The tech media is starting to talk about the arrival of designer domain names from the Internet Corporation for Assigned Names and Numbers (“ICANN”), which oversees the development and administration of Internet domain names under its contract with the US Department of Commerce Because these changes may raise significant concerns for our business customers, we’ve outlined some of the relevant topics below.
For several years, ICANN has been promulgating rules and soliciting feedback on the use of custom top-level domains (“TLDs”) (read “brand-specific” .[brand] gold .[industry]) to expand Internet real estate beyond .com and its lesser-used alternatives by December 2009. A guide for applicants has approved its second draft. ICANN solicited feedback from domain name stakeholders, including government, the technology community, existing domain name registrars (the database operators that market and lease the names), trademark owners ( i.e. companies) and the legal groups that represent them, such as the International Trademark Association. (“INTA”).
As of the end of January 2009, ICANN received over 1,000 comments, many of them highly critical of ICANN for moving too fast to bring this paradigm shift to market and for what some perceive as an exorbitant cost. Custom domain names of this variety start at approximately $300,000 in ICANN charges and setup fees, compared to the $35 annual fee for the typical .com, assuming it’s available.
For example, these custom names would allow an airline to buy .delta or Smith & Wesson to buy .gun, but is there a business advantage to this? Will this scheme produce an additional crop of suffixes that companies must defensively register as is often done with .net and .org? Plain counterfeits like .kom and .bizz are already prohibited by ICANN rules, but what process or authority will decide whether to assign .delta to the airline trademark owner or its faucet manufacturer counterpart; .austin to the city or auto manufacturer; .mayo to the clinic, county or condiment manufacturer? can .[your religion] be registered in the name of a non-member or fall into the hands of a group with opposing views? Religious leaders have already begun commenting. Do legitimate business applicants lose out to cyber speculators who then hold auctions among themselves? Does purchasing a custom domain name represent a “deal”, leading to marketers being first in line to purchase your .[brand] gold .[industry] as a back door to expand market share? Should risk-shy managers in this weak economy say “no deal” to an untested change that depletes already limited funds?
Part of ICANN’s risk analysis should include the effect a move to unrestricted domain names will have on the current list of 14 simple ASCII gTLD suffixes (of which .com, .org and .net account for 91% of all gTLD registries) and approximately 230 two-letter country code ccTLDs. Trademark owners have criticized ICANN’s process thus far for failing to provide safeguards or “rights protection mechanisms” to protect trademarks from malicious or fraudulent registration. In the past, for example, there were dawn periods that allowed trademark holders the first opportunity to obtain domain names incorporating their trademarks. Many also question whether the considerable expense is justified, other than to help ICANN recoup its $13 million in additional expenses for Internet administration. Questions also remain about the effect this myriad of unique domain names would have on search engines. Security experts say keeping an eye on malware and phishing will be more difficult in various domains. There are conflicting studies available on the internet that come to opposite conclusions on whether new domains will be more or less susceptible to attack. More importantly, trademark owners will not only have to watch out for someone trying to register their trademark as a top-level domain, but also as a second-level domain linked to it, like delta.airline or macys.shopping .
As with all things online, we’re cautiously optimistic that the market will eventually settle the debate about whether new domains are worth the risk and expense. Efficient market decisions depend on knowledge of the market to accurately assess risk. Based on most feedback, it appears to be too soon for business leaders to decide whether custom domain names are a deal, where the benefits outweigh the costs, or no deal, where exorbitant up-front costs and unanswered questions outweigh potential market benefits.