Do you agree this is a critical time for many of the original 1930 applications to ICANN to operate a gTLD Registry.

How has The “Fadi Effect” contributed to those Applicants’ Key Dates, Decisions, Dilemmas and their Critical Path to success or a costly Delay.

The first step along the path (see below) for each applicant is the need to respond to its Clarifying Questions (CQs), particularly the Financials ones.

As of today a small number of global brand applicants have already been withdrawn, reducing the number of applications to 1905. Were their applications’ unprepared? I believe that this trend will continue at a pace now, and especially given that applicants can a get a 80% refund on their $185000 application fee if they withdraw before the Initial Evaluation(IE) results are due.

The 23 March is one critical key date by which some (see below) applicants receive their IE results, which is looming up fast.

My feedback from many applicants through our previous involvement in the financial evaluation process, (developing financial models, advising and offering guidance and financial commentaries on the key financial questions (45- 50)) is that many applicants (and their consultants) are in overload. Are you in agreement with this comment and that the situation is likely to deteriorate.

Key Background Information and the “Fadi Effect”:

But firstly let us briefly look at the background and how applicants arrived at this critical point. The recent arrival of the very impressive Fadi Chehade, as CEO of ICANN, has clearly made a huge impact. I’ll call it the “Fadi Effect”.

Back in June 2012 in London I was one of the lucky people in attendance, with the world wide press when ICANN announced that there were 1930 applications to ICANN to operate a TLD Registry. Each one an Internet start up, with no prior knowledge of operating a gTLD. The monopoly age of .com was dead, perhaps. This ushered in DNS 2 and a huge expansion, and a huge investment by each applicant. $185000 was required—just to apply. ICANN, a not for profit, was in receipt of $357,050,000, increasing overnight its balance sheet by four times. New players came into the DNS space, headed by Google, Amazon, Apple, Microsoft, and everyone else under the guise of competition and consumer choice. The Game Theory and Internet landgrab had began. Will total user confusion result when those lucky applicants (with early Draw and critical competitive advantage) are expected to go operationally live in Quarter4 2013?

ICANN staff, through its multistakeholder—bottom up—consensus driven policy development process had put together an Applicant Guidebook. It took six years to write, ending up on Version 12 with 352 pages. Each applicant for a string had to put together financial, technical and operational business models using worst case and most likely business case scenarios, with fifty questions to be answered, to be evaluated and points scored.

Despite those six years, twelve versions, the Applicant Guidebook has more holes in it than a typical swiss cheese. US lawyers are going to have a field day. ICANN beware. Whether the whole gTLD evaluation, processes, contractual agreements with ICANN, implementation, delegation to IANA’s root zone should go ahead is a very mute point. The recent appointment of the very impressive Fadi Chehade as CEO and the “Fadi Effect” appears to have put the whole program back on track. He put his neck on the line committing ICANN to meet agreed target dates. So far so good.

Applicants’ Key Strategic Dates

So what are these key dates that all applicants, their consultants need to have at their fingertips to better enabled them to make key decisions on short and long term strategies. What are the Priorities. Priority 1 has to be the resubmission of Clarifying Questions (CQs), particularly the Financial related ones to achieve the required pass score at Initial Evaluation. (See Q&As below)

Applicants’ Key Strategic Decisions

Following the LA Priority Draw in December 2012 and the announcement on the 3 March 2013 of the completed list of Contention Sets (now 234 strings affecting 738 applications) each applicant can now analyse its critical path towards its gTLD Registry operational readiness and a successful new gTLD Registry start up.

Applicants have so very many key questions that need answering quickly. Key decisions need to be made on what to do next.

One has to assume that each application had a strategy on applying. Many it seems—did not.

Clearly each applicant has different key issues, timelines, and action points and business critical, sensitive decisions to make.

Applicant’s Key Strategic Dilemmas:

Applicants (and perhaps their business consultants) might identify with some of the following from the endless business scenarios along their critical path.

1. The applicant’s business model is totally underfunded. This was not factored in (ICANN’s models did not require a huge balloon payment for the auction costs of their contention set). Of course they had no idea when they applied, whether they would be in a contention set, let alone how many. Can additional funding be found? How much would be needed? What is the “economic worth” of operating and “leasing” that particular TLD string, currently in a contention set. Part 2 will be issued shortly on contention set valuations.

2. The applicant has already been hit by a Governmental Advisory Committee (GAC) early warning and further GAC advice is due at ICANN Beijing meeting. Should the worst be feared, in which case should the applicant withdraw now. How much refund would be offered or should the applicant fight back.

3. The applicant is in contention with Google and/or Amazon. What are the implications for their application with debate raging over closed-vertically integrated-generic-“industry word”-business models that the likes of Google and Amazon are using in their applications.

4.The applicant has been hit by the change to Q50b and now will not be able to answer the questions sufficiently well to enable them to get the maximum three points and so pass the Initial Evaluation. One and two points will not be enough.

The applicant can elect to go to Extended Evaluation but that will delay their application at least seven months. The problem can be solved. ICANN will not help or engage with any applicant. If the applicant does not have a solution, we do.

5. The applicant deadline on PICs( Public Interest Commitments) has been missed. Many would argue that ICANN have forced them into this position, by failing to give them sufficient time to respond. As a result should only one be submitted, albeit belatedly. They have hundreds. Does each one have to be different. Maybe a change request should be submitted which would change their whole business model. Does that mean that the whole application needs reevaluating, causing inevitable delays.

6. The TMCH (Trade Mark Clearing House) will be open for business on 26 March. What does a corporation do next. What is the cost going to be to a global brand that didn’t apply. What is the corporation’s defensive strategy. What is the cost to a global brand corporation that did apply.

7. Loads of CQs have just arrived in the applicants’ TAS inbox. The questions is what to do next. Response times are short and critical. This is what we will focus on in Part 1 today (see below).

Key Applicant Questions and Answers

The PART 1 focus will be on: Clarifying Questions (CQs) - Financials and Initial Evaluation Results Day

Clarifying Questions (CQs) - Financials, 14 January 2013 – 29 May 2013

Currently 642 applicants have been issued with CQs- Financial as 6 march for Week 8, Prioritization Draw (PD) No 700-799. This is an alarming and surprisingly high number. Here are some typical Q&As.

Why are they being issued? When did they start? Who, When, Which applicants will receive them? What is the turnaround time? Will ICANN/evaluators provide feedback and comeback? Has ICANN changed questions post AG?

Q: What are they?
A: They are issued by six panels. Financial, Technical, Geographic Names, String Similarity, Registry Services, DNS Stability.

Q: Which applicants and How many will receive them?
A: ICANN’ evaluators have indicated that 90% of all applicants will receive CQs. They have not indicated which applicants will receive them and will not do so.

Q: What percentage of applicants have currently failed the Financial Capability Evaluation Test?
A: 61% of applicants have currently failed to achieve a pass score on the CQ—Financial Q45-Q50 , Templates 1&2.

Q: Which of Q22-Q50 (Financial & Technical) questions were the worst answered?
A: Q48 costs, Q49 contingencies and Q50 Letter of Credit were amongst the worst answers. Q25- Technical

Q: Has ICANN issued Advisories? Which Questions? Do they help? Are they proforma answers?
A: Q25, 30, 48, 50 back in Nov 12. Note critically Q50B changed Dec 12. Not really! No.

Q: What is the current status on CQ- Financials?
A: Pre CQ- Financial Evaluation 1269; Pending CQ Response 517; Post CQ Evaluation 125. Total 1911 Source: ICANN Webinar 6 March

Q: When, To Whom are CQs- Financials being issued?
A: CQs - Issued from Financial & Technical Panels according to LA Draw No at 100 applications per week over 20 weeks.

Started Week 1 w/b 14 January (Request our Priority, Contention Set Report (PCS) re CQ issue date).

Q: How long have applicants got to respond on all their CQs, from all panels?
A: This was increased from maximum time of two to four weeks with deadline midnight UTC for Priority No 600 and below, 01.00 for Priority Number 600 and up. Deadlines are still incredibly tight, especially for multiple applicants.

Q: Can applicants contact the evaluation panels directly? Can they issue a CQ response early and request some feedback to resubmit again (within 4 week deadline)?
A: Applicant will not be allowed to have contact with any panel. No. No.

Q: Why were CQs- Financial & Technical being issued?
A: It is being increasingly evident that:

• Brand applicants, previously going to adopt a defensive strategy and not apply, did indeed apply, applying extremely late, ill prepared, didn’t and/or refused to answers all questions.
• Conflict between AG and Supplementaries, particularly on Q50 (b).
• Applicant given the one off opportunity to increase their points score on CQs to overall be given a pass score at Initial Evaluation.
• Applicants, especially portfolio applicants, issuing standardised answers, when each application should standalone and be financed separately.
• ICANN financial Templates 1& 2 flawed.

Q: What is applicant appropriate responses to CQs (Source: ICANN Webinar 6 March)?

A: They are:

• Applicants must answer all CQs and provide requested support documentation, or risk the application failing IE.
• Applicants address all issues mentioned in the CQs.
• Applicants not to submit a change request when responding to CQs.
• Applicant CQs responses must be submitted in TAS by the due date (UTC).

Q: Who will get their Initial Evaluation Results, 23 march 2013? How many points do they require?
A: For the lucky early Draw applicants the 23 March 2013 will be a critical date. Huge early mover/adopter advantage. This will the date when “some” applicants (see our PCS analysis) receive their Initial Evaluation results. They require 22 points from Q22—Q44 to pass technical evaluation, 8 points from Q45-Q50 to pass the Financial Capability Evaluation Test.

Q: What are the applicant’s suggested CQ Financial strategy?

A:

• Assume that your application(s) will get many CQs (up to 6 CQ questions on the financials).
• Get our PCS report to work out which week your application(s) will receive your CQ- Financials.
• Be proactive. Work out schedules, including operational live dates.
• Prioritise, using PCS,all your applications by Draw No, Most Desired by Contention Set, by Default / Worst Case Contention Sets.
• Assume first 400 Draw No will get IE results 23 March. Assume 401-1934 get IE results 31 August.
• Comply with ICANN’s Q&As above.
• Prepare a cost benefit analysis between staying with the application or withdrawing.
• Complete a change request form with a revised financial model, based on latest assumptions, further costing information and get the application reevaluated.