DOTCOM SLAMMING CHARGES LAND VERISIGN IN COURT

Reminiscent of the slamming-laden early days of long-distance competition, Internet domain name competitors are fighting it out in court. Last week, Maryland-based registrar BulkRegister won a preliminary injunction against market leader VeriSign that brought the company's latest marketing campaign to a halt.

The U.S. Federal Court for the District of Maryland found that a notice sent by VeriSign to BulkRegister customers constituted deceptive practices. The notice informed BulkRegister customers that their domain names were about to expire and offered them renewal through VeriSign.

“The injunction is a small win for us, but it says we are likely to win the entire lawsuit,” said Tom D'Alleva, vice president of marketing for BulkRegister.

Although BulkRegister was the sole plaintiff in the case, other registrars such as Go Daddy Software have publicly complained about VeriSign's practices. Go Daddy posted a copy of VeriSign's mailing on its Web site and urged customers to complain to ICANN, the governing body for registrars.

VeriSign also has been ordered to cease processing domain name transfers from BulkRegister's reseller customers.

Reserving comment on a pending case, a spokeswoman for VeriSign said the company would comply with the court's order immediately.

Marketing to one's competitors is common practice, but VeriSign's methods in this case were an act of desperation, D'Alleva said. VeriSign acts as both a registrar that sells and manages domain names as well as the registry from which other registrars buy those names.

“We don't have a problem with them marketing to our customers. That's fair competition. But when customers get a notice of expiration from a company that is also the registry, that's deceptive,” D'Alleva said.

The growth of new domain names has slowed, forcing registrars to chase after an increasingly smaller pool. “I would be surprised if there weren't these kinds of things going on as people figure out ways to get market share,” said Mason Cole, vice president of marketing at SnapNames.com. The company monitors domain names for expiration and offers to reserve those names for customers should they become available.

SnapNames.com also publishes a quarterly report called “State of the Domain” that tracks market share among registrars. Cole said the industry still is in a Wild West mode of operation due partly to its nascence and the growing pains of ICANN. “Not only are the companies in this industry trying to figure out the rules, so are the rule makers,” Cole said.

The latest report shows a huge shift in the number of domains being acquired by new registrars. However, D'Alleva said the numbers don't give a complete picture. “The reports are fairly accurate, but they don't report on profitability or revenue per name, only on volume, and that too can be misleading,” D'Alleva said.

In number of names alone, VeriSign looks to be in a swift decline, losing about 3.7 million names. The company also recently announced significant work force reductions and has seen a sharp decline in its stock value. But VeriSign has also made major inroads in the telecom space, most notably with its acquisition of Illuminet last December.

Still, VeriSign isn't conceding anything in its core domain market.

“We are not going to sit back,” the company's spokeswoman said. “We will be proactive in marketing our services to potential customers that may be customers of our competition.”