Whats the problem with the search algorithm?
When IE 5 starts, it will begin searching for a WPAD server, if it is configured to use WPAD. It starts the search by adding the hostname “WPAD” to current fully-qualified domain name. For instance, a client in a.b.Microsoft.com would search for a WPAD server at wpad.a.b.microsoft.com. If it could not locate one, it would remove the bottom-most domain and try again; for instance, it would try wpad.b.microsoft.com next. IE 5 would stop searching when it found a WPAD server or reached the third-level domain, wpad.microsoft.com. The algorithm stops at the third level in order to not search outside of the current network. However, for international sites, this is not sufficient, because third-level domains can be outside the current network. For example, if the network at xyz.com.au did not have a WPAD server, the search algorithm eventually would reach wpad.com.au, which is an external network name. If the owner of wpad.com.au set up a WPAD server, he or she could provide chosen proxy ser