01.29.2015 0

John Thune’s education on the free and open Internet


By Robert Romano

“Last year the Administration announced it wants to give up oversight of Internet Corporation for Assigned Names and Numbers (ICANN) and the Internet Assigned Numbers Authority (IANA) contract. If this transition is going to happen, it has to be done very carefully. We have to focus on ensuring that the Internet will remain open, stable, and secure.”

That was new Senate Commerce Committee Chairman John Thune (R-S.D.) speaking at the American Enterprise Institute on January 28, all but conceding that the Internet stewardship transition — a function performed by the U.S. Commerce Department since 1998 — to ICANN is a done deal.

The only thing left to decide, apparently, are the details of the transfer, including a need “to urge ICANN to implement accountability reforms as part of the IANA transition process.”

Said Thune, “If these goals cannot be met, the Administration should simply renew the IANA contract indefinitely.”

Certainly, the contract — which has ensured a free and open Internet for almost 17 years — should be renewed. For, once the authority is transferred, creating a global Internet governance monopoly, there will be no legal cause of action against the Commerce Department should any Internet censorship occur. In a 2005 ruling by the U.S. Ninth Circuit Court of Appeals, McNeil v. Verisign, it was held that no First Amendment claims can be brought against ICANN — because ICANN is not a government actor.

Therefore the only way to truly ensure that Internet governance remains “open, stable, and secure” is for the Department to maintain its oversight via the contract with ICANN and with any successor contractor.

Thune said he intends to hold a hearing in February to discuss the proposed transition with Department of Commerce Assistant Secretary Larry Strickling and ICANN CEO Fadi Chehade.

Yet, a better approach for Congress might be to question why the Commerce Department’s National Telecommunications and Information Administration (NTIA) believes it can legally perform the transfer in the first place.

Particularly since the omnibus appropriations bill for Fiscal Year 2015 — which Thune voted in favor of — contains an explicit provision prohibiting the Department from performing the transition: “None of the funds made available by this Act may be used to relinquish the responsibility of the National Telecommunications and Information Administration during fiscal year 2015 with respect to Internet domain name system functions, including responsibility with respect to the authoritative root zone file and the Internet Assigned Numbers Authority functions.”

What authority?

In fact, whether NTIA has the legal authority to transition key Internet domain name and Internet Protocol address functions has been the key controversy facing Congress and all advocates of a free and open Internet for almost a year now.

On March 25, 2014, Rep. Blake Farenthold (R-Texas) and Rep. Darrell Issa (R-Calif.) issued a letter to NTIA’s Strickling regarding the agency’s March 14, 2014 announcement of its intention to transition Internet governance to ICANN and the global multistakeholder community. The letter specifically asked Strickling, “Does the executive branch have unilateral authority to transfer control over the Internet addresses and root zone management of domains?”

As it turns out, Issa and Farenthold actually received a reply from Strickling on April 28, 2014 recently obtained by Americans for Limited Government. In it, Strickling stated: “NTIA’s announcement marks the final phase of privatization of the Internet domain name system (DNS) first outlined by the U.S. Government in 1998 after broad consultation with stakeholders in the development of Statement of Policy,” referring to the so-called “White Paper” published by the Clinton Administration June 10, 1998.

Strickling added, “Our action is fully consistent with the 2012 resolution, H.Con.Res.127, that called on the United States to continue to support a global Internet free from government control and to preserve and advance the successful multistakeholder model that governs the Internet.”

On the specific question of legal authority, Strickling wrote: “In 2000, NTIA did not contract with ICANN to procure the IANA functions services as an assertion of ‘control’ over the Internet DNS. Rather NTIA contracted with ICANN as a temporary measure to carry out the government’s policy to allow the private sector to take leadership for management of the Internet DNS. By performing the IANA functions in a competent manner for almost a decade and half, ICANN has established itself in this role and there is no longer a need to maintain a government contract designating it to perform these functions. Just as federal agencies can enter into contracts they need to fulfill their missions without specific legislative authority, federal agencies can discontinue obtaining services when they no longer need them. As NTIA made clear at the time of its Statement of Policy, it intended only to procure the IANA functions services until such time as the transition to private sector management of the Internet DNS was complete.”

Finally, in a footnote Strickling stated referencing a 2000 then-General Accounting Office (GAO) report on the potential need for legislative action in this area: “GAO’s discussion about the need for legislative authority to transfer government property does not concern the provision of the IANA functions under contract since no government property or assets are involved in the contract.”

‘No government property or assets are involved’?

There’s only one problem. Although Strickling claimed in the letter that “no government property or assets are involved in the contract,” Strickling clearly mischaracterized the current October 1, 2012 NTIA contract with ICANN explicitly, which states that “All deliverables under this contract become the property of the U.S. Government.”

Deliverables under the contract include “technical requirements for each corresponding IANA function,” “performance standards in collaboration with all interested and affected parties … for each of the IANA functions,” and “a fully automated root zone management system … [that] must, at a minimum, include a secure (encrypted) system for customer communications; an automated provisioning protocol allowing customers to manage their interactions with the root zone management system; an online database of change requests and subsequent actions whereby each customer can see a record of their historic requests and maintain visibility into the progress of their current requests; and a test system, which customers can use to meet the technical requirements for a change request; an internal interface for secure communications between the IANA Functions Operator; the Administrator, and the Root Zone Maintainer,” among other items.

Further, ICANN collects annual revenues of more than $300 million, making fulfillment of the IANA functions a property of real value.

Article 4, Section 3 of the U.S. Constitution states that only “The Congress shall have power to dispose of … property belonging to the United States.”

It therefore follows that NTIA cannot perform the transfer of the IANA functions to ICANN without a vote in Congress, or some other authorizing statute, for example perhaps 40. U.S.C., Chapter 5, Subchapter III, “Disposing of property.” More on that in a moment.

In addition, the IANA itself reverts to the Commerce Department upon termination of the contract: “the Government may terminate the contract for default.” The contract even provides for the possibility of IANA being performed by another entity: “In the event the Government selects a successor contractor, the Contractor shall have a plan in place for transitioning each of the IANA functions to ensure an orderly transition while maintaining continuity and security of operations.” These provisions further indicate that upon conclusion of the contract on Sept. 30, 2015, the Commerce Department remains in possession of the IANA functions.

‘An executive agency shall not dispose of property to a private interest’

As noted above, in Strickling’s letter to Rep. Issa, he explicitly denied that there was any property or assets involved in the transfer of the IANA functions to ICANN: “the need for legislative authority to transfer government property does not concern the provision of the IANA functions under contract since no government property or assets are involved in the contract.” This despite the fact the contract, explicitly states, “All deliverables under this contract become the property of the U.S. Government.”

A potential reason to deny this might be because then it might fall under an onerous process for disposing of property under the federal law.

The disadvantage to NTIA and ICANN would be that the IANA functions might have to come up for competitive bid.

Or if a negotiated sale, it would have to done at “fair market value”: “the sale must be publicized to an extent consistent with the value and nature of the property involved and the price established must reflect the estimated fair market value of the property.”

Since ICANN is an entity that does $300 million a year of revenue, the fair market value of the IANA functions — we’re talking about a global monopoly for allocation of an unlimited number of IP addresses, domain names, and top-level domain names — should be worth billions.

Or, if disposal were to occur through a contract broker, “wide public notice of the availability of the property for disposal” would be required. Yet, no such notice has been given.

But perhaps most critically, if Strickling were to acknowledge there is property at stake, the disposal of such property to a private interest could invoke antitrust.

Specifically, the law states: “An executive agency shall not dispose of property to a private interest until the agency has received the advice of the Attorney General on whether the disposal to a private interest would tend to create or maintain a situation inconsistent with antitrust law.” Since Strickling’s position is that there is no property involved, NTIA would not have sought the Attorney General’s advice the disposal of property to a private interest prior to the March 2014 announcement.

Antitrust law challenges to IANA functions administrator were anticipated by the Clinton administration in the 1998 statement of policy: “Several commenters suggested that the U.S. Government should provide full antitrust immunity or indemnification for the new corporation. Others noted that potential antitrust liability would provide an important safeguard against institutional inflexibility and abuses of power.”

To which, NTIA responded, saying it would seek no such immunity for the corporation and that antitrust would actually help keep the corporation in line: “Applicable antitrust law will provide accountability to and protection for the international Internet community. Legal challenges and lawsuits can be expected within the normal course of business for any enterprise and the new corporation should anticipate this reality.”

Originally in 1998, antitrust protections like the aforementioned were supposed to keep ICANN in check to prevent a global monopoly over Internet governance from being created. But Strickling neatly sidesteps the potential legal issue by simply asserting that there is no property at stake — even though the contract says there is. Curious.

Strickling cites 1998 non-binding policy statement and a concurrent resolution

As mentioned before, Strickling’s letter also cited the 1998 Statement of Policy by the Clinton Administration, and H.Con.Res. 127, as backing up the March 14, 2014 decision to transfer the IANA functions to the private sector.

However, the 1998 Statement of Policy clearly states, “This general statement of policy is not subject to the delay in effective date required of substantive rules under 5 U.S.C. Sec. 553(d). It does not contain mandatory provisions and does not itself have the force and effect of law.”

“Statements of policy” are non-binding under the Administrative Procedures Act, and not subject to the same, rigorous notice and comment periods that binding regulations are.

As for H.Con.Res. 127, that was a non-binding concurrent resolution in favor of continuing the multistakeholder process. But it only ever passed the House of Representatives, and even if it had passed the Senate, still would have provided no legal basis authorizing the Commerce Department to transition the IANA functions to ICANN.

No ‘specific legislative authority’?

Finally, Strickling wrote, “Just as federal agencies can enter into contracts they need to fulfill their missions without specific legislative authority, federal agencies can discontinue obtaining services when they no longer need them.”

So, by Stricking’s own words, the agency has been acting “without specific legislative authority” the whole time. Instead, it views the contract as simply executing a non-binding policy statement from the Clinton Administration from 1998.

That might call into question the legitimacy of the contract itself, let alone the act of the Commerce Department transferring the assets and property involved in the contract to a private entity.

Fortunately for Strickling, the originally stated legal basis for the agency entering into the contract in the first place, according to the aforementioned 2000 GAO report, “stems from [the Commerce Department’s] broad general authority to foster, promote, and develop foreign and domestic commerce, 15 U.S.C. § 1512, as well as the National Telecommunications and Information Administration’s specific authority to coordinate the telecommunications activities of the executive branch, 47 U.S.C. § 902(b)(2)(H).”

And yet, under those terms, because the contract defines property rights to the U.S. government, that merely means the Commerce Department can end its contract with ICANN or choose another contractor, but not give the asset away. That is, not without a vote in Congress. That would be theft.

All of which bring us back to Thune. Congress has asserted itself on this issue just a month ago in a bill that President Barack Obama signed into law, explicitly prohibiting the Commerce Department from performing the Internet governance transfer this fiscal year. Perhaps these critical matters will come up in Thune’s February hearing. They should.

For not only is the constitutional separation of powers at stake, but so too is the fate of the free and open Internet. If Thune is truly committed to protecting Internet freedom, then he should unequivocally tell the Commerce Department that there will be no Congressional authorization for the transfer and then provide explicit instructions that the agency renew the contract.

Robert Romano is the senior editor of Americans for Limited Government.

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