[Wg-apnic-fees] Proposal: Interim APNIC fee structure adjustments (Draft)

[Paul Wilson <pwilson@apnic.net>]

Dear all,

Following is the proposal for interim APNIC fee structure adjustments, for 
discussion and voting during APNIC-24 next month.  This measure was 
discussed by the APNIC EC during their meeting last month, as reported 
earlier by Randy Bush on this mailing list.

The attachment to this proposal is the management letter from KPMG, which 
recommends and supports these changes.

I look forward to your comments, and your support for this proposal.

Regards,

Paul Wilson
APNIC.



________________________________________________________________________

proposal: Interim APNIC fee structure adjustments  (Draft)
________________________________________________________________________



Author:    Paul Wilson, Director General, APNIC
          Akinori Maemura, Chair, APNIC Executive Council

Version:   0.1 (Draft)

Date:      6 August 2007


1.  Introduction
----------------

In May 2007 the APNIC Executive Council commissioned a study by
international consulting firm KPMG into the revision of APNIC's fee
structure.  The first stage of this work has been completed and will be
reported at the APNIC 24 meeting in New Delhi.  These results include a
recommendation for an interim fee structure adjustment to address both the
immediate budget shortfall and the ongoing uncertainty arising the use of
the US dollar in setting APNIC fees.


2.  Summary of current problem
------------------------------

The current problem is stated by KPMG in their recent advice to the APNIC
EC, which is attached to this proposal.

In section 2 the problem is summarised as follows:

   "KPMG's analysis clearly shows that the impact of the foreign currency
   movements, and the general impacts of movements in the Consumer Price
   Index (as a proxy for inflation), represent risks to APNIC which must
   be addressed. It is also clear that these factors have resulted in a
   significant reduction in the real costs of APNIC membership, and that
   an adjustment in fees should be seen as a response to an erosion in
   income, and not as a fee increase resulting from escalating costs."

In section 4.1, the justification is provided as follows:

   "We believe there is a justification for an immediate increase in the
   members' fees, and not to do so would expose APNIC to financial risk.
   The following provides an overview of the key considerations which
   support the decision that EC reached to increase APNIC's membership
   fees:

   * Exchange rate variations - The strong increase in the Australian
   Dollar ($AUD) compared to the US Dollar (USD) has detrimentally
   impacted on APNIC's financial performance. The 2007 APNIC budget was
   struck at the rate of .78, and the exchange rate has been hovering
   around .85 and this represents a 10% deterioration in this year alone.
   Furthermore since 2000, when the rate was around 0.5479, the real
   deterioration in APNIC's AUD revenues has been over 40%.

   * No increase in fees since 1996 - The membership fees have not been
   increased since 1996. There has been no adjustment for inflation over
   this period and this has resulted in a narrowing gap between revenues
   and expenses to the point where APNIC will incur a deficit for the
   first time in 2007. A percentage increase in the order of 7% represents
   a very small proportion of the losses due to inflation, but provides
   the opportunity to balance the endorsed budget for 2007.

   * Member expectations - The demand for greater and better services by
   APNIC members. While members have generally been very positive about
   the services provided by APNIC, certain improvements and enhancements
   are expected. However, the fact that APNIC faces a declining revenue
   base, when taking into account exchange rate fluctuations and
   inflation, limits the opportunity for APNIC's management to address all
   key service improvement requests proposed by its members.

   "We believe that the decision to implement a percentage increase in
   member fees in the short term, is a prudent way to manage risk."


3.   Details of the proposal
----------------------------

Under this proposal, adjustments are made to APNIC fees sufficient to
produce a balanced result for the approved budget for 2007.

Firstly, it is proposed to levy all APNIC fees in Australian Dollars.  The 
proposed conversion rate from US Dollars to Australian Dollars is 0.7889, 
which is the same exchange rate that was used to prepare the 2007 APNIC 
annual budget.

Secondly, it is proposed that fees be adjusted to a level which would
produce a balanced budget in 2007.  This involves an overall increase of
around 7% in total in fees derived from APNIC members and non-member
customers.

The complete revised fee schedule is provided in Appendix A.  It should be
noted that "round figures" have been chosen in order to allow easier
communication and administration, and therefore the percentage change is
not consistent in all cases.




4.   Advantages and disadvantages of the proposal
-------------------------------------------------

Advantages:

The proposed changes are necessary to ensure sustainable operations for
APNIC in future.  Without such changes, APNIC would need to reduce service
levels, or continues to incur losses in future.

Disadvantages:

The adjustment in currency will have administrative impacts on APNIC
members and customers, who may need to make new foreign currency
arrangements in some cases.  In order to facilitate payment, APNIC will
continue to accept payments in USD, based on the exchange rate applicable
at the time of invoicing.


===

A. Appendix - Revised Fee Schedule

A1. Membership Fees
                       Current       Current       New fee
                         (USD)         (AUD)         (AUD)
Extra large             $40,000       $50,704       $54,400
Very large              $20,000       $25,352       $27,200
Large                   $10,000       $12,676       $13,600
Medium                   $5,000        $6,338        $6,800
Small                    $2,500        $3,169        $3,400
Very Small               $1,250        $1,584        $1,700
Associate                  $625          $792          $850


A2. Per Address Fees
                       Current       Current       New fee
                         (USD)         (AUD)         (AUD)
Extra large               $0.02       $0.0254        $0.027
Very large                $0.03       $0.0380         $0.04
Large                     $0.06       $0.0761         $0.08
Medium                    $0.11       $0.1394         $0.15
Small                     $0.16       $0.2028         $0.22


A3. Non-member Allocation Fees

                       Current       Current       New fee
                         (USD)         (AUD)         (AUD)
Host or site address         $1       $1.2676         $1.35
AS number                  $500     $633.7939       $680.00
Reverse DNS domain          $50      $63.3794        $68.00


A4. Non-member Maintenance Fees

                       Current       Current       New fee
                         (USD)         (AUD)         (AUD)
Host or site address      $0.10       $0.1268         $0.14
AS number                   $50      $63.3794        $68.00
Account fee                $100     $126.7588       $135.00

===

________________________________________________________________________
Paul Wilson                                 email:     pwilson@apnic.net
Director General, APNIC                     sip:    apnic@voip.apnic.net
http://www.apnic.net                        phone:       +61 7 3858 3100

Attachment: Ltr APNIC Stage 1 030807.pdf
Description: "\"Ltr APNIC Stage 1 030807.pdf\""