Charging Scheme Task Force 2024 Meeting Minutes (17 September 2024)

17 September 2024

Attendees: Alexandru Doszlop, Sebastian Brossier, Carlos Friacas, Victor Bolaños Guerra, Raymond Jetten, Ulf Kieber, Cynthia Revström, Piotr Strzyżewski, Clara Wade

Apologies: Alex de Joode, Ivaylo Josifov, Pavel Odintsov, Alptekin Sunnetci

Chairs: Ondřej Filip, Peter Hessler

RIPE NCC staff: Daniella Coutinho, Fergal Cunningham, Athina Fragkouli, Simon-Jan Haytink, Karla Liddle-White

1. Welcome

RIPE NCC Executive Board Chair, Ondřej Filip, opened the meeting by welcoming the group and went through the agenda. He emphasised that the most important part of the meeting would be the group's input and asked if anyone had any additions or changes to the agenda. No adjustments were made.

2. Review of Report from 2012 Task Force

The group discussed the report from the previous Charging Scheme Task Force and each recommendation they put forward to the Board in 2012.

2.1 Differentiation in membership fees - larger members pay more than smaller members

The group discussed the recommendation and the conversation referenced the 2012 General Meeting vote, where a proposal to differentiate fees based on membership size was voted down. Some expressed that, despite this, the principle remained valid, though tax implications and the complexity of differentiating fees based on IP allocations were noted as challenges.

It was also mentioned that while some organisations support a tiered fee structure, others emphasised the difference between equality (everyone paying the same) and equity. Additionally, a question was raised about whether larger members should also receive more votes if they paid more, but it was clarified by the RIPE NCC’s Chief Legal Officer, Athina Fragkouli, that Dutch law would not allow members in a Dutch membership association to have more than one vote each.

2.2 Membership fees based on category fees and not on individual fees

There was general agreement on the concept of a category-based fees model. The conversation touched on special cases, such as universities that received large IP allocations (/16s) before the RIPE NCC existed. Some argued that these allocations should be considered differently, given universities' typically limited funding. Others disagreed, stressing that all members, including universities, should be treated equally, and making exceptions would be unfair to other members.

The group also discussed the distinction between legacy and PA (Provider Aggregatable) IP space, with some noting that once legacy space was converted to PA, it should be treated as such. Concerns were raised about potential abuse, such as selling off parts of larger allocations, and clarifications were provided on how legacy space could be reclassified only on request.

2.3 Membership fees cover all RIPE NCC services

Several in the group emphasised the need to avoid a system where members pick and choose services, as it would create administrative complications and could undermine fairness. Some participants raised the possibility of adding a fee for specific activities, such as IP transfers, which were resource-intensive for the RIPE NCC. However, the consensus leaned toward the idea that the general membership fee should cover most services.

Concerns were raised about the introduction of new services that might benefit only a small number of members. Some felt this could be addressed through proper planning and review, ensuring that new services were integrated into each Draft Activity Plan and Budget.

There was also discussion about the membership fees remaining sufficient to cover the RIPE NCC’s operational costs, with the possibility of additional charges for particularly resource-heavy services, such as transfers. Ultimately, the group supported the principle that membership fees should cover all activities in the activity plan but remained open to further discussions on the treatment of specific services like transfers and for certain new projects which could require additional fees, subject to approval by the Board.

The group revisited the 2012 recommendation to continue charging a sign-up fee that should be high enough to constitute something of a barrier to entry. The group generally agreed that a sign-up fee should remain in place but there was a shift in perspective that the fee was to cover the initial administrative costs of membership, rather than as a barrier to entry. There was a clarification that its primary function was to cover these costs for the RIPE NCC and not to create an unnecessary barrier.

2.5 Charging for IPv6

The group discussed the 2012 recommendation to include IPv6 allocations in the calculation for determining a member's category size, and therefore their fees. Several argued that fees for IPv6 should be significantly lower to encourage adoption. Some felt that smaller IPv6 allocations, such as /29, should be included in the base member fee to prevent financial barriers to deploying IPv6. Comparisons were made to other RIRs where the fee structure for IPv6 had been criticised for discouraging smaller organisations from deploying IPv6 due to high costs.

The consensus was that while the recommendation to charge for IPv6 remained valid, the fee structure should be carefully designed to avoid disincentivizing IPv6 deployment. Some suggested following models where smaller allocations of IPv6 were included in base fees or offering waivers, though it was noted that temporary waivers were not a long-term solution and may still discourage deployment.

The group agreed that charging for IPv6 should be approached in a way that supported and encouraged widespread IPv6 deployment, without creating financial hurdles for smaller organisations. Further discussions on how to structure fees to balance this was suggested.

2.6 Charging for Independent Resources (IPv4 PI, IPv6 PI and ASNs)

Some members supported the current charging model, where ASNs and PI resources were charged separately, and saw no reason to change it. Others emphasised the importance of maintaining a differentiation in fees based on assignment size, which is not currently in place. There was concern that charging based on categories could disproportionately affect smaller ISPs, potentially giving larger providers an advantage.

The group generally agreed that PI space should be charged separately, with no double charging. There was also a suggestion that one ASN should come as part of the base membership fee. They leaned toward maintaining separate charges for PI space and ASNs but suggested revisiting the idea of differentiating fees based on assignment size. The group agreed to further discuss this in future meetings to update the recommendation accordingly.

2.7 Charging based on period or based on a specific date

The group looked at the recommendation that the fee should be based on a specific date that is announced well in advance. There were no objections or suggestions to change this, and the group agreed to continue with the existing approach.

2.8 Charging based on service portfolio and not on RIPE NCC workload

The group agreed to discuss this recommendation further at a later date.

2.9 Charging based on Internet number resources

The team discussed the recommendation to charge members based on PA resources that they hold and that the length of time the resources were held should not be a factor. The group agreed that including time in the charging model added unnecessary complexity, and in today’s market, the duration of resource ownership was no longer relevant. The consensus was to follow the current practice, aligned with other RIRs, and base the charges for the majority on the PA resources held, without considering the length of time they’ve been held.

3. RIR Charging Scheme Comparison

Chief Financial Officer, Simon-Jan Haytink, went through his review of other Regional Internet Registry (RIR) charging schemes, noting that many other RIRs based their charging schemes on a category model, some of which included IPv6 and transfer fees in their calculations. One RIR also had an early payment discount and late payment fees. One included a discount for those in the least developed economies, which was considered an objective and judgement-free method of applying a discount.

4. Tax Ruling Explanation

Simon-Jan Haytink went on to provide an explanation of the tax implications for the RIPE NCC as a non-profit Dutch membership association. Currently, the RIPE NCC can redistribute excess funds to its members without incurring Dutch income tax, which is a beneficial arrangement aligned with the Dutch association framework. However, if the General Meeting (GM) voted to retain excess funds and add them to reserves, those funds become taxable. Importantly, any gains within the clearing house reserves were not subject to corporate income tax.

He also emphasised that the not-for-profit intent was a foundational requirement for the formation of the RIPE NCC, fitting the criteria for being a neutral and impartial Regional Internet Registry (RIR) under the ICP-2 guidelines. While Dutch associations can technically make a profit, the funds must be used to benefit wider society, and the RIPE NCC’s focus should remain on serving its members, the community and the public good.

Simon-Jan also responded to a question about potential tax implications regarding charging based 100% on IP holdings. The concern, originating from previous Task Force discussions, was that such a model might lead to IP addresses being interpreted as assets, which could result in tax liabilities for the RIPE NCC. The member asked if this was still a significant concern when considering a category model based on IP holdings, and if so, how this risk could be mitigated.

Simon-Jan clarified that it was still a legitimate concern since IP addresses were not property. He noted that there was indeed a risk that this could lead to the interpretation of tax authorities and accountants that the IP addresses should be classified as assets if the RIPE NCC charged solely based on IP/resource holdings. He emphasised the difference between two very distinct scenarios: First, assigning a value to resources, where a value would be assigned to a resource and that value would directly determine the membership fee. For example, holding four IPv4 addresses would result in ‘Four times X value = Fee’.

Simon-Jan added that using fee categories would be very different. The membership fees could be structured into ten different categories, where the IP addresses or resources held by a member would determine which fee category they fell into. These two scenarios represented fundamentally different methods of calculating fees. He also noted that membership fees were essential for a member association and that charging based on a per-IP basis was a major step away from the membership fee.

The group discussed the implications of charging based on IP holdings, with some expressing surprise that this approach raised concerns. Simon Jan re-emphasised that the former charging scheme also used resources to determine categories for membership fees. Additionally, in 2023 the RIPE NCC put forward a category based charging scheme to the GM.

Overall, the discussion emphasised the need for flexibility in fee structures, with the potential inclusion of additional charges, such as for ASNs, to ensure a balanced and sustainable model.

5. Discussion on Address Policy WG on PI Charging

Executive Board Treasurer, Raymond Jetten, suggested revisiting this topic in the next meeting and committed to bringing it up for further discussion. The group agreed to address it in the next session.

6. Preparations for October Meeting

Charging Scheme Task Force Co-Chair, Peter Hessler, led preparations for the next meetings and the group agreed to finalise the date for the October meeting and the hybrid meeting at RIPE 89.

7. AOB

Fergal said he would send the draft agenda for the next meeting to Peter and Ondřej, and that this would also be provided to the group well in advance of the next meeting.