), not to be confused with ICANN.

One member of the interim board who was selected is Ms. Capdeboscq, a representative of the French company, Bull, that is owned in significant part by the French government. Bull is part of the association which represents the French Information Technology Industry Association (SFIB). SFIB is in turn a member of EUROBIT, The European Federation of National Information Technology Associations. The Japanese member, Mr. Murai, has significant business interests in the Internet and contracts of the Japanese government: The French and Japanese taxpayers did not pay for the development of the Internet, but their countries are now in a position of significant influence. Other Board members include Mr. Kraaijenbrink, Chairman of the European Telecommunications Network Operators Association, who is the Manager of European Policy and Regulation with the Royal KPV N.V. in the Netherlands, where he is responsible for European and international regulatory strategic affairs. Mr. Eugene Triana of Spain recently left the European Commission. All are foreign regulatory gurus.

A Tea Party Postponed?

One of the ICANN board's most controversial actions to date was its proposal of a global Internet tax aimed at only a limited number of domains, peopled largely by U.S. business and private interests. ICANN proposed an annual and perpetual $1 tax on each domain name as a means to support its proposed annual operating budget of $5.9 million. (IANA, ICANN's predecessor, used to cost $250,000 a year.) The $1 tax, labeled more palatably as a "user fee" by ICANN officials, was designated for all domain names registered within the .com, .org and .net domains.

More than 240 country codes exist throughout the world (such as .uk). Approximately 80 of these countries will accept anyone's registration if they pay their money. These country code top-level domain names work just as well as .net or .com on today's web. But ICANN proposed its tax to apply only to those names registered in the top-level domains .com and .net, which registries are dominated by American users and businesses.

Article I, Section 2 of the United States Constitution clearly states that the Congress is the sole authority capable of imposing a tax on the American public. A federal court has affirmed Congress' authority over the Internet, finding that without Congressional authority, the Executive Branch could not impose a tax on Internet users. Thomas v. Network Solutions, Inc., 2 F. Supp. 2d 22 (D.D.C., 1998). The question is whether the $1 tax is a tax, or is a user fee as ICANN contends. In July 1999, just days before congressional hearings were held to review this tax and other ICANN activities, ICANN wisely announced it would defer the tax until an unspecified future date. Nonetheless, the issue of ICANN's self-authorized taxing authority remains. But ICANN has no source of funds except voluntary contributions. The unfortunate alternative funding mechanism leads ICANN to seek handouts from corporations with an interest in the policy issues before ICANN. It has also led White House staff members to promise to help raise such contributions.

Assuming Broad Power Over Registrars

ICANN has also issued mandatory contractual "accreditation agreements" for new companies that want to offer domain name registration services. In fact, ICANN has publicly threatened to terminate the right of any U.S. company that doesn't accept these terms. This includes NSI, the Internet's first registrar, whom ICANN is threatening to remove as a registrar if the company doesn't agree to sign essentially a contract of adhesion, which would give ICANN the authority to terminate NSI as a registrar. This raises the issue of what might happen to NSI's five million registrants, many of whom are U.S. taxpayers. ICANN's sparring with NSI has also led to related embarrassments. The House Commerce Committee recently obtained an e-mail message detailing an exchange between ICANN outside counsel, Mr. Sims, and a Senior Counsel to the Assistant Attorney General of the U.S. Department of Justice's Antitrust Division. The message _ sent from ICANN's counsel to ICANN's interim board chairman, Ester Dyson _ alluded to a conversation the counsel had with the Antitrust Division where he sought Department of Justice "pressure" on NSI. Mr. Sims and the DOJ attorney discussed that Justice should "increase the level of pressure on DOC by some form of formal communication or higher-level contact."

Lack of Open Processes Heightens Concerns Regarding ICANN

ICANN has developed its most controversial policies in closed-door meetings. The meetings have occurred in locations where most Internet users, particularly the small businesses who represent almost 90% of the existing domain name holders, cannot afford to venture such as Berlin, Singapore, and Santiago. Responding to mounting U.S. Congressional and net complaints about its secrecy, ICANN did open up its August meeting in Santiago, Chile. Ironically, one of the ICANN Directors, Mr. Kraaijenbrink, stated: "I felt like I was in a play ... performing an act," implying very directly that acting open and actually being open are distinctions ICANN makes. It did not, however, promise to open future ones. ICANN's persistence in closed meetings has added to its image of mystique.

ICANN's interim president, Michael Roberts, tried to rebut this criticism with a comment on the issue of consensus that is circular in the extreme. "ICANN is nothing more than the reflection of community consensus," he said, and "…community consensus was by definition not `overly' regulatory." Roberts claims that consensus is what ICANN creates, but it belies the lack of consensus to many of ICANN's policies. It implies that if ICANN characterizes something as a result of consensus ICANN has very, very broad authority.

Obscenity in Domain Names

ICANN has permitted its new registrars of domain names to register domain names that include obscenities _ whether they are the "seven dirty words" that the Federal Communications Commission prohibits from public broadcast or more imaginative but related words. Thus, with the advent of new registrars and ICANN's oversight of the domain name system, obscene domain names are now permitted and widespread. This caught the attention of social conservatives such as Congressman Cannon (R-UT) who sharply questioned this reversal of prior policy.


Global U.S. companies engaged in e-commerce around the world are genuinely and rightfully worried that without global standards the Internet could go through a disorderly and dysfunctional Balkanization of national state regulation and control. Indeed, this fear was one of the key reasons that stakeholders around the world welcomed the creation of an entity responsible for holding the whole together. But the righteous goal of creating an Internet that is not government-dominated cannot overcome completely concerns that NGOs such as ICANN may run roughshod over the Constitution and policies of the U.S. government.

Make no mistake: ICANN is or soon will be as important as the House or Senate Judiciary Committee in establishing groundbreaking policies and intellectual property regulations _ with one key exception: The people at the helm of ICANN can make rules, regulations and standards without having to answer to the voting public. Whatever you may think individually or collectively of Orrin Hatch, Patrick Leahy, Henry Hyde and John Conyers, each of the Chairmen and ranking Members of the Senate and House Judiciary Committee must face the voters at regular intervals.

ICANN was created for very legitimate reasons _ as a consensus-based organization that would enable the Internet, its stakeholders and beneficiaries to move forward in the most streamlined, cohesive manner. It must not be permitted to grow into an international cybergovernment with no system of checks and balances. Rather, ICANN _ or a similar entity based on ICANN's original ideals _ should remain faithful to the politically unencumbered, universal nature of the Internet and the boundless possibilities it offers to users around the world.

Postscript: After this article was written, an important agreement was reached between the Department of Commerce, ICANN and NSI. The agreement is too complex to present here, but it reduces the price registrars must pay the registry, encourages NSI to separate its registrar and registry business, and continues the flood of new registrars and redefines how "consensus" is to be established.

* Stephen Ryan is a partner in the Washington, D.C. office of Manatt, Phelps & Phillips. He can be reached at He is a former General Counsel to the U.S. Senate Committee on Government Affairs.

  1. The Internet Protocol system consists of four groups of digits separated by periods. For the convenience of users, individual sites are also given names, as an easy way to identify the four groups of digits. Domain names are arranged so that reading from left to right, each part of the name points to a more generalized area of the Internet. For example, in the name "," the "uscourts" in the second-level domain name and the "gov" is the top-level domain name is one of several that identify the type of organization represented.
  2. 33 Weekly Com. Pres. Docs. 1006 (July 1, 1997), available at
  3. 63 Fed. Reg. 8825 (Jan. 30, 1998).
  4. See "A Framework for Global Electronic Commerce," 33 Weekly Com. Pres. Docs. 1006 (July 1, 1997).
  5. This name is somewhat confusing because the White House Framework document Magaziner drafted previously is also frequently referred to as "the White Paper."
  6. See "DNS Statement of Policy," available at
  7. Congress has, for example, passed the "Next Generation Research Act of 1998," Pub.L. 105-305, which authorized funding for DOD, NSF, NASA, and other agencies to improve the "Internet System." The ICANN changes were never approved by Congress.

2001 The Federalist Society