ICANN Dues Plan Under Fire

Seventy-five registrars from around the world have banded together to protest the Internet Corporation for Assigned Names and Number’s (ICANN)
proposed 2004-2005 budget, which significantly raises the yearly fee for
registrars regardless of size.

If approved, the budget set forth by the Marina del Ray, Calif.-based
Internet governance body could force dozens of registrars out of
business, said alliance leader Bhavin Turakhia,
chairman and CEO of registrar Directi. Turakhia, who formed the registrar alliance back in May, said such an outcome would violate the organization’s mandate to promote Internet globalization and competition.

“There are registrars out there who are large in their country but small if
you compare them to the ones in the United States,” he said, and don’t make
the money necessary to pay the fees proposed.

In the past, fees for registrars were determined by the number of global top-level domains (gTLDs) they wanted to sell domain names from, a $4,000
yearly accreditation fee to sell .com domain names and $500 for every other
domain extension (.net, .org, .name, etc.).

This time around, ICANN has changed its billing structure. Starting this
year, registrars pay $4,000 and are able to sell domain names from any gTLD.
But assessed this time will be a fee imposed on registrars, regardless of
size. ICANN determined that $3.8 million (or 1/3 of its total registrar
cost) goes to supporting all registrars, so they will divide that figure
by the number of accredited registrars.

Currently, there are 197 ICANN-accredited registrars, meaning each would
need to pay a $19,289 variable fee, putting the tab at more than $23,000 all
together. For a registrar who was paying the $4,000 yearly fee to only sell
from one gTLD (.com), that represents a 475 percent increase in fees.
(Although that percentage increase would be impacted by how many TLDs it supported in the past.)

The figure would change if more registrars get accredited with ICANN when the budget is approved (it’s in a public comments period now). According to
ICANN’s budget proposal, officials expect 250 accredited registrars at that
time, which would lower the annual variable fee per registrar to $15,200.

Another proposed budget change affects registrars more by the size of their
operations. The transaction fee assessed for every domain name that is
added, renewed or transferred is raised from around 12-18 cents per name to 25 cents. Transaction fees make up the rest of the $11 million registrars pay into the ICANN budget.

Turakhia and 54 of his registrar members have signed an
agreement to an alternate budget of their own and sent it to Paul Twomey, ICANN president and CEO. It would keep the $4000-for-all-gTLDs and the 25
cents per transaction fee, which the group figures will raise between
$11 million to $12 million a year. This sum is roughly equivalent to the amount ICANN says it spends all together on registrar activities in a year.

Kurt Pritz, ICANN vice president and one of the authors for the current budget proposal, doesn’t disagree with the alliance’s contentions, saying the fees put an undue strain on the registrar community and make up about 70
percent of this year’s $15.8 million needed to fund ICANN, a figure that
should be around 50 percent.

“That goal has never been met and registrars have always contributed more
than that share,” he said. “I recognize, as does Bhavin, that this is a
problem and one of the goals in ICANN’s strategic plan and in this budget is
to develop alternate sources of funding to alleviate that.”

He points to several of the alternate funding measures laid out in the
budget proposal:

  • New gTLDs – Currently six registries — VeriSign
    (.com and .net), Afilias (.info), PIR (.org), NeuLevel (.biz), GNR (.name)
    and RegistryPro (.pro) — pay in $846,000 a year as gTLD managers. Adding
    new TLDs would create more revenue.
  • These registries, which provide registry-specific services, could be
    charged on the revenues they make from those operations.
  • Tax online businesses, a suggestion brought forth by some business
    owners. “ICANN proposes to engage these stakeholders and other commercial
    entities who profit from the stability and operation of the Internet and
    those who underwrite those who profit from Internet interoperability,” the
    budget proposal states.
  • Country-code TLDs. Country-specific domains (.us, .uk, .au, etc.) pay
    less than 10 percent of the total budget, Pritz said that number should be
    around 35 percent.

Pritz said the reasons for the increased budget are three-fold: in order to meet the 24
guidelines required by the Department of Commerce (DoC) before it can break
off and become a separate entity in 2006, it needs to spend money to fulfill
those guidelines; the DNS is growing, and the attendant costs
grow in kind; and the ICANN constituency is asking for new services, like
governance measures which ICANN, as a technical body, doesn’t currently

Pritz also points out that registrars who can’t pay the annual fees
can ask for forgiveness of their debt, up to two-thirds of the amount
they’re required to pay. The flip-side to that, however, is that the debt
smaller registrars don’t provide is distributed among the larger registrars,
who will then have to make up the difference.

Register.com , one of the world’s leading registrars, is on the budget advisory committee representing registrars to ICANN. Officials there acknowledged they received advance warning on the proposed budget before it went public in May and said they worked “aggressively” to reduce the budget by 30 percent.

“We think the budget as it is currently proposed is still too high,” Peter Forman, Register.com CEO, said by an e-mailed statement. “However, we are supportive of increasing the budget because we want a healthy ICANN.”

Forman, like ICANN’s Bessin, is championing alternative funding measures as a way to free registrars from providing more than 70 percent of the total funding. However, Register.com does not support the forgiveness measure, saying “no one registrar model should subsidize other models,” Forman said. “Every additional registrar, regardless of size, adds a cost to ICANN’s operations.”

Turakhia said this new fee structure is entirely too complicated, while the
budget he and his members came up with provides a solution much more clear
and gives smaller registrars a chance to meet its obligations, thus meeting
ICANN’s mandate of fostering globalization by keeping them in business.

His fear, however, is that the large, mostly U.S.-based registrars, are
all-too-happy to agree to the ICANN budget, because it could knock out some
of the competition and create a barrier to entry for registrars seeking
accreditation within ICANN. The voting structure within ICANN’s registrar
constituency is such that whoever has more of a stake in the organization — the bigger companies with more domain names under their belt — could have
more of a say when it comes to seeking a majority vote.

With 30 of the largest registrars banding together, Turakhia said, the other
167 registrars would be outvoted.

Regardless of the outcome, ICANN officials don’t plan to increase the registrar burden in the next three years, Pritz said. While
the alternate sourcing methods won’t go into effect until next year, most
will be in place and ready to pick up the burden in coming years.

Talks between alliance and ICANN officials have been ongoing since May,
Turakhia said, and the discussions have been “positive.” Time will
tell whether it bears any fruit.

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