ICANN departures draw criticism

August 20, 2011

The nonprofit group that manages the Internet’s naming system under a U.S. contract decided in June to add hundreds of new Web suffixes, expanding beyond dot-com and dot-org in a move to spur online innovation.

“Today’s decision will usher in a new Internet age,’’ said Peter Dengate Thrush, chairman of the Internet Corp. for Assigned Names and Numbers, after leading the June 20 vote.

Four days later, Dengate Thrush finished his term as ICANN chairman and within a month joined a London company called Top Level Domain Holdings that plans to buy Web suffixes created by the plan and offer Internet registry services.

Dengate Thrush’s move and that of another former ICANN employee have drawn criticism from government watchdogs. The U.S. government is considering adding a conflict-of-interest provision to the contract for domain-name system support performed by ICANN since 1998.

“Given how quickly these two individuals sped through the revolving door, one can’t help but wonder if thinking about their next career move influenced their policy decisions,’’ said Sheila Krumholz, executive director of the Washington-based Center for Responsive Politics.


ICANN doesn’t restrict what employees, executives or directors do after they leave, though they are subject to confidentiality agreements, said John Jeffrey, the group’s general counsel.

“There are no ethical or contractual prohibitions on moving from ICANN to work in the industry, and, in fact, that’s what many people have done,’’ Dengate Thrush said. “Most people at ICANN are there because they’re in the industry to start with.’’

ICANN, based in Marina del Rey, Calif., oversees 22 generic top-level domains, known as gTLDs, including the dot-com, dot-org and dot-net suffixes, which together account for almost 120 million Internet addresses.

The group has about 130 employees and operates under a zero-dollar contract with the Commerce Department. It collects fees from companies such as VeriSign, GoDaddy.com and Top Level that generate revenue by helping businesses and consumers obtain domain names. For the year that ended June 30, ICANN reported $68.3 million in revenue, much of it from fees.

At a June 20 meeting in Singapore, ICANN’s board of directors voted 13 to 1, with two abstentions, to increase the number of domain names and consider almost any word in any language as a Web suffix. The vote capped years of deliberations over the program, which the group has said would provide companies with new ways to reach customers.

Market potential

ICANN’s decision created a potential new market for companies such as Top Level, which is publicly traded on the London Stock Exchange’s Alternative Investment Market and says it’s working with groups seeking the rights to potential suffixes including dot-nyc and dot-eco.

The Web-suffix expansion has been attacked by trade groups representing large corporations and advertisers that say the change increases businesses’ costs.

The proliferation of new domain names will confuse consumers and force companies to spend hundreds of thousands of dollars to defensively register domains to protect their brands, Bob Liodice, president of the Association of National Advertisers, wrote in an Aug. 4 letter to ICANN.

“While no doubt some industry sectors will make money, most will suffer enormous costs that far outweigh the gains,’’ wrote Liodice, whose group represents more than 400 companies including Apple and General Motors.

Under ICANN’s plan, the group will accept applications for new domains from Jan. 12 to April 12. Applications will cost $185,000 per domain name, and ICANN will allow up to 1,000 new suffixes per year, spokesman Brad White said. The new domains will be ready by late 2012 or early 2013, he said.

Dengate Thrush, a 55-year-old intellectual property lawyer from New Zealand, had served as an ICANN director since 2005 and took over as chairman in November 2007. He said he was approached by Top Level Domain Holdings on June 24, the day his term as chairman ended.

Negotiations proceeded “very rapidly,’’ and he signed a contract July 15, he said. In a July 17 statement, the company announced his hiring as executive chairman and said Dengate Thrush would be an “outstanding asset.’’

“Peter championed successfully the approval of the new gTLD programme at the highest levels, and with Peter on board I have every confidence we will achieve the same success,’’ said Antony Van Couvering, chief executive of TLDH, said in the statement.

Craig Schwartz, a former ICANN employee, last month joined the Financial Services Roundtable, a Washington-based lobbying group whose members include Bank of America and J.P. Morgan Chase.

Schwartz, who was chief gTLD registry liaison at ICANN, said he accepted a job offer from the Roundtable in May and stayed through ICANN’s June 20 vote. He left ICANN June 30 and started his new job July 11.

The business group is considering creating a vehicle with the Washington-based American Bankers Association to acquire top-level domains such as dot-bank and dot-insure for use by financial institutions, said Leigh Williams, president of technology policy for the Roundtable.

“The financial community will benefit greatly from Craig’s firsthand knowledge of ICANN’s domain program,’’ Williams said in a July 11 statement announcing Schwartz’s hiring and noting his involvement in the domain-name expansion.

Schwartz said he’s not aware of any restrictions for departing ICANN staff and declined to disclose his compensation at ICANN and at the Financial Services Roundtable.

ICANN bylaws and policies

ICANN’s bylaws state that no directors “shall vote on any matter in which he or she has a material and direct financial interest that would be affected by the outcome of the vote.’’

“There’s been no evidence supplied to me or the board to show’’ that Dengate Thrush “violated our conflicts of interest policy,’’ said Jeffrey, ICANN’s general counsel. “Should such information be made available, that would considered.’’

The governance committee of ICANN’s board has been looking at whether “post-service’’ policies are needed, he said.

Dengate Thrush declined to disclose his compensation at Top Level Domain Holdings. As chairman of ICANN, he received an annual salary of $75,000 a year starting Aug. 5, Jeffrey said.

The National Telecommunications and Information Administration, the Commerce Department agency that oversees the ICANN contract, is reviewing public comments on whether the terms should be amended. The contract expires in March, and NTIA plans to open it for bidding in the fall.

“The conflict of interest issue was raised to NTIA in public comments’’ on the coming contract, Assistant Secretary of Commerce Lawrence Strickling, who advises President Obama on telecommunications policy, said in an e-mail. “Based on that input, we will consider whether the contract should contain additional provisions to guard against conflicts of interest by whomever is chosen to perform the work.’’

Federal employees may be subject to restrictions on their activity once they leave government, according to the U.S. Office of Government Ethics. The limits range from a lifetime lobbying ban to a one-year “cooling-off period,’’ temporarily barring communication with the worker’s former agency.

“Since ICANN is operating as a quasi-governmental agency, the revolving-door restrictions ought to apply, but they just don’t in this case and that’s just very unfortunate,’’ Craig Holman, legislative representative for Public Citizen, a Washington consumer advocacy group.

Rogan Kersh, an associate dean at New York University’s Wagner School who does research on lobbying, said the ICANN departures created “the perception of questionable behavior.’’

“The fact that they have the power to reshape the Internet so extensively, a vital aspect of our social and economic existence,” Kersh said, “suggests there should be heightened ethical scrutiny for the acts they perform.’’

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