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Security Concerns Boosted VeriSign's Dot-Net Bid

Scott Sutherland, an analyst at Wedbush Morgan, said losing the domain could have panicked some investors, who may have taken it as a sign that VeriSign would eventually lose dot-com as well. That's unlikely, since VeriSign's contract to run dot-com presumes that the company will retain control of the domain indefinitely unless it does something to warrant having it taken away, but Sutherland said winning the dot-net contract is likely to quell investors' concerns on that front. The dot-com registry generates more than $150 million a year for VeriSign.

Also, while dot-net may not contribute a large revenue stream, Maguire and Sutherland noted it is an extremely profitable line of business because the technology required to run the registry is already in place. The two analysts don't own stock in VeriSign and their firms don't provide investment-banking services for the company.

_____ICANN Headlines_____
Online, Benedict XVI Already Taken (The Washington Post, Apr 20, 2005)
VeriSign Maintains Hold on .net Domain (washingtonpost.com, Mar 28, 2005)
Ruling on '.us' Domain Raises Privacy Issues (washingtonpost.com, Mar 4, 2005)
Tech Policy Section

Unfair Advantage?

While it was stressing security in its dot-net bid, VeriSign also argued that competition at the consumer level wouldn't necessarily be served by moving the domain to another operator -- saying that from a consumer standpoint it's more important to bolster competition at the retail level.

"I don't think this was a choice between security and competition, security and stability are important, but Telcordia gave VeriSign its highest score for competition," McLaughlin said.

But even the choice of Telcordia as the evaluator has raised some hackles among VeriSign and ICANN critics.

Telcordia is owned by Science Applications International Corporation, a company that once owned a piece of Network Solutions. Although Telcordia fully disclosed its historic ties before the dot-net evaluation began, the company couldn't help but view VeriSign in a favorable light, said Paul Vixie, president of the Redwood City, Calif.-based Internet Systems Consortium, a company that publishes a key piece of Internet software.

"Telcordia shares a lot of corporate DNA with VeriSign. They're the same type of people, and they do things in the same general way, and these evaluations are really smell tests. ... [ICANN] picked someone who would recognize VeriSign as someone who was like themselves," Vixie said.

ICANN spokesman Kieran Baker said ICANN didn't go forward with the evaluation process until all the bidders were satisfied that Telcordia could render an unbiased evaluation.

But in the wake of the decision in VeriSign's favor, at least three of the four losing bidders have filed formal complaints about some portion of the evaluation process, and all five bidders told ICANN that they'd be submitting written comments on the evaluation process. DeNic, the company that operates Germany's sovereign dot-de, the world's second-largest Internet domain behind dot-com, has been vocal about its unhappiness with the process.

"We will comment on these issues, but I'm not sure we'll do further complaints, because we don't think it will change the results. But we're disappointed that ICANN and Telcordia did not take the opportunity to run this process more properly," DeNic director Sabine Dolderer said. DeNic complained that Telcordia misstated information about DeNic's in-house technology in the first draft of the report. Telcordia issued an amended report that did not change DeNic's ranking, which was fourth out of five.

Sentan, the joint venture between Sterling Va.-based NeuStar and Japan Registry Services, which runs Japan's sovereign dot-jp domain, placed second in the dot-net bidding process. Sentan wrote a letter to ICANN voicing concerns about the selection process, but other than that has remained fairly silent.

VeriSign's current contract to run dot-net expires June 30, and ICANN expects to complete negotiations in the next couple weeks. The ICANN board of directors must approve the final deal, and the U.S. Department of Commerce will then have the final say, but in recent years, the department has gone along with every major decision by the ICANN board. The agency declined to comment on the dot-net issue.


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