Deals Stoke Criticism Over US’s Plan to End Internet Oversight – Wall Street Journal

Icann handles the internet’s technical operations, including the crucial domain-name system, under a longstanding arrangement with the U.S. government.
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The U.S. government plans within weeks to end much of its oversight of the California nonprofit that helps run the internet, a move with broad international support. But recent business deals by the nonprofit are threatening to roil those plans.

Under the deals, the nonprofit Internet Corporation for Assigned Names and Numbers, known as Icann, is set to give significant new business to its largest contractor, Verisign Inc.,
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under circumstances that some say show favoritism.

One of the deals would give Verisign a no-bid extension on its current contract to run the huge dot-com domain. In the other deal, Verisign emerged as the surprise potential winner of an Icann auction to operate the new dot-web domain, after quietly putting up $130 million to support another firm’s bid.

Icann denies that it has given special treatment to Verisign, saying its focus has been promoting the internet’s stability and security.

The deals open a window into what is a netherworld to most users—the structures and firms that keep the chaotic-seeming internet running smoothly.

Icann handles the internet’s technical operations, including the crucial domain-name system, under a longstanding arrangement with the U.S. government. Icann also oversees the firms that run many of the internet’s top-level domains, such as dot-com.

Verisign currently runs the dot-com domain as well as dot-net, and also helps maintain the domain-name system. It makes money by receiving fees paid by people who register websites, while ensuring the registry’s operation is smooth, stable and secure.

The Obama administration is preparing to end much of its oversight of Icann on Oct. 1. The government hasn’t intervened lately in Icann’s operations, but its authority to do so has been seen as a backstop should something go wrong.

Many high-tech firms view the shift as essential to maintaining international support for the internet’s governance, as foreign countries increasingly bridle at the U.S. role. But some conservative critics, who have long worried that Icann could fall under foreign control, are seizing on the recent business deals as they try to block the government’s move.

Critics including Sen. Ted Cruz (R., Texas) say Icann’s recent deals with Verisign show it to be a feckless regulator.

“Where there’s smoke there’s fire,” Rep. Sean Duffy (R., Wis.), who’s lined up with Mr. Cruz, said in an interview. The lawmakers have called for a Justice Department investigation.

Icann denies favoritism. Regarding accusations that Icann is too cozy with Verisign, Akram Atallah, president of Icann’s global domains division, said, “‘Cozy with Verisign’ is an oxymoron,” given the firm’s tough bargaining style.

Critics face an uphill fight to derail the government’s planned transfer.

Icann has proposed giving Verisign a no-bid extension of its long-running contract to operate the dot-com domain, two years ahead of schedule. Verisign’s current contract is set to expire in 2018; the extension would last through 2024.

Verisign has had exclusive control of the dot-com registry since 2000. Starting in 2006, Verisign’s contract with Icann has had an automatic-renewal clause, meaning no bidding is required so long as VeriSign meets basic performance standards. Other domain operators have received similar deals.

Critics say Verisign’s hold on the dot-com domain already has made it an effective monopoly. Mr. Atallah says the contract extension is less significant than it appears, since Verisign would be entitled to automatic renewal in two years anyway.

The agency that oversees Icann, the National Telecommunications and Information Administration, hasn’t yet endorsed the contract extension. Noting that it hasn’t yet been approved by the Icann and Verisign boards, an NTIA spokesman said, “We have not been presented with anything to consider at this point.” NTIA would be able to keep price limits in place for the duration of the contract extension.

In the second deal, Verisign covertly provided most of the funding for a winning bid in a recent Icann auction for the right to run the potentially lucrative dot-web domain.

The Verisign-backed bidder, Nu Dot Co LLC, won the July 27 auction with a bid of $135 million. Then Verisign disclosed that it had put up $130 million of the bid and said it expected Nu Dot Co to hand over the dot-web deal to Verisign. Nu Dot Co didn’t respond to a request for comment. Such assignments aren’t unusual.

In a lawsuit against Icann in federal court in Los Angeles, one losing bidder, Donuts Inc., accused Icann of using its authority “to unfairly benefit” an applicant.

Mr. Atallah said Icann and its ombudsman investigated the suspicions ahead of the auction but no action was merited. “Now we have some other evidence that is surfacing, and we are looking again,” Mr. Atallah said. “What happens, I cannot project.”

Write to John D. McKinnon at john.mckinnon@wsj.com

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