December 2009
by Thomas Brom

Governing the Internet is a bit like trying to catch the wind in your hand. Originally an American creation, the Net is now a global network with 1.6 billion users and intense competition for domain-name allocation and control. The best known of the Internet authorities—the Internet Corporation for Assigned Names and Numbers (ICANN) based in Marina del Rey—was founded in 1998 as a private-sector body based on principles of consensus and consent. But throughout a stormy history, ICANN found itself entangled in domestic and international politics and its structure subject to legal challenge.

ICANN inherited from the U.S. government the role of de facto regulator of Internet domain names, the address system that permits computer users to send and receive information via unique identifying numbers to parties who "own" a domain name. Created as a private, nonprofit public-benefit California corporation, ICANN operated under a memorandum of understanding with the U.S. Department of Commerce (DOC). The organization controls distribution of the generic top-level domains—such as .com, .org, .edu, and .net—and allocates blocks of domain names to a hierarchy of registries and resellers who charge purchasers annual rental fees.

On September 30, however, the memorandum expired. In its place ICANN and the DOC agreed to an "Affirmation of Commitments"—a maddeningly vague document with a title evoking wedding vows in states that don't permit same-sex marriage. The United States participates in the agreement through a government advisory committee, along with dozens of other nations. In his official announcement, new ICANN president and CEO Rod Beckstrom promised to work for the "maintenance of a single, interoperable Internet," pledging that ICANN will remain a U.S.-based nonprofit corporation and operate as a multi-stakeholder, private-sector-led organization.

Then the long knives came out, at Internet speed. Conservatives denounced the agreement as a giveaway to the European Union or, worse yet, the United Nations. Professor Milton Mueller of the Internet Governance Project at Syracuse University applauded the "step away from unilateral U.S. oversight," but found that ICANN's new commitments still lacked globally applicable rules of operation, and failed to indicate any concern for freedom of expression.

Karl Auerbach, a former ICANN board member, wrote in a published email, "ICANN has quite profitably rented out .com and .net and .org and other legacy top level domains. [It] allows those to be operated as monopolies—to the tune of roughly a billion dollars a year in monopoly profits to the renters. Yet not once has there ever been any legal document that shows how in the world ICANN obtained the right to lease out those top level domains."

Auerbach concluded, "ICANN remains a body that stands astride the Internet's domain name system, not as a colossus but more as a Jabba the Hutt. ICANN is a trade guild in which member vendors meet, set prices, define products, agree to terms of sales, and allow only chosen new vendors to enter the guild and sell products."

Domain name owners were particularly anxious. Eric T. Fingerhut, a partner in the Washington, D.C., office of Howrey, says his clients in the International Trademark Association worry that ICANN's intended rollout of additional generic top-level domains (gTLDs) next year will dilute the value of the domains they own, promote cybersquatting, and force those clients to purchase additional names to protect their brands.

Josh Bourne, president of the Coalition Against Domain Name Abuse (CADNA) in Washington, D.C., adds, "ICANN is still broken, and as a regulator that has been captured from with-in, it cannot properly self-correct." CADNA—whose member companies include AIG, Goldman Sachs, Hewlett-Packard, and Verizon—is circulating a proposed bill in Congress that would suspend ICANN's current policy initiatives until a presidential commission reviews its internal operations and external relations with U.S. agencies and foreign governments. "The fight over domain names is just beginning," says Bourne.

As if ICANN needed more worries, antitrust lawyers also continue to pursue it. In 2003 Mark A. Lemley, then at UC Berkeley's Boalt Hall School of Law, and A. Michael Froomkin of the University of Miami School of Law coauthored an article challenging ICANN's immunity from antitrust liability (ICANN and Antitrust, Froomkin and Lemley, 2003 ILL. L. REV. 1.) "Whether ICANN has in fact violated the antitrust laws depends on whether it is an antitrust state actor ..., [on] whether the DNS [domain name system] is an 'essential facility' under the antitrust laws, on the extent of ICANN's 'government contractor' immunity under an unusual zero-dollar procurement contract, and on whether it can shelter under precedents that protect standard-setting bodies." Acknowledging failed challenges in a half dozen U.S. district courts, Lemley and Froomkin listed areas where they still believe ICANN is vulnerable to antitrust claims.

One of those areas is being tested by Bret A. Fausett, of counsel at Adorno Yoss Alvarado & Smith in Los Angeles. Fausett represents a group of domain-name registrars and owners that filed suit in November 2005 against ICANN and VeriSign, the operator of all .com and .net domain-name registries, alleging violations of the Sherman Act and California's Cartwright Act. The district court dismissed the action, but in June the Ninth Circuit reversed with regard to claims challenging the terms and award of the .com contract and asserting the existence and attempted monopolization of a separate market for expiring domain names (Coalition for ICANN Transparency, Inc. v. VeriSign, Inc., 567 F.3d 1084 (9th Cir. 2009)). Defense attorneys petitioned for rehearing and en banc review, and both sides submitted additional briefs.

"This is the only pending antitrust case I'm aware of," Fausett says. "ICANN is no longer a defendant, but its lawyers submitted an amicus brief for rehearing that states it is protected from antitrust scrutiny. At some point, someone will try to pin down that authority."

That someone could be the U.S. Department of Justice. In December 2008 then-acting Assistant Attorney General Deborah A. Garza, responding to a DOC request for advice on competition issues raised by ICANN's proposal to issue new gTLDs, recommended continued DOC oversight. "The antitrust laws likely would not constrain the unilateral pricing decisions of a gTLD operator whose market power derived from the creation of a new gTLD by ICANN," Garza wrote. But under the new agreement, the DOC refuses to expressly support or reject ICANN's proposals for implementing new generic top-level domain names.

"Right now our members have no appetite for an antitrust challenge to ICANN," says CADNA's Bourne. "But it would be great if Justice took it on."