In my previous article I showed that ICANN expects to recover a lot of money from the first round of applications for new generic Top-Level Domains (gTLDs)—$92.5 million, to be exact—and that even that dramatic figure is probably substantially underestimated. For that reason, I argued that ICANN probably will recoup a windfall from the first round of gTLD applications and pointed out that ICANN’s promise to consult with the Internet community before spending such a windfall is unsatisfactory because it has failed to say beforehand what surplus revenues might be spent for.

Quite apart from the high cost of an individual application fee—$185,000 is hardly chump change for any but the wealthiest applicants—the important thing to notice is the aggregate effect of adding $92.5 million in revenue to ICANN’s budget from an entirely fresh source. Consider how $92.5 million compares with ICANN’s total revenues for the past three years. In 2006 ICANN posted total revenue of $29.8 million. In 2007 it was $43.4 million. And in 2008 it was $51.4 million. By ICANN’s own questionably low estimates, then, the first round of gTLD applications, not counting a single potentially bank-breaking auction, will bring in nearly twice as much revenue as all of ICANN’s receipts last year alone.

ICANN assures us that any surplus revenues from the first round of gTLD applications, whether from application fees or auction payments, will not be spent on ordinary budget items and that expenditure will follow consultation with the Internet community. Unfortunately, there is good reason to question whether ICANN will spend potentially millions of dollars in the interest of the Internet community and not in its own self-interest. During the past three years, as the world economy has suffered a massive setback and millions of people have been thrown out of work, executive pay at ICANN has skyrocketed. In 2006 compensation for the top five highest paid employees, besides officers and directors, as listed in ICANN’s Form 990, totaled $566,292, for an average salary of $113,258 per year; in 2007 the top five were paid $985,568, for an average salary of $197,113; and in 2008 their compensation totaled $1,094,308, for an average salary of $218,861. Between 2006 and 2008, then, salaries for ICANN’s executive salaries rose by 93%. It is hard not to ask whether executives whose pay is doubled in three short years should be entrusted with free rein over potentially millions of dollars in windfall revenues.

To clarify, my concern lies not with executive compensation, per se, but with the power that ICANN appears set to acquire as a consequence of increasing its net revenues so dramatically and with the likelihood that such power will be abused. Potential abuses come in various forms, of which unjustified increases in executive pay would be the least objectionable. More problematic would be using gTLD-generated revenues to pursue litigation seeking the dissolution of the Joint Project Agreement (JPA), even over the NTIA’s objections, or a court order granting ICANN custody of the root-A server. Perhaps most troubling of all, ICANN could use windfall revenues from the gTLD application process as a war chest to litigate its way into seizing control of the IANA function itself. A small organization on a tight budget does not have the leisure of such high stakes litigation; dramatically increasing its budget would give ICANN alternatives that its past budgets have not previously afforded.

Although these possibilities seem remote, it would be unwise for Internet stakeholders to ignore them. Out of caution, we should consider setting limits on how the gTLD-related revenues can be collected and spent. Two ideas come to mind.

First, ICANN might be persuaded to charge less to dispose of gTLD applications and to administer new gTLDs. Stakeholders might, for example, urge ICANN in the strongest terms to conduct a study of the actual out-of-pocket costs of the gTLD application process and administration. If held to international accounting standards, a study like this would give some assurance to the Internet community that gTLD revenues are tailored more precisely in line with actual costs.

Second, excess profits produced by the gTLD application process could be redirected away from ICANN toward purposes supported by the Internet community at large. One idea would be to require that such surplus revenues be distributed to national CERTs or similar authorities on a proportional basis, in order of total number of DNS addresses or households with Internet use or some other neutral measure, so that the new-found wealth of the Internet can be reinvested to strengthen its security.

Whatever proposal is best, it would be a shame if ICANN were allowed to use the gTLD application process as an exercise in raw profiteering or, worse, as a means of achieving autonomy at the expense of accountability.