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