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Minutes for the APNIC fees discussion

Thursday 1 March 2007, Bali International Convention Centre, Nusa Dua, Indonesia

Meeting commenced: 09:00

Chair: Randy Bush
Co-chair: Ming Chen Liang

The Chair introduced the session and explained the agenda.


  1. History
  2. RIR comparison
  3. APNIC membership fee: Structure vs equity vs budget
  4. Report on straw poll
  5. RIPE's fee model
  6. General discussion
  7. Alternative solutions: "A continuous three-bit fee model"
  8. Review of APNIC fee structure v2.3
  9. Other views
  1. History

    Che-Hoo Cheng, EC of APNIC

    This presentation reviewed the history of the APNIC fee structure, describing how it was first established and the changes that have taken place over time. The presentation included details of the evolution of the special fee schedule for NIRs and confederation members.

    Questions and discussion

    • There was a brief clarification of the details of the last change of the fee schedule.

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  2. RIR comparison

    Randy Bush, Chair of Fees Working Group

    This presentation provided a comparison of the five RIRs' income and expenses, noting that APNIC has considerably less income and expense than either ARIN or RIPE NCC. However, the workload of APNIC is now comparable to those RIRs. The presenter noted that there is a clear difference in the service models in the RIRs. He also noted that there has not been significant staff growth in APNIC in recent years. The main problem for APNIC's finances has come from the exchange rate movements.

    The presenter concluded that there is a choice to make about the service model and how to deal with the exchange rate fluctuations.

    Questions and discussion

    • It was noted that APNIC is doing very efficient work, but that the contribution of the NIRs is a factor in reducing the costs of APNIC's total output in comparison to the other RIRs.

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  3. APNIC membership fee: Structure vs equity vs budget

    Paul Wilson, APNIC

    This presenter noted that he had published several versions of a paper proposing a possible example of a new fee structure. The main issues with the fee structure relate to fairness and consistency issues. The presenter observed that there is a clear disparity in the distribution of burden, which also creates a barrier to entry for new users. The presenter explained that the per-address fee is one of the major problems in the current structure. He also noted the issues faced by members in less developed countries, as well as the inconsistent treatment of members and non-members and of historical and current address space.

    The presenter noted that APNIC's sustainability under the current fee structure is in question to some extent. He explained that the Secretariat is required to maintain a cash surplus equivalent to one year's operational expenses. This surplus was easy to build in earlier years but is now becoming harder to maintain.

    The presenter described a set of principles which can help to structure the fee schedule. The principles are that: annual fee calculation should be based on IP address holdings; NIR members should have a comparable fee structure to normal members; support for Internet development in least developed countries; and ensure APNIC's sustainability.

    The presenter reviewed the details of the fee proposal document that has been published.

    Questions and discussion

    • There was a comment that it seems unfair that members of NIRs use 50 percent of APNIC's IPv4 addresses but pay less than 20 percent of the fees. However, it was noted that there are hidden costs and it is necessary to consider the NIRs' needs and overheads.

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  4. Report on straw poll

    Paul Wilson, APNIC

    A set of questions was recently put to an online vote in MyAPNIC. The vote was conducted according to formal voting entitlements, but was considered non-binding because of the possibility of ending with inconsistent results. Turnout for the vote was quite low, although there were more voters than the number usually present at APNIC meetings. The presenter reported the final result of the votes.

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  5. RIPE's fee model

    Axel Pawlik, RIPE NCC

    This presentation described the fee approach of RIPE NCC, which is quite different in nature to the current APNIC scheme. RIPE NCC prepares an annual activity plan and associated budget. These are then approved by the Board, which proposes a charging plan. The members then have the opportunity to approve the plan or provide input into the activities. RIPE NCC uses an algorithm to determine the members' contributions. There are five membership classes, based on relative size of resources calculated over time. The algorithm takes into account how recently the resources were allocated, recognising that the longer a resource is held, the less work is required by RIPE NCC to support it.

    Questions and discussion

    • It was noted that RIPE NCC model looks more like charging for service, than the APNIC model which looks like charging for resource rental.
    • It was also noted that the difference between the top and bottom fees is less than in the APNIC structure.
    • The process for developing activity plans at RIPE NCC was clarified. It was noted that in developing the activity plan, the budget is not discussed. First, the community decides what activities RIPE NCC should conduct, and then the next stage is to determine how to fund that. The budget is primarily discussed by staff and the executive board, although it can be discussed in member meetings.
    • There was also a clarification of how RIPE categorises membership classes, based on aged address holdings.
    • It was noted that RIPE NCC spend a lot of its money on community services. It was suggested that the value of that service to an ISP is proportional to size. However, it was noted that there has not been much discussion of this.
    • It was noted that the reason APNIC selected a fixed membership fee is because many members feel that it is hard to plan for a variable fee. It was explained that in 2002, RIPE NCC suffered a significant loss, which required a fee increase of 50 percent. This did attract some criticisms. However, it was noted that fees have reduced since then.
    • It was noted that because APNIC fees are paid in US dollars, in effect, their membership fees do vary every year.

    [Break 10:40 - 11:05]

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  6. General discussion

    • The Chair made some administrative announcements.
    • The Chair of the APNIC EC noted that the APNIC EC had discussed the fee issue at their meeting earlier this week. The EC emphasised that the fee issue is to be determined by the membership, not the Secretariat. Therefore, the EC encourages everyone to participate in this discussion. The EC will also do all it can in representing the needs of the members.
    • The Chair noted that there is another region that has NIRs, namely LACNIC. He called on a representative from LACNIC to describe the NIR structure in that region.
    • LACNIC has two NIRs, Brazil and Mexico. All members of NIRs there are automatically members of LACNIC. Every year, the NIR sends LACNIC a list of current members and a statement of membership revenue. 30 percent of that revenue is paid to LACNIC. The NIRs in LACNIC use the same general fee structure for their members that LACNIC uses for its members. Fees are based on the amount of resources held and are divided into different tiers. LACNIC uses the US dollar as its currency for fees, but pays most expenses in other Latin American currencies.

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  7. Alternative solutions: "A continuous three-bit fee model"

    Ming Chen Liang, TWNIC

    This presenter noted that after hearing about the RIPE NCC model, he may consider things differently, outside the "address rental" model and more aligned to a service model.

    This presentation, however, was based on the existing principles, but suggests using a continuous fee model, rather than the tiered approach. The presenter suggested a new structure, using three-bit increments. The presenter suggested that this suggested model could yield a 15 percent increase in revenue. He noted that the RIPE NCC model of basing fees on an activity plan could be very useful.

    Questions and discussion

    • There was a comment about the considering a discount to least developed countries. It was suggested that in many LDCs, there are monopoly ISPs and that while a discount is a good thing, there may be better ways of helping those countries.

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  8. Review of APNIC fee structure v2.3

    Billy Cheon, KRNIC of NIDA

    This presentation analysed the draft fee proposal document that had been circulated by the Secretariat. The presenter discussed the principles underlying that proposal. The presenter explained that the effect of the draft proposal would lead to a doubling in annual fees payable by KRNIC. The presenter argued that while it may at first seem unfair that the NIRs use 50 percent of the address space but contribute less than 20 percent of overall fees, the costs and contributions of the NIRs need to be taken into account.

    The presenter stated that KRNIC would not be able to accept the members of NIRs being treated the same as APNIC members. He argued that the NIR should not be considered a bill collector for APNIC. The presenter proposed that an NIR and its members should be considered as one body.

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  9. Other views

    The Chair opened the floor to general discussion.

    • It was noted that the current APNIC model uses a rental-based model, but that a service-based model could be worth considering in future discussions.
    • There was a question about what sort of fee decision model should be used.
    • It was clarified that any proposal will need to go through membership voting and be approved by the EC.
    • It was also clarified that the proposal circulated so far is not a Secretariat proposal but is actually a collection of many different suggestions that have been put forward.
    • There was a question about the comparison presented earlier about NIR address holdings and relative contributions. It was clarified that ERX holdings were not included in that comparison.
    • It was explained that the exchange rate had shifted by 50 percent since 2001 and that this makes a huge difference to the translation from US to AU dollars.
    • It was noted that as APNIC keeps growing, so will revenues. However, under the current conditions, it is becoming increasingly difficult to maintain a balanced budget.
    • It was explained that the founding directors of ARIN originally set a two year operating surplus to be held in reserve.
    • It was noted that it is very difficult for an organisation to absorb a 100 percent fee increase and that a transition period would be required.
    • It was noted that changing the fee schedule will require consideration of the voting schedule.
    • It was noted that one interpretation of the straw-poll result is that "I should pay less; he should pay more".
    • It was clarified that APNIC staff costs are about 45 percent. There was a request to also report training costs.
    • There was a general discussion about the financial reporting.
    • There was a request for more detailed input about how a transition to a different model should be managed.
    • There was a comment that there seem to be ever-increasing solutions being forward for a relatively straightforward problem. There was an expression of sympathy for unpredictable budgetary requirements. It was argued that to keep the system simple, everyone throughout the region, whether they are an NIR member or not, should pay in the same general way for the services provided by APNIC. It was argued that the NIRs provide a value added service and they should therefore charge accordingly. In other words, APNIC should set a price for the service and the NIRs should pay that and levy a value added fee accordingly.
    • It was noted that while voting can be seen as being relevant to the fee issue, it would be simpler to have the votes come from the user rather than having NIR block votes.
    • There was a statement that the general model of paying less for older resources makes sense.
    • It was clarified that in LACNIC, all members of NIRs automatically become LACNIC members and all get a vote.
    • It was suggested that with one-member-one-vote and central participation, there will be a better sense of community.
    • It was noted that the APNIC fees are a huge hurdle for many providers in LDCs. There was a strong statement of support for discounts in LDCs. It was noted that many small providers in LDCs can get only two addresses and put their entire network on a NAT. It was noted that for many years, the entire country of Uganda was behind a /27.
    • There was an explanation given of the cost factors for IP address administration in the case of LIRs under NIRs. The speaker described the responsibilities of NIRs in relationship to APNIC. There was a request for the NIRs and APNIC to work out the costs of the relative services, so that the end user getting the service pays the same amount across the region.
    • It was noted that in LACNIC the service balance between LACNIC and its NIRs is similar to this region.
    • It was argued that the fee balance should reflect the cost balance. This should be reflected in the balance between large and small members, and regular and NIR members.
    • It was argued that because NIR members are not members of APNIC, then they should not be treated in the same way.
    • It was suggested that there should be some consistency among the NIRs and a single discount level.
    • It was argued that if the model is set up well, the big LIRs that are current APNIC members may chose to join their NIR, helping that NIR to achieve better economy of scale.
    • There was another comment that the fees for small providers are a major problem for small networks in the region. There was a suggestion that there needs to be a better sliding scale, especially for the LDCs.
    • The Chair proposed a series off questions to gauge support for the principles.
    • The Chair asked how many people think the RIPE model is more appropriate. A limited number of participants showed support for this; none expressed opposition.
    • The Chair asked about discounts for LDCs. There was little opinion expressed either way.
    • There was a request for the Chair to clarify the questions.
    • There was a discussion about considering historical address space. It was noted that it is problematic to make decisions about those who are not present to represent themselves.
    • There was a statement suggesting that considering the age of allocations is a fair way of dealing with legacy address space.
    • It was noted that basing a fee on service costs is a good idea, but whether that should be based on time or other factors is an open question.
    • It was noted that the RIPE NCC model is good because it is based on relative sizes rather than absolute categories.
    • It was suggested that considering the LACNIC model is more appropriate than considering the RIPE NCC model. However, it was explained that at RIPE NCC there is an option of collecting the membership fees quarterly and half-yearly. It was suggested that this is a good option as it can help keep the member more aware of APNIC and also lead to easier management of payments.
    • There was a comment that the RIPE NCC and LACNIC models should not be considered as in conflict, and that it may be possible to develop a suitable combination.
    • It was explained that APNIC does currently offer instalment payment options.

    Meeting closed: 12:30
    Minuted by: Gerard Ross

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