________________________________________________________________________ member-2007-001: Interim APNIC fee structure adjustments ________________________________________________________________________ Author: Paul Wilson, Director General, APNIC Akinori Maemura, Chair, APNIC Executive Council Version: 1 Date: 6 August 2007 1. Introduction ---------------- In May 2007 the APNIC Executive Council commissioned a study by international consulting firm KPMG into the revision of APNIC's fee structure. The first stage of this work has been completed and will be reported at the APNIC 24 meeting in New Delhi. These results include a recommendation for an interim fee structure adjustment to address both the immediate budget shortfall and the ongoing uncertainty arising the use of the US dollar in setting APNIC fees. 2. Summary of current problem ------------------------------ The current problem is stated by KPMG in their recent advice to the APNIC EC, which is attached to this proposal. In section 2 the problem is summarised as follows: "KPMG's analysis clearly shows that the impact of the foreign currency movements, and the general impacts of movements in the Consumer Price Index (as a proxy for inflation), represent risks to APNIC which must be addressed. It is also clear that these factors have resulted in a significant reduction in the real costs of APNIC membership, and that an adjustment in fees should be seen as a response to an erosion in income, and not as a fee increase resulting from escalating costs." In section 4.1, the justification is provided as follows: "We believe there is a justification for an immediate increase in the members' fees, and not to do so would expose APNIC to financial risk. The following provides an overview of the key considerations which support the decision that EC reached to increase APNIC's membership fees: * Exchange rate variations - The strong increase in the Australian Dollar ($AUD) compared to the US Dollar (USD) has detrimentally impacted on APNIC's financial performance. The 2007 APNIC budget was struck at the rate of .78, and the exchange rate has been hovering around .85 and this represents a 10% deterioration in this year alone. Furthermore since 2000, when the rate was around 0.5479, the real deterioration in APNIC's AUD revenues has been over 40%. * No increase in fees since 1996 - The membership fees have not been increased since 1996. There has been no adjustment for inflation over this period and this has resulted in a narrowing gap between revenues and expenses to the point where APNIC will incur a deficit for the first time in 2007. A percentage increase in the order of 7% represents a very small proportion of the losses due to inflation, but provides the opportunity to balance the endorsed budget for 2007. * Member expectations - The demand for greater and better services by APNIC members. While members have generally been very positive about the services provided by APNIC, certain improvements and enhancements are expected. However, the fact that APNIC faces a declining revenue base, when taking into account exchange rate fluctuations and inflation, limits the opportunity for APNIC's management to address all key service improvement requests proposed by its members. "We believe that the decision to implement a percentage increase in member fees in the short term, is a prudent way to manage risk." 3. Details of the proposal ---------------------------- Under this proposal, adjustments are made to APNIC fees sufficient to produce a balanced result for the approved budget for 2007. Firstly, it is proposed to levy all APNIC fees in Australian Dollars. The proposed conversion rate from US Dollars to Australian Dollars is 0.7889, which is the same exchange rate that was used to prepare the 2007 APNIC annual budget. Secondly, it is proposed that fees be adjusted to a level which would produce a balanced budget in 2007. This involves an overall increase of around 7% in total in fees derived from APNIC members and non-member customers. The complete revised fee schedule is provided in Appendix A. It should be noted that "round figures" have been chosen in order to allow easier communication and administration, and therefore the percentage change is not consistent in all cases. 4. Advantages and disadvantages of the proposal ------------------------------------------------- Advantages: The proposed changes are necessary to ensure sustainable operations for APNIC in future. Without such changes, APNIC would need to reduce service levels, or continues to incur losses in future. Disadvantages: The adjustment in currency will have administrative impacts on APNIC members and customers, who may need to make new foreign currency arrangements in some cases. In order to facilitate payment, APNIC will continue to accept payments in USD, based on the exchange rate applicable at the time of invoicing. === A. Appendix - Revised Fee Schedule A1. Membership Fees Current Current New fee (USD) (AUD) (AUD) Extra large $40,000 $50,704 $54,400 Very large $20,000 $25,352 $27,200 Large $10,000 $12,676 $13,600 Medium $5,000 $6,338 $6,800 Small $2,500 $3,169 $3,400 Very Small $1,250 $1,584 $1,700 Associate $625 $792 $850 A2. Per Address Fees Current Current New fee (USD) (AUD) (AUD) Extra large $0.02 $0.0254 $0.027 Very large $0.03 $0.0380 $0.04 Large $0.06 $0.0761 $0.08 Medium $0.11 $0.1394 $0.15 Small $0.16 $0.2028 $0.22 A3. Non-member Allocation Fees Current Current New fee (USD) (AUD) (AUD) Host or site address $1 $1.2676 $1.35 AS number $500 $633.7939 $680.00 Reverse DNS domain $50 $63.3794 $68.00 A4. Non-member Maintenance Fees Current Current New fee (USD) (AUD) (AUD) Host or site address $0.10 $0.1268 $0.14 AS number $50 $63.3794 $68.00 Account fee $100 $126.7588 $135.00