Internet

What's in a Domain Name? $185,000 for Starters


The nonprofit organization that oversees the Internet’s address system is bracing for a wave of lawsuits as a result of a controversial program that may add hundreds of top-level domains such as .apple and .nyc.

The Internet Corporation for Assigned Names and Numbers, a California-based nonprofit that has a contract with the U.S. government to manage the Web’s address system, was due to start accepting applications on Jan. 12 for new extensions to the right of the dot, including brand names, cities, and almost any word in any language. The program may give rise to as many as 2,000 Web suffixes, according to ICANN. There are currently just 22 so-called generic top-level domains, led by .com, .net, and .org. Under ICANN’s plan, the Web could see the likes of .ford or .coca-cola.

Since approving the program in June, ICANN has come under fire from businesses saying the proliferation of suffixes will confuse consumers and increase companies’ costs of protecting their brands. More than 50 companies, including General Electric (GE), American Express (AXP), and Johnson & Johnson (JNJ), have signed a petition asking that the plan be delayed, and more than a dozen members of Congress have taken up their cause. Federal Trade Commission Chairman Jon Leibowitz has called the initiative a potential “disaster” that would allow con artists to rip off consumers by setting up fraudulent websites.

Even so, the Obama Administration isn’t likely to force its will onto an international organization. Whenever ICANN “seems to be paying too much attention to what the U.S. government says, it generates a certain amount of pushback from the rest of the world, and the U.S. is sensitive to that,” says Esther Dyson, the group’s first chair, and a critic of the domain-name expansion.

ICANN is pressing ahead, saying the plan has been thoroughly vetted during six years of deliberations and includes trademark protections. “We have extensive safeguards during the process and even afterward, if there are abuses detected,” says Steve Crocker, the group’s chairman. Nonetheless, ICANN will put aside about $60,000 of every $185,000 domain application fee to cover litigation that may arise from the program.

Who will benefit from an explosion of new Web suffixes? The program may spur sales for Go Daddy Group, VeriSign (VRSN), and other companies that operate and sell Web domains to businesses and consumers. Donuts, a Seattle startup whose name stands for “domain nuts,” plans to apply for 10 top-level domains under the ICANN program, says co-founder and Chief Executive Officer Paul Stahura. He declined to name the domains his company is targeting. (No one in this game wants to show their cards early). “It’s an open area that’s ripe for creative things,” says Stahura.

The expansion may also give a financial boost to ICANN, which largely supports itself by charging fees to domain-name companies. The program may double ICANN’s annual $85 million budget, says Rod Beckstrom, the group’s CEO.

ICANN approved a .xxx domain for adult-content websites in March. Almost 200,000 .xxx domains have been sold so far, according to Stuart Lawley, chief executive officer of ICM Registry, a Florida company that acquired the rights to manage the .xxx suffix from ICANN. It’s proven a good investment: ICM took in almost $25 million from sales of .xxx domains last year, according to Lawley.

It wasn’t just pornography sites that bid for the x-rated suffix. Up to 70 percent of Fortune 500 companies registered .xxx domains over a 52-day period starting Sept. 7, says Lawley, who declined to name the companies. Their goal: to protect their brands from falling into the wrong hands.

The bottom line: Online services companies are counting on a windfall from a planned expansion in Web addresses beyond .com, .net, and .org.

Engleman is a reporter for Bloomberg Government in Washington.

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