ICANN's authority to manage top level of the DNS comes from a two-year Joint Project Agreement (JPA) signed with the US Department of Commerce in 1997, since extended seven times, most recently until September 2009. Since the DoC can unilaterally cancel the JPA which would put ICANN out of the DNS business, when DoC speaks, ICANN listens.
On Thursday, the US DoC sent a scathing letter to ICANN about the proposed plan to sell large numbers of new top-level domains (TLDs). There's a long list of issues which range from insufficient attention to monopoly and consumer protection, to lack of capacity to enforce compliance, to overreach into non-technical areas such as adjudication of morality, to what they'll do with all the extra money which they're not supposed to keep since they are a non-profit.
One of the clauses in the JPA says:
This Agreement promotes the management of the DNS in a manner that will permit market mechanisms to support competition and consumer choice in the technical management of the DNS. This competition will lower costs, promote innovation, and enhance user choice and satisfaction.
To this end, in 2006 the ICANN board said they would commission a study on economic issues in TLD registrations such as whether different TLDs are different markets, to what extent domains in one TLD are substitutes for domains in other TLDs, how much market power registries (notably VeriSign .COM) have, and what ICANN would do with all the extra money the TLD process is likely to bring in, since as a non-profit they're not supposed to keep it. These are issues which would seem rather important in any new TLD process set up under the JPA.
The DoC letter specifically worries whether new TLDs will just force existing registrants to make defensive registrations in all of them. At this point it's hard to say whether they would; this is exactly the kind of question that the study should help answer.
Yet here it is two years later, ICANN is rushing to set up the new TLD process, but they, uh, don't seem to have gotten around even to start the study. DoC says, quite reasonably: "ICANN needs to complete this economic study and the results should be considered by the community before new gTLDs are introduced." I'd love to ask Paul Twomey why they haven't done the study, but history suggests that even if I did, I'd be unlikely to get a straight answer.
This means that the new TLD process will come to a screeching halt, which is probably just as well. (ICANN chronically blusters about how any minute now they'll end the JPA and be a free floating TLD management entity, but you can disregard that.) At this point it's hard to guess what ICANN will do next. Do the study and set the TLD clock back a couple of years? Negotiate with the DoC and try to do them in parallel? I'd guess the former, since the factions with money and clout hate new TLDs other than perhaps a few non-English ones which are on a separate track.
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