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explainer: Answers to your questions about the news.

How Much for That Domain?Who sells .net? To whom? And why does it matter?

By Bidisha Banerjee
Posted Monday, Jan. 24, 2005, at 6:44 PM ET

Listen to this story on NPR's Day to Day Listen to this story on NPR's Day to Day.

So you want to buy the .net domain ...

This month, for the first time, the right to manage the .net domain is up for grabs: Interested companies had to make their bids last week; the winner will be announced in March. But how does running a domain work? Who assigns this right? To whom? How much is it worth? And why does the .net domain matter, anyway?

The Internet Corporation for Assigned Names and Numbers—an international nonprofit group that's responsible for "preserving the operational stability of the Internet"—grants the right to operate domains to companies called "domain managers." ICANN runs (or, as in this case, finds companies to run) the 13 "root server" computers that contain the IP addresses for all the top-level domains (.net, .org, .gov, and the like) and country-specific registries (such as .de for Germany) in use around the world. These root servers act as directories, helping to ensure that all computers on the Internet can be found at all times.

Since 2000, .net has been the responsibility of a company named VeriSign, which also runs .com. As a domain manager, VeriSign runs two of ICANN's root servers and has 18 data centers around the world that keep open the lines of communication necessary for computers to access .net and .com addresses.

Maintaining these servers is a lucrative business for domain managers. People who sign up for .net addresses don't pay VeriSign directly. Instead, they pay a registrar (such as godaddy.com) $9 to $35 a year. This middleman then pays about $6 per registration to VeriSign, which pulls in an estimated $30 million annually off of .net. Some of VeriSign's competitors propose to charge less than $6 per registration, and in general the competitors are trying to prove that they would be more efficient than VeriSign. ICANN wouldn't disclose the financial terms of the bids, but the applications are posted on its site.

Why is the administration of .net such a big deal? While there's no inherent difference between the .net domain and .com, .net matters because it still has a lot of room to grow. (It has only 5 million users while .com has 35 million. The number of users on .com isn't going to max out anytime soon, but most of its short, snappy addresses have already been claimed.) And the .net domain is widely used, even if you see it less frequently than you see .com. In 1985, when .net was first dreamed up, it was intended to be a transport layer that individual computers would use to access many .com and .gov sites. Because of this convention, many Internet service providers are located in the .net domain. And 37 of the top 100 e-commerce sites (including walmart.com and amazon.com) store much of the infrastructural information that underlies their sites on computers with .net addresses. (Each year, $700 billion worth of commercial transactions happen on .net.) Curiously, despite .net's hidden hand in the smooth operation of .com sites, some people prize their .net address precisely because it doesn't have the commercial taint associated with .com.

Next question?

Explainer thanks Patrick Burns, Tom Galvin, and Mark McLaughlin of VeriSign; Heather Carle of Afilias; Kieran Baker of ICANN; Milton Mueller of Syracuse University; Jonathan Zittrain of Harvard Law School; and Siva Vaidhyanathan of New York University.