The Managing Lawmaker in Cyberspace: A New Power Model
34 Pages Posted: 1 Nov 2001
Date Written: October 17, 2001
This paper is about the power of The Internet Corporation for Names and Numbers (ICANN). It examines how this power was created, augmented, strengthened, and reigned in. ICANN poses a puzzle. It is essentially an unregulated and undemocratic monopoly. Yet, ICANN's exercise of power has been fairly contained. Since ICANN is a monopoly, what prevents it from taking a far more high-handed and extensive ruling posture?
Even though at first blush my analogy is counterintuitive, I analogize ICANN to a managing lawmakers of market infrastructures, such as the New York Stock Exchange, while recognizing their differences. Unlike the Exchange, ICANN has close affinity to a political unit as well.
The emergence of ICANN, its staying power, and the limitations on the exercise of its power, can be partly explained by an analogy to the economic theory of "contestable markets." The theory deals with price. I equate price to power. High prices denote a high level of power. Low prices denote a lower level of power. In essence the theory suggests that under certain conditions a monopolist would charge low prices as if it operated in a competitive market. That is because higher prices will bring less efficient competitors into the market until prices fall and they will exit. This theory highlights a special "balance of power" and its restraining effect. I believe that a similar idea helps understand ICANN's environment
The paper notes that ICANN exercises "power in default." All the strong constituents seem to have agreed not to claim exclusive control over the Internet infrastructure. The paper discusses the bases for ICANN's continuous power: its constitutional documents, and contracts, which have become part of its constitution, and its role as mediator among Internet large stakeholders. ICANN has augmented its power by a stable and able management, and arguably maintained and strengthened its following by doing its share to support the stability of the Internet.
ICANN's rising power is demonstrated by the controversies concerning the country code Top Level Domain names (ccTLDs).
The paper concludes that ICANN's power is still being shaped. It could emerge along a market model, as a central catalyst for consensus building among parties with different interests. Alternatively, ICANN could also move towards a more regulatory model of consensus-based decision making. These decisions may then constitute precedents and mature into rules. Or ICANN can combine the two models to form a more structured market and more flexible regulatory body. The market model is likely to make experiment in the development of more than one root easier than the regulatory model. As the telephone experience has shown, the time may come for a multi-root cooperative Internet structure. Or we may face a technology that is today a mere twinkle in someone's eye.
JEL Classification: K10, K11
Suggested Citation: Suggested Citation