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COMPUTING

Register.com braces for competition

by James Niccolai

From...
IDG.net

(IDG) -- With dozens of potential competitors still tied up at the starting gate, Register.com has been blessed with an early headstart in the domain name registration business.

The company is one of the five firms selected in April to take part in testbed trials of a new, competitive system for parcelling out Internet addresses ending in .com, .org and .edu. Registrations had previously been handled exclusively by Network Solutions Inc. (NSI) under a contract with the U.S. government.
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Register.com claims to have doled out well over a million Internet addresses since it opened shop in June. It expects to be profitable before the end of next year, and could launch an initial public offering in as few as 18 months, Richard Forman, its president and chief executive officer, told IDG News Service.

But the playing field is about to shift. After a few false starts, the Internet registration testbed trials look set for completion at the end of this month, when 76 registrars accredited by ICANN (Internet Corp. for Assigned Names and Numbers), which is overseeing the transition, will be free to join Register.com in doing battle with NSI.

IDG News Service talked with Forman by telephone from his office in New York. We asked him how Register.com will compete when the floodgates open, what the future holds, and why Internet users should care. Here's what he had to say:

IDGNS: How many domain names have you registered so far?

Richard Forman (RF): Well, there are more than .com, .net and .org, there are the country codes as well. Across all the top-level domains we've registered well over a million. I don't have the detailed breakdown in front of me, but the majority of them are "com," ".net" and ".org."

IDGNS: How many registrars do you expect to be competing against 12 months from now?

RF: There will probably be somewhere on the order of 50 to 70 registrars. In terms of those of any substance that I consider to be real competition, you're down to a handful; I'd say 5 to 10.

IDGNS: What are some of the benefits for consumers that will result from competition?

RF: There will be new products, new services -- and it's not just better, its new. Greater accessibility, greater control, greater ownership.
A big issue now is that people aren't really sure how to move their domain or change it, they feel like they're being held hostage by their service provider. Register.com is going to do a lot to free that up and give them a lot of ownership over their domain name. You're going to see more efficient pricing, nice bundled packages, domain names with e-mail, domain names with hosting.
It's not dissimilar to when AT&T got deregulated. Soon after, they're coming out with call waiting, caller ID, call return. ... I think you're going to see the same thing in the domain name space.

IDGNS: What other services will you offer to help differentiate yourself from the field?

RF: We're building some really powerful domain name management systems -- we call them Manage My Domain -- which allow people to handle all aspects of their domain name. We have a partnership with USA.net on e-mail services. ... We have marketing relationships with ... companies that help you research trademarks for a domain name, companies that help you promote your Web site, companies that offer Web hosting.
We won't always deliver the (additional) service ourself, a lot of the time we're partnering. ... We're doing a lot to make the domain name more a part of people's business life in the Internet.

IDGNS: How much do you expect the market to grow?

RF: At a minimum we see the market growing from the current level of around 10 million domain names to approximately 100 million domain names in the next four years. That number has been bounced off of Hambrecht & Quist and Barrons, and the experts believe the numbers are going to be between 100 (million) and 300 million domain names.
We believe approximately two-thirds or one-half of the market will be generic, like .com, .net and .org, and perhaps the new generics like .firm, .web, and .store. The other half to one third of the market will be the country codes.

IDGNS: When are the new top-level domains (like .web and .firm) expected to be introduced?

RF: It's still on the ICANN schedule, and at their meeting in California during November they'll be discussed in greater detail. I think it's something that everyone is interested in moving along. Estimates are anywhere from 6 to 18 months.

IDGNS: Do you expect to see the cost of registering a domain name fall (from about $35 per year today), and if so, by how much?.

RF: There's no question that the more registrars you have the more competitive the market's going to get. We're prepared for price compression. One of the things we've focussed on is building some of the most efficient systems in the market so that we can accommodate price drops without affecting our profit.
The important thing to recognize is that few customers view the (average cost of about) $3 per month to be a substantial fee, and they're more than prepared to pay it so long as they get good service. We're very much focussed on service and quality of offering, rather than emphasizing price.

IDGNS: Network Solutions cut a deal recently with (global Web portal company) Orientation.com to help sell their service outside the U.S. What are you doing to take your service outside of the U.S.?

RF: About 35 percent of our business now is international. We've got some great partnerships that are developing overseas. We signed a distribution agreement with the largest domain name registrar in Japan (Crayfish), we signed up about seven ISPs in Europe to help us expand overseas. We have two people working full-time on international development.

IDGNS: What role do you think register.com should play in handling domain name disputes and cybersquatting issues?

RF: That's an evolving process. Register.com was instrumental in helping to create a revised uniform dispute resolution policy which we're trying to have turned into the standard for all domain name registrars. We don't think the dispute policy should be the basis by which someone chooses a registrar, there's a lot of liability in doing that.

IDGNS: How long do you think it will be before there's what you'd consider to be a level playing field in this business?

RF: It's coming pretty soon. As soon as NSI signs its formal agreement with ICANN ... I think it will be a level playing field.
Obviously NSI needs to release control of the internic.net domain name, which is a big issue; there are issues regarding payment, that NSI is revising. There's not a level playing field in that area, but I don't see it taking more than three to six months.

IDGNS: What remedy would you suggest to resolve this ongoing wrangle between NSI, ICANN and the Department of Commerce?

RF: I'd lock them all in a room and say no food, no water and no bathroom until you come out with a signed agreement. ... What's holding it up is that no one has given any other party the appropriate motivation with which to finalize negotiations. For instance, the DOC (could write) a letter to NSI: 'Dear NSI, unless we resolve this by Sept. 30 we're pulling your right to act as a registrar.' NSI (could write to) ICANN: 'Dear ICANN, unless you come to an agreement with us by Sept. 30 we're never going to pay your fees.' Something like that. No one's putting their foot down.

IDGNS: Is Register.com profitable at the moment?

RF: We are not profitable.

IDGNS: When do you expect to become profitable?

RF: Our projections are some time during the year 2000.

IDGNS: Is an initial public offering on the horizon, and what will determine when you go public?

RF: For the most part it's just continued aggressive growth of our business. I don't see any one event that's going to say yea or nay, but there are a lot of factors: the market, our employees, our investors. There are a lot of reasons a company does or does not go public. IDGNS: Do you expect to be public 18 months from now?

RF: I hope so.

James Niccolai is senior U.S. correspondent for the IDG News Service in San Francisco.


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