ICANN delays .org sell off after California's attorney general intervenes at last minute, tears non-profit a new one over sale

DNS overseer accused of ignoring the very people it is supposed to represent

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ICANN has again delayed a decision on whether to green-light the sale of the .org registry for another month, multiple sources with knowledge of a crucial meeting have told The Register.

The organization's board of directors was due to meet and decide today on whether to approve the $1.13bn sale of the .org domain from the Internet Society to private equity firm Ethos Capital, but a last-minute letter from California's attorney general Xavier Becerra appears to have upended the plan.

Rather than take a vote, the ICANN board debated the issue and ultimately decided to put off a decision until May 4 - the fourth such delay. The organization formally acknowledged the decision late on Thursday evening local time.

"We have agreed to extend the review period to 4 May 2020, to permit additional time to complete our review," it said.

The attorney general's letter [PDF] arrived just hours before the meeting and told the non-profit organization in stark terms that it should not approve the sale as it “raises serious concerns that cannot be overlooked.”

"Empowering a for-profit entity that could undermine the accessibility and affordability of the .org domain, which serves nonprofits, should concern all of us," the California AG's office told The Reg.

"We're urging ICANN to deny the request to transfer control of the .org domain to a for-profit private equity firm. In California, we're committed to an Internet that serves everyone and we're simply concerned that this transfer puts profits above the public interest."

Those concerns include the fact that the .org registry, which acts as the online home to hundreds of thousands of non-profit organizations, would be turned into a for-profit organization as part of the sale.

"If, as proposed, Ethos Capital is permitted to purchase PIR, it will no longer have the unique characteristics that ICANN valued at the time that it selected PIR as the nonprofit to be responsible for the .ORG registry," Becerra's letter notes.

"In effect, what is at stake is the transfer of the world's second largest registry to a for-profit private equity firm that, by design, exists to profit from millions of nonprofit and non-commercial organizations."

Ethos Capital is also under fire for its unusual corporation structure (the purchase involves no less than six different companies, all of which were registered on the same day in October) and for refusing to answer specific questions about its ownership.

Just who's buying?

"Little is known about Ethos Capital and its multiple proposed subsidiaries," the letter states. "Even less is known about how these for-profit corporate entities and private investors will operate their businesses… Given the lack of transparency regarding Ethos' future plans, approval of the transfer may place at risk the operational stability of the .ORG registry."

But the issue is broader than that. ICANN's behavior during the entire process has increasingly come under fire, particularly as it became clear that the organization's staff was pushing for approval of the deal despite near universal opposition to it from the internet community.

Earlier this week, ICANN's founding CEO and chair wrote a letter to Becerra urging him to act and accusing their former organization of abandoning its core principles, accepting commitments it knows it cannot enforce, circumventing its own decision-making processes and using the coronavirus pandemic to push through the $1.13bn sale.

The impact on ICANN's reputation is also made clear in Becerra's letter: "There is mounting concern that ICANN is no longer responsive to the needs of its stakeholders," it reads before running through a series of concerns over how the organization has handled the situation.

It also criticizes ICANN's weak economic understanding of the multi-billion-dollar market it oversees, noting that Ethos Capital's financing arrangements are risky, especially given the current economic climate.

ISOC too

It's not just ICANN that is at the end of fierce criticism however: the attorney general slams the Internet Society for proposing it sell .org to Ethos 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."

It asks why ISOC didn't provide more information about the sale, or run a competitive bidding process, or consult with its stakeholders, or consider other alternatives.

While the letter stopped short of threatening action against ICANN if it does approve the sale, it made clear that the attorney general holds significant authority over the organization and is prepared to act, particularly since the sale will affect hundreds of thousands of other non-profits.

"My office is committed to protecting California's and the public's interest in a properly functioning and accessible .ORG domain system," it notes, adding: "ISOC and PIR are charitable organizations that are accountable to their community stakeholders and to the public at large. In contrast, a private equity firm is accountable only to its investors.

"Given the concerns stated above, and based on the information provided, the .ORG registry and the global Internet community – of which innumerable Californians are a part – are better served if ICANN withholds approval of the proposed sale and transfer of PIR and the .ORG registry to the private equity firm Ethos Capital. This office will continue to evaluate this matter, and will take whatever action necessary to protect Californians and the nonprofit community." ®

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