RIPE NCC Charging Scheme 1997
Karrenberg, Orange, Ridley
____________________________________________________
RIPE NCC Charging Scheme 1997
Daniel Karrenberg
Carol Orange
Paul Ridley
RIPE NCC
Document: ripe-146
Updates: ripe-143
1. Scope
This document defines the 1997 RIPE NCC charging
scheme. It is based on "Alternative Models for RIPE
NCC Revenue & Charging 1997" (ripe-143).
The RIPE NCC contributors at their 1996 meeting man-
dated the RIPE NCC to determine the charging scheme
for 1997 given the following constraints:
o The scheme is to be based on charging model 1
as presented in ripe-143.
o The NCC will determine a minimum size category
for each local registry based on an algorithm
similar to the one proposed for charging
model 3.
o The level of reserves proposed in ripe-143
should be reduced to approximately one year's
salary cost, to be earned over two years.
Based on this mandate we have developed the charging
scheme presented in section two below. Section
three details further steps to implement the scheme.
Section four provides details of the reasoning
behind this scheme both for the record and those
interested.
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2. Charging Scheme
The charges for 1997 will be fixed annual charges to
be paid in advance and based on the size category of
a local registry. A minimum size category will be
determined based on address space allocations to the
registry on November 1st 1996. Registries can be
assigned a size category higher than their minimum
category upon request. The categories will be pub-
lished. Local registries established during 1997
will be charged a sign-up fee and 25% of the yearly
fee for each quarter; their initial minimum size
category will be SMALL. The amount of the charges
are as follows:
+----------------------------+
| Charge 1997 1996 |
+----------------------------+
| Yearly SMALL 2200 1500 |
|Yearly MEDIUM 3000 4500 |
| Yearly LARGE 4000 8500 |
| |
| Sign-Up 1300 2000 |
+----------------------------+
Discussion
The increase in the charge for small registries is
due to the agreed principle that each registry will
have to pay at least the average costs for registra-
tion services in order to prevent cross subsidies
and improve stability. Given that principle the
absolute increase is kept as low as possible. See
ripe-143 for details.
The lowering of the sign-up fee is a direct conse-
quence of lowering the level of reserves and thus
the level of "plus" to be earned. If the sign-up
fee was kept at ECU 2000 as originally proposed,
almost all the "plus" which is required would be
earned from it. Only a very small amount would need
to be earned from the yearly charges. Consequently
the differences in the yearly charges would be
reduced to less than ECU 100 which practically elim-
inates the differentiation according to size cate-
gory. While changing the sign-up fee is not for-
mally within our mandate we feel that the conse-
quence of eliminating differentiation by size is
certainly not intended either. Thus we chose to
exceed our mandate and change the sign-up fee such
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that the size differentiation is maintained. At the
level of ECU 1300 the sign-up fee still covers the
costs it is designed to cover and approximately half
of the "plus" to be earned. We believe that at this
level it still provides adequate discouragement for
those not serious about performing local Internet
registry services.
We developed an algorithm to determine the minimum
size category for each registry based on the address
space allocations the registry holds. It is a sim-
plified version of the model 3 algorithm described
in ripe-143. We consider this algorithm very fair,
because the distribution it generates clearly sug-
gests the three size categories. Also the total
number of registries per category is not dramati-
cally different from the current distribution. The
following table compares the distribution of current
size categories with that of the minimum size cate-
gory determined from allocation data on October 1st
1996:
+-----------------------------------+
| Category New Minimum Current |
+-----------------------------------+
|Enterprise 4% 4% |
| Small 71% 76% |
| Medium 17% 12% |
| Large 8% 8% |
+-----------------------------------+
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While the distributions themselves suggest that few
changes are happening, the breakdown of changes
below shows that 16% of all registries will have a
minimum size category that is larger than their cur-
rent one and 12% will have the possibility to change
to a smaller category than they have currently cho-
sen.
+--------------------------------+
| % Current New Minimum |
+--------------------------------+
| 62 SMALL SMALL |
| 13 SMALL MEDIUM |
| 7 MEDIUM SMALL |
| 4 LARGE LARGE |
| 4 ENTERPRISE ENTERPRISE |
| 3 LARGE SMALL |
| 2 SMALL LARGE |
| 2 MEDIUM MEDIUM |
| 2 MEDIUM LARGE |
| 2 LARGE MEDIUM |
+--------------------------------+
Note: Due to rounding the percentages may not add up
to exactly 100.
The minimum size category for each registry will be
determined based on the address space allocations
received by that registry before November 1st 1996.
Up to this date the minimum size category for all
registries based on current allocations can be found
at ftp://ftp.ripe.net/ripe/local-ir/category and the
allocation data this is based on can be found at
ftp://ftp.ripe.net/ripe/local-ir/allocs All reg-
istries are encouraged to check this data and report
any inconsistencies to <billing@ripe.net>.
Conclusion
We strongly believe that we have developed a charg-
ing scheme that will be regarded as fair, equitable
and practical. The process of defining it has been
an open one with proposals and discussions on
record. We are confident that this scheme will pro-
vide adequate stability for the NCC. We certainly
hope that the scheme will also be applicable for a
longer period than just the coming year 1997.
We sincerely thank those who have provided us with
advice and guidance. We especially thank the con-
tributors who keep working hard to achieve consensus
on matters concerning the NCC.
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3. Steps to Implementation
3 Oct 96
1997 charging scheme published
Preliminary allocation listing per registry
published.
Preliminary minimum size category listing pub-
lished.
3-31 Oct
Registries can review preliminary data and
request any corrections.
The NCC will verify allocation time lines of
previous years.
1 Nov 96
Detailed billing procedures for 1997 published.
Complete allocation listing per registry pub-
lished.
Complete minimum size category listing pub-
lished.
15 Nov 96
Deadline for registries requesting to be moved
to a larger category. If no response is
received it will be assumed that a registry
wishes to be in the minimum category allocated
on 1 November 1996.
25-29 Nov 96
Invoices for services in 1997 sent out.
31 Dec 96
Deadline for receipt of payment of invoice for
1997 services.
1 Jan 97
New charging scheme in effect for new local
registries.
All registries are kindly requested to note the time
schedule.
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4. Detailed Reasoning of Charging Model
This section aims to describe the reasoning behind
the choice of the charging model laid down in
section 2. Since section 2 is intended as a stand
alone description of the charging scheme itself some
degree of repetition is inevitable in this section.
It should be noted that the basis document upon
which this reasoning is founded is ripe-143. To
that end this section should be read in conjunction
with ripe-143. The following three sub-sections
will expound in turn on the determination of a reg-
istry's size, the revenue required for 1997, and the
mechanics of the charging model.
4.1. Determination of Minimum Registry Size
To determine a registry's size, we have defined a
measure N(reg) which produces a value in the range
{0,1,2,...,100}. N(reg) is a simplification of the
charging measure discussed in Appendix C of
ripe-143, and is described briefly below.
Let k(reg,i) be the number of addresses allocated to
the registry "reg" in year i.
Let w(i) = i - 1992.
Define use(reg) = sum(i in 1993 to 1996) k(reg,i) *
w(i).
Let MAX = max{use(reg)} be the maximum use measured
for all registries.
The normalised usage for a registry "reg" is then
defined as:
N(reg) = (use(reg) * 100) / MAX
Based on this measure rounded to the nearest inte-
ger, we could clearly identify three distinct groups
of registries. Those with:
N(reg) <= 4 (SMALL)
5 <= N(reg) <= 12 (MEDIUM)
12 < N(reg) (LARGE)
This algorith provides a distribution quite similar
to the current distribution of size categories.
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Note on Allocation Data
Because it was not foreseen that the time line data
for allocations would need to be readily available
for charging purposes this data is sometimes not
directly available from the NCC allocation database.
In particular, suppose a local IR has been allocated
something like 193.123.0/19 in March 1993 and then
in April 1994 the remainder of 193.123/16, thus:
193.123.32/19
193.123.64/18
193.123.128/17
In some cases, these allocations have been "aggre-
gated" in our allocation database which now shows a
single allocation of 193.123/16 in April 1994.
This may result in a local IR getting a slightly
higher value of N(reg) than they would otherwise
have, and hence be assigned to the wrong size cate-
gory.
Since we keep audit trails of changes to the
database the data about the original allocations is
available in most cases. It is just not readily
accessible. Between now and 1 November 1996 we will
correct this data as much as possible. Registries
are encouraged to contact the RIPE NCC
<billing@ripe.net> with any questions they may have
regarding their allocations, as published in
ftp://ftp.ripe.net/ripe/local-ir/allocs.
4.2. Revenue Required for 1997
RIPE NCC's required revenue for 1997 as explained in
ripe-143 consists of two parts. Firstly enough rev-
enue has to be generated to cover the operating
costs for 1997, which amount to kECU 1984. Secondly
profit after tax has to be earned in order to build
up sufficient reserves to cover any RIPE NCC liabil-
ities. At the 1996 annual NCC contributors meeting
it was agreed that the size of these reserves should
be equal to one years salary costs. The period of
time over which these reserves should be built up
was retained at two years. This leads to a profit
before tax of kECU 494 needing to be earned in 1997.
Therefore in total 1984 + 494 = kECU 2478 of revenue
has to be generated.
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4.3. Charging Scheme Mechanics
Once the section 4.1 based computed frequency of
large, medium, and small local registries are fed
into the agreed charging model, (note this is charg-
ing model 1 from ripe-143), the charges for respec-
tive registries remain relatively unchanged. Large
differences are seen however when charges are com-
puted using the revised reserve levels.
If the sign up fee for new registries is kept at ECU
2000 the total amount of reserves generated by it
remains constant. This amount is approximately
equal to the needed reserves. Thus only a negligi-
ble fraction of needed reserves, ECU 5000, will have
to be earned from co-ordination activities. It is
the disproportionate splitting up of the reserves to
be earned from co-ordination activities that gives
the difference in charges for large, medium, and
small registries. If now, the reserves generated by
this activity are almost negligible then the dispro-
portionate splitting of the said reserves has little
effect. The outcome is that for all registries an
almost identical charge is set. In effect a de
facto flat fee for all registries, regardless of
size, would be created. This would be in contradic-
tion to the stratification of size, by means of
charge, that currently occurs.
There is only one variable that can be altered to
regain the differentiation in charges according to
size. That variable is the level of reserves that
have to be earned from co-ordination activities. If
this variable is raised to bring back differentia-
tion then the level of reserves earned from sign up
fees must be correspondingly reduced. The only way
that this can be reduced is by decreasing the sign
up fee that new registries have to pay. Once this
reasoning is accepted the only question remaining is
what should the new sign up fee level be.
In deciding upon a new sign up fee two opposing
aspects need to be weighed against each other.
Firstly the fee should be lowered enough to bring
about a fair and acceptable differentiation in
charging with respect to size. Secondly the fee
should not be so low as to negate the deterrent
effect a high sign up fee has on non serious local
registries starting up business. After considering
both of these opposing factors we conclude that a
sign up fee of ECU 1300 is the most reasonable
option. This fee, although lower than the present
level of ECU 2000, will still maintain a degree of
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deterrence. The differentiation in charges that it
generates although not as great as that originally
presented in ripe-143 is still marked.
An extra sideline benefit that this changed sign up
fee would bring about is the extra financial stabil-
ity that RIPE NCC would have if the number of new
registries suddenly dipped. Under the present model
all of our reserves would be earned from sign up
fees, which may leave us financially vulnerable if
the number of new registries was a lot less than
forecast. If however the amended sign up fee was
introduced then a half of our reserves would be
earned from existing registries, meaning that at
least half of the reserves would be guaranteed.
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