[gnso-vi-feb10] Molecule #2 Report

["Drazek, Keith" <kdrazek@xxxxxxxxxxxx>]

Hi Mikey, this is the report from our group, now known as Molecule 2. The first 
part is a detailed summary and the second part includes the atoms structured 
following Richard's outline (for ease of comparison). Group members should 
review and comment. Our group was able to reach general consensus on the 
following proposal for further consideration and discussion:

Molecule 2 - Overview

Our goal was to encourage competitive entry into the gTLD market. In 
particular, it was noted that Registrars are the most likely source of 
competitive entry; therefore any policy regarding CO and VI that unduly 
restricts the ability of Registrars to own or operate Registries/RSPs is 
anti-competitive. It was also agreed that Registries/RSPs should have 
reciprocity in terms of their right to co-own registrars. 

In order to address the potential “harms” of cross ownership, the proposal does 
not allow VI in general. It maintains and strictly enforces functional 
separation of Rys and Rrs and equal access, and prevents cross-owned registrars 
from selling registrations in their own TLD. Registries cannot own or control 
more than a de minimus share of a registrar distributing its TLD (de minimus 
was discussed as 5% in light of publicly traded company visibility/knowledge of 
ownership). 

In exchange for the VI restriction, there would be no ownership level 
restrictions; i.e., Registrars and Registries/RSPs could own up to 100% of 
other Registrars and Registries/RSPs, respectively.

Exceptions

This proposal allows VI for Single-Registrant, Single-User (SRSU) TLDs. Names 
in these TLDs must not be open to the general public, but only to corporate 
users.  This requires defining a process for assessing SRSU to make exceptions 
from the general policy. The process would take place prior to the launch.

Compliance/Enforcement

1. Disclosure. The proposal requires serious disclosure requirements. 
Applicants must disclose to ICANN:
 All shareholders above ___ %
 Voting powers
 Officers and directors
 Material Ks for material registry services
 Physical infrastructure
 Key/material subcontracts
 (public monitoring was discussed but not agreed)

2. Audits

3. Certifications

4. A complaint process that allows 3rd parties to report abuses

5. There would be tiered levels of enforcement: dependent on the scale of the 
violation, the context, and the amount of harm

6. Meaningful penalties/sanctions for violations

---
Below is a recap of this molecule following the same structure as Richard's 
message, for ease of comparison.

1. LIMITS DO NOT APPLY ACROSS TLDS
A registry operator or registry services provider that does not distribute its 
own TLD should not be restricted from acting as a registrar in other TLDs. An 
existing registrar should not be prohibited from becoming a new TLD registry 
just because it sells other TLDs. The potential harms of registry sharing data 
with an affiliated reseller or friendly registrar can be addressed via contract 
and ICANN compliance and enforcement mechanisms, provided resources and 
commitment are present. The benefit of new entrants, including existing 
registrars, outweighs the potential harms from cross-ownership if no 
self-distribution is permitted.

2. CONTROL/OWNERSHIP
Cross-ownership up to 100% is permitted provided there is no distribution of 
own TLD. An existing registrar should be permitted to become a new TLD registry 
and own up to 100% provided they don't act a their own registrar. Separation of 
functionality and no self-distribution make restrictions on cross-ownership 
unnecessary provided ICANN enforces contracts.

3. OWNERSHIP LIMITS
No ownership limit if cross-owned entity doesn't distribute its own TLD. De 
minimus limit (5%) if cross-owned entity distributes own TLD.
     
4. EXCEPTIONS
Exceptions should be allowed for single-registrant/single user, orphaned TLDs, 
and possibly others TBD. A procedure should be established for applicants to 
request exceptions based on business model and to ensure ability to take TLD to 
market if no other registrars agree to offer and/or market the TLD.

5. REGISTRY SERVICE PROVIDERS
Registry Service Providers should have the same restrictions as Registry 
Operators.

6. COMPLIANCE AND ENFORCEMENT
We spent a significant portion of our time discussing compliance, audit, and 
enforcement procedures. Our group felt that a "serious" structure would be 
required, but would be capable of deterring bad actors with significant but 
tiered penalties.