New gTLDs and the cost of progress


In June 2011, ICANN will announce when the new gTLD application process will open. Nick Wood considers the costs, benefits, risks and responsibilities associated with applying for trademark owners.

In June 2011, ICANN will announce when the new gTLD application process will open. Nick Wood considers the costs, benefits, risks and responsibilities associated with applying for trademark owners.

Social media, apps, geo-location, tablets—the Internet and the platforms and devices that deliver it change every month. We may be pioneers or luddites, early adapters or sceptics, But eventually, we select what is most useful or most popular with our peers and discard the rest. In our professional lives, as in our personal lives, if we are left behind, usually it takes just a little time or money to catch up.

Since 2006, ICANN’s leadership has been doggedly pushing the so-called new gTLD process, cheered along by the registry operators and registrars that dominate the ICANN community and predict financial gain.

“The domain name system is constrained by only 21 gTLDs…the new gTLD process is about the future of the global Internet and its 1.5 billion users,” exclaimed former ICANN CEO Paul Twomey in 2007. Now ICANN predicts that there will 500 new gTLD registries added to the root zone over the next five years, with hundreds or even thousands more to come.

ICANN is not for turning. Neither governments nor business, IP professionals nor security experts can slow it for much longer. Economic impact studies may have been promised, but there’s no longer any appetite for delay. Chairman of the ICANN board Peter Dengate-Thrush is due to stand down by rotation in June this year and the gTLDs will be his legacy. At the conclusion of the last ICANN board meeting on March 18, 2011, Dengate-Thrush said: “Monday [June 21] 2011 is the date when the ICANN board is going to launch the new gTLD programme....This is a resolution that the entire ICANN community can get behind. We are already scheduling the launch party”.

The problem for many trademark owners is how to respond to this announcement. The first round of the new gTLD process features a 45-day application period. This will be a time-limited window of opportunity: apply and you are in the process. Sit back and you will be locked out for maybe four or five years until the second round opens. If the new gTLD process does bestow advantages, this is a long time to have your nose pressed against the window.

The key task is to evaluate the impact and benefits of the new gTLD opportunity. How will the new gTLD process change the Internet? Supporters of the process say that in a decade, all major brands will have their own gTLD registries, and web users will be accustomed to typing the name of a brand directly into a browser rather than going through search engines. They say that brand gTLD registries will be trusted as the authentic location for information and services. Facebook and Twitter don’t require users to navigate with a .com so this is the beginning of the end of the dotcom age, supporters add. There will be innovative marketing programmes and apps created for the owners of shorter affinity domain names within brand registries, because domain name servers in the world root offer super-fast delivery of many types of data. Eventually the cost of online brand protection will reduce as trademark owners with brand registries allow large parts of their domain name portfolios to lapse. After all, if it does not end in acme, it is not acme, so who needs thousands of defensive registrations or variations?

Opponents of the process say that, with more than 90 million domains in the .com registry, .com is not going to lose value for the foreseeable future. They argue that web users who want to find a brand on the Internet can do so through search engines. The previous two ‘proof of concept’ new gTLD rounds in 2004 and 2006 added little of any real value to the Internet. Are domains such as .biz, .info, .tel or .mobi really valuable to a brand owner?

ICANN hopes for applications from city and regional authorities, civil society representatives,linguistic communities seeking domains in their own scripts, as well as investors in new media who want to run their own keyword registry. However, so far, only two brands have announced publicly that they will be applying: Canon and Hitachi. Both supporters and opponents of application say that this is due to the complexity and cost of the application process. Running a gTLD registry brings with it a plethora of responsibilities, even if you are outsourcing its day-to-day operation to a registry services provider.

The official costs of application are significant. ICANN requires:

• Payment of $5,000, part of the official application fee to pre-register

• Payment of the remaining $180,000 of the application fee

• Evidence of a financial instrument/irrevocable letter of credit worth the equivalent of the operating costs of the ‘critical registry functions’ for three years

• A fee of $25,000 per year, payable in four quarterly instalments, covering up to 50,000 domains in the registry plus a fee of $0.25 per domain per year above this threshold.

Then there are the registry service providers’ charges, which depend on the type of registry that a brand owner wishes to run. For example, a guide price for a defensive registry with under 1,000 registrations to protect a brand from what has been termed ‘permanent string preclusion’ (meaning being locked out of using a key term in perpetuity at the highest level of the domain name system because of an identical or confusingly similar application) is perhaps $60,000 a year.

For a closed brand registry with up to 10,000 domains allocated within a business utilising one registrar, allow maybe $120,000 a year.

For an open registry with 50,000 domains, think $20,000 a month and a fee per domain. Like all of the above estimates, this depends on the provider and the level of service you require, and so the per domain fee range is from $2 to $6 per domain.

These sums are naturally negotiable though it is possible that brand owners that leave it to the last minute to apply will find themselves paying higher prices and being at the back of a long queue of other applicants. They see open registries, operated by applicants for keywords such as hotels, music, news or ski, as offering a more attractive commercial proposition than a closedprivate brand registry. They are likely to require the few new staff they have appointed to work on new gTLDs to focus on open registries initially.

If you are trying to understand all the costs involved in the process, you must not forget the costs of lawyers, the escrow providers who will hold your data and the consultants you’ll need to get you through the 50 questions you must answer in the application form.

Who will make the decision to apply or not to apply for your organisation? If the new gTLD process is about anything, it is about money: fees for ICANN; income for the registry service providers; but also possibly new revenues for brand owners as a result of a heightened profile and a secure communications channel. Before you reject the new gTLD opportunity, it might be that you should consult with your digital marketing colleagues and then if they decline, check again to make sure that there is no one else out there who might take your term. Remember that in the virtual world of ICANN, a bid for ‘ABC’ could exclude ‘BBC’ forever, despite co-existence in the real world, and you can’t buy a new gTLD registry from a third party.

Nick Wood is the managing director of Com Laude. He can be contacted at:

This article was first published on 01 January 2011 in World IP Review

gtld, icann, brand owners, valideus

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