In 1993, a small government contractor named Network Solutions, Inc. (NSI) won a contract that would make it the gatekeeper of the internet. For the next six years, NSI would be the only company that could register .com, .net, and .org domains — a monopoly that generated enormous profits and enormous controversy.
Before Network Solutions
From 1985 to 1993, domain registration was handled by SRI International (formerly Stanford Research Institute) under contract with DARPA. SRI-NIC:
- Processed registration requests via email
- Maintained the root zone files
- Operated registration as a public service
- Charged nothing for domains
As the internet grew, this became increasingly unsustainable. SRI was an academic research organization, not a high-volume service provider. They needed help.
The NSF Takes Over
By 1991, the internet was transitioning from a military research project to a broader network. The National Science Foundation (NSF) became the lead government agency, managing the NSFNET backbone and supporting infrastructure.
NSF recognized that registration services needed a more robust operator. They issued a cooperative agreement (not a competitive contract — an important distinction) to find a partner.
Network Solutions Wins
In 1993, Network Solutions, Inc. won the NSF cooperative agreement. NSI was:
- A Herndon, Virginia-based government contractor
- Experienced in running network operations centers
- Not particularly large or prestigious
- Certainly not expecting to become central to the internet
The agreement gave NSI responsibility for:
- .com, .net, and .org domain registration
- Root zone maintenance
- InterNIC information services
- “Whois” directory services
The contract term was five years, with options to extend.
The InterNIC Era
NSI operated under the InterNIC brand (Internet Network Information Center). The InterNIC was actually three services:
- Registration Services (NSI) — Domain registration
- Directory & Database Services (AT&T) — Reference resources
- Information Services (General Atomics) — User support
But Registration Services was where the action was. As the web exploded in 1994-1995, domain registration became incredibly valuable.
From Public Service to Business
For the first two years, NSI operated essentially as SRI had — processing registrations for free. The cooperative agreement funded operations through NSF.
But NSI’s leadership saw an opportunity. Domains were becoming valuable. Companies desperately wanted good .com names. And NSI was the only game in town.
The 1995 Pivot
In September 1995, everything changed. NSF authorized NSI to charge for domain registration:
- $100 for two years of registration
- 30% ($30) went to the “Intellectual Infrastructure Fund” (later controversial)
- Renewals were $50/year thereafter
This transformed domain registration from a free public service into a lucrative business.
The Money Rolls In
The timing was perfect. The web was exploding. Every company needed a .com. And NSI was the only place to get one.
| Year | .com Registrations | NSI Revenue |
|---|---|---|
| 1995 | ~120,000 | ~$6 million |
| 1996 | ~488,000 | ~$25 million |
| 1997 | ~1.5 million | ~$75 million |
| 1998 | ~3 million | ~$150 million |
| 1999 | ~7 million | ~$350 million |
NSI’s stock price soared. The company that won a government cooperative agreement became a Wall Street darling.
Monopoly Power
NSI’s position gave them extraordinary power:
Sole Registration Authority
Want a .com, .net, or .org domain? You had to go through NSI. Period. There were no alternatives.
Price Control
NSI set the price. While $100 might seem cheap now, it was controversial when domains had been free. And NSI could (and did) raise prices.
Policy Control
NSI decided registration policies: who could register, how disputes were resolved, what happened to expired domains.
Data Control
NSI owned the WHOIS database — information about every domain owner. This data had significant commercial value.
Growing Controversy
As NSI’s power and profits grew, so did criticism:
Antitrust Concerns
Was NSI’s monopoly legal? Critics argued the government had created a private monopoly without meaningful oversight.
Price Gouging Claims
$100 for a domain seemed excessive, especially given NSI’s low marginal costs. Each registration required minimal processing but generated significant revenue.
Customer Service Problems
As volume exploded, NSI struggled to keep up. Registration delays, billing errors, and poor support became common complaints.
Trademark Disputes
Without verification, anyone could register any domain. Cybersquatting — registering trademarked names speculatively — became rampant. NSI had no clear policy for resolution.
The $30 Fee
That 30% going to the “Intellectual Infrastructure Fund”? It was supposed to fund internet development. But the money mostly accumulated without clear purpose, and NSI’s critics questioned whether it was just padding profits.
Industry Pushback
The internet industry — the very community that had built the network — increasingly opposed NSI’s monopoly:
Jon Postel’s Concerns
Jon Postel, the internet’s “god of names” and IANA operator, publicly criticized NSI’s policies. He saw the monopoly as contrary to the internet’s collaborative spirit.
ISOC Opposition
The Internet Society (ISOC), representing the technical community, called for competition in domain registration.
Commercial Opposition
Companies that wanted to compete in registration services lobbied for market opening.
International Opposition
Non-US governments resented American control over global internet naming.
NSI’s Defense
NSI argued their monopoly was justified:
- Stability: One operator meant consistent service
- Investment: Their profits funded infrastructure improvements
- Government Authorization: NSF approved everything they did
- Natural Monopoly: Breaking up registration would create chaos
Some of these arguments had merit. Introducing competition would be complex. But NSI’s enormous profits made the status quo hard to defend.
SAIC Acquisition
In 1995, Science Applications International Corporation (SAIC) — a major government contractor — acquired Network Solutions. This gave NSI deeper pockets and stronger government connections, arguably making the monopoly even more entrenched.
The End Game Begins
By 1997-1998, pressure for change was overwhelming:
- The US government was developing new internet governance policies
- ICANN’s creation was in process
- Antitrust investigations were underway
- Technical proposals for competitive registration existed
NSI’s monopoly wouldn’t last forever. But unwinding it would require years of political battles, as we’ll explore in the DNS Wars chapter.
Key Takeaways
- Network Solutions won the NSF cooperative agreement in 1993 to manage .com, .net, and .org
- Registration was free until 1995, then $100/2 years
- NSI became a monopoly controlling all major gTLD registrations
- Revenue exploded from ~$6M (1995) to ~$350M (1999)
- Critics charged price gouging, antitrust violations, and poor service
- SAIC acquired NSI in 1995, strengthening its position
- The monopoly ended with ICANN’s creation and the Shared Registration System (1999)
Next
NSI’s $100 fee transformed domains from free public resources into valuable commercial assets. This shift triggered the early domain gold rush — speculators, squatters, and visionaries racing to register valuable names.