TESTIMONY OF LOU KERNER CHIEF EXECUTIVE OFFICER THE .TV CORPORATION INTERNATIONAL ON THE SELECTION PROCESS FOR NEW TOP LEVEL DOMAINS BY THE INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS BEFORE THE SUBCOMMITTEE ON TELECOMMUNICATIONS OF THE HOUSE COMMITTEE ON COMMERCE AND ENERGY FEBRUARY 8, 2001 The .tv Corporation International 1100 Glendon Avenue Suite 800 Los Angeles, CA 90024 (310) 481-3800 1@ww.tv 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. 4. 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. 5. 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.