[Chapter-delegates] What's going on? As presented, the sale of PIR should be rejected by the Board

[Dave Burstein]

ISOC members
If you care about ISOC, please step up, whether you agree or disagree with
my point of view. Every time I write something like this I get direct
emails, often very encouraging. But almost no one writes to the list.
ISOC needs strong members.


Andrew and all

Either the substance of this deal is very different than the brief
announcement suggests or it is* clearly a very bad mistake that would
necessitate major layoffs and force longterm cutbacks in ISOC activity. *I
ran some numbers; "do more" is impossible unless some very important
information is being held back.

Andrew, Pepper, Walid and other board members I know to be of good intent.
So I assume there is a great deal more going on and ISOC will be
transparent about the facts.

Andrew - What's going on? This is one of the most important decisions in
the history of ISOC and at minimum the members need full information. This
could be the right course of action because there have been important
issues around PIR in the past. Do get us what we need to know.
--------------------------------------

The above is a very strong statement. It is based on closely following the
finances of ISOC for almost a decade and discussions in the past with most
senior staff. Let me explain for those less involved.

ISOC's primary funding has been ~$30 million a year from the .org
registrations at the Public Interest Registry. A small part of that -
probably less than 10% - funds the IETF.

The balance is by far the largest funding of any non-profit dedicated to
improving the Internet for all of us. That's why I have volunteered for
ISOC since 2011. We often disagree on how to work, but everyone from Vint
and Andrew through every active member is here because of what we believe.

With today's interest rates, it would require an after-tax net of well over
US$500 million to yield endowment income of ~$30 million/year. There is no
figure in the release. Is it really that high? It would be about 18X
EBITDA, a very high multiple.
--------------------
It is highly unlikely that we can replace the lost income unless something
is going on behind the scenes. It's hard for any organization to look at
its failures but we need to be very cautious making assumptions about
future fundraising.

A few years ago, we had trouble raising 10% of our income from unaffiliated
donors according to our then treasurer. When I added up the salaries
dedicated to fundraising and related communications, it appeared we had
spent almost as much as we had raised.

In addition, we pay a very high price for some of the money we do raise.
When I suggest a few years the US IGF address some domestic issues rather
than telling other countries what to do, the answer was, "Our donors might
object." (There's a recording. Guess which DC lobbyists were donors.)
Another time, the head of the DC Chapter said he agreed with my comments
but couldn't say so publicly. They wanted Verizon to sponsor their next
meeting.

In ISOC's DC circles, donations often carry a quid pro quo. That's the way
of the world.

------------

It appears the deal will require changing P.I.R. from a non-profit to a
for-profit. In two cases I know in New York, that took years. What have we
done to get government approval for a Q1 close?
-------------------

Specific questions I'd welcome answers to, besides the financial terms of
the deal, It's easy to imagine what people will assume if a "transparent,
multistakeholder" organization holds back such important information.

If the endowment income is less than ~$30M, what programs or salaries
should we cut back? Do we need a hiring freeze?

>From whom do we receive funding? I've asked before and been told the ISOC
does not reveal donors. In the US, non-profits usually give strong
recognition to funders. Without the PIR money,

PIR transferred an extraordinary $40M in the 2017 fiscal year to ISOC? Why
was that, what is being done with the money, and where is the accounting?

What was the board discussion, the details of which are not in the minutes?
Now that the deal is concluded, that doesn't have to be secret.

May we have copies of the 2018 990's for PIR & ISOC? The budget as
presented has no detail. Compare the detail of the ICANN budget.

Is a breakup fee part of the deal?

What reserves are we putting aside for possible tax and litigation expenses?
-----------------------------

What else do we need to know?

Dave Burstein








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