gTLD Application Fees and Clarifying Questions

This week ICANN sent out their first batch of clarifying questions to an estimated 100 new gTLD applicants.  Understandably, applicants are concerned and wonder if it will impact their gTLD application fees and Clarifying Questions they will receive.  Clarifying questions do not increase your fees unless of course, you fail and go to Extended Evaluation.

Hope as you will, chances are, all applicants will receive clarifying questions.  Regardless of how well written or in-depth your answers were submitted.

Fees need to be justified.    This brings us back to the introduction of the program and the link between gTLD application fees and clarifying questions. The New gTLD Program is expected to be ‘self-funding’ and ‘revenue-cost neutral’.

Breakdown of gTLD Application Fees and Clarifying Questions

ICANN has provided the components and associated costs relating to the $185,000 application fee as follows:

• Development costs of $26,950.  A recovery of costs associated with the launch of the gTLD application program.

• Application processing costs – Fixed of $24,800 relating to set-up, integration and one-time communication costs.

• Application processing costs – Variable of $73,000 for labour in relation to evaluating each application.

• Risk costs of $60,000 for unanticipated costs and variances between estimates and actual costs.

So in short, each application is expected in occur $73,000 in evaluating fees.  If these expenses are not incurred, then there are only a few options available:

•  Funds not used in the application process would have to be returned to the applicants (this should include the excess of development costs of $13,475,000 which was allocated on $26,950 per application based on 500 applications.  To date, there have been 17 withdrawals from 1,930 applications resulting in an excess of $38,269,000 or approximately $20,000 per application).

• Funds would have to be used or allocated to other item(s) which would require a significant amount of consultation, documentation and approval.

The implications would be on future gTLD application processes whereby, not only would the fees be reduced by the $26,950 but be further reduced by the amount of processing costs no longer required.  Thus, not only are the initial gTLD applicants require more patience than subsequent rounds but would inevitably pay more.  However, in all fairness, receive a first-mover advantage.

In short, all new gTLD applicants should not only expect clarifying questions but also understand the correlation between gTLD application fees and Clarifying Questions.  With over 53% of application fees being allocated towards variable and fixed processing and evaluation costs, a lack of questions will inevitably result in fewer costs and reduced application fees in future gTLD application rounds.