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Potential domain registrars cry foul

The initial phase for creating competition in the domain name registering business causes concern among registrars, who worry that the plan's pricing structure will leave them at a disadvantage.

The trial period for creating competition in the hottest market for Internet real estate is only in its second day, but already it is creating concern among future registrars, who worry that the plan's pricing structure will leave them at a disadvantage.

Under the plan put in place this week by the nonprofit Internet Corporation for Assigned Names and Numbers (ICANN), five initial companies gained permission to register domain names with the popular endings ".com," ".net," and ".org." The plan--which is only in effect for a 60-day "test-bed" phase--requires the new registrars to pay Network Solutions just $9 per year per domain name, even as the Herndon, Virginia, company continues to charge others $35.

The pricing details, however, See Don Telage Newsmaker are causing concern among at least three of the companies that have been accredited to register domain names once the trial period ends. For the duration of the period, which these registrars say could be extended, they are stuck reselling NSI's domain names at $35 per year, while the five trial registrars are not.

Domain name registration "is a commodity, and it's going to be very price sensitive, so if any of the test-bed registrants do any serious price cutting, why would people go anyplace else?" said Dick Halavais, vice president of MS Intergate, a Web design and hosting firm that is among the 29 companies accredited to register domain names once the process opens up completely.

"Setting these people up as some sort of super club that can do whatever they want is going to further restrict competition down the road," Halavais said.

Two other accredited registrars--Moraga, California-based and of Pleasant Hill, California--are voicing similar complaints.

So far, none of the five test-bed registrars--which include America Online and said how much they plan to charge to register a domain name. But chief executive Richard Forman said the future registrars' concerns are far too speculative.

"They're arguing about something that may or may not occur," said Forman, who added that, in any event, a two-month test period is not likely to harm any company in the long term. What's more, Forman said, the concerns fail to appreciate the risks the initial registrars assume in testing out the new system.

Up to now, only NSI has had the authority to register the domain names ending in ".com," ".net, and ".org," which account for an estimated 50 percent to 75 percent of the world's Internet addresses. The Commerce Department, which oversees administration and governance of the Net, has been searching for a way to turn its duties over to the private sector. The controversy over the pricing structure is yet another reminder that forging a plan that is palatable to everyone--especially as Internet use continues to explode--is a difficult balancing act.

The price NSI may charge new entrants for access to its database has been an especially hot topic. Commerce officials are keenly aware that NSI is in a unique position to underbid other registrars since it automatically gets a cut of its competitors' business. The predicament here is protecting future registrars during the test-bed phase while creating an environment that allows new competitors to catch up to the huge lead NSI already has.

"We understand [the future registrars'] concerns, but we do think there may be some market-based solutions," a Commerce Department official said.

One possibility is that one or more of the test-bed registrars may provide an interface that will allow other companies to connect to the registry at a low cost. According to Forman, already is negotiating such a plan with several of the companies.

NSI and Commerce Department officials negotiated down to the wire to reach terms governing the test-bad phase. Mike Roberts, interim chief of ICANN, said another round of talks is likely.

"The ball is back in the court of Commerce and Network Solutions to keep working," he said.