Defying the Market, Start-Up Targets Domain Registrations.

For David Hernand, co-opting some of the most popular content sites on the Internet seemed like a good way to make his point.

Hernand, chief executive of Idealab-incubated startup New.net, is assigning unofficial "dot-movie" extensions to Web sites for 1,500 Hollywood films in an effort to demonstrate the value of the registry company's slate of new domain names.

Launched in March, Sherman Oaks-based New.net is operating on the premise that the diminishing availability of basic domain names has created a burgeoning market for new Internet extensions.

But New.net is rushing into a space where others have not done well. Past attempts to introduce new domain extensions outside of the system administered by the Internet Corporation for Assigned Names and Numbers (ICANN), have failed because only a small number of users were able to access those sites.

Many Internet service providers allow users to only access top-level domains (dot-com, dot-net, dot-org and others). Now, amid a good deal of skepticism, New.net says it is solving that problem by convincing many of the leading ISPs -- including EarthLink, Prodigy Communications Corp. and United Online (the merged NetZero and Juno) -- to link directly to its new extensions.

New.net, which has 30 employees, is marketing more than 80 extensions for which it charges an annual $35 registration fee. Besides dot-movie -- which it is giving away for free -- New.net sells dot-kids, dot-shop, dot-travel and dozens of other extensions, many geared toward non-English speaking Internet users.

New.net officials say that 72 million of the 440 million Internet users around the world can access its sites. A little more than half of those get direct access from their ISPs, and the rest have downloaded software (sometimes unintentionally because it is bundled with other programs) that allows them to link to New.net's domains.

To become profitable -- and Hernand says spring 2002 is realistic -- New.net might have to register hundreds of thousands of new names. He declined to give an exact number, but said New.net has registered "tens of thousands" of names since March.

"The challenge for New.net is getting the same kind of ubiquity that ICANN-approved top-level domain names have, and that's an uphill battle," said Lou Kerner, chief executive of another Idealab company, .tv Corp., which registers the official country extension for the tiny island nation of Tuvalu.

"There have been many attempts at creating alternative roots and all have faced the same chicken-and-egg problem: To register names you have to have people using those extensions. And people won't use the extensions until there is something there," Kerner said.

Preserving uniqueness

Because New.net does not own the domain names it sells, there is nothing to prevent other companies from signing people up on those extensions, potentially with the same names sold by New.net.

"The bottom line is the Internet is just like the telephone system. You need to have unique identifiers to make it work," said Andrew McLaughlin, chief policy officer for ICANN, who is critical of New.net and other services that he believes risk making the Internet unwieldy.

"So far, all these efforts like New.net have failed because people want the Internet domain system to be administered in the public interest," McLaughlin said.

Hernand acknowledged that other companies could register the same extensions, and perhaps even the same names, but he said those names would be worthless because few people would be able to access them. New.net's deals with EarthLink and the other ISPs means only names registered by New.net will be accessible through those systems.

John Irwin, executive vice president of customer experience for EarthLink, which is carrying New.net's extensions on a one-year trial basis, said the company is less interested in the political implications of using alternative extensions than in ensuring its users get what they want.

EarthLink will decide whether to renew its agreement with New.net in early 2002, he said.