Registry Operator's Proposal

  

PRIOR TO REVIEWING THE DESCRIPTION OF TLD POLICIES OR THIS REGISTRY OPERATOR'S PROPOSAL, PLEASE REFER TO THE EXECUTIVE SUMMARY ATTACHED TO THE DESCRIPTION OF TLD POLICIES AS APPENDIX A .

I.  GENERAL INFORMATION

D1.  The first section of the Registry Operator's Proposal (after the signed copy of this page) should be a listing of the following information about the registry operator. Please key your responses to the designators (D1, D2, D3, etc.) below.

D2.  The full legal name, principal address, telephone and fax numbers, and e-mail address of the registry operator.

          Afilias, LLC
          c/o Rita A. Rodin, Esq.
          Skadden, Arps, Slate, Meagher & Flom LLP
          Four Times Square
          New York, NY 1003
          Phone: (212) 735-3000
          Fax: (212) 735-2000
          E-Mail: rrodin@skadden.com

D3.  The addresses and telephone and fax numbers of all other business locations of the registry operator.

None, at present.

D4.  The registry operator's type of business entity (e.g., corporation, partnership, etc.) and law (e.g., Denmark) under which it is organized.

          Afilias, LLC ("Afilias" or the "Company") is a limited liability company organized under the Delaware Limited Liability Company Act, as amended from time to time, in the United States of America.

D5.  URL of registry operator's principal world wide web site.

http://www.afilias.com

D6.  Dun & Bradstreet D-U-N-S Number (if any) of registry operator.

           Afilias does not have a Dun & Bradstreet D-U-N-S number.

D7.   Number of employees.

           Afilias currently has a thirteen member Board of Managers, and no other employees.

D8.   Registry operator's total revenue (in US dollars) in the last-ended fiscal year.

           Afilias was formed on Monday, September 25, 2000; so it had no revenue during the last-ended fiscal year.

D9.  Full names and positions of (i) all directors, (ii) all officers, (iii) all relevant managers, and (iv) any persons or entities owning five percent or more of registry operator.

           Afilias currently has no officers. Each member of Afilias owns approximately 5.25% of the membership interests of Afilias. Please see Schedule A to the Afilias, LLC Operating Agreement ("Operating Agreement").

          1st Domain.net, a division of G+D International LLC
          Corporate Domains, Inc.
          Domain Bank, Inc.
          DomainInfo AB
          DomainPeople, Inc.
          Domain Registration Services
          Enter-Price Multimedia AG (EPAG)
          Internet Council of Registrars (CORE)
          interQ, Inc.
          NameSecure.com
          Netnames International Ltd.
          Network Solutions, Inc. Registrar Operations
          Polar Software Ltd d/b/a Signdomains.com
          Procurement Services International (Japan), Inc.
          Register.com
          Schlund + Partner AG
          SiteName
          Speednames, Inc.
          Tucows, Inc.

           The interim senior management team of Afilias consists of a thirteen-member Board of Managers. The present Managers elected by the members of Afilias are:

D10. Name, telephone and fax number, and e-mail address of person to contact for additional information regarding this proposal. If there are multiple people, please list all their names, telephone and fax numbers, and e-mail addresses and describe the areas as to which each should be contacted.

          All inquiries regarding this proposal should be addressed to:

Public Relations:
Gertrude E. Bakel
Phone:  (212) 885-0490
Fax:  (212) 885-0570
E-Mail:gbakel@hillandknowlton.com		 Legal:
Rita A. Rodin, Esq.
Phone:   (212)  735-3000
Fax:  (212) 735-2000
E-Mail:rrodin@skadden.com

D11. The full legal name, principal address, telephone and fax numbers, e-mail address, and Dun & Bradstreet D-U-N-S Number (if any) of all subcontractors identified in item D15.3 below.

          Afilias has signed a binding term sheet with Tucows, Inc. ("Tucows") pursuant to which Tucows will provide back-end registry services for Afilias.

          Tucows' information is as follows:

          Tucows, Inc.
          535 Fifth Avenue, 17th Floor
          New York, NY 10017
          Telephone: 416-535-0123
          Toll Free: (800) 371-6992
          International Toll Free: IAC (800) 371-6992
          Facsimile: 416-531-2516
          E-mail:ross@tucows.com
          D-U-N-S Number: None.

II. BUSINESS CAPABILITIES AND PLAN

D12. The second section of the Registry Operator's Proposal (after the "General Information" section) is a description of the registry operator's Business Capabilities and Plan. This section must include a comprehensive, professional-quality business plan that provides detailed, verified business and financial information about the registry operator. The topics listed below are representative of the type of subjects that will be covered in the Business Capabilities and Plan section of the Registry Operator's Proposal.

D13.  The Business Capabilities and Plan section should consist of at least the following:

D13.1. Detailed description of the registry operator's capabilities. This should describe general capabilities and activities. This description also offers the registry operator an opportunity to demonstrate the extent of its business and managerial expertise in activities relevant to the operation of the proposed registry. The following items should, at a bare minimum, be covered:

D13.1.1. Company information. Date of formation, legal status, primary location, size of staff, formal alliances, references, corporate or other structure, ownership structure.

          Formed on September 25, 2000 as a Delaware limited liability company owned by a consortium of nineteen (19) leading ICANN-accredited Internet domain name registrars ("Member Registrars"), Afilias was founded to operate an unsponsored, unrestricted generic Top Level Domain ("gTLD") registry. Appendix A provides brief descriptions of founding Member Registrars. Afilias is considering locating its headquarters in Europe, and will make a final decision upon approval of this application by ICANN.

          Afilias' staff currently consists of a thirteen-person Board of Managers (the "Board") comprised of senior-level executives from the Member Registrars and elected by the Member Registrars. Four three-member Board committees will be formed comprising members of the Board, including an Executive Committee, an Audit Committee, a Nominating Committee and a Compensation Committee. Upon securing approval by ICANN to operate the gTLD, Afilias will hire executive and administrative staff of approximately 25 people over the first four months of operation.

          Afilias has executed a term sheet with Tucows wherein a joint venture between Tucows and Q9 Registration Services will serve as the technology provider to Afilias ("Technology Provider" or "TP") and provide the technical infrastructure and database management of the TLD registry for at least the first two years of operations.

          In addition to working with the TP, Afilias intends to utilize the technical expertise of its Member Registrars to transition the registry operations and develop its own technical infrastructure required to operate and manage the TLD registry starting in the third year of operations. Qualified representatives from Afilias will be selected to form a Technical Review Committee, which will provide guidance both during the development of the registry and on an ongoing basis. Section D15.1 provides short descriptions of the initial members of the Technical Review Committee.

          As discussed in greater detail in the Operating Agreement, each Member Registrar currently owns approximately 5.25% of Afilias, and no Member Registrar will be allowed to own more than 11% of Afilias either as a result of any acquisition or potential consolidation among Member Registrars or otherwise. Afilias will issue two classes of membership interests. Class A membership interests will be issued to the founding Member Registrars.

          To promote competition among registrars and incentivize non-member registrars to promote the new TLD, Afilias will also issue Class B membership to other ICANN-accredited registrars or other entities electing to take ownership positions in Afilias, in accordance with the Operating Agreement. Class B membership interests will represent a maximum of 60% of Afilias on a fully-diluted basis.

          Because Afilias was only recently formed, it has no references or formal alliances. However, trade references for the individual Member Registrars are available upon request.

D13.1.2. Current business operations. Core capabilities, services offered, products offered, duration of provision of services and products.

          Because Afilias was formed on September 25, 2000, it currently offers no products or services. The capabilities of the individual Member Registrars are described in Section D13.1.4 and in Appendix A.

D13.1.3. Past business operations/entity history. History, date of formation, legal status/type of entity, initial services, duration of provision of services and products.

          Afilias was formed on September 25, 2000 as a limited liability company organized under the Delaware Limited Liability Company Act, as amended from time to time, in the United States of America.

          Because Afilias was formed on September 25, 2000, it has no real operational history and currently offers no services or products. The services and products offered by the individual Member Registrars are described in Section D.13.1.4 and in Appendix A.

D13.1.4. Registry/database/Internet related experience and activities. Experience with database operation, Internet service provision.

          While Afilias is a newly formed entity and has no operating history, it is uniquely positioned to build on the core capabilities, technical expertise, operating experience, and extensive market penetration of its Member Registrars. In the aggregate, Afilias' Member Registrars registered over 10 million domain names in their last fiscal year, and represent approximately 80% of all active domain name registrations (DNR) transacted over the last 10 years. In addition to their strong position in the DNR market for the .com, .net, and .org top level domains, the Member Registrars collectively offer a wide range of related Internet services, including country-code DNR, country-code registry operations, Web hosting, ISP services, Web page design, unified messaging, and account management services. Appendix A provides additional information regarding the services provided by each of the founding Member Registrars.

          While five companies were chosen to participate in the shared-registry-system test-bed, only three actually participated, two of which are Member Registrars of Afilias.

          As a group, Member Registrars provide their services on a truly global basis, with 65% having offices in North America, 53% in Europe, 26% in Asia and the Pacific Rim, 5% in Australia and 5% in the Middle East. Including CORE's registrar members, some of which are not ICANN-accredited, Afilias' reach spans an additional 85 registrars in 23 countries. Figure 1 graphically depicts the worldwide headquarters locations of its Member Registrars, not including the 85 CORE member registrars. Collectively, Afilias benefits from substantial experience in providing DNR services since the inception of the Domain Name System, including the pioneering efforts of one member, Network Solutions, Inc., which has provided DNR registry and registrar services for the past eight years.

D13.1.5. Mission. The registry operator's mission and how it relates to expansion into the registry operation field.

          Afilias' mission is to expand the Internet as a global resource that fosters communication, commerce and community by introducing, marketing, and managing a new global domain name to Internet users around the world. Through the introduction of a new unrestricted top-level domain name, Afilias will endeavor to transform the Internet into a truly global marketplace. Afilias will leverage the expertise and experience of its Member Registrars to operate a more efficient registry service in markets that are currently underserved by the existing registry service. Afilias is committed to enhancing the DNS while maintaining the stability of the Internet.

D13.1.6. Management. Qualifications and experience of financial and business officers and other relevant employees. Please address/include past experience, resumes, references, biographies.

          As previously noted, Afilias' interim senior management team consists of a thirteen-member Board comprised of senior management executives from the Member Registrars. The Managers have been elected to the Board for terms ranging from one to three years and will elect a chairman to preside over the Board. The list of Managers on the Board and their respective terms is provided below. Resumes for each Managers are provided in Appendix B:

Three-Year Term Members

Two-Year Term Members

One-Year Term Members

          The Board will elect the following four board committees that will set the direction of Afilias on an ongoing basis.

Executive Committee

          The three-person Executive Committee shall be chiefly responsible for supervising the executive officers of Afilias and liasoning with them to provide Board input on management issues. Members of the Executive Committee will be elected by the Board upon approval from ICANN to operate the new TLD.

Audit Committee

          The three-person Audit Committee will be responsible for recommending the independent public accountants as auditors for Afilias, reviewing the audit and management analysis performed by the independent public accountants, managing the internal accounting controls, and developing the audit planning process. Members of the Audit Committee will be elected by the Board to operate the new gTLD.

Nominating Committee

          The three-person Nominating Committee will be responsible for reviewing and recommending candidates to the Board for Board vacancies, recommending criteria for Managers' tenure and nomination criteria. Members of the Nominating Committee will be elected by the Board upon approval from ICANN to operate the new gTLD.

Compensation Committee

          The three-person Compensation Committee will be responsible for reviewing and recommending salary levels, increases, and benefit programs for officers and employees of Afilias. Members of the Compensation Committee will be elected by the Board.

          Upon approval from ICANN to operate the new gTLD, Afilias will recruit, either through its own efforts or through a retained executive search firm, a senior management and administrative team for Afilias. Key executive-level positions will include the following:

President

          Responsible for coordinating the efforts of the other executives, the Board and Executive Committee, implementing the overall vision and mission of Afilias and interfacing with ICANN on significant policy issues.

Chief Financial Officer

          Responsible for managing the financial viability of Afilias and managing revenue recognition related to the billing and collection of registration fees from its registrar customer base. The Chief Financial Officer will manage a 2-person staff, including a Staff Accountant and an Accounts Operations Manager responsible for billing.

Chief Operating Officer/Chief Technical Officer

          Responsible for managing the technical operations of Afilias. The Chief Technology Officer will manage the relationships with Afilias' technology vendors and sub-contractors, liaison with Afilias' Technology Review Committee, manage the transition of the registry operations from Tucows to Afilias during the second year of operations, and recruit the necessary technical staff to operate the registry on an ongoing basis.

Chief Marketing Officer

          Responsible for implementing Afilias' marketing plan as outlined in Section 13.2.4 and developing ongoing marketing, branding, and public relations initiatives. The Chief Marketing Officer will also be responsible for transitioning Afilias' marketing function from outsourced professional service providers to an internal staff within Afilias, as required.

Vice President, Policy and Registrar Relations

          Responsible for ensuring high-quality customer support for Afilias' registrar customers and for refining and developing additional policy in conjunction with ICANN relating to services provided to such registrar customers. Afilias expects this role to be critical during the Sunrise Period described in Section E15 of the Description of TLD Policies, during which time domain name registrations must be vetted against trademark registrations. This person will also serve as an ombudsman, assisting in dispute resolutions as set forth in Section E15 of the Description of gTLD Policies.

          Additional administrative staff positions required to operate Afilias may include a Human Resources/Office Manager and a General Counsel. Proposed salaries associated with each executive, administration, and staff position identified above can be found in the Headcount Worksheet within Appendix C.

D13.1.7. Staff/employees. Current staff size, demonstrated ability to expand employee base, hiring policy, employee training, space for additional staff.

          As of the date of the application, Afilias will consist of its Board of Managers, with no additional executive or administrative staff. Afilias will benefit from the collective experience of its participating Member Registrars to transfer the expertise required to build its staff within six months of approval of the application by ICANN, enabling Afilias to set a target date to begin offering its services in Q3 2000. High-growth Member Registrars, including Tucows, Register.com, Inc. and Network Solutions, Inc. have proven capabilities for scaling their staff to meet the needs at peak level demands, and Afilias will benefit from the transfer of knowledge from its Member Registrars to successfully build its staff as demand levels require.

          In addition to its elected Board, Afilias has retained a variety of professional service providers to assist in its development and in the preparation of this proposal to ICANN. Specifically, Afilias has retained Skadden, Arps, Slate, Meagher & Flom, LLP as its outside legal counsel to advise it during its formation and to coordinate the efforts of Member Registrars in preparing this proposal for ICANN. Afilias has also retained Hill and Knowlton to assist it in developing an international public relations campaign. As a subsidiary of WPP, Hill and Knowlton also brings the expertise of Blanc & Otus, and the advertising and marketing expertise of OgilvyOne. Finally, Afilias has retained KPMG to provide business planning advisory services relating to the development of its business plan.

D13.1.8. Commercial general liability insurance. Address/include amount of insurance policy, provider of policy, plans for obtaining additional insurance.

          Afilias has partnered with Frank Crystal & Co., Inc. to obtain commercial general liability insurance coverage with an aggregate liability limit of $2,000,000. Afilias will also obtain additional insurance as deemed appropriate by management that will provide additional protection to Afilias for risks inherent in its operations, including potential liability for intellectual property infringement and for negligent acts, errors or omissions that may arise out of the processing of electronic data for others and for related computer services. Afilias is committed to ensuring that appropriate policies are secured at all times and will consult with ICANN on an ongoing basis regarding appropriate levels of coverage.

D13.2. Business plan for the proposed registry operations. This section should present a comprehensive business plan for the proposed registry operations. In addition to providing basic information concerning the viability of the proposed operations, this section offers the registry operator an opportunity to demonstrate that it has carefully analyzed the financial and operational aspects of the proposal. At a minimum, factors that should be addressed are:

D13.2.1. Services to be provided.A full description of the registry services to be provided.

          As a registry operator, Afilias will provide the following services and support to its registrar customers:

1)       Registration Services

a)       Domain Name Registration

          Afilias' core service will focus on registering domain names submitted by its ICANN-accredited registrar customers to its TLD registry. Afilias will register the domain names submitted by registrars as a general policy for a term ranging from two to ten years, as selected by registrar customers. Afilias will implement a five-day grace period to cancel a registration, which will trigger a refund to the registrar.

b)       Domain Name Renewal

          After two years of operation, Afilias will provide domain name renewal services whereby registrars may renew domain names with the registry on behalf of their registrant customers for an additional term, which can range in length from one to ten years in yearly increments. In addition, as further described in Section E10 of the Description of TLD Policies, Afilias will automatically renew registrations by one year when domain registrations expire. Renewals, however, may be canceled by registrars for a refund of the renewal fee within 45 days of the renewal.

c)       Registrar Transfer

          When a registrant transfers a registration from one registrar to another, Afilias will automatically extend the term of the registration for an additional year.

d)       Whois Lookup

          Afilias will operate a registry-level Whois service to allow third parties to conduct searches on domain names to determine their availability and ownership.

e)       Registrar Billing/Status Reports

          Afilias will provide customized billing and registration activity reports to registrar customers to provide continuous communication regarding account status and requests for minimum account deposits.

2)       TLD Marketing

          Through its appointed marketing partners, Afilias will market and brand the new TLD worldwide. Through these marketing efforts, Afilias acts to fulfill ICANN's mission to enhance the functionality and usability of the Internet on a global basis. These marketing efforts are intended to create enhanced global awareness of the Internet, its growth, and its evolution from a saturated dot-com brand to a resource with broad appeal that transcends cultural boundaries.

          The overarching strategy for Afilias is to create a brand that brings the Internet and domain name registration to individuals and businesses everywhere. In addition to investing in the brand by advertising it in a range of markets worldwide, Afilias is uniquely positioned to utilize its Member Registrars to market the TLD to their registrant customers, triggering a viral, cost-effective marketing campaign.

3)       Rebate Program

          Afilias will institute a rebate program during each year of operation. Through this rebate program, "active registrars" (defined as those ICANN-accredited registrars that have registered domain names in the new TLD) will be eligible to receive a rebate based on the amount of domain names registered in the registry. Afilias will allocate 25% of cash on hand (less allocations for operating expenses) to distribute among these active registrars. This amount will be distributed to the registrars in proportion to the number of registrations registered by that registrar during the relevant period.

D13.2.2 Revenue model. A full description of the revenue model, including rates to be charged for various services.

          Afilias will derive revenue chiefly through domain name registration and domain name renewal fees.

Domain Name Registration Fees

          Afilias will charge US$5.75 for each domain name registration per year. Registrars will be required to register each domain name for a minimum of two years and a maximum of ten years in one-year increments. As such, registrars will be billed US$11.50 for each two-year initial registration. Afilias will collect registration fees for the total term at the time of registration.

Domain Name Renewal Fees

          Similarly, for registration renewals, Afilias will charge registrars $5.75 for each renewal year. If a registrant wishes to renew a registration, the renewal must be for a term of between one and ten years. These revenues will begin during the third year of operations when the first round of two-year registrations become due for renewal. Afilias will collect renewal fees for the total renewal term at the onset of the renewal term.

          Afilias has chosen a flat annual registration and renewal fee revenue structure for two primary reasons. First, registrars have become accustomed to the annual-fee pricing structure developed by Verisign Global Registry Services in its relationships with ICANN-accredited registrars. Second, Afilias believes that Internet-based commerce is currently not well-suited for discrete micro-payments based on specific transactions performed by the registry.

D 13.2.3. Market. Market definition, size, demand, accessibility.

Market Definition

          The market is defined as the total worldwide number of registered domain names. In terms of unrestricted TLDs, 69% are registered in the US.

Web Address Volume to Date - Domestic vs. International

*Source: NSI (dotcom.com)
universe of .com, .net, .org sites

Current Registrant Profile

          According to recent statistics*, 80% of domain names have been registered by businesses and 20% by consumers. Of businesses, 67% employ 1-4 people. This suggests three distinct groups:

Registrant Motivation

          Understanding why people register domain names will help tailor Afilias' key messages to meet the needs of the various customer segments.

          This group of registrants primarily registers domain names for the purpose of setting up personal or non-business homepages.

          Typically, a small business will register a new domain name when launching a new business, product, or service to communicate the new offering.

          These companies generally register new domain names to publicize new products and services, to protect trademarks, and to increase brand awareness. This group of registrants frequently register similarly spelled domain names to protect their brand assets.

Market Size

          There is not a direct correlation between the number of Internet users and the number of domain names registered in any given market. However, countries with high penetration rates typically have high registration rates. The following sections demonstrate this premise.

Internet Users

          The following chart indicates the number of Internet users and penetration rates in several major markets. Users are defined as adults over 18 who have accessed the Internet within the past 30 days.

Region Country Dec-99
# Online (M) Penetration
North America USA 106,600 59%
Canada 13,600 56%
subtotal 120,200 58%
Europe UK 20,400 33%
Germany 30,700 29%
Netherlands 7,600 40%
Italy 15,100 16%
France 15,800 22%
Sweden 3,600 53%
Spain 9,800 18%
Belgium 3,700 28%
Switzerland 3,400 45%
Russia 5,300 5%
Poland 5,200 11%
Other 12,864 21%
subtotal 133,464 27%
Latin America Mexico 5,500 27%
Brazil 6,900 21%
Argentina 2,600 13%
Other 3,700 17%
subtotal 18,700 20%
Asia/Pacific Japan 57,100 33%
Australia 8,000 48%
Taiwan 8,600 29%
South Korea 16,500 31%
Hong Kong 2,700 35%
China 8,100 12%
Malaysia 2,900 23%
Other 6,967 13%
subtotal 110,867 28%

source: Angus Reid "Faces of the Web" study, Jan. 2000

          Some markets, such as China, which have large populations, do not necessarily have high penetration rates, but do have a high number of Internet users when compared to markets, such as Australia, where the population is relatively small.

Current Worldwide Registrations

          The following chart indicates the total number of domain names, including .com, .net, .org, and all ccTLDs, registered worldwide.

Region Country Dec-99 Domains
North America

USA 24,863,000
Canada 1,669,000
subtotal 26,532,000
Europe UK 1,901,000
Germany 1,702,000
Netherlands 820,000
Italy 658,000
France 779,000
Sweden 594,000
Spain 415,000
Belgium 320,000
Switzerland 306,000
Russia 214,000
Poland 183,000
Other 2,364,000
subtotal 10,256,000
Latin America

Mexico 404,000
Brazil 446,000
Argentina 142,000
Other 80,000
subtotal 1,072,000
Asia/Pacific Japan 2,636,000
Australia 1,090,000
Taiwan 597,000
South Korea 283,000
Hong Kong 114,000
China 71,000
Malaysia 59,000
Other 515,000
Subtotal 5,365,000
TOTAL 43,225,000

source: Center for Next Generation Internet

Accessibility

          While certain developing markets are believed to represent tremendous growth potential, restrictive government policies as well as an inadequate infrastructure offer limited growth potential in the near future. For example, there are 1.09 million domain names registered in Australia, which has an online population of 8 million, while in China, there are 71,000 registered domain names, despite a total population of 8.1 million Internet users. In Latin America, two countries account for a total 80% of all registered domains in the region.

Market Demand

          Even though growth rates in other countries and regions are higher than in the US, the absolute number of new Internet users in the US is still increasing, due to sophistication of the market and the large potential base of users. The same holds true for the growth of domain name registrations. In all likelihood, the US will continue to represent the largest market in terms of future registrations.

          The following chart indicates the projected number of Internet users in major markets over the next three years.

Dec-00 Dec-01 Dec-02
Region Country # Online (M) growth> # Online (M) growth # Online (M) growth
North America USA 139,600 30.96% 153,600 10.03% 160,800 4.69%
Canada 17,000 25.00% 18,500 8.82% 20,400 10.27%
subtotal 156,600 30.28% 172,100 9.90% 181,200 5.29%
Europe UK 34,100 67.16% 41,400 21.41% 47,600 14.98%
Germany 49,700 61.89% 66,700 34.21% 76,200 14.24%
Netherlands 11,600 52.63% 13,700 18.10% 15,600 13.87%
Italy 28,400 88.08% 38,700 36.27% 49,100 26.87%
France 28,000 77.22% 35,900 28.21% 42,400 18.11%
Sweden 4,300 19.44% 4,700 9.30% 5,000 6.38%
Spain 14,700 50.00% 19,600 33.33% 24,000 22.45%
Belgium 6,200 67.57% 8,200 32.26% 9,400 14.63%
Switzerland 4,800 41.18% 5,500 14.58% 6,200 12.73%
Russia 11,700 120.75% 21,200 81.20% 30,700 44.81%
Poland 9,000 73.08% 11,800 31.11% 15,600 32.20%
Other 18,311 42.34% 22,188 21.17% 25,319 14.11%
subtotal 220,811 65.45% 289,588 31.15% 347,119 19.87%
Latin America Mexico 11,400 107.27% 12,200 7.02% 13,000 6.56%
Brazil 13,100 89.86% 18,700 42.75% 21,400 14.44%
Argentina 5,600 115.38% 7,600 35.71% 10,000 31.58%
Other 8,825 138.51% 12,900 46.17% 15,878 23.09%
subtotal 38,925 108.16% 51,400 32.05% 60,278 17.27%
Asia/Pacific Japan 86,800 52.01% 114,200 31.57% 143,600 25.74%
Australia 10,800 35.00% 12,300 13.89% 13,500 9.76%
Taiwan 15,100 75.58% 18,700 23.84% 21,900 17.11%
South Korea 29,200 76.97% 33,000 13.01% 41,000 24.24%
Hong Kong 3,900 44.44% 4,800 23.08% 5,600 16.67%
China 22,300 175.31% 27,700 24.22% 33,100 19.49%
Malaysia 5,000 72.41% 6,200 24.00% 8,200 32.26%
Other 21,833 213.36% 33,479 53.34% 45,384 35.56%
subtotal 194,933 75.83% 250,379 28.44% 312,284 24.72%

Ogilvy Interactive Analytics department, based on Angus Reid '99 data

The total number of domain names registered in 1999 was 43,225,000. By the end of 2000, this number will increase to 57,222,000. Growth is expected to decline thereafter, despite reports that countries such as China, India, and Indonesia will experience an Internet boom.

          The following chart indicates projected growth of domain name registrations in major markets over the next three years:

Dec-00 Dec-01 Dec-02
Region Country growth(%) growth(#) growth(%) growth(#) growth(%) growth(#)
North America USA 36.42% 9,055,000 20.88% 7,082,000 12.20% 5,000,000
Canada 29.00% 484,000 16.12% 347,000 10.00% 250,000
subtotal 35.95% 9,539,000 20.60% 7,429,000 12.07% 5,250,000
Europe UK 18.88% 359,000 10.62% 240,000 8.00% 200,000
Germany 19.27% 328,000 8.37% 170,000 11.36% 250,000
Netherlands 28.78% 236,000 15.53% 164,000 10.66% 130,000
Italy 60.03% 395,000 32.00% 337,000 21.58% 300,000
France 19.26% 150,000 8.72% 81,000 8.91% 90,000
Sweden 15.49% 92,000 7.87% 54,000 7.43% 55,000
Spain 37.35% 155,000 17.54% 100,000 16.42% 110,000
Belgium 17.50% 56,000 9.04% 34,000 7.32% 30,000
Switzerland 15.69% 48,000 5.93% 21,000 9.33% 35,000
Russia 25.23% 54,000 11.94% 32,000 13.33% 40,000
Poland 15.85% 29,000 8.49% 18,000 6.52% 15,000
Other 21.24% 502,000 10.62% 304,300 8.49% 269,288
subtotal 23.44% 2,404,000 12.29% 1,555,300 10.72% 1,524,288
Latin America Mexico 80.69% 326,000 36.99% 270,000 31.00% 310,000
Brazil 39.91% 178,000 21.79% 136,000 14.47% 110,000
Argentina 40.14% 57,000 23.12% 46,000 12.24% 30,000
Other 27.50% 22,000 13.75% 14,025 9.17% 10,636
subtotal 54.38% 583,000 28.16% 466,025 21.72% 460,636
Asia/Pacific Japan 27.20% 717,000 13.33% 447,000 11.84% 450,000
Australia 20.09% 219,000 10.77% 141,000 8.28% 120,000
Taiwan 40.03% 239,000 19.74% 165,000 14.89% 149,000
South Korea 8.83% 25,000 4.87% 15,000 3.72% 12,000
Hong Kong 16.67% 19,000 7.52% 10,000 8.39% 12,000
China 15.49% 11,000 8.54% 7,000 6.74% 6,000
Malaysia 13.56% 8,000 8.96% 6,000 4.11% 3,000
Other 45.24% 233,000 22.62% 169,208 11.31% 103,742
Subtotal 1,471,000 960,208 855,742
TOTAL 27.42% 13,997,000 14.05% 10,410,533 10.98% 8,090,666

Ogilvy Interactive Analytics department, based on CNGI '99 data

 

          The above chart does not take into consideration the number of domain name holders who will effectively re-register their existing .com, .net or .org in a new TLD to protect their brands. This will increase the number of new registrations each year, although an exact figure cannot be calculated due to the unprecedented introduction of a new gTLD.

Technical Opportunity

          In addition to the global demand for domain name registration in a new unrestricted TLD, Afilias believes that a substantial business opportunity exists from the enhanced registry functionality that Afilias' registry will offer, which surpasses the functionality of the incumbent gTLD registry. More specifically, unlike the incumbent gTLD registry, Afilias' registry model will provide a shared, near real-time Whois service, whereby registrants can search one database rather than searching every registrar's Whois database to determine whether a particular domain is already registered.

          Furthermore, the new registry architecture will automate several functions that are currently performed manually. These include the ability to track, in real-time, status updates of customer registrars, custom reports for registrars, near real-time zone file updates, and over the medium term, real-time updates of the DNS zone files. By automating these processes, registrars can expect meaningful operational cost savings. As such, Afilias, through its technological solutions, will provide indirect business opportunities to its customer registrars through lower operational costs.

Competition

          Afilias faces competition from several potential competitors as an operator of a new gTLD. Afilias' competitors may include:

          Existing gTLDs and ccTLDs
Afilias will compete against the operators of the existing gTLD and ccTLD strings that enjoy a first-mover advantage, and that in some cases, have substantial financial resources to launch a counter-marketing campaign against the new gTLD.
          Other Potential Bidders
A variety of other organizations may be submitting proposals to serve as a registry operator for a gTLD. These may include other domain name registrars who are not Member Registrars of Afilias, Internet access providers and Internet service providers.

Competitive Advantage

          Afilias' strongest competitive advantage is its unique ownership structure that combines the collective expertise of its Member Registrars. Additionally, given that Afilias' owners also serve as Afilias' customers, they will continually look for ways to improve the functionality and services offered through the registry. Furthermore, Afilias' ownership structure provides a built-in distribution mechanism to market the new gTLD.

          An additional competitive advantage includes the policies set by Afilias, which Afilias believes will enhance competition among registrars and eventually other TLD registries as other TLDs are released by ICANN. Afilias will provide incentives to non-member registrars in two ways to embrace the new gTLD. First, Afilias will provide qualified ICANN-accredited registrars the opportunity to take an equity position in Afilias. Second, Afilias will implement an annual rebate program open to any ICANN-accredited registrar that registers a domain name in the new gTLD.

          Afilias' goal during the release of the new gTLD is to provide a very successful proof of concept for releasing new TLDs into the market. By marketing the gTLD successfully and by implementing a scalable yet reliable and high-quality registry, Afilias hopes to illustrate to ICANN the very strong demand for new TLDs overall. This, in turn, should prompt ICANN to release additional generic and restricted TLDs, thereby fostering enhanced competition among TLD registries.

D13.2.4 Marketing plan. Advertising, publicity, promotion strategy, advertisement development strategy, relationship with advertising firm. Use of registrars and other marketing channels.

          Afilias has appointed OgilvyOne Worldwide and Hill and Knowlton Public Relations to develop a comprehensive global marketing plan. The agencies were chosen because of their expertise in launching and building brands on a worldwide scale through their respective networks. Both agencies are owned by the WPP Group, the world's largest agency network. As sister companies, the agencies will work together to create and execute a seamless marketing campaign. A confidential, detailed description of the Marketing Plan is provided in Appendix D.

D13.2.5.   Estimated demand for registry services in the new TLD. Projected total demand for registry services in the TLD, effect of projected registration fees, competition. Please provide estimates for at least 10%, 50%, and 90% confidence levels.

          The anticipated demand for domain name registrations in a new unrestricted TLD issued by ICANN (as defined by the number of new domain name registrations) is represented quantitatively in Table 1. These estimates consider several factors, including the following:

Table 1. [CONFIDENTIAL]
Domain Name Registration Demand--New Domain Names Registered
Time Period
90% Confidence Level Conservative Estimate
50% Confidence Level Moderate Estimate
10% Confidence Level Aggressive Estimate
Sunrise Period (Days 1-60)* 300,000 700,000 1,000,000
Start-Up Period (Days 91-180) 1,250,000 1,875,000 2,500,000
Remaining Year 1 (Days 181-365) 1,293,680 2,015,069 2,790,125
Year 2 2,969,909 4,948,655 7,322,928
Year 3 3,135,132 5,541,415 8,695,925
Year 4 3,135,132 5,883,217 9,798,777
Year 5 3,135,132 6,246,093 11,041,513

* Afilias will not accept registrations for 30 days after the Sunrise Period to ensure that all properly submitted Sunrise Period registration requests are properly processed.
Note: Figures presented in the financial model may vary slightly depending on the proposed launch of the registry.

   

          Significant assumptions underlying these projections at the 10%, 50% and 90% confidence levels include the following:

1)   1st Choice String Awarded

          These projections assume that Afilias' top TLD string, .web, is awarded. Afilias' market research illustrates that .web is the most attractive string to consumers, therefore providing evidence for strong potential demand.

2)   Domain Name Registration Base Rate - [CONFIDENTIAL]

          Afilias believes that after the first six months of registry operations when trademark owners and early adopters have registered their domain names in the new TLD, demand will drop to a base level, from which incremental growth will occur. Afilias forecasts "base-rate" registrations for the first month of the Start-Up Period (as defined in Section E12 of the Description of TLD Policies) at the three confidence levels to be the following:

90% Confidence Level (Conservative)
50% Confidence Level (Moderate)
10% Confidence Level (Aggressive)		 200,000 registrations/month
300,000 registrations/month
400,000 registrations/month

3)   Registration Growth Rates - [CONFIDENTIAL]

          Afilias believes that growth in demand for domain name registrations in the new TLD will slow with time. Furthermore, in constructing the demand forecasts for registrations, different growth rates have been utilized starting after the initial Start-Up Period, as depicted below:

     90% Confidence Level (Conservative)
     Months 14-18          3% monthly growth
     Months 19-30          1% monthly growth
     Months 31-60          0% monthly growth

     50% Confidence Level (Moderate)
     Months 14-18          4.5% monthly growth
     Months 19-30          1.5% monthly growth
     Months 31-60          0.5% monthly growth
     10% Confidence Level (Aggressive)
     Months 14-18          6% monthly growth
     Months 19-30          2% monthly growth
     Months 31-60          1% monthly growth

Market Factors Impacting Demand

          While it is virtually impossible to forecast with precision domain name registration demand, particularly beyond a three-year period, Afilias believes the following market conditions and internal capabilities will impact demand for its registry services.

Competition

          VeriSign Global Registry Services, the registry operator division of Network Solutions, Inc., benefits from its dominant position as the exclusive registry for the .com, .net, and .org gTLDs. Beyond the introduction of repurposed ccTLDs (e.g., .tv, .cc, .to), Afilias represents the first wave of competition to the incumbent gTLD registry operator. After awarding Afilias approval to operate the registry for the new gTLD, ICANN may quickly authorize other gTLDs that may compete with Afilias' chosen gTLD. Increased competition from companies operating unrestricted TLDs may have a significant negative impact on the anticipated demand for Afilias' gTLD, saturating the market with gTLDs and, if introduced soon after Afilias' gTLD, reducing the initial adoption of Afilias' gTLD and its long-term growth potential.

          Afilias may also face competition from more niche or restricted TLDs that provide domain names with more descriptive information than an unrestricted TLD could offer. For instance, if, following industry trends, more businesses than individuals register domain names (80% versus 20%, respectively, according to www.dotcom.com), newly-released business-related restricted TLDs may compete with Afilias' chosen gTLD, thereby siphoning away some of Afilias' expected demand. If these competitive market conditions prevail, Afilias can expect demand levels described at the 90% confidence level or below.

          Conversely, if ICANN chooses not to issue additional TLDs in the near future, demand for Afilias' registry services should remain strong. In this scenario, Afilias can expect demand levels represented at the 50% or 10% confidence levels.

New Technologies

          The emergence of new technologies may also have a significant impact on the demand for Afilias' registry services. In particular, new domain name directory technologies and software may be introduced that eliminate the need to register each domain name individually, significantly reducing the forecasted demand for domain name registrations. The imminent introduction of these new technologies may result in demand levels described at the 90% confidence levels.

Marketing Effectiveness

          Another key component impacting the demand for the new gTLD is Afilias' effectiveness in marketing the new gTLD. Afilias' TLD is positioned to have global appeal, and as such, it must be marketed to the various growth regions effectively. Afilias must quickly create brand awareness among both existing registrants (to extend their existing brands to the new gTLD) and to potential registrants, who are yet to register a domain in either a ccTLD or a gTLD. Afilias believes that it will be able to cost-effectively encourage registrants to re-register their domain name in the new TLD through its built-in Member Registrar distribution mechanism. Effectively establishing and communicating Afilias' brand on a worldwide basis should build demand levels forecasted at the 50% or 10% confidence levels.

Pricing/Fees on Demand

          Afilias intends to price the registration fees at a rate that is less than the current industry standard fee of $6 per registration for domain names on the .com, .net, and .org gTLDs. Afilias cannot guarantee that its customer registrars will pass this reduced price to their registrant customers, thus it is unlikely that pricing will have a significant effect on demand.

Anticipated Demand Phases

          To manage demand for domain name registrations in the new gTLD most effectively, Afilias anticipates three distinct "demand" phases for registration, the first two of which are set by policies implemented by Afilias.

    (1)  Sunrise Period

          As described in Section E15 of the Description of TLD Policies, Afilias will implement a Sunrise Period to permit owners of subsisting trademark or service mark registrations having national effect and that are issued prior to October 2, 2000 to be eligible to register their trademark or service mark as a domain name, using ASCII characters only. Registrants must certify to the registrar that they are eligible to register a domain name during this period. All domain name registrations obtained during the Sunrise Period will be for a minimum term of five years, to be payed by the registrant in advance.

          Afilias anticipates that parties may dispute registrations that are granted during this period. Accordingly, Afilias will invoke a 90-day dispute period immediately following the end of the Sunrise Period to provide third parties with the opportunity to contest registrations obtained during the Sunrise Period.

          Additionally, the evaluation period will provide Afilias with the opportunity to examine the operation of the registry and round robin systems and make any necessary modifications to the system prior to the opening of the TLD to the general Internet community. [THE FOLLOWING SENTENCE IS CONFIDENTIAL] Afilias estimates, with a 50% confidence level, that during the two-month period, a total of 700,000 trademarked domain names will be registered.

    (2) Start-Up Period