[soac-newgtldapsup-wg] RE: Q&A - RyC and JAS WG VERSION 2 - PLEASE REVIEW by Friday May 20

[Karla Valente <karla.valente@xxxxxxxxx>]

Dear Cintra,

Thank you for your review. I believe Rafik already forwarded the responses to 
the GNSO Council.

Thank you,

Karla Valente
Director, gTLD Registry Programs
Mobile:  +1 310 936 4639

From: Cintra Sooknanan [mailto:cintra.sooknanan@xxxxxxxxx]
Sent: Thursday, May 19, 2011 5:13 AM
To: Karla Valente; SOAC-newgtldapsup-wg@xxxxxxxxx
Subject: Re: Q&A - RyC and JAS WG VERSION 2 - PLEASE REVIEW by Friday May 20

Dear JAS Members,

Please see my reviewed draft below for your kind attention and expeditious 
comment. I have done some shifting of text with it and made some additions in 
blue to aid readability.

Thanks in advance for your responses/approval and to Karla for her assistance.

Best regards

Cintra



On Wed, May 18, 2011 at 10:37 PM, Karla Valente 
<karla.valente@xxxxxxxxx<mailto:karla.valente@xxxxxxxxx>> wrote:
Dear Cintra, Elaine and all:

Please see attached (also below) the revised responses incorporating Cintra's 
and Elaine's answers received via e-mail. It would be great if you could review 
before our Friday meeting.

Let me know what else I can do to help.

Thanks,

Karla

Q&A Registry Constituency and JAS WG

The WG thanks the Registry Constituency for the comments and questions 
submitted. The answers can be found below.
On a general note, the WG notes that criteria are different from matrix. 
Criteria was part of the charter, but matrix is not.

3.2 Notes on Financial Need
The overriding consensus of the WG is that financial need and capability is the 
primary criteria for determining eligible applications. Such need and 
capability is to be demonstrated through the following criteria:
1.         Applicants must be capable of of contributing $45,000 towards 
ICANN's application fee, unless ICANN waives, or lowers application fees.
2.         Where applicants anticipate scheduled fees, such as for extended 
evaluation, the applicant must be capable of contributing a quarter of the 
scheduled fees.
[RYSG]  How was this determined? Is it sufficient to demonstrate viability? 
Some explanation of the WG thinking on this would be helpful.
3.         Applicants must be capable of contributing $45,000 towards registry 
operational costs, if the applicant proposes to operate its own registry 
platform. If the applicant proposes to share registry operational costs with 
other qualified applicants, the applicant must be capable of contributing the 
pro- rated proportional share of this cost.
[RYSG] Is the $45,000 amount an annual figure?  It might make up a very small 
percentage of operational costs.



First Milestone Report states that the applicant must be able to cover half the 
costs of the AG process.
4.         Applicants must be capable of of contributing $45,000 towards 
registry continuity operational costs, if the applicant proposes to fund its 
own continuity operation. If the applicant proposes to share registry 
continuity operational costs with other qualified applicants, the applicant 
must be capable of contributing the pro-rated proportional share of this cost.
[RYSG] It would be helpful to explain the basis for the $45,000 amount.


[JASWG]  Answer to 3.2 questions:

ICANN previously used figures in this range in 2000 and 2004. As the final fee 
is not yet fixed (see fee reductions and elsewhere), this minimum applicant 
capability is subject to increase, or decrease. Current offers of record by 
registry technical service providers to potential applicants are significantly 
lower than this figure e.g. The total marketing budget PuntCat invested in .cat 
was 2,000 euros.



Part 4 - What benefits do qualified applicants receive?
The WG recommends a number of different kinds of support to be made available 
for eligible applicants, which fall into the following categories:
4.1 Financial support/relief from ICANN
4.1.1 Cost Reductions
The WG recommends the following fee reductions to be made available to all 
applicants who are determined as meeting the criteria established for support:
*           Waive (consensus for this in the Milestone report) the Program 
Development Costs (US$26,000)
*           Lower risk/contingency cost (US$60,000)
[RYSG] If these contingency funds are actually needed at the amount estimated, 
where would the deficit come from?
*           Review Base cost (US$100,000) to see if reduction can be made
*           Cost reductions to encourage the build out of IDNs in small or 
underserved languages.
[RYSG]  Assuming the fees are reasonable with regard to services provided to 
registries, would other registries be expected to make up the deficit?  Or does 
the WG believe the fees are too high?  If the latter, was any analysis done to 
support that position?


[JASWG] As stated above, current offers of record by registry technical service 
providers to potential applicants are significantly lower. But, if ICANN is 
correct in the cost estimates (both for this figure and the $45K above), then 
any cost increase will be transferred to other applicants and lowering fees for 
few applicants automatically rises to others.A deficit or mitigation of risk 
can also be catered for in several ways not yet explored by the WG, with 
Insurance being one possible mechanism. There seems to be confusion as to what 
this $60K figure is meant to represent, which requires clarification from staff.
 Also regarding contingency or risk costs, as applications are reviewed to a 
higher standard for eligibility, then rational risk (must of necessity) be 
altered downward. Thereby reducing rational contingency funding requirements. 
The same question arises if the contingency funds actually needed are in excess 
of the amount estimated for regular applications (not reviewed to a higher 
standard for eligibility).



[RYSG] Does the WG believe that costs will be less for 'IDNs in small or 
underserved languages'?  If not, what is being suggested here?
*           Lower registry Fixed Fees
[JASWG] The WG is not making any assumptions the cost will be different for 
IDNs. This is, nonetheless, not a leveled field.
What is being suggested is that ICANN consider support build out of IDN 
language applications and there are cost reductions for an additional IDN 
language application when the Applicant is already applying for a Latin script 
string.

*           Exemption or deferment of IPv6 implementation requirements as 
possible
[RYSG]  Could this put the registry at a competitive disadvantage compared to 
registries that support IPv6?
Further reductions recommended
*           Reduction of the Financial Continued Operation Instrument 
Obligation to 6-12 months
[JASWG] In the WG's opinion, no. IPv4 numbers are starting to be treated as an 
asset with financial value; e.g. Microsoft recently paid $11 per IPv4 address. 
These companies wait, or even find it in their interest to obstruct, while the 
underprivileged battle against the bugs in IPv6. It makes no sense for anyone 
to be a pioneer in transitioning to IPv6; it only makes sense to go there as 
and when others go there as well. At that point DNS providers who don't keep up 
with the market (which means IPv6 and DNSSEC in this context) will lose 
business to those who do.

This will not, in our opinion, be relevant to new registries during the initial 
year(s) of operation, while the IPv6 requirement is deferred.
In some countries the IPV6 infrastructure might not yet be there, 
implementation is likely to come with a host of problems and he cost of having 
their technology is high for some applicants. It is unconscionable to expect 
the developing world applicants to tackle these problems on their own, 
therefore it should be deferred or some form of special support be given (so 
that IPV6 capability is offered to the applicants in need at advantageous 
terms).



[RYSG]  What if the registry fails?  Does the WG suggest a higher tolerance for 
failure in exchange for a smaller continued operation obligation?
[JASWG] The presumption of failure applies to all registries (including the 
2000 and 2004 round applicants now, or their successors in interest). The 
staff's choice of three years of continuity funding rationally reflects the 
failure scenario for applications made by speculators and other uninformed 
investors.

The eligibility criteria for applicants seeking support eliminate these 
likely-to-fail applicants, as the criteria ensure that the likely elapsed time 
to continuity operator discovery failure (for registries "in continuity" 
arising from support eligible applicants) is significantly less, than that of 
random speculator driven failures. As stated above in the response concerning 
contingency risk, as the same higher review standard is utilised, a lower risk 
cost principle applies here.
The WG is not suggesting high tolerance for failure; however, the WG believes 
that the continued operations following the failure is considerably less than 
the ICANN estimates.

Such lower cost for the financial continued operation instrument obligation can 
also be catered for in several ways not yet explored by the WG e.g. insurance

4.1.2 - Staggered Fees
Instead of paying the entire fee upon acceptance of the applications, 
applicants meeting the criteria established for support could pay the fees 
incrementally. Staggered fees payment enables an applicant to compete for 
strings that might otherwise have gone to the first and/or only group with 
enough money to apply.
[RYSG]  Staggered over what period of time?  What happens if progress payments 
are not made on time?
[JASWG]

Nearly a year ago the staggered fee schedule was discussed as an inverse of the 
refund schedule:
It was suggested that the applicant submits the $5,000 filing fee, and then  
$50,000 at submission of application, $65,000 after the initial evaluation, and 
then the final $65,000 when they are approved for delegation.

These figures might change if the applicants are not required to pay that 
entire fee, but it could still follow the reverse schedule of how the refunds 
would be issued.

Here are few reasons the WG believes this helps the applicant:

*         No need to raise the entire amount up front;

*         If the applicant gets through the initial evaluation and then they 
see they might have a contention string, they wouldn't have had to put out the 
entire fee up front; and

*         If it's clear there is no contention set they could raise the final 
amount of money from their financiers.

The full details must be specified, but have not yet been fully explored by the 
WG. ICANN's schedule or process is not under the control of the working group. 
Therefore the period of time and points of payment depend on the unbundling of 
the AG, which must be given by staff. If payment is not made the WG must 
consider and discuss the options for the applicant e.g. the application is put 
on hold subject to the sunset period defined.

Part 5 - Evaluation process and relationship to the new gTLD Applicant 
Guidebook (AG)
The WG has determined, at this time, that best possible process to provide 
support for such applications is to be done through a process that is parallel 
to, and not a replacement of, the ICANN Applicant Guidebook. Thus, even after 
the Guidebook is formally approved, this WG can continue its work to refine 
those components of its mandate which remain unresolved. It is important that 
the AG make mention of this program and refer interested potential applicants 
to it, however it is not the WG's intention to otherwise affect the existing 
application process. To qualify for support applicants may be required to 
demonstrate that they meet this program's criteria on financial need and public 
interest; however such activity is intended to supplement, not replace, 
existing mechanisms in the AG.
The WG had full consensus that Applicants that receive support under this 
program should repay that support as possible, and that such repayments go into 
a sustainable revolving fund used to support the future applications. Repayment 
is dependent on the gTLD Operator's financial success and will take the form of 
either
*           a capital contribution or lump sum; or
*           an income contribution or annual installment of until a lump sum is 
repaid; or
*           repayment of the full or a percentage of the reduced base cost fee 
expended by the Support Development Program.
The following broad steps did not obtain thorough evaluation or full consensus 
by the WG, but have been suggested as a starting point to this process and will 
be further refined by the WG based on the Parts 1 to 4 above. Note the process 
is meant to be to be in parallel with the AG-
1.     the Application is assessed using the criteria described in Part 3 and 
this Step takes place before the Application enters the AG process
[RYSG]  Is there enough time for this?
[JASWG] We hope so :-), the WG needs to know when the gTLD program will 
commence to answer this.


From: Cintra Sooknanan 
[mailto:cintra.sooknanan@xxxxxxxxx<mailto:cintra.sooknanan@xxxxxxxxx>]
Sent: Wednesday, May 18, 2011 7:17 AM
To: Karla Valente; 
SOAC-newgtldapsup-wg@xxxxxxxxx<mailto:SOAC-newgtldapsup-wg@xxxxxxxxx>
Subject: Re: [soac-newgtldapsup-wg] Q&A - RyC and JAS WG - PLEASE REVIEW by 
Friday May 20

Dear Karla,

Please also refer to my responses emailled to the list earlier this week.

I do feel strongly that the insurance to cover some contingency risk is a 
viable option and would like my responses particularly to that issue included.

Thank you for your help.

Cintra
On Wed, May 18, 2011 at 8:59 AM, Elaine Pruis 
<elaine@xxxxxxxxxxxxxxxxxxxx<mailto:elaine@xxxxxxxxxxxxxxxxxxxx>> wrote:
Nearly a year ago the staggered fee schedule was discussed as an inverse of the 
refund schedule:
The applicant submits the $5,000 filing fee, and then
$50,000 at submission of application, $65,000 after the initial
evaluation, and then the final $65,000 when they are approved for delegation.

These figures might change if the applicants are not required to pay
that entire fee,  but it could still follow the
reverse schedule of how the refunds would be issued.

Reasons this helps the applicant:
No need to raise the entire amount up front.
If the applicant gets through the initial evaluation
and then they see they might have a contention string, they wouldn't
have had to put out the entire fee up front.
if it's clear there is no contention set they could raise the final amount of 
money from
their financiers.

Elaine