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Domain Name Registration Fees Underway

The National Science Foundation (NSF) changed the funding picture last week on one of the few remaining U.S. federally funded Internet projects. The NSF and the InterNIC’s Registration Services division, which registers and maintains domain names, announced that beginning at midnight on 14-Sep-95, all new domain name registrations under its authority would cost $100 and include two years of registration. Yearly renewals for new and existing domains will be $50, due on the anniversary of the initial registration.

Domain names are technically the "human-readable" form of an Internet address. Every machine on the Internet is assigned a unique number: an Internet Protocol (IP) address. The number is in the form:, often called a dotted-quad. With this number, you can directly identify a specific machine anywhere on the Internet. For instance, Apple’s Web server is at All of Apple’s Internet machines have names within the domain.

The fees will eventually replace U.S. federal funding for domain registration; currently, Network Solutions, Inc. (NSI), operates the Registration Services division under a five-year contract to the NSF that was awarded in 1993 under competitive bidding. The bid included the possibility of eventually collecting fees for domain names. Conservative estimates suggest that the fees could bring in more than $5 million in 1996, assuming the fees cause a considerable drop-off in new registrations and renewals.

The action was widely expected and has been discussed at length in newsgroups and such mailing lists as com-priv – a list which endlessly and post facto discusses Internet issues – as well as in print media that covers online issues. The move apparently came without advance warning to prevent a flood of last-minute registrations. (Some reports indicated that the NSF planned to announce the policy this week, but a leak caused the early release of information.)

Because the NSF is so deeply involved in the Internet, they’ve placed piles of useful information about the decision, the fees, and the history of why they have the authority to do this at:

Prognostications and explanations by third parties have poured out since the announcement, which rated front-page or front-of-business-page placement in major newspapers, including the New York Times and the Wall Street Journal. Before we wade into an analysis, let’s discuss the different components.

What is the InterNIC? The NSF created the InterNIC (Internet Network Information Center) to provide information and registration services to Internet users, which – in 1993 – meant largely academic, government, and corporate organizations rather than consumers and small businesses. The NSF has, for several years, been in charge of big chunks of the Internet authority – the parts of the Internet that make the final decisions on how policy is transformed into real equipment.

The NSF ceded a chunk of authority on 08-May-95 when it shut down NSFNet: the Internet backbone that existed before commercial networks effectively made it redundant. Without NSFNet, the NSF doesn’t exert much control or influence on the day-to-day workings of the Internet, but the NSF does direct the Internet’s evolution into an ever-faster animal. (The Internet Engineering Task Force [IETF] actually drives technological change on the Internet, but NSF entities drive the implementation.) For more on NSFNet, see my article in TidBITS-275 and:

[To learn more about the IETF, see Paulina Borsook’s "How Anarchy Works" in the Oct-95 issue of Wired – unfortunately, it’s not yet online. -Tonya]

One of the InterNIC’s main functions, run by its Registration Services division, is to register domain names. Domain names were developed as a way to more mnemonically identify and group machines. With a domain name, you can have any number of subdomains. Subdomains are separated by dots but read right to left, from the most general category to the specific machine name or service name. So a name like "" is read like this: "edu is the educational top-level (farthest right) domain; ufoo is the second-level subdomain under education indicating this is the University of Foobar; engineering is a subdivision of the subdomain; and bilbo is probably the individual machine name in the engineering school."

The InterNIC is responsible for domain names that fall into five top-level categories: Education (.edu), Governmental (.gov), Non- and Not-for-Profit Organizations (.org), Commercial (.com), and Network (.net). The domain name registration fees apply only to second-level domains which fall under those hierarchies. Military (.mil) organizations handle their own authority and the .edu and .gov hierarchies will continue to be subsidized by federal funds for now.

An alternate hierarchy already exists in the United States: the .us top-level domain. Many service providers have adopted this use, which is geographical in nature. (Some criticism has been levelled at geographical organization, since the Internet isn’t place-driven.) Others have registered in both the .com or .org category and the .us domain to cover both bases. International hierarchies abound, with dozens of countries having their own top-level domains (such as .au for Australia) and authorities. The NSF’s announcement doesn’t affect any of these hierarchies.

Meanwhile, back at the fees… The NSF ostensibly instituted domain registration fees because of the precipitous growth in demand for registrations and the concomitant increase in costs necessary to keep up. The original contract with NSI was for $5.5 million over five years, which is clearly inadequate to handle the tens of thousands of existing domains, and the potential tens of thousands to come over the next three years of the contract. (The grant, incidentally, doesn’t cover just service, but all the associated network, staff, and overhead expense.)

Although there are currently 110,000 second-level domains under InterNIC’s authority, the Internet has millions of email users, none of whom are affected. Organizations that use domain names are either service providers (doing dial-up or other Internet connectivity), commercial online services (America Online, CompuServe, et al), or corporations with their own feeds. AOL, for instance, uses the domain for all three million users’ email, plus their corporate stuff. So this means that AOL will pay the whopping fee of $50 per year to continue to use that domain name.

The real effect will probably be felt by service providers who charged little or nothing to register individual domain names for their users and now face thousands of dollars in yearly fees. In most cases, these domains are registered to individuals who maintain access accounts or leased lines with the provider, so the additional $50 a year can be absorbed if their bills are high enough, or tacked on in the case of simple email accounts. Savvy Internet providers probably have a provision in their user contracts for passing on new fees to the registrant of the domain.

Registration fees are your friend? Why should we celebrate being charged money? Many reasons, some political, some legal, some financial, some practical.

First, this move establishes an independent source of funding for the InterNIC, independent of political vagaries. For now, NSF funding is probably safe given the importance placed on the Internet by House Speaker Newt Gingrich and Vice President Al Gore. But reducing or eliminating taxpayer support of a government plan is a rare and wondrous event.

Second, and on the same theme, the NSF noted that a significant portion of the income (30 percent) will go to a legal fund to deal with the vast potential for lawsuits in the future. Under their existing agreement with NSF, U.S. taxpayers would pick up any legal bills, whereas the new agreement requires NSI to pay the bills from this fund. Remarkably, InterNIC has not yet been sued over domain name decisions.

Third, InterNIC cannot keep up with the registration load given the current funding. More funding means more automation; the NSF said in one part of the announcement that InterNIC will clear through the backlog of registrations by the end of October, given their new ability to spend based on income derived from fees.

Fourth, the Internet has always been about paying your own way, despite NSFNet and other subsidies. Even though Internet use always appeared "free" to users at academic institutions, money has always been involved. These days, any commercial Internet user is paying for an account, a leased line, an Internet feed – whatever. Having domain names be part of a U.S. governmental burden seems inconsistent.

Fifth, this mechanism will reduce the proliferation of domain names to some extent, release unused and unwanted domains, and involve more accountability. The recent move by Kraft and Proctor & Gamble to register hundreds of domain names, some of them trademarks and others just English words, could have been prevented if enough time and staff were available at InterNIC. Many thousands of the 110,000 domains extant are probably inactive; why not reduce the administrative and technical burden in maintaining them?

What about the naysayers? Over the last year (and especially since the announcement) many voices of complaint have been raised at the InterNIC. Some have proposed starting alternative top-level hierarchies – possible only if the InterNIC and the international domain authorities agree. Without their cooperation, you would have a separate but unequal set of domains unreachable from the rest of the Internet without major kludges.

Others have alleged that the bidding process was closed, there was no public discussion, and that NSI hasn’t met its obligations. The NSF does a wonderful job answering these points, noting that the original free and open competitive bid in 1993 mentioned the possibility of fees; and that the most recent NSF review of NSI by an independent panel in Dec-94 (available to public scrutiny via the Web) showed that they had met their goals. The panel responsible for this review is a Who’s Who of respected Internet experts. toc.html panel.html

Critics who argue that there was no public discussion have disregarded the participation of NSI- and NSF-affiliated people in mailing lists, newsgroups, and other public forums in which these issues have been beaten to death. It’s hard to imagine a more public forum than com-priv, for instance, in which the InterNIC has been a relatively active participant.

Another important point has been missed in the discussion this last year. The InterNIC does a damn good job. Despite a lack of funding and geometric growth in registrations, the InterNIC last month implemented a one-day turnaround on all new commercial domain name registrations. I don’t recall anyone complimenting InterNIC, unless it was "too little, too late." In fact, it was just enough and right on time given their load.

The technical side of the whole megillah – the actual resolution of domain names (pointing requests for the second-level domains to the thousands of machines responsible for this on the Internet) – works like a charm. I can’t recall a time since Aug-94, when I first got my own full-time Internet feed, that this has stopped functioning. The InterNIC isn’t responsible for the design of the system (the IETF and many generous individuals are), but they do coordinate it and keep it running. And run it does.

In the spirit of the Internet, I’d like to invoke the phrase: "If the existing system functions 100 percent of the time, if the mechanisms to perpetuate it indefinitely exist, and if it’s constantly improving: keep it in place and help support it better." That’s a high-tech version of "if it ain’t broke, don’t fix it."

It’s likely that this move will cause some lawsuits, lots of bellyaching, and not much dancing in the streets. But in the ultimate interest of the growth of the Internet, it’s a good move. I’m putting my mouth where my money is: my company will be liable for as much as $2,500 in fees for existing domains over the next year as a result of this change. Some of this we’ll absorb, and some we’ll bill out to the domain holders. But since NSFNet was shut down last May, I’ve been waiting for the other shoe to drop. Now I can rest easy.

[Glenn Fleishman has registered over 50 domain names for clients, friends, and relatives. He’s a contributing editor for Adobe Magazine, a columnist for Web Developer (due out in November), and a freelance feature writer for InfoWorld. He also moderates the Internet Marketing Discussion List, one of the least rancorous mailing lists ever.]

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