{"id":4204,"date":"2019-11-23T18:13:26","date_gmt":"2019-11-23T22:13:26","guid":{"rendered":"http:\/\/blogs.harvard.edu\/sj\/?p=4204"},"modified":"2019-12-04T12:16:13","modified_gmt":"2019-12-04T16:16:13","slug":"a-tale-of-icann-and-regulatory-capture-the-dot-org-heist","status":"publish","type":"post","link":"https:\/\/archive.blogs.harvard.edu\/sj\/2019\/11\/23\/a-tale-of-icann-and-regulatory-capture-the-dot-org-heist\/","title":{"rendered":"ICANN races towards regulatory capture: the great .ORG heist"},"content":{"rendered":"<div>\n<p style=\"padding-left: 30px\"><em><strong>Updates<\/strong>: <a href=\"https:\/\/www.eff.org\/document\/coalition-letter-sale-public-interest-registry\">EFF letter<\/a>,\u00a0PIR&#8217;s <a href=\"https:\/\/www.keypointsabout.org\/\">update<\/a>; IGP&#8217;s <a href=\"https:\/\/www.internetgovernance.org\/2019\/11\/25\/what-to-do-about-org\/\">insider take<\/a>; ICANN <a href=\"https:\/\/www.icann.org\/resources\/board-material\/resolutions-2019-11-21-en\">resolution<\/a>;<br \/>\n<\/em><em>Ways to act, <a href=\"https:\/\/www.theregister.co.uk\/2019\/11\/26\/org_selloff_internet\/\">Reg<\/a>\u00a0essay x<a href=\"https:\/\/www.theregister.co.uk\/2019\/11\/27\/isoc_icann_dot_org_vint_cerf\/\">2<\/a>,\u00a0<a href=\"https:\/\/reviewsignal.com\/blog\/2019\/06\/24\/the-case-for-regulatory-capture-at-icann\/\">Ohashi<\/a>, <a href=\"https:\/\/twitter.com\/timberners_lee\/status\/1199752059534413824?s=21\">Tim Berners-Lee<\/a>\u00a0response;<br \/>\nLetters from<\/em> <a href=\"http:\/\/www.circleid.com\/posts\/20191127_why_i_voted_to_sell_org\">ISOC<\/a>(&#x1f607;),<em>\u00a0<a href=\"http:\/\/www.circleid.com\/posts\/20191125_showing_our_ethos_with_org\/\">Ethos<\/a><\/em>(&#x1f308;)<em>, and a\u00a0<a href=\"http:\/\/www.circleid.com\/posts\/20191126_a_better_pir_deal_maintaining_trust_is_good_business\/\">banker<\/a>\u00a0<\/em>(&#x1f6a9;&#x1f6a9;&#x1f4dc;)<br \/>\n<em>(See also <strong>Part 2<\/strong>: <a href=\"http:\/\/blogs.harvard.edu\/sj\/2019\/12\/02\/diving-for-donuts-how-to-flip-org-for-cash-with-love-and-ethos\/\">How to Flip .org<\/a><\/em>)<\/p>\n<p><a href=\"https:\/\/ethoscapital.com\/\">Ethos Capital<\/a>, a new commercial investment firm founded in the past few months in Boston, has 2 staff and only one pending investment: a deal to acquire the 501c3 non-profit that currently runs the\u00a0<code><b><\/b>.<strong>org<\/strong><\/code>\u00a0domain (valued at a few $<strong>B<\/strong>), for an undisclosed sum. This was initiated\u00a0<em>immediately<\/em> after <a href=\"https:\/\/en.wikipedia.org\/wiki\/ICANN\">ICANN<\/a> decided in May, over almost\u00a0<strong>universal<\/strong> opposition, to remove the price cap on <code>.<strong>org<\/strong><\/code> registrations with <a href=\"https:\/\/www.icann.org\/en\/system\/files\/correspondence\/muscovitch-to-chalaby-namazi-17may19-en.pdf\">no meaningful price protections<\/a> for existing or future registrants.<\/p>\n<p>This seems to run afoul of a range of ethical, ICANN, ISOC, and non-profit guidelines.\u00a0 It is certainly the privatisation of a not-for-profit monopoly into a for-profit one, which will benefit ISOC and a few individuals by inconveniencing millions of others.\u00a0 <em>I have questions<\/em>:<\/p>\n<\/div>\n<ul>\n<li>Do affected parties have recourse?\n<ul>\n<li><strong><em>Yes<\/em><\/strong>: Drew DeVault suggests <a href=\"https:\/\/drewdevault.com\/2019\/11\/29\/dotorg.html\">state and federal<\/a> <strong>options<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li>Other than polite letters, do any responses have teeth?\n<ul>\n<li><em>Maybe<\/em>: Official complaints have been filed, but don&#8217;t expect results.<\/li>\n<li>Chronic optimists can .. take part in ICANN and\u00a0<a href=\"https:\/\/portal.internetsociety.org\/622619\/form\/join\">ISOC<\/a>\u00a0governance<\/li>\n<\/ul>\n<\/li>\n<li>Has anyone currently at ICANN + ISOC made substantive comment?\n<ul>\n<li><strong><em>Yes<\/em><\/strong>: Richard Barnes, ISOC trustee, explains <a href=\"http:\/\/www.circleid.com\/posts\/20191127_why_i_voted_to_sell_org\">why he voted to sell <strong>.org<\/strong><\/a><\/li>\n<\/ul>\n<\/li>\n<li>Vint Cerf <a href=\"https:\/\/www.theregister.co.uk\/2019\/11\/26\/org_selloff_internet\/\">said<\/a>: &#8216;<em>Hard to imagine $60\/year would be a deal breaker for even small non-profits.<\/em>&#8216;\n<ul>\n<li>How did we get to Net pioneers embracing 99% profit margins?<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>For more backstory, read on&#8230;<br \/>\n<!--more--><\/p>\n<h2>A brief history of\u00a0 .org<\/h2>\n<div><em>Details via the <a href=\"https:\/\/www.icann.org\/en\/system\/files\/files\/reconsideration-19-2-namecheap-requestor-rebuttal-board-proposed-determination-18nov19-en.pdf\" target=\"_blank\" rel=\"noopener\">Namecheap complaint<\/a>\u00a0to ICANN,\u00a0<a href=\"https:\/\/www.theregister.co.uk\/2019\/11\/20\/org_registry_sale_shambles\/\">Kieren McCarthy<\/a>&#8216;s excellent series of articles at\u00a0<a href=\"https:\/\/www.theregister.co.uk\/2019\/11\/26\/org_selloff_internet\/\">The Register<\/a>, the <a href=\"https:\/\/www.eff.org\/document\/coalition-letter-sale-public-interest-registry\">EFF<\/a> + <a href=\"https:\/\/domainnamewire.com\/wp-content\/ICA-Letter-to-ICANN-Board-of-Directors-November-15-2019.pdf\">ICA<\/a> letters,\u00a0<a href=\"https:\/\/medium.com\/@jacobmalthouse\/whos-going-to-run-org-in-a-word-the-gop-8809ef6f9679\">Jacob Malthouse<\/a>, the <a href=\"https:\/\/icannwiki.org\/\">ICANN<\/a> and <a href=\"https:\/\/en.wikipedia.org\/wiki\/ICANN\">original<\/a> wikis.\u00a0\u00a0<\/em><\/div>\n<p>In 1993, Network Solutions was awarded an NSF contract to run the non-governmental <a href=\"https:\/\/en.wikipedia.org\/wiki\/Top-level_domain\">top-level domains<\/a> [TLDs].\u00a0 In 1998 ICANN was established to develop a competitive marketplace of registrars, and implemented the first version of <a href=\"https:\/\/icannwiki.org\/Vertical_Integration\">vertical separation<\/a>: distinguishing registries from registrars.<\/p>\n<p>Verisign acquired Network Solutions, including both its registry and its consumer-facing registrars, in 2000.\u00a0 At the time, ICANN required structural but not legal separation between the two.\u00a0 In 2001, ICANN began requiring legal separation between registry and registrar for all new registries.<\/p>\n<p>The next 7 generic TLDs were also appoved and began to be introduced in 2001.<\/p>\n<h3>The original non-profit registry : the Public Interest Registry<\/h3>\n<div>\n<div>In 2003, as part of a deal with ICANN to ensure it could renew its control of the\u00a0<code>.<strong>com<\/strong><\/code> registry, Verisign agreed to\u00a0give up <code><a href=\"https:\/\/icannwiki.org\/.org\">.<strong>org<\/strong><\/a><\/code>.\u00a0 A public bid and review ensued, which was won by the Internet Society (<a href=\"https:\/\/en.wikipedia.org\/wiki\/Internet_Society\">ISOC<\/a>), a non-profit <a href=\"https:\/\/www.internetsociety.org\/about-internet-society\/governance-policies\/articles-of-incorporation\/\">dedicated<\/a> to\u00a0the open development, evolution and use of the Internet for the benefit of all.\u00a0 Their winning bid was to stand up a new 501c3 to manage the domain, which they called the Public Interest Registry (<a href=\"https:\/\/en.wikipedia.org\/wiki\/Public_Interest_Registry\">PIR<\/a>).<\/div>\n<\/div>\n<div><\/div>\n<div>The non-profit nature of ISOC and PIR was central to their winning the bid.\u00a0 PIR gave ISOC a portion of every registration; in time this became the dominant source of funds for ISOC \u2014 over 90% of ISOC&#8217;s current $50MM budget.<\/div>\n<h3>The acquisition of a plurality of registries by four people<\/h3>\n<div>\n<p>In 2010, under Rod Beckstrom, ICANN began pursuing an aggressive expansion of generic TLDs, which was eventually reviewed by the <a href=\"https:\/\/icannwiki.org\/Generic_top-level_domain#First_Round:_New_gTLD_Expansion\">US Senate<\/a> in 2012.\u00a0 In November 2010, ICANN\u00a0<a href=\"https:\/\/www.icann.org\/news\/announcement-2010-11-09-en\">reversed<\/a>\u00a0its policy on <em>vertical separation<\/em>, allowing new registries to own\u00a0registrars. Separately, mega-registry\u00a0<a href=\"http:\/\/en.wikipedia.org\/wiki\/Donuts.com\">Donuts.com<\/a> was founded by people who <a href=\"https:\/\/archive.icann.org\/en\/topics\/new-gtlds\/presentation-tindal-19oct09-en.pdf\">had been fighting<\/a> for this change, with the mission of acquiring new TLDs.<\/p>\n<p>In 2012, the nature of ICANN&#8217;s work transformed: the launch of the expanded TLD program\u00a0<a href=\"https:\/\/www.icann.org\/en\/system\/files\/files\/annual-report-2012-en.pdf\"><strong>quadrupled<\/strong> its total assets<\/a> under management, by creating a new pool of funds from the Global Domains program. They invested this via their own small investment group, and have gradually moved funds into an ICANN reserve fund.<\/p>\n<p><a href=\"https:\/\/i0.wp.com\/blogs.harvard.edu\/sj\/files\/2019\/11\/tlds-2010-2016s.png\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" data-attachment-id=\"4215\" data-permalink=\"https:\/\/archive.blogs.harvard.edu\/sj\/2019\/11\/23\/a-tale-of-icann-and-regulatory-capture-the-dot-org-heist\/tlds-2010-2016s\/\" data-orig-file=\"https:\/\/i0.wp.com\/archive.blogs.harvard.edu\/sj\/files\/2019\/11\/tlds-2010-2016s.png?fit=640%2C480&amp;ssl=1\" data-orig-size=\"640,480\" data-comments-opened=\"0\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;,&quot;orientation&quot;:&quot;0&quot;}\" data-image-title=\"tlds-2010-2016s\" data-image-description=\"\" data-image-caption=\"\" data-medium-file=\"https:\/\/i0.wp.com\/archive.blogs.harvard.edu\/sj\/files\/2019\/11\/tlds-2010-2016s.png?fit=300%2C225&amp;ssl=1\" data-large-file=\"https:\/\/i0.wp.com\/archive.blogs.harvard.edu\/sj\/files\/2019\/11\/tlds-2010-2016s.png?fit=640%2C480&amp;ssl=1\" class=\"alignright size-medium wp-image-4215\" style=\"float: right;padding-left: 10px\" src=\"https:\/\/i0.wp.com\/blogs.harvard.edu\/sj\/files\/2019\/11\/tlds-2010-2016s-300x225.png?resize=220%2C165\" alt=\"\" width=\"220\" height=\"165\" srcset=\"https:\/\/i0.wp.com\/archive.blogs.harvard.edu\/sj\/files\/2019\/11\/tlds-2010-2016s.png?resize=300%2C225&amp;ssl=1 300w, https:\/\/i0.wp.com\/archive.blogs.harvard.edu\/sj\/files\/2019\/11\/tlds-2010-2016s.png?resize=150%2C113&amp;ssl=1 150w, https:\/\/i0.wp.com\/archive.blogs.harvard.edu\/sj\/files\/2019\/11\/tlds-2010-2016s.png?w=640&amp;ssl=1 640w\" sizes=\"auto, (max-width: 220px) 100vw, 220px\" \/><\/a><\/p>\n<p>Beckstrom stepped down, and ICANN COO <strong>Akram Atallah<\/strong>\u00a0briefly took over as interim CEO before his childhood friend <strong>Fadi Chehad\u00e9 <\/strong>joined as CEO from 2012-2016.<\/p>\n<p>Under Chehad\u00e9, Atallah became president of ICANN&#8217;s Global Domains Division (now their cash cow). From 2014 to 2016, the number of available gTLDs was expanded dramatically, from under 100 to around 1400 in all.<\/p>\n<\/div>\n<div>\n<h3>Musical chairs<\/h3>\n<div>\n<div dir=\"auto\">\n<p>In May 2015, Chehad\u00e9 <a href=\"https:\/\/phys.org\/news\/2015-05-icann-chief-early.html\">announced<\/a> he would leave ICANN the next March, after completing work to <a href=\"https:\/\/www.pcworld.com\/article\/2972257\/us-ending-of-oversight-of-icann-delayed-to-late-next-year.html\">end US oversight<\/a> of IANA. He started his own consultancy and joined\u00a0<a href=\"http:\/\/abry.com\/team\/fadi-chehade\/\" target=\"_blank\" rel=\"noopener\">Abry Partners<\/a>, a Boston-based equity firm (no scare quotes) where <strong>Erik Brooks<\/strong>\u00a0(HBS) was one of 3 managing partners. Both are well connected in academia as in business, and advisors or fellows of the <a href=\"http:\/\/www.chehade.company\/about\">Kennedy<\/a>,\u00a0<a href=\"https:\/\/www.belfercenter.org\/person\/fadi-banob-chehade\" target=\"_blank\" rel=\"noopener\">Belfer<\/a>, and <a href=\"https:\/\/shorensteincenter.org\/about-us\/advisory-board\/\">Shorenstein<\/a> centers.<\/p>\n<p>In March 2016,\u00a0G\u00f6ran Marby became ICANN CEO.<br \/>\nIn July 2016, Verisign (via a proxy)\u00a0<a href=\"https:\/\/www.theregister.co.uk\/2016\/07\/28\/someone_paid_135m_for_dot_web\/\">purchased .web<\/a> for $135M.<\/p>\n<p>In May 2018, ISOC appointed\u00a0<a href=\"https:\/\/www.internetsociety.org\/news\/press-releases\/2018\/internet-society-announces-new-appointments-public-interest-registry-board-directors\/\">three new trustees<\/a> to PIR, replacing outgoing trustees (a regular occurrence).\u00a0 Later that month Brian Cute, PIR&#8217;s CEO of 7 years, resigned suddenly, with no explanation. One of the new trustees took over as interim CEO.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div>\n<div>\n<p>In June 2018, <strong>Andrew Sullivan<\/strong>, former chair of the IETF&#8217;s internet architecture board, <a href=\"https:\/\/www.internetsociety.org\/news\/press-releases\/2018\/internet-society-names-andrew-sullivan-as-new-president-ceo\/\">was appointed<\/a> CEO of ISOC, starting in September.<\/p>\n<\/div>\n<p>In September 2018, Chehad\u00e9 (then a partner or senior advisor at Abry, depending on who you ask), helped Abry close their acquisition of a majority stake in\u00a0<a href=\"http:\/\/abry.com\/investment\/donuts\/\" target=\"_blank\" rel=\"noopener\">Donuts<\/a>. Donuts by then had raised <strong>$<\/strong>300M and spent much of it buying some 250 TLDs. Brooks took a board seat at Donuts.<\/p>\n<\/div>\n<div>In October 2018, Donuts co-founder and chief counsel <strong>Jon Nevett<\/strong>\u00a0(HLS), stepped down.\u00a0Brooks\u00a0<a href=\"https:\/\/www.prnewswire.com\/news-releases\/donuts-appoints-akram-j-atallah-as-ceo-300728610.html\" target=\"_blank\" rel=\"noopener\">replaced<\/a>\u00a0the Donuts CEO with&#8230; Akram Atallah.<\/div>\n<p>In December 2018, Nevett became the new CEO of PIR, responsible for <code>.<strong>org<\/strong><\/code>.<br \/>\nThe <a href=\"https:\/\/www.thenonprofittimes.com\/people\/new-ceo-at-public-interest-registry\/\">announcement<\/a> highlighted his commitment to its non-profit ideals.<\/p>\n<p>&nbsp;<\/p>\n<h2>The .org heist<\/h2>\n<div>\n<h3>Lifting the price cap<\/h3>\n<p>In January 2019, as part of the scheduled renewal negotiations between ICANN and the registries for <code><strong>.org<\/strong><\/code>, <code><strong>.biz<\/strong><\/code>, and <code><strong>.info<\/strong><\/code>, PIR requested that <strong>price caps<\/strong> on their domains be removed. ICANN <a href=\"https:\/\/www.icann.org\/en\/system\/files\/correspondence\/namazi-to-muscovitch-26jul19-en.pdf\">proposed<\/a> basing a renewal agreements on the new <a href=\"https:\/\/www.icann.org\/resources\/pages\/registries\/registries-agreements-en\"><em>Base Registry Agreement<\/em><\/a>\u00a0now used with new generic TLDs, which includes &#8216;<a href=\"https:\/\/www.icann.org\/resources\/pages\/urs-2014-01-09-en\">Uniform Rapid Suspension<\/a>&#8216;, PIR agreed to this. <em>(NB: there is disagreement about who first requested removal of price caps here)<\/em><\/p>\n<p>The EFF wrote a compelling <a href=\"https:\/\/www.eff.org\/document\/coalition-letter-sale-public-interest-registry\">summary<\/a> of why these changes did not make sense for the large historical registries.<\/p>\n<p>On March 18 2019, ICANN invited <a href=\"https:\/\/mm.icann.org\/pipermail\/comments-org-renewal-18mar19\/2019q1\/\">comments<\/a> on the idea of lifting price caps for\u00a0<code>.<strong>org<\/strong><\/code>.<strong>\u00a0<\/strong>\u00a0PIR&#8217;s non-profit status and history were touted as central reasons not to worry.<\/p>\n<p>They received more comments (<strong>3,300<\/strong>) than they had on almost any other decision, <strong>uniformly opposed<\/strong> to the change\u00a0(<em>98% opposed; 2% unclear,\u00a00.2% in support.<\/em>) Oppositions came from registrars, NGOs, and people across the globe.<\/p>\n<p>On May 1st, comments closed, and PIR responded <a href=\"https:\/\/thenew.org\/an-open-letter-to-the-org-community\/\">with an open letter<\/a> that said [paraphrasing]: &#8216;<em>We could already be raising prices 10% a year, and have not&#8230; You would get 6 months notice of any price change&#8230; We are a mission-based non-profit, and would never betray the trust that you have put into .ORG and us.<\/em>&#8216;<\/p>\n<p style=\"padding-left: 30px;font-size: small\">After the acquisition announcement in November, PIR&#8217;s public letter projected &#8220;<em><a href=\"https:\/\/www.keypointsabout.org\/\">annual price increases<\/a> of up to 10 percent on average<\/em>&#8220;, which is&#8230; not exactly the same.<\/p>\n<div>\n<p>Less optimistic, the Internet Commerce Association wrote <a href=\"https:\/\/www.icann.org\/en\/system\/files\/correspondence\/muscovitch-to-chalaby-namazi-17may19-en.pdf\">a detailed letter<\/a> to ICANN summarizing the risks, fragilities, and potential worst-case scenarios involved in lifting the price caps. Registrar Namecheap submitted a strongly principled\u00a0<a href=\"https:\/\/www.icann.org\/en\/system\/files\/files\/reconsideration-19-2-namecheap-requestor-rebuttal-board-proposed-determination-18nov19-en.pdf\" target=\"_blank\" rel=\"noopener\">request for reconsideration<\/a><em>\u00a0<\/em>to ICANN asking them to change their mind; and updated it in November when the sale was revealed.<\/p>\n<\/div>\n<\/div>\n<div>\n<h3>Decision<\/h3>\n<p>In summarizing the comments later, ICANN <b>constructed<\/b> its own reality, <a href=\"https:\/\/www.theregister.co.uk\/2019\/11\/20\/org_registry_sale_shambles\/\">saying<\/a>: &#8220;<i>there was a group that opposed lifting price caps, but it is not true that \u2018the community\u2019 was \u2018strongly opposed\u2019 to lifting them.&#8221;\u00a0<\/i>The Internet Governance Project offers an\u00a0<a href=\"https:\/\/www.internetgovernance.org\/2019\/11\/25\/what-to-do-about-org\/\">insiders view<\/a>\u00a0of how one might justify ignoring the 99%.<\/p>\n<p>In rejecting Namecheap&#8217;s complaint in November, the ICANN board said unhelpfully, &#8220;<em>ICANN org\u2019s Core Values do not require it to accede to each request or demand made in public comments<\/em>&#8220;.<\/p>\n<p>On May 7th, Chehad\u00e9 registered the domain for\u00a0<a href=\"http:\/\/ethoscapital.com\/\" target=\"_blank\" rel=\"noopener\">EthosCapital.com<\/a>.<\/p>\n<p>On May 13th,\u00a0ICANN decided to lift the price caps anyway. The decision was made by ICANN staff, not its board, evading the obligation to publicly carry out due diligence and explain board decisions.<\/p>\n<\/div>\n<div>\n<p>On May 14th, Ethos Capital was incorporated as a new Boston-based &#8220;investment firm&#8221;, founded by Brooks \u2014 who stepped down from running the 60-person team at Abry to do so. Ethos Capital has two staff: Brooks and Nora Abusitta-Ouri, a former ICANN SVP who later worked for Chehad\u00e9.<\/p>\n<p>In June, Kevin Ohashi wrote about <a href=\"https:\/\/reviewsignal.com\/blog\/2019\/06\/24\/the-case-for-regulatory-capture-at-icann\/\">regulatory capture at ICANN<\/a>, noting that the organization was coming to represent only a few influential registries, not its other constituents.<\/p>\n<p>At the end of June, ICANN and PIR signed the new .<strong>org<\/strong> registry contract (renewing PIR&#8217;s license, using the new agreement template).<\/p>\n<\/div>\n<div>\n<h3>Acquisition and capture<\/h3>\n<p>In September, Nevett (by his own <a href=\"https:\/\/www.keypointsabout.org\/\">account<\/a>) was first approached about by Brooks about acquiring PIR.<\/p>\n<p>At this point, .<strong>org<\/strong> had <em>tremendous<\/em> value to a private owner, that it could not realize for a non-profit:<\/p>\n<ul>\n<li>No justification needed for raising revenues dramatically<\/li>\n<li>No salary caps or budget transparency: any former PIR or ISOC staff could leave and work for this new group for better pay<\/li>\n<li>.<strong>org<\/strong> pricing helps set a market floor for other domains. Every price increase will directly benefit all uncapped registries \u2014 notably the Donuts portfolio. PIR would have a hard time finding ways to benefit from this, a private equity firm will not.<\/li>\n<\/ul>\n<p>On November 13, surprising almost everyone (the charitable nature of PIR was a constant talking point, and no one had floated selling .<strong>org<\/strong> to a for-profit company for any reason), ISOC announced that Nevett &amp; Sullivan had approved the acquisition of PIR by Ethos, for an unspecified amount (informally projected to be\u00a0<a href=\"https:\/\/domainnamewire.com\/2019\/11\/14\/the-economics-of-org-domain-names\/\" target=\"_blank\" rel=\"noopener\">over $1B<\/a>). Worth noting: this had\u00a0<strong>not <\/strong>been\u00a0among the modest worst-case scenarios considered by the ICA in their May letter.<\/p>\n<p>An\u00a0<a href=\"https:\/\/medium.com\/@jacobmalthouse\/whos-going-to-run-org-in-a-word-the-gop-8809ef6f9679\">email from Sullivan<\/a>\u00a0on the ISOC members list suggested that Ethos raised the money from three large funds: <a href=\"https:\/\/www.perot.com\/Perot-Holdings\/Our-Approach\">Perot Holdings<\/a>, <a href=\"https:\/\/en.wikipedia.org\/wiki\/Fidelity_Investments\">Fidelity<\/a>, and <a href=\"https:\/\/www.solamerecapital.com\/\">Solamere Capital<\/a>.<\/p>\n<h2>Announcement and responses<\/h2>\n<div>\n<p>Official statements came out Nov 13+14.\u00a0 A raft of newswire releases, straight reports of the sale (treating Ethos as a legitimate equity firm), and concerned reactions (what does this mean for us?) came out in the tech media.<\/p>\n<p>The announcement went out of its way to note the advisors behind it: ISOC + PIR had counsel from\u00a0<a href=\"https:\/\/www.morganlewis.com\/news\/morgan-lewis-advises-internet-society-in-transaction-with-ethos-capital\">Morgan Lewis<\/a>\u00a0+ <a href=\"https:\/\/www.proskauer.com\/release\/proskauer-advises-public-interest-registry-in-its-pending-sale-to-ethos-capital\">Proskauer Rose<\/a>; Ethos had counsel from\u00a0<a href=\"https:\/\/www.mofo.com\/resources\/news\/191113-ethos-capital-acquisition-of-public-interest-registry.html\">MoFo<\/a>.<\/p>\n<p>Namecheap updated their previous request for reconsideration. EFF <a href=\"http:\/\/domainincite.com\/24616-eff-becomes-second-to-appeal-new-org-contract\">filed their own<\/a>\u00a0request.<\/p>\n<p>On Nov 21, the ICANN board met, and <a href=\"https:\/\/www.icann.org\/resources\/board-material\/resolutions-2019-11-21-en\">reviewed &amp; rejected<\/a> Namecheap&#8217;s request for reconsideration of the .<strong>org<\/strong> renewal (no response yet to the EFF&#8217;s).<\/p>\n<p>On Nov 22, the acquisition was picked up by the wider media as well.<\/p>\n<p>On Nov 23-24, the ISOC <a href=\"https:\/\/www.internetsociety.org\/board-of-trustees\/meetings\/\">board met<\/a>.<br \/>\nOn Nov 24, PIR published an <a href=\"https:\/\/www.keypointsabout.org\/\">open letter<\/a> with a short Q&amp;A to the site <em>keypointsabout.org<\/em>. It had little new information, noting 4 invisible investments made by Ethos to date (only one had a recent funding round, which did not mention Ethos), and stated stolidly &#8220;<em>The removal of .ORG\u2019s price restrictions earlier this year was &#8230; in no way motivated by a desire to sell PIR.<\/em>&#8221;<\/p>\n<p>Nov 25-26 was the Internet Governance Forum&#8217;s 2019 meeting, in Berlin, full of <a href=\"https:\/\/www.youtube.com\/watch?v=l3enJr8Sdaw&amp;feature=youtu.be\">public sessions<\/a>. Some attendees tried to rally to #savedotorg.<\/p>\n<p>On Nov 27,\u00a0ISOC Trustee Richard Barnes posted a\u00a0<a href=\"http:\/\/www.circleid.com\/posts\/20191127_why_i_voted_to_sell_org\">personal explanation<\/a>\u00a0of why he voted to sell .<strong>org<\/strong>\u00a0\u2014 a belief that 1) rather than being ISOC&#8217;s most visible achievement, the public interest registry was merely a source of revenue from &#8220;<em>leasing domain names<\/em>,&#8221; and maintaining it was &#8220;<em>distracting from the broader mission<\/em>&#8221; of ISOC; and 2) they should diversify revenue sources.<\/p>\n<p style=\"padding-left: 30px\"><small>&#8230; by selling the most stable revenue source on the internet and putting the result in a managed endowment?\u00a0 Maybe the endowment can invest in Ethos.<\/small><\/p>\n<p>As of Nov 28, 10,000 people and organizations had signed the #savedotorg letter.<\/p>\n<h3>What people are saying: complaints and dismay<\/h3>\n<p><strong>Formal complaints<\/strong>:<br \/>\nNamecheap <a href=\"https:\/\/www.icann.org\/en\/system\/files\/files\/reconsideration-19-2-namecheap-requestor-rebuttal-board-proposed-determination-18nov19-en.pdf\">renewed their complaint<\/a> to ICANN.<br \/>\nEFF filed its own, saying the ICANN board should have made the decision, not staff.<br \/>\nThe Internet Commerce Association filed a complaint, with a <a href=\"https:\/\/domainnamewire.com\/wp-content\/ICA-Letter-to-ICANN-Board-of-Directors-November-15-2019.pdf\">scathing letter<\/a>: &#8220;<em>ICANN should immediately exercise its right to withhold approval of the sale of the .org registry and terminate the registry agreement in respect of any consummated transaction.<\/em>&#8221;<\/p>\n<p><strong>Open letters<\/strong>:<br \/>\nThe EFF, Wikimedia, and 24 other major non-profits wrote ISOC <a href=\"https:\/\/www.eff.org\/document\/coalition-letter-sale-public-interest-registry\">asking them to block the sale<\/a>.<br \/>\nAn individual letter-writing campaign was started at #<a href=\"https:\/\/savedotorg.org\/\"><em>savedotorg<\/em><\/a>.<\/p>\n<p>Marc Rotenberg, founding board chair of PIR, wrote: &#8220;<em><a href=\"https:\/\/gizmodo.com\/private-equity-ghouls-buy-non-profit-that-handles-org-1839860118\">We built the .org domain with the specific goal of promoting the noncommercial use of the Internet<\/a>&#8230; transparency and accountability [will be] lost when the Public Interest Registry is acquired by a private equity firm.<\/em>&#8221;<\/p>\n<p>Esther Dyson, founding chair of ICANN, wrote: &#8220;<em>As founding chairman of <a class=\"link-complex\" href=\"https:\/\/twitter.com\/search?q=%23ICANN\" target=\"_blank\" rel=\"hashtag noopener\"><span class=\"hash\">#<\/span><span class=\"link-complex-target\">ICANN<\/span><\/a>, I&#8217;m appalled&#8230; This is not what we were working for.<\/em>&#8220;, pointing out that this is both regulatory and <strong>financial<\/strong> capture.<\/p>\n<p>Tim Berners-Lee <a href=\"https:\/\/twitter.com\/timberners_lee\/status\/1199752059534413824?s=21\">wrote<\/a>: &#8220;<em>If the Public Interest Registry ends up not being required to act in the public interest, it would be a travesty. We need an urgent explanation.<\/em>&#8221;<\/p>\n<p>ISOC&#8217;s Netherlands chapter <a href=\"https:\/\/isoc.nl\/nieuws\/statement-against-the-sale-of-dot-org\/\">opposed<\/a> the sale and called on other chapters to do the same.<\/p>\n<p><strong>Financial concerns<\/strong>:<\/p>\n<p><a href=\"https:\/\/twitter.com\/ferdeline\" target=\"_blank\" rel=\"noopener\">Ayden F\u00e9rdeline<\/a>\u00a0briefly explores <a href=\"https:\/\/threadreaderapp.com\/thread\/1199380702233612288.html\">what ISOC does<\/a> with its funds and how it is run. Here is their <a href=\"https:\/\/www.internetsociety.org\/action-plan\/2020\/\">2020 plan<\/a>.<\/p>\n<p><a href=\"http:\/\/www.circleid.com\/posts\/20191126_a_better_pir_deal_maintaining_trust_is_good_business\/\">Andrew Mack<\/a>, ISOC Business constituent, writes about the many red flags in this deal, and the need for <strong>enforceable contracts<\/strong> around any expectations from the buyer.\u00a0 &#8220;<em>As a banker&#8230; they taught me to look for &#8220;red flags,&#8221; and in this deal, I see a lot of them. No public comment or public bid. No clear contractual commitments or in-depth plans to support the sector. A radical change of ownership overnight from a non-profit with a demonstrated knowledge of the sector to a not-quite-sure-who de novo entity with a lawyer-crafted website and no track record with NGOs. Magical timing of the deal following contract renewal. The connection with former (recent) ICANN management &#8230; If Ethos Capital is truly interested in supporting the NGO sector, let&#8217;s see those commitments in meaningful, enforceable contracts.<\/em>&#8221;<\/p>\n<h3>What people are saying: no comment<\/h3>\n<p>ICANN has the right to withhold approval of the proposed sale, under Section 7.5 of the <a href=\"https:\/\/www.icann.org\/sites\/default\/files\/tlds\/org\/org-agmt-html-30jun19-en.htm\">.Org Registry Agreement<\/a>; they have <strong>30 days<\/strong> after they receive the last requested information about such a sale to consent or explicitly withhold consent.<\/p>\n<p>ICANN told the Reg they were informed of the deal when it was announced publicly (<em>so: Nov. 13<\/em>), and are <a href=\"https:\/\/www.theregister.co.uk\/2019\/11\/20\/org_registry_sale_shambles\/?page=2\">in the process of analyzing the specifics of the deal<\/a>. They say they asked PIR to share further details, but PIR has refused on grounds of confidentiality.<\/p>\n<p>In that same comment, they were nevertheless supportive of the deal, exaggerating pricing protections written into the current <code>.<strong>org<\/strong><\/code> contract (<small>registrars must give domain-holders 6 months notice of a price increase for renewals, and have the\u00a0<em>option<\/em>\u00a0but <em>no obligation<\/em> to offer renewals for up to 10 years at current rates.)<\/small><\/p>\n<p>At the Internet Governance Forum meeting in Berlin, panelists avoided asking and answering the question, though it was the most-voted on a public question tool.<\/p>\n<h3>What people are saying: puppies and rainbows<\/h3>\n<p>Vint Cerf, founding ISOC president and former ICANN chair: &#8220;<a href=\"http:\/\/www.domainpulse.com\/2019\/11\/14\/pir-eyeing-growth-ethos-capital-takeover\/\"><em>I am looking forward to supporting Ethos Capital and PIR in any way I can.<\/em><\/a>&#8221; and &#8220;<em>Hard to imagine that $60\/year would be a deal breaker for even small non-profits.&#8221;<\/em><\/p>\n<p>ISOC president Andrew Sullivan, believing furiously: &#8220;<a href=\"https:\/\/www.theregister.co.uk\/2019\/11\/20\/org_registry_sale_shambles\/?page=2\"><em>We believe many in the community see the long-term benefits of this deal<\/em><\/a><em>.&#8221;<\/em><\/p>\n<\/div>\n<div>\n<p>PIR itself, in the vaguest plan for a $BB windfall I&#8217;ve seen all week, will &#8220;<em>Establish a Stewardship Council&#8230; Launch a Community Enablement Fund to support initiatives by Internet organisations&#8230; Expand .ORG prizes to non-profit organizations&#8221;<\/em>. The latter apparently refers to $30k in small\u00a0<a href=\"https:\/\/orgimpactawards.org\/wp-content\/uploads\/2019\/05\/The-.ORG-Impact-Awards-Entry-Kit.pdf\">prizes<\/a> given out last month, for the first time.<\/p>\n<p>Andrew <a href=\"https:\/\/www.keypointsabout.org\/blog\/a-message-from-internet-society-ceo-andrew-sullivan-regarding-saveorg-petition\">Sullivan<\/a> wrote a short post, acknowledging the concerns raised by the .ORG community. He thinks everything is &#8220;<em>good for all stakeholders<\/em>&#8220;, and he is an honourable man. Ethos &#8220;<em>stated their intent to keep prices reasonable<\/em>&#8220;, and they are all honourable people. In his view, ISOC&#8217;s work is &#8220;<em>connecting the half of the world\u2019s population that does not have, or cannot afford, Internet access&#8230; defending the Internet against those who attack it every day<\/em>&#8221; and they wanted the &#8220;<em>security and stability<\/em>&#8221; which a &#8220;<em>substantial endowment<\/em>&#8221; can provide.<i>\u00a0<\/i><\/p>\n<p>Ethos&#8217;s Nora\u00a0<a href=\"https:\/\/www.keypointsabout.org\/blog\/showing-our-ethos-with-org\">Abusitta-Ouri<\/a>\u00a0restated their private equity group&#8217;s warm nurturing goals, pointed to the FAQ in PIR&#8217;s public letter, and desribed the <strong>.org<\/strong> deal as a passive acquisition and just one of their many projects: &#8220;<em>A great example is when Ethos recently agreed to acquire Public Interest Registry (&#8220;PIR&#8221;) from the Internet Society.<\/em>&#8221;<\/p>\n<h3>Other mentions in the press<\/h3>\n<p>11\/19: CircleID: <a href=\"http:\/\/www.circleid.com\/posts\/20191119_thoughts_of_an_icann_public_interest_stakeholder_on_dot_org_sale\/\">Thoughts of an ICANN public interest stakeholder on the .org sale<\/a><\/p>\n<p>11\/22: EFF: <a href=\"https:\/\/www.eff.org\/deeplinks\/2019\/11\/nonprofit-community-stands-together-protect-org\">the nonprofit community stands together to protect .org<\/a><\/p>\n<div dir=\"auto\">11\/26: Techdirt: <a href=\"https:\/\/www.techdirt.com\/articles\/20191125\/23132643458\/sketchy-sketchy-case-icann-execs-self-dealing-regarding-org-domain.shtml\">Sketchy, Sketchy Case: ICANN execs self dealing regarding .org domain<\/a><\/div>\n<div dir=\"auto\">\n<p>11\/26: Domain Namewire: <a href=\"https:\/\/domainnamewire.com\/2019\/11\/26\/isoc-ceo-repeats-the-registry-competition-fallacy\/\">ISOC CEO repeats the registry competition fallacy<\/a><\/p>\n<p>11\/27: <a href=\"https:\/\/www.theregister.co.uk\/2019\/11\/27\/isoc_icann_dot_org_vint_cerf\/\">ISOC&#8217;s Vint Cerf dodges dot-org sell-off during public Q&amp;A<\/a><\/p>\n<p>11\/27: <a href=\"https:\/\/www.accessnow.org\/access-now-calls-on-icann-and-internet-society-to-halt-the-sale-of-org\/\">Access Now calls on ICANN and ISOC to halt sale<\/a>\u00a0(human rights focus)<\/p>\n<p>11\/28: <a href=\"http:\/\/www.circleid.com\/posts\/20191128_dot_org_sale_is_a_radical_departure_that_puts_internet_at_risk\/\">The .ORG sale is a radical departure that puts the Internet at risk<\/a><\/p>\n<div dir=\"auto\"><\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Updates: EFF letter,\u00a0PIR&#8217;s update; IGP&#8217;s insider take; ICANN resolution; Ways to act, Reg\u00a0essay x2,\u00a0Ohashi, Tim Berners-Lee\u00a0response; Letters from ISOC(&#x1f607;),\u00a0Ethos(&#x1f308;), and a\u00a0banker\u00a0(&#x1f6a9;&#x1f6a9;&#x1f4dc;) (See also Part 2: How to Flip .org) Ethos Capital, a new commercial investment firm founded in the past few months in Boston, has 2 staff and only one pending investment: a deal to [&hellip;]<\/p>\n","protected":false},"author":1202,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[210,216,211,218],"tags":[],"class_list":["post-4204","post","type-post","status-publish","format-standard","hentry","category-chain-gang","category-fly-by-wire","category-international","category-not-so-popular"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p7iVvB-15O","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/archive.blogs.harvard.edu\/sj\/wp-json\/wp\/v2\/posts\/4204","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/archive.blogs.harvard.edu\/sj\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/archive.blogs.harvard.edu\/sj\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/sj\/wp-json\/wp\/v2\/users\/1202"}],"replies":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/sj\/wp-json\/wp\/v2\/comments?post=4204"}],"version-history":[{"count":76,"href":"https:\/\/archive.blogs.harvard.edu\/sj\/wp-json\/wp\/v2\/posts\/4204\/revisions"}],"predecessor-version":[{"id":4351,"href":"https:\/\/archive.blogs.harvard.edu\/sj\/wp-json\/wp\/v2\/posts\/4204\/revisions\/4351"}],"wp:attachment":[{"href":"https:\/\/archive.blogs.harvard.edu\/sj\/wp-json\/wp\/v2\/media?parent=4204"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/sj\/wp-json\/wp\/v2\/categories?post=4204"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/sj\/wp-json\/wp\/v2\/tags?post=4204"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}