money

This page considers ICANN's resources and expenditure, the cost of participation and what is at stake from a commercial perspective.

It covers -

• introduction
• paying for ICANN
• where the money goes
• the cost of participation
• benchmarking
• what's at stake

     introduction

A journalistic adage is to "follow the money" rather than reporting what people say. Examining where ICANN's money comes from, where it goes, the cost of participation in ICANN policymaking and what's at stake for domain name industry businesses offers insights about restraints on the organisation and the shape of the global DNS.

ICANN's 2003-04 Budget projected total expenditure of US$7.99 million and revenue of US$8.62 million. Some US$0.63 million was to allocated to reserves, providing a cushion for delayed payments and unanticipated litigation or other legal costs.

Legal expenditure has been a feature of the organisation's existence, as it deals with the US government and with commercial entities such as VeriSign. Some of those entities presumably perceive a corporate interest in weakening a regulator (eg through delayed payments and reducing its capacity through spending on litigation) or influencing its operation through advocacy to third parties.

ICANN critics have suggested that the organisation's functions could be undertaken by volunteers or that the budget is excessive. IETF co-chair Randy Bush lamented in 2002

Why does Icann have to spend $10m to run the root servers when it never used to cost anything? They're run voluntarily

One response might be that evolution of the internet from an academic resource to an integral part of the global information infrastructure involves international consultation about policymaking, greater transparency than in the past and the litigation that's a feature of all market economies.

Administration of the DNS has, of course, had costs in the past: those costs weren't explicit, because they were 'hidden' in the salaries and support budgets of major academic institutions and network operators/developers.

The voluntarist model for governance is examined elsewhere on this site.

     paying for ICANN

As noted earlier in this profile and discussion of the DNS, ICANN is not funded by the United Nations or by the US and other governments.

Its operation is not based on a 'bit tax' on all electronic mail or internet traffic and its powers do not extend to levying a tax on all domain names, web sites or web pages.

It does not draw on a discrete endowment and for example has not received a gift from William Gates III to fund its ongoing activity (Microsoft provided an initial donation of $25,000). Apart from small-scale donations during start-up (of which the largest was US$171,500 from corporate lawyers Jones, Day, Reavis & Pogue) its only philanthropic support has been a one-off US$200,000 grant from the Markle Foundation to "promote the public interest in nontraditional, international venues where policy is made that affects the Internet, its use, and its impact on society". During start-up it received loans - since repaid - from Cisco (U$150,000), MCI Worldcom (US$500,000), 3Com (US$175,000) and Deutsche Telekom (US$200,000).

Instead in 2003-04 it expected to receive some US$6 million from TLD Name Registries/Registrars such as VeriSign (equivalent to around US18.4 cents per gTLD name), US$0.5 million from IP Address Registries, US$0.9 million from registrar accreditation fees and US$0.75 million from the new gTLDs.

     where the money goes

Expenditure on staffing was budgeted for the equivalent of 38 full time staff, at a cost of US$3.8 million. 'Technical and support services' amounted to US$0.6 million, with 'Administrative and systems' spending at US$1.6 million. That spending covered the cost of litigation, information technology and housekeeping activity such as audit and keeping the lights on in the organisation's offices in Marina Del Rey and Brussels.

The ICANN budget for Board & Public Meetings in 2003-04 was US$0.94 million, with other travel expenditure (committee and staff travel) at US$0.62 million. Annual reimbursement of individual Directors for attendance at meetings has ranged from US$1,761 to US$62,131.

One direction where ICANN money does not go is to government. ICANN has tax-exempt status as a US not-for-profit corporation based in California. That exemption covers most US federal and state taxes. ICANN has accordingly not had to base its operations in tax havens, unlike several registrars which (like major corporations) have a legal domicile in the Caymans or Channel Islands. It is unclear whether senior ICANN staff enjoy the personal income tax advantages available to employees of some international organisations.

     the cost of participation

How much does it cost to participate in ICANN as a Director or by attending the organisation's public meetings? What are the costs of advocacy, whether through formal representations to the organisation, to individual directors or to third parties such as the US Commerce Department?

The answers to those questions are unknown. However, it is possible to provide some information on an indicative basis.

ICANN's budget documentation identifies reimbursement of directors for attending board and committee meetings (on a physical basis and by teleconference). That remuneration is not particularly generous when compared to directorships in major nonprofit organisations or businesses. Aggregate remuneration of the chief executive in the order of US$0.5 million is less than that of some Australian university vice-chancellors.

It is unclear why people seek to join the ICANN board and what are the opportunity costs, eg income (and sleep) forgone while participating. Most Directors appear to be senior executives who's participation is encouraged by their business, NGO or academic employers. Participation in some cases will add lustre to a personal profile and thereby underpin recruitment to comparable positions in government, advocacy, business and academic organisations - ie traditional career building. Some presumably offset personal criticisms with the ego reinforcement that comes from making the world a better place or merely occupying a position of power.

The costs of participation in ICANN's public meetings are similarly uncertain. Attendance at three meetings per year in different parts of the globe would appear to involve direct expenditure of $40,000 for travel and accommodation. Analysis of participation suggests that most attendence is associated with an organisational affiliation, ie there are few recurrent attendances on a truly individual basis.

The costs to government of participation can be estimated by identifying which governments have sent representatives to meetings of the ICANN GAC, discussed earlier in this profile. The cost within government of monitoring ICANN is unknown.

An assessment of the reported and actual costs of government and industry sponsorship of ICANN public meetings is inhibited by variation in what's reported and disagreement about 'in kind' expenditure. ICANN notes for example that formal sponsorship of its Los Angeles public meeting in 1999 included contributions of around US$5,000 from Compaq, Neustar, NameSecure.com, MCI WorldCom, Network Solutions and Latham & Watkins. Figures aren't available for expenditure relating to the Shanghai public meeting, eg spending by the host nation on official functions and on entertainment for participants outside the meeting.

     benchmarking

There is no direct equivalent of ICANN and caution in benchmarking, such as comparisons of budgets by staff numbers, is therefore desirable.

One point of reference is the International Telecommunications Union (ITU), the United Nations agency that is discussed in a separate profile. The ITU had a budget of around £77.5 million in 2000 and some 782 staff with a considerably broader ambit. Notional costs for the operation of government telecommunication regulatory agencies in advanced economies appear to average around $50 million per year. UK regulator Oftel for example had around 200 staff and an annual budget of £17 million in 2000; the Australian Communication Authority had a budget of $51.7 million and around 357 staff in that year. At the other extreme the World Bank had administrative costs of US$140 million, with overall staff of 8,800. Overall expenditure by the World Intellectual Property Organisation, including administrative costs, was around US$480 million (US$8 million of which went on furniture).

A forthcoming Caslon paper benchmarks the cost of ccTLD administration, comparing the expenditure and staffing for example of Australia's auDA, the United Kingdom's Nominet and Canada's CIRA. Nominet had a staff of over 90 in 2000, with an annual budget of £8 million.

     what's at stake

[under development]








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