RIPE NCC Revenue & Charging 1996 (1.0)
- Date: Mon, 31 Jul 1995 19:30:34 +0200
Dear Contributors,
below you find the RIPE NCC input for agenda item 5 for our
September 1st meeting.
I sincerely regret that we are unable to propose a workable
charging model that is more usage based than 1995 as you have
requested and I have agreed to provide.
The reasons for this are detailed in the document.
Due to unforeseen circumstances
we did not have the resources to collect the
necessary data and to develop workable models.
If you have any further questions, please do not hesitate to contact me.
I will respond a.s.a.p. after returning from vacation on August 14th.
Again I sincerely regret that I cannot deliver what I promised.
Regards
Daniel Karrenberg
RIPE NCC Manager
NB: PostScript follows ASCII as usual.
RIPE NCC Revenue & Charging 1996
Daniel Karrenberg
July 1995
____________________________________________________
RIPE NCC Revenue & Charging 1996
Daniel Karrenberg
RIPE NCC
Version 1.0
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 represents the RIPE NCC input for the
decision by the NCC Contributors Committee about the
"tariff structure" as per point 3.3 of the commit-
tee's terms of reference.
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 should be 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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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 32 32 32 32 |
| | | |
| TOTAL | 141 179 222 | 261 304 346 388 430 472 |
+------------+-----------------+-----------------------------------+
The figure below illustrates that we expect the
total number of registries is expected to grow lin-
earily during 1996:
500++---------------------------------------------------+
| | A |
| | ** |
450++ | ** |
| | *A |
400++ | ** |
| | *A* |
| | *** |
350++ | *A* |
| | ** |
300++ | A* |
| | ** |
| | ** |
250++ | *A |
| *** |
| *A* | |
200++ ** | |
| *A* | |
150++ ** | |
| A* | |
| | |
100++----+----+----+-----+----+----+-----+----+----+----+
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 .
1994 1995 1996 .
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
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produce. We now have mechanisms in place to detect
deviations from expected figures very quickly and
take necessary actions.
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
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
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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 I propose to proceed in 1996 with a
charging model very similar to the one used in 1995.
3. Proposed 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.
The Registry Fee
I propose to use the same categories for local IRs
as 1996 but to reduce the fees associated by 25% for
ISP local IRs. This results in the following fees:
+----------------------------------+
| Category 1995 Fee 1996 Fee |
+----------------------------------+
| |
| Large ISP 12000 9000 |
| Medium ISP 6000 4500 |
| Small ISP 2000 1500 |
| |
| Enterprise 1000 1000 |
| |
|Last Resort 0 0 |
| |
+----------------------------------+
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New registries pay the fees pro-rata based on the
quarters of the year they are active.
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 against the creation of many small reg-
istries 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.
For the reasons above I propose to keep the signup
fee at ECU 2000.
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July 1995
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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 | 778 845 889 912 |
| Committed | 440 579 | 606 631 | 661 718 756 775 |
| 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 | 862 1013 1141 1248 |
| Committed | 514 739 | 844 955 | 745 886 1008 1111 |
| 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
1111 kECU, which exceeds the expenditure currently
planned (916 kECU). 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
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Daniel Karrenberg
July 1995
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basis, while part of the invoicing is done half-
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. Introducing Usage Based Elements
I expect that during 1996 we will have the
resources resources necessary to collect the rele-
vant data and to develop more usage based charging
models. It is quite possible to introduce usage
based elements into the system already in 1996.
One way to do this without changing the charging
scheme per se is to have usage data influence regis-
tration service response time. Requests from local
IRs could be prioritised based on past usage data
giving those customers with little usage priority
over those using the NCC a lot. Of course this
would be done taking into account the size category
of the customer.
Another way to introduce usage based elements would
be to introduce discounts for customers with little
usage once the data is available and the revenue
situation permits i this. These discounts could be
cash-back or credit towards 1997 charges.
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RIPE NCC Revenue & Charging 1996
Daniel Karrenberg
July 1995
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6. Summary
Due to unexpected developments it has so far not
been possible to develop more usage based charging
models. I therefore propose to continue to use the
successful model from 1995 in 1996 with a 25% reduc-
tion in registry fees for all ISP registries. The
signup fee should remain unchanged. This will pro-
duce sufficient revenue to sustain the NCC through
the consolidation period in 1996. Usage based ele-
ments can still be introduced during 1996 once the
relevant data becomes available and appropriate mod-
els have been studied.
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