Victory! ICANN Rejects .ORG Sale to Private Equity Firm Ethos Capital

In a stunning victory for nonprofits and NGOs around the world working in the public interest, ICANN today roundly rejected Ethos Capital’s plan to transform the .ORG domain registry into a heavily indebted for-profit entity. This is an important victory that recognizes the registry’s long legacy as a mission-based, non-for-profit entity protecting the interests of thousands of organizations and the people they serve.

We’re glad ICANN listened to the many voices in the nonprofit world urging it not to support the sale of Public Interest Registry, which runs .ORG, to private equity firm Ethos Capital. The proposed buyout was an attempt by domain name industry insiders to profit off of thousands of nonprofits and NGOs around the world. Saying the sale would fundamentally change PIR into an “entity bound to serve the interests of its corporate stakeholders” with “no meaningful plan to protect or serve the .ORG community,” ICANN made clear that it saw the proposal for what it was, regardless of Ethos’ claims that nonprofits would continue to have a say in their future.  “ICANN entrusted to PIR the responsibility to serve the public interest in its operation of the .ORG registry,” they wrote, “and now ICANN is being asked to transfer that trust to a new entity without a public interest mandate.”

The sale threatened to bring censorship and increased operating costs to the nonprofit world. As EFF warned, a private equity-owned registry would have a financial incentive to suspend domain names—causing websites to go dark—at the request of powerful corporate interests and governments. 

In a blog post about its decision, ICANN also pointed out how the deal risked the registry’s financial stability. They noted that the $1.1 billion proposed sale would change PIR “from a viable not-for-profit entity to a for-profit entity with a US$360 million debt obligation.” The debt was not for the benefit of PIR or the .ORG community, but for the financial interests of Ethos and its investors. And Ethos failed to convince ICANN that it would not drain PIR of its financial  resources, putting the stability and security of the .ORG registry at risk.

“ICANN entrusted to PIR the responsibility to serve the public interest in its operation of the .ORG registry, and now ICANN is being asked to transfer that trust to a new entity without a public interest mandate.”

ICANN was not convinced by the token “stewardship council” that Ethos proposed in an attempt to add an appearance of accountability. Echoing EFF’s own letter, they noted that “the membership of the Stewardship Council is subject to the approval of PIR’s board of directors and, as a result, could become captured by or beholden to the for-profit interests of PIR’s owners and therefore are unlikely to be truly independent of Ethos Capital or PIR’s board.”

Many organizations worked hard to persuade ICANN to reject the sale. We were joined by the National Council of Nonprofits, NTEN, Access Now, The Girl Scouts of America, Consumer Reports, the YMCA, Demand Progress, OpenMedia, Fight for the Future, Wikimedia, Oxfam, Greenpeace, Consumer Reports, FarmAid, NPR, the American Red Cross, and dozens of other household names. Nonprofit professionals and technologists even gathered in Los Angeles in January to tell ICANN their concerns in person. The coalition defending the .ORG domain was as diverse as .ORG registrants themselves, encompassing all areas of public interest: aid organizations, corporate watchdogs, museums, clubs, theater companies, religious organizations, and much, much more. Petitions to reject the sale received over 64,000 signatures, and nearly 900 organizations signed on. Joining them in their concerns were Members of Congress, UN Special Rapporteurs, and state charity regulators [pdf].

A late development that affected ICANN’s decision was the letter [pdf] from California’s Attorney General, Xavier Becerra. Citing EFF and other members of the coalition, Becerra’s letter urged ICANN to reject the sale. Although ICANN received many last-minute appeals from some parts of its policymaking community urging the organization to ignore Becerra’s letter, ICANN acknowledged that as it is a California nonprofit, it could not afford to ignore its state regulator.

Because PIR is incorporated in Pennsylvania, that state’s courts must approve its conversion into a for-profit company. Pennsylvania’s attorney general is investigating the sale, and may also weigh in. In its rationale, ICANN states that it will allow PIR and Ethos to submit a new application if they are able to get the approval of this other body with authority over the deal. But all of the reasons behind ICANN’s rejection of the sale will confront Ethos in Pennsylvania, as well.

This decision by ICANN is a hard-fought victory for nonprofit Internet users. But the .ORG registry still needs a faithful steward, because the Internet Society has made clear it no longer wants that responsibility. ICANN should hold an open consultation, as they did in 2002, to select a new operator of the .ORG domain that will give nonprofits a real voice in its governance, and a real guarantee against censorship and financial exploitation.