Latest news of the domain name industry

Recent Posts

“Dangerous precedent” as ICANN rejects $1.13 billion .org buyout

In a decision that will shock many, ICANN won’t let Ethos Capital buy Public Interest Registry from the Internet Society.

Its board of directors yesterday voted to reject PIR’s request for a change of control of the .org contract, saying that “the public interest is better served in withholding consent”.

Ethos responded angrily almost immediately, saying the decision “sets a dangerous precedent with broad industry implications” and that it is “evaluating its options”.

The ICANN resolution, which was published overnight, is justified by setting out the case that .org is a unique case: a large legacy gTLD with a mandate to serve non-profit entities.

The Board was presented with a unique and complex situation – a request to approve a fundamental change of control over one of the longest-standing and largest registries, that also includes a change in corporate form from a viable not-for-profit entity to a for-profit entity with a US$360 million debt obligation, and with new and untested community engagement mechanisms relying largely upon ICANN contractual compliance enforcement to hold the new entity accountable to the .ORG community. ICANN is being asked to agree to contract with a wholly different form of entity; instead of contracting with the mission-based not-for-profit that has responsibly operated the .ORG registry for nearly 20 years, with the protections for its own community embedded in its mission and status as a not-for-profit entity. If ICANN were to consent, ICANN would have to trust that the new proposed for-profit entity that no longer has the embedded protections that come from not-for-profit status, which has fiduciary obligations to its new investors and is obligated to service and repay US$360 million in debt, would serve the same benefits to the .ORG community.

Essentially, ICANN is holding ISOC to the by-and-for non-profits commitment that it made when it inherited the registry from Verisign back in 2002. You may recall I went into some depth on the history of .org back in December.

While noting the broad criticism from various parties — which included domainers and non-profits — about the proposed acquisition, the resolution makes specific reference to the investigation by the office of the California attorney general, which had made vague threats of legal action against ICANN.

Some commentators, including Jonathan Zuck and Michele Neylon — are worried that the AG’s influence now means ICANN has a new boss, and that special interest groups in future need only lobby his office in order to override community-built consensus.

But ICANN did not single out one reason for its decision, saying withholding consent was “reasonable in light of the balancing of all of the circumstances”.

Ethos, while not calling out the AG directly, made the broader claim that ICANN has acted outside its mandate by succumbing to lobbying by outside parties.

Its statement, which I think contains hints at future legal action, reads in full:

Today’s decision by ICANN sets a dangerous precedent with broad industry implications. ICANN has overstepped its purview, which is limited to ensuring routine transfers of indirect control (such as the sale of PIR) do not impact the registry’s security, stability and reliability. Today’s action opens the door for ICANN to unilaterally reject future transfer requests based on agenda-driven pressure by outside parties. It allows ICANN to base its decisions on a subjective interpretation of what it deems to be relevant in these transactions, rather than following its own clear and specified legal directive.

This decision will suffocate innovation and deter future investment in the domain industry. ICANN has empowered itself to extend its authority into areas that fall well outside of its legal mandate in acting as a regulatory body. Today’s decision also creates an uncertain and unpredictable business environment, where the enforceability and value of the ICANN contract itself may be called into question now that the rules of transferring ownership are open to influence by outside interests. Ethos is evaluating its options at this time.

In the same statement, PIR called the decision “a failure to follow its bylaws, processes, and contracts” and ISOC said ICANN “has acted as a regulatory body it was never meant to be”.

While the decision could be chalked up as a win for domain investors and civil libertarians that had challenged the acquisition, it has implications that may not entirely please them.

Assuming the deal stays dead, PIR is no longer promising to only increase prices by 10% a year. It will be able to raise its registry fee arbitrarily, whenever it likes, subject to notice periods and the usual uniform pricing rules.

Domainers will have to hope there’s no sour grapes at ISOC, or they could be looking at big price hikes before long.

And for those interested in censorship, remember PIR is no longer committing to a Stewardship Council that would help protect free speech in .org domains.

The ICANN decision came in spite of a last-minute plea from former chair and ISOC co-founder Vint Cerf, who in a letter (pdf) described the deal as a “wedge issue” that could be leverage to force ICANN into an existential crisis, with outside interests such as the ITU pushing itself as a replacement.

ICANN also received eleventh-hour submissions from the German government (which was against the deal) and German trade group Eco (which was vague but appeared to be for the deal).

GoDaddy in talks to buy massive registrar Host Europe – report

Kevin Murphy, November 25, 2016, Domain Registrars

GoDaddy is reportedly talking to Host Europe Group, one of Europe’s largest registrars, about an acquisition.

Reuters today reported that the deal, should it go ahead, could be worth as much as $1.8 billion.

GoDaddy has been favored over rival bids from United Internet (owner of United-Domains) and buyout firm Centerbridge, Reuters said.

HEG is the parent company for several registrar brands. Notably, it owns 123-reg and DomainMonster, two of the UK’s largest registrars.

123-reg had over 900,000 gTLD domains on its books at the last count. HEG overall says it manages over seven million domains.

The company was acquired by private equity group Cinven for £438 million ($545 million) in 2013.

It has 1.7 million customers and 1,300 employees spread across eight countries. It primarily operates in the UK and Germany.

HEG had 2015 revenue of €269.8 million ($286.3 million) and made a loss of €55.6 million ($59 million).

For GoDaddy, the acquisition is a chance to shift its revenue mix away from domains and more towards the more profitable hosting market, according to Reuters.