Dear Mr. Johnson:
On behalf of the DotOrg Foundation,
I am delighted to provide answers to your questions, below. Please feel free
to refer to our full application, www.dotorgfoundation.org, or to contact me with
any further questions you may have.
a. I'd like each bidder to identify the funds
that they are relying on for the transition. Do you have money in the bank set aside
or are you relying on the third party partners or money from capital markets for
The DotOrg Foundation was capitalized through loans from Kintera,
Inc. (Kintera) and Register.com, Inc. (Register.com). In order to fund our
transition and operation plans until registration fees are available, the DotOrg
Foundation does not require the $5 million VeriSign endowment. Although the
DotOrg Foundation believes that part of the endowment should be available to support
a smooth transition under the language and spirit of the .org registry agreement,
we have not built our plans around such reliance. Rather the Foundation intends
to get bank loans, guaranteed by Register.com and Kintera. We understand that
in the current market, banks have become more conservative. That is why it
was critical for us that these two well-financed companies, Register.com being a
public company with over $200 million in cash and cash equivalents, would act as
guarantors, in order to ensure that such loans would be easily available.
that the financial stability of the successful applicant is critical, particularly
as the delay in the review process may make it necessary to shorten project times,
potentially raising the costs of a transition. Our plans and the ability to
rely on our vendors allow us to confidently look forward to a smooth transition.
To what extent does your financing for the transition depend on timely receipt of
all or part of the VeriSign endowment? What are your plans for alternative financing
if a dispute or a delay arises in the transfer of those funds?
As we answered above,
while be believe that we are eligible for the VeriSign endowment and that it should
be available for the transition as well as for future registry operations, we have
planned fully for the contingency that the endowment will not be available.
Please refer to our answer above for detail.
c. Are you financially prepared
to deal with unforeseen costs that might arise in the transition, particularly those
related to the technical operation of the registry?
Yes. For our transition
plans, the DotOrg Foundation is able to rely fully on Register.com, whose division,
Registry Advantage, is the Foundation's registry services provider. As you
can see from our application, Registry Advantage has a detailed transition plan,
including preparation for contingencies that may increase the complexity, challenges,
and time requirements for the transition. Registry Advantage is prepared to
shoulder the costs of the transition in the interim period before registration fees
and/or the endowment are available to fund registry operations.
plans are based on its substantial experience in operating and transitioning registries.
We believe the transition plans and overall budget have accurately taken into account
start-up costs, including the potential for unforeseen costs. The plan is cautious
in estimating the necessary capitalization for registry services, while ensuring
a focus on benefits for the .org community.
d. Are you financially prepared
to deal with lower than expected numbers of new names being purchased/registrants
renewing. What tolerances do you have in your cash projections before being forced
to seek further funding?
We have taken a conservative approach to projecting demand
and revenue. In fact, as you will note from our financial model attached to
our application as the "DotOrg Foundation Annual Report," we have projected a diminishing
demand of roughly 20% by year six of registry operations. Despite this decline,
we are able to maintain positive cash flow and support registry operations, outreach
and governance activities by: focusing on our core mission, finding cost savings
in the budget, and negotiating vendor agreements that provide the maximum cost-efficiencies
for the registry. The result is a sound business plan that ensures best-in
class registry services, innovative products that differentiate the .org registry
for noncommercial registrants, and an outreach and marketing plan that ensures competitiveness
and noncommercial focus.
In fact, we would like to lower the registry fees, but
will do so only if either the VeriSign endowment or a higher than expected demand
provides for a revenue windfall that will support lower fees. We believe in
passing on cost savings, but not in jeopardizing registry operations. As further
insurance, we also understand from Register.com and Kintera that they are truly committed
to supporting the DotOrg Foundation. So, as we answered in question (a), the
two companies would guarantee a bank loan for the DotOrg Foundation. We are
confident that having these two successful companies, one of which, Register.com,
is a public company with over $200 million of cash and cash equivalents, as guarantors
provides ICANN and the stakeholder community with a greater assurance of financial
security than has any other bidder.
I'm also concerned about the stability
of the .org registry if it goes to a bidder that is relying in substantial part on
the VeriSign endowment for funding. How solid is the commitment from VeriSign to
turn over the money? I understand that there is a signed agreement between VeriSign
and ICANN with respect to the endowment, but what are the remedies if VeriSign delays
or receives a waiver on the agreement? And most important, do the bidders relying
on the endowment have the resources to function in the meantime as well as to engage
in a legal dispute and perhaps protracted litigation?
We understand that there
may be some hypotheses regarding the potential that VeriSign would not fulfill its
obligation to pay the endowment. So, while we believe we would be fully entitled
to receive the endowment for the purposes we outlined in our application, as we answered
questions (c) and (d) above, the DotOrg Foundation is prepared to operate throughout
the transition phase and beyond without relying on the endowment. We understand
the .org community's concern regarding any future registry operator's financial self-sufficiency.
We agree that it is critical to the stable and successful transition and operation
of .org, and that is precisely how we honed our own plans.
Thank you for the opportunity
to provide these clarifications. Please do not hesitate to contact me with
any further questions.