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I attempt to answer ICA’s questions about the “terrible blunder” .org acquisition

Kevin Murphy, November 19, 2019, 12:39:18 (UTC), Domain Policy

The Internet Commerce Association launched a withering attack on ICANN late last week, accusing the organization of a “terrible blunder” by lifting pricing restrictions on .org domain names.

As by now you’re no doubt aware, .org manager Public Interest Registry was acquired last week by a private equity firm with ties to ICANN’s former CEO, in a deal likely to have delivered hundreds of millions of dollars, if not more, to former owner the Internet Society.

The deal means PIR is now almost certain to exercise its newfound right to raise its prices arbitrarily, adding tens of millions to its annual top line at the expense of .org registrants.

While such a price increase is likely to have little impact on most registrants — an annual increase of even 100% would only add about $10 to the per-domain cost — it would certainly prove onerous to many of the high-volume domain investors ICA represents.

So ICA chief Zak Muscovitch whipped off a letter to ICANN (pdf) on Friday, demanding that ICANN use its contractual powers to terminate PIR’s registry agreement and put .org out for open tender. He wrote:

If you were led to believe that removing price caps on .Org domain names was a sound approach because the registry would remain in the hands of a nonprofit foundation, you have clearly been misled. If you were led to believe that despite being the effective owner of the .org registry, you were somehow forced to let your service providers tell you how much they can charge, instead of the other way around, you have been led astray. If you have been told that .Org does not have market power within the nonprofit sector, you have been led astray. If you have been told that competition from other gTLDs will constrain .org prices, you have been led astray.

I think the letter has about as much chance of working as an ice sculptor in hell, but Muscovitch does include a list of seven questions for ICANN that I’m going to attempt to answer to the best of my ability here.

First, he asks:

Were you aware whether ISOC was in talks to sell the registry when you approved the removal of the price caps?

I put the same question to PIR CEO Jon Nevett last week, and he told me: “I don’t know when the talks started with ISOC and the buyer, but neither ICANN nor PIR knew about it when finalizing the .ORG [Registry Agreement].”

I’ve no particular reason to believe he’s lying.

If ISOC was in such talks at that time, why was this material fact not disclosed to you by the registry operator, prior to you approving the renewal agreement?

The acquisition talks between ISOC and Ethos Capital certainly could have been going on prior to the .org contract being signed, which happened June 30 this year.

The main piece of evidence here is that Fadi Chehadé of private equity firm and presumed Ethos affiliate Abry Partners registered the domain ethoscapital.org on May 7, according to Whois records. A company of the same name was formed in Delaware a week later.

Given that Ethos appears to be an Abry vehicle set up purely to acquire PIR, it seems likely that talks were already underway at this point.

The domain ethoscapital.com, which Ethos is currently using as its primary, seems to have been acquired on the secondary market around August. The acquisition was announced November 13.

To Muscovitch’s question, though, I return to Nevett’s line that PIR knew nothing about the acquisition talks before the RA was finalized.

The RA was finalized and opened to public comment in March.

It’s quite possible Ethos and ISOC entered talks in the three months after the deal had been finalized but before it had been signed.

When did you first learn of the negotiations to sell the .Org registry?

An excellent question I’ve also posed but as yet have no answer to.

Did you base your decision to approve the removal of price caps, at least in part, on the expectation or belief that the registry would continue to be operated by a nonprofit organization with a public commitment to maintaining a stable pricing environment, instead of on behalf of a private equity firm whose objective is to maximize profits for its funders?

Cheekily, I’m going to take ICANN at its word and say the answer is “yes”.

One of the controversies concerning the .org renewal was that ICANN seemingly ignored thousands of comments calling for the retention of price caps.

This, ICANN has denied, saying that it “reviewed and evaluated” every comment.

Among the very few comments that weren’t outright condemnations of the decision to remove price caps were two nuanced, arguably ambivalent, analyses from two influential ICANN structures — the At-Large Advisory Committee and the Non-Commercial Stakeholders Group.

ALAC’s eight-page comment (pdf) was very much of the “on the one hand…” variety, but it paid special attention to ISOC’s public interest works when putting forward the view that uncapped pricing might be a good thing, noting (and quoting itself):

a significant portion of .ORG registration fees “are returned to serve the Internet community [through] redistribution of .org funds into the community by the Internet Society, to support Internet development.”… ISOC’s goals and priorities, while far broader than At-Large (and even ICANN), parallel those of At-Large and the interests of end-users. Many At-Large Structures are also ISOC Chapters, further demonstrating the commonality of interests.

NCSG, meanwhile, said in its comments (pdf) that price caps should remain, but increased from the 10%-per-year level. It acknowledged that some .org money flows into funding NCSG.

So there’s two influential groups, both with organizational and/or funding ties to ISOC, saying price increases may be a good thing because ISOC acts in the public interest.

And ICANN said it read and absorbed all the comments, so I’m cheekily going to say that yes, ICANN at least in part renewed the .org contract in the belief that PIR would continue to be a non-profit and act in the public interest.

Had you been aware of the planned sale of the .Org registry to a private equity firm, would you have treated the renewal of the .Org registry agreement and the removal of price caps as worthy of robust discussion and a vote by the Board, such that perhaps the terms of the agreement would have been modified?

I’m going to go out on a limb here and say hell, no. ICANN doesn’t want to be a pricing regulator, regardless of the registry operator, in my view. It’s only the US government that’s preventing it lifting price restrictions on .com, I reckon.

What involvement did your former CEO, Mr. Chehade and your former SVP, Ms. Abusitta-Ouri, have in the decision to employ the base gTLD registry agreement for legacy TLDs during their tenure, if any?

In Chehadé’s case, the answer is fairly clear. Even if he did not have a hands-on role in the decision to cajole legacy gTLD registries toward the 2012 agreement, it all happened on his watch so he bears ultimate responsibility.

It’s worth noting, perhaps, that most of the legacy gTLD agreements that migrated over to the new gTLD agreement’s standard language happened not only while Chehadé was at the helm, but also after he’d already accepted his new job at Abry.

He announced his early resignation in May 2015, telling the AFP at the time that he already had a job lined up in the commercial sector, but he declined to give specifics.

He’d probably made his mind up to quit some time before the announcement. He registered the domain name chehade.company, which he now uses for his investment vehicle Chehadé & Company, in the April.

He revealed he was joining Abry as senior advisor on digital strategy in August that year, but didn’t actually leave until March 2016.

During that interim, lame-duck period ICANN negotiated and signed (all in October 2015) renewals for 2003-round gTLDs .pro, .cat and .travel, all of which incorporated 2012 contract language related to, for example, the Uniform Rapid Suspension process.

Three months before Chehadé’s resignation announcement, ICANN signed a very similar deal with .jobs, the first time it had incorporated 2012 language into a legacy gTLD contract.

These contracts were all signed for ICANN not by Chehadé but by his long-time buddy, frequent co-worker and then-president of the Global Domains Division, Akram Atallah (who is now CEO of Donuts, which is owned by Abry).

Since Chehadé’s departure, ICANN has also taken the same contract renewal stance with TLDs including .xxx, .mobi, .museum and .aero.

By 2016 it had become standard operating practice at ICANN to nudge registries towards the 2012-round contract, as Atallah explained to then-ICA lead Phil Corwin at ICANN’s Hyderabad meeting in November 2016. Atallah stated (pdf):

So basically the negotiations are — the registries come and ask for something, and we tell them please adopt the new gTLD contract. And if they push back on it and they say they don’t want something, we can’t force them to take it. It’s a negotiation between two parties. And I think it’s within the remit of the corporation to negotiate its contracts. If the policy comes back and says that the URS is not something that we want to have as a policy, of course, we would support that.

As regards Nora Abusitta-Ouri, Ethos’s “chief purpose officer”, her former job title of “senior VP for development and public responsibility programs” suggests she had little to no involvement in gTLD contractual issues.

While her LinkedIn profile doesn’t mention it, she appears to have become chief engagement officer at Chehadé & Company after her stint at ICANN ended in July 2016.

What restrictions do you have in place with respect to cooling-off periods for former executives?

Fuck all, clearly.

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Comments (25)

  1. John Laprise says:

    As a former ALAC member who participated in the drafting of the ALAC statement and a supporter of the change in contractual terms, I can say with some confidence that At Large is pissed off. At Large, ICANN, and some ISOC staff were unaware of this transaction. Even during drafting, when the Consolidated Policy Working Group welcomed new members who were ostensibly there only to oppose the change in contractual terms, no one thought that ISOC was going to sell off .org. To my knowledge, no one suggested that.

    Non-profits live and die by the trust their members have in the organization. ISOC has done incalculable harm to its own reputation by this sell-out.

  2. Jay says:

    Icann needs to disclose all their personal domains! Now with whois block, we can’t easily dig up more of these conflicts of interest! Wouldn’t it be perfect if they could be getting their palms greased with ‘premium’ domains. There’s no oversight! Seems EVERYONE in this industry wants to be a damainer! Icann, registries and registars. They’re inept and twist rules to hide their corrupt and scams while trying to create a decent portfolio, one way or another. QUIT playing pricing games and spoiling OUR business because you all aren’t domainers and never will be FAKES. Show us those domains you got!

  3. As has often been the case, John Laprise is wrong as I personally pointed out how ISOC could sell PIR, directly on the At-Large CPWG Mailing List, see:

    https://mm.icann.org/pipermail/cpwg/2019-April/001149.html

    (where John Laprise was an active member)

    “As I noted in my own comments, nothing would stop ISOC/PIR from selling out to private equity, who could then take the heat for huge price increases, while ISOC/PIR walks away with an enormous multi-billion dollar endowment fund.”

    I felt compelled to leave the At-Large completely, after they made their statement which I vehemently opposed, as it evidenced capture.

    And as for John Laprise’s statement about “welcomed new members who were ostensibly there only to oppose the change in contractual terms”, I was in the At-Large well before the .org contract came up for discussion, e.g. I was on the mailing list in February 2019, talking about the EPDP on WHOIS, see:

    https://mm.icann.org/pipermail/cpwg/2019-February/000853.html

    (and was invited to the CPWG after being in the NARALO part of At-Large from July 2018) .org coming up for public comment only became known on March 18, 2019, and thus Mr. Laprise’s timeline doesn’t fit.

    Mr. Laprise, like many in the ICANN community, are “often wrong, but never in doubt.”

    With regards to Jay’s comments, we know from the Tina Dam lawsuit she was discussing business opportunities with a registry operator ***while she was employed with ICANN*** (see paragraphs 22 through 25 of the lawsuit, via

    https://domainnamewire.com/2019/09/13/tina-dam-sues-over-music-reveals-investment/

    How many other ICANN employees are negotiating business opportunities with current and/or prospective registry operators ****while still employed at ICANN****?

    • Kevin Murphy says:

      You certainly seem to have been more prescient than most when it comes to this acquisition.

      • Let me fix the that for you, Kevin:

        Original: You certainly seem to have been more prescient than most when it comes to this acquisition.

        Correct: You certainly are more prescient than most.

        🙂

        • Rubens Kuhl says:

          My favorite Kirikos premonition is about name collision. Now that Walter Mercado is dead, perhaps he want to inherit his legacy ? 😉

          • You’d have to provide more details/context (an exact citation), to be credible, Rubens.

            I recall being on the record about name collisions on .home and other TLDs that should be reserved, and it was spot on:

            http://www.circleid.com/posts/20090618_most_popular_invalid_tlds_should_be_reserved/

            as even ICANN agreed.

            https://www.icann.org/resources/board-material/resolutions-2018-02-04-en#2.c

            “Resolved (2018.02.04.12), the Board directs the President and CEO, or his designee(s), that the applications for .CORP, .HOME, and .MAIL should not proceed and, to account for the unforeseen impact to application processing, the Board directs the President and CEO to, upon withdrawal of the remaining applications for .CORP, .HOME, and .MAIL, provide the applicants a full refund of the New gTLD Program application fee of $185,000.”

            Notice that my CircleID article was in 2009, whereas the ICANN Board resolution was in 2018. How’s that?

            • Rubens Kuhl says:

              It was that CircleID article indeed. We have also added that article to SubPro references on the matter, to note that it was predicted.

            • Sorry, I thought a comparison to an astrologer (junk science) was an attempt at an insult, and that you were referencing a wrong prediction. (that’s why I posted a referencing showing it was correct).

    • Jay says:

      A LOT of broken rules to dig up and demand change. Whos to huge domains wont get the rights to operate 100 ntld while offering icann gets dibs on 10 of the best? They’re in bed and we need to see their domains. Dont let your possible hatred for ntld stand in the way of standing up for what is right any longer. They’re getting away with games to create precedent, and .com is next!

      • Rubens Kuhl says:

        Currently ICANN gets the same fee per domain in all TLDs of the same type / generation, with 2 exceptions, .net and .sucks. I don’t see that changing, but some transparency into that is a good thing.

        • Jay says:

          I mean sweetheart registries giving dibs to icann on actual domains. Maybe a buddy wants corn…icann works a deal where they personally get 10 best domains say uni.corn ect. How would we know with whois being blocked. Politics pricing even ethics aside, everyone wants to be a domainer now. LOTs in the position to take advantage of the top down interest surrounding every aspect – it comes down one single domain over and again. If 1 then 2 then 100 then all of them. The DNS is corrupt and if you let them scam, the internet as we know it will die, complete control of big biz private manuplation. They are giving away RIGHTS is what the problem is!

    • John Laprise says:

      If Mr. Kirikos had not gotten himself banned for conduct unbecoming the community, we might have lent him a more empathetic ear. As it was, a stranger with no ties to At Large parachuted into At Large deliberations with a shrill axe to grind.

      I’ll be the first to admit that I didn’t think that his position was a likely risk. I stand corrected and am acting accordingly.

      John Laprise

      • There was no “conduct unbecoming the community” (as shown on FreeSpeech.com) nor was there ever a “shrill axe to grind”. I did not “parachute into the At-Large”, as I noted above (I joined well before the .org public comment period, and was involved in discussing other topics too).

        Anyone can go to the public CPWG archives linked to in my prior comment above to see what really happened.

        Furthermore, anyone can listen to the recording of the conversation I had (archived on YouTube) with Glenn McKnight, Jonathan Zuck and Eduardo Diaz to see that my tone was calm and collected, far from “shrill”:

        https://freespeech.com/2019/04/10/impact-of-the-urs-and-unlimited-fee-increases-for-registrants-in-org-info-biz-and-asia/

        John Laprise and others like him were and are part of the problem. He and others should remove themselves from At-Large, rather than attempt to try to come up with a flawed solution. Those “often wrong” ICANN actors seem to be focused on perpetuating their involvement (getting free travel and/or other benefits), rather than ensuring that correct policies are adopted from day 1.

  4. John says:

    Doing evil and corruption in the open for all the world to see has been trending more and more for many years now. It’s very fashionable.

    Legacy TLDs were and are a public trust and that trust has been obliterated. The push toward the same agreement and blank check pricing as the new gTLDs is evil and sociopathic, pure and simple. With consequences worldwide, and not by any means to domain investors or domain industry participants only either (don’t they wish). I’m an end user first, “domainer” second, and observer of society before and above those as well. I don’t need to even be a “domainer” at all to know and say these blatant truths.

  5. Rubens Kuhl says:

    George, the first reference to your article in SubPro was this presentation I made to WT4:
    https://docs.google.com/presentation/d/1RuQVEoGNMB6RB0KXwCBsp_geYc0pink66fqwrBA_P2k/edit#slide=id.g17fd3b24c9_4_5

    • Thanks Rubens. On the slide it says there were “two receieved applicatios for .home and .corp”, but there were more (even the 2018 ICANN Board resolution linked to in my comment above mentioned .mail, and some had multiple new gTLD applications initially, but were withdrawn). The 2018 resolution refunded all the rest. e.g. there were 7 applications for .HOME, according to https://gtldresult.icann.org/applicationstatus/viewstatus

      • Rubens Kuhl says:

        2 strings, regardless of how many applications it got.
        You didn’t mention .mail in your article; I also couldn’t find any mention anywhere of something that leaked mail -like queries that are only for “mail” (dotless mail) not for “something.mail”, so this looks like a collision vector that nobody anticipated, and possibly warranting a different mitigation strategy.

        • I think it was “known”, but wasn’t enumerated in the top 10 non-existing TLDs. If you look at the current stats on C-root:

          https://c.root-servers.org/dsc/dsc-grapher.pl?window=86400&node=AP&plot=qtype_vs_all_tld&server=C-Root

          it pops up for Asia-Pacific list, between .vn and .id as I type this comment. So, had someone enumerated the top 100 or top 1000 invalid ones globally, it would certainly have been up there somewhere (seems fewer root servers are given stats these days, unlike last decade).

          You’re right the mitigation strategy would be completely different, given it’d be mostly email traffic. Fortunately they simply blocked the applications.

          • Rubens Kuhl says:

            Even though it seems medium in root queries/s, dotless mail gets very little action of queries at recursive DNS servers. The reason for this dissonance is that a dotless query never gets cached, and follows the root zone negative caching timer (24 hours), while for example.nonexistentTLD, the recursive caches the inexistence of .nonexistentTLD using the positive expire timer of the root zone (48 hours).

            I’m glad I don’t have to make a decision on this, but if I did, I would block .home and .corp as they did, but let .mail go to the root with some contract changes (like capital punishment for answering dotless queries, no dotless service even if IAB changes its mind one day for other dotless TLDs) and a different mitigation strategy (having a fake mail server respond and generate error messages during an extended controlled interruption). But blocking also works, it’s not that the Internet craves for this TLD after all.

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