[registrars] $100,000 Surety Bond Waiver

["Bhavin Turakhia" <bhavin.t@directi.com>]

Hi,

In the Verisign Conference at Marina Del Rey a point was raised and seems to
have been forgotten. The point was with regards to the $100,000 surety bond
which Verisign requires every com/net/org Registrar to have. It was general
consensus that this requirement should be waived off being unreasonable and
not required. I have the following points to note (some raised and some not
raised at that point in time)

. The liberalisation of the Registrar process was done in order to promote
free competition geographically. Most of you may not be aware how difficult
it is to obtain this bond in several countries - being the primary deterrant
in completing the accreditation process for most companies. We ourselves
took about 3 months to get our ICANN accreditation, but after that it took
us 4 whole months in India to get a local bank to issue a foreign guarantee
and get the appropriate permissions. This was also due to close contacts we
have and influence we hold over various parties here. I know 3 other
registrars in India (and Nicole Dunn from Verisign would vouch for this) who
are still struggling with this requirement and dont know how to fulfill it
(some of them having obtained their accreditation from over an year). It is
grossly unfair to these and other Registrars who have spent time effort and
investment in order to get accredited and then find this stumbling block to
complete their formalities and have to eventually give up (not many are as
persistence as we were). Additionally the cost of obtaining this bond in
various countries is FAR HIGHER than it is in the US. For instance here in
India bankers demand anywhere from 100-125% of the guarantee amount as CASH
deposit. India is not a Capital intensive country like USA. Here the
interest cost of capital is far higher than margins made on Domain Names.
Additionally the cost of blocking that amount of capital is detrimental to
business. Also the amount should not be seen as it is. The amount of
$100,000 in US is high, but in India it is VERY HIGH, counting current
conversion rates. This initself makes the proposition of becoming ICANN
Accredited not viable. In that sense this becomes an unfair qualification
and geographical discrimination against registrars (the very thing ICANN
should be against).

. Several banks and countries have NEVER dealt with such a bond, and fail to
understand the language, the implication, the risk involved and therefore
are unwilling to negotiate on the terms and infact raise the terms.
Considering the recent dotCOM bust - any bank guarantee with the word dotCOM
in it has begun to raise concerns. A Guarantee for the dotCOM Registry
therefore is not a very comforting service for the bankers irrespective of
what the reality is. It takes painful months to convince all the appropriate
authorities of the ZERO risk involved in the proposition.

. NO other Registry requires any surety bond from the registrar. This
includes gTLD Registries as well as private ccTLD Registries. This is only a
special requirement from Verisign.

. Verisign has clearly NEVER had to invoke a guarantee for ANY Registrar in
their entire history

. The very fact that the Registrar contractually indemnifies Verisign should
not require any sort of a bond.

I would appreciate it if this letter should spur up some discussion and
actually lead to abolishing this requirement thus allowing -

. FREE Competition
. Impartial standards geographically
. Standard signup process for all Registries

I speak less for myself (we have already completed all formalities) and more
for several registrars (many of whom have invested a large amount of time
and effort in getting accredited) who lie in the "accredited but not yet
operational" list, as well as various registrars who are year after year
paying this huge interest cost for no benefit either to themselves or to
Verisign (since verisign is not really making any money off this guarantee).

I had personally suggested several alternatives during my Accreditation
process - such as a small recurring fee from registrars taken by Verisign
instead of a huge bank guarantee. A $1000 per year from each registrar would
actually add up to $100,000 from a 100 (or $200,000 from 200 registrars). I
am sure at a cost lower than that Verisign can themselves buy insurance to
cover the risk of a registrar failing to indemnify them against third party
claims. That way Verisign can procure one single blanket insurance ionstead
of Each registrar going out there and buying bank guarantees of small sums
at different costs from around the world.

The ideal situation however would be to completely abolish this system since
it really does not serve mush purpose and actually discourages Registrars
and makes it impossible for some countries to participate (UNLESS THAT WAS
THE ORIGNAL INTENT OF THIS REQUIRMENT)

Being a comparatively new Registrar I do not know the process of getting
this change made. Whether it involves discussion amongst the Registrars
constituency, whether it involves gathering votes from people, I am willing
to make my contribution in whatever way required, in order to abolish this
requirement and create a fairer Registrar accreditation process for
everyone.

Best Regards
Bhavin Turakhia
CEO
Directi
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Tel: 91-22-6370256 (4 lines)
Fax: 91-22-6370255
http://www.directi.com
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