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How to Preserve the .org Registry's Integrity in the ISOC Sale of PIR

Sam Lanfranco

This article addresses the issues around the planned sale of the PIR .org registry by ISOC. It examines the history and issues plus looks at several possible paths forward, including PIR becoming a Benefit Corporation (B-Corp) and identifying possible alternative buyers who could retain PIR's non-profit status.

Before Tim Bernier-Lee brought the HTML markup language to the Internet, starting in 1989, there were few registered domain names. Access for public registration started in 1986, and by December, there were about five dozen registered .com domain names. By 1998, just before the early versions of the HTML markup language became available, the number of registered .com domain names was somewhere over 100, and the number of registered .org domain names was about a dozen.

The refinements of HTML 1.0 and the arrival of the Mosaic Browser in 1993 brought the possibility of easy access to digital residence, with a website on the world wide web. Today there are over one and a half billion websites in the Internet ecosystem, spread over 2,000 top-level (gTLD) and country code (ccTLD) domain names. Of interest here are the over 10 million .org registrations that, while they account for a minuscule quarter of one percent of all domain names, represent an important public interest presence in the global Internet ecosystem.

The overwhelming majority of .org domain name holders are small organizations, community entities, and non-profit organizations. The .org domain name has high integrity because of its users, and because of the policies of the non-profit Public Interest Registry (PIR), the owner of the .org registry for the past decade and a half.

All of that is about to change. A small consortium of private investors has formed a company (Ethos Capital) and been selected by ISOC to buy the Public Interest Registry (PIR) that owns the .org registry. PIR is owned by the non-profit ISOC organization. ISOC uses the profits to promotes Internet use and access, including funding the Internet Engineering Task Force (IETF). By 2020 IETF will be separate from ISOC funding. The sale would convert ISOC revenue from PIR profits to revenue from an endowment funded by the sale.

The .org registrations (circa 10 million) generate about $100 million dollars per year. PIR operates under contractual terms with ICANN, the non-profit charged with maintaining the stability and security of the DNS system and the creation of top-level domain names. For years the .org registry fee for a .org domain name had been capped in the public interest and for the many .org users with limited means. Earlier this year, although opposed by almost all stakeholders who commented, agreement was reached to remove the price cap. This made the .org registry a potentially more profitable operation.

This opened stakeholder discussion mainly focused on the intentions of ISOC and PIR about .org rate increases. The non-profit stakeholder community worried that this might result in major fee increases. As late as early November, at ICANN66 in Montreal, there was no public indication that ICANN and ISOC were negotiating the sale of PIR. Shortly after Montreal, Ethos Capital, ISOC and ICANN made public the impending sale of PIR to Ethos Capital, a sale that would move PIR from the non-profit status to the private sector.

The .org and Internet public interest stakeholders responded instantly. Relaxing the price cap also had a likely impact on the market value of PIR, and the Ethos Capital purchase price is reported to be around 1 billion plus USD. In terms of its market niche, the .org registry has no real competition within domain name markets. The relatively new and modest registries, .ngo and .ong , are also owned by PIR. Public expressions of worry about the sale have prompted ICANN to temporarily put the sale on hold.

What will happen next is unclear. ISOC had apparently been considering selling PIR and using the proceeds as an endowment to carry on its work free of running PIR and the .org registry. While there is much speculation, it is unclear who moved first. Quickly ex-ICANN personnel and a set of deep-pocketed investment groups formed Ethos Capital and concluded an ICANN approved offer for PIR. There are questions about who knew what, and when, and who was involved, how and when. While those questions address the ethics of what happened, that story is not central to the issues being addressed here. That story is work for some investigative journalists.

As things now stand, ICANN has temporarily put the PIR sale on hold. Ethos Capital hopes to conclude the transfer early in 2020. The transfer would change PIR from a non-profit to a private corporation.

This has prompted growing concern within the .org stakeholder community. The most obvious concern is the fear of significant .org registry fee increases for new and renewal registrations. The Ethos Capital group, with no track record and no expertise in Internet issues, has not said much other than: Trust Us. As well, there is no way to know if the purchase price is based on the value for the current PIR business, or on the value based on future undisclosed Ethos Capital business plans.

The major response from the stakeholder community has been to ask ICANN to disallow this sale somehow, and to keep PIR as a non-profit registry. The concern is with a buyer with no track record taking PIR private. The transaction has the look and feel of a finance capital group looking to bulk up PIR's asset value for resale, with no plans to retain PIR and registry ownership for the long haul.

While there is considerable opposition to the sale, it is not clear if ICANN has procedures to block it, if ICANN is willing to block it, or if there are other options. It is also important to remember that ISOC has a right to sell PIR. The core issue is the properties of that sale. ISOC cannot be pressured to retain PIR ownership.

One complicating property of the sale is proposed changes in the ICANN contract wording for the .org registry that gives the registry authority to retract a registration (i.e., close a website email addresses, etc.) for poorly defined due cause (bad behavior). This is the grey area where content and behavior are just short of being subject to legal and judicial treatment. This is an important and contentious issue. There are legal and judicial processes for retracting registration because of something illegal. We are talking about the grey areas that are frequently in the news of the day, things like false news, extremist websites, and websites that support questionable activities or operate at the fringes, or borders, of free speech.

This is a serious Internet policy area that goes well beyond ICANN's competence, and ICANN should not pass on such authority, nor should Ethos Capital or any owner of PIR have authority for actions that would impact the digital rights and obligations of .org domain holders. Where existing procedures are inadequate, ICANN should participate in broader policy development processes as another stakeholder. Such a policy development process should involve a broad-based multistakeholder consultation.

Consider the downside risks to what is being proposed. Many .org domain name holders are groups that mobilize for social change on the part of the poor and the marginalized, and fight for integrity in government and governance. If there is a right to terminate domain ownership at the discretion of the registry, what is to prevent registry owners from succumbing to pressure from governments to close websites under the threat of curbing that registry's business in that country. Whoever owns PIR, ICANN should refrain from any new takedown authority entitlements. The problem of government pressure on a registry is particularly important when it comes to the .org registry. This stands in stark contrast to the relative indifference governments have to the domain name abuses tolerated by the registries and registrars in the newer generic top-level domain names.

In earlier times, there was pressure to limit the .org registry only to NGOs and non-profits that were formally registered in their home countries. This restriction was not adopted. The formal registration of a non-profit requires an application to the appropriate authorities, and approval by those authorities. Many poor non-profits do not have the ability or the means for national registration, or to keep registrations up to date. Several years ago, in one move, South Africa de-registered about one-third of the country's non-profits, mainly for failure to keep up to date on their annual reports. For a resource-strapped organization to also lose its domain name and website would compound injury on injury.

Requiring non-profit registration presents governments with an easy tool to shut off dissent. Terminate an organization's non-profit registration, and its website, domain name, etc. are gone as well. This leverage happens. There are countries where NGOs must be registered to be able to receive foreign support, even if that support is only someone paying for the NGO's externally hosted website. When displeased with a group's activities, governments revoke their registration, and they are then in violation of the law if they continue to receive outside support.

In short, the rights and obligations of holding a .org domain name are important to the mission, vision and work of the domain name holder. The .org domain name holder is a resident of the Internet ecosystem, and as such should have certain rights and obligations, entitlements and protections. ICANN must be very careful about what discretionary powers get embedded into registry contracts, especially those that deal with the removal of domain name ownership. This is of immediate importance regarding contract wording in the proposed change in ownership of the PIR .org registry.

Another major problem regarding the proposed purchase of PIR by Ethos Capital is the lack of a track record for the newly formed Ethos Capital, formed for the express purpose of buying PIR. Anyone who has dealt with such investment transactions knows that purchase promises are based on the context of the moment, frequently that context being "make the deal." In a move to help enhance its integrity concerning the purchase of PIR, Ethos Capital has said that it will take PIR through B Corp Certification. This is disturbing because It is not clear if this is well-meant, or a bit of deception.

B Corp Certification is not the incorporation as a legal Benefit Corporation (aka B Corp). B Corp Certification is a Trust Mark, issued by B Lab; a non-profit whose business is certifying companies as behaving in Benefit Corporation like manner. There is nothing wrong with B Lab and its B Corp Certification, except that it applies best to ongoing businesses with a track record. It is a bit like ISO9000 and such, in that it has a checklist, a scorecard, that evaluates a business's performance and awards the Trust Mark. Ethos Capital had no track record, and it is doubtful if B Lab should even grant Certification here. Ethos Capital points out that the Certification process has an Advisory Council. Advisory Councils have a mixed record, and it is noteworthy the PIR's own Advisory Council was kept in the dark about the proposed sale of PIR and the Ethos Capital buyout.

Even if an Ethos Capital PIR did receive a B Corp Certification Trust Mark, that does not prevent Ethos Capital from changing PIR's business practices when an attractive opportunity presents itself, when there is pressure from a powerful government, or if PIR goes to a new owner. At worst, PIR would lose its Certification Trust Mark.

In addition to options that keep PIR as a non-profit, there is a solution, one that goes a considerable way toward legally binding any buyer to honor public interest pledges concerning PIR. PIR could formally incorporate as a Benefit Corporation, a legal B Corp. That can be done in any number of U.S. states and the District of Columbia (Wash D.C.), as well as in other countries. Benefit Corporation status would endure even if PIR were to be subsequently sold to new owners.

There is one remaining issue to be addressed. Whatever the outcome here, ISOC should not be required to retain ownership of PIR. Are there other prospective buyers who would honor making PIR a legal B Corp? Apparently, at the initial stages of the ISOC decision to sell, there was some sort of call for proposals that generated more than one offer. It is likely that all came from the private sector, maybe by those already involved in registry ownership.

If Ethos Capital is not to buy PIR, are there potential buyers that would be more acceptable, amenable to B Corp status, and have enough funds to match the Ethos Capital option. There are four groups of such buyers: pension funds, sovereign funds, charitable trusts, and philanthropists. Some examples:

  1. Pension funds. In Canada Ontario, Teachers' Pension Plan and the federal Public Service Pension Plan collectively administer around $400 billion in a highly varied portfolio of investments. The California State Teachers' Retirement System (CalSTRS) administers about $250 billion.
  2. Sovereign funds. The Norway Government Pension Fund Global administers a trillion dollars of funds. The University of Texas/Texas A&M Investment Management Company (UTIMCO), ranking twenty-fourth among sovereign funds, administers about $50 billion.
  3. Charitable Trusts: The Scott Trust owns the UK Guardian and the Observer. The Pew Foundation (US), and other Charitable Trusts maintain considerable endowment investment portfolios.
  4. Philanthropists: 2013 Jeff Bezos (CEO Amazon) purchased the Washington Post. It is held "hands-off" in a private LLC. Philanthropic interest in PIR as a B Corp is possible.

Looking over pension funds, sovereign funds, and charitable trusts, PIR would make an attractive addition to what they currently hold. Philanthropists are a long shot here.

Where might the ISOC sale of PIR go from here?

  1. In its approval of the sale of PIR to any buyer, ICANN should insist that PIR remain as a non-profit or be incorporated as a Benefit Corporation (B Corp), to protect the public interest.
  2. ICANN should not extend contract entitlements to PIR to exercise control over the withdrawal of domain name ownership in those grey areas that are not subject to legal and judicial action. That area calls for broader stakeholder engagement in policy development.

Can we make those two properties of an ICANN approved ISOC sale of PIR come to pass? That challenge raises a fundamental problem with the entire story around this situation. There are ten million .org domain name holders out there, and hundreds of millions of stakeholders related to the activities of those organizations. Millions of these stakeholders are also stakeholders in pension funds, sovereign funds, and charitable trusts. They should be the most interested stakeholders in this scenario. They are resident in the Internet ecosystem. They live, work and their lives are being shaped in the .org domain owners' digital community village.

However, most of these stakeholders know nothing about what is going on here. This problem is common across the regions of the Internet ecosystem. Landowners and renters keep aware of the zoning regulations that impact on their literal properties, their potential uses, and regulatory changes. Persons and entities have digital residences in the Internet ecosystem there but no idea of their digital rights and obligations. They are not engaged in the policy processes that impact their digital citizenship as residents, on their businesses, and on their lives.

The .org domain namespace represents a group of stakeholders who are deeply concerned about human rights, social justice, inclusion and exclusion, and the like. They know little of what is going on about PIR and the .org in terms of their digital rights and obligations. They are hardly engaged in the .org sale discussions. This can be viewed as a colossal failure to teach digital civics, a failure to mature digital residents of the Internet ecosystem into knowledgeable and engaged digital citizens.

In the immediate period, we need to keep up the pressure on ICANN to ensure that the ISOC sale of PIR remains either as a non-profit or as a B Corporation. We also must guard against greater registry extra-judicial (outside the law) authority to withdraw domain name registrations. In the longer run, we need to build a world where more knowledgeable and engaged digital citizens participate as stakeholders in the policy development of the global Internet ecosystem.

By Sam Lanfranco, Prof Emeritus & Senior Scholar, York University
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Thanks for this insightful analysis Sam. A Jacob Malthouse  –  Dec 17, 2019 11:18 AM PST

Thanks for this insightful analysis Sam. A minor clarification. The B Corp status requires a change in incorporating documents, but it can also be revoked by changing them back. It's not a durable certification. The only durable solution is to embed independent nonprofit oversight into the ICANN Registry Agreement.

Embeding ,org Registry non-profit status in the ICANN Registry Agreement Sam Lanfranco  –  Dec 19, 2019 7:00 AM PST

Thanks Jacob, that is the best path forward. I had assumed that stakeholder participation in proposed status changes in a Benefit Corporation would prevent reverting to a private for profit corporation, but protections in the agreement are best.

Interesting article, but with fatally flawed assumptions John Levine  –  Dec 17, 2019 11:57 AM PST

I appreciate the analysis, but as is too often the case, it's flawed by easily verified mistakes.

The overwhelming majority of .org domain name holders are small organizations, community entities, and non-profit organizations.

Nobody who had ever looked at the names in .org (easily available through the ICANN CZDS system) would say that. In fact the majority of names are just parked. Having looked at large samples of the names, I would be surprised if as many as 5% were non-profits and such.

By 2020 IETF will be separate from ISOC funding.

That is simply false. The IETF recently reorganized into an LLC that is a subsidiary of ISOC. The vast majority of its funding continues to come from ISOC, as a quick look at the ISOC and IETF LLC budgets will confirm.

Public expressions of worry about the sale have prompted ICANN to temporarily put the sale on hold.

ICANN does not have the authority to put the sale "on hold." (See the registry agreement for details.) They have asked PIR for more details, which PIR is in the process of providing.

In earlier times, there was pressure to limit the .org registry only to NGOs and non-profits that were formally registered in their home countries.

Again, that is simply false. The .org registry has always been open to anyone. My sister registered a personal .org in 1998 when it was run by Verisign predecessor Network Solutions, which she still uses. The new .NGO/.ORG registries do require registrants be formal non-profits, but only have a total of about 3000 names.

There are more issues, like unfamiliarity with PIR's Healthy Domains program they are using to get rid of malware, phishing, child abuse and other clearly illegal abuses. I could go on, but the problems should be evident. Feel free to get in touch if you'd like to rewrite this to reflect the real situation.

Corrections and the Main Issues Sam Lanfranco  –  Dec 19, 2019 7:26 AM PST

John, Thanks for the comments. As for the parked and operational names I should have been explicit with regard to mainly operational names. The parked names are an interesting issue in and of themselves. I stand corrected on the IETF funding. I read an unreliable source that stressed the separation. The .org registry has always been open but there were times when closing it, like the current .ngo/.ong, was part of the chatter around .org. Lastly, I know that there are existing take down activities but wanted to highlight that take downs are a complex problem where ICANN should be a stakeholder in wider discussions and not simply proceed with revised contract language. Lastly, the core issue here is how does the transition in ownership take place without undue risk to the .org community and the .org registry.

PIR does NOT own the .ORG Registry John Poole  –  Dec 17, 2019 1:10 PM PST

You stated: "A small consortium of private investors has formed a company (Ethos Capital) and been selected by ISOC to buy the Public Interest Registry (PIR) that owns the .org registry." WRONG! PIR is ONLY the current Registry Operator of .ORG. TLDs, including .ORG, are Global Public Resources, they are NOT owned by ICANN nor any Registry Operator. See RFC 1591 written by Jon Postel, founder of ICANN and the Internet Society, as well as the Amicus Brief (pdf) filed for the United States (Dec, 2015) in the Weinstein case, and the legal advice (pp.4-11 Dec 2008) from the US Dept of Justice Antitrust Division to NTIA and ICANN, as well as my Nov 24, 2019, letter (pdf) to ICANN et al, as to what should now happen re: .ORG. Based on the foregoing and other references I have posted here, it is now clear the parties involved, including Ethos Capital, ISOC, and ICANN, have a complete misunderstanding of the legal principles involved, and the Internet Society is attempting to "sell" something it doesn't own, i.e., the TLD .ORG. Caveat Emptor!

Re: "..does NOT own... Sam Lanfranco  –  Dec 19, 2019 7:36 AM PST

John, I appreciate your comments here, as an economist I could discuss/argue this for hours. What is important is the holding the current contract as the registry operator is the "ownership" of an asset that (a) is transferable, and (b) has market value, until such time (if ever) that the legal system rules otherwise. As for Caveat Emptor I would substitute Caveat Stakeholder.

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