ICANN made it possible for this transaction to happen. There’s only so much the internet community can do now.
It has been two months since Internet Society (ISOC) announced that it was selling Public Interest Registry (PIR), which runs .org, to private equity company Ethos Capital.
There have been many revelations since then, including that former ICANN CEO Fadi Chehadé is advising Ethos, Ethos is run by the same person who led Abry Partners’ deal to acquire Donuts, and that Ethos is paying $1.35 billion for the assets. The deal comes on the heels of ICANN removing price caps on .org domains, meaning that PIR can raise prices as high as it wants for .org registrations and renewals.
I’ve written numerous articles about the deal, and I imagine my bias shows in these pieces. But I haven’t summarized my thoughts on the deal until now, including my two main concerns about the transaction.
This deal is going to happen
In my annual predictions podcast, I said that I believe the Ethos deal will go through. At this point, the only thing I think that could trip up the deal is delay. Some Senators say they plan to step in, and ICANN is asking questions. But assuming the deal is good enough for Ethos (and I believe it’s a great deal), I expect it to outlast any delays and complete the transaction.
Even if ICANN doesn’t like the deal, there’s not much it can do to stop it. Can it reasonably withhold consent, per the contract? I’m not sure on what grounds it can do so.
Recently, a group formed and asked ICANN to hand the reins of managing .org to it. But there’s no provision in the .org registry agreement that would allow ICANN to do this unless ISOC were to proceed with the transaction without ICANN’s blessing, which it wouldn’t do.
Should ICANN not give its consent to the transaction, I imagine there would be a legal battle. If it goes ICANN’s way, then it just means that ISOC continues to own PIR and the .org registry contract, not some other party.
If ICANN were to find grounds to transfer the registry contract to someone else, then all of ICANN’s registry contracts have a problem.
Blame ISOC or ICANN?
If you don’t like this deal, you might blame ISOC. After all, it’s the one that agreed to the transaction. It is exchanging $50-$75 million of cash each year in perpetuity (not guaranteed) into a lump sum of $1.135 billion. It probably makes financial sense for the non-profit, although you can make a good argument that it threw internet users under the bus to make it happen.
At the same time, it’s ICANN that made this deal possible in the first place.
I believe that the registry operator for .org and other legacy extensions should be looked at as a steward for the extension, not the owner of the extension. But that’s not what the contract states and ICANN has moved from the stewardship to ownership model over the past 10-20 years. Granting presumptive renewal, removing price caps, and making it easy to sell the contract to someone else has turned the stewardship of these top level domains into ownership.
ICANN awarded the .org contract to ISOC in a competitive process. But its contracts never required .org to be run by a non-profit. It also designed its agreements so that the registry contract could be sold to another entity. This was made more clear when ICANN decided to use its new top level domain name base agreement for .org. This agreement was built with transferability in mind.
So it’s easy to be angry with Ethos. Or ISOC. But if anyone is to blame, it’s probably ICANN.
It’s a savvy deal
I suspect there’s a bit of jealousy of Ethos. When I told some friends about the deal and how it was structured, they were shocked that no one else thought of it earlier. Perhaps no one thought of it sooner because they didn’t have former ICANN CEO Fadi Chehadé’s background. He’s advising on the deal.
It seems that Ethos did the deal in a way that ISOC couldn’t reveal it until it was inked. It knew that, if it were made public beforehand, the pushback would have imploded the deal. Ethos also put time constraints on the deal that made it difficult for ISOC to shop it.
Any way you look at it, this deal should be a home run for Ethos.
My issues with the deal
There are two things I don’t like about the transaction.
First, it raises greater concerns about the lack of price caps on .org. After ICANN removed the price caps this summer, PIR noted that it didn’t always raise prices 10% a year anyway, even though it was contractually allowed to. Now, Ethos is giving assurances that it won’t raise prices more than 10% per year on average. Even if it’s true to its word, prices will increase more in the future than they did in the past. And once Ethos sells the registry to someone else, what will they do?
You can argue that my reason for wanting price caps is selfish. I own only about 10-20 .org domains, and I will pay more for the domains in the future.
That’s not too much money, though. Although my reasons are “selfish,” it is for the domain name ecosystem at large. My concern is what the lack of price caps does to domain names as a neutral way to publish on the web. Domain names are the great equalizer; Facebook can charge people to reach their audience on Facebook, but anyone can publish what they want on a website connected to their domain name.
If registries significantly increase renewal fees, people will be forced to switch domain names or shut down. Switching domains is very time consuming and difficult. This could make domain names lose their luster and role as an equalizer in the future.
Frankly, I don’t care if ISOC or Ethos or someone else gets the money from registry fees. I just want price certainty for the good of the entire domain ecosystem and the World Wide Web.
My second concern is that this deal makes the domain name industry look bad. We have the former CEO of ICANN advising a private equity company on taking over a top level domain that was entrusted to a non-profit. That makes excellent fodder for the public to say something fishy is going on in the domain name world.
What can be done
Even though I view the deal as a certainty, there is one thing that internet users or ICANN can push for: price certainty.
Ethos could agree with ICANN to reinstate contractual price caps. I don’t think there’s any way for ICANN to force this, but it would show that Ethos is serious about keeping prices in check. If nothing else, renewal fees must have certainty.
An alternative would be for PIR to amend its registry-registrar agreements to include price controls in perpetuity.
As for the domain industry looking bad? That ship has sailed. Thanks, ICANN.
MoGreen says
Hmm , this makes the domain industry look bad and sketchy , not sure about that, lets discuss this at our next meeting at a resort in Cancun
Charles says
>Even if ICANN doesn’t like the deal,
>there’s not much it can do to stop it.
Bureaucracies, by their nature, always have ways to get what they want, even if it is just a string of fear based “poison pill” statements.
It is their relative silence and incestuousness that is most important, and telling of what is to come.
JZ says
“I believe that the registry operator for .org and other legacy extensions should be looked at as a steward for the extension, not the owner of the extension.”
I couldn’t agree more
JarJar says
I couldn’t agree more.
The legacy registry operators should be curators of the extension. Not monopolists. And when a registry even hints at wanting unlimited pricing, ICANN should say “nope, if that is how you are going to treat this public resource, we are finding a different suitor to take care of this extension, for which you did not create, you do not own and is not yours. This is a public resource that belongs to mankind, not to one monopolist registry who only cares about profit.”
Unfortunately ICANN has done just about everything possible to totally trash the entire DNS.
It is a true tragedy what is happening to the Internet. In my opinion, this is 100% ICANN’s fault. The crazy thing is everyone sees it and knows it, but ICANN just chugs along at it’s own monopolist-creating/protecting pace … handing out no-bid contracts, then allowing unlimited price increases. What is next? Ethos and Verisign wanting to reserve premium domains and charge different prices for premium domains? Oh wait, ICANN already approved that with O.com. The next steps are already in place and unfolding.
This is so terribly wrong that the registries are taking over and doing whatever they want, and ICANN back-door negotiations allow these things and THEN asks for public comment to just ignore it all. What an incredible mess!!!
Jon Schultz says
Excellent article, thank you. I’m not too concerned about the price of .org domains going up uniformly, but if the renewal price of domains like Insurance.org and RedCross.org were to suddenly be raised to $100,000 per year, for example, that would be problematic. I would like to see Ethos publicly guarantee it will not do anything along those lines and will not sell the registry to any company which does not also guarantee it won’t happen.
Charles says
> which does not also guarantee it won’t happen.
That would be a private contract.
What is the penalty if it is not followed? And if not followed, who is going to hold them accountable? …. Especially after the seller’s bank account balance just had a nice large increase …..
This is the entire basis of government control of monopolies. ICANN, through its new supranational position, just ended that control.
Tevye says
If the registries own the extension, then using that logic Verisign, as “owner” of Dot Com. is probably worth a trillion dollars in market value. Why is Apple with their little phones and electronic doodads worth more than the company that owns Dot Com, which is used around the world and practically represents Internet commerce. Verisign is copartners with every business in the world. Warren Buffett is hip to their virtual monopoly status. There is no replacement for Dot Com. So, if you give Dot Org to one private entity – Ethos Capital, you are saying you give all the brand value in Dot Com to one private company – Verisign.
Andrew Allemann says
Oh, they’ve already given .com to Verisign. The only thing that keeps it from being worth more than the $25 billion the market values it at is the U.S. maintaining some price controls.
Brad Mugford says
It took a corrupt organization like ICANN and a sellout organization like ISOC to allow this to happen.
With all the ICANN insiders involved I feel like this has been in the works for awhile. The timing is just too convenient.
Well done guys!
Brad
Mark Thorpe says
Well said and true.
Tevye says
So is the domain industry now the wild west where the most powerful organizations get what they want and the “governing” body rubber-stamps their contracts, deflects criticism on their behalf, and travels the world for “important” meetings while consumers pay for all this from their own pockets?
What is your opinion?
John says
Yes. Wild West without any oversight.
ICANN hands out no-bid monopoly contracts – which exclude all forms of competition. Each of ICANN’s outsourced TLD contracts contain the presumptive right of renewal.
United States Department of Justice specifically warned ICANN against this – and told ICANN it should put its contracts out for public tender at the end of each term so consumers can realize the benefits of competition and competitive bidding.
ICANN has ignored this extremely important advice. ICANN is moving in its own direction.
Now you have ICANN telling the world it is not a regulator and it does not want to price regulate anymore. Despite the fact that ICANN is a regulator and it has engaged in price regulation.
Thus, no force is in place to discipline TLD pricing. Now going forward, Ethos Capital can choose to price its TLD’s however it chooses because ICANN removed ALL pricing caps in the .ORG domain extension.
So no competitive bidding (monopoly contracts which last forever) and ICANN removing pricing caps (for consumer protection.)
ICANN is now telling the world it is no longer a price regulator.
No mater how you look at this – it is bad.
ICANN continues to facilitate total market failure in the DNS.
United States Department of Antitrust said ICANN does not have Antitrust immunity.
United States Department of Antitrust also said Verisign does not have Antitrust immunity.
And I’m almost certain PIR does not either
Charles says
>United States Department of Antitrust said
>ICANN does not have Antitrust immunity.
What court deals with supranational organizations?
>United States Department of Antitrust also said
>Verisign does not have Antitrust immunity.
What happens which “China” buys Verisign?
joesaba2014 says
Hi Andrew
Everything you’ve written in relation to ORG and what you write again today, is like the cat that wants to bite its tail.
When you have seen or read that all websites (.ORG) are non-profit, we all know that this has never existed, it is very nice to see it written on your billboards but the reality is different and where money moves, there is encouragement profit.
ICANN know what it is and what it is for, the first keyword is: Internet, what comes next are empty words.
Everything was prepared from its beginnings from 1994 to 1999 is like any electronic and technological service that surpasses and many marvel at seeing the progress and only have the view but not the head to think that there will be behind this window.
I do not remember the keywords in English that write on Yahoo in 1996 from our computer with Internet at work, the click and the first result was a website of a US Nuclear Power Plant, we got scared and turned off the internet.
With the years the fashions change, now it is the moment of this market of dominance and Domaining will continue the same, although it may become more select than now, according to the prices of the increases of the extensions COM and ORG and many more surely.
If this happens, I will try to sell all the domains and enduring the best ones with long-term renewal records. I have several for the space and orbital future that will be necessary for travelers, insurance, food ……… ……..
At my retirement age, I will change and look for a space to write what I have always liked science and its amazing systems that I met from visionary writers of the US (All edited in the US) when I was 16 until 19 years old, I have always said that these books were my best teachers.
So starting with two projects of Artificial Intelligence and Virtual Reality from 1996 to 2002 at the Polytechnic University of Barcelona, Spain (EU) the virtual clothing provider has expired was an error, more than 95% of people like myself buy clothes for Internet without a provider, it will only be viable if it is custom clothing.
The virtual assistant has not yet given everything we create. It is an illusion to contribute to knowing more about what is behind each window without harming and without bad surprises.
John says
A number of good points here which I’m glad you included.
None of it could ever have happened under continued US oversight, because it could not have been done under the radar as it was and could not have been “politically feasible” even if people here wanted to push it through.
The move from public trust to ownership is pure evil and corruption.
Look to biblical prophecy. These developments are consistent with the final book of the Bible and the common understanding among the biblically literate that prophecy pertaining to the final days of this age of evil in which we live are marked by extreme inequality between rich and poor. These latest developments contribute to and seed that inequality trend on a global scale. As Andrew said, domain names have always been a great “equalizer,” echoing my thoughts exactly, but this is a radical departure from the kind of affordable opportunity people in the developed world enjoyed till now. It’s the beginning of the end right now.
168 says
Sorry for this to be long.
just not seeing a continuity of facts or statements made regarding .org and the players.
All this specspit and fear mongering over price controls yet don’t see anyone dropping .org domains in protest or to make available to non- profits for reg. fee.
Don’t see resellers offering .org at cost.
Only some can profit from .org and not others? seriously?
Certainty? – Don’t trust market controls ?
The market will decide price.
So the price is controlled. History shows that can be modified at anytime. That’s certainty.
It is quite common for Board members of any type to become advisors according to their expertise.
Would anyone here hire an advisor that doesn’t have specific knowledge of a topic of interest?
I doubt it.
As an advisor would you work for free? No.
Is there anything known about any previous board member that would lend credibility to the specspit of a dirty deal?
Anyone?
According to Mike Goodwin,
ISOC was conflicted between operating the business of .org and ISOC operating in a sustainable way.
He has also stated, the different proposals -(plural), to purchase PIR came around july/aug. suggesting Ethos wasn’t the only proposal and more people were aware than what has been publically disclosed.
Walid Al Saqaf has aptly stated,
.org is not obliged to be a not for profit.
No one has suggested any non-profit that has a budget to grow the .org extension AND support ISOC
Anyone?
The most recently formed .coop
that wants .org to be “handed” to them is so incredibly connected on many levels I find it hard to believe
1. No previous awareness
2. they have committed the capital necessary to support the growth of .org AND the sustainability of ISOC,
The last hour attempt to show “We care” about .org only and not ISOC could also be viewed as suspect as others involved also know decisions aren’t made on merit alone.
PCH ? securing it’s own future?
Haven’t found the offer published
for public comment.
Transparency?
I don’t know of any for profit entity that has alienated it’s clientel by dramatically raising it’s price and survived.
Most business’s know it’s more cost efficient and profitable to cater to current clients than to obtain new ones in part because referrals are free,
Add ons relatively effortless.
Reputation is critical.
Really? Anyone truly believe Ethos or anyone else would take a different route?
Price isn’t the only concern for non- profits.
Certainty is rare
Support and promotion are equally important, something few if any non-profit has the abiity to execute at the scale needed for .org to thrive in addition to ongoing support of the ISOC.
Haven’t seen any concern for ISOC
as a non-profit. Why not?
The only control ICANN has to prevent this action is : if there is a change related to any critical function. According to what’s been released, there isn’t any change.
ICANN stated thier review will be
in the context of 7.5 of the .org contract.
At the end it states: if ICANN fails to expresly provide or with hold it’s consent to any assignment direct or indirect change of control, ICANN shall be deemed to have consented.
(30 days after responses to RFI received)
According to my calcs. the very latest date to comment is January 24th.
I would be suprised if ICANN comments at all.
If Ethos fails to act in the best interest of non- profits, the non-profits will together, rise with a lot more backbone than the .002% speculating and fear mongering.
If Ethos does act as promised
specspitters and fear mongers benifit too.
Look forward to the accolades at least equal to the current outrage.
Look forward to see who supports Ethos by way of regs. and resales once te deal goes thru.
I personally won’t be suportive in any way until the first year report comes out.
If Ethos or any operator makes any change related to any critical function that’s when ICANN has an obligation according to the contracts. Nothing more.
According to the original president of ICANN Michael Roberts, now a part of the new .coop,
“ICANN is not in the business of making value judgements and it’s never a process in which absolute or relative merit of a particular application was determinative.”
Yet that is what they are asking ICANN to do. Hand it over.
So there is at least 10 days left to demand .coop transparency so we can all jump in and insist ICANN make an exception to an obligation that doesn’t exist.
Can’t support this effort without transparency either. They have time, resources, yet nothing ?
Anyone?
toung in cheek interesting twist in the story of evil profiteer with absolutely no alturistic intent because the public has already decided that narrative via specspit and fear mongering vs .coop dogooder because they’re special and therefore entitled to have it handed to them on a golden platter no questions asked, in the end, the entitled dogooders become the evil profiteers by simply “maintaining” the stats quo without growth of .org or support of ISOC while approving thier own compensation. Sweet deal.
Cynical? Just a bit.;) At least until the details are public.
Cheers
Rohani says
If no price caps on .org, better go with the .com
Randall Cooper says
It’s a hard pill to swallow on this deal since there are many unanswered questions and there are many hands in the pot. I think in time we will learn but this is an interesting non-the less scheme we have unfolding in front of us. I believe we will see a few landscape changes when this deal goes though and when it goes for-profit I think the registration fee will go up a bit. This opens the doors depending on if the ICANN steps in or not.
If they do not step in then its possible we see more deals like this, if they do step in then we may see some agreements change in the future or regisrars sell quick to get out of the mess it could create. I do not think either is viable but This has more unanswered questions then it does answers at this point. We as a whole group domainers do not have any answers as to who would be the overseer/board of .org after the sale…..
Darrell Jividen says
If it ain’t broke don’t fix it! How we’ve managed to even get to the point that this can happen is deplorable. Same with net neutrality, leave it alone! As much as I don’t trust the gov it was better under singular direction. If you want something different BUILD it, don’t muck with the biggest human achievement in regards to equality, education, and opportunity to ever exist.
The internet I knew growing up is $dead$.
Rickard says
The Internet community don’t have to accept this. Every system that resolves domains can be configured to look up domain names somewhere else. All we need is a trustworthy party to step up and say; hey, you know what, we’re serving an alternate register for .org. Configure your systems to use our lookup servers instead. And then they should only charge the maintenance fee for the register from people registering/renrewing with them.
Johnny says
I don’t know what’s worse ICANN and the price cap removals or the cybersquatters who have created the market for overpriced domains.
joesaba2014 says
This ORG is a comfortable conflict of economic interests in its journey through all the abbreviations concerned leaves a briefcase with a lot of money and as always happens those who used to profit equally and we believed that ORG was without spirit of Profit, this in a market where speculation in supply and economic demand has never been nor will it be without Profit. All websites and blog with ORG are lucrative and whoever says that it is not that he is a millionaire and nobody knows.
The California Attorney General is the only one who can stop this price I ask?