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My thoughts on .Org


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ICANN made it possible for this transaction to happen. There’s only so much the internet community can do now.

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It has been two months since Internet Society (ISOC) announced that it was selling Public Interest Registry (PIR), which runs .org, to private equity company Ethos Capital.

There have been many revelations since then, including that former ICANN CEO Fadi Chehadé is advising Ethos, Ethos is run by the same person who led Abry Partners’ deal to acquire Donuts, and that Ethos is paying $1.35 billion for the assets. The deal comes on the heels of ICANN removing price caps on .org domains, meaning that PIR can raise prices as high as it wants for .org registrations and renewals.

I’ve written numerous articles about the deal, and I imagine my bias shows in these pieces. But I haven’t summarized my thoughts on the deal until now, including my two main concerns about the transaction.

This deal is going to happen

In my annual predictions podcast, I said that I believe the Ethos deal will go through. At this point, the only thing I think that could trip up the deal is delay. Some Senators say they plan to step in, and ICANN is asking questions. But assuming the deal is good enough for Ethos (and I believe it’s a great deal), I expect it to outlast any delays and complete the transaction.

Even if ICANN doesn’t like the deal, there’s not much it can do to stop it. Can it reasonably withhold consent, per the contract? I’m not sure on what grounds it can do so.

Recently, a group formed and asked ICANN to hand the reins of managing .org to it. But there’s no provision in the .org registry agreement that would allow ICANN to do this unless ISOC were to proceed with the transaction without ICANN’s blessing, which it wouldn’t do.

Should ICANN not give its consent to the transaction, I imagine there would be a legal battle. If it goes ICANN’s way, then it just means that ISOC continues to own PIR and the .org registry contract, not some other party.

If ICANN were to find grounds to transfer the registry contract to someone else, then all of ICANN’s registry contracts have a problem.

Blame ISOC or ICANN?

If you don’t like this deal, you might blame ISOC. After all, it’s the one that agreed to the transaction. It is exchanging $50-$75 million of cash each year in perpetuity (not guaranteed) into a lump sum of $1.135 billion. It probably makes financial sense for the non-profit, although you can make a good argument that it threw internet users under the bus to make it happen.

At the same time, it’s ICANN that made this deal possible in the first place.

I believe that the registry operator for .org and other legacy extensions should be looked at as a steward for the extension, not the owner of the extension. But that’s not what the contract states and ICANN has moved from the stewardship to ownership model over the past 10-20 years. Granting presumptive renewal, removing price caps, and making it easy to sell the contract to someone else has turned the stewardship of these top level domains into ownership.

ICANN awarded the .org contract to ISOC in a competitive process. But its contracts never required .org to be run by a non-profit. It also designed its agreements so that the registry contract could be sold to another entity. This was made more clear when ICANN decided to use its new top level domain name base agreement for .org. This agreement was built with transferability in mind.

So it’s easy to be angry with Ethos. Or ISOC. But if anyone is to blame, it’s probably ICANN.

It’s a savvy deal

I suspect there’s a bit of jealousy of Ethos. When I told some friends about the deal and how it was structured, they were shocked that no one else thought of it earlier. Perhaps no one thought of it sooner because they didn’t have former ICANN CEO Fadi Chehadé’s background. He’s advising on the deal.

It seems that Ethos did the deal in a way that ISOC couldn’t reveal it until it was inked. It knew that, if it were made public beforehand, the pushback would have imploded the deal. Ethos also put time constraints on the deal that made it difficult for ISOC to shop it.

Any way you look at it, this deal should be a home run for Ethos.

My issues with the deal

There are two things I don’t like about the transaction.

First, it raises greater concerns about the lack of price caps on .org. After ICANN removed the price caps this summer, PIR noted that it didn’t always raise prices 10% a year anyway, even though it was contractually allowed to. Now, Ethos is giving assurances that it won’t raise prices more than 10% per year on average. Even if it’s true to its word, prices will increase more in the future than they did in the past. And once Ethos sells the registry to someone else, what will they do?

You can argue that my reason for wanting price caps is selfish. I own only about 10-20 .org domains, and I will pay more for the domains in the future.

That’s not too much money, though. Although my reasons are “selfish,” it is for the domain name ecosystem at large. My concern is what the lack of price caps does to domain names as a neutral way to publish on the web. Domain names are the great equalizer; Facebook can charge people to reach their audience on Facebook, but anyone can publish what they want on a website connected to their domain name.

If registries significantly increase renewal fees, people will be forced to switch domain names or shut down. Switching domains is very time consuming and difficult. This could make domain names lose their luster and role as an equalizer in the future.

Frankly, I don’t care if ISOC or Ethos or someone else gets the money from registry fees. I just want price certainty for the good of the entire domain ecosystem and the World Wide Web.

My second concern is that this deal makes the domain name industry look bad. We have the former CEO of ICANN advising a private equity company on taking over a top level domain that was entrusted to a non-profit. That makes excellent fodder for the public to say something fishy is going on in the domain name world.

What can be done

Even though I view the deal as a certainty, there is one thing that internet users or ICANN can push for: price certainty.

Ethos could agree with ICANN to reinstate contractual price caps. I don’t think there’s any way for ICANN to force this, but it would show that Ethos is serious about keeping prices in check. If nothing else, renewal fees must have certainty.

An alternative would be for PIR to amend its registry-registrar agreements to include price controls in perpetuity.

As for the domain industry looking bad? That ship has sailed. Thanks, ICANN.

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