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Selling off PIR, did ISOC just throw .org registrants under a bus?

Kevin Murphy, November 13, 2019, 19:10:50 (UTC), Domain Registries

Public Interest Registry is to lose its not-for-profit status, dramatically increasing the chances of .org price increases, under an acquisition deal announced this evening.
The Internet Society is selling PIR to a brand-new private investment firm called Ethos Capital Investors, which is run by two people with ties to the domain industry.
PIR CEO Jon Nevett told DI today that the company is no longer a non-profit following the transaction, and that ISOC will no longer receive a slice of every .org registration fee.
There’s a lot to unpick here.
The biggest concern is arguably that the deal substantially increases risk for .org registrants.
PIR was recently, and very controversially, granted the right to raise its prices from $9.93 per year to whatever-the-hell-it-wants per year, due to a renegotiation of its ICANN contract that scrapped its longstanding 10%-per-year price increase caps.
Many domain investors and non-profits called for the caps to remain. Uncontrolled pricing could lead to smaller charities, for example, being priced out of their decades-held domains, it was claimed.
But PIR repeatedly assured concerned registrants that it was “a mission driven non-profit registry and currently has no specific plans for any price changes”.
That tune has changed, if only a little, today. Nevett told us:

Our goal has always been to make .ORG accessible and reasonably priced — and that will continue under our new ownership. PIR has made reasonable decisions on price in the past, and we will uphold this spirit going forward. We would never make dramatic price increases as we know it would harm our registrants, as well as our registrars.

PIR also says it plans to establish an advisory council and fund to ensure its founding principles are upheld, and to apply for “B Corporation” certification.
B Corp is a private program run by a non-profit called B Lab that certifies companies that meet certain social, environmental and transparency standards, but it has no legal recognition in, for example, the US tax code.
Nevett told us today that he does not know how long ISOC was negotiating the sale, but that neither PIR nor ICANN knew of it during their contract talks.
We know very little about the new owner. Its web site, which appears to have been created very recently, merely provides bios of its two principals.
These are founder and CEO Erik Brooks, who this year quit the private equity firm Abry Partners after 20 years.
Abry, you may recall, is the company that hired former ICANN CEO Fadi Chehade in 2016 and gobbled up new gTLD registry Donuts in September last year.
His second is Nora Abusitta-Ouri, named as “chief purpose officer”, who’s apparently tasked with overseeing the moral “ethos” of the company’s investments.
Abusitta-Ouri is a former ICANN staffer who most recently held the role of senior VP for development and public responsibility programs until her 2016 departure. She’s also executive director of the Digital Ethos Foundation.
In short, based on what little information is publicly available, it appears that Ethos was set up purely for the purpose of acquiring PIR. It’s not at all clear where the money to fund the deal is coming from.
The acquisition price has not been disclosed, but given that PIR was grossing over $90 million a year at the last count, I doubt Brooks and Abusitta-Ouri are paying out of their own pockets.
Whoever’s backing this is going to want a return, and the best way to quickly soup up PIR’s growth would be to take advantage of its newfound ability to raise .org prices arbitrarily.
More than half of PIR’s revenue before today — close to $50 million a year — was handed directly to ISOC, to fund its capacity-building and education projects worldwide.
That’s all over now, which begs the question of how it will continue to fund itself in future. My guess is that, now that it has hundreds of millions of dollars in the bank, and is talking about an “endowment”, it’s going to stash its windfall in high-interest accounts and live off that income.
Meanwhile, whatever assurances .org registrants had that PIR was going to remain a non-profit concern have been utterly trashed.
UPDATE: Thanks to domain lawyer John Berryhill for pointing out in the comments that the domain name ethoscapital.org was registered by Abry’s Fadi Chehadé on May 7 this year. Additionally, a commenter on Domain Name Wire tonight noted that a company called Ethos Capital LLC was formed in Delaware on May 14, a day after ICANN published its summary of the .org contract renewal’s public comment period.

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Comments (12)

  1. Rubens Kuhl says:
    November 13, 2019 at 7:19 pm

    Removal of price caps is not only about increasing wholesale prices, but could also be about differentiated pricing, both in premiums they could still hold (1 and 2 char, for instance) and possibly a dropcatch feed.

    Reply
  2. John Berryhill says:
    November 13, 2019 at 7:39 pm

    Domain Name: ethoscapital.org
    Creation Date: 2019-05-07T14:42:38Z
    Registrant Name: fadi chehade

    Reply
  3. John Laprise says:
    November 13, 2019 at 7:52 pm

    I did not see this one coming. I defended the ICANN contract change.
    If Ethos Capital Investors abuses it’s pricing freedom, I’ll be complaining.
    As it is, ISOC should be ashamed. It might secure their financial future by sacrificing the community.

    Reply
    • Brad Mugford says:
      November 13, 2019 at 7:56 pm

      “As it is, ISOC should be ashamed. It might secure their financial future by sacrificing the community.”
      I am sure Vint Cerf would be so proud…
      Brad

      Reply
    • garp says:
      November 13, 2019 at 8:46 pm

      “I did not see this one coming. I defended the ICANN contract change.”
      You did not see this coming? Maybe you should have.
      “If Ethos Capital Investors abuses it’s pricing freedom, I’ll be complaining.”
      Who will you be complaining to? The blog comments section? What will that do? Posting blog comments will get nothing done.
      If you really don’t like it, file a lawsuit, start a class action, hire an investigator. That might actually produce results.

      Reply
  4. Charles says:
    November 14, 2019 at 3:12 am

    During the public comment period, Jon Nevett made the following erroneous statement:
    “we cannot dramatically increase prices for .ORG, as we recognize and understand that both our .ORG end users and our .ORG registrars would turn away from .ORG.”
    This statement by PIR is unequivocally wrong.
    Jon made the point that both .ORG “end users” and “registrars” would turn away from .ORG
    —With regards to .ORG end users or “registrants”: Registrants are, for all practical purposes, entrenched in their existing domain names. It is virtually impossible for an organization to switch away from .org to a different domain because they are “locked-in” to their domain name (search engine rankings, email systems, no way to recall offline media/advertising and printed business cards and all of the lost branding, goodwill, no way to update browser bookmarks, etc.) Furthermore, it is a tedious process to switch, as domain names are hard-coded into websites and databases – require planning and coordination across different departments, sometimes with third-party contracted firms, and likely involve updating thousands or more lines of website code.
    In the few cases where registrants have switched domain names, they are forced to maintain their existing domain name for search engine redirects and to make sure old emails continue to be received and don’t disappear into a black hole. There is no way to port or forward existing email without continuing to maintain the old domain registration (and paying required fees.) Registrants are simply not willing to risk giving up access to future email correspondence that originate from older emails when users hit the “reply” button. Think of all of those emails you have sent out on the past – to hundreds of contacts – sitting in inboxes. Any reply that happens in the future will not be delivered – and lost forever.
    —With regards to “registrars”: The lock-in effect is even more significant. It is enormous. Registrars have existing customers which registered .org domains (most from a very long time ago.) Each of these customers is required to renew domains annually to maintain ownership. If registrars stopped offering .org registration or renewal services – it would cause a major disruption with all of its .org customers. Imagine if GoDaddy informed its customers it was no longer offering .org registration or renewal services… Chaos!!! All of GoDaddy’s 3.8 million .org customers would be forced to transfer their domains to another registrar. Many domains would be lost and many customers would be unaware that they have to take special action or they will lose their domain name. This is a frightening customer issue. Can you imagine 3.8 million GoDaddy registrants scrambling to transfer their domains to another registrar? Many of these customers have their domains on auto-renew – so imagine the frustration when they find out that they lost their domain because it did not auto renew – because GoDaddy no longer offers this service! Therefore, it is impossible for registrars to stop offering .ORG registration services. IMPOSSIBLE. Registrars are held hostage to registries as they are the sole sourced TLD provider.
    Furthermore, because of .ORG’s longstanding history as being established with non-profits and organizations and being one of the true legacy TLD’s that launched back in 1985, it has market power and is the ONLY feasible choice for non-profits and organizations. If organizations and charities used a domain extension other than .ORG – they will lack credibility and will lose that trust factor that is built into this extension. GoDaddy can’t turn away from this revenue source, as there are no practical substitutes. GoDaddy would permanently lose business from all non-profits and organizations throughout the world. The revenue is unreplaceable. It would be stupid for GoDaddy to not sell the third most popular domain extension in the world.
    Jon pushed the false narrative that domain names are interchangeable.

    Reply
  5. R. Funden says:
    November 14, 2019 at 11:54 am

    Can they raise prices on ICANN.ORG by classifying it as a premium name?

    Reply
    • Chris says:
      November 14, 2019 at 1:09 pm

      If I understand the ntld contracts correctly you can’t turn a non-premium domain into a premium domain. If you want a domain to fall into a different price category you would have to agree upon it at the moment of registration.
      Although if you register a premium domain, they you can be screwed over at random in the future.

      Reply
  6. John McCabe says:
    November 14, 2019 at 3:34 pm

    Oscar Wilde famously said, “We are all in the gutter, but some of us are looking at the stars.”
    It is unfortunate that this one legacy TLD, the one that has built itself a $90 million/year reputation as a home for religious and non-profit organizations (albeit not exclusively) online has come to this. Who knew that PIR was tarting it up for a life of commerce.
    “The failing New York Times” (which recently passed 10 million in paid circulation, thanks largely to the grandson of a whore-monger who calls it by that name) has today published So the internet didn’t turn out the way we hoped. Where do we go from here?
    Perfect timing. It’s always a good time “to see ourselves as others see us.”
    As for the grandson, he is purportedly on the buy-side in such transactions, and for the moment lives in a big white house. Progress? Well, happy endings may at least be presumed in such transactions.

    Reply
  7. Ben says:
    December 4, 2019 at 11:38 am

    A modest proposal après Swift. GoDaddy, Tucows and other respectable registrars: “Dear loyal customers, as of today we will no longer be offering new .org registrations. We will maintain your existing registrations until they expire. You may of course choose to transfer your domain elsewhere.”

    Reply

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