.org sale officially dead
Public Interest Registry has formally announced that its proposed $1.13 billion acquisition by Ethos Capital is dead.
The company told ICANN yesterday that it is withdrawing its request for a change of control under its .org contract and that it “will not be pursuing an ICANN Request for Reconsideration or taking any other action to try to revive the Transaction”.
In a statement, CEO Jon Nevett said that PIR is no longer for sale to any other party. It will remain under the Internet Society’s control.
He also pointed out that it’s not within ICANN’s power to arbitrarily transfer .org to another registry, as some critics have called for.
“Such a transfer by ICANN is a contractual impossibility under our registry agreement,” he wrote.
ICANN rejected the change of control request after deciding it was not in the public interest for .org to pass into for-profit hands.
Following the decision, ISOC had indicated that PIR was no longer for sale.
The .org deal may be dead and buried, but calls remain for PIR to lose its contract
The Internet Society has revealed that the .org registry operator PIR is no longer for sale.
The news came in a statement from ISOC chair Andrew Sullivan late Friday, less than 24 hours after ICANN withheld its consent for the proposed $1.13 billion acquisition by private equity firm Ethos Capital.
ICANN had held the door open for Ethos and ISOC to resubmit a change of control request, and Ethos had said Thursday that it was evaluating its options, but it appears the decision has been made to keep PIR under ISOC’s wing.
In his statement, Sullivan expressed his dismay that ICANN had acted as a “regulator” by evaluating the deal using a public interest test rather than simply rubber-stamping it as it has in all other cases of registry acquisitions. He wrote:
It should concern the Internet community that ICANN has shown itself to be much more susceptible to political pressure than its limited mandate would recommend.
…
Now that we know that ICANN believes its remit to be much larger than we believe it is, we can state this clearly: neither PIR nor any of its operations are for sale now, and the Internet Society will resist vigorously any suggestion that they ought to be.
But who would want to, or could afford to, buy it? While ICANN has made it clear that PE firms are welcome to acquire other TLDs, it wants .org to remain in non-profit hands.
During the last few months of controversy, one other embryonic effort to take over .org was announced, led by founding ICANN chair Esther Dyson.
Called the Cooperative Corporation of dot-org Registrants (CCOR), it had no intention of handing over a billion dollars for .org, it simply wanted ICANN to assign the contract to its control.
It still wants that, or something like that. In a statement Saturday, CCOR said it “calls upon ICANN to proceed with the established multi-stakeholder led open request for proposals for stewardship of the dot-org domain”.
Unless it can be shown that PIR has seriously broken the terms of its Registry Agreement, the chances of ICANN randomly opening up .org to tender is pretty much zero.
CCOR goes on to say that it is still worried about .org falling into private hands and that it will lobby for legally binding policies “including the preservation of privacy, diversity and human rights, and freedom from censorship”.
“Dangerous precedent” as ICANN rejects $1.13 billion .org buyout
In a decision that will shock many, ICANN won’t let Ethos Capital buy Public Interest Registry from the Internet Society.
Its board of directors yesterday voted to reject PIR’s request for a change of control of the .org contract, saying that “the public interest is better served in withholding consent”.
Ethos responded angrily almost immediately, saying the decision “sets a dangerous precedent with broad industry implications” and that it is “evaluating its options”.
The ICANN resolution, which was published overnight, is justified by setting out the case that .org is a unique case: a large legacy gTLD with a mandate to serve non-profit entities.
The Board was presented with a unique and complex situation – a request to approve a fundamental change of control over one of the longest-standing and largest registries, that also includes a change in corporate form from a viable not-for-profit entity to a for-profit entity with a US$360 million debt obligation, and with new and untested community engagement mechanisms relying largely upon ICANN contractual compliance enforcement to hold the new entity accountable to the .ORG community. ICANN is being asked to agree to contract with a wholly different form of entity; instead of contracting with the mission-based not-for-profit that has responsibly operated the .ORG registry for nearly 20 years, with the protections for its own community embedded in its mission and status as a not-for-profit entity. If ICANN were to consent, ICANN would have to trust that the new proposed for-profit entity that no longer has the embedded protections that come from not-for-profit status, which has fiduciary obligations to its new investors and is obligated to service and repay US$360 million in debt, would serve the same benefits to the .ORG community.
Essentially, ICANN is holding ISOC to the by-and-for non-profits commitment that it made when it inherited the registry from Verisign back in 2002. You may recall I went into some depth on the history of .org back in December.
While noting the broad criticism from various parties — which included domainers and non-profits — about the proposed acquisition, the resolution makes specific reference to the investigation by the office of the California attorney general, which had made vague threats of legal action against ICANN.
Some commentators, including Jonathan Zuck and Michele Neylon — are worried that the AG’s influence now means ICANN has a new boss, and that special interest groups in future need only lobby his office in order to override community-built consensus.
But ICANN did not single out one reason for its decision, saying withholding consent was “reasonable in light of the balancing of all of the circumstances”.
Ethos, while not calling out the AG directly, made the broader claim that ICANN has acted outside its mandate by succumbing to lobbying by outside parties.
Its statement, which I think contains hints at future legal action, reads in full:
Today’s decision by ICANN sets a dangerous precedent with broad industry implications. ICANN has overstepped its purview, which is limited to ensuring routine transfers of indirect control (such as the sale of PIR) do not impact the registry’s security, stability and reliability. Today’s action opens the door for ICANN to unilaterally reject future transfer requests based on agenda-driven pressure by outside parties. It allows ICANN to base its decisions on a subjective interpretation of what it deems to be relevant in these transactions, rather than following its own clear and specified legal directive.
This decision will suffocate innovation and deter future investment in the domain industry. ICANN has empowered itself to extend its authority into areas that fall well outside of its legal mandate in acting as a regulatory body. Today’s decision also creates an uncertain and unpredictable business environment, where the enforceability and value of the ICANN contract itself may be called into question now that the rules of transferring ownership are open to influence by outside interests. Ethos is evaluating its options at this time.
In the same statement, PIR called the decision “a failure to follow its bylaws, processes, and contracts” and ISOC said ICANN “has acted as a regulatory body it was never meant to be”.
While the decision could be chalked up as a win for domain investors and civil libertarians that had challenged the acquisition, it has implications that may not entirely please them.
Assuming the deal stays dead, PIR is no longer promising to only increase prices by 10% a year. It will be able to raise its registry fee arbitrarily, whenever it likes, subject to notice periods and the usual uniform pricing rules.
Domainers will have to hope there’s no sour grapes at ISOC, or they could be looking at big price hikes before long.
And for those interested in censorship, remember PIR is no longer committing to a Stewardship Council that would help protect free speech in .org domains.
The ICANN decision came in spite of a last-minute plea from former chair and ISOC co-founder Vint Cerf, who in a letter (pdf) described the deal as a “wedge issue” that could be leverage to force ICANN into an existential crisis, with outside interests such as the ITU pushing itself as a replacement.
ICANN also received eleventh-hour submissions from the German government (which was against the deal) and German trade group Eco (which was vague but appeared to be for the deal).
Decision on .org deal may come sooner than you think
If you’re against the acquisition of .org and are thinking about an objection or spot of lobbying at the eleventh hour, be aware: this is the eleventh hour.
The deal, which would see Ethos Capital buy Public Interest Registry from the Internet Society for over a billion dollars, is on the agenda for a meeting of the ICANN board of directors this Thursday.
ICANN and Ethos have agreed to a May 4 deadline for a decision, but is whispered that the board plans to give the deal the nod, or not, at the Thursday meeting.
Given how long it usually takes for ICANN to post the results of its board meetings, typically a few days, there’s a decent chance that PIR, Ethos and ISOC could be given formal approval before any opponents have time to react to the resolution.
I think it could go either way.
The one thing I have a fairly high degree of confidence in is that I do not expect a unanimous vote.
While I think ICANN’s institutional instincts are to approve, the breadth and depth of the outrage over the deal may be difficult for some directors to ignore.
If it were only domain investors objecting, approval would be a slam dunk. But here we also have non-profits, civil liberties groups and governments crying foul.
Perhaps most importantly, there’s the objection of the California attorney generalobjection of the California attorney general to consider.
He has power over ICANN because it’s a non-profit registered in his state, and he’s said “will take whatever action necessary to protect Californians and the nonprofit community”.
His last letter to ICANN is believed to have caused the board to remove the .org deal from the agenda at its last meeting and seek a deadline extension from PIR.
One plausible interpretation of that chain of events is that the board was ready to give Ethos the nod, but the AG’s letter gave it pause.
As ICANN meets to decide .org’s fate, California AG says billion-dollar deal must be rejected
California Attorney General Xavier Becerra has urged ICANN to deny approval of Ethos Capital’s $1.13 billion acquisition of .org manager Public Interest Registry.
The call came in a letter (pdf) dated yesterday, just a day before ICANN’s board of directors was scheduled to meet to discuss the deal.
Becerra, who started looking into the deal in late January, wrote, right out of the gate:
I urge ICANN to reject the transfer of control over the .ORG registry to Ethos Capital. The proposed transfer raises serious concerns that cannot be overlooked.
Chief among his concerns is the fact that ICANN originally granted PIR the right to run .org largely because it was a non-profit with a committment to serve non-profits. He wrote:
If, as proposed, Ethos Capital is permitted to purchase PIR, it will no longer have the unique characteristics that ICANN valued at the time that it selected PIR as the nonprofit to be responsible for the .ORG registry. In effect, what is at stake is the transfer of the world’s second largest registry to a for-profit private equity firm that, by design, exists to profit from millions of nonprofit and non-commercial organizations
He’s also bothered about the lack of transparency about who Ethos is and what its plans are. The proposed new owners of PIR are hidden behind a complex hierarchy of dummy LLCs, and Ethos has so far refused to name its money men or to specify what additional services it might offer to boost its revenue.
Becerra also doesn’t buy the business plan, which would see PIR required to pay off a $300 million loan and, as a newly converted for-profit entity, start paying taxes.
He’s particularly scathing about the fact that ICANN approved the removal of PIR’s price caps last year despite receiving over 3,000 public comments opposing the changes and only half a dozen in favor.
“There is mounting concern that ICANN is no longer responsive to the needs of its stakeholders,” he writes.
Despite saying he “will take whatever action necessary to protect Californians and the nonprofit community”, Becerra does not specify what remedies are available to him.
But it looks like ICANN faces the risk of legal action no matter which way its board of directors votes (or voted) today.
Its current deadline to make a decision is April 20.
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.
[table id=59 /]
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.
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.
.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.
Delay .org deal because of… coronavirus? Gimme a break
Opponents of Public Interest Registry’s proposed acquisition by Ethos Capital are now claiming that ICANN should delay approval of the deal due to coronavirus.
A statement, released yesterday by digital rights group Access Now with the apparent approval of several other like-minded groups, outlines a few reasons why coronavirus means ICANN should reject, or at least delay its consideration of, the deal.
ICANN is currently working towards a March 20 deadline to deliver its verdict.
Peter Micek, general counsel for Access Now, said in the statement:
Far from routine, this transfer would further imperil crucial channels of trusted information in a precarious time. From Médecins Sans Frontières to Wikipedia to many of the world’s hospitals, organizations that disseminate accurate health information and connect affected communities with public resources depend on the .ORG domain. Now is not the time to shift the ground beneath their online activities.
Could a $0.97 increase in the cost of wikipedia.org this year see Wikipedia’s hive mind crumble and turn into the digital equivalent of Jenny McCarthy’s brain? Will it prompt MSF volunteers to retreat, screaming, from the front lines? I don’t think so.
The statement goes on to suggest that China would be able to use its substantial financial and political clout to lean on Ethos’ secretive backers to something something something coronavirus. Kenneth Roth, executive director of Human Rights Watch said:
The Chinese government routinely uses economic pressure to censor critics or inconvenient information, such as about its disastrous early cover-up of the coronavirus outbreak. Investors in the private equity firm that wants to buy the .ORG domain inevitably will have economic interests that Beijing could threaten.
While there may well be a nugget of truth in there, I fail to see how it applies to the current pandemic. Is the argument that China will pressure Ethos’ billionaire money men to close down domains belonging to organizations disseminating accurate Covid-19 information? It seems a stretch.
China already has substantial powers to shut down domains within its own borders, and requires registries operating in the country to comply with Draconian censorship rules. I’m not aware of any cases of these existing powers being exercised against domains globally.
A third argument is that ICANN is using coronavirus as a convenient smokescreen to quietly approve the acquisition while everyone else is busy ram-raiding corner stores for toilet paper.
Daniel Eriksson, head of technology at Transparency International, said in the statement:
If this transfer goes ahead during the current crisis as planned, we’ll look back on it as an example of vested interests taking advantage of the extraordinary situation created by the COVID-19 pandemic to further their own concerns at the expense of the broader good of society. We need to be vigilant against any such actions, and this is precisely the role of many civil society organizations that have a watchdog function. We need maximum transparency and integrity around the sale of .ORG, and that is simply not possible if the sale is rushed through at a moment when peoples’ attention is elsewhere.
Again, this seems like a stretch. The announcement of the acquisition predates the discovery of Covid-19 by weeks, and it has been subject to intense scrutiny, engagement, comment and unprecedented — albeit imperfect — levels of transparency ever since. This is an acquisition being negotiated to a large extent in the public square.
I’ll be generous and suggest a fourth explanation: this is probably just a poor-taste (but, let’s face it, successful) attempt to grab headlines by linking the #SaveDotOrg campaign, however thinly, to the pandemic currently occupying the world’s collective conscious.
There are plenty of good arguments that could be — and are being — made in favor of further delay and scrutiny of the deal, but I don’t think coronavirus is one of them.
ICANN chair: “all options open” on .org deal
ICANN has not yet decided to approve the acquisition of Public Interest Registry by Ethos Capital, but has not ruled out rejecting the deal either.
That’s according to chair Maarten Botterman, speaking to his Governmental Advisory Committee this evening.
At the online-only ICANN 67 meeting, he was asked by GAC chair Manal Ismail whether ICANN is considering withholding its consent for the $1.13 billion deal, which would see the .org registry return to for-profit hands for the first time in 18 years.
“At this moment all options remain open. We are open-minded to taking all input into account before it is time for us to decide,” Botterman replied.
“ICANN will consider the request based upon the totality of the information received,” he also said.
ICANN has the ability, under its registry agreement with PIR, to reject a change of control such as an acquisition, if it believes it’s not in the public interest.
Critics of the deal believe it would allow private equity firm Ethos and its anonymous backers to price-gouge non-profits such as charities, which need the money more.
But Ethos has offered to cap price increases at 10% per year on average for the next seven years, reimposing a price cap that PIR negotiated its way out of last year.
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