ICANN wants more information about ownership and debt.
ICANN has asked (pdf) Public Interest Registry (PIR), which manages .org, for more information about its proposed acquisition by Ethos Capital.
PIR has responded to one of the requests by updating its Public Interest Commitments.
But ICANN included two other key concerns in an April 3 letter it sent to PIR. It’s unclear if PIR has responded to these. The information would probably be deemed confidential and not be published. However, ICANN’s request notes that is has requested some of the information previously and not received a response. It’s asking PIR to answer each question individually.
The questions cover two items: who will actually own PIR and how it will pay off the $360 million loan it will be saddled with post-acquisition.
On the ownership issue, ICANN wants to understand who is actually behind the myriad of entities involved in the transaction. It might be curious if former CEO Fadi Chehade will have an ownership position.
On the debt side, it seems that ICANN wants to make sure PIR doesn’t go belly up under the weight of the debt. I think PIR will be fine, or at least its investors will. With the ability to raise prices 10% a year for the first eight years and unlimited after that, it will be printing money.
That said, financial troubles could lead to a takeover handled by courts, potentially restricting ICANN’s role in the process. ICANN’s registry contract with PIR for .org says ICANN can terminate the contract if the registry goes into bankruptcy. But it probably doesn’t want to test how this would work in practice.
Block the .ORG deal, ICANN. Do the job you’re supposed to do. Be smart and do the right thing.
Be prepared for a major backlash and lawsuits if you do approve the deal.
“ICANN can terminate the contract if the registry goes into bankruptcy.”
If there is a contract and an entity files bankruptcy (if in U.S Bankruptcy Court), it is up to the bankruptcy judge to decide if a contract is cancelled. If the contract has value, the creditors’ committee will have a lot to say about any cancellation of a valuable contract.
Former ICANN CEO Fadi Chehade knows ICANN has its entire competition mandate wrong.
He is capitalizing on this opportunity.
Fadi is well aware ICANN handed out perpetual monopolies which will never face any competition. Fadi is aware PIR has a monopoly on the .org namespace (just like Verisign has a monopoly on the .com namespace.) Fadi is aware that PIR has unconstrained pricing power on its captive base of users. Fadi is aware that there is no force in place to discipline pricing from the monopoly operator.
This is why Fadi Chehade quit ICANN on his own – went to Abry partners – and acquired Donuts, the largest gTLD operator. After the acquisition, Donuts raised wholesale prices on almost all of its TLD’s across the board. Despite the fact that years earlier, Donuts promised never to raise prices.
Shortly thereafter, one of Fadi’s subordinates (Jon Nevett) left the company and became the CEO of PIR. Keep in mind that Jon Nevett worked for Fadi for years.
So Fadi put this deal together. Fadi realized PIR – a monopoly with unconstrained pricing power – was the dream opportunity for any private equity firm.
Now you have ICANN and the registries (PIR and Verisign) telling everyone that they operate in a “highly competitive” environment. But this is not true – the United States Department of Justice Antitrust division concluded that TLD operators face no competition – because domains are complements, not substitutes for one another.
Past ICANN CEO’s and board members have recognized this very issue. As ICANN Founding CEO and Director 1998 & ISOC Founding Trustee and Director 1991 – Mike Roberts – said a few weeks ago:
“””The chartering goals include “promote competition.” As everyone knows, ICANN has actually been handing out monopoly licenses with no price constraints on the dubious theory that many monopolies will promote lower prices and provide the benefits of competition to the Internet community. That hasn’t happened, so what to do?””””
When discussing Conflicts of Interest, prior ICANN CEO Rod Backstrom said the following:
“”””At the opening ceremony for ICANN 43 in San Jose, Costa Rica, Rod Beckstrom criticized the Board and NomCom for their insularity. He said, “ICANN must be able to act for the public good while placing commercial and financial interests in the appropriate context. How can it do this if all top leadership is from the very domain name industry it is supposed to coordinate independently?” He claimed that the NomCom’s structure poses a significant threat to ICANN, and stated that the Committee, which appoints half of the Board’s voting Directors, should be “free of conflicts,” and should appoint candidates that are “financially independent of the domain name industry.” He said that ideally, a fully independent and non-conflicted NomCom should be in place before the nominations for the next round of Board appointments begins.””””
ICANN board member Karl Auerbach said:
“””ICANN has created a situation in which each top level domain registrar has a perpetual right to renew its monopoly over its respective top level domains. In exchange for that perpetual right of renewal, ICANN should require these top level domain operators be paid a registration fee that is clearly based on the actual cost of providing that service, plus a reasonable profit. This would make far more sense than than the artificially pegged and outrageously inflated registry fees that are place today.”””
ICANN board member Michael D. Palage pointed out:
“”””Among the greatest sources of concern has been the failure of ICANN staff to issue a complete public response to the ICANN Board’s October 2006 demand that ICANN Staff: commission an independent study by a reputable economic consulting firm or organization to deliver findings on economic questions relating to the domain registration market, such as: 1) whether the domain registration market is one market or whether each TLD functions as a separate market, 2) whether registrations in different TLDs are substitutable, 3) what are the effects on consumer and pricing behavior of the switching costs involved in moving from one TLD to another, 4) what is the effect of the market structure and pricing on new TLD entrants, 5) and whether there are other markets with similar issues, and if so how are these issues addressed and by whom? —— To date, no proper “study”—based upon real facts and not the mere opinion of “experts” retained by ICANN—has been released.””””
But Fadi Chehade decided to take a different path. After he left ICANN – he went running straight to private equity and to the banks – for his own personal financial gain.
How much ownership does Fadi hold and how many millions does he stand to make? On a worldwide public resource…..
Today, I rec’d an email from a major democratic fund raiser organization. Once, they are involved everyone on the Hill (U.S. Congress) will take notice.
I realize much of this info is known to us. Here are parts of the email. –
“Nonprofit groups like the Red Cross, Feed the Children, and United Way are on the front lines of the coronavirus, working to keep people healthy, fed, and housed.
But on April 20, the websites of critical nonprofits like those—and Demand Progress—could go dark.
On that date, the .org domain is poised to be sold off to a private-equity firm to the tune of $1.1 billion.1 If the deal goes through, the firm could charge whatever it wants to nonprofits using .org sites, and it could mean censorship of every nonprofit in the world.
Currently, a nonprofit entity called the Public Interest Registry controls all .org addresses. But the Internet Corporation for Assigned Names and Numbers is poised to sell that nonprofit to equity firm Ethos Capital for a pretty penny.
Selling the .org domain to a profit-driven firm is bad, bad news for any nonprofit that depends on the internet to reach people—which is especially urgent in a time of mass quarantine.
Once Ethos Capital owns the .org domain, it could censor domains to satisfy corporate conglomerates or authoritarian regimes, as other domains have done in the past. It could fail to maintain the domain properly, causing critical nonprofit websites to malfunction.2
And it could charge nonprofits outrageous fees to renew their web addresses. Case in point: Our domain name, DemandProgress.org, costs about $10 per year. If Ethos Capital raised that to $10,000 or $100,000, we wouldn’t be able to operate.
Thanks to public pressure, the Internet Corporation for Assigned Names and Numbers delayed the sale by two months, moving it from mid February to April 20. But in the midst of a global public-health crisis, there’s a danger that the pending sale could be forgotten. We can’t let that happen.”