[Advisors] Fwd: [IP] Sale of .org domain registry delayed by California attorney general

[Brian Beaton]

FYI .. https://www.icann.org/news/blog/icann-board-withholds-consent-for-a-change-of-control-of-the-public-interest-registry-pir

 

ICANN Board Withholds Consent for a Change of Control of the Public Interest Registry (PIR)

Today, the ICANN Board made the decision to reject the proposed change of control and entity conversion request that Public Interest Registry (PIR) submitted to ICANN.

After completing extensive due diligence, the ICANN Board finds that withholding consent of the transfer of PIR from the Internet Society (ISOC) to Ethos Capital is reasonable, and the right thing to do.

ICANN's role is to ensure the stable and secure operation of the Internet's unique identifier systems. We are dedicated to making the right decision, knowing that whatever we decide will be well received by some, and not by others. It is our responsibility to weigh all factors from an ICANN Bylaws and policies perspective, including considering the global public interest. We have done this diligently, ensuring as much transparency as possible and welcoming input from stakeholders throughout.

On 13 November 2019, PIR announced that ISOC, its parent organization, had reached an agreement with Ethos Capital, under which Ethos Capital would acquire PIR and all of its assets from ISOC. Under the agreement, PIR would also be converted from a Pennsylvania not-for-profit corporation to a for-profit Pennsylvania limited liability company. ISOC created and agreed to the transaction details that are under review.

On 14 November 2019, PIR formally submitted to ICANN a "Notice of Indirect Change of Control and Entity Conversion" in advance of closing the proposed transaction between Ethos Capital and ISOC. Since 2003, PIR has operated the .ORG generic top-level domain (gTLD) as a not-for-profit organization, as well as six other gTLDs. Per the gTLD Registry Agreements, ICANN must either approve or withhold consent of a proposed change of control, the deadline for which is 4 May 2020.

ICANN's role has been to evaluate the reasonableness of PIR's request for indirect change of control and entity conversion. In doing so, ICANN evaluated an extensive amount and variety of information related to the proposed transaction, including details of the transaction structure, financing, and other funding sources of Ethos Capital, the parties involved, the role of the Pennsylvania authorities, information related to financial resources and operational and technical capability, how the new for-profit PIR under the control of Ethos Capital would be responsive to the needs of the non-commercial community, what input the .ORG community had provided to PIR or ISOC on the proposed transaction, and how that community input would be reflected in the operations of PIR following its conversion.

Throughout this process, the ICANN Board has worked thoughtfully and thoroughly to determine if it is reasonable under PIR's Registry Agreements for ICANN to either approve or withhold consent to the proposed change of control. Before making our determination, the Board, among other things:

·         Conducted thorough due diligence

·         Received and reviewed hundreds of pages of documentation and responses provided by PIR, ISOC and Ethos Capital following ICANN issuing three requests for more information

·         Was briefed extensively by ICANN org

·         Received and considered more than 30 letters from stakeholders

·         Considered input from an ICANN67 public forum, views of the community and others who weighed in after we received PIR's Public Interest Commitments

·         Considered the opinions expressed in the California Attorney General's Office letter sent to ICANN on 15 April 2020

The Board was presented with a unique and complex situation – impacting one of the largest registries with more than 10.5 million domain names registered. After completing its evaluation, the ICANN Board finds that the public interest is better served in withholding consent as a result of various factors that create unacceptable uncertainty over the future of the third largest gTLD registry. Factors that were considered in determining reasonableness include, but are not limited to:

·         A change from the fundamental public interest nature of PIR to an entity that is bound to serve the interests of its corporate stakeholders, and which has no meaningful plan to protect or serve the .ORG community.

·         ICANN is being asked to agree to contract with a wholly different form of entity; instead of maintaining its contract 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.

·         The US$360 million debt instrument forces PIR to service that debt and provide returns to its shareholders, which raises further question about how the .ORG registrants will be protected or will benefit from this conversion. This is a fundamental change in financial position from a not-for-profit entity.

·         There are additional uncertainties, such as an untested Stewardship Council that might not be properly independent, or why PIR needs to change its corporate form to pursue new business initiatives.

·         The transaction as proposed relies on ICANN as a backstop for enforcement of disputes between the .ORG community and the registry operator in an untested manner.

The entire Board stands by this decision. After thorough due diligence and robust discussion, we concluded that this is the right decision to take. While recognizing the disappointment for some, we call upon all involved to find a healthy way forward, with a keen eye to provide the best possible support to the .ORG community.

The Board would like to thank the global community and stakeholders for their engagement.

The resolution and rationale document, which expands upon this decision is available, here.

Comments

Bill Maggs  22:18 UTC on 30 April 2020

How will governance change to close up the holes big enough to drive a truck through that this sorry affair exposed?

William Stewart  05:48 UTC on 01 May 2020

Very well done. Congratulations on listening and doing the right thing. This was fundamentally important, for many reasons. Great thanks.

David Mussington  06:16 UTC on 01 May 2020

I have to say I found the entire proposal to transfer the .org registry to a for profit company mystifying. I am glad that the board was able to intervene. A sterling example of wise board oversight and governance.

 

 

From: <advisors-bounces at tc.ca> on behalf of Marita Moll <mmoll at ca.inter.net>
Date: Saturday, February 1, 2020 at 12:56 PM
To: TC Advisors <advisors at tc.ca>
Subject: [Advisors] Fwd: [IP] Sale of .org domain registry delayed by California attorney general

 

Hello advisors. In what some in the community have described as a stunning development, the Attorney General of the State of California has sent a strong letter to ICANN (which is a non-profit incorporated under California law) asking for some very detailed information.  The concerns of the non-profit community have clearly been heard

Begin forwarded message:

 

 https://mashable.com/article/california-attorney-general-dot-org-sale/


The .org domain takeover has been delayed, at least for now.

California Attorney General Xavier Becerra sent a letter to the Internet Corporation for Assigned Names and Numbers (ICANN) demanding more information about the private equity takeover of the .org domain registry. The attorney general is seeking answers to 35 questions concerning the sale as well as documents sent between ICANN, private equity firm Ethos Capital, and Public Interest Registry (PIR), which manages the .org domain.

Ethos Capital disclosed last year that it was acquiring PIR from its non-profit parent organization, the Internet Society, for $1.135 billion.

ICANN, the non-profit organization that oversees domain names, disclosed the letter on its website along with its own correspondence with PIR, informing it of the development. Previously, ICANN had until Feb. 17 to approve or deny the sale. According to ICANN, as a result of the California AG’s letter, it’s seeking to delay this deadline until April 20.

ICANN says it's "fully cooperating" with the request. In its letter to PIR, ICANN gives a heads up that it will be providing the attorney general "confidential material" to comply with the AG's demands. As ICANN's letter states, it has terms in its contract with PIR which forbid the organization from disclosing information that the registry deems confidential unless required by law. ICANN clearly views the AG's letter as applicable.

It’s a stunning development that certainly vindicates the concerns of non-profits, internet activists, and domain name holders.

Many of the attorney general’s questions revolve around the removal of the long-standing price caps in ICANN’s most recent contract renewal with PIR. The price caps on .org domains allowed the registry raise registration prices no more than 10 percent each year. Without those price caps, the registry could raise pricing for registration and renewals as much as it would like. In addition, it could also add new pricing structures, such as deeming certain domains as "premium" and charging whatever it would like for those domains.

Not long after ICANN’s price cap removal gave the registry complete control of .org domain pricing, Ethos Capital announced its acquisition of the registry. Many critics of the sale were concerned with the timing of these developments. Non-profit organizations, which previously galvanized to try and stop the price cap removal in the first place, worried that the private equity firm would raise .org prices in order to quickly recoup its investment.

ICANN previously said that the organization was “powerless” to do anything about the sale of the .org registry. However, ICANN’s tune quickly changed as news spread of the private equity takeover. An ICANN board member told internet activists, who recently protested outside of ICANN’s LA offices, that the organization was taking the sale “very seriously.”

There are currently more than 11.5 million registered .org domain names. Registrants pay a yearly fee to renew their domain registrations. PIR currently generates around $100 million a year selling .org domain names to registrars, such as Namecheap and Godaddy, for just under $10 per year.

The AG’s office oversees nonprofits and charitable organizations in the state of California. Becerra has cracked down on nonprofits that break the law.

Whether the acquisition is stopped remains to be seen. It all depends on what the California attorney general finds in his investigation. 

  MaritaPermalink 

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