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Raiders of the Last Ark



Corporations, courts and Congress join the fray for the key to the Internet.

What's at stake: The internet is changing our world. Experts believe its users will grow from about 100 million to 1 billion during the next few years -- a tenfold increase. There's a lot of money to be made selling Internet addresses. But there's also a struggle over who gets to make up the addresses and sell them. Power, politics and; ultimately, money are all at stake as these decisions are being made.

The center of the free world, as it turns out, is a putty-colored plastic box on a small aluminum shelf in a squat brick office park about an hour east of Washington, D.C.

Measuring 18 inches square and just over seven inches high, the box looks like the other 100 million personal computers that routinely are used to surf the Internet. And this computer is pretty much like the others, except for one thing: Without this box, the Internet wouldn't work.

The box, known as the "A" root server, is the keystone in the most-used database mankind has ever assembled. The network organized by this box created the first truly free global market, one that spurred demand for an estimated $5 billion in tariff-free trade last year -- and is expected to handle more than $300 billion by the year 2002.

The box -- a high-speed desktop computer -- is maintained by a company called Network Solutions Inc. under contract with the federal government. The contract expires this month.

After that, the Ark of the Internet, is up for grabs.

Corporations, courts and even foreign countries are caught up in a battle for the box and, more importantly, its contents. Entrepreneurs are lined up around the world to get their names added to the box and to compete against Network Solutions for the lucrative business of selling Internet addresses.

The Clinton Administration has a plan to break up Network Solutions' monopoly. But the proposal has only fueled the global debate. It is not even clear that the United States has the legal authority to impose the plan.

"When I got into this, the first thing I wanted to know was 'What's the law? Where are the contracts? Where are the documents?'" said Chicago lawyer David W. Maher, who chairs an international committee trying to sort out the problem. "Well, I found out there aren't any. The people who run the root servers run them without a shred of paper. That's it! That runs the Internet."

The longer the race to control the "A" root server drags on, the more money Network Solutions makes. Each additional month brings the company another 125,000 customers bearing $8.75 million. And given the company's government ties and lobbying skills, it's doubtful that the Ark of the Internet will be pried open anytime soon.

Jon Postel created the box. And he has always ordered the world within it. A research director at the University of Southern California, Postel is also head of a group called the Internet Assigned Numbers Authority. He sports a flowing beard and wears sandals to work. The Economist magazine dubbed him a "God" of the Internet; the name stuck.

In 1969, Postel was among the handful of University of California graduate students who set up the first node of an experimental computer network called the Arpanet. Later he helped created a system of addresses that enabled computers on Arpanet to communicate with those on a second network built by the National Science Foundation. That inter-network address system was called the Internet Protocol.

Internet Protocol addresses are long strings of numbers. To make them easier to remember, Postel and his colleagues gave each computer a nickname. A file on each computer translated the nicknames into numbers. But by the early 1980s, the maintenance of the file on every computer on the network became cumbersome.

So the nicknames were divided into groups called "domains." Two types of top-level domains were created: national domains, such as ".ca" for Canada or ".jp" for Japan; and generic domains, such as the familiar ".net" or ".com." Separate computers were set up to administer each domain. And the root server was created to direct traffic between domains. These computers became known as the "network information center," or NIC.

This elegant decentralization -- coupled with the ease of use of the graphically oriented World Wide Web -- spurred the remarkable growth of the Internet. By the early 1990s, businesses were clamoring for space on the academic network.

In 1992 Congress asked the National Science Foundation to commercialize the Internet. The domain ".com" was to be made available for companies to do business on the Internet. The NSF took competitive bids and awarded a five-year contract to a consortium that included Network Solutions Inc.

Network Solutions was to construct a center called the InterNIC, which would assign new Internet addresses within the fast-growing ".com," ".org," ".net" and ".edu" domains, and operate the "A" root server under guidance from Postel. In exchange Network Solutions was to be paid $5.9 million over five years -- an amount the company would quickly find insufficient for the task at hand.

As Network Solutions was moving the Ark to Virginia, a giant California military contractor was going on a buying spree.

Science Applications International Corporation (SAIC) is headquartered in an affluent seaside town just north of San Diego. From the outside, its well-manicured corporate campus looks like any other. But inside, armed guards are posted in front of doors that bristle with high-tech locks, and lead-lined rooms hinder would-be electronic eavesdroppers.

SAIC is a tightly held company that grosses roughly $2 billion a year, nearly all of it from federal contracts. The company designed computers for Seawolf submarines and cockpit systems for F-15 fighters jets. It spent $50 million researching President Reagan's "Star Wars" anti-missile defense scheme, and is spending more than $500 million building an underground nuclear garbage dump at Yucca Mountain in Nevada.

Even more impressive than the scale of SAIC's work is the pedigree of its directors. Every president since Nixon has had at least one SAIC insider in his cabinet. The unparalleled lineup includes former defense secretaries and CIA directors.

By the mid-'90s, SAIC was sitting on a mountain of profit but facing a downsized Pentagon. Determined to transform itself from Cold War contractor into high-tech competitor, SAIC went looking for companies to acquire.

Network Solutions was struggling to keep up with the swelling demand for Internet addresses. There were only about 7,500 computers on the entire network when the InterNIC was created. But by early 1995, Network Solutions was adding that many registrations a month.

SAIC bought the company in March and promptly showed Network Solutions how to do business with the government. Rather than merely ask the National Science Foundation for an extra million dollars every few months -- as Network Solutions had been doing -- SAIC renegotiated the whole deal, winning permission to charge $100 for each new domain name. The proposal's raison d'être, however, was SAIC's agreement to kick back $30 per domain name to a government "Internet infrastructure fund."

Despite groans from the Internet community, registrations of new domain names skyrocketed. Network Solutions sold a record 489,000 names in 1996, and another 960,000 last year.

SAIC also improved Network Solutions' in-house systems, perfecting them to the point that the company was able to sign up 90 percent of its new $100 customers "without human intervention," according to federal documents filed by the company.

With business booming and costs low, SAIC took Network Solutions public. Last September SAIC sold 21.5 percent of "NSOL" on the NASDAQ stock exchange, raising nearly $60 million.

Buried deep within the Network Solutions' filing with the Securities and Exchange Commission was this sentence: "The NSF has stated that the Cooperative Agreement will not be re-awarded to the Company." In other words, SAIC was selling $60 million worth of a company that was going to lose its monopoly in just six months' time.

Investors may not have fully understood what was about to happen to the box, but Network Solutions would-be competitors certainly did. Eugene Kashpureff knew better than most what Network Solutions monopoly was -- and wasn't.

Kashpureff had made a small pile of money as one of the Internet's first "cyber squatters." He bought domain names he never planned to use, then sold them to companies that needed them -- like McDonald's, which bought the name www.mcdonald's. com from a fellow cyber squatter. Speculators like Kashpureff struck fear into the heart of corporate America. By 1996 a land-rush on domain names had begun, with marketers buying up every ".com" name they could ever imagine using.

But Kashpureff, a young man who'd reportedly built his first computer when he was 10, understood something that most of the frenzied corporate domain-name buyers did not: There was, in fact, no actual shortage of territory. After all, these were just nicknames. All it took to add whole new continents to the Internet was a few changes to the root server.

So Kashpureff created his own root server, which he called AlterNIC. He hoped that by offering enticing new top-level domains -- such as ".inc" or ".sex" -- he would be able to convince Internet users to abandon InterNIC. But few Internet users ever understood what AlterNIC was. Fewer still switched.

With his box nearly empty, Kashpureff proved himself a better hacker than a businessman. Last July he hacked into the Ark of the Internet.

Confused web surfers bound for InterNIC found themselves instead at AlterNIC, where, after clicking through a diatribe against Network Solutions' monopoly, they were directed back to InterNIC.

SAIC was not amused. The FBI filed criminal charges. Kashpureff was arrested near Toronto and spent 55 nights in a Canadian jail before being extradited on Christmas Eve. He has pleaded not guilty and awaits trial.

Though few are as flamboyant as Kashpureff, many entrepreneurs are eager to be masters of their own domains.

Some have gone to court requesting that Network Solutions add top-level domains like ".web" to the box. New York-based PG Media, for example, alleges violations of the Sherman anti-trust act; if successful, PG Media would sell names in the ".web" domain.

Others, such as Atlanta-based Iperdome, have carved space within little-used national domains already in the root server. Iperdome, for example, has cut a deal with tiny Tonga that enables the company's fledgling ".per" domain to work as

Iperdome founder Jay Fenello said the Tonga connection is a temporary solution. Like the others, Fenello is betting that the Ark will soon be pried open.

No one wants to open up the box more than Jon Postel. He has proposed adding up to 200 new generic top-level domains -- enough to create room for any reasonable category, and to fully dilute the ".com" monopoly.

In the fall of 1996 a group calling itself the International Ad Hoc Committee formed to develop a plan that would be ready by the time Network Solutions' contract expired. Using Postel's proposals as a starting point, the committee opened an office in Geneva and worked to obtain a broad base of international participation.

"The committee ... took in a tremendous amount of public input and produced an interim report, accepted more input and then produced a final report to the Internet community," Postel said. "The IAHC process was as open and as available for public participation as the organizers and participants knew how to make it."

At the conclusion of this contentious process, the IAHC drafted a "memorandum of understanding" signed by representatives of 150 Internet interest groups. Central to the IAHC plan were two alterations to the Network Solutions structure.

First, the job of operating the domain-name registry would be separated from the business of selling domain names. In much the same way that one company operates the airline while many agents sell tickets, the IAHC plan would create in InterNIC's place a handful of airline-like registries and hundreds of agent-like registrars -- each of whom would be able to sell names in all the domains.

Additionally, the IAHC plan would create a not-for-profit organization to operate the "A" root server, and to provide files to the dozen secondary root servers that now "mirror" the Ark throughout the world.

A new entity called the Council of Registrars was formed. Last fall the council signed up 88 prospective registrars in 23 countries. And it hired a California company to build and operate a centralized repository of domain-name information.

Emergent Corp. is now testing that system, which does the same thing that Network Solutions' does, sans the "90 percent automated" sales effort. But whereas Network Solutions receives several million dollars up front plus $100 per name, Emergent expects to make a profit on an up-front charge of $500,000 -- and a per-name fee of only 25 cents.

While the International Ad Hoc Committee loped toward consensus in Geneva, Network Solutions lobbied against the plan in Washington D.C.

The front man for Network Solutions' attack on the IAHC was Andy Sernovitz, president of a trade group called the Association for Interactive Media.

Network Solutions is a "Governing Member" of the association, which comprises TV networks, phone companies and Internet interests. These well-established enterprises were natural SAIC allies. They already had the ".com" names they wanted, or had enough money to buy whatever they needed. So for them, fewer domain names meant less competition. Also, many of these companies spent small fortunes paying lawyers to obtain and protect their brand names from cyber squatters -- and had no desire to go through that again.

Sernovitz led a brazen campaign to discredit the IAHC plan as a Swiss conspiracy to take over the Internet.

"As we sit here," Sernovitz told a House Science subcommittee, "IAHC is in the process of setting up a full administrative infrastructure for the Internet in Switzerland, entirely out of U.S. oversight." He warned the stunned members of Congress that they would be "held accountable" if they allowed these "dangers and deceptions" to continue.

Sernovitz even accused Postel of "double-dealing the United States government." He urged Congress to seize the "A" root server before it was lost to the Swiss conspirators and to investigate Postel on charges of 'enabling the Internet activities of rogue nations.

As absurd as those charges were, they resonated with congressmen and journalists who knew nothing of Postel, the IAHC or the workings of the domain-name system. Committee vice chairman Chip Pickering vowed to defend the "uniquely American" Internet, and his Quixotic crusade received widespread media attention. Pickering either didn't know that the IAHC server was being set up in California -- or the Mississippi Republican was unaware that California is still part of the Union.

Sernovitz' public testimony was reinforced by SAIC's behind-the-scenes lobbying. SAIC had given hundreds of thousands of dollars to campaigns of both parties over the preceding six years, and its lobbyists had no difficulty arranging one-on-one visits with lawmakers.

By the time the IAHC hired a Washington lobbyist late last year, SAIC's xenophobic version of the facts had become the conventional wisdom. "Everywhere we went, we were Johnny-come-lately," one IAHC representative said. "Everybody we talked to told us that SAIC and Network Solutions had already been there."

After months of privately canvassing lawyers, business groups and technology experts, White House senior advisor Ira Magaziner finally weighed in on the domain-name debate on Jan. 30.

The White House "Green Paper" borrowed heavily from the IAHC: Magaziner would separate the business of selling domain names from the job of operating the registries, and would create a new entity to take charge of the "A" root server.

But by leaving the commercially popular ".com," ".net" and ".org" registries in Virginia, and by delaying the entry of competitive registrars for six months or more, the slow-moving White House plan would be a boon for Network Solutions.

"Here in Chicago, we look for where the money goes," said Maher, who chairs IAHC's policy committee. "The continued delay benefits Network Solutions. As a result of what Ira is doing, money will continue flowing into their coffers."

There are now an estimated 8.2 million host computers in the ".com" domain, and another 5.2 million in ".net," according to one recent survey. The only other commercial registries -- tiny firms like AlterNIC and Iperdome -- have no more than a few thousand customers each.

Network Solutions reacted enthusiastically to the Magaziner plan, "welcoming the competition." Magaziner said that to move away from Network Solutions any faster would threaten the stability of the Internet, and he questions how long the company's lead will matter. "If you believe, as we do, that the Internet is going to grow rapidly from 100 million users to a billion users over the next few years," he said, "then 90 percent of the market is open to anybody." The Commerce Department will take comments on the plan through mid-March, then issue a final report.

The IAHC plan is on hold for now. Several of the international committee's members are furious over what they perceive as yet another power grab by the United States. "There has been a very negative reaction from outside the U.S., and I think that's going to grow," Maher said. "What exactly will happen next -- whether the G7 countries or the European Union will take a leadership position -- I don't know. But I don't believe that the international community will tolerate this."

As the raiders closed in on the Ark from both sides of the Atlantic last month, Postel continued tinkering with his box. A few days after the "Green Paper" was released, he redirected six of the mirror root servers to receive their instructions from a computer other than the "A" box. It was an experiment in decentralization, one of hundreds of similar tests he has quietly run over the past 29 years.

Postel's subtle change was invisible to Internet users. But Network Solutions noticed. And within days, The Wall Street Journal, The Washington Post and the Associated Press had carried stories about the "rogue" professor who had "hijacked" the Internet.

The revelation: SAIC holds the Ark of the Internet. And until someone takes it away, not even "God" is allowed inside. is allowed inside.

Tell it to Ira

Tell it to Ira

White House senior policy advisor Ira Magaziner wants to hear what you think about his plan to reshape the Internet's domain name system -- but only until mid-March.

Magaziner's "Green Paper" is titled "A Proposal to Improve Technical Management of Internet Names and Addresses." You can read it online at The paper is basically a draft of a proposed rule of the Department of Commerce. After the comment period, Magaziner and his staff will re-write the rule, and then it will become a legal regulation.

"We're serious about this being a discussion draft," Magaziner said. "No one ever gets 100 percent consensus on anything having to do with the Internet. But if this proposal gets ripped to shreds, we'll start over."

You can tell the White House what you think via e-mail. Address your electronic screed to Or write: U.S. Department of Commerce, NTIA/OIA, 14th and Constitution Avenue, N.W., Washington, D.C. 20230. All comments are posed on the commerce department site a few days after they are received.

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