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A new agreement illustrates the classic problems of regulated monopolies--and the tragedy of a regulator that doesn't do its job.
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Hey folks, listen to the big news! A scheming monopoly protected by a
lax regulator hurts consumers and holds back progress in areas of
commerce! Ah shucks, I thought I was on to something new...
No, it's just a confirmation of an old principle--the current
deal
struck between ICANN, which the U.S. government gave control over
policies concerning the Domain Name System, and VeriSign, the private
corporation that manages the insanely popular and critical .com
domain.
Take the price of a domain name, for just one example of where the
deal goes wrong. The .com domain name market is already weighed down
with price-gouging (after all, how much incremental cost is involved
in entering an item in a database?), but the new contract allows
VeriSign to raise prices 7% per year for four years, just
because--well, just because. Like Aristotle said, it's in the nature
of some things to fall and some to rise, and VeriSign decided it's in
the nature of domain name prices to rise.
There are other shocking aspects to the agreement (browse the ICANNWatch web site, and let me
know whether you know of any good document summarizing the
controversy)--so shocking that many critics believe that ICANN's boss,
the U.S. Department of Commerce, will take the radical step of
refusing to sign off on the deal ICANN made.
The classic situation of the regulated monopoly comes through in many
aspects of this complicated situation. For instance, VeriSign has
played an aggressive role, savvily using lawsuits to harry ICANN and
wear down its resistance--a pattern followed by some other regulated
monopolies. And ICANN will derive highly desired revenue from the high
fees that VeriSign charges--a conflict of interest regulators often
fall into.
It has always been a stated goal of ICANN to expand the space of
top-level domains like .com so that there would be more alternatives
and the importance of .com in the 1990s would go away. If that
happened, VeriSign would not be able to even imagine proposing the
deal they've just won. No doubt, there's a cachet about .com that will
take a long time to erase; this is beyond ICANN's control. But they've
certainly done nothing to help by keeping such an iron grip on the
top-level domain space.
ICANN is enforcing a two-layer monopoly here: the appeal of the .com
domain and the control VeriSign has over .com. Permanent, automatic
renewal of VeriSign'a control is built into the current agreement.
ICANN has fallen into a pattern: by doing a poor job, they open up the
domain name system to abuse by other actors with even more dubious
motives. For instance, by dragging their heels on internationalization
of domain names, ICANN left an opening big enough to fly an EP-3
through. So China
is creating its own, separate domain name system,
a move long feared by observers. Sure, China probably will exploit the
system to censor content--but I wouldn't presume to guess whether
censorship is the reason for creating the new system or just a
continuation of China's ongoing censorship policies. My point is that
ICANN handed them a reason to create their own system.
(Guide to snide references department: an EP-3 was the
U.S. airplane involved in the collision with a Chinese jet in April
2001, a major international incident.)
The lapse on international domain names is ironic, considering ICANN
makes a big show of caring about international issues and makes lots
of superficial gestures in that area, such as appointing board members
from around the world and holding its conferences in far-flung cities.
But they aren't making their case well; that's why so many countries
want to eliminate them of put their functions under U.N. control.
ICANN managed to weather that storm, but the VeriSign deal may prove
their Hurricane Katrina.
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