SaveDotOrg to protest outside ICANN HQ. #lol

Good grief.
Just when you thought the outrage over .org manager Public Interest Registry’s imminent sale to Ethos Capital couldn’t get any weirder, the #SaveDotOrg campaign has announced that it is going to physically protest ICANN’s headquarters in Los Angeles next week.
From 0900 until 1100 local time, Friday January 24, they’ll gather to demand that non-profit voices are heard in ICANN’s decision whether to approve the acquisition. From the announcement:

Join us in demanding that ICANN commit to a process that includes the voices and priorities of nonprofits and grassroots organizations. The .ORG domain isn’t up for sale without our participation. We’ll rally outside ICANN’s offices in Los Angeles on Friday, January 24. This is an important moment in the SaveDotOrg campaign, and we want you to join us!

Sloganed T-shirts and signs will be available.
The event is being organized by NTEN, the Electronic Frontier Foundation and Fight For The Future. All very lovely people; I can’t see this turning into some Hong Kong-style riot situation.
Unusual as it is, this kind of direct action against ICANN is not unprecedented.
Back in 2011, a group of pornographers and civil liberties activists gathered outside the Westin St Francis hotel in San Francisco to, where ICANN was holding its public meeting, protest the imminent approval of .xxx, which they thought was a threat to free speech online. About 25 people showed up, by my count, chanting slogans such as “We want porn! No triple-X!”. Buttman was there.
Those protesters, it turns out many years later, really had nothing to worry about; nobody has been forced to buy a .xxx domain, and my friends tell me porn is still very much available on the internet.
I rather suspect the #SaveDotOrg guys are in the same boat. Of all the arguments against the acquisition, the one claiming that free speech is at risk still seems to me the least convincing.

Secrets of the .org deal revealed, but much info remains private

ICANN has published a ream of new information about the proposed acquisition of Public Interest Registry by Ethos Capital, a deal widely criticized for what it could mean for millions of .org registrants.
The documentation was provided to ICANN by Ethos, PIR and the Internet Society, PIR’s current owner, on the understanding that certain confidential information would remain private or would be redacted.
Almost all of the juicy financial details remain unpublished, but there’s still plenty of interesting revelations among the packet’s 27 pages.
Before we dive into the details, here are the headlines:

• The deal is being partly funded by an enormous loan.
• Technically, Ethos isn’t the direct buyer. There are at least three corporate entities involved in the acquisition that we haven’t heard of before.
• Ethos won’t reveal the names of the directors of PIR’s would-be owner.
• Another former senior ICANN staffer and long-time Fadi Chehadé collaborator has been revealed as having an interest in the acquisition.

Most of the info relates to the proposed corporate ownership structure of PIR during and following the acquisition, and it’s a little bit more complex than Ethos simply signing a check to ISOC and taking the reins at PIR.
First, PIR is going to undergo what it calls a “statutory conversion” in its home state of Pennsylvania, changing its name from Public Interest Registry to Public Interest Registry LLC — essentially changing from a non-profit to a for-profit.
The company notes that this is not a change of entity — PIR will still be PIR — but is rather a change of its company type and legal name.
At the same time, a newly created non-profit fully owned by ISOC called Connected Giving Foundation will take 100% ownership of PIR LLC, before immediately selling its entire stake to the Ethos group.
But the buyer is not, directly, Ethos Capital. Instead, it’s an acquisition vehicle, created October 24 last year in Delaware, called Purpose Domains Direct, LLC. That company is owned in turn by another vehicle, formed the same day in Delaware, called Purpose Domains Holdings LLC.
Ethos controls both of these companies. It’s not unusual for acquisitions to be carried out via subsidiaries in this way.
That said, Ethos appears reluctant to reveal the names of these companies’ directors.
In its letter to ICANN asking for approval of the acquisition, apparently sent November 14 (one day after the public announcement), the names of the three Purpose Domains Direct directors are redacted. Corporation-friendly Delaware doesn’t make it easy to get at this information either.
However, in December 20 answers to a list of dozens of questions posed by ICANN about the deal, Ethos discloses that it has expanded its proposed board to five directors — the CEO of PIR (currently Jon Nevett), alongside two people selected by Ethos and two selected by “one or more minority equity holders”.
The minority owners are not named, but they could be the three entities revealed by ISOC’s CEO last November, which include funds managed by the Perot and Romney families.
The board will therefore be controlled by Ethos and PIR together, the documents state. No proposed directors other than Nevett are named and it’s not known whether the three redacted names from the November letter are still in line for seats.
The identities of individuals involved in the deal have been of keen interest since it emerged, shortly after the acquisition was announced, that former ICANN CEO Fadi Chehadé was acting as an adviser to Ethos, closely enough that he actually registered at least one domain name on Ethos’ behalf.
Ethos chief purpose officer Nora Abusitta-Ouri was a senior VP at ICANN until 2016, and CEO Erik Brooks worked for 20 years at Donuts owner Abry Partners, the private equity firm where Chehadé now works as a senior advisor.
Abry is not involved in the acquisition, the new documentation states. Neither are any current ICANN staffers or any other registries or registrars.
But it turns out that yet another former senior ICANN staffer is in fact involved.
The new documentation reveals that Allen Grogan, who worked as head of contracting for the new gTLD program and then chief of contract compliance at ICANN between 2013 and 2017, is also acting as an “advisor” on the deal.
It’s not clear whether Grogan is on the payroll of Ethos, Abry, Chehadé & Company, PIR, ISOC, or none of the above, but the smart money would surely be on him having being brought on board by Chehadé. Like so many senior ICANN officers hired during Chehadé’s tenure, the two men worked together for years at other companies.
The final nugget of new information that leaped out at me in the new docs is how the deal will be funded.
The packet reveals, I believe for the first time, that a good chunk of the $1.135 billion proposed purchase price is actually being paid for with new debt.
Ethos says that Purpose Domains Direct has taken out a total of $360 million in loans from various US banks to make up the shortfall left by its own investors.
The company said that PIR — a mature, high-margin business — will easily have the money to service this debt and, as a for-profit, pay its taxes. Repayments will be less than half of what it currently pays to ISOC every year, the documents state.
The documents were published here (pdf) on Saturday. Let me know if you spot something interesting I missed.

Now .org critics actually want to take over the registry, blocking billion-dollar sale

A group of ICANN alumni and non-profits want to block the $1.135 billion sale of .org manager Public Interest Registry and for ICANN to hand over the reins to a new not-for-profit entity.
The Cooperative Corporation of .ORG Registrants was reportedly formed in California this week, supported by a long list of opponents of the .org deal, which would see the Internet Society sell PIR to a new private equity company called Ethos Capital.
Currently not-for-profit .org would become commercial again, answerable to shareholders who want to see a return on their investment. PIR recently had its 10%-a-year price caps lifted by ICANN, enabling it to increase its annual registry fees by as much as it wants.
Founding directors of the new co-op reportedly include ICANN founding chair Esther Dyson and founding CEO Mike Roberts, neither of whom have been heavily involved in ICANN or the domain name industry for the better part of two decades.
According to Reuters, Also on the board are Wikimedia Foundation CEO Katherine Maher, Jeff Ubois of the MacArthur Foundation, and Bill Woodcock, executive director of Packet Clearing House, which provides .org, via back-end Afilias, with DNS resolution services.
Dyson told the New York Times: “If you’re owned by private equity, your incentive is to make a profit. Our incentive is to serve and protect nonprofits and the public.”
The new registry would not have a profit motive, and excess funds would be returned to the non-profit community.
While the new group has yet to make a formal, public proposal, the idea is reportedly to persuade ICANN to block the sale of PIR to Ethos — something nobody can seem to agree is even within its powers — and instead transfer stewardship to this new co-op.
It’s a crazily ambitious goal.
The group would be basically asking ICANN to cut off ISOC’s primary funding source. PIR currently gives tens of millions of dollars a year to its owner, and after the Ethos deal ISOC intends to live off the interest of its billion-dollar windfall.
If ICANN canceled the PIR contract and handed .org to a third party, ISOC would get nothing, potentially crippling it and subsidiaries such as the IETF.
I can’t imagine such a decision, on the outside chance ICANN actually went down this path, not resulting in litigation.
The Cooperative Corporation of .ORG Registrants is reportedly also being backed by other supporters of the #SaveDotOrg campaign (which now has over 20,000 supporters), including the free speech advocates at the Electronic Frontier Foundation and NTEN, a conference/community hub for non-profits.
This campaign last month managed to persuade a group of four Democrat members of Congress — Ron Wyden, Richard Blumenthal, Elizabeth Warren and Anna Eshoo — to express their concerns about the Ethos deal and ask ISOC/Ethos/PIR a series of pointed questions about its potential ramifications.
In its response this week (pdf), the leaders of the three entities avoided directly answering the bulleted questions, but did make some commitments that I believe are new.
Notably, they said that the registry would reincorporate as a Public Benefit LLC before the acquisition closes. This is a relatively new form of legal entity, which has been described like this:

A Public Benefit LLC is a for-profit entity; however, in operating a Public Benefit LLC, the LLC’s management can take into account social, economic and political considerations without violating its fiduciary duty to act in the best interests of the company.

In other words, PIR would be free to place the needs of .org’s non-profit registrants ahead of the needs of its own shareholders without opening itself up to legal action.
A “statement of public benefit” would be in its certificate of formation, and would include a commitment “to limit any potential increase in the price of a .ORG domain registration to no more than 10% per year on average”.
I’ve noted before that this is worded vaguely enough to give Ethos some flexibility to raise prices by over 10%, but the fact that it’s offering to bake a commitment on pricing into its corporate DNA may be seen as a step in the right direction by critics.
It’s also proposing a “Stewardship Council”, which would be “an independent and transparent body” tasked with providing policy guidance to PIR and overseeing a new “Community Investment Fund” that would be used for initiatives such as the annual .org awards program.

ASO uses super powers to demand ICANN turn over .org buyout docs

In an unprecedented move, ICANN’s Address Supporting Organization has exercised its special powers to demand ICANN hand over documents relating to the Ethos Capital acquisition of .org’s Public Interest Registry.
There’s a possibility, however small, that this could be the first shot in a war that could see the PIR acquisition scrapped.
Fair warning, this story is going to get pretty nerdy, which may not be compatible with the fuzzy-headedness that usually accompanies the first working day of the year. We’re heading into the overgrown weeds of the ICANN bylaws here, for which I apologize in advance.
The ASO — the arm of the ICANN community concerned with IP address policy — has asked ICANN Org for access to records concerning the $1.135 billion acquisition of PIR, which has attracted lots of criticism from non-profits, domainers and others since it was announced.
It’s unprecedented, and of interest to ICANN watchers, for a few reasons.
First, this is the ASO making the request. The ASO comprises the five Regional Internet Registries, the bodies responsible for handing out chunks of IP address space to ISPs around the world. It doesn’t normally get involved in policy related to domain names such as .org.
Second, it’s invoking an hitherto untested part of ICANN’s new bylaws that allows the certain community entities that make up the “Empowered Community” to make “Inspection Requests” of ICANN Org.
Third, and perhaps most importantly, there’s a hint of a threat that the ASO and other members of the EC may use their extraordinary powers to attempt to prevent the PIR acquisition from going ahead.
Before we unpick all of this, this is what the ASO has sent to ICANN, according to its December 31 statement:

As a Decisional Participant in the Empowered Community and pursuant to ICANN Bylaws section 22.7, the ASO hereby submits this Inspection Request to inspect the records of ICANN, including minutes of the Board or any Board Committee, for the purpose of determining whether the ASO’s may have need to use its empowered community powers in the near future relating to the potential assignment of the .org Registry Agreement. For this purpose, the ASO seeks to inspect any ICANN records which pertain to or provide relevant insight to the process by which ICANN will consider (and potentially approve) the assignment of the .org Registry Agreement, including the process by which input from the affected community will be obtained prior to ICANN’s consideration and potential approval of the assignment.

The Empowered Community is the entity that replaced the US government as ICANN’s primary overseer, following the IANA transition in late 2016.
Its members cover the breadth of the ICANN community, comprising the ASO, Generic Names Supporting Organization, Country Code Names Supporting Organization, Governmental Advisory Committee and At-Large Advisory Committee. Each member is a “Decisional Participant”.
Since the transition, its only real functions have been to approve appointments to the ICANN board of directors and to rubber-stamp the budget, but it does have some pretty powerful tools at its disposal, such as the nuclear ability to fire the entire board.
One of the powers enjoyed by each Decisional Participant, which has never been invoked publicly, is to make an Inspection Request — a demand to see ICANN’s accounts or documents related to the board’s decisions.
In this case, the ASO wants “records which pertain to or provide relevant insight to the process by which ICANN will consider (and potentially approve) the assignment of the .org Registry Agreement”.
But will it get this information? It seems the Inspection Request bylaw is a little bit like ICANN’s longstanding freedom-of-information commitment, the Documentary Information Disclosure Policy, with some key differences that arguably make the IR process less transparent.
Like DIDP, the IR process gives ICANN Org a whole buffet of rejection criteria to choose from. It can refuse requests for reasons of confidentiality or legal privilege, for example, or if it thinks the request is overly broad.
It can also reject a request if “is motivated by a Decisional Participant’s financial, commercial or political interests, or those of one or more of its constituents”, which makes the fact that this request is coming from the ASO particularly interesting.
If the GAC or the GNSO or the ccNSO, or even the ALAC, had made the request, ICANN could quite reasonably have thrown it out on the basis of “commercial or political interests”.
That’s not the case with the ASO, which makes me wonder (aloud, it seems) whether the ASO had received any nudges from other members of the EC before filing the request.
Inspection Requests also differ from DIDP in that any documents that are turned over are not necessarily published, and ICANN can also force the Decisional Participant to file a non-disclosure agreement covering their contents.
ICANN can even demand that an ASO member shows up at its Los Angeles headquarters in person to read (and, if they want, copy) the docs in question.
In short, ICANN has a lot of wriggle room to refuse or frustrate the ASO’s request, and it has a track record of not being particularly receptive to these kinds of demands.
The grey-hairs out there will recall that Karl Auerbach, one of its own directors, was forced to sue the organization back in 2002, just in order to have a look at its books.
But what’s perhaps most tantalizing about the ASO’s request is its excuse for wanting to inspect the documents in question.
It says it need the info “for the purpose of determining whether the ASO’s [sic] may have need to use its empowered community powers in the near future relating to the potential assignment of the .org Registry Agreement”.
One way of interpreting this is that the ASO needed to state a reason for its request and this is pretty much all it’s got.
But what powers does the Empowered Community have that could potentially cover the acquisition of PIR by Ethos? It certainly does not have the power to directly approve or reject the transfer of control of a gTLD contract.
The EC has nine bulleted powers in the ICANN bylaws. Some of them are explicitly about things like budgets and bylaws amendments, which could not possibly come into play here. I reckon only four could feasibly apply:

(i) Appoint and remove individual Directors (other than the President);
(ii) Recall the entire Board;
…
(viii) Initiate a Community Reconsideration Request, mediation or a Community IRP; and
(ix) Take necessary and appropriate action to enforce its powers and rights, including through the community mechanism contained in Annex D or an action filed in a court of competent jurisdiction.

Short of lawyering up or having the entire board taken out and shot, it seems like the most likely power that could be invoked at first would be the Community Reconsideration Request.
Judging by the bylaws, this is virtually identical to the normal Request for Reconsideration process, a process which very rarely results in ICANN actually reconsidering its decisions.
The major difference is that at least three of the five members of the Empowered Community has to vote in favor of filing such a request, and no more than one may object.
If they manage to muster up this consent — which could take many weeks — the fact that the reconsideration request comes from the “Community” rather than a single entity appears to make substantially no difference to how it is rejected considered by ICANN.
Threatening ICANN with a Community Reconsideration Request is a little like threatening to jump through an increasingly narrow series of hoops, only to find the last one leads into a pit filled with ICANN lawyers with laser beams attached to their heads.
A Community Independent Review Process, however, is a different kettle of snakes.
It’s substantially the same as a regular IRP — where ICANN’s fate is decided by a panel of three retired judges — except ICANN has to pay the complainant’s legal fees as well as its own.
ICANN’s track record with IRPs is not fantastic. It can and does lose them fairly regularly.
Could the ASO’s letter be the first portent of a community-led IRP bubbling up behind the scenes? Could such a move delay the PIR acquisition, putting Ethos’ plan for a profit-driven, price-raising .org on hold for a year or two? It’s certainly not impossible.

ICANN throws out second .org appeal, so URS stays

The Uniform Rapid Suspension process is to stay in .org, after the ICANN board of directors rejected an appeal from the Electronic Frontier Foundation.
The EFF had challenged the inclusion of URS in the recently renegotiated .org Registry Agreement, on the basis that the anti-cybersquatting system was designed for post-2012 new gTLDs and was never supposed to be deployed in legacy gTLDs such as .org.
In a Request for Reconsideration, the EFF had argued that ICANN had ignored the many commenters opposed to its inclusion in the contract, and that the board had shirked its duties by delegating the renegotiation to ICANN’s executive leadership.
But the board disagreed on both of these counts, saying in its resolution and accompanying 36-page analysis (pdf) that at no point had the organization broken its bylaws.
ICANN did not ignore the anti-URS comments, the board said, it simply decided that on balance the public interest was better served by having URS in the contract.

The Requestor has not demonstrated that ICANN Staff failed to seek or support broad participation, ascertain the global public interest, or act for the public benefit. To the contrary, ICANN org’s transparent processes reflect the Staff’s continuous efforts to ascertain and pursue the global public interest by migrating the legacy gTLDs to the Base RA.

Additionally, the board was well within its rights to delegate negotiation and approval of the RA to the CEO, the board decided. The fact that the EFF disagrees with that position does not amount to a basis of reconsideration, it found.
Since the EFF filed its RfR back in August, we’ve had the news of the $1.135 billion acquisition of .org manager Public Interest Registry by Ethos Capital, which will see it convert from a non-profit to a for-profit concern.
The EFF has since had the chance to put allegations to ICANN that its staff was aware of the deal before it was announced, and that the acquisition should have factored into its consideration of the RA renewal.
But ICANN flatly denies that it knew about the deal, which was announced four months after the renewal:

Since neither the Board nor ICANN Staff were aware of the PIR acquisition when the decision to renew the .ORG RA was made, there was no material information not considered, and therefore this is not a proper basis for reconsideration.
…
The Ethos Capital acquisition of PIR, which was announced more than four months after the execution of the .ORG Renewed RA, did not impact ICANN Staff’s determination that ICANN’s Mission and Core Values were best served by migrating the .ORG RA to the Base RA.

In conclusion, like almost all filers of RfRs, the EFF is SOL.
Another RfR, filed by the registrar NameCheap and related primary to .org pricing, was similarly rejected by ICANN’s board a few weeks ago.
ICANN is, however, currently quizzing Ethos and PIR seller ISOC for more details about the acquisition before it approves the change of contractor.

Warning (or threat?) prices must go up or .org will suffer DAYS of downtime

Public Interest Registry’s new commercial owner will have to raise domain prices significantly, or .org web sites will suffer over three days of downtime every year, one of its subcontractors has warned.
The claim came in a surprising, confusing letter (pdf) to ICANN’s top brass from Packet Clearing House, a major provider of DNS Anycast services.
PCH claims that Ethos Capital, which is in the process of buying PIR from the Internet Society for $1.135 billion, can only make a profit on the deal if it significantly ups the price of .org domains while simultaneously cutting infrastructure spending.
But its numbers don’t make a whole heck of a lot of sense to me, unless you interpret them as a threat to throw .org under a bus.
PCH is a non-profit company in the business, partly, of selling DNS Anycast services. This is the technology that allows domain names to be resolved by a server as close to the end user as possible, cutting down on internet travel time and load-balancing resolution across the world.
For 15 years, it has been providing such services to Afilias, which is the back-end registry services provider for .org and hundreds of other TLDs. Some of the money PIR makes selling .org domains therefore flows from PIR to Afilias to PCH.
While PCH is hardly a household name, even in the domain name industry (in almost 10 years, I’ve mentioned its name once), the letter, sent last week and published by ICANN last night, attempts to open the kimono a little to reveal how much it costs to reliably resolve a major gTLD.
According to PCH, “annual operational cost necessary to ensure the reliable and performant availability of .ORG” has grown from $11 million in 2004 to $30 million today.
Does that mean Afilias pays PCH $30 million a year to help resolve .org? No.
PCH says that in 2019, $1.3 million will come “indirectly from .ORG registration revenue”, with the remaining $29 million “met through tax-deductible contributions from PCH’s many donors”.
As a non-profit, PCH accepts donations from more than 30 listed sponsors, including Afilias and ICANN, as well as household names such as Amazon, Google and Netflix.
According to PCH’s letter, if .org is transferred into for-profit control, this $29 million will dry up. The letter states:

Under IRS tax law, tax-deductible donations to non-profits cannot accrue to the benefit of a for-profit. Therefore if .ORG is transferred to a for-profit entity, we cannot ask our donors to continue to subsidize its operation, 96% of .ORG’s current operational funding will disappear, and the reliability of its operation will sink from that of .COM and .NET to the least-common-denominator of commodity domains, which generally suffer several days of outage per year.

It estimates .org’s potential downtime at 3.12 days per year. It’s not saying that would happen in one big 72-hour chunk, but it still averages out at about 12 minutes per day
This amount of interruption would put PIR firmly on ICANN’s naughty step when it comes to the registry’s contractual uptime commitments — it has to provide 100% DNS service availability every month, under pain of losing its contract.
But why would those PCH contributions dry up?
Is PCH seriously saying that its donors are chucking in $29 million a year specifically to subsidize .org resolution services? Why on Earth would they do that, when .org brings in revenue of over $90 million per year and PIR only pays Afilias $18 million for registry services?
PCH provides Anycast for 243 gTLDs and 120 ccTLDs. The vast majority of these are managed by for-profit entities. There simply are not 243 non-profit gTLDs out there. Not even close.
In fact, most of the gTLDs PCH serves appear to be for-profit Afilias clients, including many dot-brands.
Goodness knows how PCH segments its income and expenditure, but it seems very likely that PCH’s donors are already financially helping to provide resolution services for commercial registries.
Could we interpret this letter as a threat to deliberately degrade .org’s performance, should the Ethos transaction go through? I’m not sure, but I think it’s a plausible read.
Regardless, we have to take PCH’s claims about the loss of sponsorship money at face value if we want to follow the rest of its calculations.

If the .ORG domain is sold for USD 1.135B, wholesale price and number of domains remain unchanged over the remaining nine years of the delegation (USD 900M gross), and operational reliability is maintained (at a cost of USD 270M), the buyer would take a net loss of USD 470M, or -6.33% CAGR. Private equity does not purposefully enter into loss-making deals. We may therefore conclude that the above scenario is not the intended outcome of the proposed sale.

That calculation seems to assume that PIR/Ethos/Afilias picks up the slack caused by the loss of the purported $29 million subsidy, rather than continuing to pay $1.3 million per year.
But PCH goes on to calculate that Ethos could make a profit on the acquisition only if it raises prices at over 10% a year AND refuses to chip in the missing $29 million.

If the .ORG domain is sold for USD 1.135B, prices are increased by 10% annually (USD 1.357B gross), and operational spending is slashed by 99%, (USD 2.7M), the buyer would make a net gain of USD 220M, or 1.99% CAGR, while increasing down-time to more than three days per year.
1.99% CAGR is not a return for which private equity would typically take this magnitude of risk. The unavoidable conclusion is that any private equity buyer who spends $1.135B to buy the .ORG domain must not only increase prices by more than 10% annually, but also cut operational costs to the minimum levels we see available at the low end of the market, with disastrous consequences for .ORG registrants and the public who depend upon them.

Again, all of these calculations appear to rely upon the notion that $29 million of voluntary donations from Amazon, Netflix, IBM, et al disappear when the acquisition is finalized.
It’s difficult to say how much PCH spends on its DNS infrastructure across the board, or how it accounts for its donations. The company does not make any financial information available on its web site.
Wikipedia reports, in an edit apparently made by PCH executive director Bill Woodcock, that the company had revenue of $251 million last year.
I assume the vast majority of that comes from and supports its primary business, which is building and maintaining internet exchange points around the world.
The only 990 tax return I could find for a “Packet Clearing House” in the San Francisco bay area shows an entity with barely $2 million of revenue in 2018.
To return to the letter, PCH concludes:

Three days per year of interrupted communications for millions of not-for-profit organizations would unacceptably damage the stability and functionality of the Internet, and more broadly of society globally.
We believe that stability and functionality should be central to any consideration by ICANN of change of control or contract modifications in relation to the .ORG TLD. As we demonstrate, the proposed transaction, or any financially-similar one, guarantees a disastrous effect on stability. Please do not approve it.

It’s a pretty shocking request, coming from an organization with a 15-year relationship with .org.
Perhaps PCH is concerned that PIR, under new management, will dump Afilias as back-end provider, leading to a loss of business for itself? Maybe, but that only appears to be a piddling $1.3 million out of a $251 million budget.
A more pressing question is arguably whether ICANN, which is currently probing ISOC and Ethos for additional information about the acquisition, finds PCH’s arguments persuasive.
ICANN has so far proved unresponsive to community concerns about pricing, but technical stability is its absolute raison d’etre. If there’s any risk at all that .org will start regularly missing its uptime targets, ICANN is duty bound to take those concerns seriously.

Non-coms want .org’s future carved in stone

ICANN’s non-commercial stakeholders have “demanded” changes to Public Interest Registry’s .org contract, to protect registrants for the next couple of decades.
The NCSG sent a letter to ICANN chair Maarten Botterman this week which stopped short of demanding, as others have, that ICANN reverse its decision to unfetter PIR from the 10%-a-year cap on prices increases it has previously been subject to.
Instead, it asks ICANN to strengthen the already existing notification obligations PIR has when it increases prices.
Today, if PIR wants to up its fee it has to give its registrars six months notice, and registrants are allowed to lock in the current pricing by renewing for up to 10 years.
NCSG wants to ensure registrants get the same kind of advance notification, either from PIR or its registrars, and for the lock-in period doubled to 20 years.
The group is concerned that, now that PIR seems set to become a for-profit venture following its $1.135 billion acquisition by Ethos Capital, there’s a risk the registry may attempt to exploit the registrants of its over 10 million .org domains.
I think it unlikely that ICANN, should it pay any attention at all to the letter, will agree to the 20-year renewal ask, given that the contract only runs for 10 years and that gTLD registries are forbidden from selling domains for periods of longer than a decade.
It would require adjustments with other parts of the contract, such as transaction reporting requirements, and would probably need some industry-wide tinkering with the EPP registry protocols too.
In some respects, the stance on pricing could be seen as a softening of NCSG’s previous position.
In April, it said that price caps should remain, but that they should be increased from the 10% a year level. If that view remains, the letter does not restate it.
The NCSG also wants the oft-criticized Uniform Rapid Suspension policy removed from the .org contract, on the basis that it was only ever supposed to be applied to gTLDs applied for in the 2012 round and not legacy gTLDs.
URS has been incorporated in all but one of the legacy gTLD contracts that have been renewed since 2012.
Finally, NCSG asks that ICANN essentially write the US First Amendment into the .org agreement, writing that it wants:

A strong commitment that the administration of the ORG domain will remain content-neutral; that is, the registry will not suspend or take away domains based on their publication of political, cultural, social, ethnic, religious, and personal content, even untrue, offensive, indecent, or unethical material, like that protected under the U.S. First Amendment.

The fear that a .org in commercial hands will be more susceptible to censorship pressures is something that the Electronic Frontier Foundation has also recently raised.
The basis for the NCSG’s demands are rooted in the original redelegation of .org from Verisign to PIR in early 2003, which came after a competitive bidding process that saw PIR beat 10 rival applicants, partly on the basis of its commitment to non-profit registrants.
You may recall I did a deep-dive into .org’s history last week that covered what was said by whom during that process.
NCSG writes:

The ORG situation is unique because of its origins in a competitive RFP that was specifically earmarked for noncommercial registrants. How ICANN handles this case, however, will have enormous precedential consequences for the stability of the DNS and ICANN’s own reputation and status. Changes in ownership are likely to be increasingly common going forward. Domain name users want stability and predictability in their basic infrastructure, which means that the obligations, service commitments and pricing cannot be adjusted dramatically as ownership changes.

NCSG’s letter has not yet been published by ICANN, but the Internet Governance Project’s Milton Mueller has copied its text in a blog post here.

ICANN delays approval of .org acquisition

Ethos Capital is going to have to wait a little longer for ICANN to sign off its acquisition of .org operator Public Interest Registry.
ICANN said today that it has asked PIR and the Internet Society, which currently owns the registry, for additional information about the proposed $1.13 billion deal.
This has the effect of delaying ICANN’s approval of the deal by up to 30 days, which could be extended by another 30 days if there’s another round of questioning.
Under PIR’s contract, ICANN gets to approve or reject any requests for transfer of control of gTLD registries. I’m not aware of any that have been rejected in the past, though hundreds have been approved.
ICANN’s CEO and chair jointly penned a blog post today, writing:

We have asked PIR to provide information related to the continuity of the operations of the .ORG registry, the nature of the proposed transaction, how the proposed new ownership structure would continue to adhere to the terms of our current agreement with PIR, and how they intend to act consistently with their promises to serve the .ORG community with more than 10 million domain name registrations.

This is perhaps an uncharacteristically assertive stance from the organization, which has so far not been seen as particularly responsive to the legions of critics that have appeared since the .org contract came up for public comment earlier this year.
The exact questions asked have not been published, and the responses may also remain sealed, due to a convention that such matters are handled privately.
PIR has already rejected ICANN’s request to publish its request for approval of the change of control.
But ICANN general counsel John Jeffrey who wrote to PIR and ISOC (pdf) yesterday to say that it is “critical” and “imperative” that PIR give permission for the correspondence to be published.
Jeffrey sneaked in a ‘gotcha’ by alluding to last week’s NTEN web conference, in which ISOC CEO Andrew Sullivan made noises about improving transparency.
The main concern with the deal is of course the fact that .org will once again become a commercial operation, having for 17 years been a non-profit that funneled hundreds of millions of .org dollars into ISOC’s coffers.
Coupled with PIR’s newfound contractual ability to raise prices indiscriminately, this has not sat well with many of the non-profits that call .org their home.
Promises from PIR and Ethos that price increases will be in line with the historical 10%-a-year cap have been met with some skepticism, and there have been calls for more transparency about Ethos’ plans.

Ethos promises to keep .org for many many many many years

Ethos Capital doesn’t plan to flip .org manager Public Interest Registry any time soon, according to its CEO.
Erik Brooks said that private equity firm Ethos, which intends to buy PIR from the Internet Society for over a billion dollars, plans to keep hold of the company for “many, many, many, many years”.
He was talking last night during a public conference call organized by NTEN, which also included the CEOs of ISOC and PIR, as well as critics from the Electronic Frontier Foundation, the the National Council of Nonprofits and the Irish chapter of ISOC.
The call was set up because many believe .org’s transition back into for-profit hands, coupled with its recently gained ability to raise prices arbitrarily, means .org’s non-profit registrants are in for a hard time as Ethos profit-takes.
While Brooks and chief purpose officer Nora Abusitta made all the right noises to settle such concerns, promising to not unreasonably raise prices and to stick with PIR’s commitment to non-profits, some participants remained skeptical.
Brooks said that his vision for Ethos, which he founded earlier this year, is “fundamentally broader and more expansive than traditional investing” where “success is defined as success for all participants, success for customers, employees, vendors, the community impacted by the company”.
PIR CEO Jon Nevett said he was initially concerned about the deal — which was negotiated between ISOC and Ethos without PIR’s participation — he is now “convinced that they’re here to do the right thing”.
He said that rather than funneling all of PIR’s spare .org reg cash to ISOC as happens currently, it will now be able to invest some of it in improving .org instead.
Brooks said he understand the community concerns about price increase.
“We are absolutely committed to staying within the spirit of how PIR has operated with the price system they have operated with before,” he said. That means 10% a year on average, as Ethos has stated before.
He added that “working on some mechanisms and some ideas that will give registrants more assurance” that this is just not PR spin, and that these will be communicated publicly over the coming weeks.
The fact that ICANN lifted the previous 10% contractual price cap just a few months before the deal was sealed did not factor into Ethos’ thinking, he said.
While what Ethos is describing is all well and good, there’s no telling what a future owner of PIR would do, should Ethos sell it or float it on the public markets.
That looked like a possibility, especially given that some say that Ethos is under-paying by a considerable margin for the registry.
But Brooks, asked what Ethos’ exit runway for PIR looked like, said that the company was committed to owning the registry “for an extraordinarily long period of time… dramatically outside the normal window of somebody owning a business… many, many, many, many years”.
Ethos’ own backers — which apparently include investment vehicles linked to Mitt Romney and the late Ross Perot — are on board with this long-term plan, he said.
So, assuming Brooks is a man of his word, .org registrants only have to look forward to price increases of no more than 10% a year for some time to come, which is kinda the situation they were in at the start of the year.
But not everyone is as trusting/gullible as me.
The EFF’s Mitch Stoltz, who was on the call, later published a blog post that seemed to shift gears somewhat away from pricing concerns towards the potential for future censorship of .org domains.
“Ethos Capital has a financial incentive to engage in censorship—and, of course, in price increases,” he wrote.
He alluded to that PIR had briefly toyed with the idea of a “UDRP for copyright” a few years ago, but had backed down under community pressure, something that he doesn’t believe Ethos would necessarily do.
Asked about the censorship issue by Stotlz during the call, Brooks said he had not given the issue a great deal of consideration but that he expected PIR’s practices on this kind of thing to continue on as they are today.

Amid .org controversy, Cerf predicts the death of all domains

As the debate about the sale by the Internet Society of .org registry PIR to a private equity company passionately continues, one reason put forward to defend the deal doesn’t appear to have been given much attention: it seems ISOC doesn’t have much confidence in the longevity of the domain name industry.
Reducing ISOC’s exposure to a single revenue source has been expressed as a pro for the deal by several supporters, but was perhaps best stated by Vint Cerf — ISOC founder, former ICANN chair, and Google’s chief internet evangelist — on an ISOC mailing list posting last week. Cerf wrote:

The domain name business started in 1992. There is not assurance that it will go one indefinitely — something new will likely come along. It would be good for ISOC to be able to continue its work without specific dependence on a single TLD’s commercial viability.

It’s perhaps not a particularly controversial statement. Nothing lasts forever. Everything dies. Whether it’s climate-related human extinction, a robot uprising, the zombie apocalypse, or the inevitable heat death of the universe, something’s definitely going to kill off DNS eventually.
I expect Cerf was more probably referring to a new technology that will come along to replace the need for domains altogether.
But is it a pressing reason to flog Public Interest Registry in 2019?
Maybe. It’s no secret that volume growth across the domain market is not great. Verisign’s latest Domain Name Industry Brief showed most growth in the second quarter driven by anomalies.
Even .org itself is struggling. Look at this chart, that tracks .org domains under management in the last few years.

You’ll see that DUM peaked at 11.4 million names in early 2016. That was after a couple of anomalous spikes that I speculate were related to pricing promotions or marketing campaigns.
It only took a few years for the gTLD to shed these gains.
Before the spikes, .org was at 10.6 million DUM. By July this year, it was at 10.5 million. Not pictured, the just-published transaction reports for August show the loss of about 30,000 more domains, bringing the TLD to its lowest level since October 2014.
Roughly speaking, for every domain it loses, PIR’s top line shrinks by a little under $10. A million domains lost is $10 million in lost revenue.
And this is a period in which PIR did not increase its prices, despite being permitted to do so by 10% per year.
Some amount of recent shrinkage could be accounted for by PIR’s “Quality Performance Index”, which seeks to reduce abusive .org registrations. But that’s only been in place since this June.
So, ISOC and Cerf perhaps have a right to be pessimistic.
And if the decline in volumes continues, it is perhaps inevitable that PIR’s new owner will have to increase prices just to keep revenues from going down in line with DUM.