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IP: AOL to Compete in Assigning Internet Domains
From: Dave Farber <farber () cis upenn edu>
Date: Thu, 22 Apr 1999 08:22:17 -0400
http://www.nytimes.com/library/tech/99/04/cyber/articles/22domain.html April 22, 1999 AOL to Compete in Assigning Internet Domains By JERI CLAUSING ASHINGTON -- America Online, the world's largest online service, was one of five companies chosen Wednesday to compete with Network Solutions Inc., which currently enjoys a Government-backed monopoly in the lucrative business of assigning the Internet addresses known as domains. While the surprising choice of America Online introduced a seemingly formidable competitor to the business of assigning Internet addresses, its selection nonetheless raised new questions about the ability of smaller companies to ever effectively compete in this much-coveted marketplace. "It's unfortunate," said Dave Farber, a professor of computer science at the University of Pennsylvania and a board member of the Internet civil liberties group the Electronic Frontier Foundation. "I think it was a good opportunity to spread the wealth. Now you get AOL against NSI, and they can have a ball." The other four companies selected in this first round -- it will be opened to many more companies this summer -- were Register.com, a comparatively small New York-based domain name reseller; a subsidiary of France Telecom; Melbourne IT of Australia and the Internet Council of Registrars, an international consortium that helped lead the movement to break Network Solution's monopoly. The selection of the five registrars was the first major action taken by the Internet Corporation for Assigned Names and Numbers, or Icann, the nonprofit corporation established last year by the Clinton Administration to move management of the Internet from government contractors to the private sector with international oversight. Since 1994, Network Solutions has had an exclusive right to assign companies and individuals Internet addresses in the so-called top-level domains -- those ending in the suffixes .com, .net and .org. Breaking that monopoly was among the top priorities of Icann when it was organized last November. At a news conference today, Icann's interim chairman, Esther Dyson, characterized the move as "a major milestone in the joint efforts of the public and private sectors to bring Internet users the benefits of real competition." But just how much competition the new companies will offer Network Solutions remains to be seen, since the company will retain its hold on the Internet registry, the central database of all Internet addresses already assigned. And under Icann's rules, competitors will have to pay Network Solutions a $9-a-year fee for access to the registry -- far more than the administration costs, critics contend. The companies also will have to pay Network Solutions a $10,000 fee up front to help cover the costs of the software it developed to enable others to add registrations to its database. Commerce Department officials have been wrangling with the company over several difficult issues, including what portions of the databases and software built by Network Solutions as a Government contractor are now public and which are private property. In the seven years since it was granted an exclusive Government contract to build the database and registry system, Network Solutions has transformed itself into a Fortune 500 company, offering a variety of registration services and establishing registry partnerships all over the world. Wall Street was unfazed Wednesday by the threat of competition from America Online. Network Solutions' stock, which had lost half its value over the last few weeks, closed at 92 -- 32 points higher than Tuesday's close, a better than 53 percent gain. "The economic reality is that Network Solutions has all the market movement in its favor, and there's nothing Icann or the Government can do to really unseat Network Solutions," said Keith Benjamin, an Internet analyst with Banc Boston Robertson Stephens in San Francisco. "They have a crucial relationship with essentially every Internet service provider on the planet." And despite the name recognition and wealth of America Online, Benjamin said, "This is a business that AOL is not going to be easily suited for. They cater to a consumer market, so it is a little confusing why AOL is doing this." Dyson said the board intentionally picked a large company, a small company and interests representing different business models and regions of the world to make sure that different companies could all interact and effectively compete. In addition to the five test-bed participants, ICANN announced that 29 applicants, including AT&T, had met its accreditation criteria and were expected to be certified to compete when the system is opened to unlimited competition this summer. Network Solutions put a positive spin on today's announcement, noting that it already had more than 5 million customers and millions of still-unassigned names to compete for. Christopher Clough, a spokesman for the company, called the competition "good for everyone," but added: "Obviously, we have a head start. We have the most established company. We have the world's leading experts on the domain-name system," Alluding to the fees competitors will have to pay for access to the registry, he noted that Network Solutions was not only "taking on five new competitors but five new customers." Bill Burrington, America Online's vice president for policy, agreed. He said his company had applied to become a registrar because it saw the opportunity to create a new "value-added service." But he emphasized that "it's too early to say how the process will play out." "This is all new," he said. "We are doing this on the fly -- in Internet time," Burrington said. "We don't know where this is all going."
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- IP: AOL to Compete in Assigning Internet Domains Dave Farber (Apr 22)