[Gnso-newgtld-wg-wt1] Notes and Action Items - New gTLD Subsequent Procedures PDP WG Work Track 1 Meeting 20 November

Tue Nov 21 04:06:19 UTC 2017

Dear Work Track Members,

Please see below the action items and discussion notes from the meeting on 20 November. These high-level notes are designed to help Work Track Sub Team members navigate through the content of the call and are not meant to be a substitute for the recording.

Slides are attached and excerpts from the chat room are included for reference.  

Kind regards,

Julie

Julie Hedlund, Policy Director

Action Items and Notes, Work Track 1, 20 November

1. SOIs: None

2. Discussion on Variable and Fixed Costs & Clarity of Application Process:

Actions Items:

 1) get a copy of the risk assessment or a sanitized version; 2) ICANN staff to follow up on the risk assessment (or the WG) on how accurate it was, why did it not come to fruition?  Hard to know when we don't know how much can be shared.

Discussions to date:

-- should be revenue-cost neutral

-- Application fee floor amount should be set

-- Method to deal with excess or shortfall of funds should be in place

-- Different application fees should be set if there is significant difference

Slide 5: Application Fees -- Fee Floor:

-- Set amount

-- Percentage of prior rounds(s) application fee

-- Other elements -- When should the application fee floor be set?

-- After each round?

--- A specific time period?

Discussion:

-- Should discuss this.  What are we trying to ensure occurs by setting a floor and list those reasons?  Or kick it to ICANN to say you should set a fee that satisfies these policy goals.

-- Should talk about the policy reasons.  We want to discourage speculation or warehousing or squatting.  Maybe we need an economist.  What we intend to do is to have the greater of the cost recovery and the price floor.  If the cost recovery is less than the price floor then the floor becomes the cost.  Or visa versa.

-- If the application fee is above the floor amount then there is no need for the floor.  We want to make sure the fee reflects that it is a valuable piece of the Internet and we didn't want TLDs to become a commodity.  We wanted to discourage speculation.  Avoid barriers to entry.  A much reduced fee reduces barriers to underserved regions.

-- A point that was brought up by Akram Atallah -- worried about ICANN becoming a registry of registries.  We need to have that discussion.

-- Cost should increase registration for new gTLDs, but avoid becoming the registry of registries.  

-- Difficult problem with lots of contradictions.  We did have a round in 2000, but we set an amount of $50K and only got 100 applications.  We had a subsequent round -- we could say that if we are worried about being cost-neutral then we could say a portion gets refunded.

-- We have had past rounds that were $50K or thereabouts.  How can we be cost neutral?  Do we charge higher up front and then refund?

-- The 2004 round -- there wasn't a lot of thought into the application pricing.  In the 2012 round the concern was the processing cost and running out of money.  We had professional risk managers.  A lot more thought went into the costing process.

-- If the application fee goes down and the applications go way up that is a reason to have a floor, and then consider a refund.

-- Is there something we could share from the 2012 risk assessment?  Might be very sensitive.

-- We can say that we think there is an application fee floor and that there could be an excess, need to decide what to do with it.

-- Action items: 1) get a copy of the risk assessment or a sanitized version; 2) ICANN staff to follow up on the risk assessment ( or the WG) on how accurate it was, why did it not come to fruition.  Hard to know when we don't know how much can be shared.

-- ICANN still seems to be of the opinion that there will be no excess --- that all the funds will be accounted for.  May still need for access to risk funding.

-- Seems like we would still want an application fee floor.

-- Important to keep in mind that the round isn't technically over.  

Slides 6 and 7:  Excess/Shortage of Funds:

-- If we come up with a list of categories how would we come up with fees?

-- If we use the terms "cost recovery" or "Cost neutral" then the applicants cover the cost and then we refund -- only option.  Not sure how to do that for those that withdraw.  If we do this as a non-profit we could do other things with the excess.

-- The difference was between the cost floor and recovery fee.  Could be a small recovery.  

-- The floor kicks in if the actual costs are lower than the floor.

-- The methodology should be clear and transparent.

-- Need to assume that the method for determining the cost is clear and transparent.  

-- What happens if we've done everything right and there is a shortfall?

-- Could we state that the elements of the contingency elements of the fee would go into a reserver fund in case there is a shortfall?  Don't see why we couldn't suggest that, but could say there was a maximum.

-- You would establish a reserve fund from a portion of the application fee?  How would that work?

-- In one round we institute a reserve fund if we have X amount to put into a pool.  In the next round if we don't need it and there is still and excess or if not we could top it up.  Continue it on that basis.

-- Right now we have a contingency fund of 1/3 of the application fee.  Really this is for unforeseen expenses.  There is another check and balance since after the first round then if there is a shortfall then there should be a higher price for applications in the next round.

-- Take the remaining issues to an email list for discussion.

Excerpts from the chat:

Jeff Neuman: Are there also some other restrictions we can place to try and prevent "squatting" other than with the price.  Not sure there are other ways, but just thought I would ask

Rubens Kuhl: I understand the reasoning for preserving security and stability, but we shouldn't have a problem with it becoming a commodity. 

Rubens Kuhl: I think that's the defintion of IANA. ;-)

Maxim Alzoba (FAITID): so far ICANN acted as a regulator, what changes?

Maxim Alzoba (FAITID): is seems to be an organisational issue on ICANN side and more relevant to operation menagement then to pricing 

Sophia Feng: I think some perception from the first round applicants is not about the application fee amount, but with the disclosures of how ICANN spend the fees, so the education of such transparancy shoud probably be improved in the second  round

Kurt Pritz: i don't get the registry of registries concern - whatever it is, I think we are already in that situation. Isn't ICANN more of a registrar? (Rhetorical question.)

Donna Austin, Neustar: To Kurt and Jeff's earlier agreement about the policy, is it possible to turn the considerations into the policy principles as it relates to setting application fees in general rather than ceilings or floors.

Trang Nguyen: @Jeff, can you clarify which risk assessment the WG is asking for? Risks change by program phase.

Jeff Neuman: @Trang - the assessment Kurt was referring to and that is referred to in the cost document Christa was discussing

Maxim Alzoba (FAITID): As I understand the current position of ICANN is that excess fees = 0

Jeff Neuman: @Trang - the assessment Kurt was referring to and that is referred to in the cost document Christa was discussing

Jeff Neuman: I think it is a good point Donna has raised....but ICANN does have insurance 

Trang Nguyen: @Jeff, thank you! That predates my time at ICANN so I don't know much about it. I'm sure someone within ICANN remembers it.

Jeff Neuman: I am sure their policies would cover everything (above a deductible) assuming no willful transgressions

Michael Flemming: Yes, but that is an eye opener to what happens with excess funds and how we would determine what would be excess. From what we just heard, it could be questionable whether or not excess fees as we see them for the first round are "excess" in ICANN's eyes.

Donna Austin, Neustar: @Jeff. ICANN may have insurance, but if the intent was to have a program that was cost neutral, then it makes sense that any unforeseen expenses be funded from the program fees.

Maxim Alzoba (FAITID): what is the current speed of depletion of the reserved funds? it might give us some understanding of how much required for the next round

Jeff Neuman: @Donna - A deductible at most is $1 M (and that is usually for large security class action cases)

Jeff Neuman: So the only thing unforseen would be that deductible

Maxim Alzoba (FAITID): if ICANN loses hard - insurance next year is going to be quite different

Cheryl Langdon-Orr (CLO - PDP Co-Chair): cost neutral 

Donna Austin, Neustar: I wonder if we can make this much simpler. The policy is that excess application fees be returned to the applicants. The applicant can opt to have the application fee returned or used as a credit to ongoing fees.

Maxim Alzoba (FAITID): the issue with the cost recovery is that ICANN adds more and more to the definition of costs (IANA added out of thin air e.t.c)

Rubens Kuhl: ICANN is non-profit, so they can pay vacations in Hawaii for NextGen and still get away with it. 

Jeff Neuman: OK, so there is an assumption that the floor will be greater than the actual cost

Jeff Neuman: In talking it through finally a little lightbulb went off in my head :)

Donna Austin, Neustar: So what you're saying is that the floor amount is not a refundable component to applicants?

Karen Day: @Donna that would be good but how would we ensure agreement on what excess is?

Justine Chew: @Maxim, you are spot on. No one seems to know what the true cost is to ICANN.

Rubens Kuhl: Perhaps the difference between the floor and the cost could be a credit towards yearly fees ? 

Rubens Kuhl: (if that applicant actually becomes a registry)

Donna Austin, Neustar: @Karen, I think to do so would make it a complicated administrative exercise.

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