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ICANN Registry Proposal

Registry Operator's Proposal - BUSINESS CAPABILITIES AND PLAN

D13.2.11. Expected costs associated with the operation of the proposed registry. Please break down the total estimated operational costs by the sources of the costs for each estimated demand level. Be sure to consider the TLD's share of ICANN's cost recovery needs. (See <http://www.icann.org/financials/budget-fy00-01-06jun00.htm#IIIB>.)

D13.2.11.1. 90% Confidence Scenario (worst case)

Operating Expenses for the Registry Operator at 90% Confidence (in $000's)  
   
    2001       2002       2003       2004    
  Quantity Amount Total   Quantity Amount Total   Quantity Amount Total   Quantity Amount Total  
Operating Costs and Expenses      
       
Cost of Good Sold      
Bandwidth fees   $60   $60   $60   $60  
Other Hosting Costs   300   309   318   328  
       
Cust Service/Tech Support    
Customer Support 4 $40 160   5 $44 220   5 $48 242   5 $53 266  
IT Department 4 75 300   5 83 413   5 91 454   5 100 499  
     
General and Administrative    
Senior Mgmt 1 150 150   1 165 165   1 182 182   1 200 200  
Liason to Sponsoring Organization 1 75 75   1 83 83   1 91 91   1 100 100  
Legal 1 200 200   1 220 220   1 242 242   1 266 266  
Accounting Labor 1 60 60   1 66 66   1 73 73   1 80 80  
Administrative Labor 2 40 80   2 44 88   2 48 97   2 53 106  
Rent (office space) 2,000 0.03 60   2,000 0.03 62   2,000 0.03 64   2,000 0.03 66  
Rent (data center) 500 0.10 50   500 0.10 52   500 0.11 53   500 0.11 55  
Equipment   50   52   53   55  
Insurance   160   165   170   175  
Other   200   200   200   200    
     
Depreciation   225   225   225   225  
     
Total Operating Cost and Expenses     $2,130       $2,378       $2,522       $2,680  
  • Cost of Goods

    Cost of Goods Sold includes $60,000 in annual bandwidth access fees. Our estimate for bandwidth access remains flat over the four year period. We assume that any decreases in price of bandwidth will be offset by any increases in need for bandwidth capacity.

    Other hosting costs include expenses related to connections, tape backup, storage, and security software based on our experience with existing customers.

  • Sales and Marketing

    It is assumed that sales and marketing expenses will be borne by the Sponsoring Organization. Please see the Sponsoring Organizationís proposal Section C12 for a discussion of sales and marketing costs.

  • General and Administrative

    Customer Support staff will increase over the four year period from four to five staff people. Although the customer service staff to new names registered ratio is high in the first year, we would like to ensure a high level of customer service which would include hiring and training customer service representatives before they may be fully utilized. Additionally, excess customer support representatives would be necessary to accommodate rapid and dramatic increases in demand. Customer Support staff requirements will increase to five as soon as 2002. We expect to rely on our own existing employment policies and procedures to keep employee related costs in check. Further, we will use our own existing staff, if necessary, as additional resources when needed. Customer support staff salaries and benefits are estimated at $40,000. Salary adjustments are assumed at 10% annually.

    IT Department staff increases match the customer support staff increases. IT staff will increase as the number of registered names increases. IT staff salaries and benefits are budgeted at an annual rate of $75,000.

    Senior management's average salary and benefits are estimated to be $150,000 plus options. Salary adjustments will increase 10% annually.

    One staff person will act as liaison and oversee the sponsoring organization relationship. Annual salary and benefits are estimated at $75,000. Salary adjustments will increase 10% annually.

    Legal costs involve establishing the organization, creating marketing contracts, monitoring regulatory compliance and other tasks. Legal costs are budgeted to be $200,000. Annual increases were calculated at 10%.

    Accounting labor includes one FTE to handle general bookkeeping and management reporting. Annual accounting labor is budgeted at $60,000. Salary adjustments are set at 10% annually.

    Administrative labor will increase as demand for domain names increases. Administrative labor is budgeted at $40,000. Salary adjustments are set at 10%.

    Office space rent is assumed to be $30/sq foot for 2,000 square feet in Bellevue/Redmond. Inflation adjustment is based on a 3% annual increase.

    Data Center rent is assumed to be $100/sq foot for 500 square feet. Inflation adjustment is based on a 3% annual increase.

    General office equipment includes an estimate for office PCs, furniture, faxes, and copiers. It is assumed that we will lease this equipment. An inflation adjustment is based on a 3% annual increase.

    Insurance cost is based on comparable insurance levels of currently operating registries for $10 million of general liability coverage. Inflation adjustment is based on a 3% annual increase.

    Data escrow cost will be passed through to the Sponsoring Organization. Please see the Sponsoring Organization's Proposal section C12 for a discussion of anticipated Sponsoring Organization costs.

D13.2.11.2. 50% Confidence Scenario (base case)

Operating Expenses for the Registry Operator at 50% Confidence (in $000's)  
   
    2001       2002       2003       2004    
  Quantity Amount Total   Quantity Amount Total   Quantity Amount Total   Quantity Amount Total  
Operating Costs and Expenses      
       
Cost of Good Sold      
Bandwidth fees   $60   $60   $60   $60  
Other Hosting Costs   300   309   318   328  
       
Cust Service/Tech Support    
Customer Support 4 $40 160   5 $44 220   6 $48 290   7 $53 373  
IT Department 4 75 300   5 83 413   6 91 545   7 100 699  
     
General and Administrative    
Senior Mgmt 1 150 150   1 165 165   1 182 182   1 200 200  
Liason to Sponsoring Organization 1 75 75   1 83 83   1 91 91   1 100 100  
Legal 1 200 200   1 220 220   1 242 242   1 266 266  
Accounting Labor 1 60 60   1 66 66   1 73 73   1 80 80  
Administrative Labor 2 40 80   3 44 132   3 48 145   3 53 160  
Rent (office space) 2,000 0.03 60   2,000 0.03 62   2,000 0.03 64   2,000 0.03 66  
Rent (data center) 500 0.10 50   500 0.10 52   500 0.11 53   500 0.11 55  
Equipment   50   52   53   55  
Insurance   160   165   170   175  
Other   200   200   200   200    
     
Depreciation   225   225   225   225  
     
Total Operating Cost and Expenses     $2,130       $2,422       $2,710       $3,039  

In the 50% Confidence scenario, we do not anticipate that costs will increase from the 90% Confidence scenario for items other than customer service, technical support and administrative staff for two primary reasons. First, as we have stated, because excess capacity is relatively inexpensive compared with retooling an operating system, we plan to implement an infrastructure that will accommodate all three demand scenarios without the need for significant upgrade over the 2001-2004 period. We plan to rely on our technical support personnel to make normal and ongoing modifications to the system that may be necessary. Second, costs for management, legal, accounting among others are not anticipated to vary appreciably with the number of users.

The need for Customer Service, Technical Support and administrative staff, however, are expected to increase as demand for domain names increases.

D13.2.11.3. 10% Confidence Scenario (best case)

Operating Expenses for the Registry Operator at 10% Confidence (in $000's)  
   
    2001       2002       2003       2004    
  Quantity Amount Total   Quantity Amount Total   Quantity Amount Total   Quantity Amount Total  
Operating Costs and Expenses      
       
Cost of Good Sold      
Bandwidth fees   $60   $60   $60   $60  
Other Hosting Costs   300   309   318   328  
       
Cust Service/Tech Support    
Customer Support 4 $40 160   5 $44 220   7 $48 339   9 $53 479  
IT Department 4 75 300   5 83 413   7 91 635   9 100 898  
     
General and Administrative    
Senior Mgmt 1 150 150   1 165 165   1 182 182   1 200 200  
Liason to Sponsoring Organization 1 75 75   1 83 83   1 91 91   1 100 100  
Legal 1 200 200   1 220 220   1 242 242   1 266 266  
Accounting Labor 1 60 60   1 66 66   1 73 73   1 80 80  
Administrative Labor 2 40 80   3 44 132   3 48 145   3 53 160  
Rent (office space) 2,000 0.03 60   2,000 0.03 62   2,000 0.03 64   2,000 0.03 66  
Rent (data center) 500 0.10 50   500 0.10 52   500 0.11 53   500 0.11 55  
Equipment   50   52   53   55  
Insurance   160   165   170   175  
Other   200   200   200   200    
     
Depreciation   225   225   225   225  
     
Total Operating Cost and Expenses     $2,130       $2,422       $2,849       $3,345  

As with the 50% scenario, we do not anticipate that costs will significantly increase from the 90% Confidence scenario for items other than customer service, technical support, and administrative staff. The need for Customer Service, Technical Support and administrative staff, however, are expected to increase as demand for domain names increases.

 
 

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