[bc-gnso] for expedited review: draft BC comment on registry proposal for Continuity Operations Instrument (COI)

Phil Corwin psc at vlaw-dc.com
Fri Nov 25 18:54:02 UTC 2011

I appreciate the work that Jon has done on this draft and hope that these additional comments are useful.

The COF proposal reminds me of deposit insurance for banks (pre-funded) as well as state insurance funds (generally post-insolvency funded) -- but the difference is that both are accompanied by rather substantial regulatory regimes to manage the risk to the common fund, far beyond anything ICANN has ever engaged in vis-à-vis registries, much less desirable in the DNS context. A COF model basically has all registries paying into a common fund to be used to extend operations for at least 3 years of a registry which either has a flawed business model or is operated incompetently (and that is always accompanied by moral hazard), while a COI model has each individual registry purchasing a financial guarantee tailored to its own scope of operation (I am neutral on when the COI fund size should be revealed -- but what I am wondering is how will it be set, and will it be adjusted at regular intervals post-launch to account for variations in domain registrations and other profit/loss factors?).

Also, who is operating the failed registry for the 3-year minimum period (the same management that steered it into the rocks), and is it wise to set a minimum that's so long if annual losses are considerable? And what is the end game for the registry at the end of the 3 years? In the bank and insurance world, any regulatory intervention that triggers a hit on the insurance fund is generally accompanied by very rapid takeover and merger of the failed entity into a solvent and well-managed one.

So overall, while open to counter-arguments, I think I am leaning toward the COI approach because it places the fiscal responsibility on each registry, and that requires much less regulatory oversight than a pooled funds COF approach -- but certainly agree that the COI instrument amount should be flexible at the inception based on business model and anticipated registrations, and then reviewed regularly post-launch for adequacy. COI also seems preferable because, as the draft notes, it provides more registrant protection, which is the main point of the exercise.

Philip S. Corwin, Founding Principal
Virtualaw LLC
1155 F Street, NW
Suite 1050
Washington, DC 20004
"Luck is the residue of design" -- Branch Rickey

-----Original Message-----
From: owner-bc-gnso at icann.org [mailto:owner-bc-gnso at icann.org] On Behalf Of Marilyn Cade 
Sent: Friday, November 25, 2011 12:50 PM
To: Ron Andruff ; sdelbianco at netchoice.org ; Bc GNSO list 
Subject: Re: [bc-gnso] for expedited review: draft BC comment on registry proposal for Continuity Operations Instrument (COI)

Will read this. I am having some trouble with how this wprks, but also think that this may be an opportunity for our BC request for improvements for IPR - if they can consider such a big change in this, why not still in ITR mechanisms. 
Sent via BlackBerry by AT&T

-----Original Message-----
From: Ron Andruff <randruff at rnapartners.com>
Date: Fri, 25 Nov 2011 10:32:40
To: <sdelbianco at netchoice.org>; <bc-gnso at icann.org>
Subject: RE: [bc-gnso] for expedited review: draft BC comment on registry  proposal for Continuity Operations Instrument (COI)

Thanks to Steve and Jon for this first cut.  It is a shame that time is so short because a considerable amount of work still needs to be done on this topic over the coming few days.  I will bring some thoughts to this discussion in a later post, but thought that the excerpt that Steve linked out to would be a helpful start and have thus posted them below for member's consideration. 
Public comment is requested concerning the recently received from the proposal for Establishment of a Continued Operations Fund. This proposal comes from the Registries Stakeholder Group (RySG) and is accompanied by an addendum (Proposed Continuity Operations Instrument) produced by the Afilias and PIR, supported by some other registries, registry applicants and other interested parties. 
The RySG proposal offers an alternative approach to the existing Continuing Operations Instrument that is part of the New gTLD Program. Here are some questions that public comment respondents could consider regarding the RySG alternative proposal as well as the existing continuing instrument model offered by ICANN. 
1. Considering ICANN's Mission, what is the appropriate role for ICANN to create a fund or act as an insurer? Under which circumstances? 
  * Can the same end be accomplished through a third party? 
  * Will an insurance company underwrite this? 
2. The current COI model outlined on the Applicant Guidebook (see: http://newgtlds.icann.org/applicants/agb) is designed to provide some safeguards regardless of the number of gTLD registries that fail. 

For the existing COI model: 
  * There will be an incentive to underestimate the projected size of the new registry, and therefore lower the cost of the COI to below what it should be to protect registrants. How could this be addressed? 

For the COF model: 
  * Who should determine how much reserve must be set aside? 
  * What criteria should be used to ensure sufficient funding and a mechanism to provide registrant protections? 
1. In the estimates shown in the addendum (Proposed Continuity Operations Instrument), what are the assumptions can be made in creating the basis for the proposed fund? 
2. How should the both the existing COI model and the newly proposed COF model ensure that it appropriately meets the needs of multiple registries sizes from small to large? 
3. Will the allocation of costs need to be adjusted over time if new registries enter the pool after the target balance is achieved? How can this account for some level of predictability and fairness for all registries? 
4. What appropriate level of internal resources should ICANN have for collections, tracking of deposits and outlays from the fund? 
5. What are the foreseeable challenges to move funds in timely manner to various parties as required responding to emergency situations? 

One comment I would leave with you all is that it should be well-noted that ICANN already extracts USD 60,000 from each applicant as a risk fee without detailed explanation as to its use.  Most applicants understand that this money will be used by ICANN legal to fight lawsuits that may arise from the new gTLD program, but find it an uncomfortable "tax" which will probably be used to fight battles that are not of their making.  Food for thought. 
Kind regards, 

Ronald N. Andruff
RNA Partners, Inc. 
220 Fifth Avenue
New York, New York 10001 
+ 1 212 481 2820 ext. 11


From: owner-bc-gnso at icann.org [mailto:owner-bc-gnso at icann.org] On Behalf Of Steve DelBianco
Sent: Tuesday, November 22, 2011 7:06 PM
To: 'bc-GNSO at icann.org GNSO list'
Subject: [bc-gnso] for expedited review: draft BC comment on registry proposal for Continuity Operations Instrument (COI) 

Per discussion in Dakar and on our 10-Nov member call, here is a draft of BC comments on the a proposed alternative to the for Continuity Operations Instrument in the new gTLD Program. 


Jon Nevett prepared this draft.  


This comment period and docs are described here <https://www.icann.org/en/public-comment/rysg-proposal-cof-17oct11-en.htm> .  


These comments are due 2-Dec, giving us 10 days for review and approval.   This is less than the 14-day period required in our charter, so I am requesting an expedited review period.  If any member has substantive objections to the expedited review, we can go to 14 days and submit our comments after the ICANN due date. 


All BC members are invited to suggest edits.     Please use track changes and circulate to BC list.    


Thanks again to Jon for taking the lead on this. 



Steve DelBianco 

vice chair for policy coordination, BC

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