Where We Are: The Pending Billion-Dollar .ORG Deal to Ethos Capital
Something big is happening, and it’s shaking up the nonprofit sector as we know it.
On November 13, 2019, the Internet Society (ISOC) and Public Interest Registry (PIR) announced that private equity investment firm Ethos Capital is acquiring all of its assets. This is groundbreaking to the nonprofit sector because if the $1.135 billion sale goes through, every .ORG domain, primarily owned by nonprofits, will be owned by this private equity firm.
The Acquisition's Impact on Nonprofits
“The biggest risk right now is the chilling effects in nonprofits’ ability to achieve their missions. Before, .ORG was run by a nonprofit, and it was run in [nonprofits’] interests. Now, those interests are misaligned and, no matter what the private equity firm says, its first duty will always be to its shareholders. And that duty is to make money; not to the nonprofits they serve,” Jacob Malthouse, co-founder of the .ECO domain and former VP of Internet Corporation for Assigned Names and Numbers (ICANN), said in an exclusive interview with NonProfit PRO.
As imagined, nonprofit organizations and activists alike are fighting back… with full force. If closed, this sale could threaten the integrity of the .ORG system, raising the price of the annual $10 .ORG domain fee astronomically. If you don’t remember, last year, ICANN lifted price caps on all .ORG domains. If you’re like me, you’re probably assuming that the whole “price cap removal” is why this sale is even happening in the first place. But during an NTEN community call, Erik Brooks, founder and CEO of Ethos Capital, assured those concerned that the lift in price caps was not part of their decision-making process in acquiring .ORG.
He goes on to explain that keeping .ORG “reasonably priced” is 100% Ethos’ intention — with an average of no more than a 10% price increase annually, which is about $1 per year. “ We are absolutely committed to staying within the spirit of how PIR has operated with the price system that they operated with before,” Erik said. But in the scheme of things, that’s up to a grand total of $10 million annually for Ethos.
Another piece of this puzzle that is concerning for nonprofits is censorship. A petition created by the Electronic Frontier Foundation (EFF) — that has over 20,000 signatures to date — claims that this sale could give Ethos the power to censor nonprofits’ speech “to advance commercial interests and to extract ever-growing monopoly rents... Ethos has a financial incentive to engage in censorship… And the contracts that .ORG operates under don’t create enough accountability or limits on Ethos’s conduct.”
“This is a certain time in America, but really thinking about organizations in other parts of the world that rely on a .ORG domain to signal to folks that they are an organization that is trying to do good work — that we can donate to them and we can support them. But [these organizations] are probably doing work their government actually does not want them to do: pro-democracy, community organizing, civil liberty-type work. With these vulnerabilities for censorship, what's to say that those governments can't say, ‘We don't want these websites online.'" Amy Sample Ward, CEO of NTEN, said in an exclusive interview with NonProfit PRO.
She continues, “And that, to the nonprofit sector, is a really big deal because we don't believe that that's how our sector should be managed.”
While there are raised concerns that censorship will become an issue if this transaction goes through, Vinton Cerf, who served as founding president of ISOC between 1992 to 1995 and as chairman of the board of ICANN, and also referred to as a "father of the internet," believes otherwise, according to an article he authored on Medium:
“In addition to its commitment to limit price increases, Ethos has proposed to create a stewardship council to advise the board on key decisions that could affect .ORG users or the internet ecosystem. It is my understanding that Ethos intends for the stewardship council to have considerable authority. The council, for example, will take on the role of ratifying strong rules protecting freedom of expression and safeguarding against censorship.”
Shared in a press release, ISOC and PIR are ecstatic about this transaction and are passing it along as really, really positive and wonderful news.
“This transaction aligns PIR with a strong, new strategic partner, Ethos Capital, that not only possesses a deep understanding of the intricacies of the domain industry, but also has the ideal mix of expertise, experience and shared values to further advance the goals of .ORG into the future. As a mission-driven firm focused on the guiding values and ideals that build successful organizations and communities, Ethos Capital is committed to ensuring complete continuity of PIR’s operations, to maintaining the strong community relationships PIR has established over the years and to continuing PIR’s longstanding partnerships and vendor affiliations to ensure domain operations run smoothly, without disruption to the .ORG community or other generic top-level domains operated by the organization.”
Saving .ORG, 1 Signature at a Time
Nonprofits, organizations that make up the majority of .ORG domains, beg to differ. In a valiant effort to stop this transaction, NTEN, the 501(c)(3) nonprofit technology trade association, launched a petition: SaveDotOrg. To date, the petition has received over 20,000+ signatures from organizations, such as DoSomething.ORG, Girl Scouts of the USA, Meals on Wheels America, Sierra Club, YMCA and many more.
The petition argues that the nonprofits depend on the .ORG domain, so any decisions affecting .ORG should be made with the consultation of the nonprofit community. It also argues, “If the Internet Society can no longer be that leader, it should work with the NGO community and ICANN to find an appropriate replacement.”
Even though nonprofits hold the majority of .ORG domains, Andrew Sullivan, president and CEO of ISOC, argues that .ORG was never intended to be exclusively for nonprofits. Jon Nevett, president and CEO of PIR, added, “ [.ORG is] not just nonprofits; anyone who wants to do good on the internet should be looking for a .ORG. It could be a family, a community and anything else like that. I think for-profits often serve not-for-profits, and quite successfully. I think that's the model that Ethos is managing here.”
But herein lies the issue: Nonprofit do make up the majority of .ORG domains, and many organizations are arguing that nonprofits should get a say in what happens to the future and health of the .ORG registry — and which entity owns and manages it.
While the SaveDotOrg petition does not have the power to stop the sale to Ethos, the number of organizations and people signing it, and how widespread it’s becoming, does speak in waves. There are so many organizations signing on to this letter, concerned for the wellbeing of the .ORG registry — they’re not going away, and they’re not forgetting about what is happening here.
“This isn't going away. People are not forgetting that this is happening. And this means that we are able to say — whether it's to ISOC, PIR or Ethos: ‘You need to answer to this group of people.' Not that you need to answer me, Amy at NTEN, but you need to answer to this sector,” Amy said. “This also means that we have been able to say: ‘There's real cause for concern here.’ There's a big public response to this, which has helped put pressure on those institutions. Now we can say: ‘No. People do care, people are paying attention and we don't support this.'”
On December 9, 2019, ICANN stepped up to the plate. ICANN has requested PIR provide information related to:
- The continuity of the operations of the .ORG registry
- The nature of the proposed transaction
- How the proposed new ownership structure would continue to adhere to the terms of our current agreement with PIR
- How they intend to act consistently with their promises to serve the .ORG community with more than 10 million domain name registrations
This request from ICANN has halted the transaction between PIR and Ethos Capital because under the terms of the .ORG registry agreement, “PIR must obtain ICANN’s prior approval before any transaction that would result in a change of control of the registry operator.”
In a letter to ISOC and PIR, ICANN urges PIR, ISOC, as well as Ethos Capital to be transparent throughout this whole process, saying:
“... be clear and open in all of their communications. We have indicated our willingness to publish the request and related materials involved in ICANN’s review, including the request for approval, the request for additional information and PIR’s responses.”
Many speculate that ICANN has the power and authority to stop the sale of .ORG to Ethos. And in reality, it’s a little more complicated than a simple “yes” or “no.” Technically, ICANN does not have the authority to stop the pending acquisition — BUT there is some wiggle room around that.
According to a statement to the Financial Times, ICANN said its job was to “assure the continued operation of the .ORG domain.” This implies that it does not have the authority to stop the sale, but it could be stopped if the stability and security of the domain name infrastructure was at risk.
“I think ICANN has a special obligation given the basis on which the contract was originally awarded to intervene in this case and say: ‘In the public interest, we forbid you. We believe this would be a breach of your agreement with us to sell this to a for-profit,'” Jacob explained.
He continued, “Do I think there'd be a lawsuit there? Yes. Do I think that ICANN would win that lawsuit? Yes, I do. I think there is a preponderance of evidence to show that ISOC is in breach of its commitments to ICANN to run .ORG for nonprofit purposes and in breach of their own commitments that they made on their website, and all of the things that they stand for as organization.”
In a published interview on The Register, Andrew said he did not expect the level of pushback against the sale. He believes that the support against the sale is “overblown.”
"I think claims that there has been an outpouring of support against the sale are overblown. If you look, there is a relatively small number of people complaining. We may be overstating the feeling; most people haven't noticed. Most people don't care one way or another."
And when asked whether or not ISOC should have some responsibility for registrants if they face huge price increases as a result of the registry becoming for-profit:
"It's a market," he responds, noting that "PIR has always been a business from the get-go," before questioning the assumption that .ORG prices will go up much. "We wouldn't [raise prices] because it would be bad for us," he says, making the argument that if prices go up too far, people will simply move to a different domain name.
Presidential Candidate Elizabeth Warren, Among Others, Joins the Fight
And this goes beyond the realm of the nonprofit sector. On December 23, 2019, U.S. Senators Ron Wyden, D-Ore., Richard Blumenthal, D-Conn., Elizabeth Warren, D-Mass., with Rep. Anna Eshoo, D-Calif., questioned the harm of the sale of .ORG domains to a private equity firm. Thus, they requested answers to a series of questions by January 6, which both ISOC, PIR and Ethos obliged. In the response, Andrew, Jon and Erik ensured to “continue to keep the interests of .ORG registrants and users, and of the public, first and foremost in the operation of PIR.”
Not good enough for Senator Wyden. In an email to Gizmodo, he expresses that the letter from Ethos simply boils down to “trust us,” and that’s “not good enough.”
“Nothing in this response addresses my concerns that selling .ORG to a private equity firm would be a real blow to internet users and nonprofits,” he said.
A New Alternative for the Future of .ORG
It seems like there is nothing (besides public scrutiny) standing in the way of the sale of .ORG to Ethos. But there might be a silver lining for nonprofits. A group of charitable web leaders are paving the way for an alternative for .ORG.
According to Medium, leaders from organizations such as Wikimedia, Internet Archive, Mozilla Foundation and Packet Clearing House are coming together to create a new viable alternative for .ORG — Cooperative Corporation to .ORG Registrants (CCOR). This move is to convince ICANN to let the co-op manage the top-level domain.
“.ORG is the open internet’s most essential non-commercial infrastructure. CCOR will ensure that .ORG will be kept free of commercial pressures, is mandated by law to uphold its public service purpose and remains exceptionally well-positioned to advance the missions of the organizations it serves,” Esther Dyson, who served as the first chair of ICANN from 1998 to 2000 and is one of seven initial directors of CCOR.
The cooperative is committing to ensuring that operation of the .ORG domain will be for the benefit for the internet as a whole, differentiating the .ORG domain as a representative of nonprofits and charitable organizations, ensuring the rights of .ORG registrants are protected and ensuring that .ORG domains will not be used as a point of control over censorship over the speech and conduct of its registrants or constituencies.
Additionally, CCOR members will be given the right to vote on organizational and operational decisions. “All current registrants of .ORG domains will be members. Each member will be entitled to one vote. No fees shall be due from members to CCOR beyond whatever costs they may have already incurred in registering .ORG domains,” according to Medium.
If you’re overwhelmed by everything that is going on and having trouble keeping up with the news of this pending acquisition, at NonProfit PRO, we will try our best to update this article as additional details of the transaction continue to break.
On January 17, the National Association of State Charities Officials (NASCO), an association of state charities officials charged with preventing the misuse of charitable assets, urged ICANN to further stall the sale of .ORG and “allow appropriate time for regulatory authorities to review impact of this proposed transaction.”
We’ve reached out to ISOC, PIR and Ethos for comment, but have yet to hear a response.