RE: [registrars] $100,000 Surety Bond Waiver (fwd)

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

hi mark,

thanks for your efforts and feedback. I appreciate it. Here are my
comments -

> I've spent the last 2 months working this issue internally.
> Initially, there
> was a lot of good debate and it looked as though there might be movement,
> but in the end, VeriSign is standing firm on this. No one
> disagrees that it
> probably is not necessary for stable registrars. But many people feel that
> removing the requirement will create an environment where less stable
> registrars may more easily enter the market, something that would
> not be in
> the best interests of anyone.

from your dialogue above i believe you are constituting a financial
obligation on part of the registrar as a determinant to decide the stability
of a registrar. which is not entirely the right approach. there are the
following issues with your approach -

1. the financial obligations are quite high already for the accreditation
process with various fees and liabilities for various registries and
insurance etc

2. stability is not a factor of financial strength - considering that i know
some registrars who can easily pay for this bond but do not have the
technical knowledge or market awareness to maintain a stable registrar
operation

3. I thought ensuring that only stable registrars get in was the job of
icann, and not verisign. that is the spirit of the accreditation process. It
is also the reason why no other Registry has a surety bond demand. ICANN is
the one that needs to ensure that registrar accreditation is limited to
stable companies

4. The surety bond maybe to a CERTAIN extent acting as a disincentive for
less stable registrars. but that is not my point. my point is it acts as a
disincentive for even the stable ones. If stability is what you want to test
then it should be a pure stability test. Several countries make it next to
impossible to get a bond, and in several others it is a complex, lengthy and
expensive process. This creates a disincentive for registrars who are
potentially stable as well as creates a burden on existing registrars. with
a market where margins are diminishing I believe this additional financial
burden only prevents a registrar from making money. Here is where the cruz
lies - YOUR SURETY BOND REQUIREMENT DOES NOT DISCOURAGE INSTABLE
REGISTRARS - RATHER THE FINANCIAL BURDEN THAT IT IMPOSES ACTUALLY MAKES
STABLE REGISTRARS INSTABLE. You can ask all international registrars and I
believe a majority response will state that the MOST EXPENSIVE, TIME
CONSUMING process was that of obtaining the required surety bond.

> Therefore, I have begun investigating alternatives to the surety bond. I'm
> trying to find some way to satisfy the need to ensure business viability
> without requiring such a large financial investment. If you have any
> suggestions, pls relay them. I should have a list of viable
> alternatives by
> the end of next week. I see some suggestions in your original email below,

This is a good idea. Lets understand the spirit here. The spirit here is to
try and eliminate Registrars who are instable from getting operational. It
is ironical that Verisign requires an INDEMNITY BOND (which has no relation
to stability) to segregate this aspect.

* One very important aspect (which I am sure you will agree with if this
exercise is being done solely for the purpose of testing stability) is that
stability needs to be tested only until sometime. Which means if a Registrar
has over 20000-25000 names and has been operating reasonably for the past 1
year i dont see any reason for him to renew his surety bond. He has provem
his stability. So how about making the bond an initial requirement and
abolishing it once the Registrar establishes a certain volume of business
and is 1 year old. That way you prevent new INSTABLE entrants and at the
same time dont put a burden on existing registrars who are already quite
stable

* Maybe a dual deposit could be maintained. Instead of using a $100,000
security bond and a $100,000 surety bond one bond could serve a dual
purpose.

> but they don't really address the core issue. The issue isn't
> payment risk,
> the issue is the level of effort associated with unstable
> registrars. There
> have been a couple of cases in the last 60 days, and the general feeling
> here at corporate is that if we drop the surety requirement (without
> replacing it with something similar), we'll be dealing with a lot more of
> these situations.

can you highlight the specific cases you talk of (without giving any names).
I am specifically looking out for details with regards to how did these so
called cases affect the domain name market, did they jeopardise any domain
name registrant and have a drastic negative impact on the registry. If not
then probably the situation is being overrated.

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


>
> -Mark
>
> -----Original Message-----
> From: Bhavin Turakhia [mailto:bhavin.t@directi.com]
> Sent: Friday, January 04, 2002 11:13 AM
> To: Rippe, Mark
> Cc: Paul Fallon
> Subject: RE: [registrars] $100,000 Surety Bond Waiver (fwd)
>
>
> Hi Mark,
>
> I wanted to find out the progress on this one. I was hoping for relief
> within the New year :) (sort of a new year good tidings).
>
> Meanwhile other Registrars have been communicating with me on
> this one too.
> We all have a large amount of our money foolishly tied up in this
> Performance bond issue (money that could well be spent on marketing and
> other resouces).
>
> Can you update me a timeline on this one
>
> Thanks
> Best Regards
> Bhavin Turakhia
> CEO
> Directi
> ----------------------------
> Tel: 91-22-6370256 (4 lines)
> Fax: 91-22-6370255
> http://www.directi.com
> ----------------------------
>
> > -----Original Message-----
> > From: Rippe, Mark [mailto:mrippe@verisign.com]
> > Sent: Friday, November 30, 2001 7:20 PM
> > To: 'bhavin.t@directi.com'
> > Subject: FW: [registrars] $100,000 Surety Bond Waiver (fwd)
> >
> >
> > Mr. Turakhia,
> >
> > I just wanted to let you know that this issue has not been
> forgotten. The
> > heat has been turned way up on it here in the last week, and I
> > hope to have
> > some resolution in the next 30 days.
> >
> > Regards,
> > Mark
> >
> > -----Original Message-----
> > From: Rick H Wesson [mailto:wessorh@ar.com]
> > Sent: Friday, November 30, 2001 1:22 AM
> > To: mrippe@verisign.com
> > Subject: [registrars] $100,000 Surety Bond Waiver (fwd)
> >
> >
> > Mark,
> >
> > here is a note from a registrar based in India, I hope we can find a way
> > to address his issues.
> >
> > thanks for you attention to this matter.
> >
> > -rick
> >
> >
> > ---------- Forwarded message ----------
> > Date: Fri, 30 Nov 2001 09:25:18 +0530
> > From: Bhavin Turakhia <bhavin.t@directi.com>
> > To: "Registrars@Dnso. Org" <registrars@dnso.org>
> > Cc: hhribar@verisign.com, Dan Halloran <halloran@icann.org>,
> >      M. Stuart Lynn <lynn@icann.org>, Divyank Turakhia
> > <divyank.t@directi.com>,
> >      Nicole Dunn <ndunn@verisign.com>, Christine Russo
> > <crusso@verisign.com>,
> >      cgomes@verisign.com
> > Subject: [registrars] $100,000 Surety Bond Waiver
> >
> > 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
> > ----------------------------
> > Tel: 91-22-6370256 (4 lines)
> > Fax: 91-22-6370255
> > http://www.directi.com
> > ----------------------------
> >
>