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NSI Livid Over ICANN Doubled Budget Proposal
By Kevin Murphy
The world's biggest domain name registrar is outraged over the Internet Corp for Assigned Names and Numbers' proposed 2005 budget, which Network Solutions Inc's CEO said levies an illegitimate "tax" on domain name holders.
But other registrars seem split on whether ICANN's $16m budget represents a step forward or back for the industry. Some say the new model will put smaller registrars in jeopardy, while others think it makes registrar payments more predictable.
ICANN is trying to almost double its budget from last year. The organization, which oversees the internet's naming and addressing systems, wants $16m to fund 2004-2005 operations, and wants domain registrars to pay $14m of that.
Both of those figures are almost double what ICANN's 2003-2004 budget called for. A major change is that ICANN wants registrars to pay $0.25 per billing transaction - that is, 25 cents for each year of domain registration, or each transfer or renewal.
NSI's CEO Champ Mitchell told ComputerWire the fees will increase costs and place an unreasonable burden on smaller registrants. He said: "We do not support it and we will oppose it. That's our position and the position of a lot of other registrars."
Other major registrars we tried to contact yesterday either could not be reached or did not return requests for comment, but mailing list chatter and ICANN representatives suggest that many registrars are in favor of the moves.
ICANN's VP of business operations Kurt Pritz said that the extra money is needed to help ICANN meet its obligations to the US government, and to provide ICANN constituents, including registrars, with the types and levels of service they demand.
"We signed a new memorandum of understanding with the Department of Commerce that clearly lays out due dates for what ICANN needs to do in the next three years to become independent of the DoC," he said. "Each of these tasks is substantial."
He added that funding is needed to overhaul the IANA management systems and hire new personnel. IANA, an ICANN "function", is the ultimate authority on who gets to run the world's country-code top-level domains (ccTLDs), such as .uk and .us.
It will also be spent on providing services to registrars, such as a new "contract compliance program", which would see that registrars and registries are acting fairly within the terms of their contracts with ICANN.
Mitchell said he reckons a lot of the budget increase has to do with ICANN striving to "appear more international" and open up new offices overseas, at a time when its authority and reliance on the DoC is being questioned by the United Nations.
The UN's World Summit on the Information Society is looking at the subject of internet governance, which includes ICANN and IANA functions. Some characterize WSIS as a means for the UN or ITU to take over these functions.
ICANN's Pritz said that the plan to grow internationally actually relies more heavily on resources donated by local governments or non-governmental organizations, rather than money provided by registrars via the ICANN budget.
Under its current funding system, ICANN picks a total budget and divides that number up unevenly between its constituent groups. Registrars and generic TLD registries always get the biggest commitments, with ccTLDs and others getting smaller slices.
The current mechanism splits the total registrar number between the over 200 registrar companies based on their market share of gTLD registrations. The new system envisages the $0.25 per-transaction fee instead.
Mitchell called this a "tax", and said registrars will pass that fee onto buyers at the checkout, raising prices. Pritz said it's up to each registrar how the fee is factored into the business model. Some registrars may just swallow the lower margin.
Mitchell said that in the case of multi-year registrations, people would be paying this upfront "tax" to support ICANN five or ten years from now, even though there's no guarantee ICANN will be around that long.
Mitchell also questioned its legality in various international jurisdictions, said the way the budget was arrived at was "irresponsible" and said NSI could resort to legal action against ICANN "if it comes to that".
The "tax" issue has come up before, notably in 1999 when ICANN's original management was forced to defend and then abandon plans to charge registrars $1 per year for each domain under management.
The ICANN budget also envisages a $3.8m support fee, split between all the registrars. If there are 250 registrars, as ICANN reckons there will be, then each will pay a bit over $19,000 in a flat annual support fee.
Some registrars claimed, on a publicly archived mailing list yesterday, that this could put smaller firms out of business. ICANN's budget includes a clause that would allow it to waive two thirds of the fee in these cases.
Other registrars argued that the changed structure would make their ICANN fees more predictable, allowing for better cost planning. Even NSI's Mitchell admitted that NSI's expenses could be reduced under the new plan.
Funding in a perennial problem for ICANN. Participants want a faster, more efficient organization, but are unwilling to shoulder more of the funding burden. Currently, there is an imbalance, with most funding coming from US firms.
The budget calls for 35% of ICANN revenue to come from ccTLDs, with that amount split between individual ccTLD registries depending on their size. In practice, most ccTLDs just don't pay, and the budget expects only $1m from these companies.
Source : http://www.cbronline.com/
