Registry Operator's Proposal - BUSINESS CAPABILITIES AND PLAN

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 Organization’s 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.