Each bulleted item below is a comment/question ICANN has received in response to the posting of the proposed budget for fiscal year 2005-06. Sources include the registries' constituency, the registrars' constituency, the Budget Advisory Group and the public comment forum. The ICANN response is found below each question in italics. Some questions are paraphrasing for clarity and to save time. The responses will be published according to the manner in which it was received, e.g., in written form to the registry constituency and so on.

• Budget Advisory Group process needs radical improvement. We appreciate the opportunity to participate in ICANN budgeting process via our elected representatives in the ICANN's Budget Advisory Group (BAG). However, in the run up to budget publication on May 17, 2005, we have observed lack of concern about providing the opportunity to respond to the budget in a timely manner. While the BAG met twice during the budget preparation period, no data or other documents were provided by ICANN staff to BAG representatives to discuss with their constituencies until very late in the process and solicit constructive feedback.
  
  For BAG to provide value to the ICANN community, ICANN must provide minimum necessary information about the budget to BAG members in a timely manner and in a format which facilitates sharing with and soliciting constrictive feedback from their constituencies.
  
  We agree that the workings of the Budget Advisory Group require improvement. (Although, the group was provided data regarding the operating plan and the budget some weeks in advance of publication.) It may be advisable for the CEO to collaborate with the Board Finance Committee and to re-invent or clearly define the BAG role for future budgets. The BAG was "suggested" by the task force on funding and first created to consider the 2003-04 budget. With the additional consultations that occur with respect to ICANN planning efforts the BAG effort as it is executed today seems redundant. During the BAG meeting earlier this year, members asked fir a better definition of their role. It may be advisable for the CEO to collaborate with the Board Finance Committee and to re-invent or clearly define the BAG role for future budgets.

• Budget must be measured against key strategic objectives. The format of the budget makes it difficult to understand the methodology behind what is being budgeted in particular strategic areas. Base expenditures, which represent 76% of the total budget, are not allocated to strategic objectives. We appreciate the detail provided in the section "Other expenditures", questions remain over the nature of some items. For example, a portion of funds under Security and Stability might be earmarked for DNSSEC, a seemingly under-funded activity, but this is not clear.
  
  The inability to be able to determine what dollars are earmarked to what areas, and how staffing is attributed to what activity makes it difficult to assess whether the funds are used appropriately and whether the funding is adequate to fulfill the mission.
  
  We recommend that this and certainly future ICANN budgets clearly indicate the amount budgeted in relation to each of ICANN's strategic priorities. Further detail for individual key projects such as DNSSEC implementation or IDNs should also be provided.
  
  A breakout of total ICANN planned expenditures ($22,988K) in relation to each of the four key strategic objectives results in the following allocations:

  Security & Stability	29.8%
  Promoting Competition	27.7%
  Bottom-up Policy Development Support	19.0%
  Ensuring Global Stakeholder Participation	23.5%

  
  
  When the operational plan and the budget was written, each objective targeted one of the four strategic priorities. The allocations above were derived by assigning each spending line item (individual salaries, expense line-items, capital expenditures) and assigning it to the appropriate strategic priority. In cases where an effort benefited multiple (or all) strategic priorities, that expenditure was divided among the applicable priorities. Examples of this are several ALAC activities that benefit both Bottom-up Policy Development Support and Ensuring Global Stakeholder Participation. Overhead functions, such as rent and utilities were divided among the priorities.
  
  Detail was provided in several initiatives where the path to implementation is clear. These include Compliance, Improvement of Registration Services, IANA Performance, Implementation of New Registry Services, Contingency Planning, Globalisation, and the execution of the MoU with the U.S. Department of Commerce. In other cases where the execution plan isn't as clear, and determination of finer detail will require study, there is less detail. In the case of every objective, however, staff is responsible for preparing detailed milestone schedules for managing the objective.

• The Budget must show funds allocated to key strategic initiatives which promote security and stability. Security is of paramount concern and we strongly encourage ICANN to focus on maintaining the stability of the identifier systems for which it is responsible, and on implementing technologies that strengthen the stability of these systems as and when they become available. The proposed budget does not clearly indicate what amount of funds will be used directly for such activities.
  
  Indeed, individual expenditures that can be associated with key projects such as $300K for DNSSEC and $270K for IDNs represent together only 2.5% of the total budget. This is very low given their importance for the security and stability of the domain name system. Is the amount ICANN has devoted to IDNs in their next FY budget a statement on the priority of IDNs for ICANN?
  
  We are concerned that the ICANN budget and operating plan underestimate the importance of key strategic initiatives. We wish to see more than 25% of the ICANN budget allocated to security and stability issues. With regard to IDNs, ICANN needs to carefully consider ramifications of not providing adequate funding to take a leadership role in addressing IDN issues.
  
  As noted above, spending on Security and Stability efforts vis-à-vis other strategic priorities exceeds 25%. Spending levels in the deployment of IDNs (or other areas for that matter) is not necessarily proportional to the scope of the effort. ICANN appreciates the comments regarding IDN implementation and echoes them. In the case of IDN deployment, ICANN plans on considerable effort from Advisory Committees, Supporting Organizations and others in the community. Governmental entities and NGOs also wish to be involved and support this endeavour. ICANN's leadership role in this area does not, at the time of this writing, necessarily require a larger than planned for expenditure and it was not deemed prudent to allocate funds where a requirement was uncertain. However, should this project arrive at a state where additional funding were to facilitate deployment, ICANN will re-prioritise spending, make a draw on contingency, or otherwise allocate funds to this very important area.

• ICANN's funds must be used within the confines of its mission. Despite the fact that gTLDs fund over 94% of ICANN's budget, we see a significant amount of money being spent by ICANN in forums that aren't gTLD related, and we are concerned that the gTLD community is not being as well served as it should. The contribution made by gTLDs appears to be disproportionate to budgeted expenses in areas that are gTLD related and where additional resources are needed to assist in timely responses to issues from ICANN staff. We are seriously concerned about the risk of funds from gTLD registries being used to fund the expansion of ICANN's mission.
  
  The amount budgeted for translation of ICANN's own web site and brochures, is more that the amount shown in the budget for addressing the entire issue of Internationalised Domain Names (IDNs) and equals the amount shown for DNSSEC. As stated in our comments to the strategic plan we continue to have questions concerning the intended use of the funds for Developing Country Internet Community Project and the intentions by ICANN to fund Internet governance events. To the extent that these efforts stay within ICANN's mission, they may be acceptable uses of funds, but we do not believe that they should be put at a higher level than security and stability.
  
  While we understand that ICANN is under pressure from various quarters to involve developing nations in its work, we do not believe that it is ICANN's role to redistribute funds obtained from gTLDs according to the principle "From each according to their ability, to each according to their need". We strongly recommend ICANN review the allocation of funds to ensure that only activities within ICANN's technical coordination mission are funded from gTLD revenues.
  
  ICANN agrees that its mission should not be expanded beyond that which was originally intended. ICANN also believes in the paramount nature of its mission to ensure stability and security of the DNS. The adequacy of the investment targeting deployment of IDNs was discussed above. The amount budget for implementation of DNSSEC was determined at a level to accomplish certain specific goals. Translation efforts will also target increased meeting participation. ICANN certainly expect to use existing events already established by other groups in order to increase stakeholder participation. The current budget does not contemplate conducting, through ICANN funding, Internet governance events. ICANN has provided in the past, and may provide in the future, a small form of sponsorship to some existing events. We also see some return for these efforts in the opening of new markets.

• Burden of funding ICANN activities must be allocated fairly -- there is a continuing trend that ICANN passes the overwhelming majority of all costs down to registrants of domain names in gTLDs and thereby forces reductions in the margins of registries and registrars to the point of non-availability, and we see no justification for this. The gTLD Registries and Registrars are estimated to be contributing $22 million, or over 92% of ICANN's revenue. The IP Address Registries contribution to all revenues is 3.4%, and the ccTLDs is 4.3%.
  
  All users of the Internet including those using ccTLDs benefit from a stable and secure Internet environment and should contribute proportionally to the systems and organizations that make this possible. In addition, the operational plan specifically mentions the need to develop "alternate revenue sources." This is not accomplished in this budget as the ICANN approach is to continue charges directly related to gTLD registrant activity although now shifting it to the registry. Registry and registrar business models cannot easily absorb these charges and therefore the "revenue source" continues to be the gTLD registrant. That does not seem to fulfill the goals for revenue.
  
  While ICANN indicates in the text of the budget that new sources of revenue need to be found, we observe that the same statement was made last year and that no change occurred since nor do we see any material change on the horizon. This situation is untenable. We call upon ICANN to develop and publish a clear funding strategy for the future and clearly communicate to the Internet community what is being paid from what funds. We stand ready to assist in this endeavor.
  
  ICANN agrees that more diverse revenue sources must be developed. The first meaningful step in this direction is the increase in fees to be received from the .NET registry. In fiscal year 2004-05, gTLD registrars contribute 82.2% of ICANN revenues and existing gTLD registries contribute 5.9%. In fiscal year 2005-06, it is planned that the gTLD registrars contribute 69.8% while the same registries contribute 21.5%. This spreading of the burden is in accordance with the commitment ICANN made last fiscal year. Having said that, ICANN strongly agrees the burden should be borne more evenly by all beneficiaries of the ICANN model, including RIRs and ccTLDs. The ccTLDs, through the ccNSO, have committed to a process of developing a funding model more in line with these expectations.

• The amount of funds budgeted from gTLD registries and registrars have increased by 45% compared to last year's budget. A similar step increase was observed in the last year's budget cycle. Despite the increase, we did not observe any change in ICANN's responsiveness or improved service to gTLD Registries. The budgeting process must include a feedback mechanism allowing to measure the performance under the budget not only in financial terms but also in terms of completion of strategic objectives. Further, we recommend ICANN to develop and implement clear performance criteria for services provided to registries and registrars.
  
  In last year's budget Registry contributions increased 15%. This year, they increase only 15% again, except for one registry, .NET.

  Regardless, services to Registries have improved in several ways, among them:

  • ICANN has taken responsibility for compliance with the inter-registrar transfer policy and resolved the vast majority of instances of individual disputes; this even though the policy calls for dispute resolution services are to be provided by registries in the first instance.

  • When one registry's emails were being caught in spam filters due to erroneous application change by the hosting company, ICANN staff and board assisted in its immediate resolution.

  • This year, ICANN resolved to respond to requests to the Chief Registry Liaison in some form within 24 hours of the initial contact. This commitment has been met.

  • On short notice, delivered an extension to GNR when they did not meet their original contractual commitment to implement EPP.

  • There is funding in the budget to fund the evaluation of proposed new registry services including the establishment of a standing technical panel. This is a significant improvement in services provided.

  Regarding registrars, service improvements have been made in many areas such as: automation of accreditation renewals, and bringing registration agreements into compliance (e.g., Whois requirements, procedures to use when Whois violation is apparent, and definition of jurisdictions).

• The operational plan includes a reference to facilitating the implementation of failover mechanisms to protect Registrants in the event of Registry failure. We wish to note that there is no mention of the risk of Registrar failure, a risk that we believe is much higher than registry failure. Unlike registrars, gTLD registries have escrow provisions in place. Moreover, in case of a thin registry such as .com, registrar failure can have significant impact on registrants.
  
  ICANN agrees. This language that is intended to cover registrar failure is in the Compliance section of the Operational Plan where compliance with data escrow provisions of the RAA is called out as a requirement. The budget also provides funding for developing a new, consensus based RAA. ICANN intends to work to establish more definite escrow requirements and other failover mechanisms designed to protect the registrant.

• How do the public participation and regional efforts relate to what other groups are already doing?
  
  Generally speaking, ICANN does not conduct or lead events in regional fora, rather ICANN takes advantage of planed events sponsored by others in order discuss the ICANN model, conduct outreach and provide education. There are many examples

  • participation, under ISOC's leadership, in events providing education regarding IANA services to ccTLDs;

  • participation in Highway Africa discussions regarding information and communications technology;

  • participated in several events with Francophonie including ccTLD training workshops,

  • participation in Pacific Island Telecommunications Association and the Pacific Island forum at their request to explain how to participate in the ICANN process;

  • participate in the U.N. Economic Commission for Africa meeting, describing ICANN's mission and mandate;

  • participate with Arab League, presenting material on deployment of IDNs

  • work with the India Ministry of ICT to work jointly toward the deployment of IDNs

  • presented to Korea's IDRC International Seminar on ICANN and its role in providing Internet governance

• The ICANN budget discusses potentially funding a GAC Secretariat. How does that sort of financial support fit within the ICANN mission?
  
  It does fit within ICANN's mission in two ways. Historically, the Secretariat has been funded by joint contributions from individual countries and, now, the EU. They may change in the future and ICANN wishes to have in place a plan to ensure the continuation of the function in the event funding is interrupted. This contingency falls within ICANN's missions: ICANN funds Secretariats to other Supporting Organizations: the GNSO and ccNSO, and the SSAC; also, support of the GAC serve to satisfy ICANN's strategic direction to ensure global stakeholder participation. If the contingency occurs, ICANN expects to expenditure two staff and associated infrastructure.

• The strategic plan call for the creation of two funds: a Security and Stability fund, and a Developing Country Internet Community Project fund. It was stated that these expenditures are to be funded from the proceeds of the incremental revenues resulting from the .NET agreement. The budget does not indicate that these items are independently funded. The budget should be annotated to indicate this.
  
  Yes, this would be a meaningful clarification and will be made.

• There is a lack of comments on the public forum - almost no substantial comments were submitted in the comment forum set up by ICANN for this purpose. This might be a direct result as to the complexity and length of the budget, discouraging thorough review and restricting the ability to succinctly summarize comments. It is sending a message of ambivalence from the community regarding the ICANN budget, which is of serious concern to us.
  
  Balancing between providing too much and too little detail is carefully done but the final product will generally displease most -- one way or the other. The table of contents and links on the budget cover page are intended to facilitate review.

• Registrars' contribution should have a top cap. It's bad enough ICANN doesn't plan to reduce our contribution, but it's even worse that we are supposed to pay even more. We the transaction fee, successful registrars that have more domains under management than last year, will even pay more this year.
  
  There was a cap of a type written into the fiscal year 2004-05 budget. Revenues received in excess of those planned are split, half going to reduce the per-registrar fee, half going to provide a reserve fund for ICANN. This year (2005-06), some registrars have suggested the same mechanism be put into place, others suggest that any overage go to offset the transaction based fees as well as the per registrar fee. The issue is being put before the registrar constituency.

• For reasons of fairness, successful registrars should contribute, regardless of what business model they are applying to be successful. It seems that currently, registrars who use the add/add grace period delete model to make money, don't contribute as they should. Under the current conditions, they can even apply for exemption. That is not fair to the registrar community as a whole.
  
  ICANN agrees and looks forward to the workshop regarding add/deletes in the registrar constituency meeting in Luxembourg. The goals of these workshops include those stated above.

• ICANN should provide registrars with a list of proposed changes to the RAA for them to work from and suggest changes.
  
  ICANN will present suggested areas of change during the meeting in Luxembourg.

• Please find whether the activity during the Add Grace period was included in the forgiveness formula 3.
  
  It is not included. As stated above, ICANN desires strongly to work with registrars to develop a model for resolving and implementing appropriate use of the add/grace period.

• Please furnish reporting on finances collected so far under the current fiscal year budget.
  
  To be furnished under separate cover.

• It's interesting that about half of ICANN's total projected income is intended to come from the Transaction Based Registrar Fee (in other words, paid to ICANN by Registrants when they acquire a domain name) and yet nowhere in ICANN's structure do I find an equivalent representation of the Registrant constituency, or indeed even the existence of a Registrant's constituency.
  
  Registrants in the coming year are estimated to be paying ICANN (through their Transactions with Registrars) $11,788,252 of ICANN's total projected income of $23,453,760. That is a lot of taxation for zero representation.
  
  There is a form of representation. There are 17 voting delegates on the Nominating Committee. Of those, six represent registrants/consumers. The NomCom appoints a majority of the board as well as other ICANN leadership positions.

• Question regarding the fiscal year budget: Is it finally decided or is it still progress? If it is decided, I want to know the exact amount of revised budget and the exact different amount that other registrars have to pay more.
  
  The budget is proposed and will not be final until adopted by the board.