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ICANN running out of money

The corporation chosen to manage the Net's domain name addressing system is in dire financial straits, and its control of the Net's technical underpinnings is in danger of being derailed.

If the new nonprofit corporation chosen to manage the Net's vital addressing system had a nickel for every complaint it has generated, its coffers would be overflowing.

Unfortunately for the Internet Corporation for Assigned Names and Numbers (ICANN), that isn't the case. The body is running out of cash.

"ICANN can't do anything if it's broke, which we are," ICANN's interim president Mike Roberts told CNET News.com today.

ICANN's projected budget is $5.9 million for the fiscal year that began July 1. Its projected expenses are $4.2 million. Right now, however, ICANN has less than $100,000 in the bank and bills are going unpaid, Roberts said.

ICANN is a nonprofit corporation recognized by the Commerce Department in November to implement a Clinton administration white paper that aims to loosen Network Solutions' grip on the billion-dollar domain name registration market and privatize maintenance of the Net's address system. Under an evolving government contract, NSI has been the sole registrar for names ending in ".com," ".net," and ".org" for the past six years.

After just seven months in operation, however, ICANN's existence is in grave danger. The corporation's dire financial situation could not only lead to its demise but also could derail the historical transition of control of the Net's technical underpinnings, which are critical in allowing any computer or Web site to go live on the global network.

While there is an ongoing, heated debate over the breadth of ICANN's power, the fact remains that the U.S. government has turned to the body to sort out a labyrinth of complicated issues. The body is expected to do everything from ensuring that the Net's domain name system is not disrupted and can handle the surge in demand triggered by e-commerce, to resolving disputes over the ownership of certain names.

The U.S. government's desire to let go of the reins over the DNS hinges on the private sector stepping up to the plate to run and fund the administration of the system.

ICANN was anointed to lead this process, but operating the corporation isn't cheap.

"We have costs from outreach around the globe and very extensive legal fees," Roberts said. "There is over $100,000 due in unpaid travel reimbursement dating back to March."

In an effort to ameliorate the problem, ICANN is on an impromptu road show to raise money. For instance, Roberts and ICANN's lawyer Joe Sims met with a group of about two dozen industry executives and trade group representatives last week in Washington to discuss the body's progress, and the conversation ultimately turned to funding.

Initially, the corporate sector kicked in about $500,000 for ICANN's start-up fund, which was principally raised by the Global Internet Project, whose 13 members include AT&T Worldnet, Netscape Communications, and IBM.

But countless other stakeholders whose Net names are their primary storefront or marketing vehicle have yet to step forward to support ICANN, which could be due to a lack of understanding of what the corporation is doing, observers say.

"It's very difficult to get companies to care about this--it's like having companies get involved in setting up the new Department of Motor Vehicles when naturally they just want someone else to deal with it," said Barbara Dooley, president of ISP trade group the Commercial Internet Exchange, which is working with ICANN.

"To fail because of politics would be one thing, but to fail because of money would be a catastrophe," she added. "The alternative is for some intergovernmental model to be put in place, which would be a lot less robust than letting the private sector lead."

Further compounding the problem is NSI's refusal to sign an accreditation agreement with ICANN. Under the agreement, NSI would promise to comply with numerous terms and conditions to operate as a registrar as well as concede to pay the nonprofit $1 for each Net name it registers to offset ICANN's administrative costs. NSI has refused, because executives say it would interfere with the company's control over its business.

The five initial competing registrars chosen to test NSI's shared registration system, along with 52 other companies that are expected to eventually tap in, have already singed the agreement--but so far only two test-bed registrars are up and running and began paying the fee July 1.

Still, what ICANN really needs is a piece of NSI's pie--the company already has registered more than 5 million names and is expected to keep a healthy portion of its market share even in the face of new competition, analysts have predicted. Nonetheless, NSI is the first to say ICANN shouldn't count on it to pull the nonprofit out of the hole.

"We have a serious problem with the funding of an unelected body," said NSI spokesman Brian O'Shaughnessy. "It was never contemplated in the administration's white paper that there would be a $1 tax--this was decided in secret by this unelected interim ICANN board."

NSI isn't the only one harping on the implementation of the $1 fee. House Commerce Committee chairman Thomas Bliley (R-Virginia) last month sent a letter to ICANN and Secretary of Commerce William Daley announcing that he will hold hearings to explore ICANN's authority and stating that he was "greatly concerned" about the fee. ICANN has until Tuesday to respond to the letter.

Although the white paper didn't mention a specific fee, both NSI and ICANN have agreed to the terms laid out in the White House's Statement of Policy, which says that "once established, the new corporation [i.e. ICANN] could be funded by domain name registries, regional IP registries, or other entities identified by the board."