Controversial .Org sale proposal shot down after months of mounting pressure

After months and months of pressure against the controversial sale of the .org web domain – used by charities and non-profit organizations, ICANN has finally yielded and halted it.

Public Internet Registry (PIR), which runs the .org domain announced the sale in November to a shrouded private equity firm Ethos Capital for a rumored $1bn (£800m).

Critics warned that the new owner would try to run .org for profit, costing charities millions. PIR was founded by the Internet Society (or ISOC) to handle the .org domain in 2003. But in late 2019, ISOC announced that it would transfer control of .org to Ethos in exchange for a $1 billion endowment. The move immediately drew criticism from advocacy groups like the Electronic Frontier Foundation, as well as some original members of ICANN, including its first chair Esther Dyson. Opponents took issue with the prospect of an equity firm managing nonprofit domains, despite promises that it wouldn’t implement price hikes or act as a censor. In its decision, ICANN described seeing “significant opposition” to the deal from politicians and organizations and “virtually no counterbalancing support” from anyone except the parties involved and their advisors.

It is highly probable that ICANN’s decision to veto the sale came after ICANN received many letters from people and organizations opposed to the transaction, among the most significant being the missive from the California Attorney General Xavier Becerra.

Becerra’s letter hit a nerve because ICANN is incorporated in California meaning it’s Becerra’s job to ensure that ICANN is living up to the commitments in its articles of incorporation, which promise that ICANN will operate “for the benefit of the Internet community as a whole.”

Becerra questioned whether ICANN was really doing that.

“There is mounting concern that ICANN is no longer responsive to the needs of its stakeholders,” he wrote.

Due to the secretive nature, Insiders suspect that the only reason ICANN finally acted to deny the sale is because the organization is more scared of the California Attorney General than Ethos Capital. The Attorney General has the power to subpoena internal documents, and so he is in a position to expose what some say has been decades of mismanagement at an organization that has a monopoly of the internet’s naming and addressing systems wrote Kieren McCarthy for The Register

Becerra also pointed to several specific concerns about the transaction. One was the shadowy nature of the proposed buyer, Ethos Capital.

“Little is known about Ethos Capital and its multiple proposed subsidiaries,” Becerra writes. Ethos Capital, he said, has “refused to produce responses to many critical questions posted by the public and Internet community.”

“If the sale goes through and PIR’s business model fails to meet expectations, it may have to make significant cuts in operations,”  “Such cuts would undoubtedly affect the stability of the .org registry.” Becerra warned.

PIR is incorporated in Pennsylvania, where the state’s attorney general is also investigating the sale. Two former ICANN veterans, Mike Roberts who was ICANN’s first CEO and was in charge of the organization for its first three years as it attempted to put a structure around the domain name system (DNS) and Esther Dyson its chair for the first two years wrote a furious letter [PDF] to the attorney generals of California and Pennsylvania, who also accused ICANN of circumventing its own decision-making processes and using the coronavirus pandemic to push through the $1.13bn sale.

“We write to express our deep dismay at ICANN’s rejection of its defining public-interest regulatory purpose as demonstrated in the totally inappropriate proposed sale of the .org delegation,” they wrote. “ICANN has not meaningfully acted to address the likely proposed service cuts, increase in prices or trafficking of data of non-profits to obtain additional revenue.”

Campaign group the Electronic Frontier Foundation (EFF) welcomed the news saying,

“ICANN today roundly rejected Ethos Capital’s plan to transform the .org domain registry into a heavily indebted for-profit entity. This is an important victory that recognises the registry’s long legacy as a mission-based, not-for-profit entity protecting the interests of thousands of organisations and the people they serve,” it said in a statement.

Ethos and ISOC have however as expected condemned the choice.

“Today’s action opens the door for ICANN to unilaterally reject future transfer requests based on agenda-driven pressure by outside parties,” said Ethos in a statement. “Although the Internet Society respects ICANN’s role in supporting the Internet’s technical coordination functions, we are disappointed that ICANN has acted as a regulatory body it was never meant to be,” said ISOC. “Despite ICANN’s decision, our work to connect the unconnected and strengthen the Internet will continue.”

A group of lawmakers including Sens. Ron Wyden (D-OR), Elizabeth Warren (D-MA), and Edward Markey (D-MA) as well as Rep. Anna Eshoo (D-CA) also commended the choice. “This deal would have saddled the .org registry with hundreds of millions of dollars of debt, putting it in an unstable position during this current economic crisis, solely to enrich a private equity firm at the expense of users and nonprofits,” said Wyden.