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Network Solutions Put on Alert

The U.S. Department of Commerce has put Network Solutions on notice that it plans to play hardball if the domain registration company resists open competition.

In a 28-page letter authored by general counsel Andrew Pincus and made public late Friday, Commerce provides a rare glimpse into the private negotiations between the government and Network Solutions, its exclusive contractor for the past six years.

The letter was penned as a response to one sent last month by Rep. Thomas Bliley, chairman of the House Commerce Committee, to Commerce Secretary William Daley, in which Bliley criticized the Internet Corporation for Assigned Names and Numbers' handling of the privatization of the domain name system.

While Commerce's reply contained strong admonitions for both sides, the document for the first time revealed Commerce's frustration with NSI's position on several key issues related to opening up domain registration competition.

One major sticking point is the Commerce Department's authority to terminate NSI's cooperative agreement with the US government, which expires on Sept. 30, 2000.

According to Pincus, NSI believes Commerce lacks such authority. Should the United States terminate or fail to renew its contract, NSI believes it has the right to manage the .com, .net, and .org domains "in perpetuity without any oversight or supervision by the US government."

Such a position, said Commerce, has "disturbing implications for the future of the Internet." The letter suggests NSI could raise its fees, thwart competitors, and block access to the whois database of registration data.

"An NSI unconstrained under U.S. law," Pincus also warned, "would quickly become a target of action by other countries in order to protect consumers against the exercise of market power."

While Commerce said it could decide to reassign NSI's functions to another contractor, such an outcome "would be extremely destabilizing for the Internet and therefore quite harmful to its development."

Similarly, the agency said it believes NSI's refusal to sign a registrar accredation agreement with ICANN would thwart robust competition and the benefits of lower prices and greater choice. "The agreement must assure reasonable supervision to prevent the exercise of market power in a way that injures consumers."

Other key issues revealed in the Commerce Department letter:

  • The agency wants to facilitate the transfer of existing domain registrations between registrars by instituting a cost-based domain transfer fee. The agency would also like registrars to be able to offer registrations of varying lengths rather than the current two-year term.

  • NSI is reluctant to give competing registrars access to whois information about when domains were registered, for fear that competitors will "harass" the registrants when the domain comes up for renewal.

  • NSI claims that "personnel resource limitations" will permit it to support the addition of new registrars at the rate of only five per month.

    More than 50 firms are waiting in the queue of ICANN-accredited registrars.

  • Commerce would like NSI to revise the InterNIC site so that visitors can search a comprehensive whois database of all registrars.

  • To prevent NSI from having an unfair advantage, its registry and registrar operations should be separated, according to the agency.

Despite Commerce's criticism of Network Solutions, the agency said it is confident it will resolve the outstanding issues and reach an agreement. According to Paul Merenbloom, an analyst with Prudential Securities which has a "strong buy" rating on the stock, the US government wants to prevent the situation from imploding, and that works to NSI's advantage.

"We have a multi-trillion dollar world economy that's based on the continued smooth operation of the DNS. No entity is going to want to stand up and say `I took this thing offline.'"