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Re: [ga] Restructuring Proposal


I read your proposal with great interest. I agree with much of it, but it 
seems very weak on the issue that seems of greatest concern to ICANN right 
now: funding.

In light of all the reconsideration being given to ICANN's structure, and 
the concerns raised over funding, I think it would be instructive for all 
to review some of the same concerns I posted to Ira Magaziner and the NTIA 
in Oct., 1998 on the issues of funding ICANN and the dangers of allowing 
independent fiscal autonomy at ICANN. Although some of the actual language 
in the ICANN bylaws has changed since 1998, the basic issues remain the 
same: Who controls the purse strings? And who pays the costs?

That full text of that posting is included below. For my 1998 proposal to 
solve the problems of funding and control please see:


I think most of the recommendations made then continue to hold true today, 
and should be considered by the Evolution
and Reform Committee and by any others who have efforts underway to 
restructure ICANN as well.

Bill Semich
.NU Domain

From: "J. William Semich (NIC JWS7)" <bsemich@mail.nu>
To: NTIA.NTIAHQ(dnspolicy)
Date: 10/3/98 10:19pm
Subject: Lack of Fiscal Accountability in ICANN Proposal


Attached is my first set of comments on the ICANN proposal, in Word 97 format.

Thank you for the opportunity to present my concerns to the interested 
parties and stakeholders in this process.

J. William Semich (NIC JWS7)
President and Chief Financial Officer
.NU Domain Ltd

The New IANA-ICANN Bylaws: Who Controls the Money?
By J. William Semich

The latest set of proposed bylaws (version 5) for the New IANA (Internet 
Assigned Numbers Authority), released on September 29 at IANA's Web Site at 
http://www.iana.org, and currently posted as the ICANN Proposal at 
http://www.ntia.doc.gov/ntiahome/domainname/proposals/icann/icann.html is 
seriously flawed by its lack of fiscal accountability to all of us who will 
use its services and pay its fees.

If the bylaws are approved unchanged by the White House as the basis for 
the Internet's first independent governance mechanism, the new ICANN 
Internet Authority would be able to set a wide range of Internet-related 
fees of any amount without constraint, float bonds of any amount which must 
be funded by future revenues, as well as collect additional fees of any 
amount to invest for undefined possible future needs, all such to be paid 
for by you, me and our children, the Internet's users of today and 
tomorrow, without their review, approval or control.

The new version of the proposed bylaws for the new Internet Authority was 
submitted on October 2, 1998 to Ira Magaziner of the White House and the 
Department of Commerce's NTIA, under the terms of the White House "White 
Paper" released last June, to create the replacement for the US 
Government's current contractual arrangement for management of the 
Internet, which is set to expire on Sept. 30, 1998.

But the new bylaws are completely devoid of any provisions to create any 
type of fiscal accountability for this, the Internet's first all-powerful, 
government-sanctioned independent Authority.

Although the new bylaws make it clear that the source of the new Internet 
Authority's revenues will be the Internet's end users and service 
providers, it leaves all spending, borrowing, investment and other 
financial decision-making solely in the hands of the Corporation's board of 
directors, who's members specifically ''have the duty to act in … the best 
interests of the Corporation and not as representatives of their Supporting 
Organizations, employers or any other organizations or constituencies." 
(Article V, Section 8)

Nowhere in the bylaws is the Board of Directors required to consult with 
any outside groups, experts, or other interested parties on how best to set 
its fees or plan its budget.

Nowhere in the bylaws is there any provision for any kind of independent 
budget review or hearing mechanism or approval process for the budget, 
borrowing, or any other fiscal decisions;

And nowhere in the bylaws is there any provision for any kind of 
independent fee-setting review process or approval mechanism, either by 
those who must pay the fees (the Supporting Organizations, who represent 
the consumers of the services to be provided by the new Corporation) or by 
any independent body of fiscal experts.

All these fiscal decisions are made solely by the new Internet Authority's 
own Board of Directors.

The relevant language in the proposed new bylaws makes this absolute power 
of the Board clear:

FIRST, it gives the board absolute control over any spending or borrowing 

"Article IV, Section 1 (a)
…the powers of the Corporation will be exercised, its property controlled 
and its business and affairs conducted by or under the direction of the 

SECOND, it gives the board absolute control over the fee setting decisions:

"Article IV, Section 2. FEES AND CHARGES
The Board shall set fees and charges for the services, rights and benefits 
provided by the Corporation to the Supporting Organizations and others, 
with the goal of fully recovering the reasonable costs of the operation of 
the Corporation and establishing reasonable reserves for future expenses 
and contingencies reasonably related to the legitimate activities of the 

And THIRD, it gives the Board the sole authority and absolute control over 
setting its annual budget, with no requirement that it actually meet that 
budget or that the budget pass any kind of review process, all this in one 
simple line of the new Bylaws:

"Article V, Section 25. ANNUAL BUDGET
The Board shall prepare an annual budget, which shall be published on the 
Web Site."

These three phrases are the total extent of any language in the new bylaws 
that might be construed as setting ANY spending, fee setting and raising, 
budgeting, borrowing, investing or any other fiscal constraints on the 
board of an Internet Authority which will be the primary manager of the 
single most important communications resource in the world.

Such an all-powerful and fiscally unaccountable organization as would be 
created by the new bylaws is a classic textbook "Authority" in its 
structure, and that is the crux of my problem with the "final" set of IANA 
bylaws released on Sept. 29.

Look closely at any publicly-funded independent Authority in the US and you 
will find a self-perpetuating, quasi-governmental organization whose 
spending decisions can not be challenged, who spends the public's money 
like water, who has all the power over its particular area of activity, but 
no accountability to the public.

In the present case of the bylaws for the new Internet Authority, there is 
minimal accountability for its policy decisions, and that is cause enough 
for concern.

But there is NO accountability for its borrowing, spending and fee structure.

There needs to be some kind of mechanism in the new entity that will create 
a counter-force to the typical Authority's inevitable desire to grow and to 
spend more and more money and increase its sway in the world (remember, the 
margins in this business are huge. A big budget can "look" small when the 
margin is in the double digits) .

The counter-force to spending increases could be a "budget review 
committee" solely comprised of the groups that will fund the new Internet 
Authority. Or it could be a Finance Committee made up of independent, 
world-renowned fiscal experts who have no vested interest in the new 
Internet Authority or the Internet per se. Or it could be a committee of 
government finance experts with experience bringing public spending into 
line. Or it could be some combination of the above.

It would be a real tragedy if, in its first efforts at self-government, the 
Internet community were to hand over management of the Internet to yet 
another quasi-public Authority, perhaps best defined in an article I 
co-authored nearly ten years ago:

"Authorities constitute a permanent, expansionist government, collecting 
and spending more and more public money, running up more and more public 
debt, and making more and more critical decisions on the public's behalf 
with each passing day. And because authorities do all this out of site - 
and beyond the control - of the general public, they constitute, finally, a 
Shadow Government."

"Inside the Shadow Government," by John Strahinich and J. William Semich, 
cover article, Boston Magazine, November, 1989.

At 02:34 PM 3/23/2002, DannyYounger@cs.com wrote:
>I have prepared a restructuring proposal for consideration by the Evolution
>and Reform Committee.  The document is posted at
>Best regards,
>Danny Younger
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