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RIPE NCC Revenue & Charging 1996 (1.0)

  • To: NCC Contributors < >
  • From: Daniel Karrenberg < >
  • 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.











                ____________________________________________________
                inc96.txt (1.0)                               Page 1
                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg
                                                           July 1995
                ____________________________________________________

                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
                ____________________________________________________
                inc96.txt (1.0)                               Page 2
                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg
                                                           July 1995
                ____________________________________________________

                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
                ____________________________________________________
                inc96.txt (1.0)                               Page 3
                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg
                                                           July 1995
                ____________________________________________________

                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 |
                        |                                  |
                        +----------------------------------+



                ____________________________________________________
                inc96.txt (1.0)                               Page 4
                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg
                                                           July 1995
                ____________________________________________________

                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.

































                ____________________________________________________
                inc96.txt (1.0)                               Page 5
                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg
                                                           July 1995
                ____________________________________________________

    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
                ____________________________________________________
                inc96.txt (1.0)                               Page 6
                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg
                                                           July 1995
                ____________________________________________________

                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.









                ____________________________________________________
                inc96.txt (1.0)                               Page 7
                                    RIPE NCC Revenue & Charging 1996
                                                   Daniel Karrenberg
                                                           July 1995
                ____________________________________________________

    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.








































                ____________________________________________________
                inc96.txt (1.0)                               Page 8

Attachment: ps00003.ps
Description: PostScript document


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