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Cost Considerations new gTLDs

  • To: gtld-intro@xxxxxxxxx
  • Subject: Cost Considerations new gTLDs
  • From: Dan Schindler <dan@xxxxxx>
  • Date: Sat, 13 Dec 2008 12:15:40 -0800

<html><body style="word-wrap: break-word; -webkit-nbsp-mode: space; 
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after-white-space; "><div style="word-wrap: break-word; -webkit-nbsp-mode: 
space; -webkit-line-break: after-white-space; "><p class="MsoNormal">Dear 
ICANN,</p><p class="MsoNormal" style="text-align: justify; text-indent: 36pt; 
">CentralNic Ltd. submits these comments in response to ICANN’s call for public 
comments on its Draft Applicant Guidebook for new generic Top-Level Domains 
(gTLDs).<span>&nbsp;</span></p><p class="MsoNormal" style="text-align: justify; 
text-indent: 36pt; "><o:p>&nbsp;We wholeheartedly support the introduction of 
new gTLDs.<span>&nbsp;&nbsp;</span>They will provide much needed innovation and 
diversity in the product offerings.<span>&nbsp;&nbsp;</span>We appreciate 
ICANN’s efforts to date in its implementation work for this crucial 
process.<span>&nbsp;&nbsp;</span>While much good work has been done so far, we 
believe that the documents still need further refinement and respectfully offer 
the following suggestions.</o:p></p><p class="MsoNormal" style="text-align: 
justify; "><o:p>&nbsp;</o:p></p><p class="MsoNormal" style="text-align: 
justify; "><b>Annual Registry-Level 
Fees<span>&nbsp;&nbsp;</span><o:p></o:p></b></p><p class="MsoNormal" 
style="text-align: justify; text-indent: 36pt; "><o:p>&nbsp;</o:p></p><p 
class="MsoNormal" style="text-align: justify; text-indent: 36pt; ">New gTLD 
fees should not be so high that they prohibit new registry operators from 
entering the market.<span>&nbsp;&nbsp;</span>ICANN’s proposal to assess annual 
fees of the greater of $75,000 or 5% of the registry operator’s revenues is 
hard to reconcile with ICANN’s commitment to promoting competition in the 
registry space.<span>&nbsp;&nbsp;</span>It might be very difficult for a new 
gTLD registry operator – especially one trying to serve a specific community -- 
to thrive under such a cost structure.</p><p class="MsoNormal" 
style="text-align: justify; text-indent: 36pt; "><o:p>&nbsp;</o:p></p><p 
class="MsoNormal" style="text-align: justify; text-indent: 36pt; ">These 
proposed fees are all the more difficult to justify when one considers the 
rates that the incumbent gTLD registry operators have 
paid.<span>&nbsp;&nbsp;</span>Why should the new gTLDs pay $75,000 during their 
start up periods when the following existing TLDs all pay $10,000 or less -- 
.cat, .jobs, .coop. aero, .museum, and .travel?</p><p class="MsoNormal" 
style="text-align: justify; text-indent: 36pt; "><o:p>&nbsp;</o:p></p><p 
class="MsoNormal" style="text-align: justify; text-indent: 36pt; ">Even 
VeriSign only paid ICANN $100,000 in .com fees in FY2002 when it already had 
over 21 million .com domain names under management.<span>&nbsp;&nbsp;</span>Its 
.com fees to ICANN only rose to $151,000 in FY2005 when VeriSign managed more 
than 38 million domains in this namespace.<span>&nbsp;&nbsp;</span>Even after 
higher .com registry fees were imposed in FY2008, VeriSign still paid less than 
2 percent of its gross revenue on the over 68 million .com names then under 
management.<span>&nbsp;&nbsp;</span>Similarly, the incumbent registry operators 
for .org, .info, and .biz each currently only pay a little more than 2 percent 
of the revenues for their respective gTLDs.<span>&nbsp;&nbsp;</span>Why should 
new TLDs be strapped with having to pay the greater of 5% or $75,000?</p><p 
class="MsoNormal" style="text-align: justify; text-indent: 36pt; 
"><o:p>&nbsp;</o:p></p><p class="MsoNormal" style="text-align: justify; 
text-indent: 36pt; ">Moreover, in determining the 5%, ICANN proposes to include 
“all bundled products or services that may be offered by Registry Operator and 
include or are offered in conjunction with a domain name 
registration.”<span>&nbsp;&nbsp;</span>This expansive definition goes well 
beyond any contractual terms with existing registries, and would create an 
unequal playing field among registry operators and would, in our opionion, 
hamper innovation.<span>&nbsp;&nbsp;</span>A new gTLD operator that expects to 
bundle a domain name with expensive security products and web hosting would be 
at a competitive disadvantage to those operators that sell such products 
separately.<span>&nbsp;&nbsp;</span>Therefore, ICANN should assess its fee only 
on the domain portion of a bundled product set.<span>&nbsp;</span></p><p 
class="MsoNormal" style="text-align: justify; text-indent: 36pt; ">If ICANN’s 
motivation for this proposed change was a concern that some new gTLD registry 
operator might try to game the system by assigning little or no value to the 
domain name component of its proposed bundled service, then it seems reasonable 
to pre-determine a market value for the domain component instead of assessing 
the fee on the entire bundle.<span>&nbsp;&nbsp;</span>Perhaps ICANN could 
determine a value of the domains by taking an average of the 5 largest gTLD 
registries’ rates in effect at that time.<span>&nbsp;&nbsp;</span>This would 
help to promote competition and ensure fairness in the assessment of fees as no 
operator would be forced to pay significantly more for its innovative 
ideas.<span>&nbsp;&nbsp;</span>It also would help ICANN with its budget and 
operational planning efforts.<span>&nbsp;</span></p><p class="MsoNormal" 
style="text-align: justify; "><o:p>&nbsp;</o:p></p><p class="MsoNormal" 
style="text-align: justify; "><b>Application Fee Refunds/Joint 
Ventures</b></p><p class="MsoNormal" style="text-align: justify; 
"><o:p>&nbsp;</o:p></p><p class="MsoNormal" style="text-align: justify; 
text-indent: 36pt; ">ICANN obviously wants the application process to be 
conducted in a fair and orderly manner.<span>&nbsp;&nbsp;</span>In the face of 
contention for the same or similar strings, ICANN should encourage the parties 
to try to work it the issue themselves before moving to an 
auction.<span>&nbsp;&nbsp;</span>ICANN could help foster these efforts in two 
ways.<span>&nbsp;&nbsp;</span>First, in Section 1.5 of the proposed RFP, ICANN 
suggests that refunds “may be available to applicants who choose to withdraw at 
certain stages of the process.”<span>&nbsp;&nbsp;</span>Consequently, refunds 
to applicants that withdraw due to string contention or in the face of an 
objection should be high.<span>&nbsp;&nbsp;</span>ICANN would save a great deal 
by not having to pursue objections and contentions in such situations, and 
would be a great benefit to the community and to the 
process.<span>&nbsp;&nbsp;</span>Importantly, ICANN should provide specifics of 
the refund policy in the next round of RFPs.<span>&nbsp;&nbsp;</span>This is 
very important to potential applicants and their financial backers – all of 
whom need to know the risks of applying well before the final RFP is 
published.<span>&nbsp;</span></p><p class="MsoNormal" style="text-align: 
justify; text-indent: 36pt; "><o:p>&nbsp;</o:p></p><p class="MsoNormal" 
style="text-align: justify; text-indent: 36pt; ">Second, ICANN should encourage 
joint ventures as a means of resolving string contention, as opposed to 
prohibiting them.<span>&nbsp;&nbsp;</span>As long as the original applicant is 
part of the joint venture, the application shouldn’t change in substance 
sufficiently to prohibit an important means to resolve string 
contention.<span>&nbsp;&nbsp;</span>If ICANN really wants to use auctions as a 
contention resolution method of last resort, it should adopt a high refund 
policy, announce it soon, and permit joint ventures to be formed by two or more 
parties that are contending for the same or similar 
string.<span>&nbsp;</span></p><p class="MsoNormal" style="text-align: justify; 
text-indent: 36pt; "><b><o:p>&nbsp;</o:p></b></p><p class="MsoNormal" 
style="text-align: justify; "><b>Registry/Registrar Relationships</b></p><p 
class="MsoNormal" style="text-align: justify; "><o:p>&nbsp;</o:p></p><p 
class="MsoNormal" style="text-align: justify; "><span></span>We support the 
ability of a registry to also operate a registrar to distribute the registry’s 
domain names.<span>&nbsp;&nbsp;</span>We understand that protections need to be 
in place to foster competition in a fair manner, but a rule prohibiting a 
registry from selling names through an affiliated registrar would hamper 
competition.<span>&nbsp;&nbsp;</span>Indeed, some niche registries would be 
unable to survive without an affiliated registrar to sell its domain 
names.<span>&nbsp;&nbsp;</span>This is especially true during a start-up 
period.<span>&nbsp;&nbsp;&nbsp;&nbsp;</span></p><p class="MsoNormal" 
style="text-align: justify; "><o:p>&nbsp;</o:p></p><p class="MsoNormal" 
style="text-align: justify; "><b>Agreement and Terms and 
Conditions<o:p></o:p></b></p><p class="MsoNormal" style="text-align: justify; 
"><o:p>&nbsp;</o:p></p><p class="MsoNormal" style="text-align: justify; 
text-indent: 36pt; ">Overall, as pointed out by the Registry Constituency and 
others, ICANN should revise the draft registry agreement in a number of 
ways.<span>&nbsp;&nbsp;</span>It could be construed to be strikingly one sided 
and unfair.<span>&nbsp;&nbsp;</span>Most importantly, ICANN should strike its 
ability to change the contract terms 
unilaterally.<span>&nbsp;&nbsp;</span>Essentially, ICANN could propose a 
ten-fold registry fee increase that is universally opposed by the registries, 
but could still be binding on them.<span>&nbsp;&nbsp;</span>Such a result would 
not only be unfair, but also would undermine ICANN’s core values, throughout 
the World.</p><p class="MsoNormal" style="text-align: justify; 
"><o:p>&nbsp;</o:p></p><p class="MsoNormal" style="text-align: justify; 
text-indent: 36pt; ">Similarly, we believe the terms and conditions in Module 6 
should be changed to add more balance to the rights of the 
applicants.<span>&nbsp;&nbsp;</span>For example, why should a successful 
applicant have to pay for ICANN’s legal fees if an unsuccessful applicant 
decides to file a claim against ICANN?</p><p class="MsoNormal" 
style="text-align: justify; "><o:p>&nbsp;</o:p></p><p class="MsoNormal" 
style="text-align: justify; text-indent: 36pt; ">Thank you for the opportunity 
to provide these comments and for moving forward with the new gTLD process as 
expeditiously as possible.</p><p class="MsoNormal" style="text-align: justify; 
text-indent: 36pt; "><o:p>&nbsp;</o:p></p><p class="MsoNormal" 
style="text-align: justify; text-indent: 36pt; ">Assuring you of our best 
intentions at all times,</p><p class="MsoNormal" style="text-align: justify; 
text-indent: 36pt; "><o:p>&nbsp;</o:p></p><p class="MsoNormal" 
style="text-align: justify; text-indent: 36pt; ">Kind regards,</p><p 
class="MsoNormal" style="text-align: justify; text-indent: 36pt; ">Daniel 
Schindler</p><p class="MsoNormal" style="text-align: justify; text-indent: 
36pt; "><img height="280" width="864" 
src="cid:D8114011-8A57-4E13-A5A4-1FE6408FA890"></p><p class="MsoNormal" 
style="text-align: justify; text-indent: 36pt; "><br></p><p 
class="MsoNormal"><o:p>&nbsp;</o:p></p><br></div></div></div></body></html>

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