ICANN has vetoed the proposed $1.1bn sale of the .org registry to an unknown private equity firm, saying this was “the right thing to do.”
The DNS overseer has been under growing pressure to use its authority to refuse the planned transfer of the top-level domain from the Internet Society to Ethos Capital, most recently from the California Attorney General who said the deal “puts profits above the public interest.”
ICANN ultimately bowed to the US state's top lawyer when it concluded today it “finds the public interest is better served in withholding consent.”
It gave several factors, all of which were highlighted by Attorney General Xavier Becerra as reasons to reject it: the fact that the sale would see the registry – which has long served non-profit organizations – turn from a non-profit itself into a for-profit vehicle; that Ethos Capital was a “wholly different form of entity” to the Internet Society; that the $360m in debt that was being used to finance the deal “raises further question about how the .org registrants will be protected”; and that the measures that Ethos Capital had put in place following an outcry were “untested.”
The decision will likely spark a mixture of relief and celebration from millions of .org domain holders, including some of the world’s largest non-profit organizations, many of which were certain that their long-standing online addresses were going to be milked for profit by an organization that never fully revealed who its directors or investors were.
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One person who had strongly opposed the deal was Amy Sample Ward, CEO of non-profit NTEN. Earlier this year she had hand-delivered a petition to the ICANN board calling on it to take concerns more seriously.
"I applaud ICANN for stepping fully into their responsibility," she said in a statement. ".Org is the home of some of the most critical services for human rights, freedom of speech, and health and education around the world. Keeping the top level domain safe and reliable is paramount. Now, ICANN must move forward with a plan for a competitive selection process to assign .Org management to a home that has the interest of nonprofits and people at its center."
The billion-dollar deal set off alarm bells from the very beginning: no one in the domain name industry had ever heard of Ethos Capital, and it only had two named employees. It quickly emerged it had been secretly created by a former CEO of ICANN, and he had registered the company one day after ICANN made clear it was going to lift price caps on the 10 million .org domains, instantly making the registry worth tens of millions more.
Financial experts soon warned that an unusual structure of six different shell companies built around Ethos Capital, all of which had been registered on the same day and just days before they approached the Internet Society to acquire the registry, looked like an asset-stripping arrangement that would potentially leave the crucial registry deeply in debt and .org owners paying the price.
In its announcement, ICANN noted “the entire board stands by this decision,” and painted its decision as the result of “thorough due diligence and robust discussion.”
The truth however is that ICANN’s staff and CEO were happy to bless the deal, as were several key board members, and it took the repeat intervention of other board members to stop the sale from being pushed through.
The turning point was the day before ICANN was due to vote on the sale, on 16 April, when California’s Attorney General sent a firm letter telling the Los Angeles-based DNS overlord it should deny the sale. That missive was sparked by another letter sent the day before to the AG from ICANN’s former CEO and former chair in which they accused ICANN of “abandoning its core duty to protect the public interest," and urged Becerra to intervene.
ICANN is a notoriously secretive organization despite being born from the internet engineering culture of open discussion, and its own bylaws including an entire section on transparency that states it “shall operate to the maximum extent feasible in an open and transparent manner.”
It has again failed to do that with what has been the most significant decision the organization has had to make since it was granted autonomy from the United States government in 2016. There are virtually no details of the discussions that went on internally during the process to give the .org sale the thumbs up or down, which was delayed four times. ICANN refused to adopt what was supposed to be a new accountability mechanism when it left US government oversight, stating that a formal application for relevant papers on the sale “exceeded the permissible scope” of that mechanism.
Insiders suspect that the only reason ICANN finally acted to deny the sale is because the organization is more scared of the California Attorney General than Ethos Capital. The Attorney General has the power to subpoena internal documents, and so he is in a position to expose what some say has been decades of mismanagement at an organization that has a monopoly of the internet’s naming and addressing systems. ®