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--></style></head><body bgcolor=white lang=EN-US link="#0563C1" vlink="#954F72"><div class=WordSection1><p class=MsoNormal><span style='font-size:11.0pt'>Dear Sub Team Members,<o:p></o:p></span></p><p class=MsoNormal><span style='font-size:11.0pt'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-size:11.0pt'>Please see the correct slides attached. These also are posted to the wiki.<o:p></o:p></span></p><p class=MsoNormal><span style='font-size:11.0pt'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-size:11.0pt'>Best regards,<o:p></o:p></span></p><p class=MsoNormal><span style='font-size:11.0pt'>Julie<o:p></o:p></span></p><p class=MsoNormal><span style='font-size:11.0pt'><o:p> </o:p></span></p><div style='border:none;border-top:solid #B5C4DF 1.0pt;padding:3.0pt 0in 0in 0in'><p class=MsoNormal><b><span style='color:black'>From: </span></b><span style='color:black'><gnso-newgtld-wg-wt1-bounces@icann.org> on behalf of Julie Hedlund <julie.hedlund@icann.org><br><b>Date: </b>Tuesday, March 28, 2017 at 12:07 PM<br><b>To: </b>"gnso-newgtld-wg-wt1@icann.org" <gnso-newgtld-wg-wt1@icann.org><br><b>Subject: </b>[Gnso-newgtld-wg-wt1] Actions/Discussion Notes: Work Track 1 Sub Team Meeting 28 March 2017<o:p></o:p></span></p></div><div><p class=MsoNormal><span style='font-family:"Times New Roman"'><o:p> </o:p></span></p></div><p class=MsoNormal><span style='font-size:11.0pt'>Dear Sub Team Members,</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Please see below the action items and discussion notes captured by staff from the meeting on 28 March. <i>These high-level notes are designed to help Work Track Sub Team members navigate through the content of the call and are not a substitute for the recording</i>. Please also see the recording on the meetings page at: <a href="https://community.icann.org/display/NGSPP/Work+Track+1+Meetings">https://community.icann.org/display/NGSPP/Work+Track+1+Meetings</a>.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Please note also that the slides referenced below are attached and for ease of reference chat excerpts are included below.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Best,</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Julie</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><div style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 1.0pt 0in'><p class=MsoNormal><span style='font-size:11.0pt'>Julie Hedlund, Policy Director</span><o:p></o:p></p></div><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><b><span style='font-size:11.0pt'>Actions/Discussion Notes:</span></b><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><i><span style='font-size:11.0pt'>1. Recap & Discussion from ICANN58</span></i><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><u><span style='font-size:11.0pt'>a. Holistic Costing Approach to Multiple Rounds (Slide 3)</span></u><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Good feedback from ICANN58 (as follows).</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Would cost recovery in the next round be in isolation. Question: is anyone looking at this holistically or only in isolation.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Consider a first-come, first-served process.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- We have already brought up concerns about surplus and application fees. </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- We don't know the number of rounds. Need more information to make it work.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Recollection from the start of the process: original intent was that the original round would be cost recovery. After the price was set the development took longer than planned and development costs went up radically. Address by spreading development costs over future rounds, presumed not enough money from $185,000.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Correct that was the original intent: 1) recover historical costs and the development; 2) evaluations; 3) litigation/contingency fund. Because of the surplus and because we've baked in historical costs and no ramp up to begin a new round -- doesn't seem that historical costs need to be built into the round going forward. Leaves the notion that if we want to do a cost-recovery type model need to build in what the costs should and should not be, assuming not a huge ramp up.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Should be some resusable elements of the system, but need to hear from ICANN staff re: development costs.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Have the flexibility to decide if new rounds should be isolated or not.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Development costs were approximately $27,000 per application (part of hte $185,000). So, the question is: should costs be in isolation or not?</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Concern that cost recovery was a pricing ceiling rather than floor. Talking about setting a floor price, which would be a change in policy.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Unclear economically if we are talking about cross-collateralizing rounds -- assume that there was a net profit from the first round. One could say that if cost recovery is the concept, consider the fact that ICANN dug into its reserves to fund the transition. ICANN has to look at getting its reserves back up. Talking about this in the abstract is a little rough; but mere cost recovery and ignoring other potential costs is narrow minded and needs to be looked at in a much bigger picture.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Take a few minutes now: existing policy is cost recovery -- do we think there should be a change to that policy, such as a floor. Put down all the reasons to have a floor/to change the policy.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Why is "Cost" to "society" -- IP community an issue?</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Need to consider why to keep current policy.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- If we do set a price above what it would cost what do we do with the surplus?</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Not sure that dropping the price would result in a large increase. Not sure that an increase in price would lower the number of applications. Price elasticity isn't clear.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- What about having different fees for different types of applications?</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><b><u><span style='font-size:11.0pt'>Action Item</span></u></b><b><span style='font-size:11.0pt'>: Helpful for WT1 members to share thoughts re questions below with Sara and Christa.</span></b><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>1. Why to have a floor/what happens if price is too low?</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Funding for reserve funds</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Piece of Internet real estate</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- If price is too low too easy -- cost for IP community of so many TLDs, many which may fail</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>2. What if price is too high?</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Anti-competitive</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>3. Why keep the current policy?</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>From the chat:</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Alexander Schubert: Why "cost recovery" in the first place? What if the cost goes down to 5k USD? We face hundreds of thousands of gTLDs? There must be a SUBSTENTIAL hurdle to overcome for applying for a gTLD. The easiest hurdle is a monitary one. If there is no entry barrier we will be FLOODED with applications by "hobby-gTLD-makers".</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Trang Nguyen: One big development cost for the next round is the system development cost.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Steve Chan: I would imagine the development cost would be dependent upon the recommendations from this group.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Trang Nguyen: TAS has been retired so we would need to do new system development. Now much work depends on how many changes from the 2012 round there will be.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Jeff Neuman: @Steve - of course to some extent.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Donna Austin, Neustar: @Alexander, we did have some discussion about the challenges associates with setting a low application fee.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Jeff Neuman: But to be honest some of that "development cost" was not wisely spent....especially in trying to develop a home grown customized one time solution.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Steve Chan: @Alexander, there is a question related to a pricing floor in CC2.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Alexander Schubert: TNX</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Jeff Neuman: I would really like for us to set forth all of the reasons for which we believe that a floor should be set (as that would be a change in policy).</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Alexander Schubert: There is also a "cost" to "society", brands, the Intellectual Property community! If 100,000 gTLDs are being applied for because they "cost" only 10k USD - then the "cost" to the wider community is BIG!</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Donna Austin, Neustar: @Greg, agree about getting the reserves back up, but ICANN shouldn't be using excess fees from a future round to do that. I know that's not what you were suggesting, but I just wanted to put that on the record.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Greg Shatan: Donna, I wouldn't consider those to be "excess fees." It's simply revenue. And I don't see why revenue should not be used to bolster reserves. On this point, since the first round fees were so significant, a floor was irrelevant. How far short is ICANN's reserves from best practices amounts of 110-120% of annual revenue? How does that compare to the $90 million of "excess" fees?</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Michael Flemming: I agree with keeping the cost higher. Cost recovery is the right idea as long as that costs come back. My firm and I feel that for our customers, the value of a gTLD can be seen in its price. Brands in the first round paid a high price for a resource and that becomes minimized if the price of that resource goes down too much for future application windows.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Jeff Neuman: @Alexander - To sum up your concerns: (i) IF too low, we may have unsophisticated Buyers of TLDs - threat to security/stability; (ii) If too low, we may hae squatting activities, abuse</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Donna Austin, Neustar: @Greg, they wouldn't be excess fees if the cost-recovery model was not applied, but my point was more that I don't believe it is appropriate to raise funds to bolster the reserve fund by opening up another round of TLDs.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Alexander Schubert: I suggest to ask whether we RAISE the amount to US $500,000.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Michael Flemming: Could we just see a list of hands to see who is for the cost-recovery model and who is against?</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Jeff Neuman: @Michael - I think it is too soon for such a poll</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Michael Flemming: Just an idea</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Jeff Neuman: I think we should focus on the pros and cons of each method.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Michael Flemming: To grab the storm, because I am curious about who we are trying to convince to change it?</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Greg Shatan: ICANN does plenty of things that cost money -- that's where the "excess"" of revenues from any income-producing activity goes, as a generic point. Non-profit does not mean non-revenue-generating...I am not suggesting ICANN turn gTLD applications into a "cash cow" but there's a big range between the lowest non-money-losing price and a massive cash cow.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Trang Nguyen: Does the concept of floor mean a floor above the cost recovery of processing applications, or some arbitrary floor? It's not clear to me.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Michael Flemming: Clarification to cost coming back: Meaning that the excess is used for an agreed upon benefit or that it is returned to applicants/registries.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Jeff Neuman: @Michael - but those brands that bought now have a huge first movers advantage (up to 7 years in theory). That is worth a higher price</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Carlton Samuels: Given what we now know of the market situation, Is there a sense that a new gTLD program should be demand-driven? And, iff we agree with that in principle, it would be a dead easy step to agree in principle the administrative costs to ICANN - the corporation - should be on a cost recovery basis.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Michael Flemming: Yes, but those same brands don't agree to loweing the price.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Jeff Neuman: Trang - the floor means that essentially we would look at cost recovery, but if cost recovery is not as high as the arbitrary price floor, then the price becomes the floor</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Trang Nguyen: Thanks, Jeff!</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Jeff Neuman: @Michael - is this really a decision that should be made by existing registries (that may be viewed as a competition concern)</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Greg Shatan: Maybe we turn every new gTLD application into a potential auction, i.e., applications are public and others can offer a higher price. Not suggesting this is a good idea, but it is an alternative to the current model.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Michael Flemming: When those same registries consider applying in subpro, yes it is a high concern.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><u><span style='font-size:11.0pt'>b. Clarity of Application Process (Slide 4)</span></u><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Feedback from ICANN58: Make application process more clear/predictable.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Question re: If AGB went with no changes would clarifying questions change? Applicants will be smarter about it; help them understand the nature of the questions -- so clarifying questions could be reduced. Also, be smarter in designing the question form.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>From the chat:</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Donna Austin, Neustar: @Trang, I think if we went forward with the current AGB, ICANN could also provide some kind of 'how to' guide based on the experience from 2012.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Trang Nguyen: @Donna, yes, absolutely.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Phil Buckingham: Surely the goal for Round 2 should be to minimise clarifying questions as much as possible . A huge number were re the Q50 question to which a solution will be found for Round 2.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><u><span style='font-size:11.0pt'>c. RSP Program (Slides 5 and 6)</span></u><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- At call on 11 April will discuss the proposal from Donna Austin.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>-- Helpful to have a discussion on the interpretation of the rules concerning testing -- implementation and policy issue.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>From the chat:</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Jeff Neuman: This subject will be a primary topic for the next WT 1 call in 2 weeks.</span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'>Donna Austin, Neustar: Christa, I think its an implementation issue. </span><o:p></o:p></p><p class=MsoNormal><span style='font-size:11.0pt'> </span><o:p></o:p></p></div></body></html>