The agreement already has been criticized by some of the companies chosen to enter the lucrative market for registering domain names ending in ".com," ".net," and ".org," which account for at least half of the Net's addresses. Prospective registrars complain that it saddles them with liability that ought to be shared by NSI and gives the latter too much control over their business.
Now the EU agency that investigates antitrust matters also is expressing concerns about the contract, according to a letter sent to one European company selected to become a registrar.
"The commission wishes to determine...whether any provisions of those agreements or related actions taken by NSI could constitute an abuse of NSI's dominant position" under antitrust laws, wrote John Temple Lang, director of the EU's Directorate General IV (DGIV). The letter, which was sent 12 days ago, gave the registrar 10 days to turn over information about its dealings with NSI.
The agency is advising that the registrars not sign the contract until it has been cleared, one recipient told CNET News.com.
An NSI spokesman confirmed that the company was first contacted by the agency in 1997 and recently received a letter concerning the investigation. The inquiry, he added, will not delay the entry of dozens of new entrants into the space previously monopolized by NSI.
"It won't hinder the speed at which competition is going to be introduced," said the spokesman, Brian O'Shaughnessy. "I don't think it's in anyone's interest to slow down the introduction of competition." He added that NSI will cooperate fully with investigators.
Officials at the DGIV were not immediately available for comment.
The EU's letter is only the latest hitch in a controversial plan by the Commerce Department to create new registrars for the most popular forms of Internet addresses. In the past few weeks, NSI and the Internet Corporation for Assigned Names and Numbers, the nonprofit agency charged with taking over operation of the Net, have become locked in a major stalemate over domain policy. At issue is whether NSI must be governed by ICANN's rules. (See related story)
Compounding the problem is opposition some of the registrars also are expressing toward ICANN and a contract it requires them to sign before selling domain names.
Still, Becky Burr, a Commerce Department official dealing with the transition to multiple registrars, agreed that the investigation was not likely to affect the process, which is still in a trial "test bed" phase.
"In some respects you could describe the test bed as an opportunity to learn more about the legal relationships between the companies" involved, she said. Burr added that the agreement the EU is investigating is temporary and that Commerce officials have said publicly that they were "not particularly pleased with the interim contract" when it was announced in April.
The EU investigation is being conducted nearly two months after the Justice Department renewed an investigation of NSI to include its claim that it owns the directory containing information on about 5 million Internet addresses it has registered since 1993. The position, which NSI says is supported by a cooperative agreement awarded by the federal government in 1992, prompted critics to claim that the Herndon, Virginia, company was hijacking a public resource.
The EU's concerns are echoed by some of the 43 companies that are required to sign NSI's contract before they can begin participating under ICANN's shared registration system.
"There's a growing body of opinion that it's unsignable in its current form," said Ivan Pope, chairman of NetNames, one of the registrars receiving the EU letter. "It's a document that gives all the liability to the registrars and maintains all the power with Network Solutions."
In addition to requirements that registrars post a $100,000 "performance bond" that NSI can collect if it believes the contract has not been met, registrars also must agree to indemnify NSI and allow the company to revoke its right to register domain names.
"We are beholden to them," said Larry Erlich, an executive with DomainRegistry.com, another registrar chosen by ICANN. "They're the people in control."
In addition, Erlich said, NSI refuses to provide information about the technical workings of the shared registration system before companies commit to using it under the contract. Erlich said NSI's refusal to answer even basic questions has made it difficult for him to estimate how long it will take for him to connect to NSI's database.
"It's hard to get investors when you can't tell them how much it will cost to implement the system," Erlich said. To date, only one of the five trial registrars, Register.com, has been able to register domain names under the system, and it took the New York City-based company about five weeks longer than expected to get up and running.
The other four test-bed registrars are still testing their systems and can provide no clear estimate of when they will come online.
The charges that NSI's requirements are unduly heavy-handed have a familiar ring. They sound similar to complaints voiced by NSI in arguing why it should not have to be bound by ICANN's rules.
NSI's O'Shaughnessy, however, called the comparison "apples to chainsaws," saying there was a big difference between NSI's refusal to be bound by ICANN and registrars' reluctance to be bound by the contract.
"Giving a nonprofit board the right to shut off NSI's business is not something we find palatable," O'Shaughnessy said. NSI's contract, by comparison, is designed to protect the company's $25 million investment in the software needed to make the shared registration system work, he added.
But NSI's contract isn't the only thing causing proposed registrars to chafe. Some of them also are critical of an agreement ICANN requires them to sign as well.
One example is a provision that allows ICANN to revoke a registrar's accreditation status if any of its officers or shareholders with more than five percent ownership have been convicted of a felony or finance-related misdemeanor within the past ten years.
"I have no control over who my shareholders are," said NetNames' Pope, who went on to say that the requirement was just one of many that unreasonably constrains his company. "We've been in this business for four years, and no one needed to accredit us, and suddenly ICANN comes along and starts imposing some very stringent requirements that I can't see the necessity for."