RE: [bc-gnso] for expedited review: draft BC comment on registry proposal for Continuity Operations Instrument (COI)

[Phil Corwin <psc@xxxxxxxxxxx>]

I appreciate the work that Jon has done on this draft and hope that these 
additional comments are useful.

The COF proposal reminds me of deposit insurance for banks (pre-funded) as well 
as state insurance funds (generally post-insolvency funded) -- but the 
difference is that both are accompanied by rather substantial regulatory 
regimes to manage the risk to the common fund, far beyond anything ICANN has 
ever engaged in vis-à-vis registries, much less desirable in the DNS context. A 
COF model basically has all registries paying into a common fund to be used to 
extend operations for at least 3 years of a registry which either has a flawed 
business model or is operated incompetently (and that is always accompanied by 
moral hazard), while a COI model has each individual registry purchasing a 
financial guarantee tailored to its own scope of operation (I am neutral on 
when the COI fund size should be revealed -- but what I am wondering is how 
will it be set, and will it be adjusted at regular intervals post-launch to 
account for variations in domain registrations and other profit/loss factors?).

Also, who is operating the failed registry for the 3-year minimum period (the 
same management that steered it into the rocks), and is it wise to set a 
minimum that's so long if annual losses are considerable? And what is the end 
game for the registry at the end of the 3 years? In the bank and insurance 
world, any regulatory intervention that triggers a hit on the insurance fund is 
generally accompanied by very rapid takeover and merger of the failed entity 
into a solvent and well-managed one.

So overall, while open to counter-arguments, I think I am leaning toward the 
COI approach because it places the fiscal responsibility on each registry, and 
that requires much less regulatory oversight than a pooled funds COF approach 
-- but certainly agree that the COI instrument amount should be flexible at the 
inception based on business model and anticipated registrations, and then 
reviewed regularly post-launch for adequacy. COI also seems preferable because, 
as the draft notes, it provides more registrant protection, which is the main 
point of the exercise.

Philip S. Corwin, Founding Principal
Virtualaw LLC
1155 F Street, NW
Suite 1050
Washington, DC 20004
202-559-8597/Direct
202-559-8750/Fax
202-255-6172/cell
 
"Luck is the residue of design" -- Branch Rickey


-----Original Message-----
From: owner-bc-gnso@xxxxxxxxx [mailto:owner-bc-gnso@xxxxxxxxx] On Behalf Of 
Marilyn Cade 
Sent: Friday, November 25, 2011 12:50 PM
To: Ron Andruff ; sdelbianco@xxxxxxxxxxxxx ; Bc GNSO list 
Subject: Re: [bc-gnso] for expedited review: draft BC comment on registry 
proposal for Continuity Operations Instrument (COI)


Will read this. I am having some trouble with how this wprks, but also think 
that this may be an opportunity for our BC request for improvements for IPR - 
if they can consider such a big change in this, why not still in ITR 
mechanisms. 
Sent via BlackBerry by AT&T

-----Original Message-----
From: Ron Andruff <randruff@xxxxxxxxxxxxxxx>
Date: Fri, 25 Nov 2011 10:32:40
To: <sdelbianco@xxxxxxxxxxxxx>; <bc-gnso@xxxxxxxxx>
Subject: RE: [bc-gnso] for expedited review: draft BC comment on registry  
proposal for Continuity Operations Instrument (COI)

Thanks to Steve and Jon for this first cut.  It is a shame that time is so 
short because a considerable amount of work still needs to be done on this 
topic over the coming few days.  I will bring some thoughts to this discussion 
in a later post, but thought that the excerpt that Steve linked out to would be 
a helpful start and have thus posted them below for member's consideration. 
Public comment is requested concerning the recently received from the proposal 
for Establishment of a Continued Operations Fund. This proposal comes from the 
Registries Stakeholder Group (RySG) and is accompanied by an addendum (Proposed 
Continuity Operations Instrument) produced by the Afilias and PIR, supported by 
some other registries, registry applicants and other interested parties. 
The RySG proposal offers an alternative approach to the existing Continuing 
Operations Instrument that is part of the New gTLD Program. Here are some 
questions that public comment respondents could consider regarding the RySG 
alternative proposal as well as the existing continuing instrument model 
offered by ICANN. 
1. Considering ICANN's Mission, what is the appropriate role for ICANN to 
create a fund or act as an insurer? Under which circumstances? 
  * Can the same end be accomplished through a third party? 
  * Will an insurance company underwrite this? 
2. The current COI model outlined on the Applicant Guidebook (see: 
http://newgtlds.icann.org/applicants/agb) is designed to provide some 
safeguards regardless of the number of gTLD registries that fail. 

For the existing COI model: 
  * There will be an incentive to underestimate the projected size of the new 
registry, and therefore lower the cost of the COI to below what it should be to 
protect registrants. How could this be addressed? 

For the COF model: 
  * Who should determine how much reserve must be set aside? 
  * What criteria should be used to ensure sufficient funding and a mechanism 
to provide registrant protections? 
1. In the estimates shown in the addendum (Proposed Continuity Operations 
Instrument), what are the assumptions can be made in creating the basis for the 
proposed fund? 
2. How should the both the existing COI model and the newly proposed COF model 
ensure that it appropriately meets the needs of multiple registries sizes from 
small to large? 
3. Will the allocation of costs need to be adjusted over time if new registries 
enter the pool after the target balance is achieved? How can this account for 
some level of predictability and fairness for all registries? 
4. What appropriate level of internal resources should ICANN have for 
collections, tracking of deposits and outlays from the fund? 
5. What are the foreseeable challenges to move funds in timely manner to 
various parties as required responding to emergency situations? 

One comment I would leave with you all is that it should be well-noted that 
ICANN already extracts USD 60,000 from each applicant as a risk fee without 
detailed explanation as to its use.  Most applicants understand that this money 
will be used by ICANN legal to fight lawsuits that may arise from the new gTLD 
program, but find it an uncomfortable "tax" which will probably be used to 
fight battles that are not of their making.  Food for thought. 
  
Kind regards, 
  
RA 
  

Ronald N. Andruff
President 
  
RNA Partners, Inc. 
220 Fifth Avenue
New York, New York 10001 
+ 1 212 481 2820 ext. 11
  


----------------

From: owner-bc-gnso@xxxxxxxxx [mailto:owner-bc-gnso@xxxxxxxxx] On Behalf Of 
Steve DelBianco
Sent: Tuesday, November 22, 2011 7:06 PM
To: 'bc-GNSO@xxxxxxxxx GNSO list'
Subject: [bc-gnso] for expedited review: draft BC comment on registry proposal 
for Continuity Operations Instrument (COI) 
  




Per discussion in Dakar and on our 10-Nov member call, here is a draft of BC 
comments on the a proposed alternative to the for Continuity Operations 
Instrument in the new gTLD Program. 

  

Jon Nevett prepared this draft.  

  



This comment period and docs are described here 
<https://www.icann.org/en/public-comment/rysg-proposal-cof-17oct11-en.htm> .  

  

These comments are due 2-Dec, giving us 10 days for review and approval.   This 
is less than the 14-day period required in our charter, so I am requesting an 
expedited review period.  If any member has substantive objections to the 
expedited review, we can go to 14 days and submit our comments after the ICANN 
due date. 

  

All BC members are invited to suggest edits.     Please use track changes and 
circulate to BC list.    

  

Thanks again to Jon for taking the lead on this. 

  

  

Steve DelBianco 

vice chair for policy coordination, BC


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