It is certainly proving to be a long and winding road for the 1923 gTLD applications submitted to ICANN. Glitches, delays and now a very high percentage of applications will very shortly be receiving clarifying (financial) questions on 26 November. Currently a very high percentage of applicants have not scored the required 8 points to pass financial evaluation. This is the next huge challenge for applicants. Critical business decisions will need to be made by applicants to ensure they pass the Initial Evaluation. Undoubtedly it will cause further delays, and fundamentally impact directly and indirectly on other applicant business decisions, especially those in contention sets, which will be announced shortly.
There are seven evaluator panels. Financial, Technical, Geographic Names, String Similarity, Registry Services, DNS Stability. Each panel could issue clarifying questions.
Also there were 8956 comments. These were directed to appropriate panels. These could cause a clarifying question if a comment has the potential to change the score of an application.
Having been involved via an ICANN EOI (2009-2011) in the financial evaluation process, fully expecting to be a financial evaluator until conflicts of interest ruled out this opportunity I have taken a great interest in the roll out of ICANN financial evaluation process. Subsequently we have developed fully integrated gTLD models, over and and above ICANN financial model templates. I was an applicant for .royal, on behalf of the UK Royal Family. We subsequently decided not to apply. Did we make the right decision?
A new gTLD update session at the recent ICANN Toronto meeting revealed some interesting and quite frankly alarming results based on the those applications part/full processed by the financial evaluators.
ICANN and the evaluators have stated they were "surprised "by the scale of the clarifying questions that will be issued.
The Initial evaluation of 1930 applications (7 have since withdrawn) revealed as of 15 October 1114 application assigned to the financial evaluation panel. Of those 864 applications were still in evaluation, with 250 being completed.
In September clarifying financial pilot questions were issued to 41 selected completed applications. The responses received will impact on these clarifying financial questions. We have been given the opportunity to review a number of these clarifying financial pilot questions.
On 26 November many many, possibly up to 90% on certain questions, of the applications processed so far will be issued by the financial evaluators with clarification questions to their financial answers for question 45 to question 50.
We estimate that there will be 600+ clarifying financial questions. A small percentage of applicants are likely to receive CFQs on all six financial questions. This implies the applicant's whole financial model won't demonstrate financial capability to operate a Registry.
Many applicants will have scored a point score of 1 on a particular question, but not an overall pass. These CFQs will give applicants a one off opportunity to increase the score to 2, critically a score of 3 on Q50, which could result in a pass score.
Q49 on contingencies and the worst case financial template and Q50 on the letter of credit/irrevocable cash deposit seem to be the more problematic questions of the six financial questions.
ICANN's two compulsory financial templates on Q46 and Q49 are very critically based on a cash flow model, not an accounting model.
Currently ICANN has announced that each application receiving CFQs has ONLY TWO WEEKS to respond and reply to the evaluators. Clearly the two week response time will not be enough and MUST be extended.
So who are the financial evaluators?
Taken from the 2009 EOI, each member of an evaluation panel must have the requisite skills and experiences developed through business experience, industry knowledge, and education that will enable them to evaluate the financial strength of each applicant, and the viability of the applicant's business model for operating the registry.
What are the key issues the financial evaluators looking for?
Each application will:
What are some of the underlying basics that each applicant should follow?
What action points should applicants make regarding clarifying financial questions in the coming weeks. What will be the impact on their business models in the future.
By Phil Buckingham, CEO,Dot Advice Ltd.. Mr Buckingham was involved at the start of the DNS in the UK in 1995, as CFO of Netnames, the pioneering corporate domain portfolio registrar. Subsequently instrumental in a merger to form Group NBT plc., which floated via an IPO on LSE in 2000. He was involved in the Financial Evaluation process, served on ICANN's GNSO Vertical Integration WG. Phil can be contacted at:
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Minds + Machines