Original URL: http://www.theregister.co.uk/2006/02/22/nominet_response_egm/

Nominet responds to rule-change concerns

No conspiracy, just good business, claim chief exec and chairman

By Kieren McCarthy

Posted in Financial News, 22nd February 2006 16:32 GMT

Nominet's chairman and chief executive have hit back at claims that changes to the company's Memorandum and Articles of Association will over-commercialise the not-for-profit company.

Chairman Bob Gilbert told us: "There is a lot of disinformation being peddled that is completely erroneous." Instead, both he and chief executive Lesley Cowley insist the changes are essential if Nominet is to compete in the fast-moving internet market.

Last week, Nominet - which runs the .uk internet registry - called for an extraordinary general meeting next month where it will ask members to vote for changes to the company's basic charter. It requires 90 per cent approval for the changes to go through.

But soon after, several members of Nominet's Policy Advisory Board started raising concerns over some of the changes. One, Hazel Pegg, has even set up a website to outline her concerns in which she urges Nominet members to vote 'no'.

Gilbert, who has spent most of the past nine months working on the changes and who has wide-ranging experience as a company law specialist, assured us that the changes were no more than "normal" and that he found it frustrating that people were misreading the changes.

The fear the changes are just the first part of a gradual move toward far greater commercialism, and possibly a float of Nominet, are unfounded he said. "I suppose it is because I have a track record of taking companies public - but then I have also done a lot of non-profit work and the two are entirely separate."

Instead, he claims, he has been "infected" with Nominet's approach and culture. It would be legally impossible for Nominet to be floated, and besides the company is determined to remain not-for-profit.

Cowley said the reason behind the changes is to update Nominet and free it from past constraints that were useful back in 1996 but now unnecessarily restrict the company.

One example is that under the existing rules, Nominet has to poll all its members by post if it is to change prices. Others are: that this company at the edge of internet technology is currently restricted in its use of electronic communication; it is not allowed to do any promotion or marketing for the .uk domain ("we'd love to do that", Cowley said); and under its current rules, the managing director also has to be the chairman.

With the existing articles, the board may change the voting rules any time it pleases. And it also faces an almost impossible task of expelling members - something that came to a head when Nominet was forced to sue one of its members for misleading consumers while all the while the company used its membership of Nominet as evidence of its trustworthiness.

"We've gone 10 years without an extraordinary general meeting, and I'd be more than happy to go another 10 years without one," said Cowley. "But what we want is to be much more responsive and quick to some of the changes that will happen in the industry whether we like it or not."

Gilbert reiterates the same line: "Nominet's original constitution has served it wonderfully well, but it's time to move on and what we want to do is give the management the ability to run the company the way they see fit."

So far, critics of the changes would largely agree with Gilbert and Cowley. Members' main concerns instead surround the ability of the board to provide "discounts" to members; to charge different members different fees; and to provide "loyalty" payments to members of the board.

Changes to the board structure also mean that while much-needed skills in business and marketing will be pulled into the company, the influence of smaller Nominet members is likely to suffer.

PAB member Pegg views the discounts as dividends by the backdoor, and the remaining changes as a dangerous move in the direction of commercialism where companies with more money will get more of a say.

Several elected members of Nominet have said privately, however, that the days of Nominet being a members-only club in the old sense of the word are over. Nominet has a £15m turnover and runs the fourth biggest domain registry in the world.

It is looking to use its expertise to grab new business as the internet grows and evolves but, Cowley promises, this will not see Nominet stealing business away from its normal members. Instead it is aiming at the big guns of the internet industry - VeriSign, Afilias, NeuStar and so on.

The deal in Nominet's gun-sights at the moment is the contract for ENUM in the UK. Afilias recently won Ireland's. "The UK was one of the first places to have ENUM," says Cowley. "Now Ireland is ahead, and Germany is miles ahead." Under Nominet's existing rules, the company is simply prevented from bidding for anything about a United Kingdom domain registry.

The creation in 2001 (and their subsequent dissolution in 2004/5) of three Nominet companies (Nominet.eu Ltd, Nominet.org Ltd and Nominet.44 Ltd) were not a way of bidding for .eu, .org and ENUM contracts, Cowley insists, but just an attempt to prevent others from misusing the Nominet name.

Others remember the situation differently, although they still remain unhappy about Nominet having to find ways round the company's rules in order to bid for business that Nominet has significant experience in.

At heart, the argument is over culture. Nominet has been extremely successful in part because of the unwavering support provided by members. In the past, when a million different distractions led many internet companies to spread themselves too thinly, Nominet thrived because of its focussed attention on the domain name market.

But things have changed, Gilbert and Cowley say. The vast majority of Nominet members agree but remain suspicious of what the proposed changes will herald. Their job is to persuade all but 10 percent of the members that they know what they're doing.

"I will defend to the last breath of my body members' rights to vote," said Gilbert. "And if they vote against these changes, fine. But I want them to know exactly what they are voting for."

The EGM will take place at 10am on March 16, at the Kassam football stadium in Oxford.®