Stakeholders Seek Another Round of gTLDs

Registrations in the new generic top-level domains (gTLDs) may be a small percentage of total domain registrations, but registries are pushing for a new round and there's no reason that shouldn't happen, ICANN stakeholders told us. The question of whether more new gTLDs are needed isn't a good one, said Peter Dengate Thrush, who chaired the ICANN board during the launch of the last gTLD round: "Innovation doesn't proceed because of identified needs." Trademark owners said more extensive review of the last round is needed before any action. The overriding question is whether search and mobile apps are becoming more relevant than domains.

As of Q1, around 330.6 million domain names were registered across all TLDs, Verisign reports, a rise of around 1.3 million registrations over Q4. Of these, new gTLDs totaled 25.4 million domain registrations, or 7.7 percent of the total.

In June, ICANN's Registry Stakeholder Group asked the board to give "serious consideration" to setting a date for the next round of gTLDs. That would give ICANN, the community and potential applicants predictability and certainty, the registries said. It would provide a deadline for all existing work on various TLD issues and prevent those inquiries from "being used as a vehicle for delaying tactics," they said. ICANN's current timeline suggests it will be late 2020 before the next round opens, but the board should set a date in Q4 2018, it said.

Chair Stephen Crocker demurred, saying in a July 26 letter that two reviews -- one on the new gTLD program's impact on competition, consumer trust and consumer choice, the other on how to introduce additional gTLDs -- are underway: Setting a date for a new application process might "contravene the multi-stakeholder process that allows for the community to have the necessary discussions to arrive at consensus, and to determine the timing."

"There is certainly a pent-up demand for the next round" judging by the number of participants at ICANN meetings voicing an interest in obtaining and operating a TLD, said Jothan Frakes, CEO of domain name registrar Plisk. Some brands like McDonald's and HTC have abandoned gTLDs won in the 2012 round, but many interested brands and companies, plus geographical entities, missed the application window, he said. Besides waiting on various working groups to present their findings and reports on the 2012 round, and further community input before proceeding to any new application, ICANN had to deal with the Internet Assigned Numbers Authority transition from under the U.S. government, he said. The various reviews could be "fertile grounds for those who wish to delay another round," said Dengate Thrush. ICANN will have a new board chair in October, which could affect progress, he said.

There are only two arguments against mountains of TLDs, said former ICANN board member Karl Auerbach, now InterWorking Labs chief technical officer. Some will be administered with lax concerns for longevity and security, but "customers can learn to be discriminating." Some may think that because some gTLDs haven't been "as white as snow," all should be barred, raising the question of whether all future internet search engine companies should be banned because some existing ones abused privacy, he said. "The technical argument against millions upon millions of TLDs has long been rebutted."

Trademark owners said the jury is out on whether new gTLDs are needed. International Trademark Association research showed most registrations in the new domains are defensive and aim to prevent others from buying brand names, said INTA Senior Director-Internet Policy Lori Schulman. Other findings included that trademark defense costs have increased, and domain names created in new gTLDs are usually parked and not creating value, she said. ICANN reviews underway of consumer trust and rights protection mechanisms in the new domain spaces must be completed before any decisions on more gTLDs, she said.

'Operating at a Loss'

In the 2012 gTLD round, expectation was "great" that if a TLD buyer passed all the rigorous reviews, it would own a great business, said Christa Taylor, founder of Vancouver-based DotTBA, which advises organizations on launching and operating new gTLDs: "Except, TLDs were launched and well, have never reached the demand that everyone expected."

Whether a new gTLD can be deemed viable depends on knowing expectations, said Taylor. An organization that wasn't expecting to break even for five years is different from one with the old expectation "that the TLD market would explode and everyone would do well financially," she said. "Most of the TLDs that are available to be registered (as opposed to closed or brand TLDs) are operating at a loss." As with any business, it takes time to build it and educate the public, she said.

Using the example of .vip, Taylor said it became generally available May 16, 2016, and now has around 807,000 registrations. Data shows the price charged by several big registrars for .vip domain names averages $19.99, she said. That gives the registry an average yearly registration volume of 647,373 and a total retail revenue of nearly $13 million, she said. Assuming the registry receives 40 percent of retail revenue, it ends up with around $5.1 million. But the registry must pay ICANN a minimum fee of $25,000 per year, along with some costs. For many new gTLDs, the mean retail revenue is around $185,000, of which the registry receives $74,000 before any other expenses. Not allowing potential applicants to purchase a TLD "creates barriers to entry that are not necessary," provided internet security and stability aren't compromised and any new applicants have the information they need to make an informed decision, Taylor said.

Introduction of new gTLDs "has been neither a smashing success nor an unmitigated failure," said Virtualaw founder Philip Corwin. Success of future rounds and overall demand for domains takes place in a rapidly evolving internet ecosystem, he said. Domains will remain important as the "central atom and key foundation for internet presence," but as the world relies more heavily on search and apps, with migration from desktop to mobile devices, "domains will fade somewhat as the focal point for user experience."