"Clause 2.3 General Obligations of ICANN. With respect to all matters that impact the rights, obligations, or role of Registrar, ICANN shall during the Term of this Agreement:

2.3.2 not unreasonably restrain competition and, to the extent feasible, promote and encourage robust competition;"

The new budget DOES NOT promote and encourage robust competition thus not maintaining the spirit of the above clause

"Clause 3.9.2 Variable Accreditation Fee. Registrar shall pay the variable accreditation fees established by the ICANN Board of Directors, in conformity with ICANN's bylaws and articles of incorporation, provided that in each case such fees are reasonably allocated among all registrars that contract with ICANN and that any such fees must be expressly approved by registrars accounting, in the aggregate, for payment of two-thirds of all registrar-level fees."

The above paragraph explicitly states - "provided that in each case such fees are reasonably allocated among all registrars". The new budget does NOT reasonably allocate the variable fees amongst all Registrars.

Effect 3: The new budget will not meet the ICANN budget objectives

At a few places in the budget document ICANN states how the new budget is supposed to be heavily reliant on Registrant fees paid to Registrars. One of the objectives of ICANN's new budget was to try and work a way whereby the final stakeholders, ie the Registrants, participate in the process of paying the Registrars. However this current budget allocation mechanism does not do that. This is because the top ten Registrars will not even bother to change their selling price to the Registrants since their cost does not change dramatically. These top ten set represent over 25 million Domain Names.

This means over 25 million Registrants will not even contribute towards the increased budget. Rather their contribution will actually come from the smaller and mid-sized Registrars who will suffer in the bargain.

Effect 4: The new budget proposal will not meet the ICANN budget targets and is essentially flawed

The new budget will directly result in a large number of Registrars going out of business and additionally discourage a large number of new potential applicants who were looking at applying for accreditation. This will result in reduced revenues to ICANN if ICANN chooses to charge a $19000 + $4000 per Registrar fee, since every Registrar who ceases to exist, or any potential applicant who gets discouraged will result in one less participant paying this $23000 fee.

If however ICANN instead does not charge a fixed fee per Registrar but charges a variable fee per domain name only, ICANN will NEVER be impacted even if certain Registrars cease to exist. Since ICANN will continue to be funded on a per domain name basis, it will not matter as to the number of Registrars who exist. I do believe this was the intent of ICANN - ie to have its budget dependant largely on the end Customers (ie Registrants) as directly as possible. The best way to achieve this would be to charge ONLY A PER domain year fee (37.5 cents instead of 25 cents). This way smaller and mid sized Registrars continue to survive and continue to pay their $4000 per annum fee, and additionally ICANN does not bear the risk of not meeting its targets since the revenue is not dependant on the number of Registrars, but on the number of domains.

Effect 5: The new budget does not comply with the MoU signed between DoC and ICANN

The Memorandum of Understanding between ICANN and DoC starts of with

"On July 1, 1997, as part of the Administration's Framework for Global Electronic Commerce, the President directed the Secretary of Commerce to privatize the management of the domain name system (DNS) in a manner that increases competition and facilitates international participation in its management."

This budget move will unfortunately REDUCE competition and REDUCE international participation, violating the principles laid out in this MoU
 

Effect 6: The new budget is partial to a set of Registrars