[Ccwg-auctionproceeds] Judith Hellerstein's comments on the Auction Proceeds Draft

[Alan Greenberg]

Sam, a few corrections.

You say:

Lastly, in addition to the issue of required independence and Option A, there is the challenge of amassing the appropriate expertise to properly and efficiently administer the granting process within a unit of ICANN itself. One has to weigh those costs against Option C, where for a management fee the administrative process is transferred to a competent entity.

The difference between A and C is that in A, the entity administering the entire project is within ICANN (subject to what it might choose to outsource) and in C, it is in a brand new entity that we will create - no existing expertise.

In both A and B, the actual application analysis and grant decision will be outside of ICANN.

Although in theory there might be future auction proceeds, one of the premises of our entire work is that this is a one-time bonanza that will not be rrepeated and we should expect the funds to be used up in some (finite) time.

Alan


At 29/07/2019 07:09 PM, Sam Lanfranco wrote:

I would like to pick up on what Anne E. Aikman-Scalese wrote: To wit:

“If the CCWG has already examined the Trust mechanism in the context of Option A, I apologize for bring this up.  It’s just completely unrealistic to think that you can establish the required independence by setting up a department within ICANN where employees responsible for grant-making are hired and fired by ICANN staff and/or Board.”

The future for new auction revenues is highly uncertain. From an economist’s perspective, I would not be surprised to find that ICANN has reached seriously diminishing marginal returns from additional auctions, whenever the applicants elect not to hold private auctions. In addition to the auctions balance being unlikely to grow, ICANN’s own evolving financial situation means that the existing balance is not immune to appropriation for other ICANN needs, no matter what the intentions are today.

>From the beginning of this discussion the implicit understanding was that the funds would be released in tranches (slices). Various “tranche models” were bandied about. For the moment the endowment preserving strategy of only allocating interest earned is essentially a dead option, given near zero and negative interest rates, the funding flow would be minimal. Other portfolio approaches may combine potentially higher yields, but also quite likely with higher risks.

These considerations lead me to believe that the auction revenues are essentially a one-time windfall, to be husbanded wisely by ICANN, with direction from the ICANN stakeholder community, and possibly used to exhaustion over some agreed upon finite time horizon. Should I be wrong, and we find that there are significant additional auction proceeds, we should consider placing them in reserve, with our decisions here to be revisited in terms of lesson learned from the handling of the first auctions balance. These are issues to be discussed among the stakeholder community.

Lastly, in addition to the issue of required independence and Option A, there is the challenge of amassing the appropriate expertise to properly and efficiently administer the granting process within a unit of ICANN itself. One has to weigh those costs against Option C, where for a management fee the administrative process is transferred to a competent entity.

The terms of reference for grant eligibility would be set through an ICANN policy development process. That would hold for both Option A and Option B. Assuming that it is the same for Options A and B, the core questions here are (a) the relevant costs of the administrative process as between A and B, and (b) the reality (and optics)of process independence with in-house ICANN management versus contracted outside process management.


My personal views are that an in-house process will be more expensive, and more fraught with problems, than a process being run by a outside foundation or similar group. ICANN has no expertise in these areas and this is not an area where ICANN should learn while doing.

Sam Lanfranco, NPOC
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