complaints that the previous system was monopolistic and too US-centric, had too much government involvement, and couldn’t keep up with the rapid growth of both the Internet and the demand for

Industry Trends domain names. (See the sidebar, “What’s Solution in a (Domain) Name?”) The issue is important because a prop- erly run DNS is a key to the ability of Internet users to register unique domain Causes New names and communicate with each other. In addition, there’s considerable money in the domain-name-registration market. The Internet Software Consortium’s July Problems 1999 Internet Domain Survey found that there are currently 56.2 million Internet hosts. As shown in the figure on page 13, Neal Leavitt Hambrecht & Quist, a technology invest- ment banking firm, projects the number of domain-name registrations will in- ast year, the US government came crease more than five times during the up with a plan it hoped would next three years, topping 32 million by settle the ongoing controversy 2002. By this time, revenue generated by over the Internet’s domain-name domain-name registrations will increase L registration system. to $2 billion. In response to the heated controversy, However, said Audrey Apfel, a senior the US Department of Commerce sanc- analyst for the Gartner Group, a market tioned formation of a nongovernmental, analysis firm, “Control of the DNS is in nonprofit agency to manage a newly pri- ICANN is short transition. It’s causing a lot of turmoil and vatized and competitive system for reg- consternation within stakeholder circles, istering, coordinating, and maintaining of money and such as network service providers, carri- Internet domain names. has generated ers, domain-name-registration providers, The agency, the Internet Corporation controversy large corporations, and governments.” for Assigned Names and Numbers in a number Discussions are ongoing among (http://www.icann.org), was formed to of areas. ICANN, Network Solutions, and the oversee the allocation and management Department of Commerce. Meanwhile, of domain names by the organizations US Representative Thomas Bliley of that register those names. ICANN also Meanwhile, ICANN has been unable Virginia (where Network Solutions is oversees management of the root-server to resolve some of its disputes with located) has also held periodic hearings system, which contains the master list of Network Solutions, the company that on the issue. top-level domain names. used to be the sole registrar of domain Interested parties are concerned that However, the formation of ICANN names and whose database contains the current controversy will delay the has launched new controversies. about 75 percent of the world’s domain planned benefits of the newly privatized For example, ICANN is short of names. Thus, the planned transition of DNS or perhaps cause the US govern- money and is operating at a deficit. In control from Network Solutions to ment to step in and run the system again. addition, some organizations contend ICANN has been slow, even though five However, said Carl Howe, corporate that ICANN is assuming too much new domain-name registrars have been infrastructure research director for power without accountability and is not approved to begin competing with Forrester Research, a market research operating with the consensus of the Network Solutions. firm, “We won’t and can’t have an unten- global Internet community. In fact, some organizations are com- able mess at the end of the day. The plaining that Network Solutions is delib- major players will come to terms.” erately dragging its feet. The company Editor: Lee Garber, Computer, 10662 Los denies this. ICANN’S FINANCIAL PROBLEMS Vaqueros Circle, PO Box 3014, Los Alamitos, This has created doubts about ICANN ICANN, which has a $5.9 million CA 90720-1314; [email protected] and the new domain-name system budget this fiscal year, is operating with (DNS), which was designed to resolve a deficit of about $800,000, according to

October 1999 11 Industry Trends

Michael Roberts, the organization’s specific expenditure figures until accoun- he doesn’t know when they will do so. interim president and CEO. tants finish calculating this information. Meanwhile, the Department of Com- Roberts noted that ICANN has only Meanwhile, ICANN continues to expe- merce convinced ICANN to scrap plans about $100,000 in the bank, has been rience a revenue shortfall. For example, to charge registrars $1 for every new unable to pay some of its bills, and has only two of the five new accredited domain name, which was expected to no contingency fund. domain-name registrars, the Council of generate $5 million in revenue. The plan Also, he said, “The budget deficit . . . Internet Registrars (Core) and Melbourne was dropped after such opponents as is deferring our ability to hire staff called IT, have paid ICANN the $5,000 annual Network Solutions and Congressman for in our original budget.” registrar fee and additional money for Bliley complained that the fee was devel- Roberts noted that expenses have been each domain name they have registered. oped and approved without public input. about 10 percent higher than expected, Roberts said that the other three new Meanwhile, Roberts said, “Our expec- although he said he would not provide registrars haven’t made payments and that tation last winter was that private dona-

What’s in a (Domain) Name?

In the early days of the Internet, vol- began complaining that the NSF’s system mance bond, have commercial liability unteers from the academic and research unfairly gave Network Solutions a insurance of at least $500,000, pay communities maintained Internet direc- monopoly in the registration business, $10,000 to Network Solutions for the tories and root servers, which contain the was overly dominated by the US gov- software the company designed to let master list of top-level domain names. In ernment and US users, and could not registrars access its domain-name data- the early 1990s, when Internet use began keep pace with the Internet’s exploding base, and pay an annual fee of $5,000 to to grow rapidly, the US National Science growth. ICANN. Foundation awarded a contract to three In 1996, a number of Internet admin- Registrars also must have the capabil- private companies to run the domain- istrative agencies formed the Internet Ad ity to provide robust and scalable name system (DNS). Hoc Committee (IAHC) to solve these domain-name registration services, a The NSF gave Network Solutions the problems. After several false starts, the global real-time Web-based interface, and exclusive contract to maintain the mas- IAHC came up with a plan that led to the a WHOIS program and database that let ter domain-name directory and register formation of the Internet Corporation users access registrar information. domain names ending in .com (busi- for Assigned Names and Numbers Meanwhile, each registrar must escrow nesses), .org (nonprofit organizations), (ICANN). The US Department of Com- an electronic copy of its registration data- and .net (network service providers). merce authorized ICANN to begin oper- base, for use in case it leaves the registra- In September 1995, the NSF gave ations on 25 November 1998. tion business or loses its accreditation. Network Solutions permission to charge The organization’s principal role in the $100 to register a domain name for two Internet, said ICANN chair Esther Termination years and $50 per year thereafter to Dyson, is to “govern the plumbing, not ICANN can terminate a registrar’s renew the name. Network Solutions gave the people. It has a very limited mandate accreditation with 15 days’ notice if it is 30 percent of the revenue to the NSF and to administer certain [largely technical] in breach of its agreement with ICANN, kept the rest after paying expenses. aspects of the . . . DNS in particular.” makes material misrepresentations, or This became big business as the num- ICANN represents a new approach to becomes bankrupt or insolvent. Regis- ber of registrations skyrocketed in the the DNS, as it is largely autonomous trants can appeal termination to any second half of the 1990s. Through June from the US government. arbitration body agreed upon by both 1999, Network Solutions registered According to ICANN interim president sides, or they can sue. about 5.3 million domain names, about and CEO Michael Roberts, “Our board 75 percent of all names. of directors is answerable to the Internet New registrars For the second quarter of 1999, the community through the mechanism of So far, ICANN has accredited five new company’s net revenue was $47.5 mil- bylaws and its Articles of Incorporation, registrars: America Online, the Council lion and its net income was $5.8 million, which provide for elections [of directors] of Internet Registrars (Core), France both 132 percent increases over the and independent review.” Télécom/Oléane, Melbourne IT, and $20.5 million in net revenue and $2.5 Register.com. ICANN has also chosen 52 million in net income it received during Registrar requirements companies for future accreditation. the same period in 1998. ICANN has set financial require- Under the newly privatized DNS, ments for organizations seeking accred- domain-name registrars can charge reg- ICANN: A new approach itation as registrars. Organizations must istrants whatever the marketplace will Over time, a number of Internet users have a minimum of $70,000 in work- bear. Most charge between $70 and and would-be domain-name registrars ing capital, post a $100,000 perfor- $119 per name for the first two years.

12 Computer 35

30 Domains .com, .net, .org 25 Others tions would cover our start-up costs, but 20 they didn’t.” The Department of Commerce has not 15 provided any additional funding to make up the resulting shortfall, but ICANN 10 has negotiated $825,000 in unsecured

loans from several companies, including New registrations (millions) 5 Cisco Systems and . Meanwhile, Roberts said, “We have 0 about $100,000 in contributions promised to us this fiscal year and are hopeful that 1995 1996 1997 1998 1999 2000 2001 2002 Source: Hambrecht & Quist the board of directors will adopt some per- manent funding mechanism at our November meeting. We believe the finan- Statistics from and predictions by Hambrecht & Quist indicate that the rapid growth in domain- cial situation will improve very soon.” name registrations will continue at least through 2002. “They won’t run out of money, but ICANN’s financial problems are hurting legally could unilaterally end the com- ICANN is supposed to begin fully inde- their effectiveness,” said Barbara Dooley, pany’s contract to register domain names. pendent operations. However, Burr said president of the Commercial Internet However, Burr said, the department she expects the conflict to be resolved Exchange, an international association could put the contract out to bid and long before then. of Internet service providers. “It’s impor- award it to another company if one Temple University School of Law pro- tant that the private sector take the ini- underbid Network Solutions. fessor David Post said Network Solu- tiative here, or the alternative is more tions’ original contract with the NSF did government regulation.” Control of the not specify who would own the com- domain-name database pany’s database on a long-term basis. DISPUTE WITH NETWORK SOLUTIONS Network Solutions’ database cur- Meanwhile, he said, both sides in the To accelerate the start of a competitive rently contains about 75 percent of the dispute have good arguments, so a court DNS, the Department of Commerce world’s domain names, based on the case on the issue could be complex. originally hoped to resolve all transition- users it exclusively registered between 1 related issues between ICANN and April 1993 and 26 April 1999. Because Accreditation agreement Network Solutions by 26 April 1999. Network Solutions’ database contains Network Solutions has refused to sign However, this deadline has slipped sev- so much important information, it is a ICANN’s accreditation agreement. eral times. And, noted associate admin- critical part of operating the DNS effec- Richard Forman, CEO of new regis- istrator Beckwithy Burr of the Depart- tively. trar Register.com, said, “It’s imperative ment of Commerce, a number of sub- According to Burr, the Department of that all registrars, including Network stantive issues are still under discussion. Commerce has the right to use the data- Solutions, work under the same contrac- Meanwhile, as new domain-name reg- base and let other registrars use it tual rules and obligations. The company istrars began operation, said Ken Stubbs, because Network Solutions compiled the refuses, asserting that it doesn’t agree chair of Core, Network Solutions “was information as a contractor for the gov- with ICANN’s terms. But until Network not as cooperative as we felt they should ernment. Solutions recognizes ICANN’s authority, be.” However, Network Solutions claims it the entire [domain-name] process and the Christopher Clough, Network Solu- owns the database, based on its original further growth, development, and sta- tions’ vice president of corporate com- domain-name registration agreement bility of the Internet may be in jeopardy.” munications, disagreed and said the DNS with the US National Science Founda- However, Network Solutions insists it transition has been smooth. He said the tion (NSF). “We created the system, and isn’t required to sign ICANN’s accredi- company generally has been working with our legal counsel has indicated that this tation agreement because of the com- five new proposed registrars each month. development work becomes [our] prop- pany’s original domain-name registration Nonetheless, he said, “There are a lot erty,” Clough said. contract with the US government. of technical and administrative hurdles While this dispute has taken place, Also, Clough said, Network Solutions [for registrars]. . . . How fast they become Network Solutions has let new registrars doesn’t officially recognize ICANN’s operational depends on the maturity and obtain domain-name-registration infor- authority. Furthermore, he said, although robustness of each company getting into mation from its database, for $9 per Network Solutions believes there is a the business.” name. need for ICANN, the company won’t If differences of opinion cannot be The issue could come to a head on 30 sign any agreement that gives ICANN resolved, Clough said, it is unlikely the September 2000, when the test phase of the right to terminate its domain-name- Department of Commerce would or the new DNS is supposed to end and registration license.

October 1999 13 Industry Trends

Dot Com Directory government property to give them a [Network Solutions] monopoly to one Network Solutions caused additional competitive edge is contrary to the spirit that may be controlled by ICANN,” he controversy recently when it launched of competition.” said. the Dot Com Directory (http://www. The new DNS could have more prob- dotcomdirectory.com), which lets users CONCERNS ABOUT ICANN lems because ICANN will manage the reg- find information about businesses on the While some in the Internet community istration of all domain names, whereas Web. Customers that register domain have criticized Network Solutions for its Network Solutions controlled only names names with Network Solutions are listed actions regarding the new DNS, ICANN ending in .com, .org, and .net. in the directory for free. Other compa- has also generated some concern. ICANN may use its power wisely, he nies pay $119 per year. For example, Network Solutions and said, but it might also exercise control for The Department of Commerce and various nonprofit and consumer groups, its own benefit. some registrars say Network Solutions is such as Ralph Nader’s Consumer Project James Love, the Consumer Project on trying to obtain an unfair advantage by on Technology, have criticized ICANN Technology’s director, said ICANN wields leveraging control of its large database for conducting closed-door meetings. too much power and authority, lacks to market the Dot Com Directory and to ICANN relented recently and opened accountability, and will become a magnet convince businesses to use its registration up most of its sessions at August’s meet- for making policy on issues not included services. ings in Santiago, Chile. ICANN promises in its original mandate, such as the use of Register.com’s Forman said that for to do the same at its next set of meetings trademarked names in domain names. true competition to take hold in the in November in Los Angeles. However, a major industry trade orga- domain-name-registration business, all Meanwhile, Temple University’s Post nization, the Information Technology registrars must operate on a level play- said ICANN might perpetuate the prob- Association of America (ITAA), is a ing field. lems attributed to the previous DNS, in staunch ICANN supporter. He said, “The fact that Network Solu- which Network Solutions was the only “The controversy is overblown and is tions is trying to use what is essentially registrar. “It’s simply transitioning from a more about personalities than sub- stance,” said ITAA president Harris age the domain-name system depends on would be compelled to stamp its impri- Miller. “We’ll reach a workable [DNS] and is based on consensus by the Internet matur on the [domain-name] process.” solution because if the private sector community. He said ICANN’s bylaws Perhaps the worst-case scenario is for can’t pull this off, it throws into doubt its promote consensus by providing for the the DNS to splinter into incompatible ability to lead in other issues.” formation of groups, made up of mem- parts, with users unable to easily access “The failure of ICANN will give bers of the Internet community, that will all domains. However, observers say the weight to the arguments of those who assist, review, and develop policy rec- Internet community won’t let that hap- want extensive government regulation of ommendations regarding domain names, pen. the Internet and claim that the industry is IP addresses, and the assignment of para- Register.com’s Forman agreed but said not capable of meaningful self-gover- meters for Internet protocols. the next 12 months will be bumpy. He nance,” he said. said, “All of the [Internet’s] governing Government regulation would slow bodies and participants have to reach the Internet’s growth, as it has done with CANN, Network Solutions, and the consensus and create a level playing field. other technologies such as telecommuni- Department of Commerce are meet- Right now it’s still like a game of chicken cations, he said. I ing regularly in an effort to settle the to see who will move first. But the end Register.com’s Forman said that while controversy over the new DNS and to result will foster fair competition.” ❖ perhaps not providing the perfect solu- establish some stability in the system. tion, “ICANN did indeed reflect work- Meanwhile, short-term delays in sta- able compromises acceptable to a large bilizing a new DNS could delay the Neal Leavitt is president of Leavitt Com- majority of interested parties represent- improvements that privatization was munications, an international marketing ing individuals, corporations, industry supposed to bring to the DNS. communications firm based in Ocean- trade groups, and not-for-profit organi- And in the long run, said Temple side, California. He writes frequently on zations.” University’s Post, “There is a chance that Internet and technology issues. Contact Roberts said ICANN’s ability to man- ICANN could fail, and the government him at [email protected].

October 1999 15