Ethos clarifies .org price rises, promises to reveal number of censored domains

Public Interest Registry and would-be owner Ethos Capital have slightly revised the set of promises they hope to keep if ICANN approves the $1.13 billion acquisition.

Notably, in updating their proposed Public Interest Commitments (pdf), they’ve set out in plain dollar terms for the first time the maximum annual price PIR would charge for a .org domain over the coming seven years.

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Previous versions of the PICs just included a formula and invited the reader to do the math(s).

The two companies are proposing to scrap price caps altogether after June 2027.

If ICANN rejects the deal, under its current contract PIR would be free to raise its prices willy-nilly from day one, though some believe it would be less likely to do so under its current ownership by the non-profit Internet Society.

The new PICs also include a nod to those who believe that PIR would become less sensitive to issues like free speech and censorship — perhaps because China may lean on Ethos’ shadowy billionaire backers. The document now states:

Registry Operator will produce and publish annually a report… This report will also include a transparency report setting forth the number of .ORG domain name registrations that have been suspended or terminated by Registry Operator during the preceding year under Registry Operator’s Anti-Abuse Policy or pursuant to court order.

A few other tweaks clarify the launch date and composition of its proposed Stewardship Council, a body made up of expert outsiders that would offer policy guidance and have a veto on issues such as changes to .org censorship and privacy policy.

The PICs now ban family members of people working for PIR from sitting on the council, and clarify that it would have to be up and running six months after the acquisition closes.

Because .org is not a gTLD applied for in 2012, the PICs do not appear to be open for public comment, but post-acquisition changes to the document would be.

ICANN currently plans to approve or deny the acquisition request by April 20, just 11 days from now.

End of the road for Neustar as GoDaddy U-turns again and buys out its registry biz

GoDaddy has changed its mind about the registry side of the industry yet again, and has acquired the business of Neustar, one of the largest and oldest registries.

The deal will see GoDaddy purchase, for an undisclosed sum, all of Neustar’s registry assets, amounting to 215 TLDs and about 12 million domains.

It means the gTLD .biz is now under the new GoDaddy Registry umbrella, as are the contracts to run the ccTLDs .us, .in, and .co, 130 dot-brand gTLDs and 70 open gTLDs.

Neustar’s registry staff are also being taken on.

“We’re bringing the whole team aboard. One of the things we’re very excited about is bringing the team aboard,” Andrew Low Ah Kee, GoDaddy’s chief operating officer, told DI today.

He added that, due to coronavirus job insecurities wracking many minds right now, GoDaddy has promised its entire workforce that there will be no layoffs in the second quarter.

Nicolai Bezsonoff, currently senior VP of Neustar’s registry business, will run the new unit. He said for him the opportunity for “innovation” was at the heart of the deal.

“We’ve always been one step removed from the customer, so it can be hard to understand what customer wants to do,” he said. “This gives us huge customer insight into what customers want and how they want to use domains.”

Pressed for hypothetical examples of innovation, Bezsonoff floated ideas about selling domains for partial-year periods, or doing more to crack down on DNS abuse.

The deal is an example of “vertical integration”, which has been controversial due to the potential risk of a dominant registry playing favorites with its in-house registrar, or vice versa.

While registries such as Donuts, CentralNic and until recently Uniregistry vertically integrated with little complaint, the industry is currently nervous about Verisign’s newfound ability under its ICANN contract to own and run a registrar.

Because GoDaddy is the Verisign — the runaway market leader — of the registrar side of the industry, one might expect this deal (expected to close this quarter) to get more scrutiny than most.

But the company says it’s going to “strictly adhere to a governance model that maintains independence between the GoDaddy registry and registrar businesses”.

Low Ah Kee said that this means the registry and registrar “won’t share any information that gives or appears to given any unfair advantage” to the GoDaddy registrar, that their business performance will be assessed separately, and that they’ll be audited to make sure they’re not breaking this separation.

If GoDaddy appears to be preemptively expecting criticism, there’s a good reason why: the proposed acquisition of .org manager PIR by private equity group Ethos Capital has caused huge upset in recent months, and there are some parallels here.

First, like .org, pricing restrictions were lifted in Neustar’s .biz under a contract renewal with ICANN last year. It fell under the radar a little as .biz is substantially smaller, not a legacy gTLD as such, and not widely used.

Like the .org deal, the transfer of control of .biz will also be subject to ICANN’s approval before GoDaddy and Neustar can seal the deal.

Could we be looking at another big public fight over a gTLD acquisition?

But unlike Ethos with .org, GoDaddy says it has no intention of raising prices with .biz.

“We will not be raising prices, in fact we will look into reducing prices for some TLDs,” Bezsonoff said.

One TLD where one assumes prices won’t be going down is .co, where Neustar has just had its margins massively slashed by the Colombian government.

The acquisition was announced just days after the Colombian government announced that it has renewed its contract with Neustar to run .co for another five years, but under financial terms hugely more favorable to itself.

Whereas the initial 10-year term saw the government being paid 6% to 7% of the .co take, that number has soared to 81%, making .co — arguably Neustar’s registry crown jewel — a substantially less-attractive TLD to manage.

One assumes that the acquisition price would have fluctuated wildly based on the outcome of the .co renegotiation, but the GoDaddy/Neustar execs I talked to today didn’t want to talk about terms.

GoDaddy’s history with the registry side of the business has been changeable.

As far as ICANN contract is concerned, it is already a registry because it owns the .godaddy dot-brand. But that’s currently unused, with the registry functions outsourced to — cough — Neustar’s arch-rival Afilias.

Given Neustar’s religious devotion to the dot-brand concept, and the weirdness of using one of your primary competitors for a key function, one might expect both of those situations to change.

GoDaddy did also apply for .casa and .home back in 2012, but changed its mind and abandoned both bids fairly early in the process.

The sudden excitement about the registry business today begs the question of why GoDaddy didn’t buy Uniregistry’s registry business at the same time as it bought its secondary market and registrar earlier this year, but apparently it was not for sale.

Following the acquisition, Neustar is keeping its DNS resolution services and GoDaddy will continue to use them, so Neustar is not entirely out of the domain game, but it looks like the end of the road for Neustar as a brand I regularly report on.

The registry started life in 2000 as “NeuLevel”, a joint-venture between Neustar and Aussie registrar Melbourne IT formed to apply to ICANN for new gTLDs. It wanted .web, but got .biz, which now has about 1.7 million names under management, down from a 2014 peak of 2.7 million.

ICANN to consider cancelling ICANN 68 tomorrow

ICANN is to consider whether to cancel its in-person ICANN 68 gathering at a meeting of its board of directors tomorrow.

The agenda for its meeting tomorrow has one line item: “Impact of COVID-19 on ICANN68”.

The four-day Policy Forum is currently scheduled to take place from June 22 in Kuala Lumpur, Malaysia.

I think the chances of this event going ahead in the midst of the coronavirus pandemic are zero point zero.

March’s ICANN 67 meeting was replaced with a series of virtual Zoom rooms on February 19, when cases of Covid-19 had been reported in just 26 countries and it was still widely thought of as a Chinese problem.

According to today’s data from the European Centre For Disease Prevention and Control, coronavirus cases have been reported in 204 countries and territories. That’s pretty much all of them.

Even if some currently hard-hit countries in North America and Europe are over the hump by June, you can guarantee that somewhere in the world there’ll be a horrific Biblical epidemic going on. I can’t see ICANN taking the risk of opening its doors to the world at a time like that.

Frankly, I think ICANN 69, the annual general meeting slated for Hamburg in October, has a big question mark hanging over it as well.

Germany may have been handling its crisis relatively well compared to other nations, but ICANN has participants from 150 countries and it may well have to make its call based not on the strongest national response but the weakest.

ICANN expects “significant” budget impact from coronavirus

The ongoing coronavirus pandemic is expected to have a “significant” impact on ICANN’s budget, according to an update from the organization.

The organization published its expectations of a $140.4 million budget for the fiscal year that begins this July last December, and opened it up for public comments.

In its summary of those comments (pdf), which had a February 25 deadline and therefore were not focused on the pandemic’s potential impact, ICANN said:

the COVID-19 pandemic is affecting significantly the entire world. ICANN expects that its activities and financial position will be significantly impacted as well. The ICANN org is working with the Board to assess and monitor the potential impact to ICANN’s funding, and planned work such as face-to-face meetings, travel, etc.

Any pandemic-related changes to the budget will be published prior to board approval, ICANN said.

So where is ICANN expecting the impact? It’s not entirely clear. I would expect to see some minor gains from slashing its travel budget in the wake of social distance rules, but it’s less obvious where a “significant” shortfall could occur.

ICANN had operational revenue — the money it gets from billing registries and registrars — of $136.8 million in the fiscal year ending June 30, 2019, its most recently reported year (pdf).

Of that total, roughly $56 million came from the market leaders in both segments, Verisign and GoDaddy, both of which have been given glowing analyst coverage since the outbreak began.

One commentator recently wrote that Verisign is “immune” from coronavirus and GoDaddy’s CFO told analysts just last week that he expects the impact of coronavirus to be “minimal” in the first quarter. That could of course change in future.

Almost half of ICANN’s revenue, some $65.7 million, comes from the top 10 registries and registrars.

So is ICANN expecting to see weakness in the long tail, the few thousand accredited registrars and gTLD registries that account for under $1 million in ICANN contributions per year? Is it expecting reduced voluntary contributions from the ccTLDs and Regional Internet Registries?

Will coronavirus cause huge numbers of small businesses to abandon their domains as they go out of business? Will it inspire large numbers of the recently unemployed and quarantined to start up web-based businesses in an attempt to put food on the table? Will it cause large portfolio owners to downsize to save costs?

All of these outcomes seem possible, but these are unprecedented times, and I couldn’t being to guess how it will play out.

ICANN’s number two Cyrus Namazi quits. Probably due to sexual discrimination claims.

The head of ICANN’s Global Domains Division, Cyrus Namazi — arguably ICANN’s number-two exec — has resigned from the organization, according to multiple sources. I believe it’s related to allegations of sexual discrimination.

ICANN staffers were told this evening that he’s resigned “effective immediately” and that a public announcement will follow.

Long-time ICANN staffer Theresa Swinehart, currently senior VP of multistakeholder strategy and strategic initiatives, will run GDD while a replacement is sought.

While I don’t expect ICANN to announce the reasons for Namazi’s departure, I believe it’s related to allegations of sexual indiscretions.

I’ve been aware for a few months of allegations against Namazi for sexual discrimination and/or sexual harassment, but I’ve been unable to get sufficient on-the-record information to run a story.

What I do know, from digging around on court web sites, is that ICANN was sued about a year ago by a former staffer called Jennifer Gore for alleged disability and gender discrimination, allegedly carried out by Namazi.

Gore’s complaint can be read here (pdf). ICANN’s response can be read here (pdf).

I’ve also been made aware of a few other female ICANN staffers who have quit allegedly due to Namazi’s behavior.

And I gather he’s been on-leave recently. Anyone who was at ICANN 67 will have noted his absence.

I’ve not heard of any allegations that could be described as remotely criminal. We’re just talking about allegations of inappropriate comments and actions at work.

I have absolutely no idea how many of the allegations, if any, are true. None. I just know that there are a lot of them.

I do know that ICANN’s PR team have been banned from talking to me for the last few weeks, since I learned about these allegations — by senior VP of global communications Sally Newell Cohen — because I talked offensive smack about Namazi to him and to another senior staffer on social media messaging channels.

ICANN grants Verisign its price increases, of course

ICANN has given Verisign its ability to increase .com prices by up to 7% a year, despite thousands of complaints from domain owners.

The amendments give Verisign the right to raise prices in each of the last four years of its six-year duration. The current price is $7.85 a year.

Because the contract came into effect in late 2018, the first of those four years begins October 26 this year, but Verisign last week said that it has frozen the prices of all of its TLDs until 2021, due to coronavirus.

Not accounting for discounts, .com is already already worth $1.14 billion in revenue to Verisign every year, based on its end-of-2019 domains under management.

In 2019, Verisign had revenue of $1.23 billion, of which about half was pure, bottom-line, net-income profit.

In defending this shameless money-grab, ICANN played up the purported security benefits of the deal, while offering a critique of the domainers and registrars that had lobbied against it.

Göran Marby, ICANN’s CEO, said in a blog post.

I believe this decision is in the best interest of the continued security, stability, and resiliency of the Internet.

…

Overall, the decision to execute the .COM Registry Agreement amendment and the proposed binding Letter of Intent is of benefit to the Internet community.

The decision was explained in more detail in a eight-page analysis document (pdf) published late last week.

I’ll summarize this paper in three bullet points (my words, not ICANN’s):

• Domainers are hypocrites.
• The deal is good for DNS security.
• Our hands were tied anyway.

First, while ICANN received over 9,000 comments about the proposed amendment, almost all negative, it said that publicity campaigns from domainer group the Internet Commerce Association and domainer registrar Namecheap were behind many of them.

the Internet Commerce Association (ICA) and Namecheap, are active players in the so called “aftermarket” for domain names, where domain name speculators attempt to profit by “buying low and selling high” on domain names, forcing end users to pay higher than retail prices for desirable domain names

It goes on to cite data from NameBio, which compiles lists of secondary market domain sales, to show that the average price of a resold domain is somewhere like $1,600 (median) to $2,400 (mean).

Both Namecheap and ICA supporter GoDaddy, which sells more .coms than any other registrar, have announced steep increases in their .com retail renewal fees in recent years — 20% in the case of GoDaddy — the ICANN document notes.

This apparent hypocrisy appears to be reason ICANN felt quite comfortable in disregarding many of the negative public comments it received.

Second, ICANN reckons other changes to the .com contract will benefit internet security.

Under a side deal (pdf) Verisign’s going to start giving ICANN $4 million a year, starting next January and running for five years, for what Marby calls “ICANN’s initiatives to preserve and enhance the security, stability, and resiliency of the DNS.” These include:

activities related to root server system governance, mitigation of DNS security threats, promotion and/or facilitation of Domain Name System Security Extensions (DNSSEC) deployment, the mitigation of name collisions, and research into the operation of the DNS.

Note that these are without exception all areas in which ICANN already performs functions, usually paid for out of its regular operating budget.

Because it looks like to all intents and purposes like a quid pro quo, to grease the wheels of getting the contract amendments approved, Marby promised that ICANN will commit to “full transparency” as to how its new windfall will be used.

The new contract also has various new provisions that standardize technical standardization and reporting in various ways, that arguably could provide some minor streamlining benefits to internet security and stability.

But ICANN is playing up new language that requires Verisign to require its registrars to forbid their .com registrants from doing stuff like distributing malware and operating botnets. Verisign’s registrar partners will now have to include in their customer agreements:

a provision prohibiting the Registered Name Holder from distributing malware, abusively operating botnets, phishing, pharming, piracy, trademark or copyright infringement, fraudulent or deceptive practices, counterfeiting or otherwise engaging in activity contrary to applicable law and providing (consistent with applicable law and any related procedures) consequences for such activities, including suspension of the registration of the Registered Name;

Don’t expect this to do much to fight abuse.

It’s already a provision that applies to hundreds of other TLDs, including almost all gTLDs, and registrars typically incorporate it into their registration agreements by way of a link to the anti-abuse policy on the relevant registry’s web site.

Neither Verisign nor its registrars have any obligation to actually do anything about abusive domains under the amendments. As long as Verisign does a scan once a month and keeps a record of the total amount of abuse in .com — and this is data ICANN already has — it’s perfectly within the terms of its new contract.

Third and finally, ICANN reckons its hands were pretty much tied when it comes to the price increases. ICANN wrote:

ICANN org is not a competition authority or price regulator and ICANN has neither the remit nor expertise to serve as one. Rather, as enshrined in ICANN’s Bylaws, which were
developed through a bottom up, multistakeholder process, ICANN’s mission is to ensure the security and stability of the Internet’s unique identifier systems. Accordingly, ICANN must defer to relevant competition authorities and/or regulators, and let them determine if any conduct or behavior raises anticompetition concerns and, if so, to address such concerns, whether it be through price regulation or otherwise. As such, ICANN org has long-deferred to the DOC and the United States Department of Justice (DOJ) for the regulation of wholesale pricing for .COM registry services.

It was of course the DoC, under the Obama administration, that froze Verisign’s ability to raise prices and, under the Trump administration, thawed that ability in November 2018.

If you’re pissed off that the carrying cost of your portfolio is about to go up, you can blame Trump, in other words.

No .com price increases this year. Thanks, coronavirus!

Verisign won’t increase prices on .com or any of its other TLDs this year.
The promise comes as part of a package of coronavirus-related measures the company announced on its blog yesterday. Verisign said:

In order to support individuals and small businesses affected by this crisis, Verisign will freeze registry prices for all of our Top-Level Domains (TLDs), including .com and .net, through the end of 2020. In addition, we will soon deploy a program, available to all retail registrars, to provide support and assistance for domain name registrants whose domain names will be expiring in the coming months.

No additional details on the proposed registrant support program were made available.
The pricing news sounds good, especially for high-volume domain owners such as domainers and trademark owners, but it should be noted that in the case of .com it amounts to a mere two-month price freeze.
Under the terms of its current agreement with ICANN, it can’t raise prices at all. The controversial proposed amendments that recently attracted about 9,000 objections, would reinstate price-raising powers.
However, assuming ICANN approves the new contract, which seems likely, Verisign would only be able to up its fees in the final four years of its six-year deal. The first of those four years begins October 20 this year.
Conceivably, it could have announced a 7% price hike for .com on October 21, but the company has now said that it will not.
Verisign also said yesterday that it’s donating an “initial” $2 million to “first responders and medical personnel in the Northern Virginia area, the United Way’s COVID-19 relief efforts, and the Semper Fi & America’s Fund”.
It is also doubling the funding available to the scheme where it matches employees’ charitable donations, which could increase (and incentivize) giving to coronavirus-related causes.

US senators tell ICANN to reject .org deal

Five US senators have called on ICANN to not approve the acquisition of Public Interest Registry by Ethos Capital.
The senators — all Democrats — said in a March 18 letter published today that the proposed $1.13 billion deal is “against the public interest”.
The surprisingly detailed nine-page letter (pdf) was signed by Ron Wyden, Richard Blumenthal, Elizabeth Warren and Anna Eshoo, following up from a similar letter sent in January. The new letter also has Ed Markey as a signatory. They write:

We were concerned that the sale would be contrary to ICANN’s commitment to the public benefit, that it might undermine the reliability of .ORG websites, and that Ethos is unlikely to be a responsible steward of the .ORG registry. New information we have obtained in the last two months, including statements made by ISOC, PIR, and Ethos, has validated these concerns. Accordingly, we write to reiterate our view that ICANN should block the proposed change of control of the .ORG registry.

Chief among their concerns is the lack of transparency about who is actually bankrolling the deal. Ethos has confirmed it will be partially funded by loans, but the identities of its actual owners have not been confirmed.
It’s been said that two of the backers are investment firms linked to high-profile Republicans — Senator Mitt Romney and the late Ross Perot.
The senators are also worried that the business plan Ethos has publicly laid out may not be realistic, suggesting that PIR will be forced to rip off customers in order to recoup the cost of the acquisition.
They go on to say that Ethos’ promise to only increase prices by 10% per year, enforceable via a Public Interest Commitment in its ICANN contract, is “weak”, particularly given that the commitment would automatically expire seven years from now.
They’re also not buying the notion that PIR’s proposed Stewardship Council, made up of outside .org stakeholders, would have enough power to guide registry policy, calling the council “toothless”.
ICANN is of course under no obligation to take its lead from a handful of legislators, but it’s yet another voice stacked against a deal that already had very little support.
ICANN has until April 20 to make a decision about the change of control.

More ICANN events cancelled for May

ICANN has cancelled its annual GDD Industry Summit and DNS Symposium, which had been scheduled to take place in Paris, France, in May.
“The decision to cancel these events was made in light of the rapidly evolving COVID-19 virus outbreak and, for the GDD Summit, included conversations with the Contracted Parties House,” ICANN said in a statement.
The two events had been due to take place back to back from May 3 to 6 and May 7 and 8, respectfully.
The GDD event is for commercial members of the domain name industry — registries and registrars — while the Symposium focuses on the technical side of the industry and had planned to focus on DNS security.
It appears that, unlike ICANN 67, neither is being replaced with a virtual meeting.

.org decision delayed another month

ICANN has been given another month to decided whether or not to approve Ethos Capital’s proposed $1.13 billion acquisition of Public Interest Registry from the Internet Society.
PIR said today that it has agreed to give ICANN until April 20 to give it the yay or nay on the controversial deal.
It seems the disruption and distraction caused by the coronavirus pandemic played at least a small role in the decision. PIR said:

To ensure ICANN and the California Attorney General’s office, with which we have been communicating, have the time they need to address any outstanding questions regarding the transaction, especially in light of current events, we have agreed to an ICANN deadline extension to April 20th. We look forward to ICANN’s decision by this date.

Yesterday, opponents of the deal suggested that the acquisition could interfere with the global pandemic response, but PIR has dismissed these claims today as “misleading and alarmist” and “deceiving the public”.
Meanwhile, PIR has updated the proposed contractual Public Interest Commitments that it believes will address some of its critics’ concerns.
Future changes to the PICs will be subject to ICANN’s public comment process, the company said. This is presumably designed to calm fears that the registry will simply dump the PICs next time its contract comes up for renegotiation.
Given the level of confidence in the efficacy of the public comment process — which I would argue is currently close to zero — I doubt this new promise will have its intended effect.
PIR has also taken on criticism that its proposed .ORG Stewardship Council, designed to make sure .org continues to be managed in the public interest, could easily be captured by Ethos yes-men.
Now, instead of appointing the first five members of the council itself, Ethos will instead recruit an “internationally-recognized executive search firm” to find five suitable candidates from stakeholder groups including ICANN’s Non-Commercial Stakeholder Group and At-Large Advisory Committee.
Those nominations will still be subject to final approval by the PIR board, however, so again I think the deal’s critics will still have complaints to cling to.
PIR expects to announce further details of the council selection process next Monday, March 23.