[Gnso-sc-budget] Next Meeting(s) - ICANN's Reserve Fund Replinishment

Sat Apr 7 14:16:05 UTC 2018

Ayden

while the Council comments, which is what we are speaking about here, maybe be silent, I do think it is useful- for informational purposes - to know what individual constituency's views are.

I think that was what Jimson was providing for our consideration.

________________________________
From: Gnso-sc-budget <gnso-sc-budget-bounces at icann.org> on behalf of Ayden F¨¦rdeline <icann at ferdeline.com>
Sent: Saturday, April 7, 2018 7:38 AM
To: Jimson Olufuye
Cc: gnso-sc-budget at icann.org; Berry Cobb \(berry at virtualroot.com\)
Subject: Re: [Gnso-sc-budget] Next Meeting(s) - ICANN's Reserve Fund Replinishment

Thanks for sharing these thoughts, Jimson.

I was reviewing our previous comment on the Reserve Fund which we submitted last December (you can find it here<https://nam01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fmm.icann.org%2Fpipermail%2Fcomments-reserve-fund-12oct17%2Fattachments%2F20171202%2Fdfea0eae%2FICANNReserveFundTarget-GNSOComments20171201_clean-0001.pdf&data=02%7C01%7C%7C46d59086f70b4f6d1ceb08d59c7c24cd%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C636586979357858669&sdata=6BLnTQYD3afpiiEF82z%2FouSUtMuZhXa5HYqgXDGL8JA%3D&reserved=0>), and we did not take a position at the GNSO-level as to what the Reserve Fund's target level should be or what the source of funds should be. So in the interest of consistency, I would suggest that we continue to be silent on these points in this upcoming comment. Does this sound reasonable?

Best wishes,

Ayden

©\©\©\©\©\©\©\ Original Message ©\©\©\©\©\©\©\
On 7 April 2018 1:23 PM, Jimson Olufuye <jolufuye at kontemporary.net> wrote:

 Hi all,

Thanks Erika for your lead and insight.

 Considering the relevant portion of the Litigation Resolution reproduced below:

Should an ICANN auction occur, the auction proceeds are first used to offset the administrative costs of the auction. (ER920, Guidebook Section 4.3 n.1.) The remainder of the auction proceeds are held in a segregated account until the Internet community develops, and the ICANN Board authorizes, a plan to use the funds for charitable purposes consistent with ICANN¡¯s mission, core values, and status as a not-for-profit entity. Accordingly, ICANN does not retain remaining auction funds for its own operational use.

I think the IANA Stewardship Transition (IST) did not constitute ICANN day-to-day operation and the activity was a public benefit process which falls into the class of a Charity activity that is non-profit oriented and ICANN is a non-profit oriented organisation. In my opinion, appropriating some segment of the Auction proceeds to defray this one-time activity does not constitute a violation of the resolution.

Furthermore, I do favour a shorter time-frame of 3 years for the reserve replenishment strategy. This is because of increasing risks associated with global market viz technology and innovation trends. While the target can be reached within 3 years, extra savings could further boost the reserve beyond the threshold of 12 months of Operating Funds.

Therefore, here are my thoughts in the event I miss the Monday call:

Firstly, a re-allocation of auction proceeds of US$36 million which was the sum used to implement the IANA Stewardship Transition (IST). The rationale for the use of Auction proceed is that the IST was a public benefit process which falls into the class of a Charity activity that is non-profit oriented and ICANN is a non-profit oriented organisation. Indeed, this allocation would provide assurance for ICANN to continue to bestow an important public benefit service to the global community.

Secondly, in the three (3)  budget years FY2019 through FY2021, ICANN can contribute US$5 million from the operating budget to the reserve. That is a total of US$15million, leaving US$17 million of the short-fall.

Finally, a re-allocation of new gTLD applications funds of US$17 million to complete the sum of US$68m for the reserve fund to be fully replenished and may be exceeded afterwards.

Thanks &

Cheers,

Jimson

--------- Original Message ---------
Subject: Re: [Gnso-sc-budget] Next Meeting(s) - ICANN's Reserve Fund Replinishment
From: "Erika Mann" <erika at erikamann.com>
Date: 4/4/18 12:03 pm
To: "Ayden_F¨¦rdeline" <icann at ferdeline.com>, "Berry Cobb (berry at virtualroot.com)" <berry at virtualroot.com>
Cc: "gnso-sc-budget at icann.org" <gnso-sc-budget at icann.org>

Hi Ayden, hi team -

Here are few thoughts from my end. I copied the relevant text from the ICANN Reserve doct and then added my comment below.

Kind regards,
Erika

B - Agreed Target Level After taking into account public comments, the ICANN Board approved, during its recent meeting in Los Angeles on 4 Feb 2018, a resolution that recommended changes to the ICANN Investment Policy to include (a) an updated rationale for the Reserve Fund and (b) a confirmation that the target level of the Reserve Fund will be set at a minimum of 12 months of Operating Expenses (See resolution https://features.icann.org/confirmation-reserve-fundtarget-level<https://nam01.safelinks.protection.outlook.com/?url=https%3A%2F%2Ffeatures.icann.org%2Fconfirmation-reserve-fundtarget-level&data=02%7C01%7C%7C46d59086f70b4f6d1ceb08d59c7c24cd%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C636586979357858669&sdata=yAUwNQ%2B5zma4OfJJjKbLXJwXwHj5bpw07WqaGoZu%2Boo%3D&reserved=0>).

  *   I wonder whether a target level of 12 months of Operating Expenses is really needed for this relatively small organization. The future risk factors will be much lower than in the recent past in most areas and, those areas that carry high risk, are unlikely to be able to be financed from the Operating Budget anyhow, like for example a root zone update are other kind of security related issues.
     *   new gTLD program will have to fight with less problematic issues, procedures are more established and I would expect that there will be less interest in gTLDs;
     *   IANA transition passed

C - Second and Third Consultation Papers The Board also determined that, once the rationale and target level have been updated, further work would be required to define a strategy to replenish the Reserve Fund from its current level to its minimum target level of 12 months of Operating Expenses, which is the subject of this second consultation paper on the Reserve Fund.

  *   I would recommend to delete: "minimum target level of 12 months of Operating Expenses". We shouldn't classify a target level of 12 month as a 'minimum level';
  *   Not certain if we want to make a recommendation concerning the following wording "further work would be required to define a strategy to replenish the Reserve Fund" but, if yes, then I recommend to base such a strategy on future risk and harm factors.

E - Sources of funding

Auction Proceeds: ICANN currently has US$ 104 million collected from auctions that were held as the mechanism of last resort to resolve string contention in the new gTLD program (including investment returns). This amount excludes US$ 132 million relating to the auction of the .WEB string net of auction fees (https://www.icann.org/resources/pages/ruby-glen-v-icann-appeal-2017-01-23-en<https://nam01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.icann.org%2Fresources%2Fpages%2Fruby-glen-v-icann-appeal-2017-01-23-en&data=02%7C01%7C%7C46d59086f70b4f6d1ceb08d59c7c24cd%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C636586979357858669&sdata=7m4o%2Fw29bID52Erg6WTOkjW7a6eXGbMGx%2BwCc6Em6kw%3D&reserved=0>).

  *   In principle I find this idea okay but I have major legal concerns with it. In the Ruby Glen LLC case (.web) ICANN explicitly argued not to use the Auction Proceed money for operating purposes.  Look in particular at page 16/17 (document, see attachment). If the GNSO is going to support this point, then we need to be certain that the IANA transition can be declared post ante as a non-operational budget portion of the reserve fund.
  *   Second, a much needed funding for special major projects (for example a root zone update) could come from the Auction Proceed future fund without storing this money first in the reserve fund.

Leftover funds at the end of the new gTLD program: the most recent financial projections for the new gTLD program indicate that an amount of US$ 80 million remains designated for the purpose of covering for ¡°hard-to-predict costs¡±, including legal risks. Should the program¡¯s risks lead ICANN to incur lower expenses than the current designated amount, then funds could be left over at the end of the program.

  *   I believe that an allocation of the so called potential 'left over' to the reserve fund might be a problematic idea. I can't see contracting parties agreeing to this.

Additional Funds from Contracted Parties: either as a one-time fee entirely allocated to the Reserve Fund or as a fee increase allowing to generate on-going operational surpluses which would then be allocated to the Reserve Fund.

  *   I recommend to not accept this idea

H - Replenishment strategy
 ¡ì A contribution from the Auction Proceeds should be considered. The amount under consideration would be US$ 36 million, corresponding to the total amount of withdrawals from the Reserve Fund to finance the IANA Stewardship transition. ¡ì The remaining shortfall of US$ 17 million ($68m less $15m and less $36m above) could possibly come from one of the following sources, in no specific order of preference: - Contribution from leftover funds from the new gTLD program, if any. - Additional contribution from ICANN Org. - Additional contribution from the Auction Proceeds.

  *   See comments made above

Kind regards,
Erika

On Wed, Mar 21, 2018 at 3:01 PM, Erika Mann <erika at erikamann.com<mailto:erika at erikamann.com>> wrote:

Thank you Berry!
I will send few thoughts to this list later in the evening today (ET time).

Cheers,
Erika

Sent from my iPhone

On Mar 21, 2018, at 8:19 AM, Michele Neylon - Blacknight <michele at blacknight.com<mailto:michele at blacknight.com>> wrote:

Thanks Berry

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From: Gnso-sc-budget <gnso-sc-budget-bounces at icann.org<mailto:gnso-sc-budget-bounces at icann.org>> on behalf of Berry Cobb <mail at berrycobb.com<mailto:mail at berrycobb.com>>
Date: Wednesday 21 March 2018 at 12:16
To: "gnso-sc-budget at icann.org<mailto:gnso-sc-budget at icann.org>" <gnso-sc-budget at icann.org<mailto:gnso-sc-budget at icann.org>>
Subject: [Gnso-sc-budget] Next Meeting(s) - ICANN's Reserve Fund Replinishment

Hi All,

Welcome back from San Juan for those that travelled.  As noted by Ayden regarding the open public comment on the Replenishment of ICANN¡¯s Reserve Fund, it seemed as though there is support to provide the Council with a draft of comments for their consideration and submission.

The public comment closes on 25 April (https://www.icann.org/public-comments/reserve-fund-replenishment-2018-03-06-en<https://nam01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.icann.org%2Fpublic-comments%2Freserve-fund-replenishment-2018-03-06-en&data=02%7C01%7C%7C46d59086f70b4f6d1ceb08d59c7c24cd%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C636586979357858669&sdata=HjqT9oIJRqIutO96atV5D3tnPUONBHkmLMfnzvyPaW0%3D&reserved=0> ) and the next GNSO Council meeting is scheduled for 26 April.  Thus, the Council¡¯s consideration will have to occur via the email list.

Here¡¯s a link to the comment submitted by the Council regarding the Reserve Fund Target Level:  https://mm.icann.org/pipermail/comments-reserve-fund-12oct17/2017q4/000013.html<https://nam01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fmm.icann.org%2Fpipermail%2Fcomments-reserve-fund-12oct17%2F2017q4%2F000013.html&data=02%7C01%7C%7C46d59086f70b4f6d1ceb08d59c7c24cd%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C636586979357858669&sdata=GDAW%2F4nyO1Obk%2FfMfSKglJbWVGYwLvYgok5bHg5jUF0%3D&reserved=0>

In preparation for discussions on this topic, you will see shortly two SCBO meetings invitations for April 2nd and 9th at 14:00UTC, each for 60 minutes.

Thank you.

B

Berry A. Cobb

720.839.5735

mail at berrycobb.com<mailto:mail at berrycobb.com>

@berrycobb

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