Melbourne IT Goes to Market

Melbourne IT is about to follow Telstra’s
lead by cashing in on the Australian Stock Exchange (ASX) on its de facto
monopoly on domain name registration for names ending with “com.au”.


The company will profit to the tune of AUS$85 million (US$54 million).


The company’s core business is selling domain names, in particular those
ending with .com.au, denoting an Australian commercial organisation, for
which it currently has the only license. Since November 1996, Melbourne IT, now
operating its domain buisnes through a subsidiary called Internet Names
World Wide (INWW), has registered 100,000 names for at least $100 each.


Re-registration occurs every two years, meaning a guaranteed annual income
of $5 million — and rising — if the company can keep its customers.


Melbourne IT will list on the Australian Stock Exchange on December 14,
offering 42.5 million shares representing 85 per cent of the company at
$2.20 per share. The sole existing shareholder, a shell company called
Melbourne Enterprises International which is a commercial subsidiary of the
University of Melbourne, will make $85 million from the float.


The market
capitalisation of the company would be $110 million, putting it second
largest behind ecorp in the Internet sector on the ASX.


Like Telstra, Melbourne IT is already making a substantial and rapidly
rising profit from its guaranteed income stream. Revenue is predicted to
double year on year, with the company suffering a slip in its profit growth
this year but expecting to shoot up in the year 2000.


The company has operated under a “non-exclusive” license to be the registry
(to maintain the infrastructure) and the sole registrar (to sell the names)
for all domain names ending with com.au since late 1996, but no other
company has been granted a license.


Competition in the registrar industry has been discussed by various
quasi-official industry organisations for many years, but it was not until
this November that the man who had been delegated the policy and
administration authority for the .au space, Robert Elz, gave away his
authority to the industry, in the form of the au Domain Authority (auDA).
Mr Elz is a researcher at the University of Melbourne.


Despite the importance of com.au to the company in the past, Prof Peter
Gerrand told Internet World that registrations in the generic top level
domains (gTLDs) like .com and .net, which now number 16,000 at a cost of
$110 per name, are now outstripping revenue which MelbourneIT gains from the .au
space.


“The com.au domain name registration business is but one of Melbourne IT’s
several lines of business, and our prospectus does not depend upon
retaining our current de facto position as sole administrator of com.au
beyond the timetable envisaged by auDA. Since October 1999 our monthly
revenues from gTLD registrations have been higher than from com.au
registrations. Thus our gTLD registration business is now our largest and
highest growth business,” said Prof Gerrand.


Other growth areas for INWW could include other 2LDs under .au like edu.au
and gov.au. Prof Gerrand said several times during meetings to set up ADNA
that he thought that the registration of names for educational institutions
and government agencies should be commercialised in the same way as com.au
and net.au (the registrar for the latter being Connect.com.au). Whether
auDA agrees to this is still to be determined.


Melbourne IT is negotiating with a US-based start-up called RealNames to
market the RealNames Internet Keywords System, which substitutes generic
words for domain names. The company is also planning to sell VeriSign
digital certificates, publish a paper directory of domain names, and
customise its online domain name payments system to sell it under the name
of ePayments.


Apart from domain names, Melbourne IT has a e-commerce systems integration
and consulting business which was started in June 1999, plus a
telecommunications software product development centre venture with
Ericsson called Advanced Services Application Centre (ASAC).


The company also has relations with other companies in the “incubator” run
by the University of Melbourne which has produced start-up companies like
Interactive Worldwide, the four-year-old e-commerce integrator formerly
known as Blue Tongue Online. Melbourne IT’s research and technology group
“works closely” with the University, although details of equity
partnerships have not been disclosed.


The company will move out of the Carlton precinct which clumps the
incubator firms near to their parent to a new address in the Melbourne CBD
in December, and will open an American office using the proceeds from the
float.

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