[governance] FW: [IP] John Gilmore on ICANN.

[Michael Gurstein]

From: Dave Farber [mailto:dave at farber.net] 
Sent: May 28, 2015 12:09 AM
To: ip
Subject: [IP] John Gilmore on ICANN.

 

I believe this is not an inaccurate description from a historical standpoint. I also attend to agree with many of the points John takes.

Dave

---------- Forwarded message ----------
From: "John Gilmore" <gnu at toad.com <mailto:gnu at toad.com> >
Date: May 27, 2015 6:46 PM
Subject: Re: [IP] How global DNS could survive in the frozen lands outside US control
To: <dave at farber.net <mailto:dave at farber.net> >
Cc: "ip" <ip at listbox.com <mailto:ip at listbox.com> >

ICANN has built itself a nice monopoly, with very little outside
influence or control.  Now it wants to reduce that to "zero" outside
influence or control.  The community and the US Government should
decline to do so.  (PS: The community has little or no say over this.)

Back when ICANN was formed in 1998, EFF proposed that ICANN's
"nonprofit" corporate charter should include some basic protections
for freedom of speech and press, due process, international human
rights, transparency, and such.  See:

  https://w2.eff.org/Infrastructure/DNS_control/ICANN_IANA_IAHC/19980923_eff_new_iana.bylaws
  https://w2.eff.org/Infrastructure/DNS_control/ICANN_IANA_IAHC/19980924_eff_new_iana_pressrel.html

  "... any foundation for governance of a communications system, such as
  the Internet, should stand on the fundamental human right of free
  expression.  ...  What was suppossed to be an excercise in Internet
  democracy has become an excercise in Internet oligarchy" - Barry
  Steinhardt, EFF President

and see generally:

  https://w2.eff.org/Infrastructure/DNS_control/ICANN_IANA_IAHC/

ICANN's management and lawyers refused to include any such provisions,
on the theory that if they were included, then people could succeed in
suing ICANN if it violated freedom of speech or the press, did things
to domain holders without due process, or was not transparent about
its activities.  ICANN management wanted the right to violate those
human rights and public oversight provisions -- and they ultimately
got it.  No court can decide whether ICANN's actions violate
international human rights law, because ICANN is not required to
follow international human rights law; it isn't a government and it
never signed those treaties.  It isn't required to follow the US Bill
of Rights, because it isn't a government.  It isn't required to follow
basic transparency policies like Freedom of Information or Open
Meetings, except to the extent that the US Government currently
requires that under their contract with ICANN.  It isn't required to
follow anything but California and US nonprofit law (which it
deliberately violated anyway, see below).  Yes, the sole substantive
rules that govern ICANN are the same ones that control the struggling
2-person environmental group or underfunded health clinic doing a bake
sale in a nearby park.  The creation of an unaccountable ICANN was all
handled by ICANN's "unpaid volunteer" lawyer, Joe Sims of the Los
Angeles firm Jones Day, who later, once the gravy train was set up,
started charging ICANN a good chunk for his ongoing advice.  As of
2014, ICANN pays Jones Day almost $4 million annually for legal
services.

ICANN soon started charging domain registrars a fee of 20c per year
per domain, for doing nothing except protecting itself from outsiders
and paying itself large wages.  ICANN sets the amount of this fee
itself, and there is nothing that outsiders, or ICANN's customers, can
do to challenge it or change it.  It is currently 18c per transaction,
and raises about $80 million dollars per year, all of which ICANN
finds some way to spend on itself and its lawyers.  By 2014 it had
more than 300 employees churning around looking for ways to spend
money on themselves and their contractors.  More than 30 of these
"nonprofit" employees make more than $250,000 a year or are "paid
directors", with the CEO wasting $900K/year.  It also spent about
$575K of your domain fees lobbying the government on its own behalf
("a staff registered lobbyist and two government affairs firms").  See
pages 7-9 and 30 and 52-53 of:

  https://www.icann.org/en/system/files/files/fy-2014-form-990-31mar15-en.pdf

At one point a single outside critic, Karl Auerbach, slipped onto the
ICANN Board of Directors.  ICANN is (was?) a California nonprofit, and
the Directors of a nonprofit have responsibility for the acts of the
nonprofit -- and have rights to oversee its acts.  They can inspect
the physical premises at any time, and can see and copy any documents
that the business has.  Otherwise the theory that the Board is in
control is a hollow mockery, and California law doesn't allow that.
ICANN claimed that its Board members could not actually access basic
information like the financial statements of the organization (how
much money comes in, how much goes out, and for what reasons).  Not
only did ICANN management refuse.  The rest of the ICANN board,
including Chairman Vint Cerf, refused, and circled the wagons to
protect ICANN from actual transparency.  In 2002, EFF helped Karl file
a lawsuit under California law to enforce his rights.  ICANN contested
the lawsuit, and Vint filed a declaration with the court in support of
their position.  ICANN lost that lawsuit, and Karl got to look at the
financial reports -- but did not get to show the finances of this
"nonprofit" to the public.  ICANN immediately revised the procedures
for electing their board, to make sure that no critic would ever get
on the board again.  However, they did start being more transparent
about their finances, since these would have to come out in their
publicly available income tax returns anyway.  See:

  https://www.eff.org/cases/auerbach-v-icann
  https://www.eff.org/press/releases/icann-director-seeks-court-order-review-records
  https://www.icann.org/resources/pages/fiscal-2014-09-15-en

Fast forward another few years, and ICANN decided to sell new
top-level domains.  The bidding process was completely rigged to
ICANN's benefit; bidders sent in a non-refundable $185,000 per
proposed domain and were guaranteed exactly nothing in return.  Domain
speculators sent in a frenzy of money, as expected, and ICANN raked in
a one-time profit of $350 million.  Some of those domains have gone
live since, and as expected, they have mainly benefited ICANN.
Recently in 2015 ICANN auctioned off ".app" for $25 million, which it
says went into a "designated purpose" fund, which ICANN of course has
sole control over.  As with the about $80 million in recurring revenue
from domain registrars and registries, they have struggled mightily
but succeeded in finding ways to waste almost all of these hundreds of
millions on themselves and their buddies.  As of 2014, they estimate
that all but $100M has been spent, and that is carefully hoarded in a
"Risk Reserve" for "future costs that cannot be estimated" (up to now,
only $1M in "risk reserve" has been actually spent).  In 2014 they
spent or wasted $17M with Ernst & Young, $16M with KPMG, $8M with "JAS
Global Advisors", $4M with Interconnect Communications, $2.8M with
Price Waterhouse, and $2.6M with Chambre de Commerce Internationale,
all for the new top-level domains program.  See:

  https://www.icann.org/en/system/files/files/financial-report-fye-30jun12-en.pdf
  https://www.icann.org/en/system/files/files/adopted-opplan-budget-fy14-22aug13-en.pdf

ICANN recently decided that the money it receives for each domain name
registered does not obligate it to do anything in particular; or as the
lawyers put it on page 75 of:

  https://www.icann.org/en/system/files/files/fy-2014-form-990-31mar15-en.pdf

  ICANN HAS DETERMINED THAT THE REGISTRY AND REGISTRAR AGREEMENTS DO
  NOT INCLUDE ANY OBLIGATIONS FOR ICANN THAT PERTAIN TO EACH SPECIFIC
  REGISTRATION OF A DOMAIN NAME. ICANN CONSIDERS THAT ITS CONTRACTUAL
  OBLIGATIONS ARE UNRELATED TO A SPECIFIC DOMAIN NAME REGISTRATION,
  WHICH THEREFORE DOES NOT CREATE SPECIFIC PERFORMANCE OBLIGATIONS
  WHICH WOULD REQUIRE A DEFERRAL OF REVENUE OVER THE DURATION OF THE
  REGISTRATION. AS A RESULT, ICANN HAS CHANGED ITS REVENUE RECOGNITION
  METHOD SO THAT THE TRANSACTION-BASED FEES ARE RECOGNIZED AS REVENUE
  WHEN EACH TRANSACTION OCCURS.

In other words, they specifically state that you are paying them for
NOTHING when you pay them every year (via your registrar and registry)
to renew your domain name.  The reason you have to pay?  Because they
control the root and they demand payment, not because they are doing
anything for you.

One minor drag on ICANN's ability to do exactly what it wants has been
the original US Government contract to run the domain name system.
Whenever ICANN got a little too crazy, the government would gently
suggest that perhaps it would re-bid that contract to somebody a
little less crazy.  As far as I can tell from outside, the USG has
used a very light touch in this process.  Anyway, the USG has never
been particularly unhappy about creating monopolies for the private
benefit of the monopolies.  But nevertheless, the structure galled
other countries, especially those who want to use international
institutions dominated by governments to impose their own kind of
cultural baggage (censorship, wiretapping, etc) on global Internet
users.  Or kleptocrats who could see how any international institution
that managed to wangle control of ICANN could start extracting free
money from the Internet; ICANN would just pass the costs down to all
of us, in a way that we already have no way to contest.  So "Get the
US out of domains" became a rallying cry for a kind of misguided
leftists in alliance with third world autocrats.  That is the current
"debate" in the multi-decade debacle of ICANN.

To sum it up?  If domain users have zero control over ICANN, if
ordinary domain owners have zero control over ICANN, if ISPs have zero
control, if domain registrars have zero control, if governments have
zero control, if even its sinecure board members have zero control,
then who will have any control over what ICANN does with the domain
name system that billions of people rely upon?  The answer is pretty
simple: ICANN management and lawyers will have full control, fat
personal salaries, a pot of hundreds of millions that they're sitting
on, recurring revenues that are totally set by their fiat, and the
rest of us will have zip.  Any questions?

        John Gilmore
        (speaking for myself, not for the Electronic Frontier Foundation)


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