Domain Name Battle Impacts Holders, Investors

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July 30, 1999 (2:24 PM EDT)

Domain Name Battle Impacts Holders, Investors

By Mary Mosquera,

The ongoing battle over control of domain name registration could lead to some instability for domain name holders, an analyst said Friday.

The list of players involved in inducing competition in the .com, .net, and .org space is widening as Network Solutions, Inc., previously the exclusive provider of online addresses, drags its feet. Still, the U.S. Commerce Department continues to negotiate with Herndon, Va.-based NSI on pricing, intellectual-property ownership, and recognition of the Internet Corporation of Assigned Names and Numbers.

ICANN is the organization to which the government transferred Internet administration last year.

Consumer groups and some Internet businesses criticize ICANN for asserting too much authority or for not exerting enough pressure on NSI to move forward.

Two congressional committees are examining the competitive and intellectual-property issues related to domain names and have told NSI to open its domain name registry and speed up competition.

House Commerce Committee Chairman Thomas Bliley (R-Va.) sent letters this week to NSI, the Commerce and Justice Departments, and ICANN seeking more detail on competition, the domain name database ownership, and he sent e-mail suggesting inappropriate behavior by ICANN's chief outside counsel in soliciting Justice Department pressure on NSI.

A House Commerce committee spokesman said the possibility of more hearings depended on answers to Bliley. Congress doesn't want to get involved, but part of its oversight job is to help the process move along, he said.

NSI said it owns the Whois registry of over 5 million domain names because it was developed under a contract with the federal government. The Commerce Department said intellectual property developed under government contract is public. NSI's recently announced "dot com directory" is proprietary information collected on its clients, so the company said it does not have to share it with other registrars. But the directory is composed mostly of the data NSI collected as the sole registrar under government contract.

Registrars told lawmakers NSI is not letting competitors access a complete and accurate registry, which is necessary to avoid assigning an already-taken address and to protect intellectual-property rights of domain name holders.

"With domain name registrations to quintuple, trying to manage the number of domain names is hard enough but the pace of growth is unthinkable," said Gary Arlen, a Bethesda, Md., Internet analyst. Growing pains are part of the problem, but it is exacerbated by NSI's start as a monopoly, he said. The company is trying to protect itself, but still move the process forward.

The ones who may be caught in the middle are domain name holders, Arlen said. "If the parties can't sort it out soon, the chaos could cause some instability on the Internet," he said.

"The Internet could be at risk because domain names are the one centralized part of the Internet, but the Internet also is flexible and self-healing," said Bill Whyman, Internet analyst for Legg Mason Precursor Group in Washington, D.C. Bits and pieces could be lost, but it won't go down, he said. The issue for the investor is all this turmoil increases regulatory risk and will the investor get paid for this risk. "Investors stand to benefit from the longer term. How you get there is the hard part," Whyman said.