By Harold Furchtgott-Roth
Furchtgott-Roth Economic Enterprises*
October 2004
In March 2005, a decision will be made about how to award a new contract for the .net registry. The registry is the nerve center for the .net top level domain (TLD) directly ensuring that Internet traffic addressed to a .net address reaches its destination. Because much Internet traffic for other TLDs such as .info and .com is handled by .net, the importance of good performance by the .net registry is magnified.
Tens of millions of Americans depend on web addresses handled directly or indirectly by the .net registry on a daily basis. Those users will not have a direct voice in the new contract. Nor will the millions of .net addressees. Nor will the federal or any other government.
If the .net registry performs well, all of these individuals and governmental institutions benefit, but superlative registry performance does not appear to guarantee renewal of the .net registry contract. Nor does the strong interest of Internet users and the government in the .net registry translate into either influence or control of the decision with respect to a new contract.
Delegating the federal government?s responsibility for the Internet
Instead, the decision about the .net registry will be made by the Internet Corporation for Assigned Names and Numbers (ICANN), a private company with an international board of directors.
ICANN was founded by the Department of Commerce in 1998 based in part on the recommendation of a paper written by a contemporaneous White House adviser, Ira Magaziner. Before 1998, much of the responsibility for the integrity of Internet addresses and making sure that Internet communications reached only intended recipients was held by the federal government. After 1998, much of that responsibility was delegated to ICANN.
Few individuals in either the Administration or Congress follow even remotely the important role that ICANN performs for the Internet and the U.S. economy. The detailed decisions of ICANN are quite beyond the view of government, much less its detailed review and assessment.
ICANN is a small organization with an annual budget of approximately $16 million. Much of the budget goes for international travel and conferences. ICANN does not manage the Internet or TLDs by itself.
ICANN has contracts with private companies to administer registries for TLDs such as .info, .com, and org. The current contract for the registry of .net, one of the most important TLDs, expires on June 30, 2005.
The success or failure of ICANN is not directly tied to the performance of the Internet. If a TLD performs well, Internet users and the economy generally benefit. But ICANN itself directly sees little of that benefit. If a TLD performs poorly, the Internet world and economy suffer, but not ICANN.
The federal government maintains responsibility for the integrity of some network industries
Although the Post Office is now largely outside of government hands, the federal government still ensures that the postal system operates properly and that letters mailed from Florida to Alaska arrive in a timely manner.
Similarly, despite thousands of private telephone companies, the federal government ensures that the numbering system works and that a phone number dialed from Maine will reach only its intended receiver in Hawaii. The Federal Communications Commission is responsible for the telephone numbering system in the United States. In the event of a hurricane or other natural disaster, the Federal Emergency Management Administration places a high priority on the restoration of vital services such as postal and telecommunications services.
Who today ensures the overall integrity of Internet addresses? According to the Memorandum of Understanding, ICANN is expected to carry out this role. Its accomplishments in this regard are, at best, obscured by a lack of transparency. ICANN by itself does not have the technical capability to assure the integrity of the Internet addresses. Instead, it delegates responsibilities through contracts. By not making the technical functionality of Internet addresses of paramount importance in the evaluation of registry contract offers, ICANN puts at risk the overall integrity of Internet addresses.
Integrity of TLDs cannot be taken for granted
Two years ago this month, unknown cyber-terrorists launched a major denial of service attack, putting at risk billions of dollars in economic activity and the security of the Internet. The attack failed, but barely. Next time, we may not be so fortunate.
The potentially catastrophic event of October 2002 has largely been forgotten. But the Internet is vulnerable to disruption either as the result of hostile attacks, natural disaster, or simple engineering accidents.
ICANN at its web site records the operational rates for the various TLD registries. These are self-reported, un-audited ?performance? reports. Even without catastrophes, occasional downtime is not uncommon. Consistently, the best performing TLD is .net, the very TLD whose contract ICANN is reviewing.
Reviewing the .net registry contract
If ICANN were to evaluate the contract for the .net registry on the basis of past performance, it would be renewed. Tying renewal to good registry performance creates powerful incentives for other registries to invest in state-of-the-art technologies and equipment in order to perform well.
On the other hand, if the .net registry is not renewed, that decision would send the opposite signal to other registries. No matter how well a registry performs, it may well not be renewed. Under these circumstances with no reward for good performance, a registry has little incentive to invest in equipment and technologies to enhance performance.
In government agencies, both contracts and licenses tend to be renewed absent cause or circumstances to discontinue them. Whether at the Federal Communications Commission or a state motor vehicle administration, it is the rare exception that a license is not renewed.
Similarly, in the private sector, contracts that perform well tend to be renewed. Of course competition always allows consideration of alternatives. If a contract is performing poorly, a competitive alternative looks attractive. Switching away from a poorly performing contract reinforces incentives for good performance. But if a contract is performing well, a competitive alternative must provide a compelling reason to switch. Blindly switching away from a well-performing contract without cause in the name of ?competition? would reinforce neither competition nor good performance.
To select a lesser registry would also threaten the reliability of .net, and without .net, there is no viable Internet. The .net registry is important not just to the domain names with a .net suffix, but also to the overall performance of the Internet. Many domain names with other suffixes, including .com and .gov, rely on .net for name resolutions and routing e-mail. Therefore, the quality of the .net registry affects not just the .net top-level domain but other domains as well.
The current .net registry contract is held by VeriSign. Complicating matters substantially, Verisign is in litigation with ICANN on several issues. As a result, it is awkward for ICANN even to handle the issue of contract renewal.
The Importance of .net to the U.S. economy
The .net decision is vitally important to the continued stability, integrity, and reliability of the Internet. The US government should show interest in this decision and the process surrounding it.
The .net registry is the fourth largest global TLD. Net is the infrastructure domain. Fifty-eight percent of name servers are on .net. It is important not just to the domain names with a .net suffix but also to the overall performance of the Internet. Many domain names with other suffixes, including many .com and .gov domain names, rely on .net for name resolutions. Half of Internet service providers (ISPs) use .net for their customers e-mail addresses.
The .net registry is critical to the smooth and secure functioning of the Internet?s architecture. According to a recent report by the Internet research firm Cyveillance:
- If .net were to experience a failure or degradation in performance, business-to-consumer e-commerce could experience a loss of billions of dollars from prolonged downtime;
- One-third of the commerce and communication on the five top-level global top level domains (gTLDs) is directly or indirectly facilitated by .net. These top five gTLDs include .com, .net, .biz and .info;
- The .net registry is critical to the overall security of the Internet infrastructure; and
- Approximately 33% of all e-mail traffic would be affected by degradation in the .net resolution process. A major degradation could cause $10 billion in damages due to e-mail problems alone.
In making the .net decision, ICANN?s key considerations should include quality of product, record of reliability, and reinvestment in the infrastructure. Rewarding an outstanding .net registrar will set a healthy precedent for future competition.
The Importance of the Internet to America and the World
This fall we mark the 10th anniversary of the web browser and effectively what we call the Internet. It is one of the fastest growing technologies ever. In 2004, 63% of our population is online and projected to increase by approximately 16% over the next 4 years (Jupiter Research). Each year, more Americans use the Internet, more American business is conducted over the Internet, more American jobs are created through the Internet, and more American investments are made with the help of the Internet.
The efficiency and reliability of a network of networks such as the Internet are determined by the efficiency and reliability of its weakest link. If a registry is inefficient or unreliable or vulnerable to attacks, investments in other parts of the Internet may be of reduced value.
The Internet will continue to be a large and growing part of the American economy regardless of the outcome of the ICANN decision. But a decision that leaves the Internet with a less capable registry could harm the Internet, and ultimately the U.S. economy. The growth and efficiencies that a smoothly operating Internet has fostered throughout our economy would be threatened by any loss of confidence in its stability and security. Such confidence exists today and must not simply be taken for granted.
The stakes are high--in terms of dollars and security-- for ICANN?s review of the .net contract. That review should not be clandestine or clouded by uncertainty. ICANN?s process should be transparent and predictable. The federal government should monitor it and fully understand the consequences of the outcome.
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*This research paper was sponsored by a grant from VeriSign. The views expressed in this paper are those of the author alone and do not necessarily reflect the views of VeriSign or any other corporation.
