Re: [soac-newgtldapsup-wg] charter language

[Alan Greenberg <alan.greenberg@xxxxxxxxx>]

At 11/05/2010 10:19 PM, Andrew Mack wrote:
> All,
>
> I think we're making two assumptions here if I'm understanding correctly:
>
> 1) That the $185k is a good number -- i.e. what it needs to be for 
> cost recovery.  We've already asked whether cost recovery should 
> include past costs but that issue doesn't seem to have been 
> addressed.  I think there is a legitimate argument that these costs 
> are sunk costs, which -- if we were to write them off -- should lead 
> to lower application fees across the board.  Please tell me if I'm 
> getting that wrong, but that's the way it seems to me.
The rationale was that the gTLD process development costs reduced 
ICANN's ability to build its reserve, and that when received for new 
applications, would go into the reserve. There was a strong negative 
reaction to this at the time it was first introduced, and no change 
was made. I am not optimistic that at this point, where the projected 
FY11 budget is rather constrained and the contribution to the reserve 
has been reduced, that this is a productive path to follow.
One possibility is that we do not argue against recovering these sunk 
costs in general, but that we do recommend that they be waived for 
whatever group of applicants meets the criteria developed under 
Objective 1. That will be a moderately small percentage of the 
overall applicant group and may be palatable.
There is one more consideration. You may have noticed that this 
entire new gTLD process has gone on for far longer than originally 
expected. The costs to be recovered have no doubt FAR exceed the 
amounts that were used in the $185k calculation. I do have some fear 
that if we try to get the overall pricing re-considered, it could 
push the application fee even higher.

> 2) We're making the assumption that everyone should pay the same 
> fees -- which is what is implied in the idea of a "subsidy" versus a 
> two-tier pricing structure.  I recognize the gaming risk in a two 
> tier system but am a bit concerned that if we argue for subsidies we 
> may be effectively saying to groups that need help (that we agree 
> deserve it)  "once we raise some money we'll get back to you".  This 
> seems a bit outside of the spirit of the Nairobi meeting.
The issue of some sort of subsidy or preferential pricing has been on 
the table for years now. The staff answer has always been that we 
need to wait for the second round. That put off the need to consider 
the gaming issues, and to consider differential pricing. It also 
allowed some of us to dream that the windfall revenue from auctions 
might be available then. For reasons that have never been clear to 
me, the staff proposals always presumes a single fee for all. The 
description of how the fee was determined 
(http://www.icann.org/en/topics/new-gtlds/cost-considerations-23oct08-en.pdf) 
makes it clear that to the extent that one could forecast the number 
of applications in the various categories (that is, a "category" 
corresponding to a different path through the decision tree on page 9 
of the document), the total costs were summed and divided by the 
number of projected applications.
So, if you accept the arithmetic (which is veiled in calculations and 
simulations we are not privy to, and so have no basis on which to 
argue) and the principle of one-fee-fits all, we don't have a lot of 
room to play here.
Arguing the one-fee-fits all principle has not been successful in the 
past. Perhaps with the Board resolution, it can be raised again. But 
I think that it does imply that if some fees go down, others will go up.
One way to approach a solution might be to not request a reduction in 
the "application" fee, but, for our Objective 1 group, have part of 
the fee deferred coupled with a reduced ongoing fee once the TLD is 
operational. This would have the net effect of a reduced fee but 
without actually lowered it on paper.

> Should we assume that everyone pays the same fees?  I'm not 
> sure.  As Baudouin and others noted, non-English speakers (who need 
> translation) and Emerging Markets applicants and NGOs (who may have 
> less access to/budget for legal fees) are already at a disadvantage, 
> as these challenges function to some extent as a tax on them.
I think that if we want have ICANN revisit the issue of differential 
fees, it must be done on a basis of fairness - that is, why should 
those who take a simple path through the decision tree subsidize 
those who take other paths. But I fear that this was not the intent 
of the Board resolution, and it may not be the best use of our time. 
More creative approaches such as the ones above may be more effective.
Alan


> Just want us to be mindful of our assumptions.
>
> Cheers, Andrew
>
> Andrew A. Mack
> Principal
> AMGlobal Consulting
> +1-202-256-1077
> <mailto:amack@xxxxxxxxxxxx>amack@xxxxxxxxxxxx
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