Re: NIR SIG Proposal at APNIC-18 - Changing NIR fee structure

To: Toshiyuki Hosaka <hosaka at nic dot ad dot jp>
Subject: Re: NIR SIG Proposal at APNIC-18 - Changing NIR fee structure
From: David Chen <david at twnic dot net dot tw>
Date: Fri, 13 Aug 2004 16:13:48 +0800
Cc: sig-nir at lists dot apnic dot net
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Hi Toshi,

I agree with the idea of proposal to set an upper limit on NIRs per address fee, althought the upper limit is still controversial.

As you proposed, JPNIC had requested 5* (/14+) and 185 * (under /14) IPv4 address in last 12 months from July 2003 to June 2004, and supposed the upper limit is /14. But NIRs are not requested as many as JPNIC on IP addresses. In TWNIC, we had requested 1 * (/14+) and 2 * (/15) and 3 * (/16) from APNIC direct pool in last year. In spite of few TWNIC members will have the benefit for the limit, we support the proposal. Somehow, it will reduce the cost of NIR members which request huge IP address, and we are also thinking the balance of the upper limit.

Regards,

David Chen
TWNIC

Toshiyuki Hosaka wrote:

Dear NIR colleagues and APNIC secretariat,

I hope you are aware of the proposal from JPNIC, to change current per
address fee system apllied to NIRs. 

This proposed scheme may affect APNIC financial conditions therefore I
left specific value of "cap" (upper limit) to APNIC's assessment, so if
possible, I would like to hear an opinion to this proposal from APNIC
secretariat before the meeting. 

Of course any comments from NIRs are most welcome.

If you have any unclear points please do feel free to ask me. I am happy
to answer.

Thanks and best regards,
Toshi




On Wed, 04 Aug 2004 15:03:45 +0900
Toshiyuki Hosaka <hosaka at nic dot ad dot jp> wrote:

Dear Maemura-san and all NIR colleagues,

The following is another proposal from JPNIC, which I have submitted by
email today. Your questions, comments, and suggenstions are highly
appreciated.

Looking forward to seeing you all in Fiji.

Thanks and best regards,
Toshi@JPNIC

----------------

Proposal: Changing NIR fee structure
Author: Toshiyuki Hosaka, Japan Network Information Center (JPNIC)
Version 1.0 as of August 4, 2004

_____________________________________________________________________
Introduction:
(A very brief description of your proposal.)
---------------------------------------------------------------------

This document proposes new NIR fee structure, which could be acceptable
for all stakeholders, i.e., APNIC, APNIC members, and NIRs. This 
proposed fee structure sets an per allocation fee charged to NIRs 
(indirectly to NIR members) at a reasonable level even when NIRs make 
a large allocation to their members, by setting an upper limit to the 
fee.


_____________________________________________________________________
Summary of the current problem: 
(Describe the situation that this proposal is intended to address.)
---------------------------------------------------------------------

NIRs are charged NIR fees, or per address fee, defined in APNIC-103 
(Operational policies for National Internet Registries in the APNIC 
region), in addition to yearly membership fee, which all APNIC members
pay as well.

  1.3 	NIR fees
  ----------------

  APNIC charges fees for providing NIR services. These fees are set at
  a level that ensures that other APNIC members do not subsidise NIR
  members and that NIRs provide sufficient funding to cover the cost of
  providing the services they require. Details of the NIR fees are
  described in the APNIC document "APNIC Fee Schedule: Membership
  Tiers, Fees, and Descriptions", within the provisions describing the
  'per address fee' for confederations.


This NIR fees increase in proportion to the address space allocated to 
NIRs (or NIR members), and there is no upper limit in the fee. This is
the problem for NIRs/NIR members especially in large allocation.

For exapmle;

 /10 in IPv4 : 4,194,304 * USD 0.02 (Extra Large) = USD 83,886.08
 /20 in IPv6 : 5,534,417 * USD 0.02 (ditto) = USD 110,688.34

Such large allocations are feasible for JPNIC members. Our IPv4 address
allocation size to our members shows a trend of increase. JPNIC has made
5 allocations exceeding /14 in recent 12 months, from July 2003 to June
2004, for instance.

Furthermore, revised IPv6 policy document (prop-016-v002) clarifies 
that LIRs can apply for larger IPv6 allocations based on the current
IPv4 infrastructure, and that the allocation size is decided in 
accordance with the HD-ratio. So it is very likely for our members to
request larger IPv6 allocations. In fact, JPNIC had inquiries recently
from two of our members regarding large IPv6 allocation at /20 level.

This is actually a huge amount of fee, larger than yearly APNIC/JPNIC 
membership fee. JPNIC has to pass such cost to our members in either 
ways as below;

 a) JPNIC passes this cost on our members
 b) JPNIC passee this cost on the requestor

Choice a) is not acceptable for JPNIC because this means small/medium
ISPs are to pay larger ISP's per allocation fee. 

Choice b) also has problems as below;

 1) NIR members may lose the motivation to request large allocations
    under NIR membership, since the expense is far larger than receiving
    allocations directly from APNIC. This is not the situation we want.

 2) This large per address fee is beyond the level that NIRs can 
    justify as "value added service", such as local language/whois/
    information/translation.

 3) This large per address fee is beyond the intention described in 
    APNIC-103.

 4) In order to avoid a per allocation fee, NIR members *may* receive
    the large amount of IP resources as an APNIC member and after that 
    it *may* transfer its membership to NIR. This causes much burden
    both APNIC and NIRs.

 5) If Large NIR members flow out to APNIC direct membership, APNIC's 
    opration cost could increase which might be transfered to membership
    fee applied to all APNIC members in the long run.

_____________________________________________________________________
Situation in other RIRs:
(If applicable, describe any policies which may apply to this 
situation in ARIN,LACNIC, or RIPE NCC. If you are not sure, leave 
this section blank.)
---------------------------------------------------------------------

(blank)


_____________________________________________________________________
Details of your proposal:
(Describe your proposal in detail.)
---------------------------------------------------------------------

JPNIC proposes to "set an upper limit on the per address fee for NIRs". 
Non-NIR confederations is not the target of this proposal.

This proposal consists of two parts. Details are as follows;


    (1) JPNIC proposes to set an upper limit on the per address fee 
        for a single allocation, provided that the NIRs make an 
        allocation from APNIC common address pool (including Direct 
        Member Allocation).

    (2) JPNIC tentatively proposes that the upper limit of per address
        fee for a single allocation should be set at /14 in IPv4, and 
        /28 in IPv6. However, this specific value is subject to a 
        financial impact assessment by APNIC.


Proposed per address fee is calculated as follows;

   (IPv4)
   /20 :   4,096 * (per address fee)
   /19 :   8,192 * (per address fee)
   /18 :  16,384 * (per address fee)
   /17 :  32,768 * (per address fee)
   /16 :  65,536 * (per address fee)
   /15 : 131,072 * (per address fee)
   /14 : 262,144 * (per address fee)
   /13 : 262,144 * (per address fee)
   /12 : 262,144 * (per address fee)
   ...   ...


   (IPv6)
   /32 :  7,132 * (per address fee)
   /31 : 12,417 * (per address fee)
   /30 : 21,619 * (per address fee)
   /29 : 37,641 * (per address fee)
   /28 : 65,536 * (per address fee)
   /27 : 65,536 * (per address fee)
   /26 : 65,536 * ...
   ...   ...


_____________________________________________________________________
Advantages and disadvantages of adopting the proposed policy:
(Explain what you believe to the be the main advantages and 
disadvantages that would flow if APNIC adopted your proposal.)
---------------------------------------------------------------------

1. Why adopt the upper limit for per address fee?

Changing the fee structure should be acceptable for all the stakeholders,
APNIC, APNIC members, and NIRs (NIR members). That is;

(1) For APNIC
 - New structure should not have siginificant inpact on APNIC financlal 
   condition.

(2) For APNIC members
 - New structure should not force current APNIC members to pay additional
   fee.

(3) For NIRs (NIR members)
 - New structure should solve current problem.
 - New structure should not cause unfairness amoung NIRs.

When we see those points, this proposal meets points mentioned above.


2. Other choices?

  2.1 Discount per address (site) fee

  Even if you discount per address fee (ex. USD 0.02 to USD 0.01), it 
  won't help NIR so much since there is still no upper limit for per 
  address fee.


  2.2 Implement allocation fee (fixed fee per allocation)

  If this scheme is implemented, APNIC has to charge larger fee than 
  current per address fee corresponds to /20 or /19, in order to keep
  the revenue from NIRs. This means smaller NIRs and NIR members are 
  charged more than current scheme, and this is not aceptable for them.


  2.3 Raise membership fee for NIRs
  
  This could be an appropriate solution for the problems, however we
  do not take this here since we cannot propose concrete NIR fee 
  structure which is acceptable for all NIRs without knowing how much
  each NIR pays yearly including both membership fee and NIR fees.


  2.4 Revise current fee structure as a whole, involving all APNIC 
      members

  It takes time and probably this is not acceptable for current APNIC 
  members.


3. Why 262,144 hosts (65,536 sites in IPv4) are the upper limit?

Based on the stats JPNIC has, /14 (in IPv4) is the appropriate level 
we can agree on. If we set the upper limit at /14, APNIC doesn't lose 
much revenue from NIRs since currently there are not so many allocation 
over /14.

Below is the JPNIC allocation made to the members.

(1) Recent 12 months (July 2003 to June 2004)

 /14+          : 5  (3%)
 /14 and under : 185 (97%)
----------
/11+ : 0
/12  : 2
/13  : 3
/14  : 1
/15  : 6
/16  : 15
/17  : 11
/18  : 20
/19  : 37
/20  : 95
-----------

(2) January 2002 to December 2002

 /14+          : 2   (0.8%)
 /14 and under : 236 (99%)

(3) January 2001 to December 2001

 no /14+ allocation


4. Why restrict to the allocation made from APNIC common address pool?

Without this restriction, NIRs with its own pool can pay less than NIRs
allocating from APNIC pool, which may cause serious impact on APNIC 
revenue. For example;

  (Case-1)
  - When APNIC allocates /12 (4*/14) to NIRs as their address pool,
    and NIRs allocate 4 * /14 to their members...

     262,144 * USD 0.02 = USD 5,242.88 (/14 limit applied)

    +-------+     +------+       +-----+
    | APNIC |-----| NIRs |-------| LIR |
    +-------+     +------+   |   +-----+
             ---->           |   +-----+
              /12            |---| LIR |
                             |   +-----+
                             |---
                            ..
                            ..
                          ------>
                          4 * /14

    In this case NIRs are to pay only USD 5,242.88, and can allocate
    4 * /14 to their members.

  (Case-2)
  - When NIRs allocate 4*/14 to their members from APNIC addres pool...

     262,144 * 4 * USD 0.02 = USD 20,971.52 >> USD 5,242.88

    +-------+     +------+
    | APNIC |-----| NIRs |------+
    +-------+     +------+      |
        |                    +--+--+
        |------------------->| LIR |
        |         /16        +-----+
        |                    +-----+
        |------------------->| LIR |
        |         /16        +-----+
       ..                ..
       ..                ..

    In this case NIRs are to pay USD 20,971.52, much larger than case-1.
    So we should have the restriction that proposed upper limit is only
    applicable to the allocation made from APNIC common address pool.


(*remark) ----------------------------------------------------------
Per address fee here is the one applied to ex.large members, and set 
/14 upper limit.
--------------------------------------------------------------------


In IPv6 case all NIRs allocate IPv6 block from APNIC pool so this 
restriction is not applied. /28 (in IPv6) limit for per address fee 
is applied to all NIRs.


5. Detailed financial impact on APNIC operation

(Subject to the calculation by APNIC)


_____________________________________________________________________
Effect on APNIC members:

Briefly explain how you think this may affect APNIC members. For 
example will APNIC members save costs, have more efficient 
administrative procedures, and so on.
---------------------------------------------------------------------

There is no negative impact on current APNIC members.


_____________________________________________________________________
Effect on NIRs:

Briefly explain how you think this may affect NIRs. If you are not 
sure, leave this section blank.
---------------------------------------------------------------------

There is no fee raise for NIRs, and large NIR members can stay NIR 
membership so all NIR and NIR members have a merit.

(end of document)




--
Toshiyuki Hosaka <hosaka at nic dot ad dot jp>
Japan Network Information Center (JPNIC)
Tel: +81-(0)3-5297-2311  Fax: +81-(0)3-5297-2312


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