ICANN Nairobi Framework for FY11 Operating Plan and Budget Wednesday, 10 March 2010 >>KEVIN WILSON: Hello there, those of you in Nairobi as well as those of you online and in Reston and wherever else you are around the world. My name is Kevin Wilson, I am the chief financial officer for ICANN, and I am very pleased and appreciative of presenting you the FY '11 operating plan and budget; more particularly, the framework for that operating plan and budget. And for those of you new to ICANN, our fiscal year ends June 30th. So this is the period from July 1st this year to June 30th, 2011. So the purpose of this discussion is to kick off the community involvement in our operating plan and budget development process. Over the next -- We have built this process for the last three years, I believe it is, to incorporate and engage the community as much as possible, so it's a framework, and I emphasize the word framework. It's not the draft or the final budget. Those come later. This is a framework offered up to the community to engage the community to provide input into the operating plan and budget. This ultimately ends in the adoption of the budget submitted to the board in June at the Brussels meeting. So this is a quick overview of the framework. Essentially, the strat plan, strategic plan has been updated, and now the operating plan process begins. We have almost five months of community feedback allowed to be -- community feedback to be incorporated, and the framework includes the commitments of ICANN for fiscal year '11 to continue on the essential services. It also allows for some growth in key areas, such as security, stability, and resiliency; IANA infrastructure; DNSSEC; I.T.; some policy development. There is also funds for resolving the remaining new gTLD issues, and preparing for the new gTLD launch. There's little growth in revenue, and we'll talk about that in a few minutes. Plan for expected next fiscal year. So we're going to, as a community, have to cut delay wherever possible. That being said, under the Board Finance Committee guidance we do have in this framework contributions of $2 million to the reserve fund. As mentioned, there is a heavy emphasis in this operating plan and budget to get community feedback. So we have had individual meetings throughout the Nairobi meeting. I think we had one conference call before. We have this forum here. There is a couple more individual presentations with ALAC and others through the rest of the week, and then afterwards there will be conference calls and then of course there is the online public forum for the community to provide feedback. This feedback will be synthesized, discussed with the Board Finance Committee, and then a posted draft budget on or before the 17th of May per the bylaw requirement of posting the draft budget for community feedback, 15 -- excuse me, 45 days before the fiscal year ends. And then like I said before, that budget is then submitted to the board for final approval at the Brussels meeting. So I'd like to spend a minute on the process, which is obviously very important. So this highlights that the strategic plan has been adopted. That's what happens in the first part of the year. The three-year strategic plan is updated. And then now we are in the operating plan and the budget development process. First is the framework, which is the posted in the middle of -- 15th of February, last month, and then the draft and the final. And you can see there the bedrock of all of this is the community feedback and engagement. To highlight the key milestones or key input dates, in addition to the community meetings we are having here in Nairobi, there is also a community call. Some are scheduled, and we'd invite others to participate as well. And then as I mentioned, the online public fora for community feedback, this first round is open April 1st and then obviously after 17th of May when the draft budget is posted there will be the opportunity for more public comments. And then as mentioned, the budget is submitted to the board in Brussels. In addition to following the strategic plan chronologically, this year we have also updated the operating plan and budget framework so that it follows also the format of the strategic plan. So it follows the four strategic focus areas, and also the enabler cross-functional that go across the four strategic areas. So this simplified one-page strategic plan that we talked about earlier in the week is also reflected in the operating plan. So we think it's important to let those of you involved in this understand the budget background that has led to this framework. The first point is that the revenues have increased at ICANN quite significantly over the last few years. 45% in the last four years. These have largely been a result of contractual increases. The dot com contract in particular has had steady step-ups of up to $6 million and now it's up to $18 million in the current year. So that being said, that revenue growth has increased significantly. In fiscal year '11, the revenue will not grow as much. We're estimating a little under 3%. I think it's 2.9%. Likewise, historically, the operating expenses of ICANN have grown significantly to match that revenue line as we have taken on and accomplished a number of large projects: the new gTLD program and IDNs, many other projects that we have been -- have spent funds for. So also during this period, because of the revenue minus expenses allowing room for contributions to the reserve fund. So right now the reserve fund is built up to $44 million of contributions plus one and a half million dollars in net earnings. So it's close to $46 million in total balance. In addition to that, the registrar fees, we have been able to build into the budget a decline in the 25 cent registrar fee with a discount down to 18 cents in the current year for those who have signed the 2009 RAA. So put those all together, there is a very big challenge to the board, the community and staff in 2011 to prioritize our existing work, to prioritize the new work to make sure that it all fits into that model. So the goals, working with the Board Finance Committee the goals that we have put forth for ourselves in preparing this framework is that we follow the strategic plan, number one. Two is that we integrate with community desires. We really built this into that. We have met with many of the constituency groups, ccNSO, the B.C. We are meeting with ALAC, SSAC. We really, really think that's a very important aspect of this operating plan and budget, that there's heavy, heavy involvement in that. The third point that the Board Finance Committee, working with us -- we're working with the Board Finance Committee is emphasizes the need to confirm the revenue estimates. So we have gone to the registries, registrars, CCs and RIRs to ask them their estimate and commitments for revenue for this budget so we have a good forecast and estimate. And then obviously take a balanced approach to prioritizing the expenditures. I mentioned earlier, there are some areas for growth. I think IANA building -- We have allocated for this framework $5.9 million, which is an 18% growth over fiscal year '10 for IANA. For security, stability and resiliency, we have 7.3 million, which is a 26% growth. Policy development, including the integration of the GNSO improvements is 6 million with a 12% growth. But for the most part, other areas in the framework, the plan is to keep the same or even some reductions. The gTLD program, there's also significant funds for the gTLD program to complete that. But because of the -- much of the work is done, we believe that there will be about a 10% decline in the year over year on the -- of expenditures for the new gTLD. This next slide shows the work we have been doing with the Board Finance Committee to balance the budget. So it shows revenue minus expenses, and the contribution to the reserve fund of $2 million. So the framework is presented that way, and identified the expenses -- identified the balancing act, the balancing effort to create that. So next I'd like to go in a little bit more detail, there's -- emphasize in response to community feedback from the past, and based on the conversations I have had this year in the Nairobi meeting, the request is continuing to be from the community to provide lots and lots of detail. The framework as posted is a little over 30 pages, and I haven't heard too many people saying there is not enough information -- that there's too much information. Most -- most of the feedback I have received is, "Can you provide more detail, and more detail." So just to highlight a few points of -- from the operating plan. The new gTLD program has a budget resource associated for the framework of 6.8 million. As I mentioned before, almost 11% decline from fiscal year '10. And this includes preparing ICANN for the launch of the new gTLD, including the TAS program, and other processes, business processes internally to prepare for the processing of those applications. It also, of course, continues the resolving of the implementation issues: rights protection, DNS stability, et cetera. For IDN implementation, there also is about a 1.1 million, and this is continuing the processing of fast-track requests. There's some resources for evaluating that process and improving on it, including the cost analysis of it. There's initiating an IDN compliance project in the framework, and some funds for things like outreach and addressing the IDNA protocol. Another area of growth is IANA and technology operations. We think that this is an important area for a number of reasons. Keeping the DNSA secure of course. This. Managing the IANA feedback performance system, continuing business excellence project and publish the interim results. Improving the streamlining of the root zone request and test implement RZM software. And very importantly, adapt to the operational requirements of DNSSEC, the scaled number of TLDs and the IDNs, to make sure that those pressures are managed appropriately. The budget resources are nearly 6 million, which is an 18% increase over fiscal year '10, which is reflecting the importance of IANA especially looking beyond the conclusion of the existing contract with the Department of Commerce. Security, stability and resiliency, SSR, is also an area of focus with 7.3 million of budget resources allocated to it for this framework, which is 26% over fiscal year '10. With 7.3 million allocated to it for this framework, which is 26% over fiscal year' 10, this includes working with other Internet stakeholders to enhance and protect the SSR, exploring DNS CERT, working with partners to considering DNS CERT. There's a DNS SSR symposium. More details are obviously in the document posted online. Contractual compliance continues, and step up the aggressive enforcement of agreements. Core meeting logistics is also an area that's pretty much flat at 5.2 million, although this does include some exploring new approaches to meeting selection, remote participation, as we're seeing here, and special needs. Policy development support does have a 12% increase, up to $6 million, which includes accounting for and helping out with factoring in all the improvements of the GNSO and just the pure volume of all the policies, PDPs, that are in process. Global engagement, increasing international participation. There's still 7.2 million. It's a modest increase of 8%, but this still includes a million dollars of translation in the budget. We still have travel support in the budget, which is an important part of keeping the work of ICANN by bringing those certain community members and supporting them, 1.5 million. There will be a travel guidelines for fiscal year '11 published and posted in the next trimester as well. Ombudsman and board support of NomCom are, essentially, for budget resources showing as flat. Thank you, Cory. Excuse me. So the final two organizational activities that we have is the DNS operations, which has a very high percentage growth, but since it's a small group working in that, it's 2.3 million, primarily because the DNSSEC root key signing facility is setting that up and making sure that we're -- we are production quality for all the zones that ICANN controls. That's $2.3 million. Organizational improvements is -- essentially, those are the reviews, including the Affirmation of Commitments, including $2 million, or 21% increase. So moving along, the budget assumptions that are built into this are, small staff growth and tighter travel policy. So we're using this as an opportunity to make sure that we're working as efficiently as possible and that we've also increased our management of those resources with the recent posting of the procurement guidelines and the cost-cutting guidelines, which we've been working through -- with the audit committee and the finance committee. As far as gTLD cost, new gTLD cost, the status there from a budget standpoint is we spend the money if we need to, delay, if possible, into the separate budget amendment, and obviously some -- much of the new gTLD costs have already been spent. We're looking at new approaches to translation and meetings to obviously save and be more efficiently until our spending there. And as mentioned before, the planned contribution is $2 million to the reserve fund. We're also using this as an opportunity, the finance committee is reviewing this -- on considering the appropriate level for the reserve fund and appropriate amount of contributions. This chart shows the budget resources by the four strategic focus areas for ICANN and the cross-functional aspects of the ICANN budget. This is a long list of reports and views of ICANN's financial information. And each of these have been requested by the community at one time or another. So we're continuing to do these. We also invite feedback on which of these reports or other reports would be most valuable in the draft budget. And that's our plan to do that. And I'll close with the functional EAG views. Those are the two that were launched last year. And those are posted each month on our dashboard. Functional, meaning the expenditures by major organizational activity. And EAG, which is expense area group, which is focus -- the view of ICANN's budget by the SO and AC, the support organizations for ICANN. So just to conclude, what's next, the -- continue the soliciting community input through online forums, through questions here, the questions and answers. I know that the smaller breakout sessions have had a lot of robust conversations and Q&A. We really encourage that. And also to set up conference calls and execute the ones that are already set up. We'll also refine the budget assumptions, confirm our priorities, synthesize community feedback posts. And then post the draft budget by the 17th of May, per the bylaws. Solicit more community feedback, have another forum, and then submit the budget to the board at the Brussels meeting. So that concludes my remarks. I'd like to open it up for questions or comments. Matthias, is there any question online? Not yet. Okay. >>MARILYN CADE: The race to the mike. Kevin, my name is Marilyn Cade, and I am a member of the business constituency and am presently the chair of the business constituency. My comments are offered in the spirit of continuing the dialogue on behalf of the business constituency with you. And I want to express our appreciation for the time that you spent with us yesterday. I said in our initial interaction in this cycle that that was a conversation, and our consultation needed to take place at a later time when we were more informed and had studied the framework and the budget in more detail. So I'd like to confirm that we will be inviting you to a conference consultation with our membership, and we will be undertaking a more detailed examination. In general, I'll say that there are a few areas where we will probably suggest some -- I hope you'll view them as tweaks. But I would just reinforce that a couple of areas of significant concern to our members is to ensure that there is sufficient focus and funding to the compliance work that ICANN does and that we are very interested in ensuring that ICANN moves -- develops a commitment to fact-based research that supports informed policy-making. And I think some of that is going to be new work. And it would be easy to think that that means significant change or perhaps a big budget investment in support of the GNSO policy council. I'll say my personal opinion is that this is the kind of work that will support the security and stability and ongoing dependability of ICANN, the organization. >>KEVIN WILSON: Thank you, Marilyn. >>AYESHA HASSAN: Hello, Kevin. It's Ayesha Hassan from the International Chamber of Commerce. Thanks again for the discussion, as Marilyn said, with us yesterday. That was very helpful. I wanted to take this opportunity to reiterate one of the comments I made yesterday in the business constituency meeting, which was to underscore that, for business, we are working hard to increase and strengthen participation of broader business in ICANN, as well as in the constituencies. And in that regard, I wanted to point out in section 4.9 on global engagement and increasing international participation that I noticed that there were several -- or there are a few particular entities within the ICANN structures mentioned, but that business was not mentioned. And we'd like to see a specific mention of these activities being focused and the resources necessary behind them to focus on complementing our efforts to strengthen broader business participation in the ICANN work. Thank you. >>KEVIN WILSON: Great. Thank you. We're -- as I mentioned in your meeting yesterday, the at large group in particular pointed out a year ago at the framework when we presented that that they weren't mentioned. But as we further re- -- further looked into that, we saw that there really were a lot of resources spent on that, spent on at large. So we elevated that and made sure that in the draft budget that was posted, we articulated exactly what those resources were. So we'll certainly do that for the -- in this case as well. >>AYESHA HASSAN: Thank you. >>BRUCE TONKIN: Had a question, I guess, for you, Kevin, but also for Marilyn. Firstly, for you, as a follow-up to Marilyn's question on database research, 'cause I think that is important that ICANN is increasingly, you know, doing the research and having that as a foundation for doing policy development, are you able to give some rough orders of magnitude of how much has been spent on some of the recent work, both the economic studies and the WHOIS studies, just so that the community has a feel for how much has been spent so far? Just in the last year? Do you know those numbers? >>KEVIN WILSON: I don't. >>BRUCE TONKIN: Not down to the detail. >>KEVIN WILSON: It's a lot. Doug, do you happen to know offhand how much? I remember a couple of the invoices. But -- >>DOUG BRENT: Yeah, hi, this is Doug Brent, chief operating officer at ICANN. I think we can respond to the community with a specific answer. If you want order-of-magnitude answers that I wouldn't bet my life on, I think that the several-year study by National Opinion Research Center on WHOIS studies, which was recently published, and I think was a professional piece of work, just not including staff costs, but actual expenditures from ICANN, was in the neighborhood of $300,000. Could have been more than that. Could have been in the 3- to $500,000 range over that entire time frame. But we will follow up with a specific answer. The economic studies, I am pretty certain if you look over the last 18 months, those would be over a million dollars spent on economic studies relating to (inaudible)/registrar separation integration and the various studies that have been done on the new gTLD market. And, again, I think what we'd like to do is validate those numbers back to the community in a blog posting or somewhere along the line. >>BRUCE TONKIN: Thanks for that, Doug. I think this raises the importance that the amounts of material, and I think we need to be able to see some line items in the budget for next year under some of the different categories. We have the category of new gTLDs, and we're talking about what we're spending there. If we are spending a million a year, we should have that as a line item, just a rough budget line. Likewise things that Marilyn is talking about in the GNSO, if we can say we have a budget for a certain amount of money for studies within the GNSO area, we just know what orders of magnitude those are, that's helpful. My question for Marilyn, Marilyn made a statement about whether compliance was sufficient. I was unclear on what was meant by that, meaning you don't think it is sufficient? Is it a funding issue? Or is it -- she's left the room, has she? Because I'm not understanding what the point was. Of course, everyone wants to make sure it's sufficient. Wasn't sure whether the issue was they didn't think we're spending enough? Or was the issue that the outcomes weren't being achieved for what we are spending, which is a slightly different point? >>KEVIN WILSON: Thank you, Bruce. (No audio to scribes). >>SÉBASTIEN BACHOLLET: -- the comments made by ALAC, and especially we were pushing for strategic projects to try to have one -- at least one ALS, one at large structure in each country. And that's not included, it gives us difficulty to say, yeah, we -- it's our idea. We need the money for that. But now we don't know, maybe the board is against this idea and staff is against this idea. Then we need to know. >>KEVIN WILSON: Okay. Thank you. That being -- let me just address that a little bit more, Sebastian, if I could. That being said, I believe this is the time for the -- that feedback to occur. So I'm hoping ALAC, as they've done in the past, does contribute a lot to the -- and all the communities, all the community groups continue to provide feedback into the framework so that we can have the most community-based draft budget possible, and operating plan. >>SÉBASTIEN BACHOLLET: Since nobody is taking the floor, yes, it's important. And I -- we just had an exchange with a board member and the president and CEO asked us to help ICANN in some issue. I would like to request ICANN to help us in some issue, too. Because it's not one way. It's also -- here also, it's two ways. If not, it will not work. >>KEVIN WILSON: I understand. Thank you. >> Kevin? >>KEVIN WILSON: Yes. Matthias, you have a question from online. >>MATTHIAS LANGENEGGER: Yes. I have two questions, and one comment from Chuck Gomes. Start with the first one. Technical operations expenses increase much more than 22%. It is not possible to validate such huge increases without much greater detail. Will more detail be provided? >>KEVIN WILSON: The short answer is, absolutely, yes. We purposely designed the framework to not be so baked, not be so complete. Because we wanted an opportunity to have the community adjust the major dials. But that's been a clear feedback just in the few meetings I've had, is that you'd like -- the community members would like to see more detail in that. And we'll provide that in the draft budget and operating plan. Thank you. >>MATTHIAS LANGENEGGER: Then the second question is, it is not clear that there are sufficient funds allocated for GNSO improvements for FY '11. Years of work have gone into the improvements, and they will primarily be implemented in FY '11. Will a detailed breakdown of the budgeted funds for this area be provided? >>KEVIN WILSON: Yes, there will be. I know that some of the challenge of this in many areas is coming up with clear operational activities that can be costed and put into the budget. So it's also a loop there that we want to provide the budget for these important aspects of ICANN's operating plan, but we also need to have clarity on what those activities are and what the -- the specific resources that are required. But the short answer is yes. >>MATTHIAS LANGENEGGER: Then there's also a comment from Chuck Gomes. He said it would be helpful to provide a comparison of expenses and revenues by group, for example, SOs and ACs et cetera. >>KEVIN WILSON: Yes. I -- Chuck, I assume you mean comparative year over year. And if that's your answer -- that's the nature of your question, then, yes, we'll provide that. Right now, we have the pie chart that you saw earlier, which just has the current fiscal year, or the fiscal year '11 framework. But we'll show that year over year so you can get a feel for that. Great. Any other questions, comments? Okay. I also want to thank the board finance committee for all their help and extra meetings we've had this past trimester to get this framework up. Ramaraj, in particular, and Gonzalo, and I don't think I see George. There you are, George. You are here. Thank you very much for all your help in leading this effort. Thank you. Any other questions, comments? Yes. >>MATTHIAS LANGENEGGER: Chuck Gomes -- is that working? Chuck just followed up on your answer. And he said, no, it's not a comparison in the same year. Revenue versus expenses. >>KEVIN WILSON: Oh, revenue versus expenses. That's. Okay. I'll listen to that, or we'll listen to that. >>SÉBASTIEN BACHOLLET: Chuck, it will be great all the revenue are coming from the end user. Thank you very much. >>KEVIN WILSON: All right. Any other questions? Comments? No? Okay. Thank you very much. (Session concluded.)