IMHO the "cost recovery basis" is a red herring for the simple
reason that it is impossible to calculate what a TLD will really
cost ICANN in the long run. Is it just the cost of processing the
application, or is it the cost of fixing problems related to that
TLD such as the need to have more ICANN compliance staff for more
TLDs with a higher than normal amount of misuse of domains under
that TLD?
The ICANN model is already a tax revenue model where ICANN taxes
every domain sold and Registries, Registrars and their agenda
collect that money on behalf of ICANN pretty much like VAT.
It need not be considered "a tax revenue model"; it could be named as "DNS fees". DNS fees is payable for every domain, it is required to maintain the DNS as a global, stable, secure and fair infrastructure. The fees are uniformly subsidized at present level for the benefit of the global Internet user; It is US $ 0.18 (18 cents) per domain through the Registrar and another US $ 0. 25 (25 cents) per domain indirectly collected from gTLD registries.
The DNS fees could be more, much more. The DNS fees could even be zero, or fixed lower at 10 cents for the first 10,000 names by a new Registry / Registrar, and for some exceptionally limited Community TLDs. For established TLDs the fees can be set as US $ 1 per Registration in total.
Also, what happens when someone pays US $ 13 million for a Domain Name? Or what happens when an unknown sum in an unspoken of transaction for a Premium Domain Name? Would ICANN still get US $ 1 as fees? This could even be set as a million dollars of premium fees. This is quite a moot point, and this could be voluntary for Registries.
The rationale arises from considering, in concept, not as much by legal assertion, the following: All names are "owned" by All Users. ICANN is the Trustee. The Registries / Registrars are lessors of the names. The names are leased out to the Registrant for a year or two years or ten years or even longer. In fairness ICANN could routinely consider and grant Registries the extensions to operate. These extension could be routinely granted in accordance with business conventions, for Registries to continue operations in their respective space. The Registrant will get similar considerations to extend the individual name registrations.
ICANN's revenues are disproportionately low. This constrains it's mission unacknowledged.
What about setting higher application fees for brand TLDs?