If you are following the tech news, you might have seen the announcement that ICANN withheld consent for the change of control of the Public Interest Registry and that this had some implications for .org.  However, unless you follow a lot of DNS inside baseball, it might not be that clear what all this means. This post is intended to give a high level overview of the background here and what happened with .org. In addition, Mozilla has been actively engaged in the public discussion on this topic; see here for a good starting point.

The Structure and History of Internet Naming

As you’ve probably noticed, Web sites have names like “mozilla.org”, “google.com”, etc. These are called “domain names.” The way this all works is that there are a number of “top-level domains” (.org, .com, .io, …) and then people can get names within those domains (i.e., that end in one of those). Top level domains (TLDs) come in two main flavors:

  • Country-code top-level domains (ccTLDs) which represent some country or region like .us (United States), .uk (United Kingdom, etc.)
  • Generic top-level domains (gTLDs) which don’t correspond to some country or region, such as .com, .org, etc.

Back at the beginning of the Internet, there were five gTLDs which were intended to roughly reflect the type of entity registering the name:

  • .com: for “commercial-related domains”
  • .edu: for educational institutions
  • .gov: for government entities (really, US government entities)
  • .mil: for the US Military (remember, the Internet came out of US government research)
  • .org: for organizations (“any other domains”)

It’s important to remember that until the 90s, much of the Internet ran under an Acceptable Use Policy which discouraged/forbid commercial use and so these distinctions were inherently somewhat fuzzy, but nevertheless people had the rough understanding that .org was for non-profits and the like and .com was for companies.

During this period the actual name registrations were handled by a series of government contractors (first SRI and then Network Solutions) but the creation and assignment of the top-level domains was under the control of the Internet Assigned Numbers Authority (IANA), which in practice, mostly meant the decisions of its Director, Jon Postel. However, as the Internet became bigger, this became increasingly untenable especially as IANA was run under a contract to the US government. Through a long and somewhat complicated series of events, in 1998 this responsibility was handed off to the Internet Corporation for Assigned Names and Numbers (ICANN), which administers the overall system, including setting the overall rules and determining which gTLDs will exist (which ccTLDs exist is determined by ISO 3166-1 country codes, as described in RFC 1591). ICANN has created a pile of new gTLDs, such as .dev, .biz, and .wtf (you may be wondering whether the world really needed .wtf, but there it is). As an aside, many of the newer names you see registered are not actually under gTLDs, but rather ccTLDs that happen to correspond to countries lucky enough to have cool sounding country codes. For instance, .io is actually the British Indian Ocean’s TLD and .tv belongs to Tuvalu.

One of the other things that ICANN does is determine who gets to run each TLD. The way this all works is that ICANN determines who gets to be the registry, i.e., who keeps the records of who has which name as well as some of the technical data needed to actually route name lookups. The actual work of registering domain names is done by a registrar, who engages with the customer. Importantly, while registrars compete for business at some level (i.e., multiple people can sell you a domain in .com), there is only one registry for a given TLD and so they don’t have any price competition within that TLD; if you want a .com domain, VeriSign gets to set the price floor. Moreover, ICANN doesn’t really try to keep prices down; in fact, they recently removed the cap on the price of .org domains (bringing it in line with most other TLDs). One interesting fact about these contracts is that they are effectively perpetual: the contracts themselves are for quite long terms and registry agreements typically provide for automatic renewal except under cases of significant misbehavior by the registry. In other words, this is a more or less permanent claim on the revenues for a given TLD.

The bottom line here is that this is all quite lucrative. For example, in FY19 VeriSign’s revenue was over $1.2 billion. ICANN itself makes money in two main ways. First, it takes a cut of the revenue from each domain registration and second it auctions off the contracts for new gTLDs if more than one entity wants to register them. In the fiscal year ending in June 2018, ICANN made $136 million in total revenues (it was $302 million the previous year due to a large amount of revenue from gTLD auctions).

ISOC and .org

This brings us to the story of ISOC and .org. Until 2003, VeriSign operated .com, .net, and .org, but ICANN and VeriSign agreed to give up running .org (while retaining the far more profitable .com). As stated in their proposal:

As a general matter, it will largely eliminate the vestiges of special or unique treatment of VeriSign based on its legacy activities before the formation of ICANN, and generally place VeriSign in the same relationship with ICANN as all other generic TLD registry operators. In addition, it will return the .org registry to its original purpose, separate the contract expiration dates for the .com and .net registries, and generally commit VeriSign to paying its fair share of the costs of ICANN without any artificial or special limits on that responsibility.

The Internet Society (ISOC) is a nonprofit organization with the mission to support and promote “the development of the Internet as a global technical infrastructure, a resource to enrich people’s lives, and a force for good in society”. In 2002, they submitted one of 11 proposals to take over as the registry for .org and ICANN ultimately selected them. ICANN had a list of 11 criteria for the selection and the board minutes are pretty vague on the reason for selecting ISOC, but at the time this was widely understood as ICANN using the .org contract to provide a subsidy for ISOC and ISOC’s work. In any case, it ended up being quite a large subsidy: in 2018, PIR’s revenue from .org was over $92 million.

The actual mechanics here are somewhat complicated: it’s not like ISOC runs the registry itself. Instead they created a new non-profit subsidiary, the Public Interest Registry (PIR), to hold the contract with ICANN to manage .org. PIR in turn contracts the actual operations to Afilias, which is also the registry for a pile of other domains in their own right. [This isn’t an uncommon structure. For instance, VeriSign is the registry for .com, but they also run .tv for Tuvalu.] This will become relevant to our story shortly. Additionally, in the summer of 2019, PIR’s ten year agreement with ICANN renewed, but under new terms: looser contractual conditions to mirror those for the new gTLDs (yes, including .wtf), including the removal of a price cap and certain other provisions.

The PIR Sale

So, by 2018, ISOC was sitting on a pretty large ongoing revenue stream in the form of .org registration fees. However, ISOC management felt that having essentially all of their funding dependent on one revenue source was unwise and that actually running .org was a mismatch with ISOC’s main mission. Instead, they entered into a deal to sell PIR (and hence the .org contract) to a private equity firm called Ethos Capital, which is where things get interesting.

Ordinarily, this would be a straightforward-seeming transaction, but under the terms of the .org Registry Agreement, ISOC had to get approval from ICANN for the sale (or at least for PIR to retain the contract):

7.5              Change of Control; Assignment and Subcontracting.  Except as set forth in this Section 7.5, neither party may assign any of its rights and obligations under this Agreement without the prior written approval of the other party, which approval will not be unreasonably withheld.  For purposes of this Section 7.5, a direct or indirect change of control of Registry Operator or any subcontracting arrangement that relates to any Critical Function (as identified in Section 6 of Specification 10) for the TLD (a “Material Subcontracting Arrangement”) shall be deemed an assignment.

Soon after the proposed transaction was announced, a number of organizations (especially Access Now and EFF) started to surface concerns about the transaction. You can find a detailed writeup of those concerns here but I think a fair summary of the argument is that .org was special (and in particular that a lot of NGOs relied on it) and that Ethos could not be trusted to manage it responsibly. A number of concerns were raised, including that Ethos might aggressively raise prices in order to maximize their profit or that they could be more susceptible to governmental pressure to remove the domain names of NGOs that were critical of them. You can find Mozilla’s comments on the proposed sale here. The California Attorney General’s Office also weighed in opposing the sale in a letter that implied it might take independent action to stop it, saying:

This office will continue to evaluate this matter, and will take whatever action necessary to protect Californians and the nonprofit community.

In turn, Ethos and ISOC mounted a fairly aggressive PR campaign of their own, including creating a number of new commitments intended to alleviate concerns that had been raised, such as a new “Stewardship Council” with some level of input into privacy and policy decisions, an amendment to the operating agreement with ICANN to provide for additional potential oversight going forward, and a promise not to raise prices by more than 10%/year for 8 years. At the end of the day these efforts did not succeed: ICANN announced on April 30 that they would withhold consent for the deal (see here for their reasoning).

What Now?

As far as I can tell, this decision merely returns the situation to the status quo ante (see this post by Milton Mueller for some more detailed analysis). In particular, ISOC will continue to operate PIR and be able to benefit from the automatic renewal (and the agreement runs through 2029 in any case). To the extent to which you trusted PIR to manage .org responsibly a month ago, there’s no reason to think that has changed (of course, people’s opinions may have changed because of the proposed sale). However, as Mueller points out, none of the commitments that Ethos made in order to make the deal more palatable apply here, and in particular, thanks to the new contract in 2019, PIR ISOC is free to raise prices without being bound by the 10% annual commitment that Ethos had offered.

It’s worth noting that “Save dot Org” at least doesn’t seem happy to leave .org in the hands of ISOC and in particular has called for ICANN to rebid the contract. Here’s what they say:

This is not the final step needed for protecting the .Org domain. ICANN must now open a public process for bids to find a new home for the .Org domain. ICANN has established processes and criteria that outline how to hold a reassignment process. We look forward to seeing a competitive process and are eager to support the participation in that process by the global nonprofit community.

For ICANN to actually try to take .org away from ISOC seems like it would be incredibly contentious and ICANN hasn’t given any real signals about what they intend to do here. It’s possible they will try to rebid the contract (though it’s not clear to me exactly whether the contract terms really permit this) or that they’ll just be content to leave things as they are, with ISOC running .org through 2029.

Regardless of what the Internet Society and ICANN choose to do here, I think that this has revealed the extent to which the current domain name ecosystem depends on informal understandings of what the various actors are going to do, as opposed to formal commitments to do them. For instance, many opposed to the sale seem to have expected that ISOC would continue to manage .org in the public interest and felt that the Ethos sale threatened that. However, as a practical matter the registry agreement doesn’t include any such obligation and in particular nothing really stops them from raising prices much higher in order to maximize profit as opponents argued Ethos might do (although ISOC’s nonprofit status means they can’t divest those profits directly). Similarly, those who were against the sale and those who were in favor of it seem to have had rather radically different expectations about what ICANN was supposed to do (actively ensure that .org be managed in a specific way versus just keep the system running with a light touch) and at the end of the day were relying on ICANN’s discretion to act one way or the other. It remains to be seen whether this is an isolated incident or whether this is a sign of a deeper disconnect that will cause increasing friction going forward.

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