C41. Do you propose to seek to qualify to receive any funds from this endowment?

Yes.  The DotOrg Foundation believes that by virtue of its non-profit status and its commitment to fulfill the principles and criteria for the .org TLD that are stated in the ICANN RFP, it qualifies to receive the full amount of $5 million dollars in endowment funds upon award of the registry agreement to the DotOrg Foundation.   See description of proposed terms and uses in Questions C41.1 and C41.2 below.

C41.1. If so, describe in detail how you propose to use this endowment. Include the commitments you propose to make about the uses to which the endowment would be put. Explain why those uses are consistent with the smooth, stable transition and operation of the .org TLD for the benefit of current and future .org registrants.

This endowment fundamentally would “be used to fund future operating costs of the nonprofit entity designated by ICANN as successor operator of the .org registry.” (ICANN-VeriSign Agreement, Section 5.1.4, italics added)

Use of the Endowment 

The term “operating costs of the nonprofit entity” logically encompasses not just maintenance of the technical status quo such as the stable transition of the registry database and provision of registry functions, but also the enhancement of registry services, such as building a “thick” Whois database and others of benefit to the noncommercial community.  The cost of operating a registry also includes technical and other support and outreach to the users of the registry.  Since one of the goals of the transition to a new registry operator is to enhance the participation of noncommercial registrants, the DotOrg Foundation also believes that the goal of the endowment would be best served if in part it is used to increase noncommercial registrations, by among other things, using the endowment to:

• Lower registry fees;
• Build additional services at the registry level to support and attract the noncommercial sector;
• Provide outreach and educational services to this sector; and
• Potentially facilitate organizations in under-served regions to become accredited registrars, or work with accredited registrars to service noncommercial registrants in their regions.

Disbursement

The DotOrg Foundation believes that the endowment should be prudently maintained to last through the term of the registry agreement and be available for the variety of operational goals. In order to do so, the DotOrg Foundation proposes the following incremental allocations of the endowment funds:

(1)Upon execution of a registry agreement between ICANN and the DotOrg Foundation, the DotOrg Foundation shall have access to:

• $500,000 to assist DotOrg Foundation with its startup and transition phases.
• $1,000,000 to meet initial working capital requirements of the new nonprofit registry operator, and to reduce by a similar amount projected working capital loans that would otherwise be necessary. [See answer to Question C7 and Attachment E1 for the DotOrg Foundation initial budget.]

(2) Upon adoption by the DotOrg Foundation Board after vetting through open and participatory policy processes of a plan to improve access and decrease registry fees, the Foundation shall have access to funds in an amount not to exceed $1,000,000 to meet the financial requirements of such a plan.  Such a plan would be. [See our responses to Questions C26 and C38 for description of initial access and fee decrease plans.]

(3) Of the remaining $2,500,000 plus future interest earned, one-half would be reserved for potential continuing implementation of the plan described in paragraph (2).  The disbursements would be made annually, based on the budget adopted by the Foundation’s Board.  The remaining half shall be disbursed in one or more annual installments to support such operational needs as may not be covered by registry fees and other such enhanced registry services as are planned by the DotOrg Foundation.  All Foundation plans would be based on open and transparent consultation with its established advisory structure.

Consistency with Goals

The uses of the endowment described above are consistent with the smooth, stable transition and operation of the .org TLD for the benefit of current and future .org registrants:

1)      The initial portion of the endowment used to fund the start-up and transition is fundamental to the goal of stable operations. This portion would cover a number of necessary steps including negotiating agreements with registrars; notifying and training registrars with regard to any transition and new .org registry policies, systems or processes; hiring the full staff complement needed to support registry operations; and establishing and implementing the governance and outreach mechanisms needed for the benefit of current and future registrants. While the subcontractor will build out technology to support the transition of the registry function, the DotOrg Foundation must take steps to complement such a build out, oversee it, and liaise with ICANN, registrars and the public interested in the .org TLD.

2)      The second portion would support the DotOrg Foundation’s continuation of and expansion upon the start up activities. Fundamentally, the Foundation must ensure that the registry is managed in a stable and secure manner. This requires it to have the staff and resources to oversee its subcontractors, to conduct outreach to registrars and other .org stakeholders, to respond to any concerns from these communities, and facilitate the Board mandate to make management and policy decisions that maintain stability and enhance registry services. Together, the initial two portions fund the DotOrg Foundation’s ability to carry out these functions during the interim start-up and operations term before new registrations and renewal fees are available to support the registry’s budget.

3)      Finally, .org registrants benefit by receiving expanded and improved services, if possible, at a lower price. This is precisely what the next several portions of the endowment are designed to do.

As technical advancements and new protocol designs have come into the domain name sector, registrars and registrants have come to expect a more advanced registry than one provided by the legacy .org system. This may mean a number of things -- from a thick Whois, which is planned for the initial transition, to processing multilingual registrations, which depends on IETF consensus, to yet unexplored services such as advanced searchability. In addition, there are services that are particularly useful for the noncommercial sector and should therefore expand their registrations in the .org TLD. To benefit current and future registrants and make the .org registry competitive in the current environment, the endowment would appropriately fund development and implementation of such improvements.

At the same time, lower registry fees would benefit the .org community and increase competition. The DotOrg Foundation, however, anticipates that it would not be able to support such discounts under its current revenue projections. Therefore it would seek to support lower fees through drawdowns from the endowment. The DotOrg Foundation believes that these contemplated uses of the endowment are not just consistent with, but fundamental to, smooth and stable operations for the benefit of all .org registrants.

C41.2. If you propose to seek to qualify to receive the endowment funds, explain why you believe that your proposed use is consistent with the terms of the endowment.

The DotOrg Foundation’s proposal would qualify for the endowment for several reasons. 

First, it would be the operator of the .org TLD.  Second it is a nonprofit, as contemplated in the agreement.

DotOrg Foundation believes that uses of the five million dollar endowment should be determined based on a set of principles, including the following:

(a)  Consistent with the limitation that the funds are only available if a nonprofit entity is selected to be the new registry manager, they should be used in part to defray registry costs that a nonprofit operator has greater difficulty in accommodating than would a privately funded for-profit operator.

(b)  Consistent with the deliberations of the Names Council Task Force on .org, and the many public comments received during that process and before the ICANN Board at the meeting in Accra, Ghana during consideration of the future of .org, the funds should be used in part to support the costs of projects that enhance the accessibility, affordability and enhancement of the utility and functionality of .org registry services.

(c)  Given the fact that neither VeriSign nor ICANN have adopted detailed criteria for the use of these funds, a significant amount should be initially reserved for future use as determined by the DotOrg Foundation Board, acting after consultation with the .org registrar and registrant communities through its Advisory Council. Please See our description of an advisory structure in our response to Question C35.

(d)  Given the fact that no specific endowment terms are included in the ICANN-VeriSign contract, the DotOrg Foundation Board believes that the entire sum should be treated as a term endowment, the principle and income of which are to be expended over the initial six year term of the registry agreement between ICANN and DotOrg Foundation. [4]   This gradual schedule allows for oversight by ICANN of the operation of the new registry and the consistent use of the endowment.  Furthermore, the Board believes that this treatment of the endowment is consistent with generally accepted accounting principles for nonprofit organizations.  The gradual nature of the disbursements appropriately balances the need for immediate assistance to the new nonprofit operator with the goals of providing enhanced accessibility, affordability and functionality of the registry over time.C41.1. If so, describe in detail how you propose to use this endowment. Include the commitments you propose to make about the uses to which the endowment would be put. Explain why those uses are consistent with the smooth, stable transition and operation of the .org TLD for the benefit of current and future .org registrants.

[4] The Foundation believes that if ICANN transfers the endowment without restrictions on the organization's ability to spend it currently, the funds would be unrestricted and therefore expenditure of the principal would be consistent with nonprofit accounting principles.  If, however, the endowment is restricted in a manner that prevents depletion of the principal, the DotOrg Foundation is prepared to coordinate with ICANN in revising its plans to expend only the permissible – or interest – portion of the endowment.