[soac-newgtldapsup-wg] COI recommendation

[Avri Doria <avri@xxxxxxx>]

Hi,

Over the course of the JAS various members of this group have suggested methods 
for resolving the COI issues.  Also a various times, participants have 
advocated insurance process.    I was speaking to someone in the Registries SG 
group the other day and was reminded of a proposal that showed up most of the 
time in the Registries comments of the guidebook, the lates being 
http://forum.icann.org/lists/6gtld-guide/msg00034.html, that I think the JAS 
should adapt and adopt:

> On Page A-46 Attachment to Module 2 – “Evaluation Questions and Criteria”, 
> there is a reference to a Continuing Operations Instrument (COI). The only 
> guidance in the latest version of the AGv6 is the following: 
>  
> “The Continued Operations Instrument (COI) is invoked by ICANN if necessary 
> to pay for an Emergency Back End Registry Operator (EBERO) to maintain the 
> five critical registry functions for a period of three to five years. Thus, 
> the cost estimates are tied to the cost for a third party to provide the 
> functions, not to the applicant’s actual in-house or subcontracting costs for 
> provision of these functions. Note that ICANN is building a model for these 
> costs in conjunction with potential EBERO service providers.  Thus, 
> guidelines for determining the appropriate amount for the COI will be 
> available to the applicant.”
>  
> In the opinion of the RySG, this description is not sufficiently clear and 
> has been a significant impediment to new applicants in their ability to raise 
> funds or to engage in the appropriate business planning required for 
> submitting an application. With the current proposal ICANN is asking people 
> to “double down” on their domain which will lock out a number of potentially 
> viable applicants who may not qualify for special assistance if they are not 
> a “disadvantaged” group but still might not have yet another pot of money to 
> draw from. In addition, the ability for companies to secure a letter of 
> credit from a reputable financial institution following the recent crash of 
> the financial markets has been difficult at best.  Securing an LOC with a 
> financial institution is essentially the same as putting that amount of money 
> aside in a cash escrow.  The cash escrow, as a reminder, is money that is put 
> aside that cannot be touched by the applicant.  Rather than using that money 
> to make its own TLD more secure or successful in the marketplace, the money 
> instead remains unavailable. We are also very concerned that this requirement 
> could significantly disadvantage new entrants to the marketplace, 
> particularly those who have relatively fewer financial resources.
> 
> Therefore, the RySG recommends the following proposal replace the existing 
> COI language:
>  
> The RySG supports the creation of a pseudo-insurance fund paid for by each of 
> the new gTLD Registry Operators for the first five years following launch of 
> the new gTLD.    As an example, we believe that requiring each registry 
> operator to pay an additional $5,000 in Registry Fees per year to ICANN (or 
> its designee) for the specific purpose of funding two or three Emergency Back 
> End Registry Operators should be sufficient.  At the low estimate of 200 
> approved new gTLDs, that would be approximately $1 million per year to fund 
> the EBEROs (“EBERO Fund”).  Although $5,000 per year may seem like a high 
> amount, the estimated amount of an LOC or cash escrow to fund three years of 
> critical registry functions could amount to anywhere from 10 to 100 times 
> that amount.  It is also recommended that the EBERO Fund should be capped at 
> a certain amount such that if the cap has been reached, no further fees from 
> the new gTLD operators shall be due until a certain amount of the funds have 
> been used.  At that point new gTLD operators shall pay a proportionate amount 
> to replenish the fund.  That amount can be shared equally by the new gTLD 
> registries or can use a formula derived by the amount of domain names under 
> management.
>  
> The RySG also believes the function of the COI could take the form of an 
> insurance policy written by a highly rated reputable insurer.  If private 
> insurance is not available, then the captive insurance fund described above 
> could be created.  The $5,000 per registry per year figure should be viewed 
> as a straw-man until proper underwriting of the risk is done to determine an 
> appropriate contribution. ICANN could hire the appropriate expert to 
> calculate the appropriate contribution and pool size, and the cost of the 
> expert could be reimbursed from the pool. 
>  


In the case of the JAS, this is another expense that could be covered by the 
fund seeded by the ICANN Board.

a.