Sponsoring Organization's Proposal - SPONSORING ORGANIZATION STRUCTURE

C12. Fiscal Information. Initial budget, expenses, existing capital, sources of revenue, accounting, audit, annual report and annual statement.

The business model proposed by Group One Registry, Inc. calls for the Sponsoring Organization to perform all marketing and administrative functions for the TLD, with the Registry Operator providing technical service functions. Therefore, the Sponsoring Organization's Proposal includes extensive market and financial analysis that might be found in the Registry Operator's Proposal in other applications.

C12.1. Market Analysis

Currently there are approximately 23 million domain names existing worldwide in all of the top-level domains combined. This number is expected to increase to 215 million names globally by the end of 2005 (Source: dotcom.com). North America, Western Europe and developed Asia will remain the main Internet markets in the next seven years. The rate of growth of the Internet in any country is related to whether or not a user has Internet access at all – not whether he or she has a personal subscription. There are more Internet users than subscribers since multiple users may access the same subscription. In order to gain an accurate representation of the potential global Internet market, the review of several recent studies on Internet and technology usage and adoption is necessary.

The Nielsen/NetRatings service reports that 35 million U.S. households or 97.1 million people currently have Internet access, an increase of 43% compared with the 24.5 million households with Internet access in the first quarter of 1998. These 35 million households represent approximately 34% of the households in the U.S., which is an estimated 36% of the total U.S. population. In the U.S., recent surveys indicate that male/female users of the Internet average 51% - 48% respectively, but will begin to even out over the next few quarters (Source: Cyber Dialog). Overall 64.2% of users are men between 25 and 54 years old, female users being 35 to 54 years.

While recent reports estimate the U.S. currently leads the Internet market, Europe will overtake North America by 2005 as the region with the most residential Internet users. North American companies will continue to be the heaviest users of the Internet, however they will focus more heavily on building multilingual businesses. Internet literacy will be greatest in the countries with the highest number of Internet users, and these users will be ready targets for Internet value-added services – one of which is wireless Internet access. (Source: Ovum)

According to a recent Forrester Research study, 50% of all online sales will be outside the U.S. by 2004. By 2003, Forrester believes that a set of globalization software and services will merge as Web-based localization ascends and legacy translation agencies diminish. Internet access and technology integration will become a must.

When the wired and wireless data market grows from over 170 million users worldwide in 2000, to the estimated 1.5 billion in 2004, an equal number of handsets, personal digital assistants, and Internet appliances will need to be equipped with Internet capabilities (Source: Cahners In-Stat Group).

C12.1.1. Market Definition and Size

Group One Registry’s target market will include cellular phones, smart handheld devices, Net TVs, screenphones, Internet gaming devices, web terminals and other appliances. While we also expect penetration into the PC market, the figures and forecasts presented in this proposal do not include PC penetration for conservative purposes.

• Digital Cellular Phones

  The total internet ready cellular phone market will grow to 1.25 billion installed units by 2004 (Source: IDC and Cahners In-Stat Group).

  European cellular phone consumers have already been using Wireless Application Protocol (WAP) for over a year. With the increase in mobile phones, faxes, pagers and Internet connections, the UK has had to find creative – short term – solutions to the demand for new phone numbers (often a single user having multiple numbers).

  Forecasters predict the phenomenon in Europe will spread, as the amount of international traffic flowing among regions increases. This is a key concern for telcos. The U.S. to Europe route continues to dominate because of the large growth in residential and corporate users. The U.S. to Latin America route will grow in importance because of the economic significance of the U.S. and the continuing deployment of new infrastructure. Telecommunications and Internet issues will merge together as global consumers blend and wireless technology allows information to be shared any time, anywhere.

  While the U.S. and Europe will continue to lead Internet and wireless use, Asian Internet usage will grow significantly, in particular in the more developed countries. Japan will remain the most dominant Internet force in the region, both for business and consumer markets. Developing countries in Asia will only account for a small fraction of the overall Internet usage due to poor network infrastructure and lack of access to necessary technology. The Asian markets will have a positive effect on the Internet market, as more users shift their telecom needs to cheaper Internet services for data transfer and value-added services like IP telephony, IP fax and electronic data exchange (Source: Ovum).

  Telecommunications, manufacturing (computer, electrical, industrial, etc), and services will see fast advancements in their ebusinesses. For example, a September 2000 Industry Standard article reported that General Motors and Ford Motor Company are moving full speed ahead to dominate online business-to-business and consumer sales in the new Internet Economy. GM, with its OnStar system, and Ford are competing to develop “telematics” Web-based communications businesses. Ford announced Wingcast, a joint venture with wireless-technology provider Qualcomm that brings Web-based communications into Ford vehicles. Other industries are also making their products Internet-ready. October 2000 articles in Business Week commend Whirlpool for its unique use of the Internet in home refrigerators and washing machines.
  
  

• Internet Smart Handheld Devices

  Internet smart handheld devices include personal companions, PC companions, smart phones, and vertical application devices that provide direct Internet access such as the Palm Vx, Palm VII, Compaq Aero series, Nokia Communicator series, and HP Jornada series. Internet smart handheld devices will experience significant growth, reaching an installed base of over 67 million units by 2004 (Source: IDC).
  
  

• Net TVs

  Net TVs are wired devices that will initially be proprietary and standalone systems that will eventually have the Net TV functionality directly incorporated into the TV. These TV-centric devices that provide Internet access include set-tops, integrated TVs, enhanced traditional cable boxes, and direct satellite devices. Game consoles are excluded. Products include Worldgate, eNavigator, Open TV, Web TV, and AOL TV. Possible obstacles that exist in the growth Net TV market are regulatory changes, capital availability and content owner interest. In spite of the obstacles, the Net TV market will grow to an expected installed base of 81.3 million in 2004 (Source: IDC).
  
  

• Internet Screenphones

  Screenphones are higher end cell phones than smart phones. Screenphones include a LCD screen for a higher quality data viewing and web browsing. Products include iPhone, Power Touch Series, and WebTouch. With the emergence and predominance of web terminals, the screen phone market will not be as significant as web terminals, but will still have an impact on the Internet appliance market. The installed base of screen phones is expected to increase to 10.6 million units in 2004 (Source: IDC).
  
  

• Internet Gaming Appliances

  Internet gaming devices, whether wired or wireless, allow the owners to play Internet games with other owners. Products include Dreamcast and PlayStation 2. A numeric domain that would attached directly to the internet gaming device could make playing an internet game possible at any time, anywhere, with anyone else with a similar device. The installed base for internet gaming devices will increase from 27 million in 2001 to 86 million in 2004. Not all internet device owners, however, will take advantage of the devices’ internet capabilities.
  
  

• Web Terminals

  Web terminals are household devices that are used to browse the web. Web terminals can exist in tethered or tablet (cordless) forms and products include i-opener, Web Companions, iBrow, and Qubit. Web terminals used in conjunction with numeric domain names allow information to be shared more quickly and easily. Web terminals are expected to increase to an installed base of 12.2 million units in 2004 (Source: IDC).
  
  

• Other

  Consumer devices that provide Internet access but are not otherwise listed above are included in this category. Products include the AutoPC or other emerging devices. The installed base of these appliances is expected to approach 2 million units by 2004 (Source: IDC).
  
  

C12.1.2 Market Demand

The total number of Internet ready appliances represents the potential size of the domain market. Each appliance could have its own domain name. We realize that while every appliance may be Internet ready, customers may not be ready for those appliances. We have therefore assumed that the penetration into the internet ready appliance market will be low, initially, and then increase with demand and as customers are educated through Group One’s efforts as well the marketing efforts of the appliance manufacturers and resellers.

Group One Registry anticipates that nearly 100% of its domain names will be active. This represents a more “efficient” use of the Internet given that only 66% of .com, .org, .edu registered domain names currently have active websites (Source: dotcom.com). Group One Registry expects this greater percentage of active websites because numeric domain names will minimize cybersquatting and potential intellectual property conflicts.

Total Worldwide Shipment of Selected New Information Appliances (in 000's of units)

	2001	2002	2003	2004
Digital Mobile Phones	650,000	748,075	860,949	990,854
NetTVs	18,334	19,336	18,736	17,808
Internet Screenphones	1,779	2,213	3,013	3,616
Internet Gaming Devices	16,005	25,410	25,603	22,638
Web Terminals	694	1,609	3,374	6,547
Internet Smart Handheld Devices	6,619	12,592	21,599	33,176
Other	257	439	589	690
Total	693,688	809,674	933,863	1,075,329
% of Total Worldwide Installed Base	77%	73%	72%	71%

Source: IDC, In-Stat, CMP Media Inc.

As the graphic shows, over 693.7 million of the 905.6 million (see Demand Chart above) Internet ready appliances in use are expected to be brand new products in 2001. This shipment figure is expected to increase to 1.08 billion new products in 2004. This high “churn” rate ensures that the products in use will be compatible and capable of utilizing advancing technologies of which having an exclusive domain name will be a part. It is likely that as customers become aware of the potential utility of numeric domain names, information appliance manufacturers will either begin providing numeric domain names with the new device or encourage demand by educating the end user on related value added products such as numeric domain names.

The market demand for numeric domain names can be estimated by the size of the current and projected installed base for information appliances. According to dotcom.com, the projected number of domain names registered to a single Internet user will increase to four names per user by the beginning of 2003.

Although the potential size of the market is significant as has been shown, we have conservatively projected that the demand will be .3% in 2001 and increase to 2.6% by 2004 of the total installed base of Internet appliances. For purposes of our figures and projections, we have applied this same penetration rate across all types of appliances. In all likelihood, the actual penetration rate between types of Internet information appliances will vary, but we believe our estimate of the average penetration rate to be conservative on the whole.

The largest constraint on the demand for numeric domain names will be educating the potential customer base about the utility of individual domain names. The current use of numeric domain names is beginning to be utilized. Our projected increase in demand is driven by Group One Registry’s own projected marketing efforts as well as the marketing efforts of appliance manufacturers and resellers. While Group One Registry’s marketing will seek to educate customers in general, appliance manufacturers and resellers will seek to expand their own markets through advertised increases in the functionality and utility of their products by the addition of a domain name. Additionally, customers themselves will begin to demand Internet service from their Internet appliances.

C12.1.3. Market Accessibility

The market demand will come from people or entities that want to name their Internet connected devices. The challenge is to simplify the usage of the technology for customers. We think simplifying the usage of domain names for devices provides a huge opportunity. The way we access this market is by finding complementary service providers such as PDA manufactures, cell phone manufacturers, DSL providers, and other last-mile service providers, MSOs (multi-service operators), wireless operators, and other network appliance manufactures. Then we sell them on the value: a named device creates demand for their products and services, because almost anyone can use it, and it is not complicated to use. Although we sell to them, they do not purchase the names directly from us, they will purchase the names via the registrar channel.

Although our TLD is restricted (see section E17 Criteria for Registration in The TLD), anyone can access the market we are servicing by visiting one of the many ICANN accredited registrars that offers names in our TLD and purchase one for a small fee.

C12.2 Estimated Demand for Registry Services in the New TLD

While the number of information appliances increases, it is anticipated that not all devices will demand a domain name. As new technologies, devices and marketing efforts make customers aware of domain name potential and uses, demand will increase. Group One Registry does not expect to capture total demand, even in the early stages of the new TLD development. It is anticipated that Group One Registry’s market share will decrease from 2001 to 2004 as the size of the market increases and more competitors target the numeric domain name market.

C12.2.1. 90% Confidence Level (worst case)

We have included financial projections for three scenarios. The 90% Confidence level scenario is nine times as likely to be met than not. In other words, we are 90% confident that our actual demand will be better than the level projected in the 90% Confidence scenario. The 90% Confidence scenario is the worst case scenario presented.

Our 90% Confidence scenario shows that we expect 494,000 subscribers in 2001, increasing to roughly 5.6 million in 2004. As the graphic shows, this volume of subscribers represents an increase from only .05% to .37% of the worldwide installed base of Internet ready appliances, excluding PCs and email servers.

While the total number of subscribers increases, this represents a decrease in Group One Registry’s market share from 18.17% to 14.27% of the market demand that we expect to result from increased competition in the numeric domain name space.

C12.2.2. 50% Confidence Level (base case)

The 50% Confidence level scenario is equally likely to be exceeded as met. It is our base case scenario.

Our 50% Confidence scenario shows that we expect 951,000 subscribers in 2001, increasing to roughly 10 million in 2004. As the graphic shows, this volume of subscribers represents an increase from .11% to .66% of the worldwide installed base of Internet ready appliances.

While the total number of subscribers increases, this represents a decrease in Group One Registry’s market share from 35% to 25.52% of the market demand that we expect to result from increased competition in the numeric domain name space.

C12.2.3. 10% Confidence Level (best case)

The 10% Confidence level scenario is nine times as likely to not be met as to be exceeded. It is our best case scenario.

Our 10% Confidence scenario shows that we expect 1.36 million subscribers in 2001, increasing to roughly 15 million in 2004. As the graphic shows, this volume of subscribers represents an increase from roughly .15% to .99% of the worldwide installed base of Internet ready appliances. As stated earlier, this increased penetration into the market will be driven by the number of new shipments of devices as appliance manufacturers stimulate demand through customer education of the utility of domain names or by including a numeric domain name with the purchase of a new device.

While the total number of subscribers increases, this represents a decrease in Group One Registry’s market share from 50% to 38.23% of the market demand that we expect to result from increased competition in the numeric domain name space. We believe our estimated market share of 50% is justified based on the utility and inherent advantage of numeric domain names in this defined market, and since ours will be the only initial marketing campaign striving to develop brand awareness and share in this market.

C12.2.4 Potential Group One Market Share of the PC Market

If we were to experience the same penetration into the PC market as we are estimating to experience in our defined market, we would have demand ranging from 3 million to 8 million more units in 2004 from our worst to best case. This would translate to $15 million to $40 million of revenue at a $5 average price per domain name. Again, we are not including these revenues in our financial projections for conservative purposes.

C12.3. Marketing Plan

C12.3.1. Vision and Opportunity

Group One Registry stands on the edge of a unique, far-reaching opportunity in the young history of the Internet age. ICANN’s commitment to grant new TLDs comes as consumers are increasingly accessing the Internet through an expanding array of devices, including existing devices, from wireless phones to desktop PCs, and new devices, from integrated TVs to gaming consoles. Combined, these products enable consumers to go online any time, anywhere.

Internet-smart handheld devices are increasing in use in Europe and Asia, with the United States rapidly catching up. Initiatives such as Wireless Application Protocol (WAP) and Bluetooth are moving the marketplace toward more common standards. With growing Internet use around the globe, manufacturers are advancing technologies to ensure products meet new demands. Group One Registry’s proposed TLD – .one – takes accessing the Internet to the next level by optimizing real-time, two-way communication. In effect, the numeric domain gives any Internet-smart device its own, permanent identity that can be accessed as part of a single, vast peer-to-peer communication network.

Group One Registry’s marketing plan directly targets this expanding Internet community – focusing on the TLD’s unique ability to transcend language and existing technology barriers. The marketing plan capitalizes first on the demand, just beginning to grow, among users of Internet-smart handheld devices for an easier, permanent method of having communication online, regardless of device. Telecommunications companies and device manufacturers, which will be able to provide distinct numeric domains to their corporate and individual customers under the TLD, are poised to take full advantage of the numeric TLD to expand current Internet communication across the globe. In fact, Group One Registry already has received letters of support for this concept from industry leaders around the world -- including NTT (Japan), British Telecom (UK), European Telecommunications Standards Institute (EU), Car Phone Warehouse (UK), Malaysian Resource Control Board (MRCB Berhard), Arab Radio and Television (Saudi Arabia), and Telia (Sweden) -- and has indications of support from elsewhere in the industry.

The marketing program will additionally concentrate on ICANN-accredited registrars, which will be a powerful channel to market the TLD to companies, manufacturers and end-users worldwide. Finally, Group One Registry’s marketing will address individual end-users themselves, who increasingly access the Internet through multiple devices from multiple locations. In doing so, it will educate consumers about the abilities of Group One Registry’s TLD to enable direct Internet communication – any time, anywhere, on any device.

C12.3.2. The Group One TLD: Branding One Number

The Group One Registry TLD itself forms the heart of the registry’s brand identity and communications. That TLD — .one — symbolizes and speaks to the individual, whether a device or person, communicating on the Internet at any time, from anywhere, on any device. It provides clear differentiation from .com, .org, .gov and .net. It also supports a global identity. The widespread use of English on the Internet, and the well-known meaning of “one” make the TLD clearly identifiable in any culture.

The use of .one also provides an easy path to enable Internet users to use numerics in second- and third-level domain names. Numeric names provide the means to move beyond the use of English toward the more universal language of numbers for users who desire to do so. These numbers could include the use of individual numbers (for example, phone or ID numbers), with third-level domain names distinguishing the different devices of an individual user. Finally, .one provides an easy means of moving to the truly global TLD of .1, utilizing a number that is perhaps the world’s single most widely understood mark of any kind, regardless of language.

C12.3.3. Customer Segments: Focused First on Internet-Smart Devices

Group One Registry’s marketing program flows directly from the company’s focus on its target customer segments. In each segment, the marketing program seeks to generate two key behaviors: (1) acceptance of numerical domains, and (2) purchase of blocks of numerical domains to be included in Internet-smart devices. Both behaviors are very achievable through Group One Registry’s marketing program.

In addition, the marketing program will leverage increased Internet demand and the rise of Internet-smart devices to create a push for individuals to seek domain names for their devices, or for themselves. Many end-users, including wireless phone users, already are comfortable with the use of numerals in their Internet access keyboards (i.e., their cell phones) and are likely to be early adopters of numerals as their domain names under the .one TLD.

The target customer segments are:

• Telecommunications companies. Group One Registry anticipates that international telcos will buy large blocks of domain names within the .one TLD, providing them as a value-added feature or promotional incentive to their end-user customers. The registry expects to receive its largest initial sales from this customer segment, since many emerging Internet markets are focusing more on access through wireless phones than PCs. Therefore, the registry will enable telcos to offer one-address access to voice and data across devices.
  
  
• Manufacturers of Internet smart-devices. Under Group One Registry’s approach, it will become desirable for manufacturers to deliver their products (cellular telephones, gaming consoles, and PDAs, for example) with assigned second-level domains under .one, providing a value-added service to purchasers. As stated previously, the registry has identified several target manufacturers of smart-consumer goods as well as emerging manufacturers (home appliances and automobile) who would benefit by adding a numeric TLD to products. With this TLD, the product is not just Web-capable; it can now be communicated with directly via the Internet.
  
  
• Registrars. The .one TLD will be sold exclusively by registrars. Numeric domains will extend their global reach and penetration. In addition, this new TLD provides registrars an additional means of generating revenue in a rapidly expanding marketplace by expanding the Internet space beyond its current confines of TLDs for groups (.com – companies, .org – organizations, etc). Registrars will have a new TLD directly targeting individuals, telecos and manufacturers. Group One Registry’s marketing program will help build awareness that helps registrars increase sales quickly throughout the Internet world.
  
  
• Wireless (and indirectly PC) end users. End users are an important target audience because of their ability to pull telcos and Internet-smart device manufacturers to .one. A global marketing campaign to reach individual users, in particular the early adopters who will be the first ambassadors, will generate awareness, and ultimately sales, of the TLD, while creating greater incentive for telcos and device manufacturers to support it.
  
  

Group One Registry recognizes that it must build and manage relationships with a variety of external and internal stakeholders beyond the customer segments. These relationships will, over time, help to foster understanding and adoption of the numeric TLD. Therefore, the registry will also develop initial and ongoing communications with board members and employees, investors, suppliers and vendors, its community, world leaders, Internet leaders, the news media and industry analysts.

C12.3.4. Marketing Objectives: Sales, Branding, Awareness

The marketing objectives are straightforward and clearly focused:

• To acquire a minimum of 951,000 users for the .one TLD in the first 12 months of operation. Based on Group One Registry’s support from major telcos in Europe and Asia, along with the company’s market research and assessments, we are confident this is a realistic figure (see 50% confidence scenario). We envision a strong ramp-up to 10 million users by 2004, as .one awareness grows and real-time, wireless Internet communication continues to expand rapidly.
  
  
• To create a compelling, positive brand identity of the .one TLD and Group One Registry among telcos, device manufacturers and registrars. These are the most important customers, especially in the early stages. The reasons lie in Group One’s support from telcos and their ability to buy large blocks of domain names under the .one TLD. In addition, registrars are important segment a direct sales channel that will help deliver value to the customer and end-user.
  
  
• To create positive brand awareness of the .one TLD among individuals. Awareness of Group One Registry itself is less important, just as awareness of Network Solutions is less important to consumers than the .com TLD. What is most important to Group One Registry’s success is end users’ recognition of the value and benefits of the .one TLD.
  
  

C12.3.5. Key Competitive Advantages: The Company and the TLD

Group One Registry’s focus on domain names for individuals or devices positions it directly ahead of one of the Internet’s strongest growth trends – direct communication, anytime, anywhere, using a multitude of devices.

Group One Registry has the expertise and resources to successfully build a global registry. Its founders have experience running registrars, creating and operating Internet infrastructure, and marketing those services to pertinent customer segments.

Group One Registry has the global and industry partnerships and support to achieve brand recognition and market share.

In .one, Group One Registry has a TLD that can become the domain system for everyone’s telephone, wireless and “smart” devices, ranging from PDAs to air conditioners. One domain to reach any or all of an end user’s computers and devices makes tremendous sense. So does a distinct TLD for numerical domains.

This registry will extend the Internet’s reach beyond the current, most prevalent user groups. This directly matches one of ICANN’s goals in granting new TLDs that promote additional innovation and Internet development. By providing a viable infrastructure for peer-to-peer communication, Group One Registry has opened the door a bit further for innovators of the Internet’s next wave of technology.

C12.3.6. Sales: Two Distinct Paths

Group One Registry plans two distinct sales paths for .one domains:

• Bulk through registrars — Direct sales by ICANN-certified registrars, which will be able to market the .one domain registration alongside their current offerings of .com, .org and .net, as well as any other public domains that become available. As explained under “Target Customer Segments,” Group One Registry anticipates that .one will provide registrars a significant opportunity to cultivate large-block business with the wireless and wired telecommunications industries as well as device manufacturers. Conversely, the registry could also sell to future organizations that become ICANN-certified registrars, like:
  
  a) Telecommunications service providers (long distance as well as last-mile exchanges);
  
  b) Wireless service providers;
  
  c) Manufacturers (OEMs) of personal computers, wireless communications equipment, Internet-equipped or “smart” devices (e.g., wireless handsets, personal digital assistants);
  
  d) Manufacturers (OEMs) of emerging “smart” consumer goods that will provide additional functions by being Internet-enabled (e.g.: home appliances, motor vehicles).
  
  
  
• Single/small-quantity sales through registrars. They can also, of course, sell .one domains to individual applicants, as under the current system.
  
  

C12.3.7. Sales Strategies: Enhancement Factors

Group One Registry plans these steps to ensure a fair, competitive sales process for domain registrations. These additional sales factors enhance the Key Competitive Advantages:

• Widespread availability, rapid implementation: Because there has been much talk about the “pent up demand” for domain registrations under new TLDs, our availability through established registrars will be good news to customers who want alternative domain registrations immediately. Again, these customers could be individual end-users or companies purchasing large blocks of numeric domains to include in their devices.
  
  
• Phase-in of name lengths: The available lengths of domain names will begin at a minimum of 20 characters and gradually step down to a minimum of 9 characters over a period of several months. This will aid an orderly introduction by giving those who wish to register an opportunity to plan the timing of their registration based on the length of the numeric string(s) they wish to register. It will also help ensure a technically stable introduction by spreading the demand for registrations over time.
  
  
• Level playing field: The pricing strategy and coordination of sales efforts will ensure that registrars are on an equal footing with each other in cultivating sales.
  
  
• Registry responsible for educating the market: Initially, the Group One Registry will take responsibility for educating the market and promoting the new TLD. Besides conducting the initial marketing promotion (advertising, direct marketing, and public relations), the registry will provide its bulk customers and registrars with Group One Registry’s brand identity and marketing materials. This explains why the registry’s marketing budget is obviously front-loaded; we expect that beginning in Year Two, there will be opportunities to launch co-op promotional allowances to enhance the amount of promotion that telcos and manufacturers can do to reinforce the perceived value of .one.
  
  

C12.3.8. Promotional Plan: An Integrated, Strategic Program

To ensure that Group One Registry’s innovation proves successful in the market, the registry will strategically build awareness and understanding of its product and brand. Group One Registry plans to quickly generate sales by using an integrated marketing approach, driving key messages through direct marketing, public relations, advertising and promotional strategies targeting key audiences.

The purpose is to expose prospective customers and end users to more detailed and credible information than they would get from an advertising campaign alone. Since the majority of the sales are expected to be bulk/wholesale, the marketing program will contribute heavily to building end-user demand—to pull through the bulk sales.

Group One Registry will focus on building awareness of its brand to drive sales. This includes communicating directly with target customer segments regarding product benefits and key competitive advantages, and building relationships with other stakeholders.

The following promotional program includes these key strategies: building a buzz, establishing the brand, creating awareness and generating sales. These strategies solidify Group One Registry as a viable competitive registry, able to attract and serve a significant portion of the near-term domain name growth.

C12.3.8.1. Building the Buzz

Group One Registry will prioritize its initial marketing efforts to: stand out from the crowd, educate about an easily misunderstood service, and stretch promotional resources as far as possible. The New Economy marketplace demands more from new businesses and brands. To stand out from the crowd, Group One Registry must create a “buzz” in the marketplace for its product and services. The “buzz” starts the awareness building process. By building a buzz with consumers, Group One Registry will effectively create demand and “push” companies to include this new TLD in their wireless or online platforms.

• Analyst Relations -- Build Third-Party Credibility.

  Before launching the TLD in the marketplace, we will hold one-on-one meetings with identified key industry analysts. These meetings enable the registry to explain the value and benefits of the .one TLD and Group One Registry. Additionally, the meetings will enable the analysts to provide stronger support in media stories for both the company and the TLD.

• Media Relations – The Launch and Ongoing Media.

  When the time comes, an essential part of this marketing program will be to highly publicize ICANN’s acceptance of the new TLD, in effect the company’s launch. The registry will initiate its media activities through existing relationships with reporters at top-tier, mainstream publications, and major regional and business publications in the U.S., Europe and Asia. Attention in on/offline industry publications will be sought to gain a full spectrum of publicity. Research into recent media coverage suggests potentially high interest in the online and print media for information about this revolutionary TLD and its benefits worldwide.

  To spark and build the buzz among key audiences, Group One Registry will leverage its third-party support from leading telcos, industry analysts and strategic alliances to promote its innovative new product in the media. The registry will focus on increasing awareness of its products among telcos, Internet-smart device manufacturers, and other consumer goods manufacturers by continuing its media relations efforts. We expect that ongoing news from the company will interest target industry publications and industry analysts. As the company continues to grow, key announcements (e.g., registration milestones, staff growth, corporate giving programs, and new value-added services) will be promoted to appropriate journalists.

• Trade Shows and Speaking Engagements.

  In addition to media placement, Group One Registry will participate as guest presenter and exhibitor in telecommunications and consumer goods industry events to demonstrate the opportunities of its “one number” TLD. These events will provide hands-on opportunities for decision makers and R&D specialists at targeted companies to experience the benefits of Group One Registry’s TLD. Organizations such as Mobile Data Initiative Next Generation (MDI-ng) offer opportunities to network with target customers at industry events. Trade shows such as the Wireless E-Commerce Summit, Mobile.Net and DemoMobile offer similar opportunities to showcase the value of .one domains to Group One Registry’s target customers. The company will create trade show materials and speeches, but will also find unique, out-of-the-box methods for bringing its brand to life and to the forefront of the event.

• Emerging E-Mail Campaign – Using the Web to Generate Sales.

  Group One Registry will leverage consumer advocacy through an e-mail campaign designed to drive awareness and sales. Early adopter consumers (such as those at computer manufacturers) often will share information on the latest technology with friends or colleagues. Harnessing this phenomenon, supporters of Group One Registry will e-mail to their friends and colleagues an initial message that includes a short white paper on .one and its benefits. E-mail to colleagues will be encouraged thus starting a chain of direct, targeted marketing through an alternative channel. In effect, the registry will build a buzz among consumers, by enabling them to spread the word themselves – thereby individually marketing a numeric TLD designed for individuals.

• Marketing Public Relations – Leverage the Demand for Coffee.

  One of the initial awareness strategies of Group One Registry will include a street-level outreach program designed to creatively bring .one offline and into unfiltered spaces. In markets saturated with high-tech users (such as San Francisco, London and Hong Kong to name a few), the new TLD, a tag line and Web address will be printed on popular convenience store coffee cups. During the morning commute, the messages on the cups will prompt consumers to look up the URL upon arriving to work. The cups will also spark discussion among office mates, adding to the reach of this promotion. Creative offline marketing campaigns have proven abilities to link consumers back to online information. In addition, such campaigns create news themselves – providing another means for awareness building in the media.

C12.3.8.2. Establishing the Brand and Creating Awareness

Group One Registry will continue to build brand equity by establishing what it – as a company, employees and products – stands for.

• Public Relations Overview – One Person, One World, One Number.

  Group One Registry will initially use public relations to begin building awareness and educating its target customers and consumers about the benefits of .one. It will use its key messages to create a cohesive slogan, for example “One Person – One World – One Number.” This slogan will drive many tactics, including:

  a) a marketing communications program – designed to bring the faces of this technology to the consumer;

  b) a cause-related marketing program – leveraging the mission of Group One Registry to give back to the Internet community by helping to diminish the digital divide; and,

  c) ongoing media relations strategies – providing frequent updates on key corporate milestones to target media, as outlined in the previous section.

  These core public relations strategies will be integrated with online and offline advertising.

• Marketing Communications – Linking Consumers to the Art of Innovation.

  Using the global theme, a direct mail campaign, targeting industry leaders and end-users, will use two different photo series: the first will be art-quality photos of average people around the world; the second, funky, fun photos of high-tech innovators and their products that will change communication by using Group One Registry’s TLD. These photos will add appeal to testimonials, while putting a global face and feeling on Group One Registry’s brand. In addition, because the images will be unique and high quality art themselves, recipients may want to post them in their offices or share them with colleagues – using a one-to-one buzz to help spread the word about Group One Registry’s TLD.

• Online Branding.

  Group One Registry will link all offline marketing efforts to its Web site, integrating messages from traditional marketing efforts to those on the Internet. The slogan and design standards will be linked across all marketing materials, to solidify the brand visually at every point of contact. Current and potential customers will be able to use the Web site for information gathering, online registration and record updates, and to find others with .one domains. Group One Registry will also link its Web site to strategic partners’ sites, in order to fully leverage the brand equity of partners, while sharing the growing brand equity in .one. Modeled after the “Intel Inside” marketing campaign, Group One Registry will work with strategic partners and customers to build value into the statement “One Number from Group One Registry.”

• Print and Online Advertising.

  A print and online advertising campaign will begin to build name recognition for the TLD and Group One Registry. A potential campaign slogan of “One Person – One World – One Number” will help link all messages into a powerful, memorable line. This slogan will also help to link the registry’s mission back to the core directives of ICANN. As described earlier in this section, this slogan (and the meaning behind it) will be communicated in everything related to Group One Registry, including collateral materials and Web sites.

  Advertising will focus primarily on targeted print and online publications, as well as banner advertising on appropriate sites. Advertising will reach millions of potential customers and consumers. Coupled with media relations activities, consumers will not only see an ad in their favorite industry publication, they will also read about .one in feature articles.

• Cause-Related Marketing.

  Group One Registry will create a unique method for giving back to its community. By linking with its strategic partners in the telco industry who are expanding their wireless-Internet businesses in South America and Asia, Group One Registry will donate a set number of domain-name registrations to help these developing countries shrink the digital divide. Within the first year, Group One Registry expects to help expand Internet access in developing countries significantly. In the future, the company will donate part of its profits to continue shrinking the digital divide. It will use partnerships with its major corporate customers to expand efforts and to spread the word about this important social and business issue. Within the U.S., Group One Registry will donate its services to organizations already working to lend technological expertise span the digital divide for nonprofits and low-income consumers.

• Corporate Identity.

  As in many established companies, Group One Registry’s brand will be communicated in everything from its logo and company collateral materials to its advertising campaign, to its hiring practices, to its corporate giving programs. As the company grows, it will carefully manage its brand image, encouraging internal ownership of the brand among employees and the Board of Directors.

C12.3.9. Generating Sales

Group One Registry’s marketing efforts will not only create awareness of its TLD and services, it will also generate sales for the company and its customers (including registrars and telcos). The company will work with those in the sales channel to sell the benefits of .one to consumers.

• Joint Promotions – Leveraging Relationships with Customers.

  Joint promotions and special offers will incent consumers to buy. The company will provide customers’ sales forces with collateral materials to help them sell .one domains. In addition, informational Web sites for the sales groups will enable them stay up to date on sales data, special promotions and marketing efforts. Targeted joint direct mail campaigns will drive leads to registrars and bulk customers – with mailing lists coming from the customers in order to foster fair competition.

• Direct Selling – Target End-User Database.

  Because of its aggressive brand building and awareness campaigns, Group One Registry expects to build its own comprehensive database of consumers. This database will be used to encourage sales in general. In its communications with end users, the registry will endeavor to promote all registrars equally. This would apply, for example, in any lists of “where to buy” sources. This database will include early adopters, such as high-tech employees, high-tech consultants and home-business owners, industry leaders and spokespeople. The database will also track the numbers of contacts with each consumer – either through tradeshows, direct mailings or other means.

C12.3.10. Marketing Budget (in $000s)*

	2001	2002	2003	2004
Public Relations includes media relations, marketing communications, cause marketing, etc.)	3,600	2,400	3,600	4,800
Advertising	2,400	1,600	2,400	3,200
Total	6,000	4,000	6,000	8,000
* (Based on 50% confidence scenarios)

C12.3.11. Marketing Timeline

Q4 2000	Q1 2001		Q2	Q3	Q4
ICANN reviews applications, determines  finalists, negotiates terms, announces TLD award(s). Group One Registry media relations focuses on inclusion of “.one” application/ concept in news coverage of the TLD expansion process.	Ad/PR and other promotional messages/ materials are developed and audience tested.	Advertising and public relations campaign builds awareness and understanding of outreach. On 45-day cycles, advertising and public relations initiatives are measured and evaluated, for continuous improvement.
		Distinct media, messages and timing to reach registrars, telecom industry and device manufacturers, to cultivate their adoption.
		Distinct media, messages and timing to build awareness and educate end-users/consumers about the value of dot-one domains.

C12.4 Expected Revenue Associated with the Proposed Registry

Group One Registry will offer individual domain name registrations at $6 per name. Volume discounts will be available. We anticipate demand for volume purchases of numeric domain names from customers wishing to register sequential blocks of numbered domain names. Examples of customers desiring sequential blocks of numbers include the individual customer who desires sequential names for each of his information appliances, to the telecom corporation that may desire to purchase a block of sequential names corresponding to telephone numbers. For purposes of our revenue model and pro-forma financials, Group One Registry’s average price will be $5.

Group One Registry will pay the Registry Operator $0.50 per registered domain name subject to a minimum monthly payment of approximately $178,000. The minimum monthly payment has been set in this model to cover the minimum registry operator operating costs. This minimum monthly payment will be increased on an annual basis for cost inflation.

C12.4.1. 90% Confidence Scenario (worst case)

The total revenue per year for the registry is calculated by multiplying Group One Registry’s market share of the information appliance installed base by the $5 average price per registered domain name described in Sections D13.2.2 and D13.2.3. We use the installed base of information appliances in our calculation because the domain name fee will be renewable annually.

These total revenues will be collected at the Sponsoring Organization level. The Sponsoring Organization will then pay the Registry Operator $0.50 per registered domain name subject to a minimum monthly payment of approximately $ 178,000. The minimum monthly payment has been set in this model to cover the minimum registry operator operating costs. This minimum monthly payment will be increased on an annual basis for cost inflation. In the 90% Confidence level scenario, revenues increase from $ 2.1 million in 2001 to $ 3.3 million in 2004 for the Registry Operator, and from $300,000 to $24.7 million in 2004 for the Sponsoring Organization. See Section C12 in the Sponsoring Organization’s proposal for the pro-forma revenues and expenses of the Sponsoring Organization.

Group One Registry will establish a fund from positive net income generated by the registry for the general betterment of the internet and to help improve the Internet’s infrastructure and public outreach. The formula currently contemplated and modeled calls for a ranging percentage of cumulative net income to be contributed to the fund at the amount of $0 for cumulative net income less than $5 million up to 35% once cumulative net income reaches $100 million. See Section C12 in the Sponsoring Organization’s proposal for projected funding amounts through 2004.

Revenue (in $000's) at 90% Confidence

	2001	2002	2003	2004
Digital Mobile Phones	$2,234	$7,691	$13,083	$23,193
NetTVs	110	451	843	1,508
Internet Screenphones	14	52	100	197
Internet Gaming Devices	74	411	897	1,591
Web Terminals	3	20	71	227
Internet Smart Handheld Devices	32	179	485	1,250
Other	1	6	16	37
Total	$2,468	$8,810	$15,495	$28,002
Registry Operator Portion	$2,130	$2,422	$2,849	$3,345
Sponsor Portion	$338	$6,389	$12,647	$24,657

C12.4.2. 50% Confidence Scenario (base case)

The total revenue per year for the 50% Confidence scenario is calculated as in the 90% Confidence scenario as projected demand multiplied by an average subscription price of $5. In the 50% Confidence level scenario, the revenues increase from $ 2.1 million in 2001 to $ 5 million in 2004 for the Registry Operator. See Section C12 in the Sponsoring Organization’s proposal for the pro-forma revenues and expenses of the Sponsoring Organization.

Revenue (in $000's) at 50% Confidence

	2001	2002	2003	2004
Digital Mobile Phones	$4,305	$13,750	$23,389	$41,462
NetTVs	211	807	1,507	2,696
Internet Screenphones	27	92	179	352
Internet Gaming Devices	143	734	1,604	2,844
Web Terminals	5	36	126	405
Internet Smart Handheld Devices	61	320	868	2,235
Other	2	11	28	66
Total	$4,754	$15,750	$27,701	$50,060
Registry Operator Portion	$2,130	$2,422	$2,849	$5,006
Sponsor Portion	$2,624	$13,328	$24,852	$45,054

C12.4.3. 10% Confidence Scenario (best case)

Again, the total revenue per year for the 10% Confidence scenario is calculated as in the 90% Confidence scenario as projected demand multiplied by an average subscription price of $5. In the 10% Confidence level scenario, the revenues increase from $2.1 million to $7.5 million for the Registry Operator. See Section C12 in the Sponsoring Organization’s proposal for the pro-forma revenues and expenses of the Sponsoring Organization.

Revenue (in $000's) at 10% Confidence

	2001	2002	2003	2004
Digital Mobile Phones	$6,150	$19,957	$34,490	$62,119
NetTVs	302	1,171	2,223	4,040
Internet Screenphones	39	134	264	528
Internet Gaming Devices	204	1,066	2,365	4,260
Web Terminals	7	53	186	607
Internet Smart Handheld Devices	88	464	1,280	3,348
Other	2	16	42	98
Total	$6,792	$22,860	$40,849	$75,000
Registry Operator Portion	$2,130	$2,422	$4,085	$7,500
Sponsor Portion	$4,662	$20,438	$36,764	$67,500

C.12.5. Expenses

This flowchart graphically depicts the flow of funds both into and out of the Sponsoring Organization and the Registry Operator. Summarized, the Sponsoring Organization will earn its revenues from the registrars as those registrars register domain names. These revenues, in addition to the Sponsoring Organization's commitment of $12 million in initial funding, will fund minimum payments to the Registry Operator, the sales and marketing plan, ICANN's cost recovery and a fund for Internet development.

The following is a list of the assumptions made for the sponsoring organization’s expenses.

C.12.5.1. 90% Confidence Level (worst case)

• Cost of Goods Sold

  The fee to ICANN is reflected in the ICANN Cost Recovery line item and is calculated as $.125/name registered.

  The minimum payment to the Registry Operator is estimated to be $ 178,000 per month. This amount is adjusted annually for inflation.

• Sales and Marketing

  Sales and Marketing is forecasted at $6,000 in 2001, $4,000 in 2002, $2,000 for 2003 and 2004 based on Hill & Knowlton estimates. It is assumed that Group One Registry will have the burden of marketing the new TLD initially until demand and competition between the registrars reaches such a point that the registrars will market themselves. While this budget includes costs of advertising and promotions, it is assumed that the Sponsoring Organization’s senior management will be the “sales force” with primary responsibility of negotiating the sales of large blocks of domain names with interested parties. Please see Section D13.2.4 of the Registry Operator’s proposal for a discussion of the marketing plan.

• General and Administrative

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

  One Registry Operator manager is needed to oversee the registry operator relationship for the Sponsoring Organization. Annual salary adjustments are set at 10%, and salaries are initially budgeted at $75,000 per year.

  Legal costs involve establishing the organization, creating marketing contracts, monitoring regulatory compliance and other. Annual increases were calculated at 10%, and initially legal costs are budgeted for $200,000 a year.

  Registry Policy Board meeting expense is based on eleven members’ transportation, compensation and lodging expenses from geographically disparate locations to meet four times a year. Inflation adjustment is based on a 3% annual increase.

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

  The administrative labor line item includes salaries for general administrative staff. Salary adjustments are set at 10%, and the initial salary is budgeted at $40,000.

  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.

  General office equipment is accounted for on the equipment line item. This includes PCs, furniture, faxes, and copiers. It is assumed that Group One Registry will lease this equipment. Inflation adjustment is based on a 3% annual increase.

  Insurance is based on comparable insurance levels of currently operating registries. Inflation adjustment is based on a 3% annual increase.

See attached document

C.12.5.2. 50% Confidence Level (base case)

Cost of Goods Sold varies from the 90% Confidence scenario as the number of registrations increase.

Sales and marketing charges are also projected to increase over the 90% Confidence scenario as additional funds are available to invest in customer awareness, penetration and the maintenance of market share.

Costs for general and administrative expenses are not anticipated to vary appreciably with the number of users. The need for administrative staff, however, is expected to increase as demand for domain names increases.

See attached document

C.12.5.3. 10% Confidence Level (best case)

Cost of Goods Sold varies from the 90% Confidence scenario as the number of registrations increase.

Sales and marketing charges are also projected to increase over the 90% Confidence scenario as additional funds are available to invest in customer awareness, penetration and the maintenance of market share.

Costs for most general and administrative expenses are not anticipated to vary appreciably with the number of users. The need for accounting and administrative staff, however, is expected to increase as demand for domain names increases.

See attached document

C.12.6. Capital Expenditures

Capital Expenditures include software acquisition and customization, and initial working capital. Because the Registry Operator will perform the technical duties associated with maintenance of the TLD, the Sponsoring Organization will incur only capital expenditures related to managing the TLD as well as owning the customized software used by the Registry Operator.

Group One Registry currently has a firm commitment for $12 million to fund the Sponsoring Organization’s capital expenditures and operating costs. This commitment is equity funding bearing no stated interest rate.

Capital Requirements for the Sponsoring Organization (in $000's)

	2001	2002	2003	2004
Software	$1,000
Software Customization	1,000
Other	100
Capital Expenditures	$2,100
Interest	$0	$0	$0	$0

C.12.7. Initial Budget

The available cash balance chart shows the net usage of the Sponsoring Organization's funding commitment. Capital expenditures and operating losses reduce the initial balance of $12 million to a minimum level of approximately $3 million before rebounding in the 90% Confidence, worst case scenario.

C.12.7.1. 90% Confidence level (worst case)

See attached document

C.12.7.2. 50% Confidence Level (base case)

See attached document

C.12.7.3. 10% Confidence Level (best case)

See attached document

C12.8 Business Risks and Opportunities

C12.8.1 Group One Registry has firm commitments for capital with which to leverage their opportunities.

Prior to submitting this application, Group One Registry has obtained firm commitments for capital funding well in excess of those amounts anticipated to be required to build the proposed infrastructure. Negotiations with other prospective investors are ongoing. This ensures that Group One Registry can move quickly to implement service and leverage the communication power of the Internet for all users.

C12.8.2 Our competitive environment can be significantly impacted through the introduction of new TLDs as authorized by ICANN.

As we have stated in our proposal, we believe our business model has a significant competitive advantage over existing TLDs for domain names demanded by information appliances other than PCs and Email domain names. We plan to utilize this advantage to support the necessary capital to ensure the stability of our service base and earn a return on investment for our investors. There is a risk that ICANN will authorize the creation of new TLDs with business models similar to ours that will erode our competitive advantage.

C12.8.3 The minimum payment to the Registry Operator by the Sponsoring Organization will be fixed and competitive.

After the initial term of the Registry Operator agreement expires, it is anticipated that the Sponsoring Organization will seek competitive bids for the operation of the registry. This competition will necessitate the setting of a competitive minimum operating fee for the Registry Operator. Once a minimum payment is negotiated between the Registry Operator and the Sponsoring Organization, the registry operator’s anticipated profit margin will be determined. Should the Registry Operator’s costs be in excess of those projected, a loss may result.

C12.8.4 Group One Registry’s proposed TLD fosters competition.

Through Group One Registry’s volume discounting of domain names, competition among TLDs will be enhanced. Lower average prices could potentially bringing new users into the market that were otherwise excluded based on price. This will enhance the utility of the entire Internet community.

C12.8.5 Group One Registry’s data will be safe.

The capital infrastructure proposed will include two redundant systems to ensure seamless functioning of Webvision’s services should one system fail. Further, Group One Registry’s data will be backed up on Webvision’s own servers in an alternate location. In addition to the redundant systems and the separately located backup on Webvision’s own servers, Webvision will escrow all of the Registry’s critical data in order to provide a backup should the unlikely event of total system failure occur in multiple locations.

C12.8.6 Our pro-forma financial projections are based on assumptions that may not prove to be correct or obtainable.

Our pro-forma estimated revenue is based on registered users using internet-ready appliances such as cell phones, PDAs, Internet Gaming consoles and other appliances for which an established market is only beginning. While our capture rate for these users is initially small, we assume our market share to increase through our domain naming structure and marketing efforts. This assumption may not prove to be correct.

Our pro-forma estimated costs are also based on assumptions of necessary hardware, software and labor services. While we have obtained a firm commitment for funding and are confident that we will be able to build the necessary infrastructure for a safe and reliable registry, our assumptions may not prove to be correct.

C12.8.7 Unlike most character-focused TLDs, our new TLD will be numeric based and will therefore avoid a variety of potential intellectual property conflicts.

It is our assumption that numeric based domain names will be virtually free from potential trademark conflicts. While this provides advantages for selling large blocks of numbered domain names to potential customers (like telephone companies), it is assumed that customers will not demand numbered domain names as commercial trademarks. Our pro-forma financial projections therefore assume that we will not obtain significant penetration into the market for web servers that have heretofore been primarily associated with trademarked domain names.

C12.9. Accounting, Audit, Annual Report and Annual Statement

Once in operation, Group One Registry expects to have a Big Five accounting firm conduct the annual audit and prepare the annual report and statement.