                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg

                ____________________________________________________




                          RIPE NCC Revenue & Charging 1996



                                 Daniel Karrenberg
                                      RIPE NCC

                                 Document: ripe-134
                            See also: ripe-132, ripe-133



    Scope

                This  memorandum describes the RIPE NCC revenue plan
                and charging model for the year 1996.  The companion
                document  "RIPE  NCC  Activities & Expenditure 1996"
                describes the activities funded.

                This document was drafted by the RIPE NCC and subse-
                quently  amended  according  to the decisions of the
                NCC Contributors Committee about the "tariff  struc-
                ture"  as  per point 3.3 of the committee's terms of
                reference.  See the committee minutes (ripe-132) for
                detailed  information about the decision making pro-
                cess.  TERENA has subsequently approved  the  tariff
                structure.


    1.  Customers & Workload

                The  bulk  of  resources expended by the RIPE NCC is
                proportional to the number of  local  Internet  Reg-
                istries  which  in  turn is mostly equivalent to the
                number of serious Internet service providers.   Con-
                sequently  the  resources  needed  are  derived from
                these local IRs.   Their  number  has  been  growing
                steadily  ever since the NCC has started operations.

                Recently the growth rate has considerably increased.
                In  Q1/95,  after  the  introduction  of the current
                charging scheme, a sharp increase in the  number  of
                local  IRs  was  observed.   This trend continued in
                Q2/95 and still continues to this day.  For  details
                see the report on the 1995 revenue situation.





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                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg

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                The  table  below  gives an overview of the observed
                and expected number of registries:


         +------------+-----------------+-----------------------------------+
         |            |    Observed     |             Expected              |
         |Registries  |  Q4    Q1    Q2 |  Q3    Q4    Q1    Q2    Q3    Q4 |
         |            |  94    95    95 |  95    95    96    96    96    96 |
         +------------+-----------------+-----------------------------------+
         |  Large ISP |  17    17    19 |  20    22    24    26    28    30 |
         | Medium ISP |  28    31    35 |  38    42    46    50    54    58 |
         |  Small ISP |  51    84   119 | 153   188   222   256   290   324 |
         | Enterprise |  14    15    17 |  18    20    22    24    26    28 |
         |Last Resort |  31    32    32 |  32    32     3     3     3     3 |
         |            |                 |                                   |
         |      TOTAL | 141   179   222 | 261   304   317   359   401   443 |
         +------------+-----------------+-----------------------------------+

                The new category "Supernational  ISP"  is  not  pre-
                sented  separately  in 1996 since these are expected
                to be conglomerations of large ISP.


                The  figure  below  illustrates  that  we expect the
                total number of registries is expected to grow  lin-
                earily during 1996:

           500++---------------------------------------------------+
               |                                                   |
               |                                                   |
           450++                                             *A    |
               |                                           **      |
           400++                                        *A*        |
               |                                      **           |
               |                                   *A*             |
           350++                                 **                |
               |                               **                  |
           300++                         A****A                    |
               |                       **                          |
               |                     **                            |
           250++                   *A                              |
               |                ***                                |
               |             *A*                                   |
           200++           **                                      |
               |        *A*                                        |
           150++      **                                           |
               |    A*                                             |
               |                                                   |
           100++----+----+----+-----+----+----+-----+----+----+----+
                        Q4   Q1   Q2    Q3   Q4   Q1    Q2   Q3   Q4

                The  irregularity  between Q4.95 and Q1/96 is caused
                by the expected closure of almost all "Last  Resort"
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                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg

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                registries.  Since these  registries  did  not  con-
                tribute to funding in the past, this development has
                no effect on the expected  revenue.   Otherwise  the
                almost  linear prediction looks very simple at first
                glance.  Some other  indicators  predict  more  than
                linear  growth  while  others  predict slightly less
                than linear growth.   These  numbers  represent  the
                best  possible  estimates  the RIPE NCC is able pro-
                duce.  We now have mechanisms  in  place  to  detect
                deviations  from  expected  figures very quickly and
                take necessary actions.  For  Q3/95  the  deviations
                between planned and expected numbers have been mini-
                mal.


    2.  Possible Charging Models

                In  September  1994   the   Contributors   Committee
                approved  the  1995 charging model while at the same
                time asking the NCC to propose a  more  usage  based
                charging  model  for 1996.  I agreed to propose such
                model(s) by July 1995.


                Unfortunately the NCC has so far not  been  able  to
                develop  such  charging  models for a number of rea-
                sons:

                In september 1994 it  was  expected  that  the  1995
                charging model would be agreed within a few days, or
                weeks at most.  However it was  not  before  Q2/1995
                that the matter was finally resolved.

                It was also expected that funding for NCC operations
                in 1994 was sufficient.  It turned out that  due  to
                the 1994 model of voluntary contributions as well as
                deficiencies in invoicing, insufficient revenue  was
                generated  to fund operations in 1994.  Consequently
                the NCC had to invest  considerably  more  resources
                than  expected  to set up a customer database and to
                tightly control invoicing as well.   This  has  been
                highly successful.  See the last 1995 revenue report
                for details.

                Finally,  the  growth  rate  of  the  workload   was
                expected to remain constant.  It turned out that the
                growth rate has increased sharply in Q1/95 and  this
                trend continued to date.

                Due  to  these  unexpected developments, the NCC has
                had not enough resources to seriously develop  usage
                based  charging  models.   In  particular due to the
                first two developments, the NCC has not been able to
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                                                   Daniel Karrenberg

                ____________________________________________________

                hire sufficient staff for all activities.  This  has
                been  aggrevated by the increased growth rate of the
                workload.  At the moment a major catch-up  operation
                is being conducted to rectify this situation.

                It  should   be  noted  that  developing usage based
                charging models is a complex task requiring  careful
                analysis of measured data.  Making the wrong choices
                can have quite serious consequences for the  stabil-
                ity  and  even  the existence of the NCC.  Some have
                advocated models  based  closely  on  the  resources
                actually  spent  at  the NCC for processing requests
                for each customer.  Such models  require  the  exis-
                tence of an adequate request tracking and accounting
                system for a number of months in  order  to  develop
                the  necessary  data.   Even if one were to use data
                already measured, such  as  the  amount  of  address
                space  assigned/allocated  developing  models  takes
                processing the data, evaluating  it  and  discussing
                with all concerned.

                The  resources  necessary for all this were expected
                to be available in September 1994 but for  the  rea-
                sons above they have not yet been available.

                Consequently we will proceed in 1996 with a charging
                model very similar to the one used in 1995.


























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                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg

                ____________________________________________________

    3.  1996 Charging Model


                The  1995  RIPE  NCC charging model is documented in
                detail elsewhere.  There are two main components:  a
                fixed  registry fee depending on the self determined
                size of the registry and a signup fee for  new  reg-
                istries.    For  detailed  information  on  how  the
                changes to the model were defined, see  the  minutes
                of the Contributors Committee meeting (ripe-132).


    The Registry Fee

                In  1996  the  same basic model is used but fees for
                ISP local IRs are reduced by 25% and  an  additional
                category "supernational" is added.  Service to "last
                resort" local IRs is no longer free of charge.  This
                results in the following annual fees:


                  +----------------------------------------------+
                  |         Category   1995 Fee         1996 Fee |
                  +----------------------------------------------+
                  |                                              |
                  |Supernational ISP                      n*8500 |
                  |        Large ISP      12000             8500 |
                  |       Medium ISP       6000             4500 |
                  |        Small ISP       2000             1500 |
                  |                                              |
                  |       Enterprise       1000             1000 |
                  |                                              |
                  |      Last Resort          0   1500/4500/8500 |
                  |                                              |
                  +----------------------------------------------+


                New  registries  pay  the fees pro-rata based on the
                quarters of the year they are active.














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                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg

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    Supernational ISPs

                The supernational category was created in  order  to
                allow  ISPs  who  provide services in many different
                regions to operate their registry services  under  a
                central umbrella.  The basic attributes of this cat-
                egory are as follows:

                o    Pays a fee of n times the  fee  for  the  LARGE
                     category, where n is an integer >=2.

                o    The  "maximum"  number of contact points to the
                     NCC is equal to n.

                o    The "maximum" address space  allocation  for  a
                     "supernational"  registry is n times the normal
                     maximum (currently /16) for n<5 and 1.5 times n
                     for n>=5.  Address allocation figures are "max-
                     imum" values and allocations are  still  deter-
                     mined  by documented need and subject to normal
                     allocation rules.

                For  detailed  arrangements  contact  the   NCC   at
                <billing@ripe.net>.

    The Signup Fee

                The signup fee is intended to fund  special  activi-
                ties and training for new registries.  Currently the
                revenue generated is structurally more than what  is
                needed  for  these  extra  activities.  On the other
                hand the signup fee has also proven to be an  effec-
                tive  barrier  preventing the creation of many small
                registries especially towards the end of  the  year,
                when the registry fees for small registries get very
                low.  In addition to  helping  to  conserve  address
                space  and  promoting  routing  aggregation this has
                prevented putting unnecessary additional load on the
                NCC.   Furthermore  new  registries  usually place a
                bigger load on registration services which  is  hard
                to  quantify  because  of  their lack of experience.
                The signup fee can  provide  some  compensation  for
                this.

                For  the reasons above the signup fee is kept at ECU
                2000.







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    Fee Waivers

                In the past NCC fees have been waived for  new  reg-
                istries  in  areas where the Internet is just estab-
                lishing.  The NCC contributors have  concluded  that
                it  is  not  their task to sponsor registration ser-
                vices in such areas and therefore have decided  that
                no  such  fee  waivers will be granted anymore.  New
                registries should look  for  sponsorship  elsewhere.
                They  can  contact  the RIPE NCC for guidance if the
                wish.

    Invoicing Information

                Detailed  information about invoicing procedures can
                be found in:

                ftp://ftp.ripe.net/ripe/new-registry/billing-96.txt



































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                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg

                ____________________________________________________

    4.  Expected Revenue

                The  table  below details the expected revenue based
                on the proposed model and  the  expected  number  of
                local registries:


        +---------------+-----------+---------------------------------------+
        |               | Observed  |               Expected                |
        |Revenue (kECU) |  Q1    Q2 |  Q3     Q4    Q1     Q2     Q3     Q4 |
        |               |  95    95 |  95     95    96     96     96     96 |
        +---------------+-----------+------------+--------------------------+
        | Contributions | 573   663 | 712    742 | 770    836    880    902 |
        |     Committed | 440   579 | 606    631 | 655    711    748    767 |
        |      Invoiced | 353   530 |            |                          |
        |               |           |            |                          |
        |   Signup Fees |  74   160 | 238    324 |  84    168    252    336 |
        |  Committed(*) |  74   160 | 238    324 |  84    168    252    336 |
        |      Invoiced |  74   119 |            |                          |
        |               |           |            |                          |
        |        Totals | 647   823 | 950   1066 | 854   1004   1132   1238 |
        |     Committed | 514   739 | 844    955 | 739    879   1000   1103 |
        |      Invoiced | 427   649 |            |                          |
        |      Received | 195   448 |            |                          |
        +---------------+-----------+------------+--------------------------+

                     (*)  Commitments  for  signup fees are not
                     recorded separately at this point in time,
                     however,  the  commitment rate of new reg-
                     istries is almost 100%.


                The table shows that we can expect to have,  by  the
                end  of  1996, commitments for an amount of at least
                1103 kECU, which exceeds the expenditure of 916 kECU
                currently  planned.  The rationale for this is given
                by reading the table as explained in  the  following
                paragraphs.

                The  first  lines  in  each  section  represent  the
                amounts to be received assuming all registries would
                contribute what is due following the proposed charg-
                ing scheme.

                The "Committed" lines represent the amount committed
                by  signed service agreements assuming that all 1995
                agreements are extended into 1996 and that the  num-
                ber   of   registries   grows   as  estimated.   The
                "Invoiced" lines  represent  the  amount  for  which
                invoices  have been sent out.  It must be noted that
                amounts committed and invoiced are not directly com-
                parable,  because  commitments are made on an yearly
                basis, while part of the  invoicing  is  done  half-
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                ____________________________________________________

                yearly or quarterly.

                The "Received" line gives the total amount of  funds
                received.

                The  projected  "Contribution"  numbers  are derived
                from the estimated number of registries by  applying
                the  respective  charging  scheme.   The commitments
                projected are at 85% of the due value, which is very
                conservative  as  the bulk of the non-committed reg-
                istries have been carried from  previous  years  and
                new  registries  tend  to  sign the agreement.  This
                predicts the income for the RIPE NCC  core  services
                from  the  existing  registries as well as possible,
                but conservatively.

                The projected "Signup Fees" are also algorithmically
                derived  from  the registry projection shown in sec-
                tion 1.



    5.  Summary

                Due to unexpected developments it  has  so  far  not
                been  possible  to develop more usage based charging
                models.  Therefore the successful  model  from  1995
                will  continue  to be used in 1996 with a 25% reduc-
                tion in registry fees for all ISP registries  and  a
                new supernational ISP category.  The signup fee will
                be unchanged.  Last Resort local IRs will no  longer
                receive service free of charge.  No fee-waivers will
                be provided for start-up registries.  This will pro-
                duce  sufficient  revenue to sustain the NCC through
                the consolidation period in 1996.


















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                ripe-134.txt                                  Page 9
