Re: [gnso-vi-feb10] Proposed Addendum to Proposals

[Antony Van Couvering <avc@xxxxxxxxxxxxxxxxxxxx>]

> Having a spirited discussion on whether or not harms will occur while 
> intellectually stimulating will not get us to a conclusion and the 
> protections that some require to move ahead with cross-ownership.


I do not think it is a stretch to posit as a harm a policy that could easily 
shut out a new registry from its market for the first 18 months of its 
existence.   Again I urge members of the group not to adopt a policy that will 
lead to failures in the industry, and certainly not without a very convincing 
showing of a countervailing harm that makes it necessary.

Antony

On Jun 15, 2010, at 1:16 PM, Jeff Eckhaus wrote:

> Thanks to everyone for the input and response to my proposed addendum. As I 
> mentioned at the close of my email this is meant to be a framework and open 
> to new ideas and constructive criticism that will hopefully start a path 
> towards a resolution. It is not a closed proposal that is take it or leave it 
> and of course will need input from the group.
> I would like to address some of the specific questions and items brought up, 
> in no particular order:
>  
> ·         The proposal is an addendum to the JN2, which would allow a 
> registry-registrar bundle to sell its own TLD after 18 months and an 
> application. There is no mention of never being able to sell names in its own 
> TLD
> ·         Yes, audit is the same thing in Beijing, Brussels and New York. 
> Thank you for asking that question and clearing that issue up.
> ·         I personally am OK if VRSN decided to become a Registrar for .shoe 
> or another new gTLD, but that is something the group can decide
> ·         The reason I set the framework with Registry/Registrar/VI group 
> because this group has stated ICANN is not up to the task and existing 
> Registries like PIR and Afilias are the ones that have brought up issues of 
> Registry data so they would be in the best position to set up the rules to 
> guard against it.
> ·         This proposal did not take into account exceptions and I leave it 
> up to the group to decide if there needs to be any (ex: community, brand)
> ·         The costs of these audits may indeed outweigh the benefits but what 
> are the options with moving forward on cross-ownership when some in this 
> group are convinced there will be enhanced harms from any type of 
> cross-ownership?
> ·         I did not propose a complete separation of registry-registrar. That 
> is a huge cost for any new entrant and effectively serves a barrier to entry 
> which may be the goal of some that support structural separation.
>  
> I have stated from the beginning that my personal belief is that the harms 
> that some are claiming will occur from the type of cross-ownership are 
> non-existent and that it is more an approach to keep out a class of 
> applicants than anything else. Harms will happen with the 15% proposal as all 
> the harms that have been brought up occurred with the 15% ownership limit in 
> place. If people were most concerned about harms they would be pushing for 
> the DAGv4 version which is 2%.
> But………we need to come to a consensus and I think this a path forward.  Having 
> a spirited discussion on whether or not harms will occur while intellectually 
> stimulating will not get us to a conclusion and the protections that some 
> require to move ahead with cross-ownership.
>  
>  
> Regards,
>  
>  
> Jeff Eckhaus
>  
>  
>  
> From: Antony Van Couvering [mailto:avc@xxxxxxxxxxxxxxxxxxxx] 
> Sent: Tuesday, June 15, 2010 8:48 AM
> To: Jeff Eckhaus
> Cc: 'Gnso-vi-feb10@xxxxxxxxx'
> Subject: Re: [gnso-vi-feb10] Proposed Addendum to Proposals
>  
> Jeff,
>  
> Thanks for the constructive attempt.  I think it's a useful way into the 
> problem I see with many proposals.  Unfortunately, the imposition of 
> significant costs and regulatory burden would be injurious if not fatal to 
> smaller registries.  I've tried to add more color to that assertion below.   
> If this issue were addressed properly, I would be much readier to sign on to 
> a compromise proposal.
>  
> I note that one of your thoughts is that a registry-registrar bundle would 
> never be able to sell names in its own TLD.  I do not believe that 
> "exceptions" for orphaned TLDs make any sense, especially if they are 
> combined with a cap that would essentially discourage the registry from 
> succeeding and would entail a very expensive migration/transition process, 
> not to mention customer confusion) when the cap was reached.  The people from 
> .coop graphically described the pain they went through in this case, in one 
> of our earlier VI meetings, I forget which one.   Furthermore, there is the 
> horrible case where the registry is not "orphaned" but might as well be -- 
> only one or two subpar registries are carrying the TLD, not marketing it, not 
> answering their phone, etc. -- and the registry impotent to do anything about 
> it. 
>  
> Suppose however that the "same TLD" restriction were not in place, and that a 
> small registry could act as a registrar for its own TLD under your proposed 
> rules. For a small registry, the restrictions would seems so bizarre, 
> punitive, and anti-competitive that the "Eckhaus Rule" would shortly be as 
> well received as the imposition of shariah in Cancun. 
>  
> Consider what I believe will be a common case: a small registry with about 6 
> - 10 employees, registry/registrar tech functions outsourced.    One person 
> in charge, two sales and marketing people, an accounting/financial person, 
> possibly a technical person to manage the registry tech functions, and 
> someone to deal with ICANN, who may also be a lawyer.  Even if someone were 
> to argue that a registry needs twice as many people -- evidence among the 
> ccTLDs notwithstanding -- the case is the same.     
>  
> This small registry may be a cultural/linguistic "community" applicant, or it 
> may simply be a small registry that for some reason doesn't reach the high 
> "community" bar, for example .indigi, which will fail as a "community" 
> because it is not a community, but a community of communities (don't blame 
> me, I didn't write the rules).   This registry may also be a small 
> entrepreneurial venture, such as (among those announced) .cal, or .board.  
> This registry may also be a government-supported geographical TLD, such as 
> the registry for a small city.   What these registries have in common is that 
> they need to or want to be able to market and sell directly to the public, 
> through their wholly-owned ICANN-accredited registrar.
>  
> The proposed audits will cost between $50,000 and $100,000.  There are 
> certain auditing costs that don't depend on the size of the enterprise.   At 
> a gross profit of (say) $10 per name, that's an extra 5,000 to 10,000 names 
> that need to be sold to be pay for those audits.  To put this in perspective, 
> this range of sales is approximately the entire annual sales of .cat.
>  
> Now consider the issue of separating the registry and registrar -- this is an 
> even bigger cost.   Basically you would have to double your staff, and 
> possibly -- in order to maintain real separation -- pay a separate rent as 
> well.  I won't attempt to estimate the cost, but it's large and very possibly 
> would make operation impossible.
>  
> All of this in order to prevent hypothetical harms to existing 
> registrars/registries.  Your suggestion may solve one problem, dear to 
> members of this Working Group, but it would create another much larger one. 
>  
> Antony
>  
>  
>  
>  
>  
> On Jun 14, 2010, at 4:54 PM, Jeff Eckhaus wrote:
> 
> 
> All,
> After today’s discussions with this group and reading the emails on the list, 
> I have noticed a consistent concern coming from many group members, that they 
> are worried about ICANN’s ability to enforce any rules that are put in place. 
> It is one of the main concerns opponents of the JN2 proposal have expressed 
> with the issue of co-ownership. Specifically being able to police the 
> following issue: “Registry Operator or its Affiliate may serve as an 
> ICANN-Accredited Registrar in any top-level domain other than the TLD for 
> which Registry Operator or its Affiliate serves as the Registry Operator” .
> Those opposed to JN2 and other proposals seem to agree that cross-ownership 
> is appropriate, but that ICANN will not be able to police any restrictions on 
> data sharing between a registry and registrar. They believe that we cannot 
> simply rely on Registrars to adhere to a signed agreement. Thus, because 
> compliance will be too difficult to enforce, we must limit cross-ownership.
> While I disagree with this viewpoint, my opinion does not matter at this 
> point. What does matter is assuring the people who are concerned with the 
> above, attempting to bridge the gap and reach consensus. To that end, I am 
> proposing an unsolicited addendum to the JN2 proposal (maybe JN3 now??) and 
> to any other proposals that allow a Registry to own up to 100% of a Registrar 
> (vice-versa) but not distribute the owned TLD.
> This will only apply to co-owned entities that have an ownership level above 
> the 2% threshold as discussed in the DAGv4:
> ·         The Registry/Registrar must agree to an annual audit for the first 
> 2 years. Every 18 months for next 3 years, and every 2 years thereafter. 
> (timing can be negotiated)
> ·         The audit will focus on ensuring that Registry data is not shared 
> with the co-owned Registrar, co-owned Resellers, and any related Affiliates
> o   Details of what data would need to be audited would be supplied by a 
> working group/committee led by current Registries
> ·         Stiff penalties would be levied if there is an audit failure 
> (amounts TBD)
> ·         All costs of the audit would be borne by the co-owned entity
> o   The co-owned entity would pay fees into a pool, not directly to auditors. 
> This avoids any thoughts of impropriety
> ·         This audit would be in addition to the audit and compliance 
> requirements already agreed to in ICANN Registry and Registrar agreements
> ·         Auditors would be independent of ICANN but would work with ICANN 
> Compliance on fees and remedies
> ·         Auditors would be rotated among assignments to avoid capture
> This is the framework of my proposal that I believe would cover Registrant 
> rights and concerns and bring comfort to those who believe there will be 
> enhanced harms if there is any type of co-ownership. Most important it would 
> cover the policing/enforcement issues that seems to be the roadblock to 
> consensus. I welcome feedback on this idea and look forward to hearing more 
> and seeing everyone in Brussels.
>  
> Regards,
>  
> Jeff Eckhaus
>  
>