Latest news of the domain name industry

Recent Posts

Four big developments in the .org pricing scandal

Kevin Murphy, November 26, 2019, 19:07:24 (UTC), Domain Registries

The renewal of Public Interest Registry’s .org contract and its subsequent acquisition by Ethos Capital is the gift that keeps on giving in terms of newsworthy developments, so I thought I’d bundle up the most important into a single article.

First, ICANN has thrown out the appeal filed by Namecheap and provided a (kinda) explanation of how the recent contract renewal came about.

The board of directors voted to reject Namecheap’s Request for Reconsideration on Thursday, as I reported last week, but the decision was not published until last night.

Namecheap had demanded ICANN reverse its decision to remove the 10%-a-year cap on price increases previously in the .org contract, enabling PIR to unilaterally raise its prices by however much it wants.

It said that ICANN had “ignored” the more then 3,000 people and organizations that had submitted comments opposing the lifting of caps.

But the board said:

ICANN org’s Core Values do not require it to accede to each request or demand made in public comments or otherwise asserted through ICANN’s various communication channels. ICANN org ultimately determined that ICANN’s Mission was best served by replacing price caps in the .ORG/.INFO Renewed RAs with other pricing protections to promote competition in the registration of domain names, afford the same “protections to existing registrants” that are afforded to registrants of other TLDs, and treat registry operators equitably.

The board also decided to describe, in a roundabout kinda way, how it conducts renewal talks with pre-2012 legacy gTLDs, explaining that ICANN “prefers” to move these registries to the 2012 contract, but that it cannot force them over. The resolution states:

All registry agreements include a presumptive right of renewal clause. This clause provides a registry operator the right to renew the agreement at its expiration provided the registry operator is in good standing (e.g., the registry operator does not have any uncured breaches), and subject to the terms of their presumptive renewal clauses.

In the course of engaging with a legacy registry operator on renewing its agreement, ICANN org prefers to and proposes that the registry operator adopts the new form of registry agreement that is used by new gTLDs as the starting point for the negotiations. This new form includes several enhancements that benefit the domain name ecosystem such as better safeguards in dealing with domain name infrastructure abuse, emergency backend support, as well as adoption of new bilaterally negotiated provisions that ICANN org and the gTLD Registries Stakeholder Group conduct from time to time for updates to the form agreement, and adoption of new services (e.g., RDAP) and procedures.

Although ICANN org proposes the new form of registry agreement as a starting place for the renewal, because of the registry operator’s presumptive right of renewal ICANN org is not in a position to mandate the new form as a condition of renewal. If a registry operator states a strong preference for maintaining its existing legacy agreement form, ICANN org would accommodate such a position, and has done so in at least one such instance.

I believe the gTLD referred to in the last sentence is Verisign’s .net, which renewed in 2017 without substantially transitioning to the 2012-round contract.

On the acquisition, the board notes:

the Board acknowledges (and the Requestor points out in its Rebuttal) the recently announced acquisition of PIR, the current .ORG registry operator, and the results of that transaction is something that ICANN organization will be evaluating as part of its normal process in such circumstances.

That appears to be a nod to the fact that ICANN has the power to reject changes of control under exceptional circumstances, per the .org contract.

Despite the wholly predictable rejection of Namecheap’s RfR, appeals against the contract’s new terms may not be over.

For some reason I have yet to ascertain, the very similar RfR filed around the same time by the Electronic Frontier Foundation was not considered, despite being on the agenda for last Thursday’s board meeting.

Additionally, I hear Namecheap has applied for Cooperative Engagement Process status, meaning it is contemplating filing an Independent Review Process appeal.

Second, Ethos Capital, PIR’s new owner, launched a web site in which it attempts to calm many of the concerns, criticisms and conspiracy theories leveled its way since the acquisition was announced.

Found at keypointsabout.org, the site tries to clarify the timing and motivation of the deal.

On timing, Ethos says:

Ethos Capital first approached the Internet Society in September 2019, well after PIR’s contract renewal with ICANN had finished… PIR was not for sale at the time the price caps were lifted on .ORG. The removal of .ORG’s price restrictions earlier this year was not unique to .ORG and was in no way motivated by a desire to sell PIR.

The .org contract was signed at the end of July, so while Ethos may well have been lusting after PIR before the renewal, it apparently did not run towards it with its trousers around its ankles until at least a month later.

On its pricing intentions, Ethos says:

The current price of a .ORG domain name is approximately $10 per year. Our plan is to live within the spirit of historic practice when it comes to pricing, which means, potentially, annual price increases of up to 10 percent on average — which today would equate to approximately $1 per year.

This sounds rather specific, but it’s vague enough to give PIR leeway to, say, introduce a 100% increase immediately and then freeze prices until it averages out at 10% per year. I don’t think the company will do something so extreme, but it would technically be possible the way it’s described here.

On the connections to Abry Partners and former ICANN CEO Fadi Chehade, Ethos says that while founder and CEO Erik Brooks is a 20-year veteran of Abry (which also owns Donuts) “Abry Partners is not involved in this transaction.”

It adds, however, that Chehade’s company, Chehade & Company, where Ethos chief purpose officer Nora Abusitta-Ouri has worked “is an adviser to Ethos”.

What this means, at the very least, is that the new owner of .org allowed an outside contractor to register the domain matching its name in the very gTLD it runs, which most domain veterans will recognize as a rookie mistake.

Ethos goes on to list VidMob Inc, Whistle Sports Inc, Adhark Inc and LiquidX Inc as other companies Ethos has invested in, perhaps rubbishing the hypothesis (which I, admittedly, have publicly floated) that Ethos was a vehicle created by Abry purely to buy up PIR.

Third, Ethos may be funded by “billionaire Republicans”.

.eco registry founder Jacob Malthouse, who’s trying to rouse up support for the #SaveDotOrg campaign, dug up an email apparently sent by ISOC CEO Andrew Sullivan to a members mailing list in the wake of the acquisition announcement, which names some of the backers of the deal.

They are: Perot Holdings, FMR LLC and Solamere Capital.

What they have in common is that they’re all — at least according to Malthouse’s since-amended original post — founded/owned/affiliated with prominent billionaire US Republicans. I’m not sure I’d fully agree with that characterization.

Perot was founded by Ross Perot, who stood for US president as an independent a few times but spent the last couple of decades of his life (which ended in July) as a Republican. I’d say his political affiliation died with him.

FMR, or Fidelity Investments, is run by Abigail Johnson, who inherited the role from her father and grandfather. While she’s made donations to Republicans including local senator, Mitt Romney, she also gave Hillary Clinton a tonne of cash to support her 2016 presidential election run, so I’m not sure I’d necessarily characterize her as die-hard GOP.

Romney himself was involved in the founding of Solamere Capital, the third apparent Ethos investor, but according to its web site he stepped down at the start of this year, long before Ethos was even founded, in order to re-join the US Senate.

I’m not sure what the big deal about these connections is anyway, unless you’re of the (often not unreasonable) belief that you don’t get to be a billionaire Republican without being just a little bit Evil.

Fourth, a bunch of non-profits are campaigning to get the deal scrapped.

The #SaveDotOrg campaign now has its matching .org address and web site, savedotorg.org.

It appears to have been set up by the EFF, but its supporters also include the non-profits American Alliance of Museums, American Society of Association Executives, Aspiration, Association of Junior Leagues International, Inc., Creative Commons, Crisis Text Line, Demand Progress Education Fund, DoSomething.org, European Climate Foundation, Free Software Foundation, Girl Scouts of the USA, Independent Sector, Internet Archive, Meals on Wheels America, National Council of Nonprofits, National Human Services Assembly, NTEN, Palante Technology Cooperative, Public Knowledge, R Street Institute, TechSoup, VolunteerMatch, Volunteers of America, Wikimedia Foundation, YMCA of the USA and YWCA USA.

The letter (pdf) states:

Non-governmental organizations all over the world rely on the .ORG top-level domain. Decisions affecting .ORG must be made with the consultation of the NGO community, overseen by a trusted community leader. If the Internet Society (ISOC) can no longer be that leader, it should work with the NGO community and the Internet Corporation for Assigned Names and Numbers (ICANN) to find an appropriate replacement.

It claims that the new .org contract gives PIR powers to “do significant harm” to non-profits, should they be abused.

The campaign has had a little traction on social media and so far has over 8,000 signatures.

Tagged: , , , , , , , , ,

Comments (7)

  1. John says:

    How many millions and millions will the prior ICANN CEO, Fadi Chehade, collect from this deal?

    How many millions did Faid Chehade already receive for putting this deal together as a transaction or sourcing fee?

    What ownership percentage does Chehade & Company have in the .ORG extension. How many millions will Fadi potentially receive?

    Fadi will likely make even more money when Ethos Capital raises prices on its domains. The higher the prices – simply equals more money for all of Ethos shareholders (including Fadi.)

    I find it extremely concerning the prior CEO of ICANN – somehow wiggled his way into a gigantic financial gain from the second legacy TLD extension in the world. He is likely now an shareholder / owner.

    Does this give any concern to the current ICANN board?

    Fadi Chehade was close with John Jeffrey and learned a lot about ICANN over the years. Fadi took his insider knowledge and leveraged this for his own personal financial gain.

    Fadi’s personal financial gain will be done at the detriment of 10+ million registrants.

    Quick note – after Fadi joined Abry partners and acquired Donuts – he also hired the next ICANN CEO Akram Atallah:

    The US Government (NITA / David Redl) was not happy with the revolving doors, and suggested there needs to be a “cooling off” period:
    http://domainincite.com/23620-us-not-happy-with-donuts-hiring-atallah

    The deal to acquire PIR is a significantly bigger issue (and was obviously done with insider information and support.) Where is NTIA’s statement this time around??

  2. Chris says:

    Imagine the hilarity if Chinese billionaires had bought the tld. I wonder if it would have gone over just as smoothly. Maybe we will find out in the future.

  3. John says:

    Read what the CEO of ICCANN Rod Beckstrom said years ago (an individual who had close knowledge of ICANN organization and board of directors:

    *******
    “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.

    The industry response to his speech was mixed. While some chalked it up to the former CEO attempting to shift attention away from his own failures,[30] others noted that some of his statements were based in truth. Kieren McCarthy pointed out in his response to the speech that some of the Board’s seats have been occupied by the same person or rotating sets of people for almost a decade, and that a few had been appointed to the Board from other leadership positions within ICANN. Only five of the 21 Members of the Board, at the time of the speech, had come from outside of ICANN’s internal groups, and all five of those delegates had been selected by the NomCom, who themselves were chosen from within ICANN. McCarthy also noted that outside voices are frequently ignored or overruled by the Board and the NomCom, including mandatory independent reviews.”

    *******

    Several have suggested Ron Beckstrom was fired a year later by the ICANN board (by not offering to renew his contract) because he called attention to the numerous conflicts of interest from board members and the many issues of transparency.

    • Kevin Murphy says:

      Who are the “several” in your last sentence? Two or three examples would do.

    • Rubens Kuhl says:

      My recollection is that Rod Beckstrom was already with an end date to his contract when he made that speech, so his termination would not be in retaliation to that speech but the other way around.

      But even from a disgruntled future ex-CEO, that statement was remarkably true at the time. I don’t see it as still true, though.

  4. Adrian Kinderis says:

    SO as far I understand it. PIR/ Ethos can say “we want to be able to set our pricing just like other new gTLD registries can do because it is in their contract” but they don’t have to take the “new” contract lock stock and barrel? So they get to cherry pick which clauses they want and demand them to be given? Am I right here? If so, yep sounds fair 😐

Add Your Comment