INTERNET

• INTERNET HOME

Emmit J. McHenry was the founder of Network Solutions, and its CEO at the time SAIC acquired it. He now has various other businesses; you can find him with Google. See the Network Solutions "Form S-1/A" of August 27th, 1997.

Reading these things is an art, but the NSI one is particularly blatant about stating the ugly facts, relying on the investor not to read them before throwing their money at NSI.

Appended to this message, for example, is an excerpt from the above filing, that gives a good idea of how much was paid by SAIC to buy Network Solutions on March 10, 1995: about $4.5 million in SAIC stock. Whose pockets that stock ended up in is not immediately visible here, though digging in other documents may discover it. Another part of this document reveals that Mr. McHenry was also paid about $850,000 cash, in return for a "non-compete agreement" and other things.

This prospectus for NSI going public, raising about $30 million, says that $10 million of that will immediately be paid out as a dividend to SAIC. This dividend had already been "declared" by the NSI board, but was to be paid after the public offering. This dividend took a profitable company and made it lose money. Also note that it paid back SAIC, days after the IPO, more than double the cost of the initial acquisition of NSI -- and that despite doubling their cash, SAIC still owned 84.5% of Network Solutions, while the IPO investors would own 15.5%. SAIC's stock had 10x the voting power of everyone else's stock, though, so SAIC would still have 97.9% of the voting control of the company.

<snip>
The following table summarizes, on a pro forma basis, as of June 30, 1997, the differences between the existing stockholder and purchasers of shares in this offering with respect to the number of shares of Common Stock purchased from the Company, the total consideration paid and the average consideration per share paid:

The foregoing table is based on the total consideration paid by SAIC for its shares based on the price of the shares of SAIC Class A Common Stock (as determined by the Board of Directors of SAIC in accordance with established procedures) used to acquire the entire Company, including the government-based business which was later transferred to SAIC, and does not give effect to the $10,000,000 dividend payable to SAIC. ... 25
<PAGE> 28

<snip>
The strings that were pulled before and during the Clinton administration's "Green Paper" and "White Paper" process, that ultimately resulted in the creation of NewCo, also known as ICANN, were pulled by SAIC. SAIC is a very interesting for-profit company with a multibillion-dollar annual revenue, most of which comes from classified contracts with the U.S. military. What's even more interesting about SAIC is that there is no external control on it: It is "employee-owned," i.e., there are no outside stockholders. If you leave the company, you have to sell your shares in it. SAIC's board of directors reads like a who's who of the military-industrial complex (former secretaries of defense, spy-agency heads, etc.). When you read about the government wasting billions on "homeland security," guess who gets it. SAIC's home page features their new brochure on "SAIC -- Securing the Homeland."

Somebody at SAIC noticed that a tiny company had gotten the temporary monopoly to run the domain name system, and was being paid a few million dollars by the government, over a few years, to do all the work. In March 1995, SAIC acquired this company (Network Solutions) for $3 million, from its founder, who had won the bid because his five- or 10-person company was "minority owned." (He later complained bitterly that they'd screwed him.)

Within the next six months, somebody inside the U.S. government suddenly decided that Network Solutions (the new SAIC subsidiary) could charge every domain name holder $50 per year, extracting hundreds of millions of dollars from Internet users. That policy was instituted despite the best efforts of the Internet community to stop it. That's one string that was pulled. Who exactly pulled it? Sounds like a job for an investigative reporter.

I helped to design and build the infrastructure for CORE to become a domain name registry. It cost us less than 25 cents per year per name to run. Even if you added the likely legal bills from NSI suing us, it amounted to less than $2 per year for each domain name. NSI is still charging $6 per year, and doing it in much higher volumes, where it should actually cost them less than 1 cent per year to do the work.

NSI, wholly owned by SAIC, then filed for a public offering. You can read their prospectus. It said, effectively, SAIC is going to keep 90 percent of the shares, and SAIC's shares each get 10 votes compared to the shares we'll sell to the public. They sold off 10 percent of the company for $54 million, during the early part of the Internet stock craze. That 10 percent owned by the public had only 1 percent of the voting power, i.e., even though it was a "public company," SAIC could do exactly what it wanted with the company, whether it was in the stockholders' interest or not. Indeed, the prospectus was blatant enough to say that it would immediately transfer significant money (I think it was $20 million) to its parent company, SAIC, from the proceeds of going public!

The next challenge was maintaining the SAIC monopoly on selling domain names. Clearly when you're selling something for more than 50 times its cost, you need a way to keep out competitors, or the price will drop. The NSI contract with the government was coming up for renewal, and since it had only been a small contract, it had been competitively bid for a fixed period, and was intended to be competitively rebid after that period. Also, lots of angry people were complaining about how rotten the NSI domain name registration policies and prices were. There were two challenges: keeping the government contract despite high prices and lousy service; and preventing other top-level domains from offering reasonable prices and good service. This is where the second string was pulled.

Clinton's White House delegated the job of sorting out this mess to Ira Magaziner. He held meetings with all the stakeholders, generally telling each of them what it wanted to hear, in order to extract more information and cooperation from each one. I also talked to all the stakeholders, and it was clear that the general consensus favored competition and sane policies, though you sometimes had to cut through a thick fog of private interests pulling for their own advantage.

But somehow in the actual government decisions, what always ended up happening was that NSI would keep its monopoly. The rationale was "stability of the Internet" (a hoax, since hundreds or thousands of people in addition to NSI were capable of doing the technical work involved), "avoiding trademark squatting" (NSI had already set its domain-dispute policy to "anybody with a trademark trumps anybody without one," so they were working in league with the trademark lobby) or "preventing chaos" (another word for competition). Somehow that statesmanlike guy Ira Magaziner managed to screw the public, screw competition and reward the billionaire spook contractor who had the monopoly contract.

But this isn't the end of the story. SAIC was particularly smart. They knew the monopoly wouldn't last forever, so they milked it and then got rid of it to a sucker. They dribbled out more NSI stock into the market as the stock price rebounded after the monopoly was secured. Then in March 2000, they sold the entire company to VeriSign for $21 billion in stock (yes, that's billion). SAIC almost certainly had enough sense to sell off at least a good chunk of this stock before it dropped through the floor. (Try reading SAIC's SEC reports for 2000 and early 2001, maybe you can tell.) Thus SAIC made billions of dollars out of spending $3 million and pulling a few strings to keep the monopoly alive.

There were other strings pulled at other times (e.g., when Vint Cerf had just joined the ICANN board, the board voted to convert NSI's short-term contract to run the "com" [top level domain name] into a permanent contract), but those first two SAIC tugs were the key ones. <snip> READ MORE ABOUT THIS

Network Solutions' customer line is 703- 742-4777, 1-888-642-9675 NOW OWNED BY VERISIGN - don't use them. Use someone else. There is an online form that is emailed to the person in charge of the account if you want to change from NWS to a new company. Reassigning the domain name to the new host takes forever. Here is the form. IS NETWORK SOLUTIONS TRYING TO STEAL THE INTERNET AGAIN?

Network Solutions Sells Out - they will market your information!

A Letter on NSI's Whois Data Sale

The following top level domain applications were filed in accordance with RFC1591, as directed by IANA. Each application was submitted to "hostmaster@internic.net" using the applicable domain name template. InterNIC provided tracking numbers and also provided email confirming that the request had been forwarded to the IANA. Duplicate requests containing the InterNIC tracking number were sent directly to the IANA, per instructions provided by Jon Postel. The InterNIC tracking numbers are noted alongside each request.

The Internet Assigned Numbers Authority

IP INDEX NETWORK NUMBERS, NETWORK NAMES, AND IDENTITIES. Dedicated to preserving the central coordinating functions of the global Internet for the public good.

The following Information is important background that explains the big picture from the beginning.

All applications cited below are acknowledged in "The IANA's File of iTLD Requests", which was submitted to the International Ad Hoc Committee (IAHC) by Jon Postel of the IANA on Dec 5, 1996, and is available for review at the following URL

Congress May Legislate Domain Names 1997

New Domain System Starts To Take Shape

Guidlines for ISP's From 1996

Illegal Tax - charged by Network Solutions (InterNic)

InterNIC Registration Tool

Registrater Domain Name From 1995