2MM cap (was: [registrars] knowing when to fold 'em)

[Elmar Knipp]

On Sat, 16 Oct 2004, Tim Ruiz wrote:

> The $2MM cap has no affect on smaller registrars whatsoever. The annual
> portion of the variable fee (the $3.8MM) is billed quarterly so it will
> be paid first before any registrar will hit the $2MM cap. It will be the
> transaction fees that cause a larger registrar to hit the cap. And
> actually, if one or more large registrars hit that cap it will mean lower
> fees for everyone else.
>  
> The reason is that ICANN will have obviously underestimated what the
> transaction fee will bring in, and the budget calls for using any excess
> transaction fees to reduce the annual portion.

Tim,

I am not sure whether I got the point in your message. The cap has nothing 
to do with the quarterly collection of the fees. The quarterly collection 
is only the technic of charging and is independent of the yearly result.


Assume the following simplified two scenarios:

Scenario 1)

350 Registrars, nobody gets forgiveness, 1 registars has 7 million domains 
(called R-7), all other have the same number of domains, which is lower 
than 7 million (called R-all).

Every registrar has to pay 3,800,000 USD / 350 = 10,857 USD.
Every registrar also has to pay 0.25 USD per domain year.

R-7 will have payed at the end of the year 10.857 USD + 7,000,000 * 0.25 
USD = 1,760,857 USD.


Scenario 2)

Same as above, but 7 million domains are transfered from R-all to R-7 
(20,000 domains from each R-all). R-7 has now 14 million domains.

In my view, R-7 has to pay at the end of the year 10.857 USD + 14,000,000 
* 0.25 USD = 3,510,857 USD. But in the ICANN model he only has to pay 
2,000,000 USD, the cap.


Conclusion: With the ICANN model R-7 gets a relief of 1,5 million USD or 
pays only 14 cent per domain. This seems to me inequitable.

If there is more income than expected in the budget, the balance could go 
to 50 % in the reserves and the other 50 % should reduce the variable fees 
*of all* and *not only* from the huge registrars.


Best Regards,
Elmar