May 20, 1999 8:25 AM PDT

What does the future hold for NSI?

As Netizens prepare to meet next week in Berlin to hash out rules for privatizing the Internet's administration, intense negotiations continue behind the scenes over the future role of Network Solutions, whose influence over the Net to date has been considerable.

Chief among the many thorny issues still undecided is how much NSI will be able to charge competitors for the domain names they register. Stakes are high in the outcome of that debate.

In addition to pricing, other issues include control over the databases in NSI's possession, the restrictions placed on NSI to prevent it from having an unfair advantage over its new competitors, and whether NSI will continue providing crucial day-to-day maintenance of the Internet's domain name system.

From NSI's point of See Don Telage Newsmaker view, the price it charges competitors is crucial to its bottom line. On April 21, when Commerce Department officials announced NSI would initially receive $9 per year for every domain name registered, the company's stock soared 53 percent.

NSI argues that the fee is fair in light of the $20 million it has invested in creating the software that will allow its competitors to connect to the master database of domain names.

Commerce Department officials, meanwhile, are still reviewing the price to see whether it complies with an agreement governing the addition of new registrars to compete with NSI. It permits NSI to seek only a "reasonable return" for its services. NSI critics say a fee as high as $9 per domain per year will keep prices for domain names from dropping, one of the key benefits of creating competition with NSI.

Since 1993 NSI has enjoyed sole authority to register domain names ending in ".com," ".org," and ".net," which account for up to 50 percent of the world's Internet addresses. Under a cooperative agreement with the U.S. government, the company also has been responsible for crucial day-to-day upkeep of the Internet's domain name system.

Last year the Commerce Department appointed the nonprofit Internet Corporation for Assigned Names and Numbers to accredit new registrars to compete with Network Solutions and to oversee future maintenance of the Net. The transition has not been without its sticking points.

Bumpy road ahead
Neither side is willing to say much in public about the negotiations, but in a recent filing with the Securities and Exchange Commission, NSI made clear that a host of issues divide it from the Commerce Department and ICANN.

"Some differences of opinion or interpretation remain to be addressed," NSI wrote in the filing. "These differences in interpretation or opinion could lead to disputes between us and the Department of Commerce or the not-for-profit corporation, which may or may not be resolved in our favor."

A Commerce Department representative was not immediately available for comment. But when the $9 fee was announced, the agency made clear that it applied only to an initial phase of competition in which five "test-bed" registrars would sell domain names under a shared registration system devised by ICANN. The two sides remain divided, however, as to whether the fee should apply once additional registrars come online.

For its part, NSI says the fee is fair.

"There is an incredible amount of technology that's gone into developing the shared registration system," said NSI spokesman Brian O'Shaughnessy. "People vastly underestimate the work and technological prowess that's involved in it."

But pricing is only the beginning. Still left undecided is who will ultimately maintain the master database of domain name holders. Under the cooperative agreement, NSI will continue to provide registry services through the end of September 2000. After that, it is not yet known what will happen. Critics of the current system say it is inappropriate for NSI to serve as both a registry and registrar, a complaint that is not likely to have been lost on Commerce Department officials.

Nor has it been lost on ICANN, which in draft guidelines for setting up the future registration system expressed its "significant competitive concerns" over having NSI provide both services. In light of the concern, NSI is prevented from using its control of the registry to benefit its registrar business. NSI also is prevented from choosing which registrars come onboard.

The restrictions are yet another source of contention. "The proposed guidelines place ICANN in an unnecessarily adversarial relationship with Network Solutions, and potentially other registries," NSI wrote in comments submitted to ICANN. Among other things, NSI added, the policies are unfair because they are not imposed on registries of other top-level domains who also serve as registrars.

Mapping ICANN's future
People from all over the world will meet in Berlin next week to plot ICANN's future and give input to many of the issues that are under negotiation. Among the items on the agenda is formation of ICANN's board of directors as well as for a supporting organization that will decide whether to create new top-level domains. The meeting runs through next Friday.

As executives from NSI continue to negotiate over their future place in the administration of the Internet, they no doubt will have in mind that the bulk of the company's $38 million in revenues for the first quarter of 1999 resulted from its exclusive authority to register the most popular form of domain names. But O'Shaughnessy, the NSI spokesman, said the concerns go well beyond the company's bottom line to include core infrastructure of the Internet.

"These are critical stability and security questions about the future function of the Internet," said O'Shaughnessy. "All these issues as we move to a competitive model need to have the consideration as an undercurrent."

 

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