[arin-ppml] Domain Name charging history - Re: Analogies

[Matthew Kaufman]

Interesting tidbits from my email archives:

"As of June 30, 1995, there were 67,677 commercial domains registered 
with InterNIC compared with 29,202 at December 31, 1994.  7,554 domains 
were added in the month of June 1995.  Although the gain was 
impressive, it repesents a falloff from the May 1995 pace when over 
10,000 domains were registered."


>> 7.	DRAFT NEWS RELEASE
>> 
>> FOR RELEASE 6 A.M. EDT, MONDAY, SEPTEMBER 18, 1995
>> Contact:	Dave Graves, Business Manager
>> 		Network Solutions
>> 		703-742-4884
>> 
>> INTERNET BEGINS FEE-BASED REGISTRATION
>> 
>> 
>> 	(HERNDON, VA)  September 18, 1995 -- Internet domain name registrants
>> will begin paying registration fees immediately in order to improve
>> registration processing and fund Internet infrastructure improvements.
>> Beginning at 4 p.m. today, a $50 annual fee will be imposed on all five
>> top-level domains: commercial, educational, government, network and non-profit
>> organization (.com, .edu, .gov, .net, . org) domain name registrations.  Until
>> now, the National Science Foundation (NSF) has subsidized these registrations,
>> which currently total more than 100,000 domain names.  A five-week backlog has
>> developed in processing domain name registrations.
>> 	The NSF will continue to subsidize the fees for the education domain.
>> NSF will also continue to pay, on an interim basis, the fees for government
>> registrations until federal networking agencies determine how the government
>> will pay for the fee in the future.  Military registrant fees are supported by
>> the Department of Defense.
>> 	The fee will apply only to domain name holders, not to typical
>> end-users who access the Internet through a commercial service like
>> CompuServe(tm), Prodigy(tm) or America Online(tm).  A domain name is the
>> Internet's equivalent of a real estate address.
>> 	New commercial, network and not-for-profit registrants will pay a $100
>> fee to register a name for two years; thereafter, they will pay $50 annually.
>> Existing registrants will owe the fee on the anniversary date of their
>> original registration. Registrants will receive three electronic notices that
>> their renewal is due on their anniversary date.
>> 	Fees can be paid by check through paper mail. There also are provisions
>> for dealing with late payments and lapsed registrations; details can be found
>> in the written policy.
>> 	The fees will be collected by Network Solutions, Inc., of Herndon, Va.,
>> which has been funded by the NSF to be the Internet registrar since 1993.
>> 	"Until now, taxpayers have funded the Internet's domain registration
>> process. This shift to user fees is consistent with and was anticipated in
>> NSF's original concept of developing support for the Internet," said NSF
>> program officer Don Mitchell.
>> 	This will replace the current level of NSF funding, which now is about
>> $5.5 million from federal taxes.  Eventually, the registration process will
>> generate revenue which will be used to improve the Internet infrastructure,
>> including hardware, software, research and education.
>> 	"In the last two years, registrations have jumped ten-fold," said NSI
>> spokesman Dave Graves.  "It's estimated that by the end of this year, the
>> figure will have topped 20,000 per month.  The volume has created a five-week
>> delay in registering new domain names.  By having those who register for the
>> Internet pay for the cost of that registration, we will have enough resources
>> to cut the backlog and begin planning improvements for the Internet."
>> 
>> _______________
>> 	Network Solutions Inc. (NSI) is a total quality network engineering,
>> integration and management firm, supporting some of the largest data networks
>> in the United States.  Networks Solutions has been the InterNIC Registration
>> Services provider for the Internet since April 1993.  An Internet pioneer, NSI
>> is a 15-year-old company headquartered in Herndon, Virginia, with a nationwide
>> workforce.  The company's specialties are internetworking, interoperability,
>> and life-cycle support solution for diverse, distributed computer networks.
>> Since March 1995, NSI has been a wholly owned subsidiary of Science
>> Applications International Corp. (SAIC).
>> 	SAIC provides high-technology services and products for government and
>> private industry in the areas of systems integration, national security,
>> health care, energy, environment and transportation.  With annual revenues of
>> nearly $2 billion, the employee-owned company has 20,000 employees in more
>> than 350 locations worldwide.
>> 
>> ###
>> 
>> FREQUENTLY ASKED QUESTIONS (Still need answer to last one)
>> 
>> 1. Q.	Why are you going to charge Internet users?
>> 
>> A.	To date, the National Science Foundation has subsidized the cost of
>> domain name registrations through a cooperative agreement with Network
>> Solutions, Inc.  With the explosive growth of the Internet, the costs have
>> exceeded NSF's ability to provide funding from taxpayers' money; therefore,
>> fees will be imposed on all users of the five top-level domains for which
>> Network Solutions is responsible (.com, .org, .net, .edu, and .gov).
>> 
>> 	The fees will apply ONLY to second-level domain name holders in the
>> domain for which Network Solutions serves as the registrar.  The fees do not
>> apply to individual Internet users who get their network access from their
>> employer or who purchase individual accounts from an Internet providers such
>> as CompuServe, Prodigy and America Online.
>> 
>> 2.  Q.	How is this going to work?
>> 
>> A.	Current domain name registrants will owe a $50 annual renewal fee on
>> the anniversary date of their registration.  The registrant will be notified
>> by e-mail 60, 30 and 15 days before this fee is due.
>> 
>> New domain name registrants will pay $100 to register the first time, which
>> will cover a two-year period.  Before the anniversary date of the second year,
>> they will receive the same renewal notifications that we've just discussed.
>> 
>> 3. Q.	Why are you doing this now?
>> 
>> A.	The concept of user fees is not new.  How and when to charge for
>> domain name registration has been discussed in the Internet community for
>> more than a year. Network Solutions has worked closely with the National
>> Science
>> Foundation to determine the requirements and processes necessary to make the
>> transition to user fees.  We believe the process is as fair as possible for
>> two reasons: first, existing domain name registrants will not be billed until
>> their anniversary date; second, Network Solutions will allow an initial
>> three-month grace period.  The current NSF-NSI cooperative agreement extends
>> until 1998, which allows the Internet community to consider funding
>> alternatives.
>> 
>> 4. Q.	What is Network Solutions' role?
>> 
>> A.	Since March 1993, the National Science Foundation has funded the
>> administration of Internet domain name registrations through a cooperative
>> agreement with Network Solutions.  This agreement was awarded after a free and
>> open competition conducted by the National Science Foundation in 1992.  This
>> agreement extends through 1998.  The original solicitation and the cooperative
>> agreement considered the ultimate shift to user fees for Internet
>> registration.  Obviously, the Internet is evolving, and the next three years
>> will give the NSF and the Internet community the opportunity to consider
>> financing alternatives.
>> 
>> 5. Q.	Exactly how will the fees be spent?  What's the formula?
>> 
>> A.	All fees received will be considered "program income" under he NSF
>> General Conditions of the cooperative agreement and must be shown as revenues
>> and their disposition accounted for.  Seventy percent of the fees collected
>> will be retained by Network Solutions to cover operating costs and will be
>> audited by NSF.  The remaining thirty percent will be spent, with guidance
>> from an advisory committee drawn from the Internet community, into the
>> intellectual infrastructure of the Internet and will be publicly accounted
for.
>> 
>> 	With regard to improvements, our first priority is to speed up domain
>> name registration time from five weeks to two days.  We hope the backlog will
>> be eliminated by the end of October.
>> 
>> 	6. Q. 	What about .edu, .gov and .mil?
>> 
>> A.	Consistent with its charter to support the higher education community,
>> NSF will continue to pay the fees associated with the education (.edu) domain.
>> NSF will also pay, on an interim basis, the fees for the government (.gov)
>> until the federal networking agencies determine how the government will pay
>> for these domains in the future.  These domain names, however, represent only
>> 2.5 percent of the total domain names.  The military (.mil) registrants are
>> supported by a separate registration service for which the Department of
>> Defense pays all fees.
>> 
>> 7. Q.	Will NSI accept electronic payments?
>> 
>> A.	NSI cannot accept electronic payments initially because of security
>> concerns.  We are carefully considering it as one of the payment options, and
>> plan a phased introduction of electronic payments as part of the future
>> improvements.
>> 
>> 8.  Q.	What happens after the agreement with NSF runs out?
>> 
>> A.	NSF is encouraging discussions within the Internet community to answer
>> this longer-term question.  We believe that organizations such as the IAB and
>> the ISOC and commercial providers as well as the more traditional Internet
>> research and education community must be involved in determining the answer.
>> 
>> 9.  Q.	Are any more fees anticipated?
>> 
>> A.	No, we believe that the $50 amount should be adequate to cover
>> reasonably
>> foreseeable contingencies.  Any new fees or increase must be approved by NSF.
>> The priorities and funding for improvements will be determined by an advisory
>> committee, reviewed by the NSF, audited and publicly accounted for.
>> 
>> 10. Q.	How did you come up with $50?
>> 
>> A.
>> 
>> COMPLETE QUESTIONS AND ANSWERS
>> 
>> 1. Q.	Why are you going to charge Internet users?
>> 
>> A.	It's time for the Internet to move from taxpayer subsidies to user
>> fees. Until now, the National Science Foundation has subsidized the cost of
>> domain name registrations through a cooperative agreement with Network
>> Solutions, Inc.  The Internet has had explosive growth -- there are now seven
>> times more requests for domain names than a year ago.  The cost exceeds NSF's
>> ability to provide funding from taxpayers' money; therefore, fees will be
>> imposed on all users of the five top-level domains for which Network Solutions
>> is responsible (.com, .org., .net., .edu., and .gov).
>> 
>> 	The fees will apply ONLY to second-level domain name holders in the
>> domain for which Network Solutions serves as the registrar.  The fees do not
>> apply to individual Internet users who get their network access from their
>> employer or who purchase individual accounts from an Internet providers such
>> as CompuServe, Prodigy and America Online.
>> 
>> 1.5 Q.	Who put the National Science Foundation in charge of the Internet?
>> 
>> A.	In 1991 the federal networking agencies asked the National Science
>> Foundation to assume responsibility for supporting the non-military Internet
>> registration services.  In 1993, the NSF competitively awarded a cooperative
>> agreement to Network Solutions, Inc.  The award solicitation and resulting
>> agreement considered the possibility that ultimately, Internet domain name
>> registration would move from subsidy to fee-for-service.
>> 
>> 2.  Q.	How is this going to work?
>> 
>> A.	Current domain name registrants will owe a $50 annual renewal fee on
>> the anniversary date of their registration.  The registrant will be notified
>> by e-mail 60, 30 and 15 days before this fee is due.
>> 
>> 	New domain name registrants will pay $100 to register the first time,
>> which will cover a two-year period.  Before the anniversary date of the second
>> year, they will receive the same renewal notifications that we've just
>> discussed.
>> 
>> 3. Q.	Why aren't you giving adequate advance notice?
>> 
>> A.	The concept of user fees is not new.  How and when to charge for
>> domain name registration has been discussed in the Internet community for more
>> than a year.  Network Solutions has worked closely with the National Science
>> Foundation to determine the requirements and processes necessary to make the
>> transition to user fees.  We believe the process is as fair as possible for
>> two reasons: first, existing domain name registrants will not be billed until
>> their anniversary date; second, Network Solutions will allow an initial
>> three-month grace period.  The current NSF-NSI cooperative agreement extends
>> until 1998, which allows the Internet community to consider funding
>> alternatives.
>> 
>> 4. Q.	What do the domain name users think about this?
>> 
>> A.	Many domain name applicants/holders previously have indicated they're
>> willing to pay a fee for better service, and there are many who understand the
>> need to make the Internet self-supporting.  There are some who feel that
>> existing domain name users should be exempt from any fee and that fees should
>> only be charged to new domain name registrants.  However, that would make new
>> registrants pay for maintaining the 110,000 domain names that already exist.
>> We don't think that's either fair or sustainable over the long run.
>> 
>> 5.  Q.	What exactly is a domain name?
>> 
>> A.	A domain name is a unique identifier which designates a specific
>> computer on the Internet.  Organizations choose a domain name and then
register
>> that name with the registrar who enters the name into the global domain name
>> system.  Then any Internet user can use the domain name to communicate with
>> that organization over the Internet.
>> 
>> 5.5 Q.	Since the Domain Name Service links the names with the numbers user for
>> routing, wouldn't it be simpler to base the fees on the numbers?
>> 
>> A.	Large blocks of numbers have been assigned to Internet service
>> providers and others for future use.  These numbers reflect potential for
>> future use but not actual current use.  It would be difficult to base an
>> equitable funding solution on numbers since the names more accurately reflect
>> actual Internet use.
>> 
>> 6. Q.	What about the average Internet user?
>> 
>> A.	While it is difficult to describe the "typical" Internet user,
>> generally speaking, they fall into three categories: there are large
>> organizations and corporations, which have a single, or relatively few,
>> domain names.  For those users, the costs are insignificant.  There are
>> those who have Internet access through on-line services such as America
Online,
>> Prodigy and Compuserve. These services each have a single domain name for all
>> the end users.  That means America Online will pay a single $50 fee annually,
>> regardless of how many subscribers the service has.  The third group are small
>> businesses and individuals who have their own domain name.  The fee amounts to
>> less than $5 per month which is less than the cost of a single movie ticket.
>> 
>> 7. Q.	What is Network Solutions and why does this company get to charge for
>> the Internet?
>> 
>> A.	Since March 1993, the National Science Foundation has funded the
>> administration of non-military Internet domain name registrations in the U.S.
>> through a cooperative agreement with Network Solutions.  This agreement was
>> awarded after a free and open competition conducted by the National Science
>> Foundation in 1992.  This agreement extends through 1998.  The original
>> solicitation and the cooperative agreement considered the ultimate shift to
>> user fees for Internet registration.  Obviously, the Internet is evolving, and
>> the next three years will give the NSF and the Internet community the
>> opportunity to consider financing alternatives.
>> 
>> 7.5 Q.	When NSF originally competed for the services now provided by NSI, the
>> NSF was paying.....  The situation now has changed and there is a profit to be
>> made.  Why not re-open the competition?
>> 
>> A	The original competition solicitation that resulted in the Network
>> Solutions award considered that the move would be made to fee-for-service
>> and cost recovery from end-users.  Network Solutions won that award
>> competitively and has performed very well.  Since there has been no change in
>> the scope of the effort and the imposition of fee-for-service was included in
>> the original solicitation, no additional competition is necessary.
>> 
>> 7.6 Q.	Is there an NSF precedent for this?
>> 
>> A.	There is precedent for the dramatic growth seen under this award in
>> almost all of the awards associated with the (earlier) NSFNET.  There is no
>> precedent, however, for continued support by NSF for an activity now primarily
>> involving organizations and individuals outside the research and education
>> community.  This is why user fees became necessary.
>> 
>> 8. Q.	How much profit is this going to generate beyond what's reinvested in
>> the Internet?  What's your margin?
>> 
>> A.	We don't know what our costs will be, since the growth in registrations
>> is so great, and this activity has never been privatized before.  As a
>> tax-paying, for-profit corporation, we certainly hope that we have accurately
>> estimated our cost of performance, and that the fees will be sufficient to
>> cover those costs and provide us with a reasonable profit.
>> 
>> 9. Q	Exactly how will the fees be spent?  What's the formula?
>> 
>> A.	All fees received will be considered "program income" under he NSF
>> General
>> Conditions of the cooperative agreement and must be shown as revenues and
>> their disposition accounted for.  Seventy percent of the fees collected will
>> be retained by Network Solutions to cover operating costs and will be audited
>> by NSF.  The remaining thirty percent will be spent, with guidance from an
>> advisory committee drawn from the Internet community, into the intellectual
>> infrastructure of the Internet and will be publicly accounted for.
>> 
>> 9.5 Q.	What is this "intellectual infrastructure?"
>> 
>> A.	Conceptually, it's the framework which allows the hardware (circuits
>> and
>> routers) of the Internet to operate.  We haven't, as yet, identified all the
>> pieces.  Some of the more obvious ones include the IANA (Internet Autonomous
>> Numbering Authority, which oversees the name and numbering schemes for the
>> Internet); an RFC (Request for Comments, the communally developed operational
>> policy documents for the Internet) Secretariat and the root domain servers.
>> These all need continued and enhanced financial support as the federal
>> agencies which have been providing their funding are confronted with a new
>> commercial Internet environment which continues to require these functions.
>> Community input is being sought to help identify other essential elements.
>> 
>> 10. Q.	What kind of service improvements are you talking about?  How fast will
>> you be able to process domain names?
>> 
>> A.	Improvements will be based upon direction from an Internet user
>> advisory
>> committee approved by the National Science Foundation.  For example, Network
>> Solutions may be asked to pay for or replace root domain name servers which
>> are now provided voluntarily by the research and education community.
>> 
>> 	With regard to improvements, our first priority is to speed up domain
>> name registration time from five weeks to two days.
>> 
>> 11. Q.	How long will we have to wait for these improvements?  And when will
>> the domain name backlog be caught up?
>> 
>> ((DAVE -- NEED TO ANSWER FIRST PART))  We hope the backlog will be eliminated
>> by the end of October.
>> 
>> 12. Q. What about .edu, .gov and .mil?
>> 
>> Consistent with its charter to support the higher education community, NSF
>> will continue to pay the fees associated with registration in the education
>> (.edu) domain.  NSF will also pay, on an interim basis, the fees for the
>> government (.gov) until the federal agencies determine how the government will
>> pay for these domains in the future.  The education and government domain
>> names, however, represent only 2.5 percent of the total domain names.  The
>> military (.mil) registrants are supported by a separate registration service
>> for which the Department of Defense pays.
>> 
>> 13. Q.	Will this affect foreign registries?  Are they already a revenue
>> stream?  If not, why not?
>> 
>> A.	The Internet is a global enterprise.  Most "foreign" organizations are
>> registered under their two-letter "country code" (e.g., .HK for Hong Kong or
>> .FR for France).  Authority for registration under these domains has been
>> delegated to foreign registration authorities closer to their respective
>> areas.
>> 
>> 14. Q.	How many domain names are there?  How many Internet users overall?
>> 
>> A.	There are more than 110,000 domain names in the five top level domains
>> (.com, .edu, .net, .org., .gov) administered by NSI.  It is impossible to
>> reliably estimate the total number of Internet users.  There are over 84,500
>> registered networks, with more than 61,000 of these connected to the Internet.
>> These 61,000 networks comprise about 6.5 million computers, which may equal
>> up to 30 million or more users.
>> 
>> 15. Q.	What happens if someone' domain name registration lapses?  How quickly
>> can that domain name be reissued?  What happens if the original registrant
>> wants it back?  What if there are extenuating circumstances?  What happens if
>> someone's check bounces?  What happens if somebody uses a false or stolen
>> credit card?  Will you issue refunds for any reason?
>> 
>> A	Each domain name registrant will receive three electronic notices that
>> their renewal is due on their anniversary date.  If no payment is received by
>> the anniversary date, the domain name will be removed from the Internet
>> immediately.  If no payment is received within 60 days, the name becomes
>> available on a first-come, first-served basis.  In cases where there is a
>> problem such as a bad check or credit card, the name will be removed
>> immediately and held for 60 days before being available for reassignment.
>> Refunds will not be available.
>> 
>> 16.	Will NSI accept electronic payments?
>> 
>> A.	NSI cannot accept electronic payments initially because of security
>> concerns.  We are carefully considering it as one of the payment options, and
>> plan a phased introduction of electronic payments as part of the future
>> improvements.
>> 
>> 17.	Does this mean you will have to keep track of paper mail addresses?
>> 
>> A.	Network Solutions can only provide electronic notices that the fee is
>> due.
>> 
>> 18.	What happens after the agreement with NSF runs out?
>> 
>> A.	NSF is encouraging discussions within the Internet community to answer
>> this longer-term question.  We believe that organizations such as the IAB and
>> the ISOC and commercial providers as well as the more traditional Internet
>> research and education community must be involved in determining the answer.
>> 
>> 19.	Are any more fees anticipated?  Do we have any guarantees that you
>> won't
>> keep hiking fees?  What guarantees are there that the money will really go for
>> Internet improvements?
>> 
>> A.	No, we believe that the $50 amount should be adequate to cover
>> reasonably foreseeable contingencies.  Any new fees or increase must be
>> approved by NSF. The priorities and funding for improvements will be
>> determined by an advisory committee, reviewed by the NSF, audited and publicly
>> accounted for.
>> 
>> 20.	In terms of cutting registration time, does this simply mean hiring a
>> few more clerks?  How much can that cost?  Will your books be audited, and
will
>> you disclose exactly what the revenues and expenses are?
>> 
>> A.	While Network Solutions will need additional staff to complete
>> registrations, we are also investing in automating the process.  The National
>> Science Foundation, while not providing the funding, will continue to provide
>> oversight.  NSF will approve an advisory committee from the Internet community
>> to review the fees and recommend appropriate expenditures.
>> 
>> 	All fees received will be considered program income under the NSF
>> General Conditions of the cooperative agreement and must be shown as revenues
>> and their disposition for related activities accounted for.  Seventy
percent of
>> the fees received will be retained by Network Solutions as consideration for
>> its services and will be audited by the NSF.  The remaining 30 percent will be
>> spent, under guidance from the advisory committee, to support the intellectual
>> structure of the Internet and will be publicly accounted for.
>> 
>> 21.	Don't you really want the money to build a legal defense fund?
>> 
>> A.	As we said before, the move to a "fee for service" arrangement has been
>> driven by the fiscal reality that the government can no longer subsidize this
>> service. Unfortunately, litigation costs are a reality of doing business
>> today.  As with any other prudent company, Network Solutions has to factor
>> reasonable legal expenses into its cost of doing business.
>> 
>> ((DAVE: ADD RISK DISCUSSION WE SPOKE OF?))
>> 
>> 22.	How did you come up with $50?
>> 
>> A.	We believe that the $50 fee is adequate to cover reasonably foreseeable
>> contingencies.
>> 
>> 23. Q.	What if someone can't afford the fee?
>> 
>> A.	The fee amounts to less than $5 a month.  We think this is a fair
>> charge to cover the cost of domain name services and represents a trivial cost
>> compared to the access and equipment expenses associated with maintaining an
>> active Internet presence.
>> 
>> 24. Q.	What other plans does NSI have to make money from its Internet
>> monopoly?  What other surprises are in store?
>> 
>> A.	Under the terms of our agreement, no changes of increases in fee can be
>> imposed without prior NSF approval.  We believe that the $50 fee is adequate
>> to cover any reasonably foreseeable contingencies.  For this reason, based on
>> present knowledge, we expect no additional fees.
>> 
>> 25. Q.	Do you think this will slow down the rate of Internet domain name
>> requests?
>> 
>> A. 	It's premature to speculate, but in talking with long-term Internet
>> users, we find strong support for the user-fee concept because it will pt the
>> Internet on a self-sustaining basis and fund improvements that tax revenues
>> could not support.  Gordon Cook, publisher of the Cook Report on the Internet,
>> recently stated that charging a small uniform fee should help preserve the
>> independence of the IETF (WHAT'S THIS?)
>> 
>> 28. Q.	Won't providers just pass this cost along to the little guy who uses
>> the Internet?
>> 
>> A.	Considering that providers such as America Online, Prodigy, Compuserve,
>> MCI Sprint, Harvard, MIT, IBM, GE, etc. have a single domain name for all end
>> users, amortizing the $50 annual registration fee over the number of end users
>> should have a minuscule effect.
>> 
>> --

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