ICANN says NO to Ukraine’s Big Ask

“ICANN has been built to ensure that the Internet works, not for its coordination role to be used to stop it from working.”

That’s ICANN’s response to Ukraine, which earlier this week asked for Russia to lose its top-level domains and IP addresses, to help prevent propaganda supporting its invasion of the country.

The request was arguably based on a misunderstanding of the extent of ICANN’s powers, and CEO Göran Marby says as much in his response last night (pdf) to Ukraine’s deputy prime minister Mykhailo Fedorov:

In our role as the technical coordinator of unique identifiers for the Internet, we take actions to ensure that the workings of the Internet are not politicized, and we have no sanction-levying authority

He goes on to warn about the “devastating and permanent effects” of ICANN suddenly deciding to take unilateral action against .ru, .рф and .su:

For country-code top-level domains, our work predominantly involves validating requests that come from authorized parties within the respective country or territory. The globally agreed policies do not provide for ICANN to take unilateral action to disconnect these domains as you request. You can understand why such a system cannot operate based on requests from one territory or country concerning internal operations within another territory or country. Such a change in the process would have devastating and permanent effects on the trust and utility of this global system.

He concludes:

Within our mission, we maintain neutrality and act in support of the global Internet. Our mission does not extend to taking punitive actions, issuing sanctions, or restricting access against segments of the Internet — regardless of the provocations. ICANN applies its policies consistently and in alignment with documented processes. To make unilateral changes would erode trust in the multistakeholder model and the policies designed to sustain global Internet interoperability.

The response is expected, and I believe broadly, if not unanimously, supported in the ICANN community.

In a line I wish I’d written, the Internet Society’s CEO Andrew Sullivan put it pretty succinctly in a blog post yesterday:

The idea of unplugging a country is as wrong when people want to do it to another country as it is when governments want to do it to their own.

And Sébastien Bachollet, chair of ICANN stakeholder group EURALO, insisted (pdf) that “the Internet must remain intact”.

RIPE NCC, which had been asked to revoke IP addresses supplied to Russian organizations, wrote that it “believes that the means to communicate should not be affected by domestic political disputes, international conflicts or war.”

ICANN may take a short-term PR hit in the wider world, which includes people who have a misunderstanding of how powerful ICANN is and how tenuous its grasp on the powers it does have.

While .ru appears to be safe, there’s nothing I read in Marby’s letter that would preclude it from initiating retirement proceedings against .su, when the proper policies have been approved.

ICANN could block Donuts from buying Afilias

In what appears to be an almost unprecedented move, ICANN is to review Donuts’ proposed acquisition of rival Afilias at the highest level, raising a question mark over the industry mega-merger.

The org’s board of directors will meet Thursday to consider, among other things, “Afilias Change of Control Approval Request”.

It’s highly unusual for a change of control to be discussed at such a high level.

Every registry contract contains clauses requiring ICANN’s consent before a registry switches owners, and it has approved hundreds over the last decade. But the process is usually handled by legal staff, without board involvement.

The only time, to my memory, that the board has got involved was when it withheld consent from .org manager Public Interest Registry earlier this year.

It’s not entirely clear why Afilias has been singled out for special treatment.

It’s probably not due to its status as a legacy gTLD registry operator because of .info — when GoDaddy bought .biz operator Neustar’s registry business earlier this year, there was no such board review.

In addition, the .info contract’s change of control provisions are very similar to those in the standard new gTLD contract.

Could it be due to Donuts executives former ties to ICANN and the perception of a conflict of interest? Again, it seems unlikely.

While Donuts CEO Akram Atallah is former president of ICANN’s Global Domains Division, former ICANN CEO Fadi Chehadé is no longer involved with Donuts owner Abry Partners, having jumped to erstwhile PIR bidder Ethos Capital this July.

Are there competition concerns? It’s a possibility.

Afilias holds the contracts for 24 gTLDs new and legacy, but supports a couple hundred more, while Donuts is contracted for over 240.

But between them, they have barely 10 million domains under management. Donuts isn’t even the market leader in terms of new gTLD registrations.

And ICANN avoids making competition pronouncements like the plague, preferring instead to refer to national competition regulators.

Could ICANN’s interest have been perked by the fact that Afilias is the back-end provider for .org’s 10 million domains, and the proposed Donuts deal comes hot on the heels of the failed PIR acquisition? Again, it’s a possibility.

But none of the dangers ICANN identified in the .org deal — such as pricing, freedom of speech, and the change from a non-profit to for-profit corporate structure — appear to apply here.

There could be technical concerns. Atallah told DI a couple weeks ago that the plan was to ultimately migrate its managed TLDs to its Amazon cloud-based registry.

But moving its clients’ TLDs to a new back-end infrastructure would require their consent — it would be up to PIR and its overlords at the Internet Society to agree to moving .org to the cloud.

I think it’s likely that a combination of all the above factors, and maybe others, are what’s driving the Afilias acquisition to the ICANN boardroom. It will be interesting to see what the board decrees.

.org made $97 million last year

Public Interest Registry has published its 2019 tax returns, revealing a top line of $97.1 million.

That’s a tad under the $101.1 million it reported for 2018, presumably due to the declining number of .org domains under management.

It lost roughly 200,000 names in 2019, bottoming out at 10.4 million, though it has since recovered in 2020.

The returns also reveal that back-end provider Afilias was paid $18.3 million for its trouble, and ICANN was paid $2.6 million in fees.

The Internet Society, which owns PIR and uses it for most of its funding, was paid $67.5 million, up from the $48.7 million given in 2018.

The form also list the salary and bonuses for 20-odd staffers and directors, for the salary voyeurs among you.

ICANN dissenter explains why she wanted .org sale approved

ICANN has finally published the dissenting statement made by one of its directors following the vote to deny Ethos Capital the right to acquire Public Interest Registry from the Internet Society.

Avri Doria was one of only two directors to vote against the majority on the April 30 resolution, and the only one to file a written statement for the record, which ICANN has now published (pdf). It reads:

Briefly, I believe that the contractual conditions have been met by PIR and Ethos and that they have gone beyond these required contractual conditions to offer significant public interest commitments currently missing from the current contract.

On balance after intense study of the proposal I have come to conclusion that the Public Interest of registrants and users is better served by the PICs offered by PIR, though they could
be stronger, than by forcing PIR to remain within ISOC without any guarantees on public interest related to data usage and freedom of expression.

In exchange for ICANN approval of the deal, Ethos had promised to cap its price increases at 10% for eight years and to create a largely independent stewardship council to monitor issues related to privacy and free speech in .org.

With ICANN voting to deny the acquisition, PIR is not required to live up to those commitments, but opponents of the deal feel that its not-for-profit status under ISOC control provide stronger protections against bad behavior.

ICANN said it rejected the deal on “public interest” grounds for a variety of reasons including the lack of transparency into Ethos’ ultimate ownership, distrust that Ethos would be able to service its debt, doubt over its management in the long term, and the sheer volume of dissent from the community.

Also playing a strong role was an objection from the California attorney general, who pulled rank and informed ICANN that it should reject the deal, reminding the organization that it was subject to his oversight. This has been described as a dangerous precedent.

ICANN’s .org decision was NOT unanimous, and it was made in secret

When ICANN announced its decision to deny Public Interest Registry’s request to be acquired by Ethos Capital at the end of April, I felt a little foolish.

I’d confidently predicted just days earlier that the decision by the board would not be unanimous, but ICANN, in announcing the decision, said “the entire Board stands by this decision”.

But it turns out I was right after all. Three directors voted against the consensus and one abstained.

The dissenting votes were cast by industry policy consultant Avri Doria, Serbian internet pioneer Danko Jevtović, and former Sudanese ccTLD operator Ihab Osman.

Doria and Jevtović voted against the first resolved clause, which rejected PIR’s request. All three voted against the second resolved clause, which would have allowed PIR to file a second request.

Sarah Deutsch, a private practice lawyer, abstained from both votes, presumably because she also sits on the board of the Electronic Frontier Foundation, the civil liberties group that can, via California’s attorney general, probably be credited most with getting the transaction killed.

All three dissenters and Deutsch are Nominating Committee appointees.

According to the preliminary report of the April 30 meeting, “Doria indicated that she would be voting against the resolution and explained her views about how the public interest would be better served by ICANN granting its consent to PIR’s request.”

What her reasons were are not reflected in the record.

It also seems likely that any substantive minuting of ICANN’s decision is likely to be limited, as it appears to have been made at a different, off-the-books session at an unspecified earlier date.

The preliminary report notes the “the Board discussed and considered alternative draft resolutions for potential Board action as part of an earlier briefing”.

No such earlier meeting is listed on ICANN’s web site. The board’s previous formal meeting, two weeks earlier, had PIR’s request removed from the agenda at the last minute.

So it appears that ICANN’s board decided to reject the deal basically in secret at some point between April 17 and April 29, during a meeting of which ICANN has no obligation to publicly release the minutes.

Nice transparency loophole!

There’s always the Documentary Information Disclosure Policy, I suppose.

.org sale officially dead

Public Interest Registry has formally announced that its proposed $1.13 billion acquisition by Ethos Capital is dead.

The company told ICANN yesterday that it is withdrawing its request for a change of control under its .org contract and that it “will not be pursuing an ICANN Request for Reconsideration or taking any other action to try to revive the Transaction”.

In a statement, CEO Jon Nevett said that PIR is no longer for sale to any other party. It will remain under the Internet Society’s control.

He also pointed out that it’s not within ICANN’s power to arbitrarily transfer .org to another registry, as some critics have called for.

“Such a transfer by ICANN is a contractual impossibility under our registry agreement,” he wrote.

ICANN rejected the change of control request after deciding it was not in the public interest for .org to pass into for-profit hands.

Following the decision, ISOC had indicated that PIR was no longer for sale.

The .org deal may be dead and buried, but calls remain for PIR to lose its contract

The Internet Society has revealed that the .org registry operator PIR is no longer for sale.

The news came in a statement from ISOC chair Andrew Sullivan late Friday, less than 24 hours after ICANN withheld its consent for the proposed $1.13 billion acquisition by private equity firm Ethos Capital.

ICANN had held the door open for Ethos and ISOC to resubmit a change of control request, and Ethos had said Thursday that it was evaluating its options, but it appears the decision has been made to keep PIR under ISOC’s wing.

In his statement, Sullivan expressed his dismay that ICANN had acted as a “regulator” by evaluating the deal using a public interest test rather than simply rubber-stamping it as it has in all other cases of registry acquisitions. He wrote:

It should concern the Internet community that ICANN has shown itself to be much more susceptible to political pressure than its limited mandate would recommend.

…

Now that we know that ICANN believes its remit to be much larger than we believe it is, we can state this clearly: neither PIR nor any of its operations are for sale now, and the Internet Society will resist vigorously any suggestion that they ought to be.

But who would want to, or could afford to, buy it? While ICANN has made it clear that PE firms are welcome to acquire other TLDs, it wants .org to remain in non-profit hands.

During the last few months of controversy, one other embryonic effort to take over .org was announced, led by founding ICANN chair Esther Dyson.

Called the Cooperative Corporation of dot-org Registrants (CCOR), it had no intention of handing over a billion dollars for .org, it simply wanted ICANN to assign the contract to its control.

It still wants that, or something like that. In a statement Saturday, CCOR said it “calls upon ICANN to proceed with the established multi-stakeholder led open request for proposals for stewardship of the dot-org domain”.

Unless it can be shown that PIR has seriously broken the terms of its Registry Agreement, the chances of ICANN randomly opening up .org to tender is pretty much zero.

CCOR goes on to say that it is still worried about .org falling into private hands and that it will lobby for legally binding policies “including the preservation of privacy, diversity and human rights, and freedom from censorship”.

“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).

Decision on .org deal may come sooner than you think

If you’re against the acquisition of .org and are thinking about an objection or spot of lobbying at the eleventh hour, be aware: this is the eleventh hour.

The deal, which would see Ethos Capital buy Public Interest Registry from the Internet Society for over a billion dollars, is on the agenda for a meeting of the ICANN board of directors this Thursday.

ICANN and Ethos have agreed to a May 4 deadline for a decision, but is whispered that the board plans to give the deal the nod, or not, at the Thursday meeting.

Given how long it usually takes for ICANN to post the results of its board meetings, typically a few days, there’s a decent chance that PIR, Ethos and ISOC could be given formal approval before any opponents have time to react to the resolution.

I think it could go either way.

The one thing I have a fairly high degree of confidence in is that I do not expect a unanimous vote.

While I think ICANN’s institutional instincts are to approve, the breadth and depth of the outrage over the deal may be difficult for some directors to ignore.

If it were only domain investors objecting, approval would be a slam dunk. But here we also have non-profits, civil liberties groups and governments crying foul.

Perhaps most importantly, there’s the objection of the California attorney generalobjection of the California attorney general to consider.

He has power over ICANN because it’s a non-profit registered in his state, and he’s said “will take whatever action necessary to protect Californians and the nonprofit community”.

His last letter to ICANN is believed to have caused the board to remove the .org deal from the agenda at its last meeting and seek a deadline extension from PIR.

One plausible interpretation of that chain of events is that the board was ready to give Ethos the nod, but the AG’s letter gave it pause.

As ICANN meets to decide .org’s fate, California AG says billion-dollar deal must be rejected

California Attorney General Xavier Becerra has urged ICANN to deny approval of Ethos Capital’s $1.13 billion acquisition of .org manager Public Interest Registry.

The call came in a letter (pdf) dated yesterday, just a day before ICANN’s board of directors was scheduled to meet to discuss the deal.

Becerra, who started looking into the deal in late January, wrote, right out of the gate:

I urge ICANN to reject the transfer of control over the .ORG registry to Ethos Capital. The proposed transfer raises serious concerns that cannot be overlooked.

Chief among his concerns is the fact that ICANN originally granted PIR the right to run .org largely because it was a non-profit with a committment to serve non-profits. He wrote:

If, as proposed, Ethos Capital is permitted to purchase PIR, it will no longer have the unique characteristics that ICANN valued at the time that it selected PIR as the nonprofit to be responsible for the .ORG registry. In effect, what is at stake is the transfer of the world’s second largest registry to a for-profit private equity firm that, by design, exists to profit from millions of nonprofit and non-commercial organizations

He’s also bothered about the lack of transparency about who Ethos is and what its plans are. The proposed new owners of PIR are hidden behind a complex hierarchy of dummy LLCs, and Ethos has so far refused to name its money men or to specify what additional services it might offer to boost its revenue.

Becerra also doesn’t buy the business plan, which would see PIR required to pay off a $300 million loan and, as a newly converted for-profit entity, start paying taxes.

He’s particularly scathing about the fact that ICANN approved the removal of PIR’s price caps last year despite receiving over 3,000 public comments opposing the changes and only half a dozen in favor.

“There is mounting concern that ICANN is no longer responsive to the needs of its stakeholders,” he writes.

Despite saying he “will take whatever action necessary to protect Californians and the nonprofit community”, Becerra does not specify what remedies are available to him.

But it looks like ICANN faces the risk of legal action no matter which way its board of directors votes (or voted) today.

Its current deadline to make a decision is April 20.