by Milton Mueller

On November 13, the Internet Society announced that the .ORG domain registry will be sold to a for-profit private equity firm. Much of the community that pays attention to ICANN is in an uproar about it. There is now a movement to “Save .ORG;” there are claims that the sale was corrupt or unethical; there is loose talk about major price increases, wailings about “soulless capital” taking over the Internet, and a lot of interesting speculation about the role of former ICANN CEO Fadi Chehadi in the sale.

Most of the basic facts about the sale have been reported elsewhere. A good summary from Samuel Klein is here. Not so clear is what should be done about it. We are still debating the appropriate response by ICANN, the Internet Society, and the noncommercial domain registrants for whom .ORG was supposed to be their special place. In this article, we outline what we think is the problem and the appropriate responses to it. IGP believes that there is cause for concern, but civil society groups are in danger of losing credibility with poorly thought out or ineffectual responses.

The Players

The Internet Society is a global nonprofit formed by Vint Cerf and other Internet pioneers in 1992. It has always had a somewhat fuzzy mission. Originally it was intended to serve as the corporate umbrella for the IETF. Then it added to its mission policy and education oriented toward promoting the Internet. Until 2003, when it came into control of .ORG, it was small and always short of money.

Public Interest Registry (PIR) currently holds the delegation for .ORG. PIR was set up in 2002 by the Internet Society (ISOC) as a wholly owned subsidiary for the express purpose of applying for the .ORG domain. The .ORG domain was up for grabs because the US Commerce Department forced its previous owner, what is now Verisign Inc., to divest itself of .ORG in order to promote registry competition and diversity. When it applied for the domain, PIR made much of the fact that it was a nonprofit devoted to serving the Internet community. But the key fact about PIR is that the revenue it generates through the sale of .ORG domain names solved ISOC’s perpetually shaky financial condition. In recent years, PIR has turned over $45 – $60 million per annum in revenue to ISOC, supporting its worldwide presence, jobs and activities.

Ethos Capital is the entity that bought PIR. It is a shell corporation for which former ICANN CEO Fadi Chehadi serves as an “informal advisor.” The company Ethos Capital was created in June 2019 and Chehadi is known to have registered the domain name for it on May 7 – just a week before ICANN removed the price caps on .ORG. Its sole employee is Nora Abusitta-Ouri, someone that Chehadi employed at ICANN in a high-level but not very productive position when he was CEO.

ICANN enters the story as the governor (issuer of contracts) for top level domain name registries. Just this year, ICANN and PIR negotiated a modified contract (known as a Registry Agreement or RA). The new agreement was controversial because it removed price caps from .ORG and imposed on it a new dispute resolution policy (the URS) that did not go through the normal policy process. The new contract was greeted with hundreds of negative comments, yet ICANN ignored them, partly due to the fact that many of them could be attributed to domain name speculators and big DC-based nonprofits who had been mobilized by the domainers.  Domainers, who hold large portfolios of domains that they hope to sell in the secondary market, are strongly affected by the wholesale price of domains in ways that genuine registrant/users of domains are not. For example, a $2/year increase in the price of a .ORG domain really doesn’t matter much to an organization like ours. To a domainer sitting on 300 domains, it does matter. Don’t confuse domainer interests with nonprofit organizations.’

ICANN Can Intervene

ICANN will probably pretend that it has no ability to intervene in this process, but that is clearly not true. The Registry Agreement for .org gives PIR the delegation via a succession of presumptively renewable ten-year terms unless it commits an uncured, fundamental, and material breach or it goes bankrupt. However, under Article 7.5, PIR has to provide ICANN with 30 days’ notice of any change in control, and ICANN can respond by terminating the agreement, if termination is a reasonable response under the circumstances to the change of control. Additionally, there is an elaborate Registry Continuity Process already defined in ICANN’s procedures. That process could be triggered by a sale of the Registry. One of the considerations in this process is an assessment of whether the new registry operator has the support of the community it is supposed to serve.

What Now?

What is the appropriate response to this by the .org community? Our view is direct and simple. Stop focusing on whether .ORG is run by a purported non-profit or a for-profit. Focus instead on the contractual protections in the Registry Agreement and the policies that govern .ORG.  Under the .ORG Registry Agreement (7.5), ICANN has to approve the transfer of the domain to a new owner. We are calling upon ICANN to withhold its approval until some modifications are made to the .ORG registry contract. Yes, we are asking for a quid pro quo!

Are Price Caps Necessary?

We did not support price caps, for a variety of reasons set out in our earlier blog post. But PIR’s movement from nonprofit to for-profit makes the elimination of price caps more concerning to entities with .ORG domains, who fear exploitation by a profit-maximizing company. The most ardent critics of the new contract claim that without price caps embedded in .ORG’s Registry Agreement the new “Private Interest Registry” would be able to jack up prices at will. One article has even claimed that renewing a .ORG domain could cost $50,000.

That’s an absurd claim. The .ORG registry would self-destruct if it tried anything like that, losing millions of existing registrations and scaring away new registrants. Even if new registrants were enticed with a lower price, who would trust .ORG after such opportunistic behavior?

But while there is an intensely competitive market for new registrations, the same cannot be said for renewals. High switching costs affect any attempt to move an organization with an established domain from one domain to another. Domain names are the basis of URLs, the web links that allow users to access a web site with a click. Linkages to URLs from other sites are what make a domain rise in search engine listings. Search engines and links are the key to public visibility on the internet. Changing a domain name suddenly is not an option unless one wants to piss away years of search engine mojo and years of embedded linkages and email addresses.[1]

What We Need: Long Term Contracts

Price caps were instituted as a way to handle the switching cost problem, but they are not the best way. Price caps get ICANN into the business of price regulation, which in the long term is bound to cause it and the domain name registration market more trouble than it is worth. It is best to let the market regulate prices insofar as that is workable.

The best way to deal with the hold-up problem in domain name renewals is to allow registrants to register names for longer periods. Require significant notice of price changes (the current contract provides 6 month notice, which is acceptable), and then allow registrants to register at the old price for as long as they like. Right now, the maximum period of registration ICANN allows is 10 years. The availability of longer term contracts, and even contracts in perpetuity, can prevent opportunistic behavior by the registry. It can also give organizations stability and certainty in a critical piece of Internet infrastructure. Consumers have been given similar rights in other identifiers – no one says you can only have an email address for 10 years; mobile phone numbers are portable across providers and thus are in effect a property right of the consumer.

The 10 year limit is arbitrary. It has no basis in supply constraints or demand. It was, in fact, a regulation imposed on registrants by external special interests, but that’s another story for another time. So for those concerned about potential price gouging by the new PIR, the answer is clear: allow us to lock in a rate by registering .ORG names for whatever period we want. If you have a problem with “in perpetuity,” then at least allow 20, 30 and 40 year contracts.

Getting rid of the URS

So for those concerned about potential price gouging by the new PIR, the answer is clear: allow us to lock in a rate by registering .ORG names for whatever period we want.

As we argued before, once we are modifying the .ORG contract we also need to get rid of the Uniform Rapid Suspension (URS) procedure. As argued by EFF and the Domain Name Rights Coalition, URS was designed on the premise that new TLDs posed special risks to trademark holders (risks that never really materialized, by the way) and so special protections would be needed. The same risks simply do not exist in legacy TLDs. There is simply no justification for including URS in the .ORG contract.

Protecting ORG Registrants From Content Discrimination

ORG registrants could also use stronger contractual protections against content regulation initiatives by the registry. Although we have succeeded in banning content regulation by ICANN as part of the accountability reforms associated with the transition, pressure has been placed on registries to regulate content on their own. The instrument of these regulations is usually the so-called “Public Interest Commitment” (PIC). In a PICs a registry promises to regulate certain things that some external party wants them to regulate. Although the pressures for these things come from the broader ICANN process (e.g., trademark owners or GAC), ICANN can claim it is not doing content regulation.  Noncommercial entities need stronger assurances that the domain name infrastructure will not be used to regulate speech. It would be good if these assurances were built into the new .ORG Registry Agreement.

What Matters and What Doesn’t

Overall, the theme we would like to promote is that the ownership of PIR is much less important that the contractual protections embodied in the .ORG contract. We need longer term and perpetual renewals, and end to the URS, and stronger guarantees that whoever runs .ORG will not engage in various forms of content regulation that registries have recently said they might do using so-called Public Interest Commitments (PICs).

To bemoan the fact that .ORG is no longer run by a nonprofit is a bit of a joke, as the profit generated by this “nonprofit” registry funded ISOC to the tune of tens of millions of dollars a year. It actually makes a great deal of sense for the Internet Society to capture the value embedded in PIR through a sale so that it can get out of the business of being a highly profitable nonprofit, and create an endowment that stabilizes its funding. The purchase of .ORG by a cabal of ICANN insiders shortly after the price caps were removed is more problematic, but registrants of .ORG need to focus on their own interests and make use of the leverage that exists in existing contracts and procedures to enact changes in the .ORG RA.

[1] IGP itself is in that situation. We have held internetgovernance.org since 2004, and igp.org since 200X. After years of hard work and good publications, type “Internet governance” into Google or some other search engine, and our site is sure to be in the top five. Change the URL, however, and we would instantly lose all that SE mojo and sink into obscurity for some time. Old links would persist all over the internet and lead nowhere, turning away attention and traffic.