NSI antitrust woes not over yet

Nearly two years after would-be Net registrar PGMedia accused NSI in court of violating antitrust laws, the suit appears stalled over weighty legal issues.

4 min read
Nearly two years after would-be Internet registrar PGMedia accused Network Solutions in court of violating antitrust laws, the suit appears stalled over weighty legal issues and procedural hurdles raised by the government's recent attempts to privatize Internet administration.

Bogging down the case is whether NSI, the government-appointed monopoly registrar for the most popular forms of Internet addresses, can even be sued. Adding to the confusion is the push by the Commerce Department to open up registration competition later this year.

In a federal See Don Telage Newsmaker lawsuit filed in March 1997, New York City-based PGMedia accused NSI of violating antitrust laws by refusing to expand the number of TLDs, or "top level domains," available in the master directory it maintains under authority of the government. PGMedia, which sells domain names with novel endings such as ".firm" and ".store," argues that NSI and the government lack the authority to dictate what TLDs are made available on the global network.

PGMedia's request for an order declaring that the U.S. government lacks the authority to govern the Net--and requiring NSI to modify its "root server" to recognize hundreds of new TLDs--is now pending before a federal judge in Manhattan.

NSI now has sole authority to register domain names ending in ".com," a coveted extension that graces an estimated two-thirds of the nearly 5 million Internet addresses registered worldwide. Last year alone, NSI netted more than $93 million in revenues, a 107 percent increase over 1997 revenues, and attributed the explosive growth to the popularity of ".com" addresses. PGMedia and other NSI critics complain that the refusal by NSI and the government to create new generic TLDs has only fueled NSI's government-granted monopoly.

Since PGMedia filed its suit, however, the Internet landscape has changed drastically, throwing a monkey wrench into an already-complicated lawsuit. Last fall, the National Science Foundation passed responsibility for the Internet to Commerce Department, which in turn has laid out a plan to turn administration to a private company and open up registration competition. By March, five companies are slated to offer wholesale registration to addresses ending in ".com," ".net," and ".org," and by June, the field is slated to be opened to any accredited registrar.

When the move is complete, the nonprofit Internet Corporation for Assigned Names and Numbers will assume authority over the domain name system, or DNS, which serves as the plumbing for Internet addresses around the world. The Commerce Department, in conjunction with the Internet Assigned Numbers Authority, currently governs the system.

Already arguing that PGMedia's suit is flawed on constitutional grounds, the NSF and NSI say the proposed changes are another reason why the lawsuit ought to be thrown out of court.

"This lawsuit represents an effort by plaintiff to derail that carefully developed process," attorneys for the NSF argued in a court brief filed last year. "In essence, plaintiff demands that the issue of new generic TLDs should be decided not by the Internet community, but rather by a court order requiring the addition to the DNS of some 500 TLDs that plaintiff has already sold to prospective registrants." The NSF goes on to argue that the case should be stayed until the plan has been implemented.

NSI, which is being represented by the same firm representing Microsoft in the antitrust suit against it by the Justice Department (DOJ) and 19 states, is also seizing on the Commerce Department's plans.

"During the transition period, any policy decisions about the addition of new TLDs to the root zone file will be made by the Department of Commerce--not NSI," the company argued in a court brief filed last month. "In short, NSI does what it is told to do by the Department of Commerce."

Under established case law, NSI argued, governmental agencies are immune from antitrust laws, and so are private companies carrying out programs under authority from the government. Herndon, Virginia-based NSI points out that a similar antitrust case filed against it in late 1997 was dismissed last year on the same "federal instrumentality" grounds. In light of the Commerce Department's directive for NSI to turn over its database, "there is no longer any question as to whether NSI has any discretion concerning the addition of new TLDs," the company claimed.

But PGMedia is not rolling over yet.

"The mere establishment of a nonprofit corporation...neither ends the controversy between PGMedia and defendants nor alleviates the continuing, irreparable harm suffered by PGMedia as a result of defendants' monopolistic control over DNS and denial of PGMedia's access to Internet top-level domains," PGMedia argued in its own January court filing. "This court has no assurance that ICANN will ever be in a position to offer PGMedia the DNS access it has fruitlessly sought since 1997."

PGMedia also rejects NSI's argument that it and the NSF are immune from antitrust law, saying that a company can be exempted from antitrust law only when Congress explicitly authorizes such immunity. Further, PGMedia argues, both the U.S. government and NSI lack standing under international law to restrict the expansion of TLDs in other countries.

Evidence that there is strong demand for new generic TLDs is growing, said Sascha Mornell, director of marketing at Register.com, a retail domain name registry. He said his company registers 10 to 20 domain names per day ending in ".md." Although the TLD formally recognizes the country of Moldovia, many pharmaceutical companies believe it may be a desirable piece of real estate in the future. Similarly, broadcast companies are showing interest in addresses ending in ".tv," the TLD for Tuvalu, he said.

Still, with NSI controlling the plumbing of the vast majority of the Internet, legal challenges to its authority are likely to continue. Analysts note that even after the Commerce Department's privatization plans are completed NSI is likely to wield immense control over the DNS, since it will continue day-to-day upkeep of the root server. MyInternet.com, a small domain-name management service, says it will sue NSI if it cuts off access to its root server as NSI has promised.