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Update: Why New Yorkers Should Be Wary About .NYC Websites

(This post has been updated with New York City’s response)

Residents of the Big Apple (NSDQ: AAPL) learned this week that their city could be the first to have its own domain name — a fancy new “.nyc” instead of boring old “.com”.

New Yorkers so far have greeted the news as further proof that the world is indeed about them but, this time, they should be careful about what they wish for.

History shows that new domain names arrive as a digital novelty but then become little more than a tax on business owners.

That’s because a company only needs one domain to host their website but must also purchase other ones to protect themselves from scammers and cyber-squatters.

The only ones who win are the scammers and the registry operators who line their pockets by forcing companies to buy names they don’t want or need.

New York City landmarks like Katz’s Deli and Magnolia cupcakes are doing just fine with their existing websites but may grudgingly buy the new name so they don’t have to pay a ransom to free “” or “” from a cyber-squatter.

This not a hypothetical problem — Verizon recently filed a lawsuit to reclaim 660 different fake website names. Each new domain name, including gems like “.biz,” “.travel” and “.mobi” just makes it more expensive for companies to stamp out the squatters. The problem is likely to get bigger as ICANN staffers, in a brazen act of self-dealing, are leaving the non-profit web overseer to run their own domain name companies.

New York City’s Digital Officer, Rachel Stearne, suggests an unnamed company in Virginia is likely to be the registry operator for “.NYC”

There is already a website called that is taking orders for “.NYC” names.

Update: Nick Sbordone, a city official, says the website is misleading and that New York City has not authorized it to reserve names.

Sbordone also said that people and businesses will have to be able to show a nexus to New York — like a residence or a business — to be eligible to use “.nyc”

The city has yet to determine, however, if a “.nyc” buyer will have to show they are eligible before they buy the name. If not, places like Magnolia Bakery could use the rules to reclaim the name but would still have to spend money to enforce them against a cyber-squatter (in many cases, it could prove cheaper to just pay the ransom).

Sbordone added that the sale of “.nyc” names are at least a year away and that the city would consult local stakeholders in coming months.

Carole Post, the Commissioner of the Department of Information Technology and Telecommunications, offered the following comment:

“We view the .nyc TLD as a unique opportunity, at a unique time, to ride the digital wave and keep New York City at the leading edge of innovation.”