Questions to and Answers from Applicant for .pro

ICANN Questions:

ICANN is in the process of reviewing Registry Pro's TLD Application. As outlined in the October 23, 2000 TLD Application Review Update which appears at http://www.icann.org/tlds/tld-review-update-23oct00.htm, ICANN may "gather the additional information [it] require[s] by posing specific questions to applicants in e-mail and requesting a written response."

Keeping in mind the goal to evaluate applications to operate or sponsor new TLDs in as open and transparent a manner as possible, both the questions posed by ICANN and the Applicant's responses will be publicly disclosed on the ICANN website.

Accordingly, ICANN requests your reponses to the following questions:

1. Identify and describe in detail your specific sources of funding to include your plan to cover the net deficits in years one and two of the pro forma financials.

2. Identify and describe in detail the the penetration assumptions in your application with respect to lawyers and accountants located in large firms.

3. State in detail your position as it relates to possible legal claims by certain applicants and/or non-applicant third parties based on alleged trademark, patent or other violations of purported rights in the TLD identified in your application.

4. If you receive a new TLD, state whether you will indemnify ICANN for claims arising from legal challenges regarding your right to operate the new TLD. If you will indemnify ICANN, identify and describe in detail the resources you propose to utilize for the indemnification.

5. Identify and describe in detail the your average and worst case transaction time for post to confirmation of acceptance.

6. Identify and describe in detail the service level to which you are willing to contractually commit for transaction time from post to confirmation of acceptance.

Registry Pro Responses:

1. RegistryPro intends to establish a robust, reliable and highly scalable registry, with an extensive international marketing plan, in order to meet the ICANN goals of world-class technical capability, stability, and true competition in the gTLD space. RegistryPro has offered to do this at no more than the charge of $6.00/name currently charged in the gTLDs.

To maintain the solvency of RegistryPro as an independent entity, we project that a $30 million investment is required in the first two years of operations (at 50% confidence level) (Reference pages 3-3, Appendix 2, Registry Operator's Proposal, original TLD Application). RegistryPro will be supported by its shareholders (register.com and Virtual Internet) in the manner detailed below. As a result we project that actual maximum cash flow funding requirements in the first 12 months of operations are as follows:

	                                               Year 1

	Capital expenditure                  		6.76*
	Net operating cash flow           		9.38 *
	Interest costs                           	0.33 *
	Taxation costs                         		0.38 *
	Total                                     	16.85*

*Reference - Pages 2-3, Appendix 2, Registry Operator's Proposal

Capital expenditure of $6.76 million is currently projected to be incurred in the first 3 months of operations. RegistryPro will review its options as to whether these assets should be purchased or leased if and when its application is successful.

The above estimates depend, of course, on the negotiations with ICANN regarding the technical specifications, marketing plans, registry fee, and other details, if we were to reach that stage.

If RegistryPro is awarded the bid, funds would be sourced from a combination of existing cash resources and third party funding. It is the intention of the RegistryPro partners, register.com and Virtual Internet plc, to be the primary source of funding and in the original application an initial commitment of $10 million has been estimated, subject to board approval. The partners, each, have healthy balances of cash, cash equivalents, short-term investments, and securities available for sale of $164.9 million (register.com's statement ended 30 September 2000) and cash and cash equivalents of $32.5 million (Virtual Internet's statement ended 31July 2000). To date in 2000, the partners' combined reported revenues have been $63 million and cash flows from operations have been $17.8 million.

As to the potential for third party funding, Virtual Internet and register.com are public companies with a proven track record of attracting dedicated investment. Positive endorsements of the application from potential investors, including our technology partner, Baltimore Technologies, before and since the submission indicate that a range of complimentary sources of funding exists. Please also refer to a letter from Legg Mason regarding their confidence in our ability to raise funds from outside sources. To the extent RegistryPro thinks it appropriate and necessary at the time of the bid award, it would reach out to the investment community.

2. RegistryPro has adopted a conservative approach to determining market size and penetration for .pro. The .pro TLD would be available to professional individuals, their associations, and other professional commercial and non-commercial entities. Yet, RegistryPro focused on individual rather than institutional registrations, and from our preliminary research concluded that market penetration will average 26% of the worldwide individual professionals. This would include those individuals presently employed by large legal and accountanting firms.

Due to the relatively small percentage of individuals employed by large firms as compared to the worldwide totals, RegistryPro did not believe it was prudent to include assumptions of higher market penetration by assuming bulk registrations by these large firms. According to the National Association for Law Placement, lawyers in large firms account for only 12% of all practitioners in the United States. On a worldwide basis, this is significantly diluted since law firms of 100 or more practitioners are an anomaly almost exclusively unique to the United States. Similarly, less than 7% of all accountants worldwide are employed by the Big 5 accountanting firms. Based on these statistics, bulk registrations of some or all of the large firms would not significantly impact our estimates of worldwide market penetration.

However, based on information RegistryPro has received from its marketing consultant (see STC letter attached), there is good reason to believe that these large firms could, with appropriate incentives, be early adaptors and market leaders. This factor leads us to believe that the large firms will lead to higher market penetration. Accordingly, if RegistryPro is awarded the TLD, we intend to conduct significant and in depth market research of key decision makers in large firms to determine the most effective way to foster bulk, firm-wide registrations and, as part of our marketing strategy, to offer the appropriate incentives through registrars to large, highly visible firms of lawyers and accountants to accomplish that goal. We do not believe that this would impact our financial assumption as laid out in the bid application and above, and in fact believe that the increased number of registrations would only bolster the cashflow of the entity.

In conclusion, we believe that the penetration of the .pro TLD is likely to be higher than the average 26% assumption used in RegistryPro's application.

3. RegistryPro believes that its bid does not violate the trademark, patent or other intellectual property rights of any third party or applicant. Moreover, prior to submitting its bid, RegistryPro had instructed Grant,Spencer,Caisley & Porteous, Trade Mark Attorneys in London, England to carry out a Worldwide Identical Search (WISS) on RegistryPro, which confirmed, subject to the standard limitations, that no relevant published marks existed.

4. If RegistryPro receives a new TLD, it is prepared to indemnify ICANN, its board, officers and employees for claims arising from legal challenges regarding RegistryPro's right to operate the new TLD. Such indeminifcation would be limited to claims based on the acts or ommissions of RegistryPro. RegistryPro has retained Weil Gotshal & Manges to represent it in connection with this bid, and expects that such firm would defend the entity against any such claim. As stated in our response to ICANN's questions dated November 1st, RegistryPro's shareholders are well capitalized with $164.9 million in cash, cash equivalents, short term investments, and securities available for sale (Register.com's statement ended 30 September 2000) and $32.5 million in cash and cash equivalents (Virtual Internet's statement ended 31 July 2000). Additionally as stated in that response, the partners' combined reported revenues to date in 2000 have been $63 million and cash flows from operations have been $17.8 million.

5. RegistryPro's systems were designed to ensure fast, reliable shared registry functions to the registrar community. Due to the thick nature of the registry, many transactions will be significantly more complicated than those used in the current .com gTLD. The addition of a new domain into the registry will be one of the most resource-intensive tasks. Nevertheless, RegistryPro's systems expects to complete 99.99% of all transactions within one second. The average completion time for new domain transactions is estimated to be 500 milliseconds. The average completion time for most other transactions should be faster than this.

6. RegistryPro is prepared to contractually commit to the service levels described in section D15.2.11 of the Registry Operator's proposal. Under such a service level agreement, the shared registry service would be considered up during any minute in which 99% of all transactions (including the addition of new names into the registry) are completed and confirmed within one second. RegistryPro will contractually commit to an SLA which guarantees that shared registry functions will be up for 99.99% of the time during any calendar month. This service level agreement addresses both the availability and the performance of the shared registry service. Due to the critical nature of this service to its registrars, RegistryPro considers periods of slow performance to be equivalent to downtime for SLA purposes.

Downtime occurring within planned outages will not count against service level commitments. Planned outages must meet all of the following criteria:

  • Registrars must be notified at least 72 hours prior to the outage.
  • Planned outages must be completed within a specific two-hour maintenance window. Such planned outages will occur at the same time and day of each month.
  • No more than 10 planned outages may occur during any calendar year.
The service level commitments described above assume that measurements are being made from the same network as the shared registry system's. RegistryPro will contract with a third party, pursuant to industry standards and ICANN guidance, to assess the performance of registry functions across the Internet.

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