ICANN Revenue Models [Michael D. Palage]

[Marc Salvatierra <marc.salvatierra@xxxxxxxxx>]

The comment below is submitted by ICANN staff on behalf of Michael D. Palage.

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From: Michael D. Palage
Sent: Thursday, April 01, 2010 11:30 PM
To: 'op-budget-fy2011@xxxxxxxxx'
Subject: ICANN Revenue Models

My name is Michael Palage. I am President and CEO of Pharos Global, Inc. a 
consulting company that provides management solutions to domain name 
registration authorities. The views expressed herein are my own, and not 
necessarily the views of any Pharos Global current/future/past client.

Can ICANN please advise in what forum the ICANN community can engage in a 
discussion in how ICANN sets and collects its fees from registry operators.

When you look at what existing gTLD registries have to pay ICANN and what 
prospective gTLD registries will have to pay, you will notice the following 
interesting anomaly. The current proposed registry contract calls for 
prospective TLD applicants to pay a fixed annual fee of $25,000 per year 
regardless of the number of registered domain names. Once the number of 
registered names exceed 50,000 domain names there is an additional $0.25 per 
name charge by ICANN, see Section 6.1 
(http://www.icann.org/en/topics/new-gtlds/draft-agreement-specs-clean-04oct09-en.pdf)

Now let's take a look at the existing registry operators fee arrangements.

.MUSEUM (http://www.icann.org/en/tlds/agreements/museum/agreement-03nov07.htm)

Now .MUSEUM pays $500 per year for the right to have 5,000 registered names 
included in the .MUSEUM zone (average cost of $0.10 per domain name). If the 
number of registered domain names falls between 5,000 and 50,000 the registry 
has to pay ICANN $5,000 annually (average cost of $0.10 per domain name).

If you look at the .COOP and .AERO agreement you will see similar provisions.

So here is my question to ICANN which to date no one has been able to answer, 
why is ICANN proposing to impose a 500% increase in the annual registry cost to 
register 50,000 domain names. While the new gTLD application process is 
designed to be self funding, thus perhaps justifying the $185,000 application 
fee, I find it very strange that ICANN has proposed raising their fees 500% and 
no one really seems to care.

While I appreciate that for-profit ventures may find this a necessary cost of 
doing business, I believe these unjustified substantial fee increases by ICANN 
may represent a barrier to entry for some developing countries or for smaller 
cultural/linguistic community based TLDs from developed and developing 
countries.

To highlight the potential inequalities of ICANN's change in funding consider 
that the $185,000 application fee represents 370 YEARS of annual registry fees 
in connection with the operation of the .MUSUEM TLD at current registration 
levels. Read that number again 370 YEARS. Unfortunately, ICANN general counsel 
and other senior staff over the past several years have been able to address 
this issue. That is why I was encouraged to see the GAC identify this important 
public policy issue in their most recent communiqué.

Therefore my question to the ICANN financial committee, and Board as a whole, 
is how can the ICANN community engage in this constructive dialog?