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Web-Name Fight Shows Limits to U.S. Power Over Internet Guardian

A plan to add hundreds of top-level Internet domains beyond .com is proceeding over objections from U.S. officials, illustrating limits in the government’s ability to sway the nonprofit that manages the Web’s address system.

U.S. lawmakers and regulators have asked the Internet Corporation for Assigned Names and Numbers to scale back the program, spurred by complaints from more than 50 corporations that it will increase their costs, confuse consumers and create opportunities for fraud. The companies, including General Electric Co. (GE) and Coca-Cola Co. (KO), want the government to persuade Icann to postpone the expansion scheduled to begin Jan. 12.

The Commerce Department, which oversees Icann’s contract with the government, is unlikely to force the group to alter the program because the agency lacks the authority and doing so could spark a global backlash, according to Esther Dyson, who served as the organization’s first chairwoman from 1998 to 2000.

“The U.S. has no right to shut it down,” Dyson, a New York-based technology startup investor and critic of Icann’s program, said in an interview yesterday. “It was created in order to be accountable to the world at large and not to the U.S. government.”

The Commerce Department urged Icann in a Jan. 3 letter to respond to industry complaints about a plan to add hundreds of top-level Internet domains beyond .com, while making clear that the government does not wish to interfere with the group’s decisions about the expansion. Photo Illustration: David Rogowski/Bloomberg Close

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The Commerce Department urged Icann in a Jan. 3 letter to respond to industry complaints about a plan to add hundreds of top-level Internet domains beyond .com, while making clear that the government does not wish to interfere with the group’s decisions about the expansion. Photo Illustration: David Rogowski/Bloomberg

Whenever Icann “seems to be paying too much attention to what the U.S. government says, it generates a certain amount of pushback from the rest of the world and the U.S. is sensitive to that,” Dyson said.

Icann, based in Marina del Rey, California, has managed the Internet’s address system since 1998 and oversees 22 so-called generic top-level domains, including .com, .net, and .org. The group receives no U.S. funding under its government contract and is instead supported by fee income.

Brand Names

After six years of deliberations, the organization’s board of directors approved a plan in June to expand the number of top-level domains to spur innovation and competition. Icann will begin accepting applications for new Web suffixes that include brand names, cities and words in almost any language, such as .apple, .nyc and .book.

Applications will cost (COST) $185,000 per domain. The program may double Icann’s annual $85 million budget, Rod Beckstrom, the group’s chief executive officer, said in an October speech.

The total price tag of operating a new top-level domain may reach $1.5 million, including legal and consulting fees, Web development and other costs, according to Gary Elliott, vice president of global marketing at Hewlett-Packard Co. (HPQ) and chairman of the Association of National Advertisers.

The ANA has assembled a coalition of companies and business groups opposed to the expansion, including American Express Co. (AXP), Johnson & Johnson (JNJ), Costco Wholesale Corp. (COST), Ford Motor Co. (F), JC Penney Co. (JCP), and Kellogg Co. (K)

Commerce Letter

The Commerce Department urged Icann in a Jan. 3 letter to respond to industry complaints about the program, while making clear that the government does not wish to interfere with the group’s decisions about the expansion.

There is “tremendous concern about specifics of the program that may lead to a number of unintended and unforeseen consequences,” Assistant Secretary of Commerce Lawrence Strickling wrote in a letter to Icann Chairman Stephen Crocker, citing meetings with industry representatives.

Strickling said Icann should take steps to minimize the “perceived need” for trademark owners to defensively register domains they have no interest in operating, and consider phasing in new top-level domains once the application period closes.

Icann will review the Commerce Department’s recommendations and appreciates that the agency “recognizes that many of the recent concerns expressed about the new top-level domain program are more about ‘perceived’ problems than actual deficiencies,” Crocker said in an e-mailed statement yesterday.

Contract Renewal

The Commerce Department’s letter acknowledges that “the claims of the business community are legitimate and important, and Icann needs to take these concerns into serious account,” Dan Jaffe, executive vice president for government relations at ANA, said in an e-mail yesterday.

The agency “could step into this fight directly and do something substantial” including through its contract with Icann to manage the Internet’s address system, Jaffe said. “Clearly, Icann will not listen until it is forced.”

Icann’s current agreement with the National Telecommunications and Information Administration, a unit of the Commerce Department, expires in March and the NTIA has requested bids for a new contract.

‘New Bidders’

“It will be interesting to see if any new bidders come to the plate,” Josh Bourne, president of the Coalition Against Domain Name Abuse, said in an interview. “In the absence of competition, there’s no leverage that’s afforded over Icann.”

Bourne’s nonprofit group has criticized the structure of the domain-name expansion, including the lack of a timeline for a second application round. Its members include Eli Lilly & Co. (LLY), Morgan Stanley (MS) and Nike Inc. (NKE)

Senator Jay Rockefeller, a West Virginia Democrat who leads the Senate Commerce Committee, urged the Commerce Department in a Dec. 28 letter to ask Icann to delay the application period or “drastically limit” the number of new domains it approves next year, citing the potential for increased costs to brand and trademark owners.

A bipartisan group of 17 members of the House Energy and Commerce Committee made a similar request on Dec. 21, asking Icann to delay the program in order to address “widespread concerns” about its impact.

FTC Letter

Icann should introduce the expansion as a pilot program and reduce the number of domains created to lower the risk of consumer fraud, the Federal Trade Commission said in a Dec. 16 letter. FTC Chairman Jon Leibowitz told lawmakers on Dec. 7 that the planned addition of top-level domains may be a “disaster,” letting con artists set up fraudulent websites.

The FTC, which has no direct authority over Icann, can act when companies engage in deceptive trade practices.

Canon Inc. (7751) and Hitachi Ltd. (6501) are among the few large companies that have expressed public interest in the new top- level domains.

Procter & Gamble Co. (PG), the world’s largest consumer products company with more than 50 brands including Tide and Pampers, and Hewlett-Packard, the biggest computer maker, have said they have no plans to apply for their own Web suffixes.

Those most poised to benefit from the domain-name expansion are Internet registries and registrars, trademark lawyers, marketing firms, and Icann itself, said Dyson, Icann’s first chairwoman.

“Icann should say, ‘Gee, we are now hearing from people, and we’re not officially bound by them, but they are clearly sending signals that some of what we’re doing requires some further thought,’” Dyson said.

To contact the reporter on this story: Eric Engleman in Washington at eengleman1@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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