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New gTLD failure risk bond capped at $300k

Kevin Murphy, December 26, 2011, 11:42:16 (UTC), Domain Policy

New generic top-level domain applicants will have to find between $18,000 and $300,000 per gTLD to cover the risk of their business failing, according to ICANN.

ICANN revealed the figures, which have been calculated from prices quoted by 14 potential emergency back-end registry operators, in a pre-Christmas info-dump on Friday.

The so-called Continued Operations Instrument is designed to cover the cost of paying an EBERO to manage and/or wind down a failed gTLD business over up to three years.

All new gTLD applicants must either secure credit or put cash in escrow to cover the COI, the amount of which depends on how many domains under management they anticipate.

This table shows the size of the COI for various sizes of zone.

Projected Number of DomainsEstimated 3 Year COI (USD)
10,000$18,000
25,000$40,000
50,000$80,000
100,000$140,000
250,000$250,000
>250,000$300,000

This essentially means that any registry that plans to grow its gTLD into a commercially successful volume business needs to find $300,000 to cover the cost of its potential failure.

Only five previously introduced new gTLDs have topped 250,000 domains under management in their first five years: .info (with 8 million today), .biz, .name, .mobi and .tel (which peaked at 305,000).

Smaller gTLDs, comparable to a .cat, .jobs or .travel, will only have to find $40,000 to $80,000. It’s likely that the majority of .brand applicants will only need to secure the minimum $18,000.

While potentially expensive, it’s welcome clarity into new gTLD funding requirements, albeit coming just two weeks before ICANN begins to accept applications.

ICANN also threw a bone to potential applicants from countries with poor access to credit.

The organization previously only contemplated allowing credit from banks with an ‘A’ rating or higher, but it now says it will accept, in its discretion, financial instruments from the highest-rated institution available to the applicant.

ICANN said it may also consider becoming a party to these credit agreements, again in its sole discretion, but that such applicants could lose points when their application is scored as a result.

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Comments (6)

  1. Rubens Kuhl says:

    The face value of COI has decreased, but it got harder to get the 3 points from it.

    • M says:

      Why is it now harder to get 3 points? The requirement has always been that you must have the COI in place at the time of application submission. The new information provides clarity on amounts and also provides clarity on acceptable financial institutions.

  2. gpmgroup says:

    Will ICANN fees still be due during such times of distress?

    • Kevin Murphy says:

      I’d have to double-check, but I think the idea is that you’re out of business by the time the EBERO takes over.

  3. M says:

    Is the bond returned if ICANN rejects an applicant?

    • Kevin Murphy says:

      Applicants do not give the money to ICANN, they either put it in escrow or merely have a letter of credit with a bank, so there is nothing for ICANN to return if ICANN rejects an applicant.

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