The
RrSG considers that the proposed ICANN Reserve Funding proposal is well thought
out and researched. The use of comparisons to other not-for-profits was
appropriate. Estimates of what is needed in reserve are by their nature a
series of deductions based on foreseen contingencies. Consequently
deliberations about the optimal size of a reserve fund must reflect a number of
considerations. What are the reasonable
risks? How long must the organization be able to run without revenues? How independent
should the ICANN structure be from its sources of revenue? What is lavish and
what is a prudent? The Registrars recognize that opinions will differ on
reasonable grounds, and as a group they have clear interests to advance and
concerns to express.
Registrars’ concerns
The
Registrars are concerned with two questions: the size of the reserves, and
therefore the duration of the time that ICANN should be expected to run without
further revenues, and the sources of the money intended as reserves: what
sources should be used, in what order, and what sources should not be used.
Duration of reserves
There
was no support whatever for a duration of reserves longer than 12 months. Some
members considered that even 12 months of funding at current expenditure levels
was excessive for the intended purpose of the reserves. Those members stated a
preference that the reserves be held strictly for the purpose of winding down
ICANN in the event that that becomes necessary. A majority of RrSG members
considered that a twelve month reserve suitable for the purpose of running the
organization was reasonable.
Sources of the reserves
It
was the strong feeling of the Registrars that ICANN was living on a rich diet,
that administration was top-heavy, and this in turn generated a wariness
towards allowing one-time uses of reserve funds to make up for budget deficits.
It was recognized that benefits once extended, and habits once ingrained, would
render it difficult to roll back or restrain.
Of
supreme importance, Registrars also state their opposition to any proposed
increase (temporary or permanent) in Registrar per-domain fees to replenish the
reserve fund. Replenishing and
maintaining the fund must be incorporated in to ICANN’s budget, and shortfalls
should not be borne by registrants, but by cutting expenses elsewhere in the
organization. In this regard it was proposed that, for greater transparency on
the expense side, Registrars request that ICANN-Finance identify Board expenses
directly related to Board governance activities as distinct from those of
representing ICANN in various venues.
Second,
registrars expressed concern that ICANN should not use the gTLD auction proceeds
for purposes of replenishing the reserves. The group considers that such an act
would run counter to the stated purpose of the gTLD auction proceeds and could
set a dangerous precedent for future ICANN funding. If once registrars allowed
such a practice, it is believed that ICANN would tend to make a habit of
over-spending its budget, drawing down the reserves to cover the shortfall,
then replenishing the reserves from the auction fund, thereby turning auction
proceeds into an additional source of funding to cover ICANN over-expenditure.
According
to the New gTLD Auction Proceeds
Discussion Paper, Updated[1]the
complete set of uses of the auction proceeds have not finally be agreed upon,
but no one has contemplated auction proceeds should be used for establishing
reserves. It cited the New gTLD Applicant Guidebook as follows:
New gTLD Applicant Guidebook –Section 4.3.
Third, the Registrars considered that, independently
of the preceding considerations, other reserves should be used in priority to
auction funds, namely the funds set aside as litigation reserves. Accordingly,
the registrars consider that a reserve policy must address the issue of the
priority of use of various reserve funds: in what order they should be drawn
down, and they consider that unused litigation reserves should be used before
registrars are called upon to top up general reserves.