An interesting discussion at GovCampNSW, was over Sydney top level domain name. This is available, but there are numerous issues around its use: can Sydney Australia have exclusive use? What rules government it? How are commercial and community interests balanced? AUDA set up Community Geographic Domain Names for community domain name use. The Sydney top level domain might be used similarly. In my view the NSW government should purchase the domain name, at least as a defensive measure and perhaps turn administration over to local government. Some sub-domains would be valuable, such as hotels.sydney and others would need to be reserved for the obvious user, such as operahouse.sydney.
See also Carving up the web by Paul Wallbank.