[CPWG] A white knight on the horizon for .ORG?

[Greg Shatan]

*Responses in-line.*


My understanding is that the cooperative intends to continue funding IETF,
which is one of ISOC's primary missions.

*Weird. That underscores the concern that this is as much about burying
ISOC as it is about rescuing .ORG.  I'd be very interested to see what they
propose. Right now, that would mean funding ISOC, since IETF is an
unincorporated activity of ISOC. Do they propose to both starve ISOC and
dismantle it?*

As for ISOC's other missions, what has ISOC/PIR accomplished with the $900
million in excess payments that they have extracted from .org registrants
over the years, aside from paying themselves excessive compensation?

*I think trashing ISOC is essentially off-topic, a massive distraction and
an unnecessary time-suck.  W**hile I'm curious about your factual basis for
the $900 million number or for saying anyone is "paying themselves
excessive compensation"  or for using colorful words and phrases like
"excess payments," "excessive" and  "extracted," I don't want to muddy the
waters here. I'm not an ISOC fanboy, but the merits of ISOC (or the like
thereof) is a different discussion for a different time (or at least, a
different thread)..*

If ISOC had delivered $900 million in value to the community, then it would
likely have more support from Dyson et. al, and from the .org community.

*Please see above. *
*ISOC was never set up to deliver value to .org registrants as such. As for
the larger .org community (beneficiaries and members and employees of
non-profits), we would have to look at what ISOC has done to evaluate the
truth of your statements.  Because ISOC directs significant efforts to
underserved communities who may not be participating here, the shard of the
.org community that has been set on fire here may not be aware of what
ISOC's done.  As for Esther Dyson, I have no clue how 20+ years of history
have brought her to this point. *

In what way is the .org community's resistance to the sale to Ethos Capital
"Ill-informed" and contrary to their own interests?

*At this point, everybody is still fairly ill-informed,  However, some
people and entities (which cannot be called "the .org community") have
chosen to jump to conclusions.  Ethos Capital could very well be a better
steward and manager of PIR and .ORG than ISOC has been -- they could invest
capital, add services, increase reliability, innovate, etc.  If this is the
case the change in ownership could be significantly beneficial to the .org
community (including, but not limited to NPO/NGO .org registrants.)*

*Another way in which this portion of the .org community is ill-informed is
that a lot of what they have read is ill-informed, overheated, highly
slanted rhetoric -- long on innuendo and insinuation and short on facts
(but long on opinion and outright fantasy masquerading as facts -- I think
the kids these days call that "fake news").  The jumping to conclusions and
worst-case-scenario mongering is truly impressive, in a bizarre way.*

As in your Cooper Union example, ISOC has been overly reliant on
overcharging .org registrants for their funding, rather than needing to
attract funding voluntarily from donors through demonstrating that they are
doing good work with contributed funds.  Perhaps removing them from a
stream of money they receive that is entirely disconnected from any good
that they do with the money will be good for ISOC, and impose some
operational and mission discipline on them.

*I never thought I would quote Ronald Reagan, but "There you go again."  No
one is overcharging or being overcharged, nor would I agree that the
stream, etc. is "entirely disconnected' from the good, etc., or that ISOC
lacks all "operational and mission discipline."  (That last point could be
the subject of a nuanced debate, but should not be the subject of a
casually tossed grenade.) Other than that, see the first response above.*

As for the end-user interest here.  End-users have an interest in finding
nonprofits where they expect to find them - on their long-standing .org
domain names.  End-users wish to avoid confusion and uncertainty trying to
find the nonprofits they wish to support, or whose services they wish to
benefit from, at a new address.  They also wish to avoid being ripped off
by any new registrant who mispurposes a previously registered .org domain
name.

*There's no reason to assume that any of this would change if Ethos Capital
owns PIR.  All of this assumes that Ethos Capital would spectacularly
mismanage PIR and .org to the point where numerous significant non-profits
jumped ship (and by extension even more numerous smaller non-profits), the
billion-dollar asset is essentially destroyed, and the TLD becomes a
lawless no-man's-land rife with cybersquatters, spammers, scammers, malware
purveyors, phishers and other miscreants of the DNS.  I'm getting scared
just writing about it, but I remind myself that it's only a story.... *

They also wish to avoid downtime in .org, if Ethos Capital scrimps on
infrastructure investment to boost profits as PCH suggests would need to
happen for Ethos to earn a reasonable return on their investment.  All
these are risks that would occur if PIR moves to Ethos Capital, and Ethos
Capital creates an environment that is unattractive to .org registrants -
whether through pricing, policies, use of data or loss of stability.

*This is more of the same.  PCH may be good at what they do, but their
"analysis" seemed to be a poorly-reasoned, illogical hatchet job that
relied on some very questionable assumptions.  Again, why would Ethos
Capital sabotage a billion dollar asset?  If you want to lose a billion
dollars, there are easier ways to do it -- try betting on New York sports
teams or the ponies, or investing in Broadway musicals.  What Ethos Capital
can't afford to do is torch their biggest asset  -- the investors will say
goodbye and the principals will be destroyed.  It's far more rational to
assume that they will invest in and improve the assets to create an
environment that is more attractive to .org registrants.  Airlines need
passengers, restaurants need diners, sports teams need fans and audiences.
For a TLD, the equivalent is registrants and traffic.*

*That said, I am frustrated at not being better informed (though not so
frustrated as to buy into the apocalyptic narratives).  I would like to
know much more about how Ethos Capital intends to run the business, what
their overall PE strategy is, what their goals and exit strategies are,
what their plans are for future purchases and investments and how those
will relate to PIR. I am not enthusiastic about the sale or about the
process so far. But I'm less enthusiastic about the arguments to oppose the
sale that I've seen so far.  **Call me an open-minded skeptic at this
point. *

*It's entirely possible that the facts, once gathered, could convince me
and many others to oppose the sale -- even without the "parade of
horribles" above.  There are more plausible (though less electrifying) ways
that this could go appear likely to go wrong: Ethos could load PIR up with
debt or demoralize the workforce; it could spend money on improvements that
don't pan out; it could juice up PIR for a quick sale and return on value
while PIR becomes a nomadic PE asset; domain names could finally turn out
to be a fad, etc.  But I need a lot more substance and a lot less smoke to
reach a conclusion that truly bad things are likely to happen.*

*Best regards,*

*Greg*



On Wed, Jan 8, 2020 at 5:14 PM Jonathan Zuck <JZuck at innovatorsnetwork.org>
wrote:

> I think there are some strong arguments here and, in parallel to whatever
> is happening with Dyson, we should pursue some of this as commitments in
> the new contract.
>
> Jonathan Zuck
> Executive Director
> Innovators Network Foundation
> www.Innovatorsnetwork.org
>
> ------------------------------
> *From:* CPWG <cpwg-bounces at icann.org> on behalf of Nat Cohen <
> ncohen at telepathy.com>
> *Sent:* Wednesday, January 8, 2020 5:06:01 PM
> *To:* Greg Shatan <greg at isoc-ny.org>
> *Cc:* CPWG <cpwg at icann.org>
> *Subject:* Re: [CPWG] A white knight on the horizon for .ORG?
>
> My understanding is that the cooperative intends to continue funding IETF,
> which is one of ISOC's primary missions.
>
> As for ISOC's other missions, what has ISOC/PIR accomplished with the $900
> million in excess payments that they have extracted from .org registrants
> over the years, aside from paying themselves excessive compensation?
>
> If ISOC had delivered $900 million in value to the community, then it
> would likely have more support from Dyson et. al, and from the .org
> community.
>
> In what way is the .org community's resistance to the sale to Ethos
> Capital "Ill-informed" and contrary to their own interests?
>
> As in your Cooper Union example, ISOC has been overly reliant on
> overcharging .org registrants for their funding, rather than needing to
> attract funding voluntarily from donors through demonstrating that they are
> doing good work with contributed funds.  Perhaps removing them from a
> stream of money they receive that is entirely disconnected from any good
> that they do with the money will be good for ISOC, and impose some
> operational and mission discipline on them.
>
> As for the end-user interest here.  End-users have an interest in finding
> nonprofits where they expect to find them - on their long-standing .org
> domain names.  End-users wish to avoid confusion and uncertainty trying to
> find the nonprofits they wish to support, or whose services they wish to
> benefit from, at a new address.  They also wish to avoid being ripped off
> by any new registrant who mispurposes a previously registered .org domain
> name.  They also wish to avoid downtime in .org, if Ethos Capital scrimps
> on infrastructure investment to boost profits as PCH suggests would need to
> happen for Ethos to earn a reasonable return on their investment.  All
> these are risks that would occur if PIR moves to Ethos Capital, and Ethos
> Capital creates an environment that is unattractive to .org registrants -
> whether through pricing, policies, use of data or loss of stability.
>
> Regards,
>
> Nat
>
>
> On Wed, Jan 8, 2020 at 4:49 PM Greg Shatan <greg at isoc-ny.org> wrote:
>
> In my view the Cooperative idea is a non-starter, if its stated goal is to
> take .ORG away from ISOC and leave ISOC with nothing.  This does more to
> muddy the waters than to to clarify them -- though it is a great way to get
> attention.
>
> ISOC never said it didn't want to run .ORG. And there's no reason to
> believe that the Ethos sale was contemplated when the contract was
> renewed.  As for the price caps, ICANN has been the primary driver for
> removing them, by getting all registries on the 2013 agreement.  There are
> legitimate reasons for concern about the transaction, but these are not.
> These are distractions.
>
> As a matter of good governance, ISOC had to consider the concerns arising
> from largely relying on a single source of income.  It's not unheard of,
> but it's best avoided. (See footnote)  ISOC had no choice but to consider
> whether it would be a more responsible steward of its mission (
> https://www.internetsociety.org/mission/) by changing this situation,
> e.g., by selling PIR. I assume this has long been on ISOC's mind. That does
> not mean that this sale to this buyer is the right decision -- but it
> provides much-needed context.
>
> Simply losing .ORG would be incredibly destructive of ISOC's mission and
> operations, and would be the worst possible outcome from an ISOC governance
> standpoint (and every other ISOC standpoint).  It's interesting that Dyson
> et al. are making a proposal that would essentially bury ISOC.  It's
> certainly not an outcome that ISOC would or could ever put on the table.
>
> I would not jump to the conclusion that a sale of PIR is counter to the
> interests of any other non-profit, much less every other non-profit.  Ethos
> Capital is largely an unknown factor.  Whatever their strategy, their goal
> is almost certainly to increase the value of PIR. Driving away its customer
> base will do the opposite.  Ethos may be able to make investments in PIR
> that ISOC could not (e.g., turning PIR from a consumer of back-end services
> to a provider of back-end services), and which would make PIR a stronger
> company.
>
> That said, I'm still skeptical about Ethos Capital.  I have plenty of
> experience with the private equity world and its hard to imagine any PE
> (Private Equity) firm as the ideal home of .ORG.  On the other hand, PE
> firms have many different approaches, and we can't jump to the conclusion
> that Ethos will repeat some other PE horror story.  (And there have been
> numerous PE horror stories, along with even more numerous PE success
> stories.)  Their stated approach provides some comfort, though it's too
> vague and too oriented toward loose "promises" rather than binding
> commitments.  Their current investments (all minority holdings which may
> have been contributed to the PE fund rather than originated by it) are
> fairly standard tech investments that do not reveal any public interest
> orientation.
>
> As for community resistance, a lot of it still seems ill-informed and may
> well be driven by "special interests" wielding the "community" as a tool.
> The resistance is likely sincere on the part of many non-profits, based
> only on the information they've been fed and concerns about Ethos arising
> from lack of information.  (For a fascinating and disturbing example of
> non-profits being manipulated to lobby against their own interests, see the
> article about the Energy industry and NAACP chapters  at
> https://www.nytimes.com/2020/01/05/business/energy-environment/naacp-utility-donations.html.)
> And who knows if the opposition is "widespread"?  It's noisy, and its
> gotten attention, but that's not the same thing...
>
> On paper the sale of .ORG is a Good Thing for ISOC; in reality, it's only
> good for ISOC if it's good for .ORG.  From an individual end-user
> perspective, how do we define what "good" means and how do ensure that, if
> the sale happens, it's good for end-users (and if it's not good for
> end-users, it shouldn't happen)?  That is where we need to focus our
> efforts.
>
> Best regards,
>
> Greg
>
> Footnote: Cooper Union, the storied engineering school in New York, is
> largely dependent on rent from the land it owns under the Chrysler
> Building. For decades, this allowed Cooper Union to be tuition-free, but
> costs outstripped revenue, deficits mounted. Cooper Union was in a bind and
> roundly criticized for this over-reliance, particularly when they started
> charging tuition for the first time in history.  Fortunately, they had
> renegotiated the lease during the real estate boom of 2006 with a schedule
> of future rent hikes that went from $7.8 million in 2017 to $32.5 million
> in 2019 (and then $41 million in 2028), and they are on the road to
> recovery.  But there's no such pot of gold at the end of the .ORG rainbow.)
>
>
>
>
>
> On Wed, Jan 8, 2020 at 2:51 PM David Mackey <mackey361 at gmail.com> wrote:
>
> Alan,
>
> Agreed. Your points make sense from an iSOC centric perspective.
>
> I guess there's irony in that iSOC's organizational interests seem to be
> in conflict with interests of other stakeholders in the larger Internet
> community. Who could have seen that coming? Multistakeholder model?
>
> 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. As the Internet continues to expand, and
> as the value to global society increases, we probably can all agree that an
> end user's perspective is probably worth more than ever before, and yet
> still so hard to understand and express.
>
> Cheers!
> David
>
>
> On Wed, Jan 8, 2020 at 1:46 PM Alan Greenberg <alan.greenberg at mcgill.ca>
> wrote:
>
> "It's hard to understand why the iSOC organization is pushing back against
> strong community resistance."
>
>
> Its not so hard to understand.
>
> - The deal will be good for ISOC. It gives them financial security and
> gets them out of the Domain name business.
>
> - They believe that this will work out well for .ORG (and with the recent
> assurances, perhaps they are right).
>
> - If this deal is cancelled (or not allowed by ICANN), it is not clear
> that there will be a replacement that puts .ORG in non-profit hands and
> will be nearly as lucrative to ISOC - which implies they might have to
> scale down operations.
>
> Alan
>
>
>
> At 08/01/2020 01:24 PM, David Mackey wrote:
>
> Maybe a bonanza for lawyers, but also it also comes with tarnished
> reputations for .ORG, PIR, iSOC, Andrew Sullivan, etc.
>
> It's hard to understand why the iSOC organization is pushing back against
> strong community resistance.
>
> So much for consensus building with the multistakeholder model. Maybe
> we're headed back towards the days of pre-ICANN Internet Governance with
> the associated financial costs and time-delays to resolve disputes.
>
> On Wed, Jan 8, 2020 at 9:54 AM Alan Greenberg <alan.greenberg at mcgill.ca >
> wrote:
> I don't see how a proposal to ICANN can imply $ to ISOC. The only way I
> can interpret this is as Evan has: an outright cancellation of the
> agreement by ICANN and re-delegate to the new corp.
>
> An interesting concept, but if nothing else, the resultant lawsuits would
> likely to be a bonanza for lawyers...
>
> Alan
>
> At 08/01/2020 09:25 AM, Evan Leibovitch wrote:
>
> From what I can gather from what's been written so far, they're going to
> demand ICANN to simply re-delegate the registry to them and leave ISOC with
> nothing (though the actual proposal to ICANN may be different and indeed
> include compensation of some sort). Looks like they want to make the case
> that .ORG is a resource that needs a custodian rather than commodity that
> can be tossed around at will. It's comprised of an interesting group that
> includes ICANN's first president and the USG person in charge of handing
> TLD control to it.
>
> - Evan
>
>
> On Wed, 8 Jan 2020 at 07:05, Jacqueline Morris <jam at jacquelinemorris.com
> > wrote: Hi Evan Do you know if there is a monetary  value on this bid
> that is public yet? Will it give ISOC the endowment that it is looking for? Jacqueline
> A. Morris Technology should be like oxygen: Ubiquitous, Necessary,
> Invisible and Free. (after Chris Lehmann <http://twitter.com/chrislehmann>
> )
>
> On Wed, Jan 8, 2020 at 3:27 AM Evan Leibovitch <evan at telly.org> wrote: Looks
> like Esther Dyson and others are forming a co-operative to offer an
> alternative bid to Ethos:
>
>
> https://www.nytimes.com/2020/01/07/technology/dot-org-private-equity-battle.html
> It is unfortunate that the proposed alternative is yet another US
> corporation, though the bulk of .ORG registrants are American so this will
> likely be unchallenged.
> Chance of ISOC accepting to even evaluate this alternative bid without
> pressure is slim given that many deals like Ethos' contain penalties for
> backing out. But the pressure is certainly there, and not abating.
> -- Evan Leibovitch, Toronto Canada @evanleibovitch or @el56 _______________________________________________
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