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TAXING DOMAIN NAME SERVERS|
or "Think Globally and Act Locally"...
Now that the elections are over in the U.S. It appears that
some governments and local areas are quickly beginning
to see the light, that the Internet is a potential source of
tax revenue. This could also be a result of the windfall
profits being reaped by Network Solutions, Inc. and
their owner, SAIC, from its "cooperative agreement"
with the National Science Foundation (NSF) which is
largely funded by the U.S. Government.
State governments and local communities are beginning
to see that "tax-like" dollars for domain registrations are
being sent to Virginia from all around the world. As usual,
the Washington, D.C. area economy is the beneficiary
and states get little in return. In the past, people would
claim that free registrations in the US. domain allowed
people an alternative, and these "Internet Taxes" were
not a concern.
The US. domain is no longer totally free. Companies
are being delegated city's names and in some cases
they are sending invoices without the registrants' prior
approval. To make matters worse, some of these
companies are not operating in the state where the
city is located. This raises questions about business
licensing, registrations and interstate commerce.
Even though U.S. Internet users are constantly being told
that they should "think globally" and avoid U.S.-centric
views, when the rubber hits the road, Internet Politicians
"act locally" to protect their own interests. This is
no different than what has been happening for centuries,
all around the world, with government politicians.
As government politicians begin to see the "taxation"
patterns and revenue flows, there is little doubt that
they will become interested in mapping the Internet
to existing rules and regulations. One of the easiest
ways to do this is via the domain registration system.
Because of all of the discussions about new top level
domains and domain registries, people are becoming
more educated about the technology and the flexibility
of the systems. Many people have been mislead that
the system is rigid and "Internet Taxes" must be paid
to those that maintain the system and no one else
can participate. This is clearly not the case.
One of the keys to controlling the Internet domain
system rests with the root name servers. Internet
Service Providers use these root name servers to
help their subscribers locate web sites and e-mail
destinations. If ISPs are "encouraged", via legislation
or regulation, to use state supplied (or supported)
root name servers, the state can insert itself into
the domain name look-up flow, with very little effort,
and can bring "Internet Tax" dollars back to the
state (or community) where the commerce is
The arrangement would be very simple, the state
would provide a small collection of root name
servers and delegate all of the top level domains
to registries located in that state. The major
top level domains such as .COM, .NET, and .ORG could be easily operated by local agencies
under "cooperative agreements" with the state.
Those agreements could be made with ISPs
in the state who cooperate with the plan.
With such an arrangement, companies currently
registered in the .COM domain would have to
register in each state (or region) where they wanted
to "easily" do business. They could start with
a "federal registration" as they do today and
then reproduce that in each state. Fifty states
at $50/year could cost a company $2,500.
At a more realistic cost of $10/state, these
fees could be brought into line with other
corporate filing fees currently levied by states.
To discourage changes, a fee could be charged
for any transaction, just as most states do today.
This process is nothing new to corporations
who must register as a "foreign corporation" in
all the states where they have operations. (Since
people could always bypass the domain name
system by using an IP address people could
still reach a company, the hard way).
The registration fees could help to fund Internet
infrastructure in that state and would not have to
be sent to a Washington, D.C. suburb. Also, the
technical burden on the companies would not be
high because all states could direct their .COM
name servers to the same corporate name servers
now supplied by the company (unless the company
wanted a different DNS data base for a different
region of the country).
While it would be nice to think that everyone is
going to "think globally" and "act globally" it is
clear that this is not the case. Pandora's box
was opened when the NSF allowed for "Internet
Taxes" to be levied without representation.
Those taxes have been enjoyed by a select
group of individuals who keep telling everyone
that there are no other solutions.
Many people have witnessed the bitter battles
over the domain name system and the positioning
for revenue opportunities and windfall profits.
These battles are just getting started. The next
round of top level domain expansion is likely
to attract large corporate players and it appears
that the Internet Politicians are more willing to
turn things over to big money, than the local
One solution available to local politicians is to
take that global NSF action and apply it at a local
level. They can now "think globally" and "act locally"
and keep those tax dollars in their community.
With a small change for ISPs, and some minor
investment in infrastructure, a state can insert
itself into the domain name system and follow
the model established by the Internet Politicians.
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