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.

5 Comments Tagged: .org, acquisition, anycast, dns, ethos, ICANN, isoc, packet clearing house, pch, pir

Russian company approved as gTLD escrow provider

ICANN has approved Russian internet exchange point MSK-IX as its 10th gTLD data escrow provider.
The organization said that week that Joint Stock Company “Internet Exchange “MSK-IX” has been added to its roster of companies fighting for gTLD registries escrow business.
MSK-IX is mainly in the business of operating an internet peering hub — a location where ISPs can connect their networks to backbones and to each other — in Moscow.
It becomes the fourth escrow provider in Europe, and the only one in Europe outside of the EU.
There are also five approved providers in Asia and only one — original provider Iron Mountain — in North America.
ICANN says it is not currently looking for any more providers.
gTLD registries are contractually obliged to periodically put their domain and registrant data into escrow, on the off-chance they go out of business and domains need to be transferred to a different company.

Comment Tagged: escrow, ICANN, msk-ix, new gTLDs

Guy gets 14 years for trying to steal a domain with a gun

An American man has received a sentence of 14 years in prison after being found guilty of a plot to steal a domain name at gunpoint.
Rossi Lorathio Adams II received the sentence on Monday, according to the US Attorney’s Office in Iowa, having been found guilty of “one count of conspiracy to interfere with commerce by force, threats, and violence”.
Adams, who went by the screen name Polo, attempted to obtain the domain doitforstate.com from its registrant to support a popular social media channel he managed.
When the registrant refused multiple times, Adams drove his cousin — armed with a gun and written instructions how to push the domain into Adams’ GoDaddy account — to the registrant’s house.
A fight broke out, described vividly by the US Attorney, during which both the registrant and the gunman got shot.
Both survived, and the gunman got 20 years behind bars for his role in the attack.
If there’s a moral about domaining here, I invite the reader to discover it on their own.

1 Comment Tagged: crime, godaddy, theft

GoDaddy girls often make more money than the men

Women in some roles at GoDaddy are making more money than their male counterparts, according to data released by the registrar today.
In technical positions in the US, female employees are making on average $1.03 for every $1 men make, GoDaddy said. Women in leadership positions make two cents more than men.
But women in non-techie, non-leadership jobs make a penny less than males, the company said.
“The 2019 global salary data shows that GoDaddy is paying men and women at parity across the company, when comparing men and women in like roles,” GoDaddy said.
The new data also shows that 29% of GoDaddy employees globally are female, which is the same as last year.
But the proportion of women in technical jobs decreased by two points to 17%.
Meanwhile, 36% of non-technical roles are staffed by women, up one point from 2018.
In the US, the female contingent was a little higher — 30% overall, 19% of techies and 37% of non-techies.
The male-female mix at GoDaddy appears to be in the same ballpark as what we generally see with attendance statistics coming out of ICANN meetings — roughly 70/30.
GoDaddy started publishing this data five years ago as part of a plan to foster diversity, reduce unconscious bias, and generally get away from its roguish foundational image as a company that flogged millions of domains with “GoDaddy Girls” — usually busty spokesmodels in skimpy clothing.

4 Comments Tagged: godaddy

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.

Comment Tagged: .org, acquisition, eff, ethos, ICANN, isoc, ncsg, pir, price caps, renewal, verisign

Kamel’s deputy gets promoted at ICANN

ICANN has promoted Mandy (Kathryn) Carver to the position of senior VP for governmental and intergovernmental engagement, replacing her late boss, Tarek Kamel.
Carver has been with ICANN for 13 years and reported to Kamel, as a plain VP, for the last six. She’ll now report directly to the CEO.
She’s a human rights and health lawyer, with previous experience at several non-profit entities.
Kamel died in October at 57 after a long battle with poor health.

Comment Tagged: ICANN

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.

8 Comments Tagged: .org, acquisition, ethos, ICANN, isoc, pir

AlpNames died months ago. Why is it still the “most-abused” registrar?

Despite going out of business, being terminated by ICANN, and losing all its domains several months ago, defunct AlpNames is still being listed as the world’s most-abused registrar by a leading spam-fighting organization.
SpamHaus currently ranks the Gibraltar-based company as #1 on its list of the “The 10 Most Abused Domain Registrars”, saying 98.7% of its domains are being used to send spam.
But AlpNames customers and regular DI readers will recall that AlpNames mysteriously went titsup in March, then got terminated by ICANN, then had its entire customer base migrated over to CentralNic in April.
So what’s this about?

I asked SpamHaus earlier this week, and it turns out that Whois query throttling is to blame.
It seems SpamHaus only pings Whois to update the registrar associated with a specific domain when the domain expires, or the name servers change, or where it’s a new registration with an unknown registrar.
I gather that when CentralNic took over AlpNames’ customer base, it did so with all the original name server information intact.
So, SpamHaus’ database still associates the domains with AlpNames even though it’s been out of business for the better part of a year.
A SpamHaus spokesperson said:

This is a very unusual situation, as a huge majority of the domains that contribute to the Top 10 list in question are created, abused, and burnt quickly; meaning a change of registrar is exceptionally rare. However, in the case of these particular domains registered with AlpNames we can only assume that the sheer volume of unused domains was too high for the owner to use in one single hit.

The actual number of “AlpNames” domains rated as spammy by SpamHaus is pretty low — 1,976 of the 2,002 domains it saw were rated as “bad”.
GMO, at #4 on the list, had over 40,000 “bad” domains, but a lower percentage given the larger number of total domains seen.

2 Comments Tagged: alpnames, centralnic, ICANN, security, spam, spamhaus

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.

6 Comments Tagged: .org, acquisition, censorship, copyright, ethos, ICANN, isoc, pir, price caps

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.

14 Comments Tagged: .irg, .org, ethos capital, isoc, pir