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<p><font face="Times New Roman, Times, serif">Hi Greg. I totally
second what you are saying here -- we should set out the
conditions under which such a sale could happen and point out
that Ethos does not, as yet, appear to meet them.</font></p>
<p><font face="Times New Roman, Times, serif">Conditions would
include need to retain the public interest aspect of the
registry, and elements about how the board is constituted and
conditions for transparency. The most recent info. from the PIR
response to ICANN presents serious issues about the board of
this organization -- whose members they not prepared to reveal.</font></p>
<p><font face="Times New Roman, Times, serif">Marita</font><br>
</p>
<div class="moz-cite-prefix">On 1/12/2020 5:33 PM, Greg Shatan
wrote:<br>
</div>
<blockquote type="cite"
cite="mid:CAGQ5VrUF7UFJvEXuF-0stMpddKs6neAV8O92+Tn_D0ujJ12rtg@mail.gmail.com">
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<div class="gmail_default"
style="font-family:verdana,sans-serif">
<div class="gmail_default" style="font-size:13.3333px">I
think it's critical that At Large focuses on what the
future of .org will look like, and how we get there.</div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px"><br>
</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px">I don't think there is any
legal basis for the .org contract to be terminated with
PIR. </span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px">Similarly, I don't think
there is any legal basis for ISOC's control of PIR to be
terminated against the will of ISOC.</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px">It's a waste of time to
consider solutions based on these end results, whether
from the Coalition or otherwise.</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px"><br>
</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px">However, it is entirely
realistic (even it seems unlikely) to think that ICANN
could block the sale to Ethos Capital. </span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px">If ICANN does block the
sale, the result will be the <i>status quo ante</i>:
ISOC will continue to control PIR and PIR will continue
to be the registry operator for .org.</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px">Same thing if the sale
doesn't go through for other reasons (e.g., Pennsylvania
Attorney General review, which appears to be required
under these circumstances). ISOC/PIR/.org remain
linked.</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px">At that point, ISOC either
ends this exploration or looks at other options.</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px"><br>
</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px">Alternatively, it's
realistic to think that ICANN could put binding
conditions on its approval of the sale.</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px"><br>
</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px">Therefore, I suggest that we
concentrate on providing advice to the ICANN Board on
how it should review and analyze this sale. We should
consider what criteria ICANN should use, and how these
relate to ICANN Bylaws, the .org contract, etc. This
analysis could result in ICANN blocking the sale or
imposing conditions on the sale. If the latter, we
should advise what those conditions are, and how they
would be enforced.</span><br>
</div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px"><br>
</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px">There are multiple
legitimate reasons to critique the sale, the seller and
the buyer -- both the process and the result, and the
actions and statements throughout. Unfortunately, there
are also multiple criticisms driven by self-interest,
score-settling, animus, stereotype, exaggeration or lack
of information; the latter type tends to obscure the
former, because the latter are more sensational. We
need to separate the wheat from the chaff -- a
frustrating but necessary step -- and provide the best
advice we can based on legitimate concerns about this
transaction. And it's not a bright line between the
two.</span></div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px"><br>
</span></div>
<div class="gmail_default" style="font-size:13.3333px">Take,
for example, the non-profit status of the .org registry
operator. I see no reason or evidence to show that ICANN
or PIR or ISOC were mandated or required to preserve the
non-commercial status of PIR. Claims that they were have
led to some fairly scorching allegations. But this is a
distraction. The better question is forward looking --
being confronted with this fork in the road, should the
.org registry operator be required to remain a
non-profit? If so, on what basis? If not, on what
basis? In either case, what are we trying to protect and
preserve about .org as it is and as it should be (but not
as some wish it had been but wasn't -- e.g., an official
non-profit registry)?</div>
<div class="gmail_default" style="font-size:13.3333px"><br>
</div>
<div class="gmail_default" style="font-size:13.3333px">If we
can keep our discussion on track, we will get to a result
more quickly.</div>
<div class="gmail_default" style="font-size:13.3333px"><br>
</div>
<div class="gmail_default" style="font-size:13.3333px">Best
regards,</div>
<div class="gmail_default" style="font-size:13.3333px"><br>
</div>
<div class="gmail_default" style="font-size:13.3333px">Greg </div>
<div class="gmail_default" style="font-size:13.3333px"><span
style="font-size:13.3333px"><br>
</span></div>
<div class="gmail_default" style="font-size:13.3333px"><br>
</div>
<div class="gmail_default" style="font-size:13.3333px"> </div>
<div class="gmail_default" style="font-size:13.3333px"><br>
</div>
</div>
</div>
<br>
<div class="gmail_quote">
<div dir="ltr" class="gmail_attr">On Sat, Jan 11, 2020 at 7:44
PM Holly Raiche <<a
href="mailto:h.raiche@internode.on.net"
moz-do-not-send="true">h.raiche@internode.on.net</a>>
wrote:<br>
</div>
<blockquote class="gmail_quote" style="margin:0px 0px 0px
0.8ex;border-left:1px solid
rgb(204,204,204);padding-left:1ex">
<div style="overflow-wrap: break-word;">A really good
summation of what has happened, and why. The outstanding
question for ALAC in this context is whether it was ever
in ICANN’s mandate to preserve the non-commercial mission
of PIR - or whether it should have been - and whether
there are steps that can be taken that can mitigate the
for-profit nature of the takeover - in Katherine Maher’s
words, preserve the long term commitment to the open and
non-commercial nature of PIR - now in the hands of a
for-profit corporation.
<div><br>
</div>
<div>Holly<br>
<div><br>
<blockquote type="cite">
<div>On Jan 12, 2020, at 3:48 AM, David Mackey <<a
href="mailto:mackey361@gmail.com"
target="_blank" moz-do-not-send="true">mackey361@gmail.com</a>>
wrote:</div>
<br>
<div>
<div dir="ltr">
<div dir="ltr">Roberto,
<div><br>
</div>
<div>"I believe that our two assessment by and
large coincide"</div>
<div><br>
</div>
<div>Agreed!</div>
</div>
</div>
<br>
<div class="gmail_quote">
<div dir="ltr" class="gmail_attr">On Sat, Jan
11, 2020 at 11:27 AM Roberto Gaetano <<a
href="mailto:mail.roberto.gaetano@gmail.com"
target="_blank" moz-do-not-send="true">mail.roberto.gaetano@gmail.com</a>>
wrote:<br>
</div>
<blockquote class="gmail_quote"
style="margin:0px 0px 0px
0.8ex;border-left:1px solid
rgb(204,204,204);padding-left:1ex">
<div style="overflow-wrap: break-word;">
<div dir="auto" style="overflow-wrap:
break-word;">David,
<div>Just a point of clarification.</div>
<div>When I was talking about valuation, I
was not talking about the sale price but
about an assessment of the PIR assets
according to financial standards.
Although I am not an expert, and
therefore I might be wrong, I do believe
that the sale price was higher than the
objective valuation of the company,
considering the assets including reserve
funds, that have been drastically
reduced in the last couple of years.</div>
<div>The reason why Ethos is ready to pay
more than the valuation is that it has a
strategy that could extract more value
from PIR than ISOC was able to, and this
is, IMHO, a key element in the
understanding of the importance of the
operation. My personal opinion is that
Ethos wants to change the business model
of PIR - the question is how, and my
answer is that this will be realised
through vertical integration with
Donuts. This might well be done via a
sale to a different entity that ensures
this vertical integration - in this case
I believe that our two assessment by and
large coincide.</div>
<div>Of course, this is just a personal
opinion, and I do not have any
information for drawing this conclusion
other than what is currently public.</div>
<div>Cheers,</div>
<div>Roberto</div>
<div><br>
<div><br>
<blockquote type="cite">
<div>On 09.01.2020, at 01:19, David
Mackey <<a
href="mailto:mackey361@gmail.com"
target="_blank"
moz-do-not-send="true">mackey361@gmail.com</a>>
wrote:</div>
<br>
<div>
<div dir="ltr">
<div dir="ltr">
<div dir="ltr">Roberto,
<div><br>
</div>
<div>I am not an expert of
finances either. However,
from a broad historical
perspective, I can see the
following... </div>
<div><br>
</div>
<div>.ORG established in
1985. Estimated Value =
$0.</div>
<div>.ORG transferred from
Verisign to PIR in 2003.
Estimated Value = $0 plus
right for Verisign to
maintain .COM contract</div>
<div>PIR sold from iSOC to
Ethos in 2019. Value =
$1.135 billion (yet to be
closed)</div>
<div><br>
</div>
<div>I don't have any reason
to doubt the valuation of
the proposed transaction.
I trust Ethos has done
their financial homework
properly. I also have no
reason to doubt that iSOC
has not done their
homework too. Ethos and
iSOC seem to believe they
have found fair market
value. </div>
<div><br>
</div>
<div>I think it's irrelevant
to worry about the
valuation of the
transaction in 2019, as
agreed to between Ethos
and PIR. It's up to the
buyer and the seller to
establish a fair market
price. <span><font
face="arial,
sans-serif">I also
think it's a red
herring to worry about
any potential .ORG
domain price
increases. That ship
has sailed.</font></span><span
style="font-family:-webkit-standard;font-size:inherit"> </span></div>
<div><br>
</div>
<div>I do think end users
have an interest in
whether PIR is sold as an
asset from iSOC
(non-profit) to Ethos
(for-profit). The mission
of those two organizations
are very different. It is
well accepted that
for-profit companies only
have one mandate to their
shareholders and that is
to make money. It's simple
and should not be
controversial in, and of,
itself. They may want to
protect the value of their
asset, PIR, but their
overriding mission serves
the interests of their
shareholders. </div>
<div><br>
</div>
<div>I think many people are
missing the nature of
Ethos's investment.
Although ICANN may add
guard rails to protect
against pure-profit
behaviour, I suspect the
investment payoff to Ethos
is when they sell their
asset in the future. A
metaphor that can be used
is when a company
purchases a building. They
maintain it and collect
rent for a number of
years, but the big payoff
is when they sell it for
capital gains in the
future. Capital gains is
the profit motive, not the
rent/revenue that's earned
each year while managing
the asset. Hence, it is
highly likely that Ethos
is making a $1.135 billion
bet that it can maintain
and grow the value of PIR,
so that it will make more
than $1.135 billion in the
future. This is what
private equity companies
do. If Ethos is
successful, PIR will be
worth more than $1.135
billion in the future.
Still the current and
future valuation of PIR is
not relevant to end users.
End users are often well
served by properly
functioning capital
markets in the right
context. </div>
<div><br>
</div>
<div>However, in this case,
it's the switching of the
organizational mission
from a non-profit, iSOC,
to a for-profit, Ethos,
which causes problems and
risks for many Internet
stakeholders and end
users.<font face="arial,
sans-serif"> <span>Current
.ORG registrants are
switching from assumed
stakeholders to
Ethos/PIR customers.
The nature of the
relationship is
changed during the
transaction. </span></font></div>
<div><br>
</div>
<div>Regardless on how this
is done, I believe
Katherine Maher, CEO and
Executive Director of the
Wikimedia Foundation,
makes a valid point in
wanting to preserve "a
longterm commitment to the
open and noncommercial
internet". Hence, I
believe At-Large End Users
interests do not align
with iSOC organizational
interests for purposes of
this transaction. </div>
<div><br>
</div>
<div>Cheers,</div>
<div>David</div>
</div>
</div>
</div>
<br>
<div class="gmail_quote">
<div dir="ltr"
class="gmail_attr">On Wed, Jan
8, 2020 at 4:06 PM Roberto
Gaetano <<a
href="mailto:mail.roberto.gaetano@gmail.com"
target="_blank"
moz-do-not-send="true">mail.roberto.gaetano@gmail.com</a>>
wrote:<br>
</div>
<blockquote class="gmail_quote"
style="margin:0px 0px 0px
0.8ex;border-left:1px solid
rgb(204,204,204);padding-left:1ex">Hi
David.<br>
One sentence in your email
prompts another element that
we want to consider if we want
to build a complete picture.<br>
<br>
> On 08.01.2020, at 20:51,
David Mackey <<a
href="mailto:mackey361@gmail.com"
target="_blank"
moz-do-not-send="true">mackey361@gmail.com</a>>
wrote:<br>
> <br>
> < ….. ><br>
> <br>
> I guess it's not totally
surprising as we've seen the
Internet expand over decades
across the globe to the point
where organizations like PIR
are valued in the billions of
dollars.<br>
> <br>
> < ….. ><br>
> <br>
<br>
I am not an expert of
finances, but I believe that
the sale price of PIR is
appropriate for granting ISOC
a steady income - once
invested - that is at least
what PIR was providing.<br>
<br>
OTOH, I am not convinced that
the current value of PIR is
above a billion - but I may be
proven wrong. Whatever the
case, we should wonder why
Ethos believes to be able to
extract from PIR a higher
revenue than what PIR produces
today.<br>
IMHO, the ability to raise
price is not the good answer.
This ability is provided by
the contract with ICANN, and
predates the sale - so it is
something that ISOC has
without doubt factored in the
sale price.<br>
The best chance to increase
the profitability comes from a
different business model or a
different corporate structure
(or both, obviously). The
first thing that comes to my
mind, that I have hinted
already in my early comments -
but then not elaborated upon -
is vertical integration. I am
not claiming to be an expert
on the domain name business,
but as co-chair of the
Vertical Integration Working
Group I have learned a lot.<br>
PIR, as registry, has to treat
all the registrars equally.
When PIR owned a registrar, it
was obliged to provide to all
other registrars the same
information given to it.
However, a registrar can pick
and choose registries to
partner with and with whom to
share information even of
strategic nature. Considering
the relationship that folks in
Ethos have with Donuts, it
would not be surprising to see
in the future a collaboration
where - to be compliant with
ICANN rules - Donuts is
running the show, and PIR
would set its business
accordingly.<br>
<br>
Should we take this also into
account to assess the
situation? Maybe we should.
But maybe the first step could
be to discuss whether this is
a reasonable scenario or
whether I am off the mark.<br>
<br>
Cheers,<br>
Roberto<br>
<br>
</blockquote>
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