Privatizing the Internet?

[Previous] [Contents] [Next]

Mark Weller

Today, the Internet is undergoing fundamental changes. With the emergence of e-commerce, a large marketplace has evolved on-line, using a communications network that is largely owned by private companies. The creative combination of this entrepreneurial spirit with the libertarian culture of the net is becoming a powerful force. One could even say that the Internet is a sort of Mecca of free speech and free trade.

This is why the way the Internet works at its core is so paradoxical. For at the very base of the Internet lies a complicated jumble of government bureaucracy and legislated monopoly that is antithetical to the on-line marketplace. This jumble needs to be sorted out - and soon. Already, the remaining elements of government involvement in the Internet are causing problems for electronic commerce.

The system to which I refer is the domain registry, government's involvement in the granting of Internet domains. Domains are the latter part of a web address, for example, the .com in amazon.com. There are other domains as well, such as .mil for the US military or .org for non-profit societies.

The most sought after domain suffix is .com, which for years has been administered by InterNic, a private company with a government monopoly to license domains. When one needs a .com domain, at some level, one needs to deal with InterNic.

The centralized system is suboptimal. Registering domains is often a long process - response times for domain registries vary from a few days to several weeks. Many registered domains are dormant, that is, they have no website attached to them and are effectively undeveloped lots in cyberspace. As well, due to the high number of existing domains, registration charges for hundreds of sites are going uncollected, which has led to a large number of free riders, people who have active domains for which they do not pay after their registration has expired. InterNic itself has recognized the need for change - it is being swamped by so many requests for domains that it can't keep up.

Another consequence of this system is that web addresses are not private property. Rather, they are considered public property which is leased out in portions for use. However, unlike the bandwidth auction that the United States holds when allocating ranges for telecommunications, this model allows for no pricing mechanism. In fact, for political reasons, the US Congress has held down the price of domains for years. Rather than allow government to allocate domain names and control the prices of them, it would be much more efficient to allow them to be freely exchanged in the marketplace.

Work has begun on commercializing the domain registry, but it is moving very slowly. A US government plan to create a private, non-profit agency to shepherd this process was first announced by the Clinton Administration in 1997, but this body has yet to take on any of the duties of domain issuance. In the meantime, InterNic has spread its duties out to a small group of companies, but these remain responsible the US government.

It is important that the privatization of the domain registry move ahead quickly, so that the creative power of the marketplace can begin to drive the Internet. Such privatization would enable even greater change than now exists. Further, the restriction of domains to a narrow band of numbers and naming conventions could also be abandoned. This would allow for much more diversity in naming and reduce the concentration of web sites within, for example, the .com range, and would also allow for bidding to ultimately determine who gets what web address. Web addresses would also finally be in the possession of the purchaser.

If the Internet is a highway, then the non-profit proposal is akin to privatizing not only the Ministry of Highways, but the roads themselves. These changes would bring considerable improvements, since the current operation, to overextend the metaphor, is the equivalent of a traffic jam on the on-ramp to the Information Highway.

[Previous] [Contents] [Next]

info@fraserinstitute.ca You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.

If you know someone who would be interested in this web page, please enter their email address below, and we will forward this URL to them: Email Address:

Last Modified: Wednesday June 9, 1999.