[registrars] Analysis of ICANN fee position

[Elana Broitman]

I wanted to add a perspective on what happens if ICANN goes directly to the registries. 

Under the RRA, Section 5.3: Pro-Rata Charges for ICANN Fees. Registrar agrees to pay to VGRS, within ten (10) days of VGRS's invoice, a portion of any variable registry-level fees paid by VGRS to ICANN, pro-rated among all registrars sponsoring registrations in the Registry TLD based on their relative numbers of domain-name registrations sponsored.  (.com example)

Under the Registry Agreement with ICANN, Section 7(c), the Registry Operator shall pay the quarterly Fixed and Variable Registry-Level Fees within thirty days after the date of ICANN's invoice for those fees. 

So, the payment terms would be beneficial for the registries, if we must pay to them rather than ICANN. Not only would ICANN be more dependent on the registries, we would be more constrained as well, particularly considering that we have letters of credit with the registries, which can be used for our fees.

Elana Broitman
Register.com
575 Eighth Avenue
New York, NY 10018
Phone (212) 798-9215
Fax   (212) 629-9309
ebroitman at register.com 


-----Original Message-----
From: Bruce Tonkin [mailto:Bruce.Tonkin at melbourneit.com.au]
Sent: Tuesday, October 14, 2003 11:20 PM
To: registrars at dnso.org
Subject: [registrars] Analysis of ICANN fee position


Hello All,

Here is my take on the current situation, and where we need to move
forward for next year.

(1) Current situation
- the budget is approved by the ICANN Board
- Registrars have a limited ability to influence the budget during the
budget process, and have even less ability to directly influence the
Board members
- the 2003-2004 budget is now approved by the ICANN Board
(we should have been more vocal in the community before the budget was
approved)
- the current structure for meeting the ICANN budget is primarily from
the suppliers of domain name services
- presently ICANN can invoice registrars directly (if registrars agree
to this), or as a back up they can invoice the registries directly
- registries have built into their contracts the ability to pass on the
fee to registrars
- registries with significant market power are highly likely to pass on
the fee to registrars (e.g Verisign)
- registries with limited surpluses (cash reserves) will be forced to
pass on the fees to registrars

While registrars pay the fee to ICANN we have at least some chance to
influence ICANN in the areas that concern us.  This leverage is really
based on the fact that ICANN will need to change their processes to
invoice registries, and this will delay their receipt of funds and
direct scarce resources to deal with the change.  The leverage will only
work once, after that we will be bypassed in future years.

By refusing to pay the fee as a registrar, registries (especially
Verisign) in the short term will gain greater leverage over ICANN.

Based on the current situation, Melbourne IT will approve ICAN billing
us directly rather than collecting the same money from us mainly via
Verisign (as they represent the bulk of our gtld domain name
registrations).  Melbourne IT will also endorse the letter proposed by
Elana.


(2) Future situation

- registrars get more active in defining ICANN's budget
(lets start now for 2004-2005 financial year)
- registrars work within ICANN to consider alternative funding models
(e.g ICANN could run an auction for new tlds and keep the proceeds to
fund regulation, or even more radical ICANN could run an auction for the
wildcard entry in the .com and .net zones, why should Verisign as a
registrant get this entry at no cost)
- for the per domain name fee compoenent of ICANN fees, lets make it a
fixed fee per NEW/RENEWAL/TRANSFER transaction so that it can be clearly
indicated to our customers - rather than based on a retroactive number
of domains under management. 
- I think it is better that ICANN's revenue be tied in some way to
market growth rather than at present the budget is just apportined to
registrars based on the number of domains under management (thus a
company in the market for longer pays a larger portion of the fees) -
this would align ICANN's goals more clearly to the goals of registrars

So I think for the future year, we should begin to think about different
funding models for ICANN, and start campaigning.  Certainly the other
sections of ICANN (other than registrars and registries) are quite happy
for us to bear the burden of costs, and happy for ICANN budget to keep
growing (as they don't see the effects).

Maybe an agenda topic for Carthage should be future funding models for
ICANN.  If we don't do anything - expect the budget to increase again
next year, and for us to be the most affected party.



Regards,
Bruce