[council] Letter from ICANN to registrars regarding approving the budget

["Bruce Tonkin" <Bruce.Tonkin@xxxxxxxxxxxxxxxxxx>]

Hello All,

I have attached a copy of a letter sent to registrars from ICANN seeking
support for the registrar fee structure.

It is written with registrars in mind, but does give a feel for what
ICANN believes it has achieved in the past year, and what it is planning
to do that has an impact on registrars.

Regards,
Bruce Tonkin



24 June 2005 
 
To: registrar

It has been a motivating and challenging year since we discussed the
development of the present 
ICANN budget. At the outset, please let me express our gratitude for the
Registrar expression of 
support for the budget and the ICANN model during the past year. We do
not take for granted 
the fees paid by the Registrars and recognize the significance of those
fees. We do not cash those 
checks believing they are our due but rather, we acknowledge that we
must continually earn the 
right to receive those fees through ICANN's performance. 

We are writing to request that you provide your formal approval of the
Registrar fee structure as 
defined in the ICANN fiscal year 2005-06 budget. As discussed last year,
the fee structure 
described in the budget for the upcoming year remains the same as the
previous year's budget. 
That is, the budget provides for a 25-cent (U.S.) per transaction fee
and a flat fee of 
$3.8 million to be divided among all active Registrars. 
In addition, the flat $4000 annual accreditation fee 
remains in place. This flat fee will provide Registrar access to new
registries as they are 
designated with a minimum administrative burden. 

ICANN has been receiving the higher level of revenue as provided in the
new fee structure since 
March of this year. While we have only been receiving that new level of
support for a few 
months, we are putting that money to work in the ways we discussed last
year at this time. 


Initiatives 
===========

ICANN has posted a plan and procedures for contractual enforcement or
compliance. We are 
presently in the process of hiring three positions to initially staff
that function. In addition, we have devoted essentially a full-time
equivalent to enforcement of the consensus based Inter-
Registrar Transfer policy. This compliance function includes
rectification of transfers improperly 
blocked, return of names transferred without proper authentication, and
a report describing 
recommended improvements to the policy. The recommendations include
increased flexibility in 
the policy where security would not be compromised and taking steps to
improve the reliability 
of the transfer authentication. ICANN staff is spending considerable
resources contributing to the 
study and prevention of domain name hijacking. The fruition of that work
will be presented by 
SSAC in Luxembourg. We are also adding two full-time equivalents to
respond to general 
Registrar requests in a timely manner. 

In addition, ICANN staff has devoted considerable time and study to the
issues and potential 
abuses created by the "add-storm" surrounding the batch pool and the use
of adds/deletes within 
the five-day grace period. There have been workshops and proposals
describing potential 
solutions to both these issues, solutions in which market forces will
continue to drive the 
business segments. ICANN will work with Registrars in order to timely
implement a consensus 
based solution. 

ICANN is also designating new TLDs that are intended to open up the name
space and create 
new market opportunities. Several new registries will be designated as a
result of the recent 
sTLD round. ICANN has taken measures to ensure that the new sTLDs
release names through 
accredited Registrars only in the same way as existing Registries do. In
addition, this round of 
sTLD designations is serving to provide lessons for future rounds of
gTLD designations. With 
the increased funding, ICANN is commissioning the studies necessary to
determine under what 
conditions new TLDs can best be created to react to market forces rather
than regulation. 

Additional effort is also being applied to the investigation of the
stable deployment of full IDNs 
(or IDN.IDN registrations). We think that this effort will result in new
markets for many 
accredited Registrars. 

A major feature of the .NET agreement is the stream-lined, tightly
defined manner in which 
ICANN will consider new registry services for approval. This roadmap
will provide better clarity 
and predictability to Registrars in determining how to approach proposed
changes by registries 
and also how to effectively pursue changes that Registrars see as
beneficial. 

One of the initiatives to be taken on immediately is the re-drafting of
the Registrar Accreditation 
Agreement. ICANN staff has prepared an issues list for discussion with
the Registrar 
constituency in Luxembourg. 

Responding to External Forces 
=============================

The Finance Committee members have reviewed the budget against our
future goals. These goals 
are not only desires for improvements, they are requirements imposed by
external organizations 
or forces. 

For example, ICANN is more than halfway into a three-year MoU with the
U.S. Department of 
Commerce. That agreement specifies the path by which ICANN will become
an independent 
organization. ICANN has satisfied 16 of 25 milestones on that path, all
on or before the required 
deadlines. However, much work remains for the full completion of these
tasks. Investment in 
infrastructure, contingency plan execution and business back-up
agreements (to mention some) 
must be put into place before ICANN can become an independent entity. 

ICANN has also devoted some resources by becoming involved in the U.N.'s
World Summit on 
an Information Society (WSIS). WSIS and the recognition that a viable
ICANN model must 
involve stakeholders worldwide has lead ICANN to globalize its efforts
with regard to ensuring 
stakeholder participation. To fail in either the MoU or in the WSIS
environment may lead to a 
governance model different from one that encourages innovation and
bottom-up consultation. 
This is why we believe investment in these areas is so important to
ICANN, and also the 
Registrar community. 


Diversifying Sources of Funding 
===============================

Finally, ICANN continues to diversify its sources of funding. This year,
the .NET registry 
agreement was re-written in several significant aspects. First, the
successor registry, VeriSign, 
will pay fees to ICANN equal to 75-cents (U.S.) per registration-year.
This is in-line with our 
discussions with Registrars last year that registry fees were,
relatively speaking, too low when 
compare with the business models and fees paid by Registrars. While the
altered funding scheme 
has not resulted in a proposal by ICANN to reduce Registrar fees at this
writing, we expect that 
further diversification in the future will lead to opportunities for the
Finance Committee to 
reconsider the quantum of Registrar fees. 


Conclusion and Next Steps 
=========================

We are pleased with the work so far, but realize that we have more to
do. Everyone at ICANN 
recognizes the importance of the Registrar community in facilitating the
development of 
effective new business models in the DNS and to ICANN itself. We have
heard and considered 
your concerns, ideas, and views over the past year. We will continue to
participate in 
meaningful dialogue on the issues affecting the Registrar community. We
look forward to 
working with you into the future while we achieve mutual goals. 

Conversations with many Registrars regarding the new budget indicate
that the approval process 
need not be the extended process that occurred last year. If you wish to
signal your approval for 
the budget, please write an email or letter to Kurt Pritz, Vice
President, Business Operations, indicating that the writer, an officer
of the company empowered to do so, 
"approves the Registrar fee structure in the FY 2005-06 ICANN Proposed
Budget". 

If you have any questions regarding the budget or ICANN's initiatives,
please feel free to contact 
either Paul or Kurt Pritz directly. 

Thank you again for the time taken to read and consider this material. 

Sincerely, 
 

Paul Twomey, CEO 
Hagen Hultzsch, Chair, Board Finance Committee