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There is a price for Network Solutions Inc. losing its monopoly status in domain name registration - and VeriSign paid it. The provider of Internet trust services said last week it will acquire NSI in an all-stock deal estimated at $21 billion.

The transaction, subject to regulatory review and stockholder approval, would create a single vendor solution for start-up and expanding e-commerce companies. VeriSign will gain access to business customers that are just becoming Web-enabled companies.

"The move was made [for VeriSign] to gain access to companies as they established a Web presence and to get NSI's databases of information. In that sense, it's a powerful play," said David Schwartz, senior analyst for Dataquest.

The deal is expected to close in the third quarter. Upon close, NSI will become a subsidiary of VeriSign. Jim Rutt will continue as CEO of NSI and will report to Stratton Sclavos, president and CEO of VeriSign. The employee base of the resulting company is expected to grow to pursue new market opportunities.

A spokesman for the National Telecommunications and Information Administration within the Department of Commerce said it expects to meet with executives from VeriSign and NSI within the next few days. While it is too early to comment on the proposed acquisition, the purchase does not appear to be an antitrust matter, the spokesman said.

However, the move is bound to draw the attention of some registrars.

"Although it is changing, NSI's near monopoly status in domain registry will probably raise some red flags," Schwartz said. "I'm sure other registrars will try to block it, and maybe other security companies, but I think it's a difficult argument to make and I think [the acquisition] will get approved."

VeriSign appears unconcerned about the perception of NSI as a monopoly. "The agreements in 1999 with the Commerce Department and the [Internet Corporation for Assigned Names and Numbers] went a long way to diffusing that perception and opened up the marketplace," said Anil Pereira, vice president of VeriSign's Internet services group.

Many competing registrars look to VeriSign for trust services, and at least one has a positive view of the acquisition. "VeriSign is a one-stop shop for [domain naming system] and digital certificates for large customers," said Bryan Evans, director of technology at InterAccess, a Chicago-based regional provider of broadband and Web hosting services. "This helps them more strongly compete for that market. For the small business market, they would continue selling through resellers like us."

"The reality is that the registrars have already been working within this paradigm. There is no real change to them," Pereira said.

NSI is the largest domain name registrar and has registered more than 8.1 million domain names since 1993. The company had exclusive control of the domain name database until November 1999, when NSI, ICANN and the Department of Commerce reached an agreement to open the database to competition.

However, registrars and analysts speculate that VeriSign could spin off the registry database still controlled by NSI. VeriSign responded to the speculation with a resounding maybe. Under the agreements with the Commerce Department and ICANN, NSI can extend the contract after a certain time if it decides to reduce beneficial ownership in one or two other businesses below 25%, Pereira said.

"Clearly NSI has been evaluating its strategic alternatives for a while. Now that we are doing this combination, we will address all the possible alternatives. There is certainly an argument to be made for keeping it all together and continuing to deliver excellent service," Pereira said.

In pursuit of its e-commerce strategy, last month VeriSign also acquired California-based Signio, a provider of payment services to online merchants, and Thawte Consulting, a South African company that provides digital certificate products for Internet, extranet and e-mail security.

"We look at our strategy as building a trust utility for the Internet," Pereira said. "All [the acquisitions] combine to cement this piece of the Internet infrastructure so people can go from establishing themselves online through the full life cycle of e-commerce."