The suffix that most people absentmindedly type when they’re donating to an animal shelter or joining a synagogue or reading a research paper is for sale.
Private equity firm Ethos Capital wants to buy “.org,” the digital home to more than 10 million nonprofits, for $1.1 billion.
The move would initially be invisible to those organizations and their users, but internet access advocates say it could quickly upend the nonprofit world as we know it. The sale could lead to higher domain name prices, service outages and privacy breaches, as the firm tries to recoup its major investment, they say. Ethos Capital has dismissed those claims as fear-mongering, vowing to only raise the price of a .org address by a little bit.
But a group is fighting back — and it’s based in Berkeley.
Some of the most vocal anti-Ethos advocates have formed a cooperative of major nonprofits that wants to purchase the domain instead. The board includes Esther Dyson, former founding chairwoman of the Internet Corporation for Assigned Names and Numbers (ICANN), the entity that has the final say about who gets .org. ICANN has already delayed the sale, asking for more information.
Two of the cooperative’s board members — Packet Clearing House Executive Director Bill Woodcock and Jeff Ubois, who works in philanthropy and was once president of the Berkeley Hillside Club — have connections here. The group’s mailing address is in Berkeley, too.
On Wednesday, Woodcock, who lives in Berkeley, was rushing around, making t-shirts for a likely upcoming protest at an ICANN meeting in Mexico. But he took a break to have coffee with Berkeleyside to talk about what his cooperative is vying for and what a .org sale could mean.
This Q&A has been edited and condensed and portrays one perspective on the issue. Ethos Capital was not interviewed.
Berkeleyside: What exactly is .org, and who runs it?
Bill Woodcock: The .org top-level domain contains the internet domains of most of the world’s nonprofits. It’s not just Planned Parenthood and the church on your corner, it’s also the World Bank and the United Nations. That was all established in the ’80s.
At the time, the entire internet was a project of the government. They delegated the administration of “names and numbers” to the University of Southern California, and there was a postdoc there, Jon Postel, who did all that. He was replaced by this big bureaucratic process called the Internet Corporation for Assigned Names and Numbers (ICANN), which is the global nonprofit that will make this decision.
In 2002, the U.S. government told ICANN, “Hey, we see .org is being run by a for-profit company. It would make more sense for it to be run by a nonprofit.” They got 11 proposals for the .org domain, and the main criteria they used was public interest and technical stability. The Internet Society, based in D.C., was selected.
Since then, there’s been zero downtime, zero time out of service. All the nonprofits who rely on the internet haven’t had outages.
How did we get to the current situation?
Until 2016, the U.S. government had oversight authority over ICANN. But there’s been a process of making ICANN more independent – the internet is a global thing now, not a U.S. thing. What that was replaced with was supposed to be public oversight. This is the first time that that public oversight has been called into play.
A few years ago, probably, Bain Capital and Fidelity and Perot Holdings were [likely] contacted by the guy who was then president of ICANN. [Berkeleyside has not independently verified this.] He put into motion the removal of the wholesale price cap on .org domain names, which had been gradually raised from $6 to $9.93. Until then, the contract under which .org was delegated to the Internet Society had been reviewed every three years, and he started the process that changed that to 10 years. Those changes went into place and one day later they registered the domain name Ethos Capital, which [appears] to be owned by Bain and Fidelity and Perot.
“Do we want flights grounded so Mitt Romney can make a few hundred million more?”
What Ethos has done is propose to buy control of that delegation from the Internet Society for $1.1 billion. Anyone with access to public numbers and a calculator can calculate that there’s not really any price over $400 million that’s sustainable, without either raising the prices or dropping quality or finding other revenue sources.
What’s at stake if Ethos Capital buys .org?
They’ve said they’re entertaining bids with an operating cost of $330,000. The current operating cost is just over $30 million, so that would be a 99% cut in spending. You don’t get 15 years of uninterrupted service for $330,000 a year.
It’s really hard to predict future downtime, just like it’s hard to predict the effect of earthquakes on buildings. There can always be a bigger cyberattack in the future, so being prepared means being responsible and spending the money.
But insofar as we were able to estimate, you get about 3.12 days of downtime per year. Multiply that times every nonprofit in the world. We’re talking about Doctors Without Borders and the Red Cross. We’re talking about the IATA that does international air traffic control. Do we really want international flights grounded for three days a year so [Bain founder and U.S. Senator] Mitt Romney can make a few hundred million more? Not a reasonable societal tradeoff.
Once you’ve axed 99% of your spending you also need to jack up the prices, in a Martin Shkreli-style maximization of profits. Then, how else do you make money? Let’s say somebody goes to investigate contraception or abortion. Regardless of where they wind up, whether that’s Planned Parenthood or some crazed right-wing church website, either way, that’s going to be a .org. The feed of everybody who went looking for those things is going to be for sale. Ethos has already bought five companies to monetize the private information they’d be harvesting if they got .org.
Ethos has called these horror scenarios “alarmist.” Do you really know flights will be grounded and every abortion seeker’s data will be sold?
Yeah, I’m an alarmist because this is the exact kind of thing private equity does, and math says you can’t not do it. Their money doesn’t appear by magic, it appears by leveraging something else.
There’s no reason a for-profit company can’t run .org. But it is clear you can’t pay back $1.1 billion in debt over 10 years without doing these bad things.
Ethos, as a private equity firm, can say anything they want and they’re not legally bound to do it.
What are you proposing should happen differently?
The Internet Society’s board has already said they’re converting this from a nonprofit to a for-profit. They’ve already signed binding agreements with Ethos Capital. ICANN has to decide whether it’s going to abide by its regulatory role and do an actual competition and decide who’s going to get this, or whether they’re just going to rubber-stamp this deal — or whether they’re going to say no to this particular deal but yes to, like, the fifth one that shows up after. Our contention is the public interest purpose of ICANN is not served by merely saying yes or no to a series of commercial deals.
And your new cooperative would be a contender if they did hold a competition? How would your organization ensure stability and user privacy?
Yes, this is a bunch of nonprofits that have gotten together and said we need to put forward a solution. The proposed alternative is a cooperative, which is the strongest form of protection of a participant in an organization. We’re trying to lock everything in, in the articles, in such a way that it’s legally binding. The board of directors of a cooperative cannot change its articles. In this particular cooperative, if we’re successful, the members are every .org registrant, which means 10 million members. We’d need to get five million and one of them to agree, to change the articles.
“There’s kind of a nexus in the Bay Area.”
If you pay $15 to GoDaddy for a .org domain name, our best prediction is between $4-$4.50 would go back to you at the end of the year as a credit against your next year’s payment.
How did this group come to be based in Berkeley?
There’s kind of a nexus in the Bay Area, but me and Jeff [Ubois] are both in Berkeley. Our mailing address, 1442A Walnut St., the little mailboxes place, is the obvious and easy answer for a tech startup with a Northern California nexus. Every tech spinoff of UC Berkeley, ever, has always had its address there. That’s one of those little tech industry in-jokes.
There’s a British domain-name industry blogger who got on Google Maps and found the Street View picture of that and started posting about how this couldn’t be a serious effort if that was its address.
Where do things stand and what do you expect in the coming days?
The deadline for ICANN to act is Jan. 19. But the next board meeting is after the 19th. Then there’s a general meeting in Mexico. Our best guess is it won’t be decided by then, so we’re all going to go there.
In the meantime the 19th is going to come and go, so what the ICANN board is supposed to be discussing is whether to offer Ethos a deal where Ethos gives a voluntary extension on their deadline until after their board meeting. They could say yes right now, but that seems unlikely given the tenor of conversation. It really depends on the ICANN board doing the right thing. There’s not really anyone else with any power to do anything here.
Ed. note: Minor edits were made after publication for clarity and accuracy.
