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NGO Community Urges ICANN to Exercise Independent Judgment as It Reviews the .ORG Sale

ICANN is reviewing the Internet Society's proposed sale of Public Interest Registry, the .ORG registry operator, to private equity firm Ethos Capital. ICANN effectively has the power to stop the sale by terminating PIR's Registry Agreement. The Electronic Frontier Foundation, NTEN, Consumer Reports, Americans for Financial Reform and several other organizations joined Monday's Public Forum at ICANN67 to ask questions about how ICANN plans to review the change of control of the .ORG registry to protect noncommercial users' interests.

To date, over 25,000 people and 839 organizations have signed a letter demanding a stop to the sale, which would let Ethos Capital raise domain registration fees and implement new enforcement mechanisms that could be used to censor NGOs. Unfortunately, the ICANN staff and board did not answer any of our questions at yesterday's Public Forum, but we hope to hear from them in the coming days.

Public Interest Commitments Won't Adequately Protect Users

As EFF and NTEN recently explained, Ethos Capital's attempt to address criticism by forming a Stewardship Council doesn't resolve the NGO sector's concerns. PIR's ability to veto council members ensures that the council will stay in lockstep with PIR. As I asked in today's meeting:

PIR has proposed to create a Stewardship Council whose initial members will be selected by the PIR Board. PIR's Board will retain a veto over any new members. And any three members of the Stewardship Council can uphold any decision by PIR's board and management, whatever its effect on freedom of expression. Does ICANN consider PIR's proposal sufficient to safeguard the interests of .ORG registrants?

Today's meeting made it clearer than ever that Ethos Capital is ill-equipped to manage the .ORG registry on behalf of the NGO sector.

Ethos also unveiled new Public Interest Commitments (PICs), additions to the .ORG RA that Ethos says will keep the registry from raising prices above a certain rate and establish the Stewardship Council. In two recent webinars, Ethos stressed that revising or revoking the PICs would require amending the RA, framing this as insurance that the PICs will continue to bind PIR and any subsequent owners of the .ORG registry. But that overstates the difficulty of amending the RA, which can be negotiated at any time by the registry owner and ICANN, even in the face of overwhelming public opposition.  In fact, that's exactly what happened last year when the .ORG RA was revised to diminish registrants' rights and remove price caps. As my colleague Cara Gagliano asked:

Can Public Interest Commitments in a registry agreement later be revised or revoked through bilateral negotiation between the registry operator and ICANN staff, as ICANN has stated is the case for other contractual terms?

Because one of the PICs deals with registration fees, a topic that ICANN has signaled it is no longer interested in overseeing, National Council of Nonprofits' Rick Cohen asked whether PICs are an appropriate method for limiting price increases at all:

In 2019, ICANN indicated its interest in exiting the role of price regulation, but the PIC proposed by Ethos would place ICANN back in that role. Because ICANN would be the only body empowered to enforce the proposed PIC, is this a role ICANN is willing to play? And what commitments to the .ORG community to uphold the PIC will ICANN make?

A For-Profit Registry Is Not Well Positioned to Defend Nonprofits

PIR and Ethos Capital have repeatedly distanced themselves from statements PIR and ICANN made in 2002 when PIR was first formed. From the beginning, PIR's connection to the global NGO sector was seen as essential to its management of .ORG. ISOC's then President and CEO Lynn St. Amour promised that .ORG would continue to be driven by the NGO community — in her words, PIR would "draw upon the resources of ISOC's extended global network to drive policy and management."

PIR, Ethos Capital, and their various spokespeople have downplayed the significant change that will come with transitioning PIR to a for-profit, private equity-owned company. Particularly given the significant amount of debt that Ethos' investors plan to impose on PIR, NGOs are right to ask what corners a for-profit PIR would cut in order for Ethos to recoup its investment. As Elliot Harmon, EFF's Activism Director asked,

"What relevance, if any, does ICANN believe the 2002 criteria for the redelegation of the .ORG domain, and ISOC's commitments, hold today?"

Americans for Financial Reform's Patrick Woodall expanded on the financial picture surrounding the proposed sale of PIR, raising serious questions about what changes Ethos will make to .ORG in order to make a profit:

PIR has said that the transaction will maintain its financial viability because it generates $50 million in operating revenue and its annual interest-only loan payments are only about $20 to $25 million. Using PIR's generous $50 million income assessment (which is higher than any prior year), and assuming the 10% annual price increases, PIR will still only generate $380 million in revenue over the term of the loan but will owe over $480 million (about $120 million in interest payments and $360 million in principal). How will PIR repay the $360 million principal when it comes due without compromising the stability of PIR or imposing additional costs on its users?

ICANN Must Ensure Real Public Oversight of the .ORG Sale

Several speakers demanded that ICANN play a more active role in leading a public discussion on the change of ownership and how it will affect NGOs. While Ethos has taken some steps to lead a public engagement process, it can't do so neutrally. As EFF's Elliot Harmon said:

Since the Internet Society announced the sale of PIR, Ethos and PIR's communication with the public has been largely one-directional. Ethos and PIR have now hosted several webinars, but they've consistently failed to adequately respond to most of the questions and concerns raised by leaders in the NGO sector.

As the steward for the TLD system, ICANN itself should lead public engagement on the issue of the PIR sale. It should be leading engagement with global NGO sector leaders and listening to their feedback before it approves the transfer of ownership of the registry.
This public forum is a good start, and I hope that ICANN thinks of it as a start, not a conclusion. ICANN, not PIR itself, should be collecting and evaluating written public comment on this issue.

Consumer Reports' Katie McInnis asked a pointed question of the ICANN board: can it lead that process if board members haven't disclosed their own financial connection to the sale?

Some members of this Board have current or past business relationships with contracted parties or other companies in the domain name industry. Does any member of this Board stand to gain financially from the sale of PIR and its future operation by Ethos Capital?

Yesterday's meeting made it clearer than ever that Ethos Capital is ill-equipped to manage the .ORG registry on behalf of the NGO sector. ICANN must intervene to stop the sale.

By Mitch Stoltz, Senior Staff Attorney at the Electronic Frontier Foundation

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