FairWinds Partners — December 28, 2011
What are the odds that the same week we decide to run a series about the financial aspects of applying for and running a new gTLD, ICANN publishes a set of guidelines for the Continued Operations Instrument (COI)? Maybe it’s because the COI is a question that has been on the minds of almost every applicant we’ve talked to. Or maybe we should chalk it up to a holiday miracle.
Either way, in an announcement published Friday, ICANN listed its estimations of what it will cost to cover critical registry functions for three years for various numbers of domain names. Here are those cost guidelines:
ICANN was careful to point out that “these are costs only for providing the five critical registry functions identified in this process. These cost guidelines are not representative of the costs needed for running all of the services associated with operating a gTLD.”
The problem is, applicants have almost no other guidance from ICANN on what the costs will be to run all of those other “services.” While the numbers provided by ICANN are most likely somewhat accurate for companies planning to run single-registrant, closed .BRAND gTLDs, they are actually quite low for running an open gTLD that will sell second-level domains to third parties. Understandably, existing registries keep this kind of financial information close to the vest. So when ICANN says, “The Maximum COI for any new gTLD need not be more than U.S. $300,000,” it is difficult to justify why any applicant would go to the trouble of securing a COI for more than that amount.
As a reminder, the purpose of the COI is to ensure that key registry functions will continue in the event that a registry fails; basically, it is a measure that protects registrants who have registered domains in that gTLD. Securing a COI, whether by depositing cash into an escrow account or getting a letter of credit from a financial institution, is not exactly a picnic for most would-be applicants. Here, ICANN has basically given applicants permission to cut that COI off at $300,000, regardless of the predicted size of the registry. While this comes as good news for corporate .BRAND applicants, it could have potentially dangerous consequences if larger, open registries fail.