Comments on the second draft of the gTLD applicant's guide

[Patrick Vande Walle <patrick@xxxxxxxxxxxxxx>]

Unfortunately, this second draft version of the applicant's guide does not
yet address major concerns in the process. 

As stated in the previous comments round, it is fundamentally wrong to
assume that all new gTLD applicants will use the .com model of mass market
approach for domain names. Both the amount of the application fee and the
yearly registry fee imply that the registry will need to sell as many
domain names as possible, favouring numbers over quality. This is the wrong
approach with regard to community-based TLDs.

The amount of the application fee should be reduced, as it may
discriminate against less financially resourceful applicants, such as
communities. While I understand ICANN may want to prevent frivolous
applications with a high application fee, it nevertheless excludes from the
process a lot of potential serious applications targeting a limited
community.

It is unfair that only the applicants of the first round would have to
cover the past costs of the new gTLD development program. On the other
hand, it is difficult to guess how many applications will be submitted on
each round. Because these costs have already been expended and that ICANN
clearly states that whatever is recovered will be transferred to a reserve
fund, it is therefore suggested to simply drop the $26,000 that represents
the incidence of gTLD development program cost on each application. 

Note that this request for a large up-front investment in the application
process is orthogonal to the expectation of ICANN for the applicants to
demonstrate the availability of continuation funding. Whatever capital will
be invested in submitting the application will not be available in the
future. Hence, ICANN's financial expectations at the application stage may
plant the seed of future registry failure. 

Further, payment of the application fees in several installments should be
offered to TLD applicants. For those applicants that need to submit a
strong business plan to their investors, having a pay-as-you-go fee through
the application process will make it easier to convince investors.  

ICANN should also consider postponing for two or three years the
collection of the annual registry fee, to allow new gTLD operators to start
operating in a financially sound context, with no loans and other debts
that may compromise the start-up of their activities. On the short and
medium term, this help new registries to become more solid and will be
beneficial for the the long term stability of the DNS space. 

The fact that ICANN only allows for payments to be made in USD places a
high risk on the business plans of those applicants that work in other
currencies. As suggested elsewhere, ICANN should accept payments in other
currencies, at a rate fixed at the time the applicant's guidebook is
published.

There is still a fundamental contradiction in using an auction model as a
last resort for community-based applications. By definition,
community-based applications will target smaller communities and use a
cost-recovery model, rather than a purely commercial one. For the winner of
the auction, this will mean recovering its costs through increasing the
gross price of registrations. As a consequence, the number of domain names
sold may be reduced and the newly launched registry may not meet its
business
plan. Ultimately, auctions may also be a cause of registry failure. 

Patrick Vande Walle 
ALAC, but speaking in my personal capacity