Network: Nominet set to de-mutualise

Members of the cyberspace version of Companies House would like to cash in. By Andrew Mullins

THE 1,000 members of the organisation in charge of Internet addresses in the United Kingdom stand to make millions overnight if proposals to de-mutualise Nominet UK are accepted. More than 300,000 Internet addresses, or domain names, have been sold to firms wanting to set up their own website with an address ending "co.uk".

The number of new sites is climbing by 23,000 a month and each registration costs about pounds 80. The US equivalent of Nominet UK, Network Solutions, has a $2.2bn estimated value.

Two separate plans to end the non-profit-making status of Nominet UK are currently being considered by its members. "Nominet is a very `profitable' non-profit organisation and I would like to see the members benefit from that," said Alun Webber, a member who is behind one plan. "We've conducted a poll of members and two-thirds of the replies have been in favour of my plan."

Nominet UK acts like a cyberspace version of Companies House, ensuring that no two addresses are identical and opportunists cannot make large profits from registering the names of large concerns to which they have no connection.

Members pay a pounds 500 registration fee and a further pounds 100 each year for the right to purchase domain names for about pounds 20, which they then sell on. After two years, address holders have to pay another sum to keep their address, which is in effect rented much like a post office box number.

Bob Fox, managing director of Net Registrar UK.CO, is behind the rival proposal to de-mutualise Nominet. He'd like to go further than Mr Webber and float Nominet as a plc, rather than turn it into a limited company. Together with Steve Feigen, MD of Abacus Software, he will be standing for the board of Nominet UK at the annual meeting later this month. According to Nominet insiders, Fox is seen as less likely than Webber to succeed in his persuasions. Fox admits that his deal with a Colombian telecom company to supply Web addresses ending in "uk.co", rather than those ending "co.uk "as currently supplied by Nominet, has weakened his claims that he has the interests of members at heart.

Ivan Pope, chairman of Netnames, one of the larger members, and a founding director of Nominet UK, said: "My immediate response is that the carpetbaggers are among us. I suppose it's inevitable. It is an issue that has been raised before." But Pope is against the plan. "It would be dangerous to do this," he says. "We would be stepping into a minefield. We have an AGM coming up, and no doubt this will be the hot topic."

Not all member companies feel the same way. One Nominet UK member who did not wish to be identified, said: "I'm not wedded to the idea of a non-profit Nominet. If there was a resolution for conversion that meant a windfall payment, a lot of the smaller members would not think twice."

The decision to become a commercial company would be taken by a vote of members. One quarter of votes are on a one member, one vote basis. The rest are divided up using a formula based on how many domain names the member sold in the previous year. Fox would like to end this system and is proposing a total one member, one vote system, which would be reflected in the allocation of shares.

Both groups in favour of de-mutualisation have similar complaints about Nominet UK as it stands. "The people who run Nominet may not be fat cats, but they are pampered pussies," says Webber "You have to ask questions of any company that is spending as much on legal fees as it is on staff." Like Fox, he believes that Nominet is overly influenced by a clique of large Internet service providers.

William Black, MD of Nominet UK, says: "This is a national resource and we shouldn't abuse it. Even if the members decided to change Nominet into a plc, they couldn't get their hands on the money already in the company. I'm pretty sure that the Government will have something to say about this."

Nominet UK's role makes it a natural monopoly and those members against de-mutualisation believe the Department of Trade and Industry could step in and protect their current status. A DTI spokesman said: "Nominet is constituted as a not-for-profit company with open membership rules. Any change in [its] constitution would require examination by the competition authorities."