[Ecommerce] Wall Street Journal: Plan for Adult Area Sparks a Fight On Control of Web

[Manon Ress]

/Red-Light District/
Plan for Adult Area
Sparks a Fight
On Control of Web

Dot-XXX Proposal Focuses
Global Ire on U.S. Role;
Is Regulator Independent?
Pressure From Conservatives
By *CHRISTOPHER RHOADS*
May 10, 2006; Page A1

JUPITER, Fla. -- Stuart Lawley wants to create a new Internet
neighborhood for the adult-entertainment industry: dot-xxx. The 43-
year-old British entrepreneur believes the new three-letter ending
for Web-site addresses would help protect children from online
pornography, by making it easier to filter such material. He also
hopes to make a pile of money by collecting fees for registering dot-
xxx sites.

The matter, which could be voted on as early as today by the
organization that governs domain names, has triggered a rancorous
global debate involving freedom-of-speech advocates, child-protection
groups, adult-content providers, foreign governments and conservative
Christian groups.

[Stuart Lawley]

Mr. Lawley's proposal also raises thorny issues for the U.S.
government, which funded the creation of the Internet and has long
played a behind-the-scenes role in running it. As the Internet grows
as a place of business and a forum for exchanging ideas, some have
argued that it shouldn't be dominated by any one country. That
discontent has prompted a few countries and regions to begin breaking
away and forming their own Internet-like computer networks -- a
threat to the universality that makes the Internet such a powerful tool.

The Commerce Department has expressed reservations about the dot-xxx
measure, amid a flood of email from conservative groups, according to
internal government documents reviewed by The Wall Street Journal. In
one document, the department made clear that it could block the
proposal if the domain-name organization, called the Internet
Corporation for Assigned Names and Numbers, or Icann, approves it. As
a result of the concerns, Icann has postponed several scheduled votes
since last August.

The Commerce Department says it wanted to make sure that Icann had
received input from all interested parties.

"We expected an objective process," says Mr. Lawley, in the living
room of his opulent, Mediterranean-style home on the waterfront here.
"So we found it bizarre that the Commerce Department would want to
get involved in the minutiae of a single contract."

Commerce established Icann in 1998 as a way to formalize the approval
of new domain-name suffixes and other technical procedures that keep
the Internet running. The majority of its board members are non-
American. The department has usually been careful not to meddle
publicly with Icann, a nonprofit group based in Marina del Rey, Calif.

But as Internet use has exploded around the globe in recent years,
carrying more than $2 trillion in annual commerce, discontent among
other governments over the U.S.'s influence has grown. Now the dot-
xxx case is becoming a flashpoint for that criticism.

"Icann exists to make technical decisions about the Internet," says
Martin Selmayr, an official in the European Commission office that
oversees Internet and telecom matters. "It's unacceptable to make the
question of whether to approve a domain address a political decision,
based on the government of the day."

*Not Giving Up Oversight*

Last June, the Commerce Department signaled it had no intention of
giving up its oversight of Icann, a statement that angered countries
expecting Commerce to sever its ties. That question will come to a
head soon, since Commerce's memorandum of understanding that
established Icann is up for renewal by the department in September.

[Address Book]

Web-address suffixes weren't expected to draw so much controversy.
They were created to make navigating the Internet easier. In addition
to more than 240 two-letter suffixes for countries, such as dot-de
for Germany, there are 18 three-letter names for general uses like
dot-com and dot-edu for educational institutions.

The dot-xxx saga started six years ago when Icann set out to create
more suffixes. It wanted to spark more competition among domain-name
operators. Each operator collects annual fees from users who register
a Web-site address with that suffix.

The process attracted 47 applicants, including a 29-year-old Canadian
named Jason Hendeles, who proposed dot-xxx. It cost $50,000 to apply,
but running a popular domain name can be lucrative. *Verisign* Inc.
makes hundreds of millions of dollars from managing the dot-com and
dot-net domains.

A member of a wealthy Canadian real-estate family whose mother is a
well-known modern-art collector in Toronto, Mr. Hendeles says he
spent around $200,000 on the effort.

Ultimately, Icann opted for less controversial options, approving dot-
biz, dot-museum and dot-aero, among others. The board's main criteria
boiled down to whether there was a perceived need for each name.

By the time Mr. Lawley arrived on the scene in 2003, Mr. Hendeles's
company, ICM Registry Inc., was "in hibernation," says Mr. Lawley.

After graduating from college in the U.K. in 1985, Mr. Lawley started
a company that sold fax machines to small and medium-size businesses.
He sold the company in 1997 but soon jumped back into business,
helping his old fax customers get onto the Web. He took his new
company, Oneview.net, public.

As the Internet boom turned to bust, he sold Oneview to *Freecom.net*
Ltd., which subsequently accused Mr. Lawley of inflating the number
of his customers. Mr. Lawley and other senior executives resigned
from the newly merged company and agreed to pay back stock valued at
about $8.5 million. Mr. Lawley says the disagreement over the numbers
stemmed from Oneview's having more than one account with a given
customer, and counting those as multiple accounts, while Freecom
considered them a single account.

Mr. Lawley says he has never had any connection to the porn world. He
says he got interested in domain names in 2003 at his son's school in
Florida, when he met a parent involved in Icann affairs. Soon he came
upon the dot-xxx file at Icann and gave Mr. Hendeles a call. They
agreed to revive ICM and give dot-xxx another try.

The timing was good, since Icann was about to launch a new batch of
suffixes.

Mr. Lawley says he wanted the ICM proposal to address concerns about
online pornography, an industry that generates an estimated $1
billion to $5 billion a year in revenue. ICM has pledged to donate
$10 of the proposed annual fee of $60 for a dot-xxx domain name to
child-protection groups and to require users of dot-xxx to label
their content.

ICM has also proposed establishing a foundation that would engage
interested parties in a dialogue about online pornography. ICM now
consists of four people, including Messrs. Lawley and Hendeles, who
between them made 90% of the investment in the company.

In June of last year, the Icann board agreed to enter contract
negotiations with ICM. Mr. Lawley thought the effort, which had cost
about $2.4 million, was close to paying off.

Then, conservative groups jumped into the fray. The Family Research
Council and Concerned Women for America implored supporters to write
to the Commerce Department to oppose dot-xxx. They argue, among other
things, that the concept legitimizes online pornography. Because it
doesn't require adult-content providers to move their material from
their dot-com sites to dot-xxx sites, the step just adds pornography
to the Internet, they say.

"The porn industry is constantly preying on the eyes of our
children," says Charmaine Yoest, a spokeswoman for the Family
Research Council. "This would only double porn holdings on the
Internet."

Through mid-June, Commerce Department staffers tracked incoming
emails on the subject with increasing alarm, the internal government
documents show.

*'Who Really Matters'*

On June 16, in an internal email, a Commerce official said the
administration needed to make it clear to conservative Christian
groups that the White House shared their opposition to dot-xxx.

"Who really matters in this mess is Jim Dobson," wrote Fred Schwien,
the executive secretary to Commerce Secretary Carlos Gutierrez,
according to the documents reviewed by the Journal. Mr. Dobson is an
evangelical Christian who hosts a highly influential daily radio show
called "Focus on the Family."

"My suggestion is that someone from the White House ought to call him
ASAP and explain the situation, including that the White House
doesn't support the porn industry in any way, shape, or form,
including giving them their own domain name," Mr. Schwien wrote,
according to the documents.

Mr. Schwien declined to comment. A Commerce Department spokesman says
Mr. Schwien was not involved in policy discussions on this issue
within the department.

Mr. Dobson couldn't be reached for comment.

On Aug. 11, five days before Icann's scheduled vote on the dot-xxx
proposal, Michael Gallagher, then the official responsible for
Internet matters within the Commerce Department, wrote to Icann
stating it had received nearly 6,000 letters and emails opposing the
domain-name suffix due to "concern about the impact of pornography on
families and children."

The letter, which was made public, didn't disclose Commerce's opinion
on the matter. But an internal memo prepared by Commerce, titled
"United States Control of the Domain Name System," spelled out how
the U.S. could kill the plan: "If the international community decides
to develop an .XXX domain for adult material, it will not go on the
Top Level Domain (TLD) registry if the U.S. does not wish for that to
happen." The top-level domain registry refers to the list of approved
domain suffixes, which Icann manages.

The head of the Icann advisory committee that represents other
governments also wrote to the board, citing "discomfort" with the
proposal from several countries.

At the Aug. 16 Icann meeting, Icann postponed the vote on dot-xxx,
citing a need for more input.

"We were well aware of the international dynamic," says Mr.
Gallagher, who has since re-entered private law practice. "We
intervened to make sure that Icann had input from all parties."

Vinton Cerf, the chairman of the Icann board, says, "At no time has
the Department of Commerce said you must do this."

Some in the adult-entertainment industry itself also oppose the plan.
"This is probably the only time that my industry and folks on the far
right agree on something," says Steven Hirsch, the founder and co-CEO
of Los Angeles-based Vivid Entertainment Group, which makes about 60
adult films a year. More than a third of its revenue comes from
online sales, he estimates. "Dot-com is much better known, and we
have spent millions of dollars promoting our dot-com business," he adds.

Mr. Lawley says the debate over how dot-xxx will affect pornography
on the Internet should be irrelevant, since Icann's approval criteria
have nothing to do with such questions.

"We never said we're going to save the whales or stop world hunger,"
he says. "We fit the criteria. The only question is, Will someone
intervene at the last minute?"

*Write to *Christopher Rhoads at christopher.rhoads@wsj.com
<mailto:christopher.rhoads@wsj.com>^1




************************************************
Manon Anne Ress
manon.ress@cptech.org,
www.cptech.org

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