RealTime IT News

Registrars End Budget Holdout

A slight change in the fee structure for registrars was just enough to ratify Internet Corporation for Assigned Names and Number's (ICANN) $15.8 million budget measures.

The new fee structure goes into effect Nov. 1.

The ICANN announcement, made earlier this week, signals the end of a nearly three-month holdout by the companies who buy and sell domain names for their customers. While many of the more successful registrars supported the proposed budget, a coalition of smaller registrars was dead-set on opposing fees they said violated the Internet organization's mandate to promote globalization and competition because of their amount.

ICANN executives needed only a majority two-thirds vote in support of the budget measures to garner registrar approval, a group that's paying $11.4 million of the $15.8 million budget. Voting power is determined by the amount of fees an individual company pays into the organization every year, so larger companies have more of a say in ICANN matters than smaller registrars.

When officials adopted the 2004-2005 budget in July, Paul Twomey, ICANN CEO, said ICANN was within a "whisker" of having the necessary votes from registrars. It wasn't until Friday, however, that it got the majority support needed when U.S.-based registrar Network Solutions signed on.

However, the fee structure for registrars remains much the same as it was when adopted. Registrars still pay a $4,000 annual fee for the right to sell generic top-level domains (gTLDs) like .com, .net or .org; they're charged 25 cents for every billable transaction they make (new subscriptions, renewals or transfers to domain names); and they're still each paying a portion of the $3.8 million ICANN officials say is needed to cover registrar-related costs during the year, though a part of the variable fee for smaller registrars can be forgiven and put back in the overall pool of money for fee redistribution.

The only recent change to the registrar's fee structure comes from the manner in which registrars recognize their individual 25-cent transactions, a recent addition to ICANN's proposed budget. Companies now have two choices when it comes to multi-year domain registrations: they can either pay ICANN the entire transaction fee -- thus a three-year renewal would net ICANN 75 cents in the current fiscal quarter -- or they can defer payments yearly.

So, instead of paying 75 cents right away, registrars can pay 25 cents annually over three years. For a company like Network Solutions, which in March started a 100-year domain registration service, it means they can spread their payment to ICANN with 100 small installments, rather than 10 larger payments of $2.50 (ICANN only recognizes 10-year terms on domain registrations).

Susan Wade, a spokeswoman for Network Solutions, said the company has been working with ICANN on the proposed budget for some time, but could not confirm at press time that the deferred payment clause was added at their request.

"It was a compromise situation; we didn't get everything that we wanted, and they didn't get everything they wanted," she said of the company's talks with ICANN officials.

Officials at the Marina del Ray, Calif., organization were not available at press time for comment.

Bhavin Turakhia, the front man for a coalition of small registrars opposed to the ICANN fee structure, was able to wring some concessions in order to swing some votes ICANN's way earlier this year. His Web site proposed a fee structure he said is less of a burden on smaller registrars than the current model but that provides the same revenues ICANN needs.

He said the 76-member coalition, which collectively makes up 10 percent of the registrar voting power, was able to convince ICANN officials to modify the budget to include a price cap clause freezing the transaction fee at 25 cents, as well as a promise to fix the variable fee at $3.8 million dollars for the next three years.

Additionally, if the money ICANN collects from per-transaction fees exceeds projections, that extra money is used to reduce the fixed variable fee and build up ICANN's reserve fund.

Turakhia considers the concessions a 40 percent to 50 percent success, but the caps aren't set in stone. According to the budget's wording, it's ICANN's "sincere intention" to honor the fees for the next three years. Turakhia said there's nothing to stop ICANN from removing the caps in next year's budget except its word, which he doesn't find likely.

"If ICANN backtracks on its commitments in next year's budget, there's very little chance of it getting approved, so I don't think they will do that," Turakhia said. "I doubt very much that ICANN would have a budget issue where they, once again, increase the budget and try to squeeze the money out of various sources."

Still, he had a tough time convincing the coalition he founded to approve the fee structure. Turakhia said only about half of them followed suit when he gave his blessing to the proposed budget.

ICANN is in a quandary concerning the payment for its operations. According to its budget proposal, litigation costs ran 300 percent over the amount budgeted for the current fiscal year. Notable is the organization's legal disputes with VeriSign , registry owner of the .com and .net gTLDs.

The company is trying to sue ICANN for suspending a number of its marketing initiatives, primarily the controversial Wait-List Service (WLS) and SiteFinder.

The organization also needs funding to support new programs to become an independent, worldwide Internet body.

Currently, ICANN is under contract with the U.S. Department of Commerce to manage the technical aspects of DNS management for TLDs. Independence means fulfilling certain milestones, some of which are due to be implemented by Dec. 31.