Under terms of the surprise deal announced Thursday (see text), VeriSign (vrsn) wouldn't be compelled to spin off the part of its business that sells domain names to consumers. That had been a requirement of a landmark 1999 agreement with the Clinton administration, which allowed VeriSign to retain long-term management control over the Internet's master list of addresses.
Executives involved in the talks say the agreement was driven by VeriSign's falling market share for sales of new Web addresses. VeriSign currently sells fewer than half the world's 28.2 million Web addresses ending in "com," "net" or "org" -- a big shift from its monopoly until June 1999. There are now dozens of companies that sell Web addresses, though only VeriSign, until now, has controlled the registry of addresses, for which it collects a percentage of every sale.
The new agreement preserves VeriSign's control over the "com" master list through 2007 and promises the company a special "presumption" that it will be allowed to continue in that role afterward. Currently, dot-com addresses comprise about 80% of the world's Web addresses.
Another factor driving the deal was that the perceived need for VeriSign to split into two businesses -- one to manage the master list of Web addresses, another to sell addresses -- had faded of late, as competitors no longer feared the registry gave the company an unfair sales advantage.
The deal was quietly hammered out this week between VeriSign and the Internet Corporation for Assigned Names and Numbers, ICANN, a nonprofit group that manages many of the Internet's core functions. ICANN's board will formally vote on the agreement by April 1. The deal also must be approved by the Commerce Department. VeriSign's board is expected to approve the deal.
The agreement would effectively create three separate Internet registries to replace the current unified one. But officials at ICANN and VeriSign said the change wouldn't disrupt Internet operations and that consumers likely won't notice since the agreement deals largely with behind-the-scenes issues. ICANN is currently creating seven new Internet registries to manage new domain names such as "biz," "info" and "museum." Those registries would be separate from VeriSign, which in June 2000 purchased Network Solutions Inc., original holder of the domain-name monopoly.
Under the deal, VeriSign would permanently surrender control of "org" addresses by December 2002. The company also would establish an endowment of $5 million toward the future operation of "org" addresses. It further agreed to spend $200 million in research over 10 years toward making Internet registries more efficient.
ICANN indicated that it wants "org" Web addresses reserved only for nonprofit organizations "after some appropriate transition period," a restriction that hasn't been enforced in recent years. Details haven't been worked out, though one ICANN official suggested that current "org" Web sites may be allowed to continue regardless of their affiliation with nonprofits.
VeriSign also will agree to give up control over "net" Web addresses by January 2006; it would be allowed to bid for future rights to run that registry, but approval by ICANN was considered highly unlikely.