VeriSign eyes telecom market alongside the Internet

Expanding its business horizon beyond the Internet, VeriSign Inc.’s CEO said Wednesday the company sees itself at the intersection of the Internet and telecommunication networks within five years, providing a huge database that links users and devices on both networks with routing and authentication technologies.

VeriSign has been keeper of one of the Internet’s major routing databases, the domain name service database for the .com, .net and .org top level domains, since it purchased Network Solutions in 2000, and now sees the digitization of telecommunication services and the growing importance of Internet telephony services as a chance to expand into a potentially huge new business area.

Last year the company paid US$1.2 billion to buy telephony services provider Illuminet Holdings Inc. The acquisition will help VeriSign launch a service offering corporate customers registration services for Enum, a new communications protocol that allows users to type a telephone number into a Web browser and then access associated records, such as Internet telephony, Web site addresses or e-mail addresses.

Later this year, VeriSign hopes to take its first steps in other areas of the telecommunication sector and begin by offering trusted SMS (short message service) on cellular telephones and trusted instant messaging services over the Internet, said Stratton Sclavos, president and CEO of VeriSign, addressing a news conference in Tokyo.

“By 2007, VeriSign will be a hub for computers and communications on the Internet and voice networks,” he said. Operating a database at the center of the Internet and telecommunication networks, Sclavos expects the company could be handling as many as one trillion database queries per day. In contrast, VeriSign’s domain name database handled 5.4 billion queries per day in the fourth quarter of 2001, the company said.

Should the company achieve this goal, Sclavos said he expects between 20 per cent and 25 per cent of revenues to come from telecommunication services in the one or two years running up to 2007.

The focus on telecommunication comes just as VeriSign is beginning to push into the area of Web services.

“In terms of new technology and new services, we believe the Internet is beginning its second wave,” he said. “And many of the largest technology companies are now promoting Web services. Web services is very important because it can give us the next wave of productivity.”

The Web services push was announced at the RSA Conference 2002 in late February in San Jose, Calif., and was accompanied by deals with the three companies Sclavos mentioned and several others.

In Japan, VeriSign and Fujitsu Ltd. announced on Wednesday an agreement where Verisign will sell and integrate its security systems into Fujitsu’s offerings for corporate users.

Its concentration on these new business areas come as the domain registration service business, one of VeriSign’s main business areas since it bought registrar Network Solutions in 2000, has gotten much more competitive and begun to shrink. With the bursting of the Internet bubble and the release of new top-level domain names, a catchy dot-com name isn’t as valuable today as it was perceived to be two years ago, so domain speculators are not snapping up hundreds of names. Recent data showed that during the fourth quarter of 2001, the number of domain names registered in the .com, .net and .org space dropped for the first time in history.

At VeriSign, Sclavos sees the business as remaining an important revenue stream but declining in relative terms from previous levels. In 2000, revenues from the domain name service made up between 60 percent and 65 percent of total revenues however this had fallen to around 50 percent and it expected to be between 30 percent and 35 percent of total revenues.

“The dependance on the domain name service has become much less in recent years.”

VeriSign, in Mountain View, Calif., can be reached at