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Confusing ICANN fee structure for new top level domains.

The headline number for new top level domains is $185,000, the price of submitting an application.

But domain registries also pay ongoing fees to ICANN each quarter. Amazingly, what exactly those fees are is up for debate.

Here’s the full text of section 6.1 on the registry contract new TLD operators will have to enter into:

Registry Fixed Fee of US$6,250 per calendar quarter and (ii) the Registry-Level Transaction Fee. The Registry-Level Transaction Fee will be equal to the number of annual increments of an initial or renewal domain name registration (at one or more levels, and including renewals associated with transfers from one ICANN-accredited registrar to another, each a “Transaction”), during the applicable calendar quarter multiplied by US$0.25; provided, however that the Registry-Level Transaction Fee shall not apply until and unless more than 50,000 Transactions have occurred in the TLD during any calendar quarter or any four calendar quarter period (the “Transaction Threshold”) and shall apply to each Transaction that occurred during each quarter in which the Transaction Threshold has been met, but shall not apply to each quarter in which the Transaction Threshold has not been met. Registry Operator shall pay the Registry-Level Fees on a quarterly basis by the 20th day following the end of each calendar quarter (i.e., on April 20, July 20, October 20 and January 20 for the calendar quarters ending March 31, June 30, September 30
and December 31) of the year to an account designated by ICANN.

If you read that paragraph and are a bit confused, you’re not alone. I reached out to several new TLD applicants for clarification on the fees. There was disagreement — and some befuddlement — amongst them. But perhaps by walking through it here we can crowdsource what the fees actually are.

What is clear is there are two fees: a fixed fee and a transaction fee.

The fixed fee is $6,250 per calendar quarter. This is the “$25,000 a year ongoing cost” you keep hearing about.

Now read the long sentence about the transaction fees again:

The Registry-Level Transaction Fee will be equal to the number of annual increments of an initial or renewal domain name registration (at one or more levels, and including renewals associated with transfers from one ICANN-accredited registrar to another, each a “Transaction”), during the applicable calendar quarter multiplied by US$0.25; provided, however that the Registry-Level Transaction Fee shall not apply until and unless more than 50,000 Transactions have occurred in the TLD during any calendar quarter or any four calendar quarter period (the “Transaction Threshold”) and shall apply to each Transaction that occurred during each quarter in which the Transaction Threshold has been met, but shall not apply to each quarter in which the Transaction Threshold has not been met.

Let’s break that down:

1. There’s a transaction fee of 25 cents for each “annual increment of an initial or renewal domain name registration”. What’s not entirely clear is if these fees are front loaded. For example, if someone registers a domain for 10 years, is that ten annual increments that must be paid upfront? It sure seems that way. (It’s worth pointing out that you can hit the 50,000 transaction threshold without 50,000 domains registered.)

2. The transaction fee only applies when 50,000 transactions have occurred in a specific time period. But the time period is really confusing to me:

“during any calendar quarter or any four calendar quarter period (the “Transaction Threshold”)”

Hmm. So if you hit 50,000 transactions in a quarter then you definitely pay. Yet does the transaction fee also kick in if I reach 50,000 transactions in a “four calendar quarter period”, i.e. a rolling year? It appears that way…until you read the next part of the sentence:

“[The fee] shall apply to each Transaction that occurred during each quarter in which the Transaction Threshold has been met, but shall not apply to each quarter in which the Transaction Threshold has not been met.”

So then if you reach 50,000 transactions in a “four calendar quarter period”, the transaction fee actually won’t apply if you don’t reach the threshold in a single quarter. That seems to cancel out the reference about a four quarter period.

Next issue: I don’t see anywhere in here where it says the transaction fee is in place of the fixed fee.

So that means when you make your 50,000th transaction in a quarter you suddenly pay a transaction fee on all 50,000 of those transactions. You’d be better off with 49,999 transactions because the 50,000th one will cost you a whopping $12,500!

There’s also a “variable registry-level fee” (section 6.3) that seems to be an insurance policy for ICANN if future registrar accreditation agreements do not include variable registrar fees.

I reached out to ICANN’s PR for clarification yesterday but didn’t hear back. I’m sure someone somewhere understands exactly how these fees work, but they certainly need to clean up and clarify the language.