ICANN, the nonprofit that oversees the Internet’s domain name system, has given itself another two weeks to decide whether to allow control of the .org domain to be sold to private equity firm Ethos Capital. The decision comes after ICANN received a blizzard of letters from people opposed to the transaction, including California Attorney General Xavier Becerra.
Becerra’s letter was significant because ICANN is incorporated in California. That means it’s Becerra’s job to make sure that ICANN is living up to the commitments in its articles of incorporation, which promise that ICANN will operate “for the benefit of the Internet community as a whole.”
Becerra questioned whether ICANN was really doing that. “There is mounting concern that ICAN is no longer responsive to the needs of its stakeholders,” he wrote.
A secretive buyer and a lot of debt
California’s attorney general pointed to several specific concerns about the transaction. One was the shadowy nature of the proposed buyer, Ethos Capital. “Little is known about Ethos Capital and its multiple proposed subsidiaries,” Becerra writes. Ethos Capital, he said, has “refused to produce responses to many critical questions posted by the public and Internet community.”
Ethos Capital’s plan is to buy the Public Interest Registry (PIR) from its current parent organization, the nonprofit Internet Society. To help finance the sale, Ethos will saddle PIR with $300 million in debt—a common tactic in the world of leveraged buyouts. Becerra warns that this tactic could endanger the financial viability of the PIR—especially in light of economic uncertainty created by the coronavirus.
“If the sale goes through and PIR’s business model fails to meet expectations, it may have to make significant cuts in operations,” Becerra warns. “Such cuts would undoubtedly affect the stability of the .org registry.”
Becerra also blasts the Internet Society for considering the sale in the first place. “ISOC purports to support the Internet, yet its actions, from the secretive nature of the transaction, to actively seeking to transfer the .org registry to an unknown entity, are contrary to its mission and potentially disruptive to the same system it claims to champion and support,” he writes.
Becerra ends his letter with a warning: “This office will continue to evaluate this matter, and will take whatever action necessary to protect Californians and the nonprofit community.”
Becerra is far from the only critic of the .org deal. On Monday, ICANN’s first CEO, Michael Roberts, and original board chair Esther Dyson penned a letter blasting the transaction and their successors at ICANN.
“We write to express our deep dismay at ICANN’s rejection of its defining public-interest regulatory purpose as demonstrated in the totally inappropriate proposed sale of the .org delegation,” they wrote. “ICANN has not meaningfully acted to address the likely proposed service cuts, increase in prices or trafficking of data of non-profits to obtain additional revenue.”
They called for a six-month delay of the transaction to give ICANN and elected officials more time to scrutinize it.
ICANN is an unusual organization. It nominally represents the Internet community, but its governance structure doesn’t give ordinary Internet users much direct influence. In the past, ICANN has been overseen by the US Department of Commerce, but the US government has been gradually relaxing its oversight of the organization in recent years.
At the same time, US policymakers have resisted efforts to bring Internet governance under the control of international bodies such as the International Telecommunications Union. They feared that this would give too much influence to autocratic regimes such as China and Russia. As a result, ICANN is effectively accountable to no one, even as it controls a resource—the Internet’s domain name system—that’s worth billions of dollars.
That creates an obvious temptation for ICANN insiders. As the Register has documented, several of the people involved in the Ethos Capital transaction are former ICANN officials. That might be one reason why the deal is getting a sympathetic hearing from ICANN even as it’s been strongly opposed by many independent voices.