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ICANN sees clearly now: The money's gone

July 16, 1999
Web posted at: 9:10 a.m. EDT (1310 GMT)

by Carolyn Duffy Marsan

Network World Fusion
domain name graphic

(IDG) -- Seven months after its launch, the nonprofit organization that oversees Internet domain name registration is out of cash and has racked up $1 million in unpaid bills. Although the organization's leaders are begging for contributions from networking companies and government agencies, no white knight has stepped forward to rescue the controversial venture.

The Internet Corporation for Assigned Names and Numbers (ICANN) has hit financial straits at a critical juncture in the transition of the domain name registry business from a monopoly to a competitive market. A test of how well five companies can share registration of .com, .net and .org domain names was scheduled for completion on July 16. ICANN has approved 37 additional companies to offer registration services once the test is done.

Of concern for corporate Internet users is whether ICANN's financial problems will affect their ability to get domain names approved quickly, accurately and at a reasonable price.

"If the funding problem lingers long enough, then sooner or later there won't be people willing to donate their time to ICANN," says Chief Counsel Joe Sims. The Internet community needs to decide whether a competitive domain name process is "important enough to continue to do."
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"ICANN's financial situation is serious in that we might have looked to ICANN as a unifying force in the industry," says Chuck Davin, chief technical officer at PSINet, a Virginia ISP that is planning to offer domain name registration services. But with or without ICANN, "we believe the environment is going to be competitive and open and have no government involvement."

Until recently, Network Solutions Inc. (NSI) of Herndon, Va. assigned most Internet domain names, under a contract with the U.S. government. NSI maintains a central database of domain names, assigns new names and collects fees for the use of those names. With responsibility for the three most popular domain names -- .com, .net and .org - NSI controls nearly 75% of all Internet name registrations.

The Clinton Administration targeted NSI's monopoly position in 1997, when it announced plans to privatize the management of Internet domain name allocation. Last November, the Department of Commerce selected ICANN to oversee the privatization process.

To get started, ICANN raised more than $400,000 from networking companies, including Ascend, MCI Worldcom, America Online and Cisco. These funds were intended to maintain ICANN's activities until a regular source of income such as registration fees could be established.

For the last few months, ICANN has been experiencing a severe cash crunch due to delays in the development of a competitive domain name registration market and higher-than-expected operating costs. NSI's actions, in particular, have contributed to ICANN's mounting legal bills.

"The $421,000 that came in the door ran out a long time ago," Sims says. "We're well over $1 million in the hole."

ICANN has paid its small technical and administrative staff at its headquarters in Marina del Rey, Calif., but it has not reimbursed its interim directors or contractors for their work. Travel and hotel expenses have accumulated as ICANN held meetings in Berlin, Singapore and Santiago, Chile.

"If we are to avoid having to spend a lot of time worrying about where we're going to get next month's money, we need a $2 million cash infusion," Sims says.

ICANN is seeking funds from its original donors, the Commerce Department, trade groups and government agencies outside the United States.

"We're begging. We're going after any organization that will give us money. We're spreading the word wide and far," Sims says.

ICANN planned to raise money by initiating a $5,000 annual fee for registrars and a $1 annual fee for domain name registrations. However, NSI has refused to pay the fee. And since registration by other companies is just beginning, ICANN has yet to receive any revenue from fees. These fees were projected to contribute $5 million to ICANN's coffers in the fiscal year starting July 1.

The fees will likely be delayed further as the result of criticism from Internet users, the Commerce Department and members of Congress. The Commerce Department has recommended that ICANN eliminate the $1 fee and wait until this fall, when the organization plans to elect a board of directors, before developing a permanent financing system.

In a July 8 letter to Rep. Tom Bliley, chairman of the House Commerce Committee, Commerce officials said elimination of the $1 fee means that "ICANN must receive government funding, continue to rely on corporate contributions or finance itself through some combination of both sources. We pledge to work with ICANN and the entire Internet community, to the extent permitted by law, to obtain interim resources for ICANN."

While it will be unpopular among Internet users for ICANN to accept government money, it is unclear whether Internet vendors will rally to the organization's defense.

PSINet initially supported ICANN with a donation of $10,000 but has no plans to give additional funds, according to Davin.

Davin says PSINet's support of ICANN was based on three principals: an open process for ICANN; a new era of competition for domain name registration; and reduced involvement from governments. "We are cautiously optimistic with respect to ICANN," he says. "What you are hearing now in the Internet community is mixed reviews on these three goals."

Davin says he expects competition in the domain name registry business regardless of whether ICANN continues to exist. "The community would find some other way to bring it about," he says. PSINet is one of the 37 companies accredited by ICANN to offer domain name registration services.

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