VeriSign's domain deal on hold

The US government will need until May 14 to review a controversial deal extending computer security firm VeriSign's managerial responsibilities for running the .com domain system, according to documents released late Wednesday.

VeriSign, which blew past Wall Street's expectations in earnings released Thursday, inked the extension with the Internet Corporation for Assigned Names and Numbers earlier this month, but critics complained that the deal gave too much power to the company and would hurt competitors.

In a letter to ICANN and VeriSign that was posted on ICANN's Web site, the Department of Commerce's acting general counsel, Alden Abbott, said his agency could not complete its review of the deal as quickly as the parties had hoped.

"Given the significant issues raised by the agreements, the department will need the next few weeks to complete a thorough review to achieve a comprehensive understanding of their implications for competition in the domain-name market, and the security and stability of the Internet," Abbott wrote in the letter. "We are targeting May 14, 2001, as the date for communicating the results of our review to you."

According to the deal between ICANN and VeriSign, the company would continue to run the database listing all domain names ending in .com at least through 2007. Under a previous arrangement, VeriSign was to have split off the unit running the database from its business of selling new domains by March 10, 2001.

Domains are the extensions at the end of Web addresses. The most commonly used domains are: .com, .net, .org and .gov.

In return, VeriSign agreed to relinquish control of the .org database by the end of 2002. The company would retain control of the dot-net database for at least a few more years.

VeriSign said it was not troubled by the letter and that it expects the government eventually will approve the deal. "We're not surprised or in any way concerned by the May 14 date," said Roger Cochetti, senior VP at VeriSign, noting that the contracts associated with the deal total more than 1,000 pages.

ICANN was not immediately available to comment.

In 1992, the National Science Foundation tapped VeriSign unit Network Solutions Inc., then an independent consulting firm, to register Internet domain names ending in generic suffixes such as .com and .org.

The lucrative deal lasted until 1999 when the Clinton administration handed over management of the domain-name system to ICANN, a nonprofit established solely to oversee the system. The plans also allowed competitors for the first time to register new domains, though Network Solutions continued to operate the databases.

About that time, Network Solutions and the government agreed that the company could continue to manage the domains until 2001. VeriSign acquired Network Solutions last year.

Separately on Thursday, VeriSign impressed Wall Street with its first-quarter earnings announcement. Despite the slowing economy, VeriSign, which also markets online security services and products, said earnings rose more than fivefold, to $US213.4 million from $US34.1 million, in the first quarter of last year. Net income, excluding amortization and some other charges, totaled $48.6 million (23 cents per share), compared with $US2.2 million (2 cents) last year. Analysts had expected earnings of 13 cents.

The company said its Internet domain-name registration business recorded 1 million newly registered or transferred names in the quarter, giving it a total of 15.5 million names registered.

VeriSign shares traded on the Nasdaq were little changed Thursday, slipping 38 cents, or 0.8 percent, to $US46.22.

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Aaron Pressman

PC World
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