Why I Support Canadian Presence Requirements for .CA Domain Names

By Zak Muscovitch
Zak Muscovitch

It nearly goes without saying that if ".CA" means and should continue to mean, "Canada", the registration of a .CA domain name ought to involve some tie to Canada. As Canadian Internet Registration Authority ("CIRA") CEO, Byron Holland, aptly put it, "The fundamental requirement of having a Canadian presence in order to get a dot-ca domain name make sense...because it is a country code and there is an assumption that there is some "Canadian-ness". And that is why, in a nutshell, I support a Canadian 'presence requirement' for the registration of .CA domain names. Nevertheless, the question of what constitutes an appropriate 'presence requirement' is an interesting issue, and one which deserves some attention and debate. CIRA's Canadian Presence Requirements ("CPR") have held up generally well over the past ten years, but nevertheless, certain aspects of the CPR deserve a review.

The CPR has not undergone any changes for over seven years, since June 5, 2003. To put this in perspective, back in 2003, only about 10% of the world's population was online, and now it is nearly 30%. Canadian Internet usage has also risen, from about 63.8% penetration in 2003, to over 75% in 2010. In 2003, there were only 333,256 .CA registrations, and now in 2010, there are nearly 1.5 million. Facebook was not even launched until February of 2004. In case you have forgotten where you were in 2003, it was the same year that the space shuttle Columbia was lost. This was a long time ago, and was 'ages' ago, by Internet standards.

But CIRA's CPR actually went into effect much earlier; originally on November 8, 2000, and only subsequently underwent minor revisions in 2003. In 2000, the state of the Internet was a whole other story. In December of 2000, there were only 60,000 registered .CA domain names. The increase in .CA registrations has grown alongside the growth of Internet usage in Canada. Internet usage (as a percentage of total population) in Canada was only 40.3% in 2000. In 2000, Google had only recently moved out of their garage office and into a real office. Once again, to put the year 2000 into perspective, this was the year of the Florida election debacle and the year the 'dot-com bubble' burst. A very long time ago…

CIRA's CPR expressly states that "CIRA is committed to reviewing these Canadian Presence Requirements from time to time in order to ensure they remain in the best interests of Canadians and the .ca registry". Considering the foregoing, it may be that 'time to time' should be now.

From my consultations with CIRA members and .CA domain name owners, the consensus view appears to be that people, of course want the .CA registry to remain 'Canadian', meaning that the registry should continue to be committed to Canadian presence requirements, and indeed this does appear to be in the public interest. But can the registry remain Canadian and still undertake a review of the CPR in order to ascertain whether any updates are possible or required? Surely the answer to this question must be, "Yes", as there is hardly a policy, let alone an Internet-related policy, which cannot sustain some examination after the passage of ten years. Moreover, although I support Canadian presence requirements, there is ample evidence of areas within the CPR which are of concern and should be reconsidered. During the 2010 election for CIRA's Board of Directors, I hope that these issues will be considered by all concerned, with an open mind. The following are some of my concerns regarding the current CPR which I believe should be addressed.

The 'Canadian/Provincial Corporation' Category

Pursuant to Paragraph 2(d) of the CPR, "a corporation under the laws of Canada or any province or territory of Canada" may register a .CA domain name. In law, a corporation is considered a legal person, so a Canadian corporation is treated the same way as a Canadian individual, i.e. both are permitted to register a .CA domain name.

As a result of Paragraph 2(d), anyone, anywhere in the world, can incorporate a corporation in Canada and thereby gain the right to register a .CA domain name. In British Columbia, New Brunswick, Nova Scotia, Prince Edward Island, and Quebec there are no residency requirements for directors of a corporation, thereby enabling a foreigner to incorporate by merely using a registered address for service, and not actually being Canadian or even having a single director or shareholder being Canadian.

Accordingly, Paragraph 2(d) of the CPR is a wide-open doorway for any foreigner to register a .CA, provided that they can pay the several hundred dollars in provincial government filing fees, any legal fees, and file annual tax and corporate returns. This is a small hoop to jump through for foreign companies and individuals who are willing to pay the entrance fee. The question then arises, if the CPR requires a "Canadian presence" in order to maintain "Canadian-ness", why permit such a category to exist? The reason, ostensibly, is that a legal provincial corporation has the same legal rights, for the most part, as a Canadian individual, as aforesaid, and it is far beyond the jurisdiction of CIRA to change corporate law in Canada.

Nevertheless, if the CPR only requires, in essence, a registered address for what is really a foreign domain registrant in substance, how does this really keep the registry Canadian? If this is all that it takes to be considered to have a "Canadian Presence", i.e. a registered office address, then why maintain this facade at all? Why not forego the requirement for a corporation altogether and merely require the registered address in order to qualify as a "Canadian Presence"? The only difference between the two approaches is a payment to the provincial government of several hundred dollars to incorporate. This is an issue that should be discussed if and when a review of the CPR occurs.

A Real Canadian Presence Means Activity in Canada

Perhaps the main consideration in determining a Canadian presence should not be something as artificial as a registered address alone, but rather whether there is a bona fide intention, or actual, activity in Canada. Bona fide 'activity in Canada' seems to be a much better gauge of whether a Canadian presence exists. This is the approach taken by some other national registries. The United States and Australia permit registration by organizations, individuals and trademark holders who reside outside of the country but engage in activities within the country (such as trade, the buying and selling of goods or providing services to customers).

The Canadian government's mandate to CIRA was to operate the registry as "a key public resource, helping to promote the development of electronic commerce in Canada and important to our country's future social and economic development". Accordingly, does the CPR, in its current form, with regard to Paragraph 2(d) in particular, operate in accordance with the public interest? A real question is raised here since Paragraph 2(d) appears to favour a facade of "Canadian Presence", instead of a genuine Canadian presence that is contingent upon bona fide and actual activity in Canada. A genuine Canadian presence, e.g. economic activity in Canada would appear to promote Canada's mandate to CIRA, which is at least in part, is to promote the development of economic commerce in Canada.

Certainly, the aforementioned mandate to CIRA plainly states that the development of electronic commerce in Canada is an important policy objective, but where the debate lies, is whether the development of electronic commerce in Canada is best served by a more isolationist approach, or by a globalized approach.

People who favour the more isolationist approach would interpret CIRA's mandate to help develop electronic commerce in Canada, as obligating CIRA to restrict the use of the .CA, as a Canadian resource, to Canadians, as much as is possible. As such, favouring Canadians' use of the .CA ccTLD to the exclusion of foreigners is seen as the best way to ensure that Canadians have free and uncompetitive access to the ccTLD, thereby allowing Canadians' use of the Internet to flourish, and enshrining the Canadian-ness of the ccTLD so that it is consistently identified with Canada and Canadians.

On the other hand, people who favour a more globalized approach would interpret CIRA's mandate to help develop electronic commerce in Canada, as obliging CIRA to permit non-Canadians to register a .CA provided that they are actively involved in electronic commerce in Canada, such as the provision of goods or services via the Internet to Canadians. As such, the nominal "Canadian Presence" required by Paragraph 2(d) is seen as an unnecessary barrier to trade and commerce that inhibits the development of Internet commerce. Supporters of this view are not concerned that allowing foreigners who trade with Canadians will dilute the Canadian-ness of the .CA ccTLD 'virtual real estate' any more than allowing foreign business to buy or rent actual Canadian land.

Free Trade or Certain Restrictions on Trade?

The isolationist-globalization debate is nothing new in Canada. It perhaps reached its apex during the lead-up to the North American Free Trade Agreement ("NAFTA"). NAFTA came into effect on January 1, 1994. The purpose of NAFTA was to promote fair competition and eliminate barriers to trade. As stated in NAFTA's objectives, at Article 102(a), the purpose of NAFTA was, inter alia, to:

Article 1204 of NAFTA states that:

No Party may require a service provider of another Party to establish or maintain a representative office or any form of enterprise, or to be resident, in its territory as a condition for the cross-border provision of a service.

It is no surprise, that in 1994 when NAFTA was implemented, there was no mention of the Internet as an area or industry that Canada intended to maintain protections over, from a Canadian cultural or identity perspective; the Internet, as we know, simply it did not exist. Had it existed, it may well have been listed in Annex I to NAFTA, which set out Canada's reservations of existing measures and liberalisation requirements, i.e. areas that Canada was carving out from NAFTA, for various reasons. Furthermore, had CIRA existed in 1994, it may well have asked the Canadian government to specifically list the ccTLD as an area that Canada wanted to maintain as a "non-conforming measure".

Nevertheless, the .CA ccTLD was of course not shielded from the liberalisation of trade practices that NAFTA espoused, and NAFTA became the law of Canada. As such, an interesting question exists as to whether CIRA's CPR are currently in accordance with NAFTA. From a review of Article 1204, supra, a foreign person that wants to offer services to Canadians must not be met with obstacles to trade, such as residency or maintenance of an office. This sounds an awfully lot like CIRA's CPR. Nevertheless, it may be argued that such a foreign person may offer services to Canadians freely, whether the foreign person has a .CA or not, since the foreign person is able to offer such services over the Internet from any number of TLD's, therefore no violation of Article 1204 in fact exists. Nevertheless, Article 1102 might then come into play, as this provision prohibits Canada from treating American or Mexican investors any differently than Canada treats its own investors, and the CPR does intentionally discriminate against non-Canadians.

Whether the CPR breaches provisions of NAFTA or not, the issue of the most appropriate approach to CIRA's mandate to help develop electronic commerce in Canada is a subject that deserves debate and discussion. There are good arguments on both sides of this issue, with all view points directed at helping to develop electronic commerce in Canada.

Enforcement

The issue of enforcing the CPR also deserves some attention. For any Canadian presence requirements to be effective, they must of course be enforced. When CIRA enacted its new Whois Policy on June 10, 2008, the ability of the Canadian Internet community to police the CPR nearly evaporated overnight. No longer would individual Canadian Internet users be able to see Whois details in most cases, and therefore would be unable to report violations of the CPR. This was an unintended consequence of the new Whois Policy, and unfortunately contributed to widespread violations of the CPR which could only be detected by CIRA's staff, with limited resources. Accordingly, any discussion of a review of the CPR must necessarily also involve how the Whois Policy operates to decrease enforcement and increase violations.

Furthermore, anecdotal evidence from .CA registrars and Canadian Internet users suggests that violations of the CPR are occurring on a massive scale, and go largely undetected. Unlawful .CA registrations are occurring as a result of individuals using fraudulent registration details, and also as a result of unlawful proxy services. The evidence of this is easily ascertainable on the Internet. Many users of these proxy services are even unaware that the proxy service is non-compliant with CIRA regulations and policies. Accordingly, I believe that any discussion of the CPR must necessarily also focus on the degree of effective enforcement available.

Disclaimer: I am running for election to the single public seat currently available on CIRA's 2010 Board of Directors. I would appreciate your support so that I can continue to raise issues of public importance for the betterment of CIRA and the Canadian Internet community. My campaign web site is http://zak-for-cira.ca/. You can read about by background at http://www.dnattorney.com.

By Zak Muscovitch, General Counsel, Internet Commerce Association

Related topics: Domain Names, Policy & Regulation, Registry Services, New TLDs

Comments

This article seems somewhat at odds with Kerry Brown  –  Sep 16, 2010 2:08 PM PDT

This article seems somewhat at odds with your nominee statement here:

https://elections.cira.ca/2010/finalslate/show/2797/en

Where you say:

“Chief amongst these issues, is I want to revisit the CANADIAN PRESENCE REQUIREMENTS. This is an outdated and archaic policy which has screwed Canadian domain name owners and scared away foreign investment.“ and “SIMPLE: GET RID OF THE CANADIAN PRESENCE REQUIREMENTS, or at least make them less stringent.”

I concluded from the nomination statement that you would prefer there was no Canadian presence requirement at all. You specifically singled out “CANADIAN PRESENCE REQUIREMENTS” as a key issue. You highlighted “SIMPLE: GET RID OF THE CANADIAN PRESENCE REQUIREMENTS” with capital letters. You use words like “archaic”, “screwed”, and “scared away”. From your nomination statement I concluded that if elected you would push for removal of the CPR. In this article you seem to have a different opinion in that a review is necessary but your preferred result is not the removal of the CPR. You support the CPR but believe it should be relaxed somehow. These two positions seem very different to me. Have you changed your opinion since you filed your nomination statement?

Thanks for bringing up this issue. It is an important issue that will affect all ccTLDs as new gTLDs come online. I don’t necessarily agree with your perspective on it but an open dialog now, before the new gTLDs are competing with ccTLDs is very useful. That is where I think the biggest issue with presence requirements for ccTLDs will come into play. My belief is a strong national identity will allow a ccTLD to remain relevant in a sea of competing TLDs. What is required to obtain that strong national identity is an interesting question worthy of much discussion.

Full Disclosure: I am a current director on the CIRA board. My term ends in September 2011. Any opinions stated here are my opinions alone. I am speaking as a private member of CIRA seeking information on whom to vote for in the upcoming election. I do not speak for CIRA or the CIRA board.

Hi Kerry!Thanks so much for your comment Zak Muscovitch  –  Sep 16, 2010 2:48 PM PDT

Hi Kerry!

Thanks so much for your comment and question. Nice to finally get a comment!!

To answer your question, since preparing the statement that you referred to, I have been campaigning for a seat on the Board and have had the great opportunity to consult with numerous CIRA members and stakeholders on this issue. I see the role of a candidate and director to both lead on issues, and to listen on issues. From these consultations, I have concluded that the consensus is that the Canadian Presence Requirements can be re-examined with a view to making them more equitable, while keeping intact the requirement for a strong nexus between the registrant and Canada. So, in the end, I support Canadian presence requirements, as an important feature of the .CA ccTLD registry, but believe that there is room to make some improvements, particularly in connection with Paragraph 2(d).

Just today, I got one of numerous emails that I receive, from small American and non-Canadian companies that want to do business with Canadians through a .CA domain name, in addition to their .com or other domain name. They realize that having a .CA is an important marketing tool, the same way as Expedia.ca, Amazon.ca, Travelocity.ca, and Ebay.ca, all have one. The solution for such non-Canadian businesses is to either get a trademark (impossible for a generic.ca in most cases) after a year or so of waiting, or incorporate a provincial Canadian company. All this takes for them to do is pay some fees and jump through some hoops. At the end of the day, such companies will get a .CA and do trade with Canadians if they want to. The question is then whether the current CPR, by allowing this, has somehow weakened the registry and not fulfilled CIRA's mandate by Industry Canada. I don't think that this has necessarily been the case. If the current practice has not been a problem, then perhaps there is an opportunity to re-examine this section of the CPR and see if there is a preferable test of 'Canadian Presence', to merely having what effectively amounts to a post office box. Trade in Canada seems like a more genuine yardstick and I think may actually strengthen Internet commerce in Canada, without weakening the identity of the registry.

I look forward to any dialogue on this issue as I think it is a very interesting one that is kind of 'existential' and goes to the root of CIRA's mandate. Thanks again Kerry!

Thanks for clarifying that Zak. One of Kerry Brown  –  Sep 16, 2010 4:36 PM PDT

Thanks for clarifying that Zak. One of the qualities of a good director is to listen with an open mind and be willing to change your mind at times. I look forward to meeting you at the CIRA AGM and discussing this further. This is a complex issue that has to be carefully considered. I agree with you that it is time to review it.

Position vs Interest Alex Tajirian  –  Sep 16, 2010 3:13 PM PDT

I am very interested in issues related to opening-up a ccTLD.

Zack’s post and Kerry’s comment are based on positions on the issue rather than addressing stakeholders’ interests. But whose interest and why? Should it be Canadians’, the Internet community’s, the managing registry’s, or …?

I am looking forward to learning from your insights. Thannks!

Identifying the stakeholders in an issue this Kerry Brown  –  Sep 16, 2010 4:54 PM PDT

Identifying the stakeholders in an issue this complex is always a hard task. Any decent review would spend considerable time figuring out who the stakeholders are before conducting the review. My initial opinion would be the stakeholders are (in no particular order) registrants, registrars, the Canadian public, and the Canadian government. There are many subgroups of each stakeholder in that group that would need to be considered but that would be my starting point.

Another great comment! Zak Muscovitch  –  Sep 16, 2010 3:35 PM PDT

Hi Alex,

Was a pleasure meeting you previously at DomainConvergence and I have enjoyed reading your articles on CircleID. Thanks for your great comment; the issue of what the driving interest should be, is indeed at the heart of this matter. I think that practically speaking, of course "all stakeholders" in the registry should have a say. But beyond this, I think we must look to Industry Canada's original mandate to CIRA for guidance. I realize that this mandate is 10 years old and is not divine inspiration, but its broad principles have held up really well and are as relevant today as they were 10 years ago IMHO.

I think that by examining the "Prime Directive" from Industry Canada(to borrow the term from great literature...), we can see that the objective of the .CA registry is fundamentally to operate the registry as "a key public resource, helping to promote the development of electronic commerce in Canada and important to our country's future social and economic development". This is a fine balancing act, that incorporates social as well as economic goals. I wrote a lengthy article on this subject recently, here.

So, to answer your question, CIRA's direction and operations should incorporate many interests, from all stakeholders ranging from registries to domain name owners to national interests, but the 'Prime Directive' is to develop electronic commerce in Canada and reach our country's aspirations as a society. This is fundamentally, the definition pf public interest, and I believe that the public interest as it applies to CIRA, and is paramount.

Strategic Asset Alex Tajirian  –  Sep 17, 2010 7:42 AM PDT

Can we think of .ca as a strategic country asset that should not be “outsourced”?

Hi Alex,Can you clarify what you mean Zak Muscovitch  –  Sep 17, 2010 8:04 AM PDT

Hi Alex,

Can you clarify what you mean a bit? I want to make sure i understand what you are getting at.

Zak

I am raising the possible similarity with Alex Tajirian  –  Sep 17, 2010 8:23 AM PDT

I am raising the possible similarity with the argument that companies should not outsource the development of their strategic assets, i.e., they should have control over production and ownership. For a ccTLD, outsourcing can be viewed as opening-up the ccTLD to the world, ie, not requiring country presence.

Hi Alex,Many thanks for your clarification. I Zak Muscovitch  –  Sep 17, 2010 9:49 AM PDT

Hi Alex,

Many thanks for your clarification. I hope that my views on Canadian presence requirements were made clear in the article, and insofar as comparing outsourcing of production to not requiring a Canadian presence, its a creative analogy, but I would need to be persuaded a little more as to its accuracy.

Australia not so different Jon Lawrence  –  Sep 19, 2010 11:09 PM PDT

Zak - you stated that "The United States and Australia permit registration by organizations, individuals and trademark holders who reside outside of the country but engage in activities within the country (such as trade, the buying and selling of goods or providing services to customers)." This is certainly true in the case of .us, but is not the case in .au. 

Foreign organisations can register in .au but only if they have registered with the Federal government and/or the Tax Office or if they hold an Australian Trademark.  That's not so different from what you've described for foreign organisations wishing to register in .ca

It is possible to work around the edge of the .au policies by registering a Business Name with one of the state Business Registration authorities, using a local agent, but this is of questionable legality as the registration of a Business Name comes with certain obligations.

You may be interested in following the regular review of the .au policy framework which has just kicked off.  You can follow developments here: http://www.auda.org.au/2010nnp/2010npp-index/

A different approach Zak Muscovitch  –  Sep 20, 2010 8:04 AM PDT

Hi Jon

Thanks so much for your comment!

I take your point that under the Australian system, there are hurdles to cross for foreign registrants, and in that sense the Australian system has similarities. I would however argue that under the Australian system, the registration by a foreign business is much more easily accomplished and a much lesser cost. Obtaining a license is arguably much less onerous than having to actually incorporate and maintain such a corporation for the sole purpose of obtaining a domain name registration.

But in any event, I think the main difference between Canada and Australia in terms of foreign registrations, is a hugely important one: Under the Australian policy, there is an actual category for foreign companies who wish to do business in Australia and obtain an Australian domain name. There is no such category under the Canadian rules. In fact, many who do not support any changes or review of the Canadian Presence Requirements even argue that .CA's should be for Canadians, period. Accordingly, there is a remarkable contrast in approaches and mentality. Under the Australian system, it is expressly contemplated that foreign businesses will want an Australian domain name, whereas under the Canadian policy, .CA domain names are reserved and intended to be for Canadians, exclusively. That is why in Canada, you won't find any advertising or promotion to foreign prospective registrants, like they do in Australia. For example;

http://www.passioncomputing.com.au/Domain-Names/Australian-domain-names/Australian-Domain-Name.aspx

As such, the Australian policy doesn't require that all registrants in fact be Australian, only that they have a qualified Australian presence. This is different than the Canadian policy. That is why I tried to make the point that a true Canadian presence is not contingent upon a mere post-office box as the trigger to becoming Canadian, but rather should mean a genuine activity in Canada, such as trading with Canadians, or perhaps, looking at the system used by another ccTLD, which enables foreign corporations to register a ccTLD.

I compared 12 ccTLD registries in a study and prepared a chart, here:

http://dnattorney.com/ccTLD-Foreign-Registration-Comparison-Study.doc

I can see from the link you provided, that the Australian registry appears to be undertaking a major policy consultation and review (http://www.auda.org.au/2010nnp/2010npp-index/). I would like to see that in Canada.

Thanks again for your good and interesting points.