ICANN Stops Controversial Sale of .org Domain to a Private Firm

ICANN Stops Controversial Sale of .org Domain to a Private Firm

The non-profit organization that oversees the Internet’s domain name system, the Internet Corporation for Assigned Names and Numbers (ICANN) has stopped the proposed controversial sale of the org domain to a private equity firm for over $1 billion.

ICANN says the controversial proposed sale is not in the public interest. This stand is a big blow to the sale that had only a few supporters apart from the equity firm, the proposed buyer, in the sale.

The .org domain registry is currently run by the Public Interest Registry, a non-profit subsidiary of another non-profit called the Internet Society. Public Interest Registry(PIR) was created in 2002 to manage the .org domain and has been doing so ever since.

Months after ICANN lifted price caps on the .org domain, fall of 2019, the owner of its registry, the Internet Society stunned the world by announcing it would sell the registry PIR for over a $1 billion. This will effectively put the ownership of the .org domain in the hands of a new owner, Ethos Capital, a secretive private equity entity.

The announcement for sale of org Domain received swift criticism and powerful backlash. ICAAN in its resolution halting the sale, says it received its first letter opposing the deal just two days after it was announced. The internet body would eventually receive protest letters from about 30 groups opposing the sale, as well as many negative comments during public hearings. Meanwhile, the body says, the deal has received “virtually no counterbalancing support except the parties involved in the transaction and their advisors.”

IS ICANN RIGHT?

Although ICANN does not possess unlimited power to stop the sale, there is a provision in its contract with the registry, PIR to get its approval for any plan in an ownership control change. The contract stipulates “approval will not be unreasonably withheld”. The big legal question, then, is whether it was reasonable for ICANN to withhold its approval. On Thursday, ICANN’s board concluded that it was.

PIR OWNER, INTERNET SOCIETY KICKS

Internet Society says “we are disappointed that ICANN has acted as a regulatory body it was never meant to be, as laid out in Article 1 of its bylaws,” the Internet Society owner of the .org registry said in an email statement. “The outcome seems inconsistent with prior decisions made by ICANN in similar cases. We stand by our decision in favor of the transaction to unlock the full potential of the Internet Society, PIR, .ORG community, and ultimately the Internet.”

ICANN SAYS ITS DECISION IS REASONABLE AND IN OVERALL PUBLIC INTEREST

The Board of the Internet Corporation for Assigned Names and Numbers, ICANN says the decision to halt the sale is both reasonable and in the public interest. Sights two main points, too much debts and lack of transparency to back it up.

TOO MUCH DEBT

The botched sale, a leveraged buyout, to Ethos requires the registry, PIR taking out a $360 million loan to help finance the transaction. The ICANN board is of the view that the prospect of loading the PIR up with debt gives it concern because of the possibility of PIR running into a financial crisis if financial projections by PIR, Internet Society, and Ethos Capital failed. If that happened it might affect PIR’s ability to manage the .org domain well and endanger the stability of the .org domain.

“The incurrence of this debt was not for the benefit of PIR or the .org community, but for the financial interests of the Internet Society, Ethos Capital, and other investors in the transaction,” ICANN’s board stated. “Burdening PIR with significant debt obligations could create uncertainty as to the long-term financial stability of PIR, particularly in light of the current and likely ongoing economic uncertainty.”

LACK OF TRANSPARENCY

ICANN’s board also says not enough transparency in the transaction (sale of org domain). Claims Ethos Capital failed to provide ICANN with full details of who owns Ethos Capital.

“PIR declined to provide the specific ownership interests of the investors in the transaction,” ICANN’s board notes. “ICANN has not been provided detailed information concerning various minority investors (many of whom are entities, likely with additional investors), including vehicles through which significant minority investors (the apparent second-largest investor to Ethos Capital) will make its investment.”

THIRD & FINAL FACTOR

According to ARS Tecnica’s report on the stoppage of the sale, the final factor that worked against the sale deal, ICANN stated, was a “lack of meaningful engagement” with the .org community “in the design of the proposed transaction.” ARS Tecnica opined, “as a non-profit focused on Internet governance issues, the Internet Society has a number of mechanisms for accountability to .org domain holders and the Internet at large. Obviously, a newly created private equity firm has much less ability or incentive to be responsive to Internet stakeholders.”

“The public interest is better served in withholding consent as a result of various factors that create unacceptable uncertainty over the future of the third-largest gTLD (generic Top Level Domain) registry,” the ICANN’s board stated.

NOT HURRAY YET TO THOSE OPPOSED TO THE SALE OF ORG DOMAIN REGISTRY

According to ARS Tehnica, “ICANN’s decision isn’t necessarily the final word on this issue. ICANN left the door open for the Internet Society to address ICANN’s concerns and submit another proposal. Theoretically, the group could also take ICANN to court, arguing that its decision to withhold consent was unreasonable—and therefore barred by the contract governing the .org domain.

They concluded “but the controversy over the .org sale has already done serious damage to the Internet Society’s reputation. And there’s little reason to think the group would get a sympathetic ear either from ICANN’s board or the courts.”

Will PIR go to court the sale of org domain registry? Let’s hear your view in the comment box.

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