ICANNs Bid to Double Budget Raises Ire

By Matthew Hicks  |  Posted 2004-05-20

ICANNs Bid to Double Budget Raises Ire

The Internets domain-name oversight body is proposing to double its budget and raise fees for the companies that register Web addresses—a move that is unleashing criticism about who will pay for the heftier spending.

The Internet Corporation for Assigned Names and Numbers (ICANN) this week publicly posted its budget plan for fiscal year 2004-05, here in PDF form, in which it seeks to spend $15.8 million, almost twice the $8.7 million being spent this fiscal year.

The bulk of the revenue to fund the increase—about 80 percent—would come from registrars, the companies accredited by ICANN to sell domain names to businesses and individuals, and that has led some to cry foul.

"Its a huge increase, and theres not much justification for it that they can offer," said Champ Mitchell, chairman and CEO of Network Solutions Inc., one of the largest registrars.

"Most of this [increase] is to spend money in places where they hope to guarantee the existence of ICANN and that, to me, is not a good basis on which to double your budget," Mitchell said. "We dont see these increases having a real advantage to registrants, who are people we all ought to be serving."

ICANNs board of directors is expected to consider the proposed budget, which is open for public comment, at its July 23 meeting in Kuala Lumpur, Malaysia. ICANN officials could not be reached Thursday for comment on the proposed budget.

Mitchell said he views most of the increase as ICANNs attempt to counter efforts within the United Nations to play a bigger role in the domain name system, particularly overseas.

The UNs World Summit on the Information Society has been holding meetings to discuss playing a larger role in the Internets addressing system.

Among the biggest increases proposed in ICANNs budget are to increase staffing from 33 to 59 positions and to double the amount of spent on travel to $2.4 million. ICANN mentions the UN process along with demands from the domain-name community and from the U.S. Department of Commerce as reasons for an increase.

Litigation also played a role, responsible for $2 million of the increase, the budget proposal states. For example, ICANN faces a lawsuit challenges its role and authority from VeriSign Inc., the registry that manages the Internets largest domains.

Click here to read more about an ICANN win earlier this week in the VeriSign lawsuit.

According to ICANN, the budget proposal "is intended to enable the organization to move forward on a number of fronts and reach goals heretofore unattainable due to a lack of staff, planning and resources."

Not all registrars are critical of ICANNs move to expand the size of its budget. Go Daddy Software Inc., another large registrar, supports the move because ICANNs role has grown rapidly with the rise of the Web, and it needs more money to fund enforcement and meet new demands, said Bob Parsons, founder and president of the Scottsdale, Ariz., company

"The $15.8 million that theyre looking for, when you consider what they do and the size of our industry, its a deal," Parsons said. "Were expecting ICANN to be a regulator and a quasi-public company and to also police the registrar industry, and they simply dont have the funds to do that."

Next Page: The proposal also adds a new per-registrar fee.


-Registrar Fee">

In its budget proposal, ICANN says it is expecting to raise $8.4 million from a 25-cent transaction fee that registrars would pay for each yearly domain-name registration, which is $2.6 million more than last year.

It also has added a new per-registrar fee for fiscal year 2004-05 to raise an additional $3.8 million. Based on the current number of registrars, it would cost about $19,290 per registrar.

Herndon, Va.-based Network Solutions, Mitchell said, would add the additional registrar fee onto the cost of a domain-name registration. He said he fears that the biggest losers in the budget increase would be small businesses and individuals registering only a few domain names.

Smaller registrars worry that the higher fees could put them out of business, said Patricio Valdes, president of Parava Networks Inc., a Houston-based registrar of about 65,000 domain names.

At the same time, he said, ICANN staff has suggested that smaller registrars could pay the fees from the revenue many of them receive by leasing their registry connections to domain-name back-ordering services, which attempt to grab domain names as they are deleted.

But ICANNs board has approved the controversial wait-listing service (WLS), a back-ordering service to be managed through VeriSign. Valdes said that with the main registry handling back-ordered names, the additional revenue stream would end, bringing a double-whammy down on smaller registrars. ICANN and VeriSign have yet to say when the WLS would begin.

Click here to read more about ICANNs approval of the WLS.

"A lot of the smaller registrars are not going to make it, and we might be in trouble," Valdes said. "Theyre increasing all the fees on the registrars but, on the other hand, our customers are expecting prices to be lower. Theyre not going to react well if we have to increase prices."

Peter Forman, president and CEO of New York-based Register.com Inc., said he doubts that the additional registrar fees will lead to higher domain-name registration costs for businesses and consumers.

Instead, he said, most registrars will eat the cost. Forman said that while he supports ICANN, he also is opposed to registrars carrying the burden for a bigger budget.

"They need to diversify their revenue streams," Forman said. "Its onerous for registrars, who are a competitive community, to bear over 80 percent of the budget and for registries that are granted limited-term monopolies not to bear a significant portion."

ICANN has less flexibility to raise fees on the registries that manage particular domains such as .com or .net because it entered into multiyear agreements that stipulate by how much it can increase fees, he said.

When asked if theyd rather see another organization, such as the UN, take over ICANNs duties, most of the registrars shared a sentiment similar to Formans.

"You know what they say about democracy, it is the worse form of government except for all others," Forman said. "ICANN is worst form of government for the Internet—except for all others."

Check out eWEEK.coms Developer & Web Services Center at http://developer.eweek.com for the latest news, reviews and analysis in programming environments and developer tools.

Be sure to add our eWEEK.com developer and Web services news feed to your RSS newsreader or My Yahoo page

Rocket Fuel