Report of Vice President - Dividend requirements 29/08/03

FAQ ON INTERNETNZ DIVIDEND REQUIREMENTS

Version 1.0
24 August 2003

Primarily to fund its activities that are not directly covered by the DNC fee for .nz related activities.
However it should be noted that in order to take a conservative tax position, the DNC fee only covers the direct costs of the DNC Office and .nz Oversight Committee. A reasonable proportion of the Council's and Officers time is still taken by .nz related activities.

These are many and varied, as circumstances arise, but some current activities include:

Internet Code of Practice
Representation to Government and Parliament on behalf of internet users and providers
Next Generation Internet Project
Sponsorship of Conferences such as NZNOG, Uniforum and Netsafe
New technologies such as IPv6, Enum, DNSSEC etc
Summits on topical issues
Responding to topical internet issues (DET patent etc)
Cyberlaw education and research
Anti-Spam Campaign
Supporting INZ website and e-voting system
Broadband application inter-operability testing

The 2003/04 budget is for $815,700 of direct .nz expenditure (funded by $838,400 of DNC fee) and $581,950 of general society expenditure (excludes one off cost of sale of Domainz).
The general society expenditure can be further broken down as follows:
$225,000 Staffing
$144,700 Office Expenses
$73,000 Council Expenses
$139,250 Distinct Activities or Projects
This is not entirely a fair reflection as much of the staffing cost goes towards supporting activities. Many worthwhile activities show no visible external cost such as representation to Government, as they are done primarily by staff and volunteers. Others such as a Code of Practice Summit involve considerable staff and volunteer time as well as external costs.
It should also be noted that office expenses include technical support for the InternetNZ networks, websites, e-voting system etc.

Once InternetNZ makes a decision on its dividend requirements for the next three years, this will be fed into the forecasts of NZRS, and the new forecasts will form the basis of reviewing the monthly $2 fee at the end of this year. This review is done jointly by NZRS and the NZOC by way of a recommendation to the INZ Council.
Every $100,000 of dividend requires $167,000 of pre-tax profit, which in turn is $167,000 of fees income.
If one assumes that in the 2004/05 year there will be (at the midpoint) 150,000 names then one can estimate that every $100,000 dividend will make up $0.09c of the monthly domain name fee.

InternetNZ also receives income from membership fees, from interest and recently grants for specific activities (such as inter-operability testing).
On current projections incomes for each of these items is forecast to be $20,000, $90,000 and $100,000.
InternetNZ Council is keen to increase funding from sources other than dividends, but it is most unlikely to be able to eliminate the need for dividends from NZRS, unless it was to cease almost all society operations not related to the .nz TLD.

Yes, and in fact in 2003/04 INZ will receive no dividend from NZRS, instead just drawing down its reserves.
The sale of Domainz has obviously given InternetNZ considerable reserves. InternetNZ can use these purely as investments to earn interest, or it can use a proportion of them to fund activities over the next few years.

David Farrar
Vice-President