Proposed Budget:
Fiscal Year 2005– 2006

POSTED 17 MAY 2005


TABLE OF CONTENTS



Planning Process

This proposed fiscal year 2005-06 budget provides a description of the ICANN budgeting process for this upcoming year, annual objectives that the organisation has set out to accomplish, and an explanation of the revenue model and spending plan for the year. After public comment and follow-up discussions with the Budget Advisory Group and the ICANN Board of Directors' Finance Committee, the budget will be amended and submitted to the ICANN Board for adoption in Luxembourg on 15 July 20051.

During the preceding twelve months, ICANN staff and Board members have consulted with a wide range of people representing a variety of interests and needs relating to ICANN's mission. This included intensive consultation regarding ICANN's proposed strategic plan. Examples of this consultation include:

This consultation process has focused on what the various parts of the ICANN internet community think ICANN should be doing to continue improving its performance and included Governments and law enforcement officials, academic and everyday users of the Internet, ccTLD managers, gTLD registry and registrar operators, Internet Address communities, members of the Technical community, business leaders, Intellectual Property Holders, Internet service providers, and technical Internet operators.

In response to this community input, ICANN adjusted its planning priorities. This budget is a key first step towards addressing these priorities. The budget is based upon the results of consultations with various Internet constituency groups and the goals set out in the Memorandum of Understanding with the U.S. Department of Commerce.

ICANN staff developed this budget through a bottom-up, collaborative approach involving key ICANN stakeholders, including those who contribute to its revenue.

In order to develop budgetary requirements in a zero-based, bottom-up fashion, ICANN department heads each created departmental annual operating objectives. ICANN senior staff then met as a group to identify additional objectives that are shared as a team. After compiling these objectives into a single operational plan and identifying the owner of each objective, each manager wrote a departmental budget. The departmental budgets were reviewed by management to ensure effective and efficient use of funds. Senior management then conducted an additional review of the consolidated budget.

The process also included (and will continue to include) consultations with the ICANN Board of Directors Finance Committee and the Budget Advisory Group. Consultations with the community will continue through the public comment period for the proposed budget.

The process thus far has greatly enhanced communication among stakeholders and between ICANN and the Internet community. There has been a great exchange of information among the parties describing the challenges and opportunities facing all.

ICANN's 2005-06 budget will permit ICANN to meet the requirements of the Internet community and fulfill the obligations in the final full year of the MoU with the U.S. Department of Commerce. The new budget was developed through ICANN's evolving strategic planning process. The budget incorporates the "operational objectives" identified through that planning process.

Operational Objectives

Operational Plan Highlights

The ICANN Operational Plan describes over 100 individual measurable goals set out for the fiscal year. Several of these goals (or groupings of them) are of prime importance to many constituency groups. Therefore, before describing the Operational Plan in detail, it is first meaningful to briefly discuss some of the important aspects of the plan in more detail.

Compliance

The budget provides that ICANN will augment the corporate compliance program, including the system for auditing registry and registrar contracts for compliance by all parties to such agreements. ICANN published its compliance program at http://www.icann.org/compliance/.

The compliance program will build upon existing, constructive relationships with the registrar and registry communities. The elements of the initial program will consist of:

An effective compliance program will protect peer and client members of the Internet community by ensuring constancy of conduct across the registrar and registry communities.

Improvement of Registration Services

Registration providers offer an invaluable service to the global Internet community by registering domain names and IP number assignments and publishing the information that ensures stable mapping of names to Internet resources. ICANN will provide and improve the following services to registration providers:

Services to registrants:

Meeting the needs of registration providers and consumers is already a significant element of ICANN's budget, but there are many activities that are under-funded and under-staffed in light of the demand for such services. To provide the level of service that appropriately fulfills ICANN's service goals will require substantial investments in systems, infrastructure, regional presence and personnel.

IANA Performance

ICANN's stakeholders require timely, reliable, and accurate responses to their operational requests, and responsiveness to their evolving needs.

To increase its effectiveness, ICANN's IANA function has initiated a work program to map its processes and activities. Systemic improvements to these processes will enable faster, more efficient and more accurate performance of ICANN's operational functions.

The immediate priorities for improved performance are:

On an ongoing basis, ICANN staff will refine the management system based on experience and feedback from ICANN's stakeholders.

Implementation of New Registry Services

ICANN, working with product developed by Supporting Organisations, is proposing a transparent, repeatable and predictable process for evaluation of proposed changes in registry operations. In order to support the process, ICANN will retain the services of a technical panel that, if called upon, will dedicate itself to the evaluation of proposed services. ICANN will also provide internal staffing to provide preliminary opinions regarding proposed services on a timely basis as is called out in the new process.

ICANN continues to work with the GNSO and will also develop and publish performance guidelines so that applicants and requestors will understand the process, the input requirements and the timing of outcomes.

Contingency Planning

In accordance with good business practices and the objectives described in the MoU with the U.S. Department of Commerce, ICANN has developed a contingency plan to ensure continuity of operations in the event the organisation incurs a severe disruption of operations, or the threat thereof, by reason of its bankruptcy, corporate dissolution, a natural disaster, or other financial, physical or operational event. Similarly, ICANN has developed a contingency plan to ensure continuity of registry and registrar relations in the event that any such organisation suffers a severe disruption of operations.

The budget for the contingency plan requires capital investment, new geographically diverse infrastructure, and staff time to put into place agreements, relationships and procedures that will guarantee on-going operations.

Globalisation

ICANN has translated documents into 17 different languages, up from zero 20 months ago. As a global organisation, ICANN will provide multilingual communications and materials to communicate with regional Internet communities in order to provide relevant expertise, assistance, and information. As part of developing and implementing an economical and effective strategy, ICANN will, in consultation with the community:

ICANN has been contacted by several governmental and non-governmental agencies regarding establishing regional presences/partnerships in certain locations. This budget contains seed money to develop those inquiries, take initial steps to explore the establishment of potential presences to ensure the efficacy and appropriate operational strategy for the site, and retain the services of regional liaisons. ICANN will conduct consultations regarding the establishment of regional presences with the Internet community and provide an operational plan to the Board for approval.

ICANN's regional presences will intend to:

The MoU with the Department of Commerce

To date, ICANN has timely met 16 of the 25 deliverables described in the MoU with the U.S. Department of Commerce. A significant portion of the budget will be dedicated toward achieving the remaining objectives set forth by the MoU and for continuing to evolve the ICANN organisation in preparation for the post-MoU environment.

A key deliverable for this effort is completing the implementation of process by which new top-level domains are designated. ICANN has received or will receive input from supporting organisations, advisory committees, outside professional entities and consultants regarding this process. The implementation will also be informed by the latest round of sTLD applications, the .NET bidding process and recent changes in the registry operator market and business structure. The new process will define allocation methods, consideration of deployment of IDNs, the number and frequency of TLDs to be introduced.

Litigation

Significant litigation expenses have exacerbated the current resource shortfall. During the current fiscal year, litigation expenses and associated outside services agreements will exceed the budgeted amount. ICANN is closely and economically managing litigation through a combination of ICANN staff work and judicious use of outside counsel. For this budget, ICANN has slightly reduced the litigation budget from the actual expenses in this current year based upon the status of current litigation.

World Summit on an Information Society (WSIS)

A significantly smaller portion of the budget will be spent managing developments springing from the UN's WSIS and the Working Group on Internet Governance (WGIG). This investment is dedicated to describing the value of the open, transparent, bottom-up model for policy development and governance. ICANN's international role, the value ICANN provides to the worldwide Internet community, and the proper management of governmental involvement in the evolution and policy making processes for the Internet.

Introduction to ICANN Operational Objectives

The ICANN Operational Plan is a one year plan based upon the goals set out in the ICANN Strategic Plan and is largely comprised of the consolidated annual work objectives of the ICANN staff. The objectives were derived from the annual requirements documents written by each of the ICANN Department Heads and also through internal consultations in order to capture goals that might be shared among functions or departments. Even though the Strategic Plan consultation process continues, the consultations to date, (including those in the Amsterdam meeting and also solicited or received by ICANN) informed the objective development process.

The objectives are organized according to the ICANN mission described in the Strategic Plan: ensure the stability and security of the DNS, promote competition, support the policy making role of the supporting organisations and advisory committees, and ensure the participation of the global community to promote education and use concerning the DNS. A fifth area is added to capture initiative to improve ICANN infrastructure and processes that are necessary and will facilitate the accomplishment of the other objectives.

Given early revenue projections and the uncertainty attendant with those projections, this plan describes goals at two levels. "Planned" goals are those that ICANN will fully pursue. The "In Development" goals are those that will be pursued through the fiscal year but completion would require additional resources or time.

The Strategic Plan calls for the establishment of three funds: a Stability and Security Fund, an Developing Nation Internet Community Project Fund, and a strategic reserve. Many of the objectives below are targets of those funds. For the purposes of this plan, ICANN will budget the uses for these three efforts in the Operational and Budget Plans.

ICANN is now developing an Expense Budget based upon the goals below and upon regular operating expenses. Having defined and correlated these objectives, the budgeting process includes making economic decisions concerning staffing levels, outsourcing, resource acquisitions and other items to ensure that the accomplishment of these objectives is being conducted in an economical manner.

Ensure Stability and Security

Planned

Through consultation with the global community create, a plan for ICANN's role to facilitate deployment of IDNs. Initially, through the IAB, understand and make a plan to address specific technical issue associated with the present implementation. Such a plan must be detailed in that it provides specific technical direction and coordinates that direction with RFCs. Retain technical expertise to facilitate the deployment. Develop a process for developing IDN policy through ICANN's supporting organisation and advisory committees. Fully form the ICANN President's Committee on IDNs.

Develop, in collaboration and cooperation with the RSSAC, a framework for relations between ICANN and the root-server operators. Work with root server operators to promote best practices.

Create a technical standing panel for the evaluation of new registry services. The panel will consist of approximately 20 members selected by the chair. The chair will be jointly appointed by registries and ICANN.

Continue implementation of the contingency plan developed in accordance with the U.S. DoC to ensure continuity of business and technical operations in the event of an unplanned interruption due to business failure or natural event.

Commit, through leadership and funding, deployment of DNSSEC. Facilitate, support, and sponsor the creation of a non-profit DNS deployment organisation that is intended to be relatively short-lived and also receives funding from other sources. Facilitate the creation of metrics by which to measure the new organisation and deployment of DNSSEC.

Consult with the managers of root name servers and other appropriate experts in order to transition, under appropriate terms and conditions, ICANN's signing of the authoritative root.

In Development

Determine and implement changes in organisational structure for making changes to and management of the root-zone. Continue to enhance L Root operations and safeguards.

Provide 24-hour support for all technical operations through appropriate, economical use of local and global staffing.

Through appropriate consultation and solicitation of expert advice, develop ICANN's post-MOU organisational model and DNS governance role.

Consider and act on the potential deleterious effects of economic forces on the stability and security of the DNS. Take as case studies the "add storm" environment, name hijacking, and registration abuses, among others. Commission studies by economists and technical experts that can: develop an understanding of the interplay between technical and business forces as they apply to the DNS; and the effects, pressure and outcomes of those forces on infrastructure and business models. Integrate the results and take appropriate measures in the form of amended agreements, policy development initiatives, white papers, altered accreditation and registry designation processes, and others in order to mitigate identified risks.

Take substantial steps toward developing a reserve fund for ICANN equal to approximately 75% of annual spending levels.

Promote Competition

Planned

Develop effective IDN project teams to address technical and policy making objectives associated with the successful implementation of IDNs. Working with outside entities, establish test beds for IDN.

Implement a full contract compliance program including: compliance philosophy, staffing plan, complaint process flow, auditing procedures, interactions with government agencies. Implement metrics for measuring program effectiveness. Post program descriptions, hire and train staff, develop log tools and templates for automated usage. Publish registrar (and other contracted party) performance metrics as described by a registrar "Dashboard" on the web site. Focus upon:

By acquiring necessary resources through hiring or consulting, complete the implementation of a strategy for the implementation of new TLDs:

Facilitate enforcement of the Inter-registrar Transfer Policy (ICANN, rather than registries, has become most effective in the enforcement of this policy). Implement a tracking system and standardize handling of complaints.

Launch a technical working group to draft implementation recommendations for the next version of the Redemption Grace Period (RGP II). With staff assistance, implement RGP II for those registries that choose to do so (it will not be a requirement).

Complete the evaluation of the ten sTLD applications received last year and the technical and legal negotiations with those applicants that meet the baseline criteria. Once a registry agreement has been executed, ICANN will facilitate the launch the new sTLDs: educating registry and sponsor staffs work to create good working relationships between ICANN and the new registries.

Amend Registrar Accreditation Agreement to reflect changes in the registrar and DNS operating environments, focusing on the aspects of the relationship between ICANN and registrars that facilitates competition and positive growth in the market.

Implement an online case management system -- implement a ticketing and tracking system to monitor all cases (complaints, inquiries, suggestions, etc.) coming in from email, telephone, and online filings.

Develop automated accreditation application tracking -- implement a tracking system for monitoring status of all pending applications. Automate the application process so that accreditation applications can be completed and filed online.

Implement a registrar online access system -- a secure online account access system for all registrars to use to maintain contact information and to eventually access billing data.

Create a customer service program -- staffed to answer incoming email, phone, and online inquiries. Unit will triage inquiries to minimize time spent by others to answer simple or repeat inquiries. It will also track patterns and develop responses to routine inquiries and improve online FAQs. Provide access for registrar and registries to ICANN maintained data base regarding performance, UDRP information, etc.

Fully implement the process for consideration of new registry services in a timely, transparent, predictable manner as described in the proposed .NET agreement. Staff the technical evaluation panel, educate registries, and provide trained staff to consider applications as they arise.

In Development

Consider requirements, and develop and execute a plan for the implementation of full IDNs. Coordinate implementation through gTLDs, ccTLDs and governments through policies developed by the ccNSO.

Policy Making Support

Planned

Conduct a review and describe a plan for improving the effectiveness of ICANN interaction with the ALAC. Fund selected, cost effective activities.

Conduct an evaluation of staff support for country code processes in order to improve ICANN's policy development supporting role and IANA customer service.

Work through the ccNSO to develop effective policies, ensure security and stability and promote the models of the ccTLDs. Adopt a policy for providing ICANN with a predictable source of revenues from the ccNSO members.

Complete the GNSO evaluation process by facilitating the implementation of the changes and improvements indicated by the report of the independent evaluator.

Support the successful completion of the GNSO Policy Development Processes in Whois. Implement result from PDP into registry agreements and support the new policies.

Through consultation with the ASO and other communities, develop and implement policy to guide the distribution of IPv6 addresses by IANA.

Continue its efforts to achieve stable agreements or frameworks of accountability with ccTLD operators. Execute agreements with the large ccTLDs in each region in order to within a year have agreements that cover a majority of cc registrants. Execute 15-20 ccTLD agreements, representing 50-67% of the cc registrants and covering all regions.

In order to fulfill the MoU requirement to pursue formal legal agreements with the RIRs, execute agreements between each of the RIRs and ICANN.

In Development

Establish ICANN's International Information/Interactions function, which includes capture of information and reporting process, analysis of information as relevant for global strategy, distribution of appropriate information to leadership and Board.

Develop a vision for the GAC role. Conduct a review and describe a plan for improving the effectiveness of ICANN interaction with the GAC. Potentially fund selected GAC activities such as travel for the chair, meeting participation, and sponsoring regional meetings.

Accelerate reviews of supporting organisations in order to provide increased feedback and provide a sound basis for making positive changes and improving the policy development processes.

Global Participation by Stakeholders

Planned

Establish an outreach and educational model that defines the benefits realized in coordination with our meetings and involving different people with different levels of background. Utilize expertise of those outside ICANN to achieve outreach goals through the establishment of Fellowships, solicitation of papers, or providing advice to entities that can provide local support and resources.

Provide training and education to users of IANA services, targeting, in particular, ccTLD managers and regional technical communities who rely on IANA registries and services.

Continue to facilitate the building of an "At-Large" network of user groups throughout the world and support the advocacy efforts of these groups and the At-Large Advisory Committee (ALAC).

Continue support for At-Large organizing and advocacy: provide training and education workshops in developing countries to promote At-Large understanding of and involvement in ICANN; host user forums to advance At-Large engagement in ICANN policy development.

Implement a mechanism such as RSS to facilitate discovery of updates to the website by interested Internet stakeholders. Write script and procedures to provide a disciplined, competent method of giving selected updates wide distribution.

Translate selected documents and meeting transcriptions as appropriate to effectively communicate to all regions globally. Select languages for translation in a case-by-case manner based upon audience and subject matter. Enable larger portions of the community to interact in the ICANN planning process.

Conduct (on-line and in-person) outreach to Internet user groups in all regions to educate and inform them about ICANN and its activities; encourage groups that involve individual Internet users to register as "At-Large Structures"; support the establishment and work of a "Regional At-Large Organisation" (RALO) in each of ICANN's five geographic areas; and support the user advocacy, advisory and policy development activities of the RALOs and the ALAC.

In Development

Re-build the ICANN website in a way responsive to consumers, users and registrants. Update website for ICANN to improve meetings information dissemination and registration process. Provide better navigation; provide topics and places where forums and discussion can be readily accessible to the public at-large. Include multilingual options. Upgrade the IANA website and registries' information behind the website to facilitate updates and improve responsiveness.

To provide educational opportunities in developing areas: create and distribute professionally prepared materials describing technical aspects of and policy making opportunities in the DNS, translate those materials as appropriate, sponsor regional conferences and empower regional organisations to coordinate these communications.

Translate documents, including the implementation of parallel websites in different languages. Provide real-time translation at meetings.

Hire regional liaisons and explore models to establish regional presences in order to facilitate outreach to the local Internet community. Consult with the community and develop operational plans to determine the feasibility and effectiveness of different regional presence models. Present effective models to the Board for consideration and possible approval. These presences should enable local personnel (not ICANN staff) to work with regional populations to bring:

Improve internal expertise and performance in an economical manner by establishing an intern program or fellowship program with notable universities.

Continue support for At-Large organizing and advocacy: create new interactive At-Large website/s; create a user's/consumer's "guide" for domain name registration; establish an "At-Large Fellows" program to encourage outstanding individuals (especially from developing countries) to be involved in ICANN.

Establish partnerships (and execute MoUs where feasible) with country-level local Internet communities, regional governmental and intergovernmental organisations, governments and business in order to gain support for and facilitate accomplishment of ICANN's mission. This includes partnerships or MoUs with relevant international, regional organisations (both governmental and private sector).

Increasing public participation through international outreach initiatives, such as:

Produce a series of Public Service Announcements to effectively create awareness of the work to ensure a single, interoperable Internet, accessible to the international community in English, French, Spanish, Portuguese, and other languages. For example, produce a Public Service Announcement for the full recognition of AfriNIC and to describe the introduction of generic top level domains -- entitled "Don't get lost in Cyberspace."

Establish electronic newsletters and other methods to facilitate education and communication. Provide the tools developed to supporting organisations, advisory committees and other Internet community groups so that they can communicate through the medium.

ICANN Administration & Infrastructure

Planned

Implement online internal ICANN services to streamline administration in the areas of purchasing, HR administration, expense reporting and scheduling. Improve efficacy of financial controls through implementation of the new processes. Develop, implement and maintain operation HR procedures to ensure effective recruitment, compensation systems, employee relations and legal compliance.

Implement metrics for measuring responsiveness and efficacy of those responses to board requests for information or action.

Conduct a review of the ICANN organisational structure to determine the most effective form of organisation and staffing levels for fulfilling ICANN's mission and these objectives.

Conduct a review of the ICANN project management system.

In Development

Improve internal ICANN infrastructure and operating systems so that all employees and offices share a common operating environment; upgrade servers to ensure stability of local infrastructure. Facilitate, through internal support, the work of traveling users. Provide employees with secure access to ICANN information, upgrade network security mechanisms. Implement an integrated personnel management system for all ICANN offices (payroll, social security, holidays, etc.). Automate several functions, including invoicing. Expand, in an economical manner Marina del Rey Office Space to accommodate need for staff, meeting space and storage. Balance available facility costs with moving and other administrative costs.

Proposed Revenues

ICANN's fee structure will remain essentially constant this fiscal year. Increases in total revenues will derive primarily from growth in the domain name space and fees accruing from the negotiation of the .NET agreement.

gTLD Registrar Fees

Registrar-Level Transaction Fees

For fiscal year 2005-06, ICANN will maintain the current registrar-level transaction fee of US$0.25 per transaction. Each "transaction" will be defined as one-year domain registration increment caused by a successful add, renewal or transfer command. Domains deleted within the add or auto-renew grace periods will not be charged a transaction fee.

The per-transaction fee will continue to be charged for each one-year increment of every transaction (e.g. the fee for a three-year renewal will be US$0.75), and registrars will continue to have the option to "defer" payment the fees for the years beyond one for each transaction.

Per-Registrar Fees

Per-registrar fees will also continue at current levels in the aggregate. Each ICANN-accredited registrar will continue to pay a fixed fee of US$4000, plus a per-registrar variable fee totaling US$3.8 million divided among all registrars. (As of 17 May 2005, there were 471 ICANN-accredited registrars.) The per-registrar fee is based upon the validated concept that ICANN often expends the same quantum of effort in providing services to a registrar regardless of the size of that registrar.

Depending on registrar size and activity, some registrars will continue to be eligible for "forgiveness" of two-thirds of the standard per-registrar variable fee. (The criteria for eligibility for partial forgiveness will also remain the same as last year: fewer than 350,000 names under management and fewer than 200 attempted adds per successful net add.)

Thus far, in fiscal year 2004-05, 21 registrars (representing fewer than 5% of all registrars) were granted forgiveness out of 67 registrars that applied for forgiveness. The applications of the remaining 46 were rejected.

gTLD and sTLD Registry Fees

Fees from gTLD registries are described in detail in the accompanying budget schedule and notes. In summary, gTLD registries will continue to pay fixed fees based on registry size and as determined by contract in amounts ranging from US$500 to US$151800.

In fulfillment of its obligation to develop alternate sources of revenue, ICANN has proposed the implementation of registry-level transaction fees. In accordance with the terms of the unapproved, proposed registry agreement forms for .NET, ICANN will receive a fee payable by the registry operator per transaction-year. This agreement is scheduled to go into effect
1 July 2005.

ICANN recently designated new sTLDs, signing agreements to create the .JOBS and .TRAVEL registries. These agreements call for per-transaction fees of US$2 per name-year. ICANN expects to execute two to three additional agreements to designate new registries in the near term. Fees will be based upon the results of technical and commercial negotiations with the proposed registry sponsor and the business model proposed.

ccTLD Contributions

Many ccTLDs have expressed support of the ICANN model and the understanding of the value that model provides. There have also been expressions that a consistent structure by which the ccTLD provide fees to ICANN must be developed. The mechanism for funding will be determined by the ccTLDs, through the ccNSO. In consideration of the promised development of a fee model, ICANN has not altered the expectation of fee receipts for this writing. However, it is expected that a fee structure will be developed in the upcoming months and, as a result, fee receipts from ccTLDs will exceed plan.

Regional Internet Registries

With the execution of the MoU between the NRO and ICANN, it was expected that the RIRs would release fees that have been held in escrow. However, since the execution of the MoU, the RIRs have not released funds. ICANN is working with each RIR to reach an agreement and release funds. ICANN's independent auditors, recognizing the risk to revenue receipts, have required ICANN to make note of the shortfall in its financial statements.

In fiscal year 2004-05, based upon discussions with an RIR representative, ICANN budgeted RIR contributions equal to 10% of the previous year's budget. The predicted contributions of $823K represented a 54% increase over the previous year's budget. In fiscal year 2005-06, ICANN has asked for the same amount.

Finally, it is important to note the RIRs provide funding to ASO meetings, staff support for the ASO, and travel and attendance at the ICANN meetings.

Alternate Sources of Revenue

Sound business planning dictates that ICANN should continue to develop alternate sources of funding in order to provide a more robust revenue base. Specifically, these sources should include the ccTLDs, the RIRs, the formation of new gTLDs, and other interested parties.

ICANN expects some impact from these sources during the upcoming fiscal year. As revenues increase from new sources, fees accruing from existing substantial contributors, such as the registrars will be reduced.

Proposed Budget Schedules and Notes

FY '05-'06 REVENUE PROJECTION

 

Jul-Sep '05

Oct-Dec '05

Jan-Mar '06

Apr-Jun '06

Total FY06

Notes

Registry/Registrar Revenues

 

 

 

 

 

 

Transaction Based Registrar Fee

$2,947,063 $2,947,063 $2,947,063 $2,947,063 $11,788,252 (1)

Variable Registrar Support Fee

$950,000 $950,000 $950,000 $950,000 $3,800,000 (2)

Registrar Application Fees

$22,500 $22,500 $22,500 $22,500 $90,000 (3)

Annual Registrar Accreditation Fees

$326,000 $130,000 $158,000 $160,000 $774,000 (4)

IP Address Registries

$0 $411,500 $0 $411,500 $823,000 (5)

Subtotal: Variable Registry/Registrar Revenues

$4,245,563 $4,461,063 $4,077,563 $4,491,063 $17,275,252

 

Fixed gTLD Registry Fees

$0 $0 $0 $0 $0

 

Tiers 1&2

$0 $0 $7,000 $0 $7,000

 

Tier 3

$178,500 $178,500 $178,500 $178,500 $714,000 (6)

Dot Net

$1,062,627 $1,062,627 $1,062,627 $1,062,627 $4,250,508 (7)

New sTLD Initial Fixed Fee

$20,000 $30,000 $300,000 $300,000 $650,000 (8)

Subtotal: Fixed TLD Registry Fees

$1,261,127 $1,271,127 $1,548,127 $1,541,127 $5,621,508

 

Subtotal: gTLD Revenues

$5,506,690 $5,732,190 $5,625,690 $6,032,190 $22,896,760

 

ccTLD Registry Fees

$0 $0 $0 $0 $0 (9)

Tier 1&2 ccTLD Registry Fee

$0 $0 $10,000 $0 $10,000

 

Tier 3 ccTLD Registry Fee

$0 $0 $212,000 $0 $212,000

 

ccTLD Voluntary Contributions

$0 $0 $200,000 $600,000 $800,000

 

Subtotal: ccTLD Fees & Contributions

$0 $0 $422,000 $600,000 $1,022,000

 

Miscellaneous Income

$8,000 $9,000 $9,000 $9,000 $35,000

 

Less Bad Debt or Bad Debt Allowance

($124,500) ($124,500) ($125,000) ($126,000) ($500,000)

 

Total Revenues

$5,390,190 $5,616,690 $5,931,690 $6,515,190 $23,453,760

 

Notes to Revenue Plan:

(1) Assumes $0.25 per transaction fee remains constant, conservative growth

(2) Same fee as previous year

(3) Assumes reduction to three applications per month

(4) Assumes reduction to approximately 200 registrars

(5) Assumes same fees as budgeted last year

(6) Same fee structure as last year

(7) The $0.75 per name fee will support to operations, the Security/Stability Program, and Developing Nation Internet Community Projects

(8) Assumes designation of .JOBS and .TRAVEL in April '05 and startup of .MOBI in January '06

(9) Assumes same fees as previous year pending development of ccNSO fee plan


FY '05-'06 EXPENSE & REVENUE PROJECTION

(US$ 000)

 

2004-2005 Approved Budget

Year-End Total Projection

Difference Projection to Budget

Proposed 2005-2006 Budget

Difference Budget to Budget

Difference Projection to Budget

See Notes in Text

EXPENDITURES

 

 

 

 

 

 

 

Staff Full-Time at Year-End

59

49

0

69

10

20

(1)

Base Expenditures

 

 

 

 

 

 

 

Personnel

$5,668

$4,500

($1,168)

$8,187

$2,519

$3,687

(2)

Professional and Technical Services

2,977

3,818

841

3,605

628

(213)

(3)

Board Meetings & Other Travel

2,380

2,300

(80)

3,039

659

739

(4)

Capital Expenditures

982

180

(802)

592

(390)

412

(5)

Administrative & Systems

1,533

1,553

20

1,965

432

412

(6)

Subtotal: Base Expenditures

$13,540

$12,351

($1,189)

$17,388

$3,848

$5,037

 

Other Expenditures

 

 

 

 

 

 

 

NomCom

163

200

37

175

12

(25)

(7)

Outreach Program

205

201

(4)

295

90

94

(8)

Technical Infrastructure

440

242

(198)

390

(50)

148

(9)

Communications

73

40

(33)

73

0

33

(10)

Security & Stability Projects

80

0

(80)

1,320

1,240

1,320

(11)

DNSSEC

0

0

0

300

300

300

(12)

IDN

80

20

(60)

270

190

250

(13)

Technical Standing Panel

0

0

0

650

650

650

(14)

Registry Failover

0

0

0

100

100

100

(15)

Developing Country Internet Community Project

0

0

0

1,131

1,131

1,131

(16)

Translation

0

0

0

300

300

300

(17)

At-Large & Community Projects

0

0

0

381

381

381

(18)

Regional Meetings

0

0

0

450

450

450

(19)

Ombudsman

0

0

0

259

259

259

(20)

Contingency

1,333

0

(1,333)

1,957

624

1,957

(21)

Subtotal: Other Expenditures

$2,294

$683

($1,671)

$5,600

$3,306

$2,623

 

Total Expenditures

$15,834

$13,034

($2,860)

$22,988

$7,154

($5,880)

 









 

2004-2005 Approved Budget

Year-End Total Projection

Difference Projection to Budget

Proposed 2005-2006 Budget

Difference Budget to Budget

Difference Projection to Budget

See Notes in Text

Base Revenues

 

 

 

 

 

 

 

Registry/Registrar Revenues

 

 

 

 

 

 

 

Transaction Based Registration Fee

$8,449

$8,089

($360)

$11,788

$3,339

$3,699

(22)

Variable Registrar Support Fee (per registrar)

3,800

3,800

0

3,800

0

0

(23)

Registrar Application Fee

35

330

295

90

55

-240

(24)

Annual Registrar Accreditation Fees

900

1,931

1,031

774

(126)

-1,157

(25)

IP Address Registry Fees

823

0

(823)

823

0

823

(26)

Subtotal: Variable Registry/Registrar Revenues

$14,007

$14,150

$143

$17,275

$3,268

-10,882

 

Fixed gTLD Registry Fees with Agreements

 

 

 

 

 

 

 

Tiers 1&2

7

7

0

7

0

0

(27)

Tier 3

846

846

0

816

(30)

-30

(28)

.NET fees

0

0

0

4,251

4,251

4,251

(29)

New sTLD Initial Fixed Fee

600

0

(600)

650

50

650

(30)

Subtotal: Fixed TLD Registry Fees

$1,453

$853

($600)

$5,724

$4,271

$3,418

 

Subtotal: gTLD Revenues

$15,460

$15,003

($457)

$22,999

$7,539

($7,464)

 

ccTLD Registry Fees

 

 

 

 

 

 

 

Tiers 1&2 Fixed

10

10

0

10

0

0

 

Tier 3 Variable

212

212

0

212

0

0

 

Contributions

800

600

(200)

800

0

200

 

Subtotal: ccTLD Fees & Contributions

$1,022

 

($200)

$1,022

$0

$0

(31)

Miscellaneous Income

$50

35

($15)

35

-15

0

 

Less: Bad Debts or Bad Debt Allowance

$500

$500

$0

$500

$0

($500)

(32)

Total Revenues

$16,032

$14,538

($672)

$23,556

$7,524

($7,014)

 

Contribution to Operating Reserve

$198

$1,504

$2,188

$568

$370

($1,134)

 

 

Notes to Fiscal Year 2005-06 Expense and Revenue Projections

(1) The fiscal year 2005-06 budget calls for a final staff size of 69 by the end of the fiscal year. This represents an increase of ten positions beyond that budgeted in the previous fiscal year. ICANN continues to fill the positions budgeted last year. Incremental staffing will address project based and operational requirements as described below. Additionally, new staff will fulfill the requirements described in the succession plan -- a key section of contingency planning. Key new positions include:

(2) This line item represents the costs associated with the personnel changes detailed in Note (1). Not all positions will be filled for the full 12 months. They will be filled in accordance with a planned growth model to ensure all efficiencies can be employed. Note that positions are considered fulltime (except where noted) staff positions even though they may, in the interest of economy, be filled by contract personnel.

Of the $2.5MM increase from last year's budget, approximately $1.5MM is due to "annualisation" of new hires this past year and salary increases. By "annualisation" it is meant that several new positions were hired during FY 20004-05, therefore a full-year salary was not budgeted for those positions then but a full-year salary is budgeted for those positions in FY 2005-06.

The $3.7MM difference between year-end projection and the budget is greater than the $2.5MM figure above because many hiring were delayed due to the seven-month lag between the start of FY 2004-05 and the increase in revenue flow.

(3) This line item grew to match anticipated litigation expenses. ICANN is presently involved in several suits. Additionally, ICANN is engaging the services of independent review panel services, limited public relations services, and other consultants who will be engaged if the effort is required and if their engagement represents real cost savings as compared to the expense of utilizing staff. These efforts may include:

(4) In fiscal year 2003-04 there were three ICANN meetings. Due to timing implications, in the upcoming year ICANN must budget for four meetings. This is because the first meeting of the fiscal year takes place in July in Luxembourg (uncharacteristically late) and the last takes place in June 2006 in Marrakech, Morocco. Therefore both of these meetings and the two intervening meetings must be budgeted in FY 2004-05. This represents a 33% increase in expense over the previous year. Additionally, travel has incrementally increased to partially satisfy requests for ICANN attendance at meetings and conferences. Most trips for next year are already tentatively planned so that maximum savings can be realized by advanced purchase of tickets.

(5) Capital purchases generally include all acquisitions of equipment over $1000 per piece. This line item includes the purchase of new or replacement laptops for employees. Each laptop is planned for four year of use. Other equipment includes upgrades to IANA registry equipment, relocation to more economical offices in Brussels, re-location of non-root server functions to off-site facilities in compliance with ICANN contingency improvements, web casting equipment, root server upgrades, and limited teleconferencing equipment to enhance communications with stakeholders.

(6) These costs, a major component of ICANN expenses, have historically remained flat despite increases in other areas. The increase this year is due to increases in: insurance costs (insurance not related to employee benefits), employee relocation (historically zero), and communications (increased number of teleconferences).

(7) The Nominating Committee is charged this year with filling certain seats on the ICANN Board of Directors and advisory committees. The present committee will meet face-to-face once during the fiscal year. (The successor committee will also meet during the same fiscal year.) In addition to these travel costs, the amount budgeted will cover administrative costs, e.g., teleconferences, documentation distribution and administrative support.

(8) Outreach efforts include securing advice regarding the most economical methods by which to establish effective regional liaisons including technical infrastructure, legal and tax issues. There is also funding to determine and pursue, with board approval and based upon local and community advice, regional presences.

(9) This line item funds effort to support capital and administrative projects such as website improvements, statistical reporting of performance, security of co-location facilities to more secure environments, root server planning, and execution of contingency plans.

(10) Communications efforts include dissemination of ICANN activities and actions to improve transparency and openness. The results will be multi-lingual publications, e-zines, web castings and public service publication aimed toward Internet community efforts to improve stability and increase competitive opportunities. This number does not represent the full extent of ICANN spending on multi-lingual communications, translation efforts are captured under a separate, segregated line-item.

(11) Security and Stability Projects. A portion of the fees paid by the operator of the .NET registry will become part of a special restricted fund to enhance and facilitate the security and stability of the global Internet's system of unique identifiers. These monies will fund distinct projects; the first are outlined below.

(12) ICANN and other contributors intends to fund a not-for-profit concern that will work to promote, and then implement, DNSSEC. Disbursement of funds to a different entity is contingent upon the presentation of the new concern's operating plan and approval by the ICANN board.

(13) ICANN will promote the deployment of top-level IDNs generally and through separate efforts: a study defining the market opportunities/risks, global and cultural issues, and technical ramifications associated with IDN implementation; retaining, so long as it is economically makes sense to do so, a contractor/consultant to provide advise regarding DNS stability issues; and hosting regional forums with location specific organisations.

(14) This fund will retain the services of a Standing Technical Panel, support it, and provide for travel and communications as required for its efficient operation. In the event that ICANN reasonably determines that a proposed Registry Service might raise significant Stability or Security issues, ICANN will refer the proposal to a Standing Panel of experts (and simultaneously invite public comment on the proposal). The Standing Panel shall consist of a total of 20 people expert in the design, management and implementation of the complex systems and standards-protocols utilized in the Internet infrastructure and DNS. The panel will operate as defined in registry contracts.

(15) As part of the panel to designate new TLDs, ICANN will work with registries to establish or improve failover plans to protect registrants in the event of registry failure or interruption to operations.

(16) Developing Country Internet Community Project. A portion of the fees paid by the operator of the .NET registry will become part of a special restricted fund for developing country Internet communities to enable further participation in the ICANN mission by developing country stakeholders. These monies are intended to fund outside entities as opposed to ICANN staff efforts.

(17) The ICANN brochure and other materials are now translated into 17 languages. An increased comprehensive translation program has been budgeted for the fiscal year 2005-06 to assist with those stakeholder groups who do not operate in English as their first language. Included will be facilitation of participation at ICANN meetings in multiple languages.

(18) At-Large activities include expenses to improve upon the significant progress that has been made on the creation and involvement of ICANN At-Large. As ICANN attempts Regional At-Large Organisations, additional start-up funds are needed. To increase the likelihood of establishing the At-Large framework envisioned in the bylaws, additional ICANN support is required for At-Large organizing/outreach, including staff support to secure the involvement of a significant number of At-Large Structures in each region in ICANN policy activities, and face-to-face interactions at ICANN meetings of At-Large community leaders.

(19) ICANN will sponsor attendance at regional meeting for the world's least developed countries. Meetings will include seminars describing IANA services, DNS structure and operations and opportunities available through widespread connectivity and an interoperable Internet.

(20) The ICANN Ombudsman was established in accordance with the bylaws. The Ombudsman recently made report to the ICANN Board regarding work to date. This money funds the direct costs associated with this office. Indirect costs are funded separately by ICANN.

(21) A contingency of 10% was set to anticipate legal fees or other actions that could affect the budget by up to $2MM. Contingency was not applied to the meeting expense line item. Contingency is to be spent at staff discretion to cover unanticipated expenses.

(22) This year's budget holds constant from last fiscal year the $0.25 transaction fee. Transaction based fees are fees paid through the registrar for every new subscription, renewal or transfer.

(23) This year's budget holds constant from last fiscal year the $3.8MM fee to be divided on a per registrar basis. While certain ICANN expenses related to supporting registrars are based upon the number of transactions (i.e., the size of the registrar), many costs are essentially equal for all registrars regardless of size (i.e., aspects of a contractual compliance program). Therefore, ICANN will allocate $3.8 MM to registrars on a per registrar basis. Given the present number of registrars, that fee is estimated to be $8,500 per registrar annually. The fee will be calculated on a quarterly basis and vary with the number of registrars accredited at the end of the quarter prior to the invoice date.

(24) With the possible implementation of an alternate solution to the deleted names market, it is anticipated that application fees will decrease.

(25) Fixed accreditation fees will remain constant for access to the first registry ($4000) but will be set at zero for additional registries. Therefore, payment of this single fixed fee, as well as the other variable fees, will accredit registrars to sell domain names for all Top Level Domain registries. (Sponsored TLDs may limit those registrars who may sell names for their particular sTLD.)

(26) Estimated RIR contributions have been set based upon communications between the ASO and ICANN.

(27) The budget for TLDs is based on the tier system used for determining ccTLD contributions. The fees for sponsored TLDs having up to 5,000 names under management as of July 1, 2004 (Tier 1) are budgeted at $500 per TLD. The budgeted amount for Tier 2 fees (sponsored TLDs having more than 500 names and up to 50,000 names under management as of July 1, 2004) is $5,000 per TLD.

(28) This represents the annual fixed fees (paid in quarterly installments) associated with the Tier 3 gTLDs as follows:

OperatorRegistry Amount
VeriSign .com $151,000
Afilias.info$151,000
PIR.org $151,000
NeuLevel .biz $121,000
GNR.name$121,000
RegistryPro.pro $121,000
Total $816,000

(29) Successor Operator .NET -- $4,351,000 based on the unapproved proposed agreement forms and current number of names under management.

(30) The new round of sTLD applications may result in one or more new registries. As of this writing, two, .jobs and .travel have signed agreements with ICANN designating new registries. Three other candidates, .cat, .mobi, and .post have entered into technical and commercial negotiation with ICANN. Other candidates remain viable. Four of these new registries are expected to be in operation during FY 2005-06. ICANN is budgeting revenue of $650,000 from all new sTLDs. While uncertain, it is also not appropriate to ignore the revenue-generating potential of these proposed registries. Therefore, ICANN believes it prudent to budget this amount based on best judgment of the staff.

(31) ICANN believes significantly more revenue should be generated from the ccTLDs than has been realized in the past. Internal goals are greater. Additional revenue will be based on successfully communicating the real value provided by ICANN services. ICANN is actively recruiting staff whose (nearly) sole purpose will be to communicate and execute agreements with ccTLDs in order to stabilize relationships and revenue across this global community.

(32) "Bad debt" has been increased proportionally with the revenue budget.

1 A continuing budget resolution will be proposed to the ICANN Board to fund ICANN operations at current levels for the period 1-15 July 2005.