NSI last month acquired id-Names, a Houston-based firm that specializes in the registration of international TLDs, and it is preparing for the changing competitive environment in the business it has defined for six years.

Despite looming changes, NSI's business is good. So far this year it has registered more than 340,000 domain names, roughly 90 percent of those within .com — an increase of 73 percent from 197,000 in the same period in 1997.

The first quarter of 1998 marked NSI's sixth consecutive quarter of profitability. Net income for the first quarter of 1998 jumped almost 300 percent, from $516,000 to more than $2 million, over the first quarter of 1997.

Internet World recently spoke with Battista about the future of the domain-name business, the expected transition of Internet oversight from the U.S. government to an international body, and NSI's role in the future of the Internet.

Internet World: Do you expect the government's final recommendation on the DNS to be much different from its proposals? With only weeks remaining until those recommendations are released, what are you hoping for?

Gabe Battista: First of all, we support the framework the government put forth in the green paper. We thought it was the right solution and that it will drive things to a competitive solution. Based on the kinds of comments we've been able to pick up, we expect some changes, but not overwhelming changes. I believe it was fairly well received, if you accept the fact that a transition has to happen and that the government has to step in and ensure the smooth transition. But the devil is in the details.

Battista: Because of the rule-making procedure, any discussions we have would, by law, be part of the public record. We've been in a quiet period while the government has been gathering comments. Before the green paper was published, we were talking to anyone we could to put forth our position. The last few months have been really quiet.

IW: There are expectations that the government will want to create at least three, if not more, new top-level domain names. Which ones, if any, would you most like to see created?

Battista: Whether it's three or five, I'm not sure how the names will be picked or what they will be. We're not in a position to say what names they should be, so I have no feelings about that at all. If any new names are introduced, they will either be accepted and be successful in the marketplace or they won't. If people find value with them, they will be successful.

Battista: The whole issue of new TLDs has benefits and risks. It provides for diversity and new names, and it also takes trademark issues that have yet to be resolved on a global scale and compounds them. If there are new TLDs, we'll participate, and compete, and give our customers a one-stop shop. There needs to be a process on how trademark disputes are solved. This is difficult, because there is not a global trademark law. We've had to ferret some of those issues out with .com.

Battista: No. I think the marketplace should resolve these things. We've registered nearly 2 million names and we've had about 3,000 disputes. You don't want to slow up the process for 1,997,000 others because you have 3,000 disputes. A global body would only slow the growth of the Internet. I think every registrar is going to have to figure out how to work this. I don't want to slow the Internet up.

Battista: I would say let the buyer beware.

Battista: In the first quarter of 1998 we registered 340,000 new names, and we're not seeing much demand for new TLDs. Most--I would say 89 to 90 percent of those we registered-were in .com. There is more and more demand for domain names as part of a brand identity. People recognize that, as a brand, being international continues to grow in importance. But since NSI cannot decide what the new TLDs are going to be, those seeking new TLDs are not coming to us.

Battista: We just acquired a company [Houston-based idNames] that allows a company to register any name around the world, no matter what the TLD. That's something that some large customers and some Fortune 500 companies need to secure their brand name internationally, and now we can help them do that if they want to. But if someone wants to register in .to or tin, that is probably going to represent some competition to us. Domain names are not a net-sum-zero game. There are plenty of opportunities for additional participants to be successful.

Battista: I think that domain names are brands. People have to decide when they want to secure their brands. There are something like 4 trillion combinations just in .com. People should worry about it if they are going to need a domain name to do commerce- they should go and get the name even if they want to use it later.

Battista: I think the board will address issues like policy with respect to protocol, and key things about the infrastructure. But price-setting should be left to the marketplace. Those things that can be driven by the marketplace should be driven by the marketplace.

Battista: I respond "yes" to both of them. When the Internet started, it was a United States institution, but it has become a global institution. I think this is an issue of transition. Let's move to that international body. I think it should represent the percentage of users on the Internet. If tomorrow the Internet became a U.S-only institution because all the global users stopped using it, we wouldn't need a global body to govern it. This is an evolving situation. Board appointments should be for a limited time.