COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 20.02.1998

COM(1998) 111 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL

INTERNATIONAL POLICY ISSUES RELATED TO INTERNET GOVERNANCE

INTRODUCTION

The Internet is rapidly becoming the principal infrastructure for electronic communications of all kinds including electronic commerce (6). The extremely rapid expansion of the Internet in recent years is expected to continue, particularly in Europe where current growth rates imply that Internet usage is doubling each year. The Internet will deeply influence many areas of human activity such as education, culture and every day life.

The Internet is rapidly becoming an indispensable method for information provision, and marketing and selling of services and products on-line. In January 1998 there were about 107 million Internet users world wide and about 30 million servers. (7).

The Internet has historically, inter alia, grown from of the efforts of the US Government to set up an advanced data communications infrastructure for the purposes of national security and research. Its current management is carried out under contract to various US agencies, among which the Defence Advanced Research Project, Agency (DARPA), the National Science Foundation (NSF).

The technical management functions of Internet are, in some respects, similar to those of the current global telephony network i.e. like phones, computer web sites are assigned numbers. In addition however, there is a technical mapping of names upon the numbers in order to facilitate user-friendliness. As an example, the web-site of the European institutions is htttp://wwweuropa.eu.intl, a name which is mapped to a uniquely assigned number. It is anticipated that in the future, also individual terminals will required Internet numerical numbers so as to enable their integration in the Internet environment (E.g. mobile multimedia terminals for use with UMTS). Access to Internet numbers and names will thus become of essential importance.

The management of both these number ranges, the names and their domains (e.g. toplevel domains COM, NET, ORG) is becoming of the highest commercial, even strategic, interest. Access to numbers, but in particular to names, will determine the visibility of enterprises on the Internet. This visibility is of vital importance in attracting customers and thus for electronic commerce.

The European Community and the Member States have an abiding interest in the future organisation and management of the Internet because the structures that are put in place will strongly influence the highest level of decision, the extent to which all areas of the world - including Europe - have fair andequitable access to the Internet, the introduction of competition in those areas - such as the allocation of Domain Names where this would be beneficial, and ultimately determine' the general efficiency and economy of the Internet through responsibility for and control of essential co-ordination between the respective Internet bodies.

Within the US Government, this matter is dealt with at the highest political levels and the US Administration under the auspices of the White House and the Department of Commerce, has now published a draft plan in the form of a Green Paper, for the future organisation of the Internet.

The major issues which arise in this context are an effective illustration of the need for an international framework, as has been set out in the recent Communication on "Globalisation and the Information Society: the Need for Strenghtened Internatiornal Cooperation" (8). Furthermore, the underlying principles of international governance of the Domain Name System were expressed in the Bonn Declaration (9) and in the EU-US Declaration on Electronic Commerce (10).

In view of the Community policy issues, it is the intention of the Commission to provide the US Government with a written response to the proposals contained in their Green Paper.

THE ISSUES

Although the bulk of the Internet functions as a highly distributed and dis-aggregated medium, there are a few central critical functions upon which all the rest depends.

These are:

- to assign blocks of numerical addresses to regional registries;

- manage the root of the domain name system and the creation of new top level domain names, and

- manage the allocation of a variety of Internet protocol parameters.

These activities must be done in a centralised fashion with the advice and consent of the Internet Community, however their organisation and management is currently still based on the informal and voluntary structures which evolved during the period where the Internet was much smaller and primarily used by the academic and research community. Indeed, these structures are no longer appropriate to the size, growth rate and contemporary use of the Internet and it has been recognised for some time that the current arrangements would shortly come to an end.

The US Administration's, contrarcts with IANA (11) for the assignment of numerical addresses and with NSI lnc. (12) for the management of the existing generic Top Level Domains will expire during 1998 and will not be renewed. The Internet community (particularly the Internet Society, ISOC) set up an ad hoc committee (13) in 1996 to study the problem of the Internetnaming system (DNS (14)).

The United States Administration's Green Paper is a discussion draft which is open for public comment for a period of thirty days following publication in the Federal Register on 18 February 1998. It addresses technical management of Internet Names and Addresses, and proposes several basic decisions regarding how the Internet would be managed in the future. The document sets out the co-ordinated functions of the Internet, which would in future become the responsibility of a new private corporation which would take over the responsibilities of the Internet Assigned Numbers Authority, and distinguishes certain competitive functions, inc luding the business of registering Internet names. However the Green Paper goes further and makes specific proposals for the licensing of a limited number of new Registries to be undertaken by US industry. The Green Paper also enters into the trademark and dispute resolution area and in so doing seems to seek exclusive United States jurisdiction over the Internet.

In the view of the Commission however, the globalisation of the Internet and the importance of an international framework for the long-term organisation of the Internet underlies the need to associate a wide range of international interests with future policy in this area.

Several inter-related policy issues arise in this context:

- International Approach:

The principal objection to the actual proposals of the US Green paper is the lack of recognition for the need, and practical implementation, of an internationally coordinated approach as advocated by the Commission in its recent Communication on Globalisation and the Information Society (15).

- Jurisdiction (16):

The current US proposals, could in the name of the globalisation and privatisation of the Internet, consolidate permanent US Jurisdiction over the Internet as a whole, including dispute resolution and trademarks used on the Internet.

- Participation:

It will be necessary to take steps to ensure that the private sector in Europe including users and industry fully participates at all relevant levels in the process.

- Dispute Resolution and Trademarks:

In addition to the risk of US jurisdiction over all Internet trademark disputes, there is a problem regarding the dispute resolution procedures themselves. During the course of 1997 intensive international efforts were undertaken in the preparation of a new dispute resolution procedure for the Internet within the framework of the WIPO. The US Green Paper makes no reference to the results of this international approach but however envisages a separate dispute resolution procedure foreach of the Internet Registries, and a new "study".

- Competition policy aspects:

The reorganisation of the Internet management bodies raises several competition policy issues:

* it would appear that IANA would for practical purposes occupy a natural monopoly position with respect to Internet numbers and the Root servers as well as exercise certain regulatory functions. The extent to which it would be indemnified from anti-trust suits is not clear and is probably not adequately codified from the point of view of European competition law.

* the US proposals for structural separation of Registry/Database and Registrar activities within NSI, appear not to go far enough to ensure a level playing field and fair competition particularly as the alternative CORE system may not be allowed to create effective competition for NSI in the short term.

- Portability and Scaleability:

By analogy with the system of telephone numbering, it would be highly desirable if in the future, the Internet Domain Name System could both permit portability of Internet names and addresses between Registrars, and that the structure of the name-space would permit expansion of the number of names that can be accommodated in the long term. The question is whether the Internet address space as a whole will be able to expand to accommodate continued rapid growth in the number of users. This issue needs to be addressed.

- The selection of new Registries for the generic Top Level Domains (gTLD's):

During 1997 a new system of gTLD Registries was proposed by the IAHC, modified on the basis of international consultations including recommendations from the Commission and implementation is now well advanced. This new system involves a Policy Oversight Committee (POC) which is the governing body; a Council of Registrars (CORE) which is a not-for-profit association of member Registrars which manages a shared data base for seven new gTLDs. Eighty eight member Registrars have joined this system, including 35 in the EU. Many thousands of new Domain Names have already been applied for within this system. The Draft US Proposals make no reference to this system.

APPROACH TO RE TAKEN

It is essential for the European Union to participate fully in the decisions which will determine the future international governance of the Internet on the basis of the general objectives set out in the recent Commission proposals for increased international cooperation on global communications policy, and on the basis of the following specific objectives:

- balanced and equitable international private sectorparticipation in Internet governance reflecting an equitable balance of interests and contributions; including adequate procedures for the representation of consumer and user interests,

- ensuring an appropriate level of representation and participation for the responsible international organisations in this area in the context of a more general approach to the international consensus regarding the regulation of the information and communication industries world-wide;

- implementation of the existing guidelines regarding the Domain Name System (DNS) adopted by the Bonn Conference (17), including the introduction of competition in the allocation of existing generic Top Level Domains and conformance with agreed intellectual property and dispute resolution procedures;

- apply the appropriate competition rules, and especially the competition provisions of the EC Treaty and EEA Agreement, to ensure in particular that the transition to the new structures does not create or strengthen dominant positions of companies and organisations charged with the governance of the Internet nor that any agreements or practices amongst those companies and organisations prevent, restrict or distort competition within the EU/EEA;.

- ensuring transparency and certainty of the DNS with a view of the orderly administration of taxation and the need to combat fraud;

- fair and transparent financing of Internet organisations including equitable allocation and utilisation of the existing Internet Infrastructure Development Fund;

- in the context of the re-allocation of the DNS Root Servers, to attend to their management and operation and particularly how to improve operational security of the system in the event of partial failure, including which data should be distributed and replicated globally to this effect;

- periodic review and up-dating of the arrangements which are put in place.

RECOMMENDED COURSE OF ACTION

In the first instance and without prejudice to the division of competence between the Community and its Member States; the Commission recommends that a joint reply of the European Community and the Member States will be transmitted to the US Administration. The US Administration has indicated that they are prepared to take into consideration all comments and contributions and - if a consensus does not ensue - to revise their proposals.

It should be noted that the Commission addressed several communications and comments to the US Administration about these matters during the course of 1997 in which the essential European interests in this context were explained.

In parallel, the Commission will continue their consultations with the interested private sector participants in Europe. The Commission will also exchange information in this regard with other interested public authorities about the envisaged approach to these US proposals.

It will be necessary to ensure that the responsibilities of the public authorities towards society and the economy at large are effectively linked to the functions of any industryled self-regulatory bodies. The development of an international Internet instrument may be needed which would in the first instance:

define the powers and responsibilities of international self-regulatory bodies, determine certain jurisdictional issues, and codify the conditions under which public authorities would refrain from regulating the corresponding activities directly.

Such an instrument would also be in the interest of industry because it would contribute to the development of a harmonious and open global regulatory environment, world wide and thus facilitate electronic communications of all kinds. At first, it would not necessarily concern all public authorities, but it should be open to adhesion by those governments and international organisations which wished to do so.

The Council is requested to take note of:

(1) the fact that a variety of inter-related Community policy issues Internet governance, notably telecommunications policy, competition policy, trade policy, and internal market policy;

(2) the need to ensure EU participation in an international approach with regard to Iternet governance and, in particular, this illustration of the need for strengthened international communications policy as recently set out in the Communication on Globalisation and Information Society.

(3) the underlying principles of international governance of the Domain Name System as set out in the Bonn Declaration (18) and in the EU-US Declaration on Electronic Commerce (19).

The Council is furthermore requested:

* to agree to the broad lines of the approach as identified in this Communication;

* to agree to a first, joint reply to the US Gover nment by the Community and Its Member States, a draft of which is provided in annex I;

* to authorise the Commission to submit to the US Administration the joint reply of the European Community and its Member States

(6) "A European Initiative in Electronic Commerce" (COM(97)157final, 16.4.97), 'Security and Trust in Electronic Commerce', COM 97(503) final and the Joint EU-US Statement on Electronic Commerce.

(7) Source: Network Wizards.

(8) Globalisation and the Information Society, The Need for Strengthened International Co-ordination, COM(98)/50 final, 4, February 1998.

(9) European Ministerial Conference, Bonn 6-8 July 1997, draft declaration: "Fostering economic growth: developing content and commerce, point. 12: Ministers stress the importance of Internet domain names for the development of electronic commerce, They support the principle of an internationally recognised body operating a transparent system of management of the Domain Name System. They consider it imperative to ensure adequate European representation in this system."

(10) Joint EU-US Statement on electronic commerce, 5 December 1997, point 4.v): "The creation of a global market-based system of registration, allocation and governance of Internet domain names which fully reflects the geographically and functionally diverse nature of the Internet."

(11)Internet Assigned Numbers Authority (IANA)

(12)Network Solutions Inc. (NSI)

(13) The International Ad Hoc Committee, (IAHC).

(14) Domain Name System (DNS)

(15) See footnote 3.

(16) The Green Paper takes the form of a "proposed rule of the Department of Commerce".

(17) Final Declaration of the European Ministerial Conference, Bonn 6-8 July 1997: "Fostering economic growth: developing content and commerce, point. 12: Ministers stress the importance of Internet domain names for the development of electronic commerce. They support the principle of an internationally recognised body operating a transparent system of management of the Domain Name System. They consider it imperative to ensure adequate European representation in this system.'

(18) European Ministerial Conference, Bonn 6-8 July 1997, draft declaration: "Fostering economic growth: developing content and commerce, point. 12: Ministers stress the importance of Internet domain names for the development of electronic commerce. They support the principle of an internationally recognised body operating a transparent system of management of the Domain Name System. They consider it imperative to ensure adequate European representation in this system."

(19) Joint EU-US Statement on electronic commerce, 5 December -1997, point 4.v): 'The creation of a global market-based system of registration, allocation and governance of Internet domain names which fully reflects the geographically and functionally diverse nature of the Internet.'

Glossary and Vade-Mecum

1. Terms of the Art

Domain: An Internet Domain is the alpha-numeric string which identifies the Internet Protocol (IP) Address (a number) associated with a specific computer which is connected to the Internet.

DNS: Domain Name system. The whole system of Internet names (the domain names) and address (theIP addresses) which underlies the global routing of Internet communications, e.g. e-mail and the

worldwide web.

gTLD: Generic Top Level Domain. e.g. COM. A top level domain that is not specific to any sector of

activity or territory.

New gTLDs: those proposed by the IAHC, viz..FIRM,.SHOP,.ARTS,.REC,.NOM,.WEB and.INFO.

nTLD (or ccTLD): National Top Level Domain (e.g. BE, CN, LV) also known as country-code TLD's (ccTLDs) because they are based on the ISO 3166 standard two letter country codes.

SLD:Second Level Domain, such as.CO.UK,.CEC.BE,.EU.INT,.TM.FR etc.

Server: A computer managing the data base for any Internet Domain

Root Server: One of the 13 computers which manage the databases for the top level domains. The "A" Root Server co-ordinates communications between the other Root Servers. Currently the "A" Root Server is located in NSI, in the United States. Nine others are also located in public or private organisations in the US. There are two Root Servers in the EU and one in Japan.

WWW: The World Wide Web, a technique of inter-linking files and databases throughout the Internet, invented at CERN, Geneva.

2. Some Internet organisations

IANA: The Internet Assigned Numbers Authority, is an activity of the Information sciences Institute of the University of Southern California. IANA manages the allocation of Internet addresses world wide, among other technical functions.

NSI: Network Solutions Inc., a subsidiary of SAIC Inc. A company which manages the data base and registration business for COM and other generic TLDs under contract from the National Science Foundation (NSF)

NSF: National Science Foundation, the US Government Agency with primary responsibility for the financing of R&D in the US. NSF also Chairs the Federal Networking Council.

ISOC: The Internet Society, a private association of individuals and corporations with an interest in the Internet. ISOC participates in many aspects of the current organisation of the Internet.

POC: The Policy Oversight Committee, a Board responsible for the policies applied in the proposed seven new gTLDs, including certain regulatory responsibilities.

CORE: the Council of Registrars, a not-for profit association of (currently) 88 Registrars to develop and manage a Registry database and related services for the registrations in the new gTLDs.