[liberationtech] ICANN races towards regulatory capture: the great .ORG heist

[Yosem Companys]

*11/23: Updated with legal + financial details, the EFF letter to ISOC
<https://www.eff.org/document/coalition-letter-sale-public-interest-registry>,
the original ICA letter to ICANN*

Ethos Capital <https://ethoscapital.com/>, a new commercial investment firm
founded in the past few months in Boston, has 2 staff and only one
investment: a deal to acquire the 501c3 non-profit that currently runs the .
*org* domain (valued at a few $B), for an undisclosed sum. This was
initiated *immediately* after ICANN
<https://en.wikipedia.org/wiki/ICANN> decided
in May, over *universal* opposition, to remove the price cap on .*org*
registrations
with no meaningful protections
<https://www.icann.org/en/system/files/correspondence/muscovitch-to-chalaby-namazi-17may19-en.pdf>
for
existing or future registrants.

This seems to violate a range of ethical, ICANN, ISOC, and non-profit
guidelines.  It is certainly the privatisation of a not-for-profit monopoly
into a for-profit one, which will benefit a few by inconveniencing millions
of others.  *I have questions*:

   - Do affected parties have recourse?
   - Other than polite letters, is anything being done?
   - Why does Vint in particular think this is a good idea… ?
   - Has anyone currently at ICANN + ISOC made substantive comment?

For more backstory, read on…
A brief history of  .org
*Details via the Namecheap complaint
<https://www.icann.org/en/system/files/files/reconsideration-19-2-namecheap-requestor-rebuttal-board-proposed-determination-18nov19-en.pdf>
to
ICANN, Kieren McCarthy
<https://www.theregister.co.uk/2019/11/20/org_registry_sale_shambles/> at
the Reg, the EFF
<https://www.eff.org/document/coalition-letter-sale-public-interest-registry>
+ ICA
<https://domainnamewire.com/wp-content/ICA-Letter-to-ICANN-Board-of-Directors-November-15-2019.pdf>
letters, Jacob
Malthouse
<https://medium.com/@jacobmalthouse/whos-going-to-run-org-in-a-word-the-gop-8809ef6f9679>,
the ICANN <https://icannwiki.org/> and original
<https://en.wikipedia.org/wiki/ICANN> wikis.  Please leave corrections or
additions in the comments ~*

In 1993, Network Solutions was awarded an NSF contract to run the
non-governmental TLDs.  In 1998 ICANN was established to develop a
competitive marketplace of registrars, and implemented the first
version of vertical
separation <https://icannwiki.org/Vertical_Integration>: distinguishing
registries from registrars.

Verisign acquired Network Solutions, including both its registry and its
consumer-facing registrars, in 2000.  At the time, ICANN required
structural but not legal separation between the two.  In 2001, ICANN began
requiring legal separation between registry and registrar for all new
registries.

The next 7 generic TLDs were also appoved and began to be introduced in
2001.
The original non-profit registry : the Public Interest Registry
In 2003, as part of a deal with ICANN to ensure it could renew its control
of the .*com* registry, Verisign agreed to give up .*org*
<https://icannwiki.org/.org>.  A public bid and review ensued, which was
won by the Internet Society (ISOC
<https://en.wikipedia.org/wiki/Internet_Society>), a non-profit dedicated
<https://www.internetsociety.org/about-internet-society/governance-policies/articles-of-incorporation/>
to the
open development, evolution and use of the Internet for the benefit of
all.  Their winning bid was to stand up a new 501c3 to manage the domain,
which they called the Public Interest Registry (PIR
<https://en.wikipedia.org/wiki/Public_Interest_Registry>).
The non-profit nature of ISOC and PIR was central to their winning the bid.
The acquisition of a plurality of registries by four people

In 2010, ICANN began pursuing a more aggressive expansion of generic TLDs,
which was eventually reviewed by the US Senate
<https://icannwiki.org/Generic_top-level_domain#First_Round:_New_gTLD_Expansion>
in
2012.  In November 2010, ICANN decided
<https://www.icann.org/news/announcement-2010-11-09-en> to reverse its
policy on vertical separation, allowing new registries own registrars.
Separately, mega-registry Donuts.com
<http://en.wikipedia.org/wiki/Donuts.com> was founded by people who had
been fighting
<https://archive.icann.org/en/topics/new-gtlds/presentation-tindal-19oct09-en.pdf>
for
this change, with the mission of acquiring new TLDs.

<https://i0.wp.com/blogs.harvard.edu/sj/files/2019/11/tlds-2010-2016s.png>

In 2012, Beckstrom stepped down, and ICANN COO *Akram Atallah* briefly took
over as interim CEO before his childhood friend *Fadi Chehadé *joined as
CEO from 2012-2016.

Under Chehadé, Atallah became president of ICANN’s Global Domains Division.
>From 2014 to 2016, the number of available gTLDs was expanded dramatically,
to around 1400 in all.
Musical chairs
In 2016, Chehadé left ICANN to start his own consultancy and join Abry
Partners <http://abry.com/team/fadi-chehade/>, a Boston-based equity firm
(no scare quotes) where *Erik Brooks* (HBS) was one of 3 managing partners.
Both are well connected in academia as in business, and advisors or fellows
of the Kennedy <http://www.chehade.company/about>, Belfer
<https://www.belfercenter.org/person/fadi-banob-chehade>, and Shorenstein
<https://shorensteincenter.org/about-us/advisory-board/> centers.

In May 2018, ISOC appointed three new trustees
<https://www.internetsociety.org/news/press-releases/2018/internet-society-announces-new-appointments-public-interest-registry-board-directors/>
to
PIR, replacing outgoing trustees.  Later that month Brian Cute, PIR’s CEO
of 7 years, resigned suddenly, with no explanation. One of the new trustees
took over as interim CEO.

In June 2018, Andrew Sullivan, former chair of the IETF’s internet
architecture board, was appointed
<https://www.internetsociety.org/news/press-releases/2018/internet-society-names-andrew-sullivan-as-new-president-ceo/>
CEO
of ISOC, starting in September.

In September 2018, Chehadé (then a partner or senior advisor at Abry,
depending on who you ask), helped Abry close their acquisition of a
majority stake in Donuts <http://abry.com/investment/donuts/>. Donuts by
then had raised *$*300M and spent much of it buying up some 250 TLDs.
Brooks took a board seat at Donuts.
In October 2018, Donuts co-founder and chief counsel *Jon Nevett* (HLS),
stepped down. Brooks replaced
<https://www.prnewswire.com/news-releases/donuts-appoints-akram-j-atallah-as-ceo-300728610.html>
the
Donuts CEO with… Akram Atallah.

In December 2018, Nevett became the new CEO of PIR, responsible for .*org*
The announcement
<https://www.thenonprofittimes.com/people/new-ceo-at-public-interest-registry/>
highlighted
his commitment to its non-profit ideals.


The .org heist

In early 2019, PIR asked ICANN to drop the price cap on .*org* registrations
and renewals. PIR touted their non-profit status as a reason to approve.

In March 2019, ICANN pushed this idea forward, inviting comments on the
proposal. They received more comments (*3,300*) than they had on almost any
other decision, *uniformly opposed* to the change (*with 6 exceptions, 0.2%
of the total.*) The oppositions came from registrars and NGOs across the
globe.

In summarizing the comments later to the Register, ICANN *lied *boldly if
not creatively, saying
<https://www.theregister.co.uk/2019/11/20/org_registry_sale_shambles/>: “*there
was a group that opposed lifting price caps, but it is not true that ‘the
community’ was ‘strongly opposed’ to lifting them.”*

On May 1st, after comments closed, PIR responded to the comments with an
open letter <https://thenew.org/an-open-letter-to-the-org-community/> that
said [paraphrasing]: ‘*We could already be raising prices 10% a year, and
have not… You would get 6 months notice of any price change… We are a
mission-based non-profit, and would never betray the trust that you have
put into .ORG and us.*‘

More realistically, the Internet Commerce Association wrote a detailed
letter
<https://www.icann.org/en/system/files/correspondence/muscovitch-to-chalaby-namazi-17may19-en.pdf>
to
ICANN summarizing the many risks, introduced fragilities, and potential
worst-case scenarios involved in lifting the price caps.

On May 7th, Chehadé registered the domain for EthosCapital.com
<http://ethoscapital.com/>.

On May 13th, ICANN 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.

On May 14th, Ethos Capital was incorporated as a new Boston-based
“investment firm”, founded by Brooks – 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 Chehadé.

On November 13, in a surprise move, ISOC announced that Nevett and Sullivan
had approved the acquisition of PIR by Ethos, for an unspecified amount
(projected to be well over $1B
<https://domainnamewire.com/2019/11/14/the-economics-of-org-domain-names/>).
It is worth noting that this was *not *among the modest worst-case
scenarios considered by the ICA in their May letter.

Nevett claimed that he was first approached about an acquisition in
September. An email from Sullivan
<https://medium.com/@jacobmalthouse/whos-going-to-run-org-in-a-word-the-gop-8809ef6f9679>
suggested
that Ethos raised the money from three large funds: Perot Holdings
<https://www.perot.com/Perot-Holdings/Our-Approach>, Fidelity
<https://en.wikipedia.org/wiki/Fidelity_Investments>, and Solamere Capital
<https://www.solamerecapital.com/>.

The announcement went out of its way to note the advisors behind it: ISOC +
PIR had counsel from Morgan Lewis
<https://www.morganlewis.com/news/morgan-lewis-advises-internet-society-in-transaction-with-ethos-capital>
 + Proskauer Rose
<https://www.proskauer.com/release/proskauer-advises-public-interest-registry-in-its-pending-sale-to-ethos-capital>;
Ethos had counsel from MoFo
<https://www.mofo.com/resources/news/191113-ethos-capital-acquisition-of-public-interest-registry.html>
.


… so now what?

Official statements came out Nov 13+14.  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.

On November 22, this was picked up by the wider media as well.
What people are saying: complaint and dismay

Namecheap renewed their complaint
<https://www.icann.org/en/system/files/files/reconsideration-19-2-namecheap-requestor-rebuttal-board-proposed-determination-18nov19-en.pdf>
to
ICANN, who still have to approve the sale as part of maintaining its
10-year agreement with .*org*

Marc Rotenberg, founding board chair of PIR: “*We built the .org domain
with the specific goal of promoting the noncommercial use of the Internet
<https://gizmodo.com/private-equity-ghouls-buy-non-profit-that-handles-org-1839860118>…
transparency and accountability [will be] lost when the Public Interest
Registry is acquired by a private equity firm.*“

The Internet Commerce Association, in a scathing letter: “*ICANN should
immediately exercise its right to withhold approval of the sale of the .org
registry
<https://domainnamewire.com/wp-content/ICA-Letter-to-ICANN-Board-of-Directors-November-15-2019.pdf>
and
terminate the registry agreement in respect of any consummated transaction.*
“

The EFF, Wikimedia, and 24 other major charities wrote Sullivan of ISOC asking
him to block the sale
<https://www.eff.org/document/coalition-letter-sale-public-interest-registry>
.

A letter-writing campaign was started at #*savedotorg*
<https://savedotorg.org/>.
What people are saying: no comment

ICANN has the right to withhold approval of the proposed sale, under
Section 7.5 of the .Org Registry Agreement
<https://www.icann.org/sites/default/files/tlds/org/org-agmt-html-30jun19-en.htm>;
they have *30 days* after they receive the last requested information about
such a sale to consent or explicitly withhold consent.

ICANN told the Reg they were informed of the deal when it was announced
publicly (*so: Nov. 13*), and are in the process of analyzing the specifics
of the deal
<https://www.theregister.co.uk/2019/11/20/org_registry_sale_shambles/?page=2>.
They say they asked PIR to share further details, but PIR has refused on
grounds of confidentiality.

In that same comment, they were nevertheless supportive of the deal,
exaggerating pricing protections written into the current .*org*
contract (registrars
must give domain-holders 6 months notice of a price increase for renewals,
and have the *option* but *no obligation* to offer renewals for up to 10
years at current rates. So if the registry chose to quintuple its rates,
each registrar would have the option to offer its customers at most 10
years of registration at the old, unquintupled rate).
What people are saying: puppies and rainbows

Vint Cerf, founding ISOC president and former ICANN chair: “*I am looking
forward to supporting Ethos Capital and PIR in any way I can.*
<http://www.domainpulse.com/2019/11/14/pir-eyeing-growth-ethos-capital-takeover/>
“

ISOC president Andrew Sullivan, believing furiously: “*We believe many in
the community see the long-term benefits of this deal*
<https://www.theregister.co.uk/2019/11/20/org_registry_sale_shambles/?page=2>
*.*“

PIR itself, in the vaguest plan for a $BB windfall I’ve seen all week, will
“*Establish a Stewardship Council… Launch a Community Enablement Fund to
support initiatives by Internet organisations… Expand .ORG prizes to
non-profit organizations*“. The latter apparently refers to $30k in small
prizes
<https://orgimpactawards.org/wp-content/uploads/2019/05/The-.ORG-Impact-Awards-Entry-Kit.pdf>
given
out last month, for the first time.

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   http://blogs.harvard.edu/sj/2019/11/23/a-tale-of-icann-and-regulatory-capture-the-dot-org-heist/
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   (via José María Mateos <chema at rinzewind.org>)
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