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comments on ICANN fundraising

Follow the Money: an Inside View of ICANN Fundraising

The COOK Report has received the full text of nine email messages 
detailing ICANN's efforts in June to stave off bankruptcy.  It has 
obtained independent verification that they are  messages that were 
given by ICANN to the House Commerce Committee Subcommitte on 
Oversight and Investigations that held hearings on July 22.  The 
e-mail below makes very clear that ICANN's support is focused largely 
within IBM MCI, Cisco and the Executive Office of the President. 
MCI's Vint Cerf and IBM's Vice President of Internet Technology, John 
Patrick show themselves as the masterminds of a campaign to collect 
funds from internet related companies.  The guise is that without 
ICANN the Internet cannot function smoothly and "if ICANN fails 
e-business/e-anything is in jeopardy." The messages show the grasping 
self-serving mindset of the ICANN clique - one that is useful to 
contrast to their avowed stance of public interest coordination of 
Internet technical functions.

ICANN has constructed an edifice of Byzantine complexity to do a job 
that six people are doing now for a cost of about $600,000 a year 
including equipment and overhead.  Those who have not bought into its 
centralized, control-oriented mindset maintain that it is a job that 
does not need to be done and is one that will allow a handful of huge 
corporations to dominate the formerly decentralized entrepreneurial 
workings of the Internet.  The Internet is functioning quite well 
without ICANN.  Congress must ascertain what has motivated ICANN's 
core supporters, a group of only four people: Vint Cerf, John 
Patrick, Esther Dyson, and Mike Roberts to claim that the Internet is 
in danger?  Do we really want the Internet, which is functioning 
perfectly well, run by an unaccountable bureaucracy staging a global 
road show and spending annual some ten times the current amount that 
gets the job done?

Two legacy companies, IBM and MCI, are at the heart of a gambit to 
build -- with the aid of other legacy operations like Netscape and 
AT&T, and the hangers-on of the failed gTLD-MOU, IAHC, Core group -- 
an unaccountable operation that is at heart antithetical to the 
interests of the globally expanding entrepreneurial Internet. 
Leaders of most other internet companies, seeing through the 
Cerf-Patrick subterfuge, have not contributed to those directing the 
ICANN gambit.  Unfortunately, Cerf, Patrick, Dyson and Roberts didn't 
get the message that should have been delivered by their last years 
worth of fund raising efforts. ICANN should be put out of its misery 
and the Internet left to run itself.

The lessons taught by ICANN will provide strong motivation for domain 
name registrars and the regional IP number registries to contribute 
the six to seven hundred thousand dollars a year necessary to keep 
IANA functioning.  Left to its own devices we will find that the DNS 
registry/registrar industry will be able (perhaps with some 
congressional guidance) to form an association.  We shall see that 
this association will be able to operate multiple root servers in a 
way that will prevent most conflicts and that by letting the market 
place actually operate we shall quickly gain a larger and more stable 
DNS system.

The inner circle of ICANN is amazingly narrow.  MCI-WorldCom (Vin 
Cerf & John Sidgemore), IBM (John Patrick, Roger Cochetti, Mike 
Nelson & George Conrades) Mike Roberts (who at Educom was beholden to 
IBM funding), Esther Dyson (known as one of the most influential 
persons in the IT industry)  Joe Sims (anti trust attorney for the 
powerful law firm of Jones and Day) and Tom Kalil, the group's white 
house liason to the highest levels of the Clinton Gore administration.

An SOS from IBM and MCI WorldCom Falls Flat

The ICANN Papers begin with a June 7th Mike Roberts message to Mike 
Nelson, Roger Cochetti and Vint Cerf: "Esther and Joe and I are not 
quitters, but reality suggests that unless there is an immediate 
infusion of $500K to $1M there won't be a functioning ICANN by the 
end of August. There are various approaches that have been kicked 
around in the last several months - a second round from current 
supporters, a special appeal to those who have not given yet, a loan 
of some kind.  I don't think those of us on the ICANN side have a 
preference one way or the other."

On the same day Vint Cerf replied in a message showing the unusual 
length that he was prepared to go to salvage ICANN as an  MCI/IBM 
control vehicle.

Cerf: "I have talked with John Sidgmore.  We will try to get $500K at 
least "backup" in case nothing else in the way of fundraising works. 
Mike Nelson, I have copied John Patrick and Irving Wladawsky-Berger 
[Editor: an IBM e-commerce executive] on this message, as well as 
John  Sidgmore.  If IBM and MCI Worldcom can come up with $1M in 
"bridge" funding, to be paid back at a later time under reasonable 
terms that will not harm ICANN, then perhaps we can begin a new 
fundraising campaign knowing that we have the ability to back up the 
campaign with a rescue effort in the short term.  It will be easier 
for John Sidgmore to make the case to the MCI WorldCom management if 
IBM is willing to go into this with us and split the $1M cost.  Is it 

"I would then launch a campaign with GIP, ITAA, Internet Society, and 
other interested groups on the basis that ICANN must succeed or 
Internet will be in jeopardy.  This ought to play well with any 
company whose stock price is dependent on a well-functioning 
Internet." "Thoughts?"

Having failed to get sufficient money to support ICANN from outside 
sources, Vint returns to the IBM/MCI duopoly of the Global Internet 
Project which since its 1997 launch has featured Patrick and Cerf as 
the prime movers.  An October 1997 news story from Reuters made a 
candid announcement of the intentions behind the GIP. "Internet 
Companies Welcome Idea of Global Charter BRUSSELS (Reuters) - A group 
of U.S., European and Japanese companies involved in the Internet 
informally welcomed a European Union proposal to draw up a charter to 
govern the global computer network. The companies, who have united as 
the Global Internet Project (GIP), said they wanted to be involved in 
the process [of the global charter design]."

>From the vantage point of two year's hindsight it is clear that ICANN 
is the charter of the GIP for governing the global computer network. 
This is the carefully crafted tool of control that Cerf and Patrick 
fear the loss of.  The lengths to which Cerf is ready to go to 
salvage his creation are quite extraordinary. "I would then launch a 
campaign with GIP, ITAA, Internet Society, and other interested 
groups on the basis that ICANN must succeed or Internet will be in 
jeopardy.  This ought to play well with any company whose stock price 
is dependent on a well-functioning Internet."

The reader will note the willingness to use fear, uncertainty, and 
doubt to manipulate other players to reach for their check books if 
only to maintain a public perception that things are under control. 
Note also that ITAA is the Information Technology Association of 
America, a Washington DC lobby for American IT companies.  ITAA Vice 
president Jon Englund has for the past year been enlisted to use the 
ITAA as a platform for ICANN support, although the effort has been 
reasonably quiet - reaching its highest profile when ITAA gathered 
the copyright and trademark interests in a January 1999 Washington DC 
meeting to influence the formation of ICANN's Domain Name Supporting 
Organization.  Vint's feel of control over ISOC, ITAA, and GIP and 
his willingness to put his reputation on the line is impressive.

On June 8th, John Patrick was correctly worried that with only MCI 
and IBM squarely behind the GIP effort, there would be an impression 
of big corporate capture of ICANN. Possibly motivated in part by the 
fact that George Conrades and Esther Dyson have their own venture 
capital operations, Patrick wrote a dunning letter to Silicon Valley 
area VCs.  The Patrick letter contains some telling admissions. 
Patrick: "ICANN is trying to get the policy, technical and financial 
aspects of the Internet moved successfully from U.S. government to 
the international private sector.  Everyone thinks this is a good 
idea.  In fact, I would say that the future of the Internet is 
dependent on the execution of the plan."

Consider carefully his words.  Remember that Esther was recently 
chiding Dave Farber not to call ICANN the Internet's "Oversight 
Board" since ICANN's purpose was nothing more than dealing with a 
subset of technical coordination. On June 13 Patrick, writing in 
assumed privacy to venture capital fund directors, paints a different 
and very broad picture of control: namely moving "the policy, 
technical and financial aspects of the Internet to the international 
private sector."  Speaking in public ICANN has always denied an 
interest in policy and financial control.  In Patrick comes on with 
great urgency: "Not sound alarmist, but if ICANN fails 
e-business/e-anything is in jeopardy.  This means your future 
investments and your past ones."  Explaining why getting money from 
small companies will take too long and that getting money from large 
ones, "creates problems of "big US companies trying to 
dominate/control the Internet". Loan guarantees might be an angle, 
but they present complexities for companies to provide them. You guys 
and your vc colleagues have created incredibly creative financings 
for many $billions of Internet opportunities.  Could a handful of you 
jump in and help solve this relative trivial financial hurdle to your 

It seems that John never stopped to realize that his VC audience 
looked for return on its investments, and that they might have their 
own opinions on the soundness of fronting for ICANN.  Further those 
who were sure only had to call the CEO's of companies they funded. 
These men and women would be quite ready to give their own 
interpretation of the Patrick letter.  Judging by the events that 
have unfolded with ICANN getting loans from Cisco and MCI, ICANN 
failed the VC risk analysis test.  (As far as we can tell it also 
failed the IBM test.  Despite Patrick's pushing IBM seems not have 
loaned ICANN anything - evidence of remarkable shrewdness on the part 
of those above Patrick.)

On June 14th George Conrades of Polaris Ventures, CEO of Akami 
Technolgies, and an ex IBM vice president asked Patrick where IBM 
itself stood on ICANN.  (Tellingly, Conrades, whom we have always 
considered IBM's representative to the ICANN board, was the only 
ICANN Board member besides Esther Dyson involved in these 
discussions.)  George was quite blunt: "Is this a challenge IBM would 
take on?  I realize potential downside to ICANN
perception (capture and all that) but what about a "United Way" kind 
of involvement/support."

On June 15th with things apparently not going well the ICANN Keystone 
Cops turned to the White House.  While Al Gore did not found the 
Internet, he has always been supportive of investment in it on the 
part of the US government and the part of IBM.  My first acquaintance 
with Mike Nelson, (John Patrick's lieutenant which is copied on many 
of these emails) came at the US Congress Office of Technology 
Assessment in the fall of 1990 when I was hired to craft an 
assessment of the National Research and Education Network.
Nelson at this point was Gore's technology staff person and was 
author of the High Performance Computing Legislation eventually 
passed by Congress in 1992.  After 18 months experience with Nelson 
(late 1990 to early 1992) Mike's loyalty to IBM became very clear. 
My only surprise has been that it took quite a number of years before 
he went to work for them directly last year.

Kalil has always been the chief IT staff person on the National 
Economic Council in the Executive Office of the President.  Ira 
Magaziner turned to his study of the Internet in 1995 under Kalil's 
tutelage.  Tom has also had a major responsibility for the Next 
Generation Internet project.  Although my evidence is circumstantial, 
it appears to me that he is the primary link between Clinton and Gore 
and Becky Burr in the Commerce Department.

We find Joe Sims, ICANN's high powered anti-trust attorney reporting 
on June 15 to chair@jonesday.com: "Esther and I met with him today, 
and he promised to do what he could to promise what he could to 
encourage private donations to make it clear that we are not going to 
be financially starved for the foreseeable future.  He said it would 
be useful to have emailed to him information on the budget, work 
plans, etc. - the kind of stuff that he could give people to show 
them that we have a real live operation here."

And on June 17 Mike Roberts writes to Kalil: "Tom, pleased to hear 
about your offer of help to Esther and Joe. There are three current 
documents that may be of use to you. (In addition to Esther's letter 
to Nader, which lays out the current terms of political engagement.) 
One is a six month status report from ICANN to Commerce, which 
carefully lays out what we have been doing and why. The second is our 
budget package for next year, starting at 7/1/99, which details what 
the projected income is and what it is going to be used for. Both of 
these are available in html on our website, which copies better than 
my ascii versions."

"The third document is a private and confidential financial statement 
based on actual results as of 6/15/99 and projected to fiscal year 
end at 6/30/99 the most salient figure on this schedule is a negative 
net worth of $727,954 at June 30. I'd be happy to fax the entire 
schedule to you if you give me a number for a machine where the 
schedule won't get loose. I'm discussing it with the CFO of Cisco 
tomorrow and with MCI as well, with respect to second round of 
financial support. Let me know if I can provide additional help."

What Happens Next?

In view of the bold ideas about the need to wake up corporate America 
because nothing less than the fate of the internet is at stake, its 
amusing to note that only the CFO of Cisco and Vint Cerf's MCI 
delivered money ($650,000) at 7% interest.  ICANN tried to keep what 
it was doing quiet.

Suddenly on August 17 much delayed minutes of the July 26 ICANN Board 
Meeting appeared on the ICANN web site where at 
http://www.icann.org/minutes/minutes-26july99.htm we read " WHEREAS, 
the Board of Directors has determined that it is in the best 
interests of the Corporation to borrow up to US$2,000,000 on an 
unsecured basis at such rates; RESOLVED [resolution 99.64], that the 
Corporation is authorized to borrow the aggregate principal amount of 
$2,000,000 from various lenders selected by the Interim President and 
Chief Executive Officer on an unsecured basis, at interest rates not 
to exceed seven percent per annum, with repayment terms of not less 
than one year, and on other terms and conditions substantially as set 
forth in Exhibit A hereto."   To cover the movements described in 
this article the board gave its retroactive approval:  RESOLVED 
FURTHER [resolution 99.69], that the authority given in these 
resolutions is retroactive and any and all acts authorized herein 
performed before the passage of these resolutions are ratified and 

Brock Meeks story on the ICANN fund raising appeared the following 
day August 18 and on the August 20th ICANN announced that it had 
"received loans in the amount of $500,000 from MCI WorldCom and 
$150,000 from Cisco Systems. These funds, which will be put toward an 
overall target of $2 million, will enable ICANN to temporarily meet 
its expenses until permanent funding is secured." Of course what 
ICANN did with the funds when it received them is instructive:  It 
paid $800,000 in invoices from its fiscal year ended June 30, 1999. 
ons-through-8-31-99.html  Of the $800,000 in invoices $500,000 was 
from Joe Sim's Jones and Day Law Firm.  Services rendered by what 
last summer war announced as ICANN's probono attorney.

Tony Rutkowski commented to BWG: ICANN appears to have been created, 
manipulated, and propped up substantially by John Patrick and Vint 
Cerf who have never had any public accountability. "I'm not aware 
that either has ever publicly explained what they are doing and why, 
much less participated in any forum - electronic or otherwise - where 
anyone substantively knowledgeable could interact with them.  Indeed, 
it has long made a mockery out of all these public discussion and 
even the government's own public processes, when the real deals were 
all being worked out behind the scenes by others to meet their 
unknown objectives. Has anyone been able to ever engage them on these 
matters or heard an explanation?"

Did Al Gore Create or Give Away the Internet?

While Al Gore may not have created the Internet, the above 
correspondence makes clear how on his watch, his trusted lieutenant 
Mike Nelson has been a participant in a Clinton Gore administration 
sanctioned give away in the words of IBM's John Patrick of "the 
policy, technical and financial aspects of the Internet to the 
international private sector." While ICANN has been a closed door 
black box, the Europeans do have three members (Capdeboscq, 
Kraaijenbrink, and Triana) of a ten member board.  Before they sit 
back with satisfaction that Christopher Wilkinson (a GAC member 
representing the EU) has their interests adequately protected, they 
need to read and ponder carefully that ICANN, when the rubber meets 
the road, is a strictly American operation.

We have one last chance.  The House Commerce Committee is not through 
with its investigation.  Mikki Barry submitted 30 pages of answers to 
their questions last week.  Found at 
http://minion.netpolicy.com/dnrc/82799cong.html the testimony makes 
quite it clear how badly the Clinton, Gore, Kalil lead NTIA has 
gotten in over its head in letting Patrick, Cerf, Dyson  and Roberts 
dispose of technology interests that should be serving all Americans 
and all American business rather than this tiny clique of insiders. 
While NSI may be non responsive, ICANN is the far bigger stench.  Our 
current executive branch leaders have badly failed us.  It is time 
for Congress to take over.  Including Senator McCain on behalf of the 
Senate Commerce committee.  The committee should subpeona Cerf and 
Patrick and find out just what they had in mind when they warned of 
Internet instability and the failure of E-commerce if ICANN doesn't 
get its way.  Reading the ICANN Papers we can only wonder at the 
private personna shown here by Cerf and Dyson in contrast to their 
public postures of the "Internet is for everyone" and  "champion of 
the little guy."

But there are additional contrasting forces at work. The gap between 
the innocuous public role claimed for it by ICANN's supporters and 
the lengths to which powerful men like Cerf and Patrick are willing 
to go on its behalf, carries with it the odor of deception.  If ICANN 
is so essential to the survival of the Internet, they should be 
willing to engage in open debate in its support.  The fact that they 
have hidden for a year from any public debate where they cannot 
control the terms says that their real agenda could not survive 
public scrutiny.

A strong hint of the likely real agenda came in one of the 
resolutions from the Santiago meeting where ICANN announced the 
Formation of [an] Ad Hoc Group. "RESOLVED that the Interim President 
and CEO, working with Director Kraaijenbrink, is directed to 
establish an ad hoc group to be charged with developing the 
objectives and proposing structures for future policies in the area 
of numbering, especially as required to meet global market needs and 
taking into account the convergence of information technology 
services and networks."  [Editor: ad hoc group being formed is in 
response to the August letter to the ICANN Board sent by ETSI and 
ETNO.  The letter indicated a vote of no confidence in the ability of 
the three regional IP number registries to hand out IPv6 addresses.]

On August 31, Jim Dixon, Telecom Director for EuroISPA, commented to 
the BWG list: "'Numbering' and 'Global'. That's two magic words in a 
row.  In telephony and governmental circles, "numbering" policies are 
those that relate to the allocation of telephone numbers.  I read 
this as a suggestion that a global policy for the allocation of 
numbers can be created, with telephone number allocation becoming 
more or less a detail in the larger problem of allocating IP address 
space.  This actually makes a great deal of sense.  Certainly if we 
have 128 bits of IP[v6] address space13 or so digits of telephone 
numbers can be tucked in there without anyone even noticing it."

"And everyone in either of the businesses can see the "convergence" 
of the Internet and telephony and all of the activities associated 
with both. My company (an ISP) got its telco license six months ago. 
The dominant telco (British Telecom) drags out the process, but we 
expect to have an active interconnect in a couple of months. I'm not 
familiar with how this sort of thing works in the States, but I 
expect that most of the larger ISPs in the UK will be telcos inside 
of three years," Dixon concluded.

The ICANN resolution concluded: "The group will include 
representatives of businesses, including telecom operators and 
Internet service providers and trade organizations, the ASO Council, 
the ICANN Board, and other legitimately interested parties. The group 
will present an interim report before the ICANN public meeting in 
2000. A final report from the ad hoc group will be presented to the 
ICANN Board prior to the Annual Meeting in 2000."

Dixon: "To me this is the first sign of any imagination on the part 
of the ICANN board. Up to now it has just been fumbling around, 
trying to take over the domain name system in a confused and rather 
grandiose way.  But this looks like the Board is beginning to grasp 
the possibilities: if enough people are careless enough, ICANN just 
might be able to get control of the entire global telecommunications 
system.  Worth trillions, I should think."

This message contains a strong hint of what may be troubling Vint 
Cerf when he fears for the future of the Internet if ICANN doesn't 
survive.  Perhaps his fear is just a code word for his concerns for 
MCI WorldCom, a legacy telco if there ever were one. MCI WorldCom is 
not a greenfield carrier.  As shown by the 10 day long collapse of 
its frame relay network in August, it contains a dizzying array of 
acquired legacy networks that will be very costly for the debt 
belabored enterprise that Bernie Ebbers has built to up grade.  An 
ICANN that could control IPv6 allocations on behalf of the interests 
of such companies could be an invaluable resource to someone in 
Cerf's position.

Whatever happens to MCI Congress must be made to understand that a 
bankruptcy of ICANN as the failed private preserve of Cerf and 
Patrick is in the public interest.  It must realize that someone like 
the Markle Foundation could provide necessary funding for IANA and 
that the domain name camp needs to start over to rebuild its house 
this time in an open and truly democratic way.  We can still hope 
that Network Solution might seize the opportunity present by ICANN's 
betrayal of trust to reform itself in the interests of the Internet 
community as well as its stock holders.  Above all Congress must do 
its homework and come to the realization that the biggest danger for 
the Internet and for American technology is to fall victim to the 
myth that a single group needs to control it.

The Triumph of the IP Insurgency or of ICANN?

What I wrote on January 29, 1999 is even more true on September 1.

 Even so, knowing that the IP Insurgency is now so close to total 
triumph in undermining the old telecom order, we would be naive not 
to consider the possibility that more serious intentions lay behind 
the conservative, old line computer companies, and ITU-oriented telco 
interests that control ICANN. There can be no proof that ICANN will 
do evil because ICANN is not yet fully constituted, and has not yet 
been given NTIAs' final blessing. But make no mistake about it, the 
legal and operational framework that [has been] built for ICANN has 
been structured such, that it will be quite possible for ICANN to 
implement rules designed to blunt and slow down further innovation of 
the IP insurgency under the guise of "management of public resources 
on behalf of the alleged common good." While the world's legacy 
telcos and computer companies may be slow to innovate, they are run 
by people intelligent enough to realize that if they can't win on 
technical merit, ICANN may be their last best hope. ICANN looks 
destined to become the first Internet international regulatory body. 
Therefore the legacy computer companies and legacy telcos of the 
world have ample reason to want to gain direct or indirect control of 
ICANN. Such control may be their only way to see that the IP 
insurgency doesn't run them out of town.

But something even more profoundly important is at stake. The 
technologies of the industrial age raised the economic barriers for 
anyone wanting to start a business beyond the range of most ordinary 
Americans. Because our culture and history has long preached the 
virtues of self-reliance and economic independence, this was hard for 
most of us to swallow. It was the small cost and enormous power of 
the personal computer hooked to a modem that, for the first time in a 
century, re-opened the door to individual freedom and economic self- 
reliance. But this re-opened door is a profound threat to both those 
business interests that seek monopoly market power and those whose 
livelihood depends on social and political control of the masses. 
These people fear the Internet and are determined to find a way to 
control it. ICANN, as constituted, represents the last best hope of 
achieving their misguided goals.

The COOK Report on Internet            Index to seven years of the COOK Report
431 Greenway Ave, Ewing, NJ 08618 USA  http://cookreport.com
(609) 882-2572 (phone & fax)           ICANN: The Internet's Oversight Board -
cook@cookreport.com                    What's Behind ICANN's Desire to Control
the Development of the Internet http://cookreport.com/icannregulate.shtml