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

[Antony Van Couvering <avc@xxxxxxxxxxxxxxxxxxxx>]

I am saying that separation requirements will make that much more likely, for 
the very practical reasons I laid out: cost.   I also laid out where those 
costs will fall.

I do not believe comparisons to previous rounds are very informative, 
unfortunately.   There were very few new registrars and many registrars, 
including small registrars who were happy to specialize in less well known 
TLDs.   In the coming round, registries may actually outnumber registrars (I 
mean "real" registrars, not the clones.)

I am not trying to invent remotely possible hypotheticals.  A rule-set that 
imposes hundreds of thousands of dollars in costs on startups can certainly be 
predicted to have adverse consequences.   It's not a stretch. 


On Jun 15, 2010, at 1:51 PM, Neuman, Jeff wrote:

> Antony,
>  
> You are making an assumption that any registry/registrar separation 
> limitations will result in registry failure.  The registries launching in 
> 2001 and beyond all launched with restrictions and I do not believe the 
> operators of any of these TLDs consider themselves as having failed.  They 
> may not be as large as others out there, but they have not failed.  DNS still 
> works, registries are still accepting registrations…..
>  
> I believe we should stay away from the sweeping statements and get back to 
> trying to achieve consensus. 
> 
> Thanks Jeff E for your proposal and as one of the authors of the JN2 
> proposal, I would like to discuss that addendum with both supporters of the 
> JN2 proposal as well as supporters of other proposals that with these changes 
> could also support JN2.
> 
> Thanks!
>  
> Jeffrey J. Neuman 
> Neustar, Inc. / Vice President, Law & Policy
> 
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>  
> From: owner-gnso-vi-feb10@xxxxxxxxx [mailto:owner-gnso-vi-feb10@xxxxxxxxx] On 
> Behalf Of Antony Van Couvering
> Sent: Tuesday, June 15, 2010 1:33 PM
> To: Jeff Eckhaus
> Cc: 'Gnso-vi-feb10@xxxxxxxxx'
> Subject: Re: [gnso-vi-feb10] Proposed Addendum to Proposals
>  
> 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
>  
>  
>