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Former ICANN CEO Rod Beckstrom commenting on .Org deal

by — Policy & Law 8 Comments

Beckstrom posed arguments during forum last week.

On February 11, American University Washington College of Law held a program about the sale of .Org to private equity company Ethos Capital.

Former ICANN CEO Rod Beckstrom was in attendance, and he posed some good questions about the transaction. The video below starts playing at the point Beckstrom begins commenting:

After hearing of the deal, Beckstrom says, “I felt incredibly sad… I was just shocked. Not just because this non-profit asset was being monetized, but because of how it was handled.”

Beckstrom posed several questions, including the valuation of the deal and if ISOC/PIR are really operating in the public benefit, as required of non-profits.

Ethos adds legally-binding provisions to try to save .Org deal

by — Policy & Law 15 Comments

8-year price cap, censorship and data controls would be baked into registry agreement amendment.

Logo for .org domain, featuring a blue circle with white letters spelling ORG

Ethos Capital, the company that is trying to acquire the .Org registry, took a big step today to try to push it over the finish line. It agreed to add a Public Interest Commitment (PIC) (pdf) to the registry agreement with ICANN that would enforce some of the promises it has made publicly.

The move comes after ICANN sent a letter to Internet Society, which current controls .org, making it clear that ICANN believes it has the power to nix the deal on grounds beyond security and stability.

Among the commitments is to cap the .org price for the first eight years. The price increase will be capped at 10% per year on average, and now “on average” has some teeth. It can’t be front-loaded, although the trigger date will be backdated to June 2019.

The current wholesale price of a .org domain is $9.93. That means that, after eight years, the price could be around $21, more than double the current price.

After eight years, PIR could change the price as much as it wants. (That might be about the time Ethos decides to exit the business.)

Before the Ethos announcement, Public Interest Registry said it had no current plans to increase the price of .org domain names.

Additionally, the .Org Stewardship Council will have veto authority on changes to .org policies around censorship and freedom of expression, as well as the use of .org registrant and user data.

PIR will also establish a Community Enablement Fund to support initiatives benefitting .org registrants. It will contribute $10 million to this fund during the remaining lift of the current registry agreement. That’s about $1 million a year.

ICANN Board quizzes Internet Society over .Org sale

by — Policy & Law 14 Comments

Board questions how the deal is in the spirit of the original decision to assign .org contract to Internet Society.

Logo for .org domain, featuring a blue circle with white letters spelling ORG

ICANN’s Board of Directors is asking Internet Society (ISOC) pointed questions about the proposed sale of Public Interest Registry, which operates .org, to private equity company Ethos Capital.

Maarten Botterman, chair of the board, sent a letter (pdf) to Gonzalo Camarillo, chair of the ISOC Board of Trustees, on February 13. The letter asks 18 questions, and many of them relate to how .org will be run as it relates to Internet Society’s proposal when it was awarded the domain extension.

Botterman wrote:

When ISOC applied for and was awarded the right to manage .ORG in 2002, ISOC made commitments to the Internet community on how it would differentiate and uphold the
unique purpose of the .ORG TLD. ICANN awarded the management of the .ORG registry with the belief that ISOC was uniquely positioned to live up to these commitments for the long
run. These commitments have been maintained since that 2002 award, and ICANN has heard loud and clear that the community of .ORG registrants is concerned that these
commitments already have been abandoned or will be abandoned if the transfer to Ethos Capital is completed. ICANN has also heard concerns raised that the .ORG community was
not consulted by ISOC as part of the ISOC’s consideration of the proposed transaction.

That ICANN’s Board is considering the transaction and the spirit of the original deal to assign ISOC the .org contract is an interesting development.

Among the more interesting questions the board has asked ISOC:

  • There have been public statements that ISOC received multiple bids for the sale of PIR. Did ISOC solicit any responses from bidders as to how each would continue to uphold any/all of the 2002 Commitments?
  • What has Ethos Capital committed to do in regard to the 2002 Commitments? And are such commitments included in any of the transaction documents, organization documents or elsewhere in a manner that insures they will be sustained and enforceable by .ORG registrants or others in the future? [emphasis added]
  • We understand that ISOC received a written proposal from Ethos Capital in September 2019. Were any prior proposals made or prior discussions had with Ethos Capital or any of their representatives or advisors? If yes, when did those discussions occur? [This gets to the issue of if discussions were held in conjunction with ICANN dropping price caps on the .org domain.]
  • Please describe how, in deciding to sell PIR to Ethos Capital, ISOC balanced the interests of the .ORG community with ISOC’s interest in achieving a sizeable endowment to support ISOC’s future operations separate from PIR and .ORG?
  • Given the public reaction to the announced sale of PIR, will ISOC commit to completing any additional engagement with the .ORG community prior to consummating the proposed transaction with Ethos Capital? [PIR has pushed back on ICANN’s request for more time to evaluate the deal. Now ICANN is effectively going directly to ISOC with this request and a request to engage with the community.]

ICANN’s board has requested that ISOC respond by February 24.

What you really need to know about the sale of .Org to private equity

by — Policy & Law 5 Comments

Let’s cut through the clutter and falsehoods.

Logo for .org domain, featuring a blue circle with white letters spelling ORGA lot has been said and written about Internet Society’s (ISOC) sale of Public Interest Registry, the group that runs .org, to Ethos Capital. Some of it is true, some of it is false, and some of it is up to interpretation. This goes both ways; ISOC and Ethos have some bad (or at least misleading) talking points, but much of the fuss on the internet is wrong or based on questionable data.

Here’s what you need to know.

The deal solidifies ISOC’s financial future

It’s hard to debate that this deal doesn’t make sense for ISOC, at least financially. It’s trading in an annual revenue stream for an endowment. As long as it has a reasonable way to invest that endowment, it should be able to generate steady cash flow going forward.

While the domain name business has been on a steady, mostly upward trajectory for .org, there is certainly risk that this could change in the future. I understand why ISOC views this as a good financial move for its organization. I’m sure it knew it would get some pushback, but it decided that the opportunity was too good to pass up.

PIR is not cash-strapped and and can easily reinvest in .org

One of ISOC’s and Ethos’ talking points is that, because PIR has to give its profits to ISOC, it is cash-strapped and can’t reinvest in the registry or new products and services.

There are two questions at play here: (1) is .org declining? and (2) is PIR cash-strapped? Click here to continue reading…

Guest editorial: ISOC’s broken funding model and profligate spending

by — Policy & Law 15 Comments

[Editor’s note: The following is a guest editorial from Nat Cohen, who provides interesting details about the birth of Public Interest Registry and its role with Internet Society. While I don’t necessarily agree with all of the conclusions, I think it’s a good contribution to current discussions about the sale of Public Interest Registry to Ethos Capital.]

Blue background with white quote box and the words "Guest Editorial"

The Internet Society (“ISOC”) generates tens of millions of dollars for itself each year through its control of the .org registry, Public Interest Registry (“PIR”), which makes money each time a .org domain name is registered or renewed.  Running .org has become so lucrative that PIR is now a target for acquisition by private equity firm Ethos Capital.  Much of ISOC’s revenue comes from nonprofit organizations[1] which predominantly use .org domain names.[2]  As a consequence, funds needed by those nonprofit organizations to pursue their own worthwhile missions are transferred to ISOC.  This raises the question as to whether ISOC’s control over .org serves the public benefit.

The way the nonprofit funding model usually works is that the nonprofit does good work and raises funds from contributors who voluntarily wish to support the mission of the nonprofit.  A nonprofit, such as Doctors Without Borders, must demonstrate that it is a good steward of donated funds in order to be able to attract continued contributions.

In contrast, ISOC uses its modest financial support of the Internet Engineering Task Force (“IETF”), where most of the actual work is carried out by “thousands of volunteers from around the world”,[3] to justify fat compensation packages for its own executives, while imposing a $70 million upcharge on its base of .org registrants, and enjoying control of a public resource valued at over a billion dollars.  The funds it extracts are not contributed voluntarily but come from compelled payments from those wishing to use .org domain names.[4]  It spends vast sums of money without needing to justify that the money is being put to a worthwhile or efficient purpose and with no accountability to discipline its spending.

ISOC’s Purpose and its Profligate Spending

ISOC’s primary mission is to support the modest funding needs of the IETF.[5] The IETF is an Internet standards body made up of thousands of people volunteering their time and effort[6] to accomplish the IETF’s goal of “making the Internet work better.”[7] The IETF conducts three meetings per year, runs mailing lists and publishes Internet standards documents.  ISOC contributed $3 million to the IETF in 2018,[8] yet most of that was merely passing along outside contributions earmarked[9] for the IETF.[10] Click here to continue reading…