Stratton Sclavos, CEO, VeriSign

Stratton SclavosThis year,
VeriSign extended its reach into the networked world. While the
company is involved in a bewildering
array of endeavors, from secure e-commerce transactions to domain name
registration to selling ringtones (via the recently acquired Jamba), its
elevator pitch is that it provides “a layer of intelligence on the

VeriSign’s intelligent services reside in the layer above the
routers and servers that provide the Internet’s plumbing and below the
applications and services that users deal with. The company has moved into telecom
services, switching calls and providing database services, caller ID and
local number portability; it soon will begin handling mobile content

Sclavos sat down with in VeriSign’s Mountain
View, Calif., digs to talk .com, telecom and just how many pots the company can dip into.

Q: You’ve most recently added telecommunications services to your
product portfolio. Will we see VeriSign moving into even more sectors?

We began in security, as an enabling service provider, moved into the
domain registration industry [with the acquisition of Network Solutions],
then into payments and telecom. Our core competency is building massively
scalable reliable services and being a trusted entity in the middle.

It’s been a 10-year journey to build a common infrastructure and serve
multiple markets. We’ve continued to get more profitable, because we throw
volume at the same infrastructure. Our ultimate goal is that all network
traffic will touch a VeriSign service, so we can enable it along its way and
possibly accelerate the technology.

Q: Do you think the new top-level domains will take off?

There was never really a customer demand for
new general-purpose TLDs. A lot of it was rhetoric and fascination with what
happened with .com and .net, looking for another gold rush. But if you look
at the new ones, like .info or .biz, most owners of those names bought them
to protect, rather than to serve. We don’t use them. Meanwhile, .com has
come back into fashion as a preferred name in many Asian and European

Q: How are you competing to keep the management of .net?

We’ve been a good operator of .net over the decade.
We’ve certainly demonstrated the ability to scale with demand. I’m not sure
anybody else has that capability. There will be political and competitive
forces against us, so we’ll have to do our best.

Q: Does VeriSign want to own the Internet?

In the global domain name system, about 50 percent of the names are in
.com and .net. The rest are in other extensions, [mostly country code
domains]. The fallacy of that argument is that .com and .net are a monopoly
that all domains run through. In reality, it’s about 50 percent of the

That’s a good market, but at the same time, the faster growers over the
past few years were country codes. I don’t think, if you look at the market as
a whole, VeriSign has that much control — .com is more popular internationally
than it was, but is still not that popular globally. The rest of the market is
still large and growing — and, frankly, not under contracts with ICANN.

Q: Do you think ICANN is doing a good job?

There’s a bit of misplaced priorities around some of this on the part of
those who advise and give their feedback to ICANN. I think ICANN management
has the right goals in mind, stability and security being the main thrusts
of what they’re concerned about. But they keep getting dragged into the
competitive battles.

Q: But if you’re operating .com and .net, some people think there
isn’t enough competition.

If .com and .net are only 50 percent of the market, there’s a large
percentage of the market that is going elsewhere. I think the need around
more competition at extension level is not really there. We need more
innovation around the services level. What things could we do if we were
able to innovate at the core and make the network more intelligent?

We run a phenomenally scalable and reliable service, and we do it in a
more trusted way than I believe anyone else could. But like any other
utility, people only notice when something goes wrong. People don’t notice
that we scaled the network from 1 billion to 14 billion interactions a day,
without a hiccup.

We spent all our own money to do that in the last
three years at a time when nobody else could invest. At the end of the day,
we’re a commercial entity; we think we provide a good service and make a
decent return on that, and we’d like to be able to innovate around those

That’s where we get frustrated with the system that exists today in a
lack of clarity of where we can innovate effectively. We’ve got to get into
a new debate about what’s the future of the network and how do we invest
enough to keep these new services coming?

Q: How does telecom fit into VeriSign’s plan?

We built out the DNS for intelligence. We then bought into the telecom market
at a difficult time for the industry, because we believed the assets we
owned around routing and directory services would be very valuable, as
telecom came back to life. Now, we operate one of the best service providers
for call routing, database services and, now, content services — much of it
running on our common intelligent infrastructure.

Our strategy in telecom is to enable new-generation communications,
commerce and content. On the communications side, we own the networks; on
the commerce side, we own billing and payment services on the Internet and
voice side. On the content services side, we had several carriers coming to
us asking for data and content services. So, we bought Jamba out of Berlin.
We think it’s the worldwide leader in ringtones and graphics over wireless
networks. We’re seeing a ramp-up in their revenues and their profits. It’s
been a wonderful surprise on the upside.

Q: You’ve even added voice over IP services.

The driving reason we went into telecom is that we believed that networks
would converge. We thought to ourselves, if we could be the company in the middle between
the traditional voice world and the new voice world, we could help our customers
make the transition more efficiently. We bought Illuminet to gain the
traditional network connection, and we took some technology from our DNS
business and began to modify it to be the directories for VoIP routing and

Q: Will Wi-Fi, 3G or VoIP be the real drivers of convergence?

I don’t think the consumer cares. The difference in the thinking now is
that instead of convergence happening at the core of the network, convergence will
happen in the hands of the user. The user wants to know, wherever they are,
regardless of the network type or bandwidth, calls for voice and data can
get to them and they can self-provision how it happens. It all goes to IP
sooner or later; there doesn’t have to be a declared winner between
traditional wireless, Wi-Fi, Wi-Max or broadband. They’ll all win as long as
the customer doesn’t have to care. I just want the phone to work.

These things were all white-hot in the year 2000 and then went away.
They’re alive again, but at the very earliest stages. Our view is, build it
now so the rest of the ecosystem can evolve around it, so that by ’07 or ’08,
there’s an interesting business for us. That’s one lesson we learned from
the bubble. We should tell people what we’ve done, rather than what we’re
going to do and meanwhile, invest for the long term in some of these
infrastructures. We don’t want to rely on them for next year’s revenues.

Q: How is building out the EPC network going?

In essence, it’s a copy of the DNS network. We took everything we learned
in DNSA about how to look up a name, associate it with an IP address, and
then help route the traffic that needs to get there. That’s all EPC is.

Q: Right now, a lot of companies seem to be building their own
infrastructures. Do you see this?

I feel like we’re living this movie all over again. In 1994, it wasn’t
clear why businesses would use the Internet versus EDI or private lease
lines. Once we made it simple to connect anywhere in world, the power of the
network showed through.

Right now, people question the value of EPC vs. building all the
infrastructure themselves. Once we begin to develop the capabilities,
through pilots and software vendors, people will wake up and say, “Wow, that
looks like the Internet.”

But unlike the Internet, where you couldn’t quantify the value, I’ve seen
many retailers and manufacturers point to hundreds of millions of dollars in
potential savings.

Q: Will we see even more data convergence, with perhaps EPC data being
connected to e-commerce information to enable new kinds of business

VeriSign is not smart enough to know what those demands are going to be
so we tend to want to build the system in the middle that can serve all
those needs. The things we’ve done that have succeeded incredibly well all fall
into that bucket of, build it once, and use it many times.

Our core competency is to run these things and let everyone else plug in.

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