[members-discuss] Response to Comments on the Charging Scheme Proposals

Dear all,

I’d like to answer the comments and questions that have been raised 
since the Board Treasurer announced the final proposed charging scheme 
options.

See Raymond’s mail announcing the options at:
https://www.ripe.net/ripe/mail/archives/ncc-announce/2023-April/001645.html

Also see my colleague Fergal’s mail explaining the instant run-off 
voting method and how it will work with the charging scheme vote:
https://www.ripe.net/ripe/mail/archives/ncc-announce/2023-May/001647.html

Purpose of the Charging Scheme and Budget

The charging scheme is the mechanism the RIPE NCC uses to ensure it 
collects sufficient funds to carry out its promises to the members in 
future years. As a safeguard, any excess (or shortage) of funds is 
subject to a redistribution vote by the General Meeting. This 
redistribution has happened many times in the past. This ensures that 
the RIPE NCC operates on a cost-recovery basis, or in other words 
operates as a not-for-profit.

The Charging Scheme does not define the cost budget of the RIPE NCC, but 
of course there is a relation between the two. The projected income does 
at the very least provide direction regarding discussion on the Activity 
Plan and Budget.

The Activity Plan and Budget defines the planned activities and 
associated costs for a financial year. And for the longer term, we have 
developed a five-year strategy. Both of these documents are published 
for the members to provide input on, and they are then approved by the 
RIPE NCC Executive Board.

The Draft Activity Plan and Budget is published on a yearly basis every 
autumn, specifically to consult with our membership. Additionally, this 
year there is the option to provide input and feedback via the RIPE NCC 
Survey 2023, which will launch next week. The Activity Plan and Budget 
is effectively the RIPE NCC’s promise to its members in terms of what it 
will do and how much it will spend in the coming year.

The most recently approved Activity Plan and Budget (in this case 2023) 
forms the basis for projections of the required income for the following 
financial year, as this is the most recent approved “promise to our 
members”. All charging scheme projections are made with this promise in 
mind, to ensure sufficient income to continue that promise. If the 
Activity Plan and Budget 2024 requires us to cut or add activities or 
costs, then that is what we will do to fulfill our promise.

That being said, efficient and effective use of membership funds is a 
priority and will remain a priority of the Executive Board and the 
management of the RIPE NCC.

Why Change the Current Model?

We need to ensure sufficient and sustainable income to continue our 
operations in a stable and predictable manner. The high market value of 
IPv4 resources combined with the possibility of multiple LIR accounts 
per member has created uncertainty and unpredictability for a 
significant part of our income. A member-based model rather than an LIR 
account model will help to reduce this uncertainty by removing the LIR 
account as the basis for the charging scheme.

We are also addressing the stated unfairness in the current model. 
Although some members have expressed the desire for increased 
differentiation, we see the proposed change as a significant difference 
from the current one LIR-one fee model. It allows us to spread the 
funding burden differently because in the current model, all members 
with one LIR account pay the same fee (exception is the independent 
resources). Due to a significant inflow of New LIRs in 2019 and 2021, 
there is a considerable amount of members who hold more than one LIR 
account, and these members do pay additional LIR account fees. One of 
the major benefits of the category model is that it charges per member, 
and with that it reduces the uncertainty caused by multiple LIRs and the 
associated consolidation risk.

We aim to achieve a clearer distinction between RIPE Policy and the RIPE 
NCC Charging Scheme by removing the LIR account as the basis of the 
charging scheme.

And we want to ensure that the RIPE NCC together with its members is 
ready for any change the future might bring, by increasing the 
possibilities the charging scheme provides to adapt for this change. Of 
course, this can only happen with formal approval by the GM.

The Category Model

Under this model, the categories would apply as soon as a member holds 
IPv4 or IPv6 resources as defined in the charging scheme document. 
Limits as defined in the charging scheme document are the upper limits 
of the categories. The lower limit for Category 1 is one resource (one 
IPv4 address or one IPv6 address). The base category applies to all, 
including members with no IPv4 or IPv6 resources.
We have been asked why there is not a per-IPv4 address model, with 
comments that the category model favours bigger members. In a way, it 
does, but less so than in the one-LIR account, one-fee model. We also 
need to stay true to the fact that we are a membership association, so 
while we can differentiate between members, this needs to stay within 
reason.

Additionally, we need to ensure the independence of the RIPE NCC by not 
becoming too dependent on a small subset of our membership for a 
significant part of our income. Furthermore, protecting the one 
member-one vote principle could become significantly more difficult if 
the contribution differences become extreme. So we can facilitate 
differentiation between members in size of contribution, especially 
compared to the current model we have, but it is essential that this 
stays within reason. One clear benefit of the category model is that we 
can refine it over time, working towards a model that is acceptable for 
more members.

On the pricing and category limits, they have been set with the latest 
Activity Plan and Budget in mind, to ensure at the very least that we 
can continue with our promise to members in 2024. If the Activity Plan 
and Budget 2024 requires the RIPE NCC to reduce or add activities or 
costs, we will act accordingly.

Regarding the options presented for voting, our initial plan was to 
submit two charging schemes for a vote, to provide a clear choice to the 
members on a category-based model or the current model. Both of these 
models would provide income at the level of the 2023 budget if we apply 
a correction for expected inflation of 5%, resulting in a projected 
income of EUR 42 million.

After feedback from members we wanted to ensure the GM could vote for 
“NO CHANGE” which is represented in Option D. Additionally to this “NO 
CHANGE” vote, I personally requested to add a vote to keep the income 
(before any correction for inflation) at the same level as in 2023, 
which is the reason Option C has been added. The 2nd or 3rd vote on 
charging for ASN assignments and/or transfers would (if approved) 
provide additional income over that provided by the charging scheme 
voted for by members.

The Waiting List

The current situation regarding the IPv4 waiting list and costs 
associated with a /24 IPv4 allocation is in our eyes an undesirable one. 
With the uncertainty of the waiting period (around 1.5 to 2 years) which 
can be shorter or longer, plus the two-year “non-transfer” policy, it 
means unpredictable costs for our members and income that is not 
transparent for the RIPE NCC.
- Two-year waiting period = sign-up fee plus two years LIR service fee = 
4,100 EUR
- Two-year “non-transfer” policy = two years LIR service fee = 3,100 EUR
- Indicative price 7,200 EUR

To address this, we propose a one-time join-the-waiting list fee, and a 
to-be-determined /24 IPv4 allocation fee. This would replace costs that 
apply to members based on being on the waiting list for a long time 
without receiving resources, as members would be charged the waiting 
list fee upon placement on the waiting list, and the allocation fee only 
just before resources are allocated (with the opportunity to reject the 
resources).

This is, in our opinion, a fairer way to charge for these resources. To 
define this charge and work out any possible issues with RIPE Policy, we 
are postponing this vote to allow for consultation with the membership 
because this to-be-determined fee will have an effect on who applies for 
the resources. We also need to consider fees already paid by LIR 
accounts, and whether a discount would be in order for fees already paid 
in relation to specific IPv4 allocations. And for this, time is needed 
to consult with membership.

Additionally, this fee will also result in additional income for the 
RIPE NCC, which will be subject to a redistribution vote, assuming this 
provides excess funds.

See the original announcement on the waiting list freeze:
https://www.ripe.net/ripe/mail/archives/ncc-announce/2023-April/001643.html

Finally, there are probably more questions and comments than I have 
answered here. But we are preparing for the General Meeting (GM) next 
week where there will be several presentations from our side on the 
charging and budgeting of the RIPE NCC. Our Managing Director will 
present at both the NCC Services Working Group on the past and future of 
the RIPE NCC, and he will present a more detailed presentation on budget 
developments in the GM. I will also present on the Charging Scheme 
options as well as give an update on our current financial situation.

I hope you will register to join and follow these presentations, and you 
will have the opportunity to further ask questions and discuss the 
various options to vote on.

https://www.ripe.net/participate/meetings/gm/meetings/may-2023

Kind regards,

Simon-Jan Haytink
Chief Financial Officer
RIPE NCC