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August 17, 2011 / gavinlaw

What you need to know about the generic top level domain program: Should you apply for a gTLD?

by Tony Guo

The generic top level domain (gTLD) program allows the creation of new gTLDs in the domain name space. Businesses and organizations interested in having their own dot brand/organization should consider the feasibility of obtaining the gTLD. There may be easier and cheaper alternatives to protecting a brand or trademark.

The application process is lengthy and arduous. Current predictions peg the time from application to ownership between nine and twenty months. But there is reason to believe the application will take longer. No one knows for certain how long a specific application will take. The .XXX gTLD, for example, was proposed in 2000. After facing strong adversity, it was finally approved this year, eleven years later.

The final cost of an application is also an unknown factor. The baseline application cost is 185,000 dollars; however this does not include many of the expenses an applicant faces. The longer the application process takes the greater the expenses. Further, if the gTLD becomes challenged, the costs can easily balloon into millions of dollars. Because this is the first time, it is difficult to predict how much money businesses and organizations will need.

Once an applicant is approved and gains the desired gTLD the applicant must take charge of the internet registry. Applicants can choose to pay someone to run the registry for them. In the large majority of cases, the registry earns more money than operating costs. The .XXX domain is predicted to make two hundred million dollars a year. Most of the money comes from registrants buying the domain name as defensive measures.

Although there is risk in applying, there may be greater risk not applying. The first round of applications begins January 12, 2012 and ends April 12, 2012. There is no set date for the next round of applications. It may be years down the road before businesses or organizations can apply for gTLDs again.

Applications can be objected to for many reasons. Government Advisory Committee (GAC) warnings give an applicant “an indication that the application is seen as potentially sensitive or problematic by one or more governments.” And while a GAC is not a formal warning it is notice to the applicant that the government may object at some stage.

In addition other applicants can make a string contention objection. Although applicants can coexist in the business markets, this does not mean they can coexist in the domain system. String contention is when two or more applicants file an identical or similar gTLD string and the strings create a probability of user confusion.

There are two types of applications, community based and standard. Applications that are community based are given preference. In a community based application the applicants are encouraged to work together. If for some reason they are unable, the gTLD will go to auction. The highest bidder wins the gTLD. Some of the more popular gTLDs are expected to go for millions of dollars if they go to auction.

For community based applications, any member of the specific community may lodge a community objection. In the proposed .bank, any bank may file an objection. Having a closed registry is beneficial for those who do not want to defensively purchase domain names. The cost of defensive purchases (see .XXX for an example) can become very high.

Life as a registry owner is not as glamorous as it first appears. Once an applicant accepts a gTLD they must follow certain guidelines. The registry owner signs a ten year term agreement specifying registry services. It is hard to predict what services should be named because they can evolve in time. Amendment of the services is fairly complex.

Businesses and organizations should carefully weight the costs of obtaining a gTLD with the costs of defensive measures. A well run gTLD can be profitable, but the initial cost creates a difficult barrier.

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