29 September 2014

Domain Names Industry, ICANN, Regulatory Capture

"ICANN has been largely captured by the [domain] names industry"

What is "capture?"

Regulatory Capture: definitions--
Regulatory capture - Wikipedia"Regulatory capture is a form of political corruption that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure [or Internet governance failure in the case of ICANN]; it creates an opening for firms to behave in ways injurious to the public (e.g., producing negative externalities). The agencies are called "captured agencies"."

Regulatory Capture Definition | Investopedia"Regulatory capture is a theory associated with George Stigler, a Nobel laureate economist. It is the process by which regulatory agencies eventually come to be dominated by the very industries they were charged with regulating. Regulatory capture happens when a regulatory agency, formed to act in the public's interest, eventually acts in ways that benefit the industry it is supposed to be regulating, rather than the public."

"... regulatory capture occurs because groups or individuals with a high-stakes interest [ICANN's high-stakes stakeholders--e.g., Registries, Registrars, and Registry service providers] in the outcome of policy or regulatory decisions can be expected to focus their resources and energies in attempting to gain the policy outcomes they prefer, while members of the public, each with only a tiny individual stake in the outcome, will ignore it altogether.[1] Regulatory capture refers to the actions by interest groups when this imbalance of focused resources devoted to a particular policy outcome is successful at "capturing" influence with the staff or commission members [i.e., ICANN groups, committees, Board of Directors] of the regulatory agency [ICANN], so that the preferred policy outcomes of the special interest groups are implemented..." (source: Wikipedia, supra)

Regulatory economics - Wikipedia: "... Countering, overriding, or bypassing regulation is Regulatory Capture where a regulatory agency created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the industry that the agency is charged with regulating. The probability of regulatory capture is economically biased, in that vested interests in an industry have the greatest financial stake in regulatory activity and are more likely to be motivated to influence the regulatory body than dispersed individual consumers, each of whom has little particular incentive to try to influence regulators. Thus the likelihood of regulatory capture is a risk to which an agency is exposed by its very nature..."

This is a well-known flaw at the heart of multistakeholderism. To paraphrase George Orwell, within ICANN, all stakeholders are equal, but some are more equal than others. ICANN's high-stakes stakeholders with vested interests--e.g., domain name registry operators, service providers, and registrars--have "captured" the organization, dominate its decision-making, policies and outcomes, Board of Directors, and are generally over-represented throughout its organizational structure. The most effective counter to powerful commercial vested interests are governments, but in the case of ICANN, governments are relegated to an advisory capacity except for the United States government which still holds "ultimate power and authority" by virtue of its agreements and contracts with ICANN. As for domain name registrants, who are the actual customers or consumers of domain names (and who pay a fee to ICANN included as part of the registration fee for each domain name), they have almost no representation within ICANN--there is no "Registrants Group" within the ICANN structure (unlike the multiple groups who represent registries (one for gTLDs, one for ccTLDs, etc.) and registrars. Unsurprisingly, ICANN's record of protecting domain name registrants from price-gouging and other abusive registry and registrar practices is almost non-existent. So much for the multistakeholder model of Internet governance as practiced by ICANN.

A good example of  ICANN's capture by the Domain Names Industry is ICANN's new gTLDs program where ICANN, ridden with conflicts of interest at its highest levels, subverted the wider public interest in favor of the high-stakes stakeholders' interests--

Ethics Fight Over Domain Names Intensifies - New York Times  March 18, 2012: "The Commerce Department ...warned the organization [ICANN] that it needed to tighten its rules against conflicts of interest or risk losing a central role.... ICANN has come under heightened scrutiny because of an initiative to increase vastly the number and variety of available Internet addresses. Under the plan, which ICANN is putting into effect, hundreds of new “top-level domains” — the letters like “com” that follow the “dot” in addresses — are set to be created. Some business groups say the expansion of domains will cause a rise in trademark violations and cybersquatting, while some governments object to Icann’s move to create address suffixes like .xxx, for pornography. But the initiative has been cheered by companies that register and maintain Internet addresses. A number of current and former members of the ICANN board have close ties to such registrars or to concerns involved in other areas that stand to benefit from the expansion... [Rod] Beckstrom [former ICANN Chairman]... “... all [ICANN] top leadership is from the very domain-name industry it is supposed to coordinate independently... “A more subtle but related risk is the tangle of conflicting agendas within the board...”... the United States government is also dissatisfied with ICANN. The Commerce Department said it had canceled a request for proposals to run the so-called Internet Assigned Numbers Authority because none of the bids met its requirements: “the need for structural separation of policy-making from implementation, a robust companywide conflict of interest policy, provisions reflecting heightened respect for local country laws and a series of consultation and reporting requirements to increase transparency and accountability to the international community.” Eyebrows were raised last year when Peter Dengate Thrush, former chairman of ICANN and a fan of the domain name expansion, joined a company that invests in domain names. [Read more at the link above--a version of this article appeared in print on March 19, 2012, on page B6 of the New York edition with the headline: Ethics Fight Over Domain Names Intensifies.]

See also:

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