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The New
Top-Level Domain Names:
Impact and Implications

by Geoff Keston

Copyright 2020, Faulkner Information
Services. All Rights Reserved.

Docid: 00021171

Publication Date: 2003

Report Type: TUTORIAL

Preview

The familiar generic top-level
domain names like .com and .org have been joined by a
long list of new extensions called “gTLDs.” This major change offers
new opportunities
to
stake out territory online, but it also presents risks and burdens by
forcing brand owners to work harder to ensure that their intellectual
property is protected and that they maintain a positive, highly visible
Web presence.

Report Contents:

• Executive
  Summary
• Description
• Current View
• Outlook
• Recommendations
• References
• Web Links
• Related
  Reports

Executive Summary

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In the past few years, the Internet
Corporation for Assigned Names and Numbers (ICANN) has begun offering a
much wider
range of generic top-level domain names
(gTLDs), the part of an Internet address that appears after the Web
site name (most familiarly
.com, .org, .edu, and .net).

As a result,
Internet
addresses are taking on
a dramatically more diverse appearance. Examples of new gTLDs include
.shoes,
.guru, and .NYC, which is just for people or organizations with a New
York City street
address. Web addresses with these extensions can be bought through
typical registrars, so in addition to owning mycompanyname.com, for
example, someone
can buy mycompanyname.shoes. An organization
can also bid in an auction to own a new extension and then keep that
extension for itself (for instance, Amazon sought .Amazon as an
extension) or serve as the registrar for that domain, selling URLs that
use that extension.

Buying a
single URL such as
myname.guru typically costs just a little
more than buying a .com name, but owning a gTLD domain is very
expensive, with
an upfront application fee of $185,000, annual renewal fees
of
$25,000, and full responsibility for operating the domain name
infrastructure. The auctions for these domains can be fiercely
competitive.

The new
top-level domains are considered by some observers to be useful tools
for managing
an online identity, for message delivery, and for customer engagement.
Owners of gTLDs can assign the sub-domains underneath it. As a
marketing tool,
this could be a very effective way of making products and services
visible. The trick here, however, is making sure that existing
investments in search engine optimization for e-commerce sites are not
diluted or abandoned by a move away from an existing .com
presence. On
the other hand, some observers have criticized the new domains as being
simply an attempt to generate more revenue for registrars, and they
have expressed concerns about the potential for practices like
cybersquatting, in which someone buys a domain for a company’s brand
name and then sells it to the brand owner at an inflated cost.

Description

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The
Internet Corporation
for
Assigned Names and Numbers (ICANN) creates and enforces administrative
policy and has hands-on responsibility for managing the Domain Name
Services that make Internet users and resources visible and accessible
to one another. A long, convoluted, and occasionally Byzantine struggle
among bureaucratic entities has seen the emergence of a new era of
ICANN governance that is largely based on stakeholder management. This
move toward more dispersed policy responsibility and decision making
has been spurred by the fact that Internet use is exploding, and the
number
of Internet users worldwide is expected to grow: By 2023, 5.3
billion people — about 2/3 of Earth’s population — an increase from
2015’s three billion users.¹ 

The growth of the
global
Internet community is expected to deliver healthcare, education, and
economic
benefits to previously underserved regions and to
create huge market aggregation opportunities through access to new
consumers. However, there is
insufficient space within the traditional generic
top-level
domain (gTLD)
naming structure to
accommodate this growth. See
Table 1 for a list of older gTLDs.

With the intention of accommodating the Internet’s
growth, ICANN
voted in 2011 to remove most restrictions
on gTLDs. As a result, a whole new batch
of domain name suffixes have been introduced. In parallel, ICANN domain
name
internationalization efforts mean that Internet addresses as a whole,
including new gTLDs, are now displayable in characters other than the
Latin alphabet (for example, in Cyrillic, Arabic, and Asian character
systems).

New gTLDs can be acquired in two ways. In one,
customers buy a domain
name that ends with a new gTLD, such as
“companyname.expert” or
“myhobby.club.” This is similar to how domain names
like “faulkner.com” have historically been
obtained. Or, buyers can enter auctions that grant the winner an
entire gTLD. In this case, the owner can use the domain extension for
its own marketing purposes, or it can sell domain names to other
parties. The application fee for buying an entire gTLD is $185,000 with
annual renewal charges of $25,000, and gTLD owners have sole
responsibility for operating their domains, which is a
significant and potentially costly undertaking. But custom
gTLDs
have important potential advantages. While having an ordinary .com URL
is like having a street address (everyone knows where to locate it),
owning a new gTLD is more like operating a private, value-added post
office. An enterprise could use a gTLD to combine management and
administration for all of its Web presences, country specific
activities, product support, and brand development activities, using a
single, brand-reinforcing top-level domain.

One of the benefits of the new gTLD structure is
that owners
may treat their domain names as “closed,” which means that they, and
they alone, can assign the sub-domains underneath it. (For example, in
the URL www.faulkner.com, “faulkner” is a sub-domain of .com. But
whereas .com addresses are open to any users, a .faulkner top-level
domain could be restricted by a private owner.) As a marketing tool,
this could be a very effective way of making products and services
visible. But organizations also need to be cautious about distracting
from the .com presences they have already established.
Some early adopters of branded gTLDs might redirect users to existing,
successful .com sites.

Among high-profile trademark owners, there has been
considerable
ambivalence, even hostility, toward ICANN’s move to liberalize and
dramatically
expand top-level domain naming. Some of this concern arises from doubts
about whether a stakeholder-governed ICANN will act decisively to
maintain orderliness, transparency, and access in an explosively
growing Internet namespace. Trademark infringement and
cybersquatting are huge concerns, as are the high startup and operation
costs of branded gTLDs. (Cybersquatting
on
new
gTLDs began early on,²
and the number of disputes being filed over gTLD cybersquatting
continues to rise.³) Many global
trademark holders have expressed uncertainty that the preemptive
purchase of gTLD names offers them a
reasonable value proposition. For example, in testimony before the US
Congress, a
Fox News Corporation representative asserted that it would cost the
company $12 million up front to register all of its brands as gTLDs
and said that the organization had no confidence such an investment
would pay its way.⁴
Businesses and
consumers alike have shown a strong and
enduring preference for the .com suffix, even though ICANN has long
offered alternative gTLDs, like .web or .info, and country-based
addresses.

A
particularly noteworthy threat is that among the new gTLDs are several
names, such as “.sucks” and “.porn,” that could be used to
embarrass trademark holders. For instance, one company could register
a .sucks domain with a rival’s name. Alternatively, someone
could
register a domain name for another company and then demand excessive
payment to not use it. Exacerbating the problem is that the domain
names are expensive to buy from the registar – .sucks names
can
cost $2,499 or more, for example. (For more information, see
“Reputational Damage
from New Generic Top-Level Domains (gTLDs)” in the June 2015 Faulkner
Security Management Practices.⁵) Recent research has shown an increase in fake domains that look similar to a company’s real URL.⁶ These imposter sites are used to lure visitors and then conduct phishing scams and other types of attacks.

In contrast to the
first round .com boom, owners of existing trademarks
and intellectual property are being given an opportunity
to register
their brand names as part of a “sunrise” initiative, intended to
prevent a repeat of the profiteering and extortionate behavior of 1990s
cybersquatting and trademark infringement. Organizations
can try to protect their trademarks through the Trademark
Clearinghouse, which was created specifically to help protect
intellectual property in response to ICANN’s new gTLDs.

Another example of the types of
problems that may emerge in the future is the following: Given
longstanding
concerns and the potentially serious technical ramifications of massive
governmental censorship programs based on domain blocking, in 2010
ICANN leadership demonstrated what was arguably bad judgment in
championing a new gTLD, .xxx, for exclusive use by providers of adult
content. Several country representatives, including those from India
and China, put ICANN on notice that they would block this gTLD within
their borders if it was enabled. At the same time, the adult content
industry went on record as saying they were not interested in having an
.xxx domain. Facing many vocal opponents and few significant
supporters, ICANN leadership remained undeterred, and adopted the new
domain based on the votes of thirteen board members. (One was opposed
and two others abstained.) Adoption of .xxx
prompted formal EU objections to the US Department of Commerce, which
declined on principle to use its powers to overrule ICANN stakeholders.
The ultimate result was a global surge of Internet censorship blocking
.xxx, but also reaching far beyond. One example is that Turkey’s
Directorate of Telecommunications prohibited domain names that include
any of 138 words it considers offensive. Unfortunately, several of the
forbidden words occurred as substrings in longer, legitimate names. As
a
result, thousands of non-adult sites disappeared from view. Crude
censorship approaches based on domain naming are easy to implement but
also relatively easy to circumvent, which is why they are a source of
concern for network engineers and security experts. The unity and
integrity of the Internet’s addressing and naming scheme is not merely
its greatest strength; it is also the only thing that makes it even
remotely possible to identify and contain the source of threats.

Current View

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New gTLDs Continue Being Introduced

As of March 2020, the
total number of new gTLDs launched since the program began was 1,188, with the most popular being .icu, .top, .xyz, and .site.⁷ 

ICANN has also announced plans to create a new system for introducing and managing new GTLDs.⁸
It is expected to create new processes and to use some new systems. New
staff will be hired too. These changes — which have been outlined but
not fully detailed — demonstrate that the organization remains
committed to the program.

gTLD “Safeguards Against Abuse” Published

In 2016, ICANN put into place new safeguards designed to
prevent abuses
in the domain naming system. These safeguards, which were published as
a series of questions and recommendations to answer them, are presented
in Table 2.⁹

In a 2019 report, ICANN reported that “some progress has been made in the
past years” regarding protecting against gTLD abuse.¹⁰ One step has been to clarify the security requirements of
domain name registries. Another key development was the launch of the
ICANN Domain Abuse Activity Reporting system, a research project for
collecting data on and studying domain-related security issues.”

Outlook

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Pricing and Competitive Pressures

Over the past few years, as new gTLDs have been introduced, the
marketplace has changed.
Notably, a smaller percentage of domain names are now owned by the
largest registrars.¹¹ Retail prices for gTLDs
have gone down, and a wider
range of participants have entered the market. In particular,
registrars from Asia and Europe have acquired larger numbers of
available gTLDs. Registrars in China have been especially active.

Protecting
brands, such as by purchasing domain names only to prevent
malicious actors from exploiting them, has become a common practice.
But these registrations are expensive. From some perspectives, gTLDs
have created more opportunities for spammers than for legitimate users.¹²

Impact on Stakeholders

Possible Winners

Some large, well-known brand owners will gain the opportunity
to consolidate
a global market presence. Owning a
private gTLD makes sense for those who have strategies that
leverage strong, established brands. Branded gTLDs could offer novel,
innovative means to build a community around products, to focus
messages, and to build consumer loyalty by providing perks like
personalized
sub-domains and tailored services. Social media sites are already very
good at this, so the model exists.

ICANN
probably wins, with a revenue windfall from application fees,
plus what may turn out to be significant income from ongoing gTLD
renewal fees. Registrars also have a new product to sell. A prime
example of using the new system for profit is the company
Donuts, which won
auctions for many new extensions and now allows other registrars to
sell domain names that have these new gTLDs.

Possible Losers

Some organizations with high-profile
brands to protect
are going to feel significant pain in the wallet. Choosing
whether to participate in the application procedure for new
gTLDs is something of a roll of the dice. Failing to stake claim to a
valuable brand today might look penny-wise and pound-foolish if it
takes a lawsuit to cure trademark infringement later. This is a
particularly bitter pill for enterprises that have already invested
significant
time and effort in cultivating a Web presence. Many see
branded gTLDs as a distraction from tending to established footholds in
the .com domain. Moreover, some see ICANN’s move as a form of
extortion, compelling enterprises to defensively invest in the new
gTLDs to protect their brands.

A
proliferation of gTLDs will only help the sophisticated and
hydra-like mechanisms of intellectual property thievery and copyright
infringement, so owners of content have a bigger surveillance job after
the proliferation of top-level domain names. This risk has been
heightened by the introduction of gTLDs, like .sucks, that may
be
highly likely to be used simply to embarrass certain companies. If
there are significant
implementation problems or a proliferation of gTLDs that many
stakeholders find offensive or threatening, ICANN could lose
credibility and suffer a serious erosion of support.

And
some losers may be a surprise. For instance, e-tailer Amazon lost
its bid for the gTLD “.amazon” because of objections made by South
American nations.¹³

Recommendations

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ICANN warns that “[w]hen you apply for a new gTLD you are
applying to run a
registry business. You will be responsible for a critical and highly
visible piece of Internet infrastructure. Just as Verisign is
responsible for all the domain names registered in the .com top-level
domain, so you would be responsible for all the domain names registered
in your .something gTLD.”¹⁴ 

Such
organizations also take on a security risk. A 2019 study found that
32-percent of organizations that had acquired a gTLD “have experienced brand impersonation and abuse against it.”¹⁵ 

So-called
“dot-brand” gTLDs, in which a company’s name (rather than “com,” “org,”
etc.) follows the dot, are one way to combat such threats. But these
brands are expensive and their marketing benefits remain uncertain.¹⁶ Recently, some companies have discontinued use of dot-brand domains that they had registered.¹⁷

As the new generation of gTLDs emerges, enterprise planners
should consider the following:

• Policing Abuse of Copyrights Will Be Harder.
  Intellectual property owners are going to have to shoulder an
  increasingly complex burden in terms of identifying and stopping
  copyright infringement in a time of proliferating, internationalized
  TLDs. This will take planning, tools, and resources.
• Consumers
  Have Not Rushed to Embrace Alternative TLDs, So Why Should Enterprises?
  Consumers have had alternative TLD choices like .tv, .info, and .mobi
  for a considerable time, but none of these has really put a dent in
  the success of .com sites.
• ICANN’s
  Actions Matter. ICANN’s
  responsibility for day-to-day operation of
  the Internet is something that touches many aspects of online activity.
  For anyone with IT
  planning
  responsibilities, it is certainly worth following the political
  evolution of Internet governance.

References

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• ¹ Cisco. “Annual Internet Report (2018–2023) White Paper.” Cisco. March 9, 2020.
• ²
  Daniel Fisher. “Cybersquatters Rush to Claim Brands
  in the New
  GTLD Territories.” Forbes. February 27, 2014.
• ³ Aurelie Tran. “Cybersquatting: Increase of UDRP Complaints Filed with WIPO in 2018.” Nameshield. March 30, 2019.
• ⁴ US
  House of Representatives. “House Hearing: ICANN Generic
  Top-Level
  Domains (gTLD).” US
  House of Representatives. May 4, 2011.
• ⁵ Geoff
  Keston. “Reputational Damage from New Generic Top-Level Domains
  (gTLDs).” Faulkner
  Information Services. June 2015.
• ⁶ Danny Palmer. “Cybersecurity: Why One Old Web Ccam Is on the Rise Again.” ZDNet. June 18, 2019.
• ⁷ nTLDStas. “New gTLD Summary.” (cited March 16, 2020)
• ⁸ Nick Wood. “The Start of Something Big: ICANN Announces Planning for Round Two of New gTLDs.” CircleID. June 20, 2019.
• ⁹ ICANN. “New gTLD Program
  Safeguards Against DNS Abuse.” ICANN. July 2016.
• ¹⁰ ICANN Governmental Advisory Committee. “DNS Abuse Mitigation.” ICANN Policy Forum 65. June 2019.
• ¹¹ Michael Berkens. “Over 53% Of New
  gTLD Are Registered In China: Just Over 10% By Those In US.” The
  Domains. March 31, 2016.
• ¹² James Sanders. “Rampant Spam, Falling Registrations Show New gTLDs Have Limited Business Value.” TechRepublic. June 15, 2018.
• ¹³ Alison Griswold. “Amazon Loses
  Bid for ‘.amazon’
  Domain Name.” Slate. May 21, 2014.
  ¹⁴ ICANN. “Benefits and Risks of Operating a
  New gTLD.” ICANN. 2015.
  ¹⁵ MarkMonitor. “The Online Brand Protection Life Cycle Domain and
  Cybersecurity Edition.” MarkMonitor. 2019.
• ¹⁶ Claudio DiGangi. “Protect Your Rights Online: Understanding ICANN’s New gTLDs and RPMs.” IPWatchdog. June 13, 2019.
• ¹⁷ Andrew Allemann. “Chrysler Crashes Its Dot-Brand Domain Names.” Domain Name Wire. September 12, 2019.

Web Links

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• Donuts: http://www.donuts.domains/
• ICANN: http://www.icann.org/
• ICANN Domain Abuse Activity Reporting: https://www.icann.org/octo-ssr/daar
• The Trademark Clearinghouse: http://www.trademark-clearinghouse.com/

About the Author

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Geoff
Keston
is the author of more
than 250 articles that help organizations find opportunities in
business trends and
technology. He also works directly with clients to develop
communications strategies that improve processes and customer
relationships. Mr. Keston has worked as a project manager for a major
technology consulting and services company and is a Microsoft Certified
Systems Engineer and a Certified Novell Administrator.

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