The Clinton administration got tough with Network Solutions Inc. yesterday, warning that the Herndon company could lose its right to assign and manage many types of Internet addresses, the company's chief source of revenue, if it does not do more to open its now largely monopolized business to competitors.
The company responded that it is working to bring on competition and would "exercise all legal remedies" if the government tries unilaterally to cancel its registration business.
The unusually blunt and public admonition from the Commerce Department comes as it attempts to negotiate details for ending the firm's lucrative monopoly over the address-assignment business. For years, the company had exclusive rights to register Internet addresses that end in ".com," ".org" and ".net," but promised last year to let other companies enter the business starting this summer.
In exchange for that commitment, Commerce agreed that Network Solutions (NSI) could retain control over some key management functions on the global computer network, including the operation of a master database of addresses in the .com, .org and .net "domains." That arrangement was viewed by many industry analysts as a significant victory for NSI.
Five companies are preparing or have already begun to compete with NSI on a test basis; full-scale competition has yet to begin. Commerce and NSI have been unable to agree on specific terms for changes in their "cooperative agreement" that would bring about that competition.
The company contends that a new nonprofit corporation set up at the government's behest to oversee the technical issues surrounding competitive domain registration is too powerful and secretive. Critics of NSI, however, argue that the firm is delaying so it can continue to reap monopoly profits.
The Commerce Department delivered yesterday's warning to NSI in a 32-page letter to Rep. Thomas J. Bliley Jr. (R-Va.), the chairman of the House Commerce Committee, who had sent a letter to Commerce Secretary William Daley last month criticizing the role of the nonprofit corporation, the Internet Corporation for Assigned Names and Numbers, or ICANN.
Commerce's general counsel, Andrew J. Pincus, wrote: "We believe that the functions now performed by NSI under the Cooperative Agreement could be reassigned through a recompetition of those tasks. Upon such reassignment, NSI would cease to have any legal right to provide [address assignment and management] services, unless it won the competition."
Pincus wrote that Commerce could take such a step if it cannot reach an agreement with NSI. Among the key sticking points are the fee NSI wants to charge rivals to manage addresses in the master database, NSI's refusal to sign a contract with ICANN and NSI's claim that its "white pages" listing of current address holders does not have to be shared with firms that want to compete with NSI.
Commerce contends that NSI's proposed fees are too high and penalize those who want to switch to rival firms. The department also argues that the white pages database should be shared with competitors.
The company maintains that many of ICANN's contractual terms, including a provision that it can cancel the agreement with only two weeks' notice, are excessive. NSI also argues that it owns the white pages database because it created the information.
NSI spokesman Christopher Clough said having another company take over NSI's address registration and management functions "creates serious security and stability issues" for the Internet. "They could technically disconnect 5 million Internet addresses," Clough said.
Should Commerce take such a step, he said, NSI "would exercise all legal remedies." The company believes that its original agreement with the government, signed in 1992, gives it the right to continue operating the three domains into the future. "We think it's inconsistent for Commerce to contemplate this," Clough said.
Under the preliminary cooperative agreement, rival firms were supposed to be able to start offering domain registration at the end of June. Technical glitches in tests and the ongoing negotiations have delayed the process, which now is not likely to begin for several more weeks.
Commerce also used yesterday's letter to voice its displeasure with some of ICANN's recent moves that have generated criticism from many Internet activists and business leaders. The department urged ICANN to eliminate a $1-per-year fee it decided to impose on every address registered, and not to make any decisions on how it will finance itself until its board of directors gets elected members.
Commerce also urged ICANN to open its board meetings to the public and told the group that it should respond to fears among some Internet users that it aims to move from being a technical management organization to a regulatory body for Internet content and commerce.