E-COMMERCE AND DEVELOPMENT REPORT 2002

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1 United Nations Conference on Trade and Development E-COMMERCE AND DEVELOPMENT REPORT 2002 CD Version prepared by the UNCTAD secretariat United Nations New York and Geneva, 2002

2 Note Symbols of United Nations documents are composed of capital letters with figures. Mention of such a symbol indicates a reference to a United Nations document. The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. Material in this publication may be freely quoted or reprinted but acknowledgement is requested, together with a reference to the document number. A copy of the publication containing the quotation or reprint should be sent to the UNCTAD secretariat. The Executive Summary of this Report can also be found on the Internet at the following address: UNCTAD/SDTE/ECB/2 Copyright 2002, United Nations All rights reserved

3 Foreword E-commerce is one of the most visible examples of the way in which information and communication technologies (ICT) can contribute to economic growth. It helps countries improve trade efficiency and facilitates the integration of developing countries into the global economy. It allows businesses and entrepreneurs to become more competitive. And it provides jobs, thereby creating wealth. But knowing that an instrument is powerful is not enough to ensure that it will be put to the best possible use. We need to understand how it works, and how and when it should be used, and find creative ways to put this knowledge into practice, disseminate it widely and maximize its power. Towards that end, the E-Commerce and Development Report 2002 provides factual information and analysis covering a range of topics that will influence the expansion of e-commerce in developing countries. The Report also identifies the policy and business options available to developing countries, and makes practical proposals for maximizing the contribution of e-commerce to economic and social development. If the world is serious about achieving the Millennium Development Goal of halving the number of people living in extreme poverty by the year 2015, ICT must figure prominently in the effort. Everyone governments, civil society, private sector businesses has a vital stake in fostering digital opportunity and putting ICT at the service of development. Yet despite commendable efforts and various initiatives, we are still very far from ensuring that the benefits of ICT are available to all. The digital divide is as wide as ever, with billions left unconnected. I hope this report contributes to the efforts of the international community to seize the extraordinary opportunities of the digital revolution. Kofi A. Annan Secretary-General of the United Nations

4 Acknowledgments The Electronic Commerce and Development Report 2002 was produced by a team led by Zhongzhou Li, Officer-in-Charge of UNCTAD s Division for Services Infrastructure for Development and Trade Efficiency, and coordinated by Yusuf Kalindaga, Officer-in-Charge of the Electronic Commerce Branch. The following UNCTAD staff members participated in the preparation of this publication: Cécile Barayre, Pilar Borque Fernández, Dimo Calovski, Angel González Sanz, Rouben Indjikian, Lorenza Jachia, Carlos Moreno, Susan Telstcher and Haijuan Yu. The UNCTAD team wishes to express their recognition to the following consultants who provided background material for specific chapters of the Report: Christopher Gibson, Charles Goldfinger, Cristian Huggle, Swasti Mitter, Frank Nikolla, Jean-Christophe Perrin, G. Russel Pipe. The contribution of experts who submitted papers on e-finance to events organized by UNCTAD and which have been used in the relevant chapter is also acknowledged. The cover of the Report was designed by Diego Oyarzun Reyes, and the text was edited by Graham Grayston, Talvi Laev and Chris Macfarquar.

5 Contents Foreword... Explanatory notes... Abbreviations... Executive Summary... iii iv v xix PartOne E-COMMERCEANDDEVELOPMENT:SOMECROSS-SECTORALASPECTS 1. E-Commerce around the world: A brief status report... 3 A. Global connectivity and online trade... 3 B. Regional perspectives C. E-commerce and development: the international dialogue Notes References The domain name system and issues for developing countries A. Introduction B. Domain names: Coming into the mainstream C. The role of ICANN D. Domain names and legal issues: The relationship between the DNS and Intellectual Property Rights E. Concluding remarks and policy recommendations Notes References and bibliography Annex I: Overview of the DNS Annex II: Registrar prices for domain name registration Gender, e-commerce and development A. The relevance of gender B. Digital opportunities for women C. Capacity building: rationale for a gender lens... 70

6 vi CONTENTS D. Other factors affecting women in the digital economy E. Conclusions and policy recommendations Notes References and bibliography Annex I Annex II Annex III: Mainstreaming gender in ICT policy M-Commerce: Wireless communication opportunities for developing countries A. Introduction B. Main Features of M-commerce C. Wireless in Developing Countries D. M-commerce Applications and Trends E. Privacy and Data Protection F. Main Findings and Recommendations Notes Annex I: China: M-commerce applications and strategies A case study PartTwo IMPACTOFE-COMMERCEONSELECTEDSECTORS 5. The IT industry, e-business and development A. Introduction and definition of the Information Technology Industry B. Trade in IT products and Trade Policy Environment C. Role of IT in E-business and the developmental impact of the IT industry D. Methodology of the survey of most important IT multinationals E. Results of the survey F. Conclusions Notes References Annex I: Statistical data on the IT sector Annex II: Questionnaire on Electronic Commerce and Investment in Developing Countries

7 CONTENTS vii 6. E-Finance for development: Global trends, national experiences and SMEs A. Introduction B. Internet banking C. Internet payments D. International electronic trade and finance systems E. Online credit information and credit insurance systems F. Private Equity Mobilization G. Microfinance initiatives H. Lessons from global e-finance experiences I. E-finance challenges for SMEs J. Conclusions Notes References and bibliography E-Commerce and the publishing industry A. Introduction B. Publishing features and main issues C. E-publishing in developing countries D. Copyright issues in the world of e-publishing E. Conclusions and recommendations Notes References and bibliography Annex I: Statistics of the ISSN Register Annex II: Number of book publishers in selected countries/territories in Annex III: A brief description of electronic publishing initiatives E-Insurance A. Introduction B. Suitability C. Best Practice D. Regulatory and supervisory issues and insurance activities on the Internet E. Conclusions Notes Annex I: IAIS Principles on the Supervision of Insurance Activities on the Internet

8 viii CONTENTS 9. Export performance and E-Services A. Introduction B. Information technology and services export performance C. Measuring export performance in the services sectors D. Case studies from developing countries: computer-related services exports E. Conclusion and policy implications Notes References Annex I: Methodologies employed for measuring export competitiveness Annex II: International Trade in Services,

9 CONTENTS ix List of Boxes Box Page 11. Republic of the Congo (.cg) cctld TLD forums Critique of UDRP Gender structure in back-office services (India) Changing modes of working could be of benefit to the corporate sector Some women enjoy teleworking Other women feel concerned Management perception of teleworking (India) Reasons for women leaving highly paid jobs: Examples from software companies in Kerala, India Women s participation in IT education and training Carnegie Mellon University on attracting women into IT programs Accounts of difficulties in accessing basic Internet infrastructure Opportunities in offshore outsourcing and English proficiency Network technologies Survey of national B2C m-commerce market trends M-commerce services in Norway The Information Technology Agreement Open-source software Localization of software and websites: a growing industry The online strategy of Le Monde E-publishing and copyright in Peru E-publishing and copyright in the United Kingdom ACORD insurance standards MarketScout: an e-market for insurance agents inreon.com AIS - AIO Insurance Software Limited statistics on international trade in services Dynamic e-services List of Charts Chart Page 11 Shares of world Internet users and e-commerce revenue Primary regions served by surveyed public exchanges, Authority concept of the DNS Authoritative root server system Share of total domain name registrations... 36

10 x CONTENTS Chart 16. DNS Resolving Gender profile of enrolment in IT courses in the United Kingdom, 1994/ / Gender profile of IT enrolment and graduates in the Philippines, Transmission of message from mobile phone to bank Mobile POS terminal transactions using bank cards Mobile securities service value chain Access to telephones, PCs and the Internet per 100 inhabitants (2001) Total exports of IT products ($ billions) Share of IT in World Trade (percentage) Simple average of tariffs applied to IT products Sectors in which the companies invest Means that your company uses in order to establish a presence in developing countries What proportion of your facilities in developing countries use the following technologies? In which of the following regions does your company currently invest or intend to invest (percentages)? Percentage of companies that invest in the different regions according to the location of their headquarters Factors that your company considers in choosing a developing country as a potential location for investment For what purpose does your company invest or intend to invest? (percentages) Percentage of companies that invest in the different regions according to the purpose of investment Actions that would help improving the competences of your company s local employees in developing countries Actions that would encourage you to increase your reliance on local subcontractors Internet payments: a radical value shift The Identrus scheme Insurance Premium Volumes in Developing Countries Insurance on the Web: total Internet sales Product suitability for e-insurance Pre-Internet Insurance Internet-Enabled Insurance How Insurers Enable Agents to Quote Costa Rica: total exports ( ) Costa Rica: Computer-related services exports ( ) India: Software and services exports Expected business process outsourcing market (US$ billion Page

11 CONTENTS xi List of Tables Table Page 11. Estimates of Internet users worldwide (millions) Internet users (thousands), , by region Internet users per 10,000 people, , by region Some estimates and forecasts of worldwide e-commerce (billions of dollars) A forecast of total e-commerce (B2B and B2C) (billions of dollars) Some global B2B estimates and forecasts (billions of dollars) Forecast B2B and B2C in 2006, by region (billions of dollars) Total e-commerce (B2B and B2C) in selected Asian countries and territories ( , billions of dollars) Estimates of the evolution of e-commerce in transition economies (billions of dollars) Sponsored gtld agreements Registrar charges, selected registration services in the.com domain Registration fees, selected African cctld registration services in geographical order from North to South Highest reported prices for domain names Employment pattern of software services companies in Malaysia in Women s internet usage in selected countries IDC s services industry IT activity groupings IDC s services industry business activity groupings Women reached by 34 largest microfinance schemes Total exports of IT products and developing countries share of exports Dataset utilized for analysis of trade in the IT sector World trade in cultural goods by category Daily newspapers: number published and circulation per 1,000 inhabitants Price changes in serial (journal) prices in the United States Nonprofit journals, issue prices and prices per page (US$), 1985 and Journals published by commercial publishers, issue prices and prices per page (US$), 1985 and Growth in number of scholarly electronic journals and other communication forums Estimated Revenues Generated by Foreign Sales/Exports of selected U.S. Core Copyright Industries, , (billions of dollars) USTR 2002 Special 301 Decisions and IIPA estimated U.S. trade losses due to copyright piracy (in millions of U.S. dollars) and estimated levels of copyright piracy for Online personal insurance markets and carriers in the United States Selected examples of European online personal insurance carriers and markets World exports and imports in goods and services Services exports by major category, Growth rate of selected service products share in world exports RCA by service sector for developing and developed countries

12 xii CONTENTS Table Page 35. RCA indices and growth rates by country Countries with RCA indices >1 and positive growth rates WMS 5-year average and growth rates by country Countries with WMS 5-year average > 1 and positive growth rates Countries with WMS 5-year average >1, RCA indices >1 and positive growth rates in both Indian software and services exports: key service lines (US$ millions)

13 CONTENTS xiii List of abbreviations A ABA ABoC ABS ADR AFTLD AOL AP APC APEC APTLD AR ARPANet ASYCUDA ATM American Bar Association Agricultural Bank of China Australian Bureau of Statistics Alternative Dispute Resolution African Top Level Domains America On Line accounts payable Association for Progressive Communications Asian-Pacific Economic Cooperation Asia Pacific Top Level Domain Forum accounts receivable Advanced Research Projects Agency Network Automated System for Custom Data automated teller machine B BIAC BNDES BOC BPM5 BPO BRAC BSCH B2B B2C Economic and Industrial Consultative Committee of OECD Brazilian Development Bank Bank of China IMF 5 th Balance of Payment Manual Business process outsourcing Bangladesh Rural Advancement Committee Banco Santander Central HispanoAmericano Business to Business Business to Consumer C CA CAPROSOFT CBC CCIPT CCRTU cctlds CDMA CEF CENAT CENTR CFCC Certificate Authority Cámara de Productores de Software Construction Bank of China China Council for the Promotion of International Trade China Central Radio and Television University Country Code Top-Level Domains Code Division Multiple Access Caixa Economica Federal Centro de Alta Tecnología Council of European National Top-Level Domain Registries China Financial Certificate Center

14 xiv CFO CGE CIECC CLS CMB CMU CNAP CNNIC COD COFACE CRS CSRC CONTENTS chief financial officer Computable general equilibrium China International Electronic Commerce Center continuous linked settlement China Merchants Bank Carnegie Mellon University Cisco Networking Academy Program China Internet Network Information Center Cash on Delivery Compagnie française d assurance pour le commerce extèrieur Computer Reservation System China Security Regulatory Commission D D&B DMCA DMO DNS DP Dun and Bradstreet Digital Millennium Copyright Act (ICT Information and Communication Technologies destination management/marketing organization Domain Name System digital products E EBOPS EBPP ebxml ECE EDI EDIFACT EIPP ERP EU Extended balance of payment services electronic bill payment and presentment Electronic Business using extensible Markup Language United Nations Economic Commission for Europe Electronic Data Interchange Electronic Data Interchange for Administration, Commerce and Transport electronic invoice payment and presentment enterprise resource planning European Union F FAQ FDI FTAA FTC frequently asked questions foreign direct investment Free Trade Area of the Americas Federal Trade Commission of the United States G GAC GATS GATT GBDe GDI ICANN Government Advisory Committee General Agreement on Trade in Services General Agreement on Tariffs and Trade Global Business Dialogue in Electronic Commerce Gender Development Index

15 CONTENTS xv GDP gross domestic product GDS global distribution system GE General Electric GEF Global Electronic Finance GIS Geographical information systems GNP gross national product GPRS General Packet Radio Service GTAP Global Trade Analysis Project GTFNet Global Trade Finance Network gtlds Generic Top-Level Domains G3 Third generation mobile communications technology, ITU specification G8 Group of 8 H HCOPIL HSBC HTML Hague Conference on Private International Law Hong Kong Shanghai Bank hypertext mark-up language I IANA IBM ICANN ICBC ICC ICP ICT IDB IDC IDN IETF IFC IGC IIPA ILPE IMF INNs IP IPO IPRs ISP ISTAT IT ITAA ITU Internet Assigned Numbers Authority International Business Machines Internet Corporation for Assigned Names and Numbers Industrial and Commercial Bank of China International Chamber of Commerce Internet Content Provider Information and Communications Technologies Inter-American Development Bank International Data Corporation Internationalized Domain Name Internet Engineering Task Force International Finance Corporation International Gate Way International Intellectual Property Alliance Internet Law and Policy Forum International Monetary Fund International Non-propietary Names Internet Protocol Initial Public Offer Intellectual Property Rights Internet Service Provider Italian National Statistical Institute information technology Information Technology Association of America International Telecommunication Union

16 xvi CONTENTS K KNSO Korean National Statistical Office L LACTLD L/C LDC Latin American & Caribbean Country Code Top Level Domain Organization letter of credit least developed country M MFN MII MLES MoE MoFTEC MPS MULTIMOD most favoured nation Ministry of Information Industry UNCITRAL Model Law on Electronic Signatures Ministry of Education Ministry of Foreign Trade and Economic Cooperation Ministry of Public Security Multi-region econometric model N NASSCOM NATLD NGOs NTO National Association of Software and Service Companies North America Top Level Domain Organization Non-governmental organizations national tourism office O ODR OECD Online Dispute Resolution Organisation for Economic Co-operation and Development P PBoC PKI POS PROCOMER P2P People s Bank of China Public Key Infrastructure point of sale Promotora del Comercio Exterior de Costa Rica Peer-to-peer R R&D RCA RDPR RTGS research and development Revealed comparative advantage Restrictions Dispute Resolution Policy real time gross settlement

17 CONTENTS xvii S SAR SAT SBEM SLD SMS SME STP SWIFT special administrative region State Administration of Taxation Softbank Emerging Markets Second-Level Domain Short Message Service small and medium size enterprise straight through processing Society for World Interbank Financial Telecommunications T TCP/IP TLD TRIPS transmission control protocol/internet protocol Top-Level Domain Agreement on Trade-Related Aspects of Intellectual Property Rights U UCP Uniform Customs and Practice for Documentary Credit UDRP Uniform Domain Name Dispute Resolution Policy UN/CEFACT Centre for the Facilitation of Procedures and Practices for Administration, Commerce and Transport of the United Nations Economic Commission for Europe UNCITRAL United Nations Commission on International Trade Law UNDP United Nations Development Programme UNESCO United Nations Educational, Scientific, and Cultural Organization UNU-INTECH United Nations University Institute for New Technologies URL Uniform Resource Locator USBOC United Bureau of the Census V VAT VMM VoIP VSAT value-added tax Virtual Microfinance Market Voice-over-Internet Protocol Very Small Aperture Terminal W WAP WCT WIPO WMS WSIS WTDR WTO wireless application protocol Cooperation Treaty World Intellectual Property Organisation World market share World Summit on the Information Society World Telecommunication Development Report World Trade Organisation X XML Extensible mark-up language

18 EXECUTIVE SUMMARY 1. E-commerce around the world: A brief Status Report In contrast with the weak performance of several key developed and developing economies in recent months and the difficulties experienced by the information technology (IT) sector, Internet use and particularly electronic commerce have continued to grow at a fast pace since the publication of the E-Commerce and Development Report The number of Internet users worldwide is expected to reach 655 million by the end of Developing countries accounted for almost one third of new Internet users worldwide in In most of them, however, Internet penetration rates remain very low. As for e-commerce, the following table presents three estimates of global online sales. In the most optimistic forecast, e-commerce would represent about 18 per cent of worldwide business-to-business and retail transactions in Worldwide E-Commerce: some Estimates and Forecasts (Billions $) Source Forrester 2, , , , , IDC , Emarketer (B2B only) , , Regional perspectives Africa Internet connectivity has improved in Africa. The number of dial-up subscribers grew by 30 per cent in 2001 and now stands at about 1.3 million. Incoming Internet traffic represents 1 gigabyte per second, while outgoing traffic is around 800 megabytes per second. However, only 1 in 118 Africans has Internet access, and only 1 in 440 has access if the five countries with the most users are excluded from the calculation. Cost remains an extremely high barrier. Business-to-business (B2B) outside South Africa remains almost negligible. However, B2B opportunities have been identified in the online and offline services sectors. In the business-to-consumer (B2C) sector, handicrafts and products and services targeting Africans outside their home countries seem to dominate. Latin America E-commerce is highly concentrated in four relatively developed Internet markets (Argentina, Brazil, Chile and Mexico). Overall, between 50 and 70 per cent of Latin American enterprises in the formal sector are estimated to have access to the Internet. The Internet is widely used for business contacts and informationgathering, but only a minority of enterprises carry out online transactions. Large transnational corporations, notably in the automotive sector, are playing a key role in the development of online B2B transactions, especially in Brazil and Mexico. Banking is another sector in which B2C providers in the region, particularly in Brazil, have developed a competitive edge. Brazil has also made significant progress in business-related e- government applications.

19 xx EXECUTIVE SUMMARY Asia and the Pacific It is in this region that e-commerce is spreading most quickly among developing countries. The region s enterprises, particularly in manufacturing, are exposed to pressure from customers in developed countries to adopt e-business methods and are investing to be able to do so. China s population of Internet users is already the world s third largest. The transformation of this great potential into an actual e-commerce market may not happen at the same pace. Logistical difficulties such as insufficient transport networks represent a serious hurdle to B2B development, as they make it difficult for companies to realize the potential gains of increased efficiency in their supply chains. Countries with economies in transition Fast growth in both B2B and B2C e-commerce is expected in the Central and Eastern European countries with economies in transition. However, e-commerce in transition economies is not likely to reach 1 per cent of global e-commerce before While the more technologically advanced nations in Central Europe and the Baltic have relatively high rates of digital literacy and are laying the foundations for the development of e-commerce activity, others (particularly in the Balkans, the Caucasus and Central Asia) remain far behind. North America and Western Europe In the most advanced markets e-commerce growth seems to have been little affected by the prevailing poor economic conditions. B2B e-commerce in 2001 constituted at most 2 per cent of all B2B transactions in the United States and much less in Europe, but the share of online transactions in total B2B sales is growing quickly on both sides of the Atlantic, and it is estimated that in the next two to four years it will approach 20 per cent, representing a massive shift of business operations towards the online environment. Enterprises will focus on e-business tools for procurement, supply chain operations, business process outsourcing and, to a certain extent, e-marketplaces. In the case of B2C e-commerce, persistent growth during the economic slowdown could indicate that, rather than being a maturing activity, online retailing is still in a growth phase even in those economies where it took off earlier. Although even in the United States the share of B2C e-commerce in total retail sales remains modest (below 3 per cent), it has progressed significantly more in a number of sectors, in some of which online sales already represent up to 18 per cent of total sales. Some of these sectors, such as software, travel and tourism services and music, could represent good opportunities for developing-country suppliers. E-commerce and development: the international dialogue The effects of Internet-induced changes in the global economy and their implications for developing countries will depend to a significant extent on factors that policy-makers, business players and other stakeholders can influence. Policies must be designed, articulated in coherent e-strategies and implemented in partnership with all the relevant players to ensure that the new opportunities for creating, transforming, applying and exchange information and value are used to improve the productivity of developing economies and their enterprises. The process of designing the strategies that can make e-commerce a force for development must necessarily include an international component that supports national efforts by ensuring that the developmental perspective is present in a meaningful way in the multiple international discussions of the Internet, information and communications technology (ICT) and the organization of their economic applications. A close relationship between national e-commerce strategies and international cooperation would be greatly facilitated by the emergence of a common understanding of the fundamental elements of e-commerce strategies for development, specially if, as seems desirable, ICT is to be mainstreamed into official development aid programmes. 2. The Domain Name System and Issues for Developing Countries Domain names have evolved very rapidly into a common feature used to identify a website s location while at the same time expressing the name, brand or other identifying features of the person, business or organization using the domain name. As the use of information and communications technology (ICT) and e-commerce spreads in developing countries, domain names are expected to become important for commercial and non-commercial uses in these countries. The development of a national domain name system (DNS) infrastructure is an important means of facili-

20 EXECUTIVE SUMMARY xxi tating the online exchange of information in developing countries and thus creating a valuable resource for communication, education and business. At the same time, however, domain names and the DNS present a complex array of commercial, technical, policy and legal questions which highlight many of the cross-border issues presented by the Internet and e-commerce. Developing countries need to understand these issues and formulate responses that are appropriate for the country s online community, satisfying relevant legal, cultural, economic, language and other dimensions. Policy decisions are required in relation to developing countries national country code top-level domains (cctlds), which foster not only ease of registration of domain names but also overall confidence in the cctld space. There is no single model for structuring a cctld that would meet the needs of all countries or territories. In developing countries, cctld administrators can develop appropriate policies to meet the needs of their community, with the overall goal of promoting access to and use of the Internet. In particular, authorities in developing countries should be aware of the architecture and functioning of the DNS so that they can establish a reliable DNS environment to ensure that predictable results are achieved when a user enters a domain name. It is important that the overall structure of the DNS market within a country provide a competitive environment, at least at the registrar level. One key decision is whether the cctld should be structured more openly so that anyone, even non-residents, can register, or whether to reserve the cctld exclusively for local residents and companies. CcTLD administrators in developing countries can enhance domain name registration practices by (i) ensuring that standard agreements exist for domain name registrants setting out their rights and obligations; (ii) ensuring equal treatment of all eligible registrants requesting domain names; (iii) making the policies and procedures of the cctld available on the Internet for public inspection; (iv) establishing a clear policy for maintaining registrants contact information, and for protecting their privacy; and (v) establishing a dispute resolution policy. Increasing amounts of information are becoming available to developing country experts to assist in formulating an appropriate approach for management of the cctld. Developing-country cctld managers should become involved in the relevant forums for exchanging information about and participating in the DNS; information about cctld organizations is provided in this chapter. The Internet Corporation for Assigned Names and Numbers (ICANN) is a central player in the management of the DNS, with its governance and coordinating functions extending to many areas of importance. While it has achieved a number of important milestones, it has not been able to avoid continuing questions concerning its structure, its basis for legitimacy, its sources of funding and its international representativeness. Unlike a treaty-based organization, ICANN was established as a private-sector organization with responsibility for coordinating the DNS in a number of key areas. ICANN has been funded through the registries and registrars participating in the global DNS and has introduced the concept of accreditation for companies seeking to offer registry and/or registrar services for the generic top-level domains (gtlds) in the DNS. One issue of special concern to developing countries is that most cctld administrators have yet to sign any formalized agreement with ICANN. Such an agreement would define rights and responsibilities, including funding commitments. A reform process is underway for ICANN. For developing countries, the reform of ICANN is an important issue because it gives these countries a renewed opportunity to engage in the ICANN process, either directly or through their regional cctld organizations so that their perspectives, requirements and international diversity are duly taken into account. Domain names have generated a number of legal issues, key among them the tension arising from conflict between domain names and the system for protecting trademark rights. Relying on trademark law, a company can develop goodwill in connection with its brand and expect that the brand will be protected from infringement, while consumers will similarly be protected from deceptive practices. Domain names were launched into the commercial space in a manner that largely disregarded this aspect of the intellectual property system. The automatic process for registering a domain - first used for the gtlds but now commonly applied also in many cctlds - created conditions that permitted a flood of registrations of popular names. A positive consequence of this approach is that it has presented a low entry barrier for the many new entrants into e-commerce, including businesses in developing countries. At the same time, however, the disconnect between the DNS and the trademark system has given rise to practices such as the bad-faith registration by third parties of trademarks as domain names in order to take unfair advantage of the marks. After a somewhat painful transition period in which trademark owners and domain name registrants, and

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