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Report: Network Solutions Monopoly Intact Until 2000

A new research report from Prudential Securities says true competition in the Internet domain registration business may not arrive until year 2000.

In a recent report on Network Solutions, Prudential analysts Paul Merenbloom and Aydin Tuncer write, "We find it hard to believe that the company is likely to face any material competition ... within the coming several quarters."

The investment firm predicts that technical issues will delay the launch of a shared registration system, testing of which is slated to begin April 26. The building and debugging of the feeder systems that will interface with NSI's central domain database will require at least four months, according to Merenbloom, who says he worked in information systems for 12 years.

Prudential also foresees legal and other policy-related roadblocks to open competition. One major hang-up could occur shortly after April 21st, which is when the Internet Corp. for Assigned Names and Numbers is expected to release the names of the five registrars selected from a pool of 12 applications.

In an interview with InternetNews.com, Merenbloom said he believes the selection process could be delayed by legal challenges.

"If you are an applicant and not selected, would you just say 'Oh well, I tried' and leave $100 million dollars sitting on the table? Chances are you will exhaust all reasonable avenues for appeal."

The report also questions whether large corporations such as America Online Inc. or MCI Worldcom will enter the registration business in the future. While such services may seem a logical extension of their current offerings, the big players are likely to wait in the wings.

According to Prudential, "The economic upside is ... too small to warrant early access into a space that is filled with uncertainty and controversy."

Because of these obstacles to competition, the investment firm says NSI will enjoy a protected status at least until the end of this year and possibly into the first part of year 2000.

"The longer NSI is in its current position, the stronger its brand name becomes, the larger its audience, and the greater the loyalty of its patrons," Merenbloom said.

Prudential has accordingly raised its 12-month price target for NSOL from $125 to $188. The report also says that NSOL should be a "core holding for Internet portfolios."