Internet2 Financial Outlook and Member Dues for 2006 and 2007

Internet2 Financial Outlook – Member Dues & Abilene Fees for 2006 and 2007 Laurie Burns, Member & Partner Relations Internet2 Internet2 Business Meeting Spring 2005 Internet2 Member Meeting May 3, 2005

Priority discussions • Discussions held with Councils during first quarter of 2005, most extensively with NPPAC • Priority rankings different, points to diversity of interests in community and importance of balancing what is paid for by member dues and what from other sources

Financial outlook • Reserves have been managed to provide short-term bridging and to minimize impact of new resource needs on members • Reserves are maintained to allow investments in the future, but can't absorb ongoing operational deficits such as projection for ’05 and beyond • Facing a period of increased spending: • Next generation of Abilene • Related technology development (e.g., HOPI) • Ramped up work in security

Closing the gap Magnitude of resource needs requires: • Exploration of other sources of revenue • Continued and heightened control of costs, including reducing activities in some areas • Examination of sustainable sources of funding

Closing the gap Exploration of other sources of revenue • Grant and donations extremely important, but can be one-time or otherwise limited • Potential competition with members may mean Internet2 should not pursue certain grant opportunities Cost control critical and will continue • Internet2 is reallocating $500,000 in 2005 to absorb current year’s work in security without increasing deficit

Sustainable sources of funding • General Principles • Sustained sources of funding are crucial to Internet2's financial health • Sustained sources of funding allow Internet2 to remain independent • Small additional investments by each member adds up to significant funding for priority efforts, allows forward progress that benefits whole community

Member dues • Dues were not changed for first six years of Internet2’s existence • Dues have remained flat for last two years, at $27,000, $10,800, and $2,500 • During the past two years, Internet2 has: • Reduced expenditures and controlled headcount growth • Shifted resources to take on new work • Found grant support for work deemed important to the community • Maintained its reserves

Member dues • Reduced expenditures • Health care costs, conference calling, cell phones, legal support specialization, outsourced travel • Headcount relatively flat, maintained flexibility in staff force, voluntary and involuntary attrition • Shifted resources • Absorbed earlier phase of security work and ramp-up of InCommon work with existing staff and resources • Reduced staffing for the Commons, digital video work, and end-to-end performance

Member dues • Found grant support • Number of funded grants grew from 4 to 10 in past two years • 10 of 19 (53%) of submissions were funded, involving 40 member institutions • 5 of 10 are sub-awards with a member lead • Of remaining 5, over 70% of funds were distributed to member institutions

Member dues • Maintained reserves • Financial model has been to build reserves to support investments in important projects • 2002/2003 Abilene upgrade and investment in NLR are recent examples

Abilene primary participation fees • Primary Participation fee of $20,000 has remained constant since launch • During this time, Abilene has: • Been through a major upgrade • Seen major increases in utilization • Seen major decrease in revenue per gigabit • Continued to decrease connection fees

Abilene revenue 2000-2004

Abilene primary participation fees • Abilene’s costs aren’t dropping as fast as revenues per megabit • Abilene continues to out-perform other point-to-point lit services • New work in security and HOPI are directly relevant to next generation of Abilene

New fees and dues • Approved by Board of Trustees on April 17 • 2006: • Dues to $28,500/$11,500/$2,600 • Participation fees to $21,000 • 2007: • Dues to $30,000/$12,000/$2,700 • Participation fees to $22,000

Internet2 Financial Outlook and Member Dues for 2006 and 2007