How much does it cost to register a top level domain

Recently, ICANN, the body that is responsible for managing the domain name system of the Internet, approved what it refers to as “one of the biggest changes ever to the Internet’s Domain Name System,” under which, for the first time ever, ICANN is permitting companies an opportunity to create and control new generic top level domain names.  There is a lot of misinformation already circulating regarding this matter. Here is information on these drastic changes and their possible impact on you and your business.

DOMAIN NAME STRUCTURE

Internet domain names consist of multiple components, including a top level domain name, then a second level domain name, and, in some cases, lower level domain names. Take, for example, our firm’s website, “www.rwolaw.com.” The top level domain name (or “gTLD”) is the suffix, “.com.” The second level domain name is “rwolaw.” The “www” component is separate and designates the host server, in this case a world wide web server.

Historically, when a business wanted to establish a website, it would do so by acquiring rights to a second level domain name, for instance “www.amazon.com.” Businesses did not have the ability to claim a unique gTLD. The major impact of ICANN’s recent action is that business or other organizations will soon have the opportunity to claim a customized gTLD. Instead of using a second level domain name under a gTLD such as “.com,” a company can use its company name as the gTLD itself, such as “.amazon.” In this example, Amazon could establish as its homepage the name “www.home.amazon” instead of “www.amazon.com,” and an e-mail address could be “[email protected]” instead of “[email protected]

IMPLICATIONS FOR YOU

The registration of a unique gTLD will not be a realistic option for most companies due to the prohibitive expense and workload involved. Nonetheless, these developments will affect your company and the structure and use of the Internet in the future even if you do not register a gTLD.

Most importantly, you will want to ensure that no gTLD is registered that uses your trademarks, brands, or company name. ICANN will publish the gTLDs from the initial round of applications, and third parties will have the opportunity to object to an application on several grounds including for violation of intellectual property rights. There will be a fee for filing an objection.

In addition, you should pay attention to any applications that seek registration of a gTLD containing any general terms covering your particular business sector or industry. If an outside entrepreneur or even a competitor in your industry is applying to register a term relevant to the entire industry, there are additional potential grounds to assert an objection on the basis that the applicant is not legitimately representative of the entire “community.”

If a general term is registered as a gTLD by a legitimate registrant, you may consider acquiring a second level domain name under that gTLD from the registrant. For instance, if a trade association of computer sellers registers “.computers,” and you are in the computer industry, you might consider acquiring “www.[your company’s name].computers.” Note that the process for acquiring such a second level domain name for the new gTLDs will differ from the process for acquiring a second level domain name under the existing gTLDs such as “.com,” because you will have to go through the private registry operators. In particular, we expect the prices will be higher to allow the registrant to offset its costs in obtaining the gTLD.

REGISTERING A TOP LEVEL DOMAIN NAME

The expenses and effort involved in registering a new gTLD are huge, and will probably deter all but the largest and most dedicated companies from pursuing these gTLDs. The initial fee for registration is $185,000, which is in many cases nonrefundable or only partially refundable if the gTLD is not granted. In addition, there are ongoing fees of at least $25,000 per year thereafter. The application requires submission of materials outlined in a “Guidebook” published by ICANN, which is currently 352 pages in its preliminary form.

The applicant must provide, as part of the application, evidence of its technical as well as financial capabilities to run a gTLD. Unlike when a company acquires a second level domain name, registering a gTLD makes the company the “registry operator” responsible for actually running a part of the Internet, including registering others to use second level domain names under the gTLD, to the extent the company permits others to do so.

Applications will be accepted for a limited initial period from January 12, 2012 to April 12, 2012, with later rounds expected, but not yet scheduled, in later years. ICANN anticipates receiving 300 to 1,000 applications during this initial application period.

BRAND-SPECIFIC VS. GENERAL DOMAIN NAMES

It is anticipated that companies are going to claim brand-specific gTLDs, such as “.apple” and “.canon,” which will be used solely by the registrant who will not allow third parties to acquire second level domain names. Apple will obviously not sell Microsoft the rights to “www.laptops.apple.”

Organizations will also be able to register more general gTLDs. For instance, the trade group American Trucking Association representing the trucking industry could seek to register “.trucks,” and then allow its members to acquire second level domain names under that gTLD. This ability will not be restricted to neutral trade organizations. One company in an industry may find it more advantageous to register a general term instead of its brand name. For instance, one trucking company could seek to register “.trucks” for its own use. Further, enterprising companies may seek to register a general gTLD with the goal of making money by getting others to pay fees to acquire second level domain names under the gTLD. There are some limited safeguards against an individual company registering a name that represents an entire group if that company is not truly representative of the group.

PROS AND CONS OF REGISTRATION

The major expected benefits of claiming a new gTLD for a particular brand are the increased opportunities to promote the brand through use of the customized name and to potentially increase internet traffic. Due to the expense involved, a brand-specific gTLD will also no doubt carry significant prestige. As a registry holder, the registrant will also be able to exercise more control over its website which may help prevent fraud or misuse. In some industries, the control of a gTLD will have advantages in that the registrant will be able to assign second level domain names to related parties. For instance, a company with many subsidiaries could assign different second level domain names to each subsidiary, and a company with networks of franchisees or distributors could assign personalized second level domain names to each franchisee or distributor.

The primary drawbacks of claiming a new gTLD are, of course, the expenses that are required for the initial and ongoing registration, and the costs for the technical maintenance and administration of the gTLD. Undertaking the registration requires a major financial commitment and time commitment. Another little-discussed possible downside is the unfamiliarity that the public will have with the new gTLDs, at least initially. For instance, a customer looking for Microsoft’s website today would intuitively know to visit “www.microsoft.com,” but if that company uses a custom gTLD instead, the customer may not know what address to enter. Would it be “www.home.microsoft,” “www.main.microsoft,” “www.store.microsoft,” or something else? At some point in the future, standard naming conventions will likely evolve for these new gTLDs that will resolve some of this confusion.

As a final note, your current websites will continue in existence. The development of the new gTLDs does not change or affect the existing gTLDs such as “.com,” “.net,” or “.org,” or the second level domain names under them. It is expected that those sites will remain the most valuable based on their widespread use and recognition.

Douglas R. Ferguson and Robert B. Bliss, franchise distribution lawyers at Robinson Waters & O’Dorisio can assist you with matters related to the new gTLDs, including monitoring the applications for new gTLDs for potential threats to your intellectual property rights, preparing objections to applications, or even discussing a potential gTLD registration on your behalf. If you would like to discuss any of these issues further, of if you have any questions regarding this memorandum, please do not hesitate to contact us directly at 303-297-2600.

Confusing ICANN fee structure for new top level domains.

The headline number for new top level domains is $185,000, the price of submitting an application.

But domain registries also pay ongoing fees to ICANN each quarter. Amazingly, what exactly those fees are is up for debate.

Here’s the full text of section 6.1 on the registry contract new TLD operators will have to enter into:

Registry Fixed Fee of US$6,250 per calendar quarter and (ii) the Registry-Level Transaction Fee. The Registry-Level Transaction Fee will be equal to the number of annual increments of an initial or renewal domain name registration (at one or more levels, and including renewals associated with transfers from one ICANN-accredited registrar to another, each a “Transaction”), during the applicable calendar quarter multiplied by US$0.25; provided, however that the Registry-Level Transaction Fee shall not apply until and unless more than 50,000 Transactions have occurred in the TLD during any calendar quarter or any four calendar quarter period (the “Transaction Threshold”) and shall apply to each Transaction that occurred during each quarter in which the Transaction Threshold has been met, but shall not apply to each quarter in which the Transaction Threshold has not been met. Registry Operator shall pay the Registry-Level Fees on a quarterly basis by the 20th day following the end of each calendar quarter (i.e., on April 20, July 20, October 20 and January 20 for the calendar quarters ending March 31, June 30, September 30
and December 31) of the year to an account designated by ICANN.

If you read that paragraph and are a bit confused, you’re not alone. I reached out to several new TLD applicants for clarification on the fees. There was disagreement — and some befuddlement — amongst them. But perhaps by walking through it here we can crowdsource what the fees actually are.

What is clear is there are two fees: a fixed fee and a transaction fee.

The fixed fee is $6,250 per calendar quarter. This is the “$25,000 a year ongoing cost” you keep hearing about.

Now read the long sentence about the transaction fees again:

The Registry-Level Transaction Fee will be equal to the number of annual increments of an initial or renewal domain name registration (at one or more levels, and including renewals associated with transfers from one ICANN-accredited registrar to another, each a “Transaction”), during the applicable calendar quarter multiplied by US$0.25; provided, however that the Registry-Level Transaction Fee shall not apply until and unless more than 50,000 Transactions have occurred in the TLD during any calendar quarter or any four calendar quarter period (the “Transaction Threshold”) and shall apply to each Transaction that occurred during each quarter in which the Transaction Threshold has been met, but shall not apply to each quarter in which the Transaction Threshold has not been met.

Let’s break that down:

1. There’s a transaction fee of 25 cents for each “annual increment of an initial or renewal domain name registration”. What’s not entirely clear is if these fees are front loaded. For example, if someone registers a domain for 10 years, is that ten annual increments that must be paid upfront? It sure seems that way. (It’s worth pointing out that you can hit the 50,000 transaction threshold without 50,000 domains registered.)

2. The transaction fee only applies when 50,000 transactions have occurred in a specific time period. But the time period is really confusing to me:

“during any calendar quarter or any four calendar quarter period (the “Transaction Threshold”)”

Hmm. So if you hit 50,000 transactions in a quarter then you definitely pay. Yet does the transaction fee also kick in if I reach 50,000 transactions in a “four calendar quarter period”, i.e. a rolling year? It appears that way…until you read the next part of the sentence:

“[The fee] shall apply to each Transaction that occurred during each quarter in which the Transaction Threshold has been met, but shall not apply to each quarter in which the Transaction Threshold has not been met.”

So then if you reach 50,000 transactions in a “four calendar quarter period”, the transaction fee actually won’t apply if you don’t reach the threshold in a single quarter. That seems to cancel out the reference about a four quarter period.

Next issue: I don’t see anywhere in here where it says the transaction fee is in place of the fixed fee.

So that means when you make your 50,000th transaction in a quarter you suddenly pay a transaction fee on all 50,000 of those transactions. You’d be better off with 49,999 transactions because the 50,000th one will cost you a whopping $12,500!

There’s also a “variable registry-level fee” (section 6.3) that seems to be an insurance policy for ICANN if future registrar accreditation agreements do not include variable registrar fees.

I reached out to ICANN’s PR for clarification yesterday but didn’t hear back. I’m sure someone somewhere understands exactly how these fees work, but they certainly need to clean up and clarify the language.

Written by Jane