Los Angeles Times, CA newspaper
Tuesday, July 8, 1997

U.S. Probes Firm That Issues Web Addresses

By Jube Shiver Jr., Times Staff Writer

WASHINGTON -- Deepening a global controversy over allocation of the "domain names" that point Web surfers to sites on the Internet, the Justice Department has launched an antitrust probe of the company that dominates the Internet address registration business, the agency confirmed Monday.

Network Solutions Inc. of Herndon, Va., which is moving to raise $35 million from an initial public offering to expand its business, disclosed that it had received a request for documents from the Justice Department.

"We are investigating complaints of possible anti-competitive practices in the Internet address registration industry," department spokeswoman Gina Talamona said.

The investigation comes as explosive growth and commercialization of the Internet has prompted many businesses, organizations and even foreign officials to complain bitterly about the way domain names are administered.

With some experts predicting that the pool of desirable Internet addresses could be depleted as early as 2000, the scramble for domain names is dwarfing the battle for vanity phone numbers that many Fortune 500 companies waged when 800 prefix numbers became available in the 1970s.

Network Solutions has a monopoly to register Internet addresses in crucial "top-level" domains--".com" for commercial sites, ".org" for nonprofit groups and ".net" for communications carriers--under a five-year contract with the National Science Foundation. The contract ends in March.

It could not be learned what particular domain name registration practices concern the Justice Department. In March, a New York company called PG Media Inc. sued Network Solutions, alleging that the company was violating antitrust laws by not adding new domain suffixes. The company has also been the target of complaints about its service by some involved in Internet commerce.

The federal probe is likely to be closely watched by groups such as the World Intellectual Property Organization and the telecommunications section of the Organization for Economic Cooperation and Development in Paris, which also have been unhappy with the way domain names are administered. The two groups have recently talked of asserting some control over Internet domain names with an eye toward setting up independent registries.

A handful of international groups that help govern the Internet have recommended the creation of seven new top-level domains--including ".store", ".firm" and ".info"--as a means of alleviating the address crunch. But Network Solutions and some major Internet service providers have withheld support for the proposal.

Network Solutions charges $100 for a two-year initial registration and $50 a year for renewals; it sets aside 30% of the money for Internet upkeep. The company contends the new plan would not provide enough support for Net infrastructure.

The address process has been rife with controversy as the Internet has gone from being a collegial, self-governing medium that mostly served the academic and scientific communities to a roiling commercial battlefield.

Earlier this year, for example, Mattel Corp., which owns the European trademark rights for Scrabble, sued Network Solutions in federal court in Los Angeles for letting archrival Hasbro register the domain name "scrabble.com," even though Hasbro markets the game in the United States. A lawyer for Mattel, which is seeking unspecified monetary damages and a preliminary injunction to bar Hasbro from using "scrabble.com," declined to comment.

More recently, Mecklermedia Corp., a magazine publisher, paid more than $100,000 for the domain name "internet.com." Meanwhile, sensing that many companies are frustrated in their quest to secure choice domain names, two Silicon Valley entrepreneurs have convinced the tiny Pacific Island nation of Tonga that there is big money to be made selling domain names registered under the country's ".to" address suffix--for example, "microsoft.to"

"Having your own cyber ID is becoming increasingly critical," said Gary Arlen, president of his own Bethesda, Md., Internet consulting firm. "For companies that think it is important to have a presence on the Internet . . . this is the first big battle over corporate branding to build a base for electronic commerce" with customers.

Meanwhile, a widely publicized White House study on electronic commerce released last week, called for an inter-agency working group to consider "what contribution government might make, if any, to the development of a global competitive, market-based system to register Internet domain names."

Network Solutions executives could not be reached for comment. But Edward G. Poplawski, a Los Angeles lawyer who is an outside counsel for Network Solutions on the Mattel case said, "A lot of these domain name disputes have been blown out of proportion."

Poplawski added that since Network Solutions is operating under an agreement with the National Science Foundation to administer domain names, "it's difficult to imagine, under those circumstances, what antitrust problem [Network Solutions] would be creating, given that they are operating" under a government-created franchise.

But Stan Gorinson, a Washington lawyer and antitrust expert, said government agreements alone can offer no protection to antitrust violations.

"Government rights, whether they are patents or [Federal Communications Commission] licenses, can be misused, and the fact that somebody has a governmental licence doesn't necessarily preclude them from being looked at on antitrust grounds," Gorinson said.

Copyright Los Angeles Times