Re: [soac-newgtldapsup-wg] WT(ab) proposal

[Eric Brunner-Williams <ebw@xxxxxxxxxxxxxxxxxxxx>]

Tijani,


1. The cost and/or complexity of an applicant's representation of need 
should not increase the cost and/or complexity of preparing an 
application.


2. ICANN's restriction to contract as the basis for delegation, which 
has caused a significant issue with the Postal Union's application for 
.post, and the recent "no individual" restriction, forces a private 
corporate form on all applicants.
This is likely to result in incorporations in the year prior to the 
submission of the application. Therefore the three year prior 
requirement will have to look beyond the corporation which is the 
applicant, to other entities and their current assets.


3. An asset-based construction of need ignores the origin and purpose 
diversity expressed at several points by the Board (and the GAC).


4. A representation-at-application-based construction of need rewards 
applicants that conceal assets which are subsequently disclosed.

5. The minimum requirements for facilities-based registries 
operations, whether planned to be cost-recovery or profit generating, 
are different from the minimum requirements for outsourced operations.
Further, the accounting flexibility of established registry technical 
services operators makes representation of need very problematic. The 
creative factoring of receivables and other tools of finance for two 
or more corporate entities can allow significant freedom of action.
Without naming names, I know of situations in which "applicants" are 
offered all fees paid by the technical services hosting provider, and 
continuity is guaranteed by the  technical services hosting provider, 
in exchange for revenue structures that are more expensive (to the 
contracted party's anticipated revenue stream) than commercial debt 
funding.

Which leads me to this observation:

6. As a general rule, representation of need by applicants pursuing 
facilities-based registries operations, whether planned to be 
cost-recovery or profit generating, is less likely to be gamed than 
representations of need by applicants pursuing third-party operations.

Turning to the treatment of gaming, we have an attempt to accurately 
state the assets of the applicant at the time of application, and a 
consequence, which unfortunately is limited to the period in time 
prior to the point of contract with ICANN and transition to delegation 
and operations.
I propose that the horizon of discovery be extended, so that if fraud 
is discovered after the applicant ceases to be an "applicant" and 
becomes a "contracted party", the fruits of the fraud are lost. A way 
to make this change, and add materiality so that "any" does not harm 
the accidentally under-declared applicants, is
"A material misrepresentation will result in the denial of the 
application, forefiture of all fees and a charge for all forms of 
assistance rendered at market rates, and constitutes material breach 
and result the transfer of the contract and delegation to a third 
party if the applicant is a party to a registry agreement."
Staff has lawyers who can write the final language, this is just an 
attempt to state that the duration is longer, and the liability is for 
more than just the application, in case there isn't an application at 
the point of discovery of fraud, but an ongoing operation.
Something that I'm still thinking about is if the investments and 
revenues of an assistance-received registry operation for some number 
of financial quarters should be part of what we look at.
There are two things that come to mind:
a) discovery of "late" assets used to market a registry, a "hidden 
horde", intended to create revenues unanticipated to the needs 
evaluator, and related,
b) what, if anything, to do with surprising successes

The idea I'm working on is if current assistance creates a claim on 
future expenses and revenues, then the risk gaming applicants run is 
not ended at some early point, such as before a planned but 
undisclosed revenue bubble, and surprising successes where gaming is 
not present have a means of refunding assistance.
Sorry this is so long,
Eric