[Chapter-delegates] News relating to the sale of PIR

Sat Feb 22 02:19:15 PST 2020

Please find below my comparison of Ethos' recently announced ICANN Public Interest Commitments (PIC) with their previously announced Benefit Corporation (B-Corp) commitments. 

The Ethos announcement does not state explicitly whether the PIC is replacing the B-Corp commitments, but, for the reasons given in section III(a) below, it appears to me that the PIC is intended to replace the B-Corp commitments. I would appreciate clarification on this point, because, as explained below, it appears to me that the PIC is walking back the B-Corp commitment regarding price increases.

The PIC does have a stronger commitment regarding freedom of speech and use of data, but it is a process commitment, not a substantive commitment, and, for the reasons given in section III(b) below, it appears to me to be an inadequate commitment.

All things considered, I find that the PIC does not meet my expectations: it was not consulted with the concerned communities, the price protection is insufficient, the composition of the Stewardship Council remains problematic, the powers of the Stewardship Council are inadequate, the reporting requirements for the new PIR are inadequate, and the enforcement mechanism (ICANN) is not sufficiently transparent nor strong.

Therefore, I continue to oppose the proposal to sell PIR/.ORG to Ethos.

Warning: what follows is long. It is structured as follows:

I - Benefit Corporation Commitments

II - Public Interest Commitments

III - Comparison of the two commitments

  (a) Pricing

  (b) Stewardship Council

  (c) Reporting

  (d) Enforcement

IV - Comments on the press release

V - Pennsylvania Benefit Corporation reporting requirements

I - Benefit Corporation commitments

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

Ethos had previously stated that it would incorporate public benefit commitments in the new PIR's Certificate of Formation as a Pennsylvania Benefit Corporation (B-Corp). I copy-paste in section V below the reporting requirements for such a corporation.  

Ethos' statement is at:

  https://www.keypointsabout.org/blog/commitments-in-certificate-of-formation 

The B-Corp commitments can be summarized as follows:

1) PIR will promote and support the purpose-driven and other organizations and individuals that use the .ORG top-level by committing to: (a) provide high-quality domain services and related products and services, (b) found and support a charitable foundation and (c) promote a culture of accountability and transparency for the registry, employees and customers.

2) PIR will not increase annual fees a .ORG domain name by more than 10% per year on average.

3) PIR will establish a Stewardship Council from which it will seek strategic advice and recommendations to help guide PIR management and the board in considering the interests of .ORG stakeholders. PIR will delegate to the Stewardship Council rights to oversee and appropriate a portion of the PIR charitable foundation’s funds to finance initiatives undertaken in support of the .ORG community.  

II - Public Interest Commitments

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

Ethos has now announced that it will add Public Internet Commitment (PIC) to the contract between PIR and ICANN.  The PIC is at:

  https://www.keypointsabout.org/s/20200220-PIC.pdf 

The commitments in the PIC can be summarized as follows:

A) The annual fees for a .ORG domain name will be capped for eight years, as follows:

Maximum price

2019:  9.93

2020: 10.92

2021: 12.02

2022: 13.22

2023: 14.54

2024: 15.99

2025: 17.59

2026: 19.35

2027: 21.29

2028: No cap, that is, no limitation on price increases

B) There will be a Stewardship Council. No employee, director or member of PIR shall serve on the Council. The Council shall gave the binding right to veto modifications of PIR policies regarding censorship and freedom of expression, and use of .ORG registrant and user data.

C) PIR will establish a community enablement fund. Grants from the fund will be approved by the PIR Board upon recommendation of the Stewardship Council.

D) PIR will produce and publish annually a report that assesses its compliance with A), B), and C) above.

III - Comparison of the two commitments

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

The recent Ethos announcement does not explicitly say whether the new PIC is replacing the previous B-Corp commitment.  For the reasons given below, I suspect that it is.

a) Pricing

==========

In the B-Corp commitment price increases would be limited to 10% per year, on average, with no time limitation.

In the PIC, the price increases are capped until 2027, unlimited after that.

So it appears to me that Ethos is reneging its B-Corp commitment and that price increases may be larger than what it said it would commit to.

This leads me to believe that the B-Corp commitments have been withdrawn.

b) Stewardship Council

======================

The Charter of the Stewardship Council is at:

  https://www.keypointsabout.org/s/20200220-ORG-Stewardship-Council-Charter.pdf  

As far as I can tell, there was no consultation with the concerned communities regarding this charter.

Responsibility 2 refers to "Recommendwations" [sic] which makes me wonder whether this document was slapped together in a hurry, without careful review.

According to Responsibility 3, the Stewardship Council cannot provide advice or recommendations regarding day-to-day operational matters, financial or budgeting matters, or pricing of PIR services.

>From the information provided to date, it appears that the initial members of the Stewardship Council will be appointed by Ethos (and might include people such as Vint Cerf or Steve Crocker). The Council will then renew its own composition as members leave it. This is spelled out in Principle 4: the inaugural Council will consist of 5 members appointed by the PIR Board (which will be controlled by Ethos) and 2 members nominated by the PIR Board and a to-be-established Nominating Committee. 

The PIC states that no employee, director or member of PIR shall serve on the Council. I'm not sure what is meant by "member of PIR", however it appears that the principals of Ethos, or the owners of the owners of PIR and/or Ethos could serve on the Council.

We don't anything more about how the members of the Council will be selected, nor how they will consult the concerned communities (in particular the .ORG registrants).

The PIC gives veto rights to the Stewardship Council with respect to changes in policies regarding censorship and freedom of expression, and use of .ORG registrant and user data. But the veto requires a two-thirds majority of the Council, see Principle 12 of the Council's Charter.

Note that this is a process commitment: Ethos commits to submit any such changes to a process, but the changes can take place unless they are blocked by a two-thirds majority of the Stewardship Council.

It seems to me that a substantive commitment would have been more appropriate, something like "PIR will not modify current policies regarding censorship and freedom of expression, and use of .ORG registrant and user data."

The Stewardship Council's veto powers are limited by Principle 12, which states that PIR and the PIR Board reserve the right at all times in their sole judgment to take actions consistent with PIR’s Anti-Abuse Policy and to ensure compliance with applicable laws, policies and regulations.

Note that this clause does not refer to US law. Maybe I'm being paranoid, but it seems to me that this clause would authorize PIR to, say, revoke the registration of a domain name for a Chinese entity if the entity had violated Chinese restrictions on freedom of speech, or violated Russian obligations to register as a non-profit entity, or violated US sanctions against Iran, Cuba, Venezuela, etc.

I conclude that the proposed Stewardship Council is not an effective mechanism to safeguard the interests of the concerned communities: it has nothing to say about operational matters or prices, it requires a two-thirds majority to veto a change in freedom of speech or data protection policies, and anyway PIR reserves its right to comply with laws that may be different from US law.

c) Reporting

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

Under the B-Corp commitments, PIR would have to publish a pretty comprehensive annual report, see section V below.

Under the PIC, PIR only has to report with respect to pricing, changes in policies, and the community enablement fund.

d) Enforcement

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

B-Corp commitments can be enforced in the Pennsylvania courts, where proceedings are public.

Enforcement of PIC is up to ICANN, and not all parts of its proceedings are public.

I know the PIC, and its enforcement process, fairly well because I was one of the first PIC DRP panelists. I did not hear any cases: there have been only two cases to date.

Here is information on the PIC and its enforcement:

  https://icannwiki.org/Public_Interest_Commitments 

  https://newgtlds.icann.org/en/applicants/agb/base-agreement-specs-pic-faqs 

  https://www.icann.org/resources/pages/picdrp-2014-01-09-en 

As can be seen from the FAQ, the decision of a PICDRP panel is not binding. It is a recommendation to ICANN, who will then decide what, if anything, to do about the alleged violation of the PIC. That is, the PICDRP panel's role is essentially to provide advice to ICANN, who may (normally will) tell the offending registry to comply with its PIC. If the offending registry fails to comply ICANN could, as a last resort, revoke its registry contract.

It appears to me that enforcement of B-Corp commitments in the Pennsylvania courts would be preferable to enforcement of PIC through the ICANN PICDRP.

IV - Comments on the press release

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

Regarding Ethos' announcement, Andrew Sullivan has stated: "They [Ethos] listened, and responded."

I disagree. One of the key points that has been made repeatedly by many critics of the proposed deal is that there was insufficient consultation with the concerned communities, and that nothing should be cast in stone until it was consulted with the communities.

I'm not aware of any consultations prior to Ethos publishing the PIC. 

It's worth recalling that George Sadowsky attempted to organize a consultation, but that Ethos finally declined, on the grounds that a weekend-long meeting was not feasible given schedules and other events already in motion. I infer that given schedules and other events were more important than the consultation that George was trying to organize. To me, this provides an unflattering view of the importance that Ethos gives to hearing the views of the concerned communities.

Regarding the PIC, Andrew Sullivan has stated: “With this in place, and as the Internet Society and PIR advance their missions, the Internet will become stronger, more secure, and more accessible.”

Since the deal in question involves the sale of one gTLD, I fail to see how it it could make the Internet stronger or more secure. 

Regarding accessibility, the main issue is lack of affordable access in much of the developing world. 

The reasons for the relatively high cost of access include lack of competition, lack of infrastructure, and the high cost of international connectivity. 

I fail to see how moving the PIR/.ORG revenue stream from the non-profit sector to the private equity sector will make the Internet more accessible, but perhaps I'm missing something.

V - Pennsylvania Benefit Corporation reporting requirements

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

The reporting requirements for Pennsylvania Benefits Corporations are outlined here:

  https://www.dos.pa.gov/BusinessCharities/Business/Resources/Pages/Pennsylvania-Benefit-Corporation.aspx 

Each year, the benefit corporation must prepare and distribute to its shareholders an Annual Benefit Report describing its efforts to create public benefit during the preceding year. The report must be filed with the Department of State, thus making it a matter of public record. The report must also be posted on any public website maintained by the corporation. The fee for this filing is $70. The report must:

    Describe the general public benefit and any specific public benefit pursued and created during the year and any circumstances that may have hindered the creation of these benefits;

    Assess the overall social and environmental performance of the benefit corporation against a third-party standard and state the process and rationale for selecting the third-party standard;

    Give the name and contact information of the benefit director and the benefit officer, if any;

    Provide the compensation paid to each director;

    Give the name of each person that owns 5% or more of the outstanding shares of the benefit corporation; and

    Contain the annual compliance statement of the benefit director described in Section 3322(c)

    Contain a statement of any connection between the organization that established the third-party standard and the benefit corporation, or their directors, officers or any holder of 5% or more of the governance interests/outstanding shares in either organization, including any financial or governance relationship which might materially affect the credibility of the use of the third-party standard

    If the benefit corporation has restricted the powers of the board of directors, a description of the persons who exercise those powers and of the benefit director.

From: Chapter-delegates [mailto:chapter-delegates-bounces at elists.isoc.org] On Behalf Of Christine Saegesser via Chapter-delegates
Sent: Friday, February 21, 2020 14:17
To: Chapter-delegates
Subject: [Chapter-delegates] News relating to the sale of PIR

Dear Chapter Delegates,

The following announcement relating to the proposed sale of Public Interest Registry was made a short while ago at 13:00 UTC today: https://www.keypointsabout.org/pressrelease

If you have any questions about this news, please feel free to contact us at isoc at isoc.org 

The Chapter Leaders call with Board Chair Gonzalo Camarillo scheduled for Friday 28th will go ahead as planned, but we would also be interested to hear from you if you would like us to arrange an additional call about this news earlier in the week.

Thank you, 

Christine

=======================

Announcement:

Ethos Capital Announces Accountability Initiatives to Secure a Strong Future for .ORG

Ethos Voluntarily Initiates Legally-Binding Public Interest Commitments that Enforce Price Limits on .ORG and Codify Strong Safeguards Against Censorship of Free Expression and Use of Personal Data  
Establishes a $10 Million Community Enablement Fund to Support the .ORG Community
Releases .ORG Stewardship Council Charter

February 21, 2020 – Boston, MA – Ethos Capital (“Ethos”) today announced several key initiatives that strengthen and reinforce the company’s commitments to the .ORG community as part of its acquisition of Public Interest Registry (“PIR”). These initiatives are legally-binding measures that enforce price limits, safeguard against censorship and protect personal data through an amendment to PIR’s Registry Agreement with the Internet Corporation for Assigned Names and Numbers (“ICANN”) that allows PIR to operate the .ORG top-level domain. This amendment is codified in what is known as a Public Interest Commitment (“PIC”). These legally-binding commitments cannot be unilaterally modified by PIR and will apply to .ORG regardless of who operates .ORG.

In connection with these initiatives, PIR has granted ICANN an additional extension to March 20, 2020 to review PIR's submissions.  PIR will continue to work collaboratively with ICANN to address any potential outstanding questions by this date.

PUBLIC INTEREST COMMITMENT (PIC)

In response to the .ORG community’s requests for increased clarity around Ethos’ commitments, Ethos has voluntarily proposed to add an amendment to PIR’s .ORG Registry Agreement with ICANN in the form of a PIC. Upon completion of the acquisition, the PIC will become a legally binding amendment to the current Registry Agreement. It will be enforceable both by ICANN through its compliance department and by members of the community through ICANN’s Public Interest Commitments Dispute Resolution Procedure (“PICDRP”). 

“We have been listening closely to stakeholder feedback – both positive and negative – and have been working diligently to address these specific issues head on,” said Erik Brooks, Founder & CEO of Ethos Capital. “A primary request we heard from the .ORG community was for strong enforceability measures to ensure that Ethos would be held accountable to its promises. We are taking these actions to show that we stand firmly behind the commitments we’ve made – and most importantly – behind the registrants and users who have made .ORG the incredible domain it is today.”  

This Amendment to include the PIC will include the following legally-binding contractual provisions: 

1.    Affordability of .ORG Domain Names: Fees charged to registrars for initial or renewal registration of a .ORG domain name will not increase by more than 10% per year on average for eight years from the start of the current Registry Agreement, under a precise formula that does not permit front-loading of those price increases.  Through this commitment, .ORG will become one of the only TLDs to have a price restriction and it will remain one of the most affordable domains in the world. 

2.    .ORG Stewardship Council: The .ORG Stewardship Council (the “Council”) will have authority to provide independent advice on and a binding right to veto modifications proposed by PIR to PIR’s policies regarding (1) censorship and freedom of expression and (2) use of .ORG registrant and user data. The Council will have specific authority to veto any proposals or modifications that would limit the Council’s oversight in these areas. No employee, director or member of PIR shall serve on the Council.    

3.    Community Enablement Fund: PIR will establish a Community Enablement Fund to provide support for initiatives benefitting .ORG registrants and approved by the Council. The commission, charter, and funding of the Community Enablement Fund will be established by PIR’s Board with input from the Council. The Council will be responsible for providing recommendations and advice regarding the Community Enablement Fund. Appropriations from the Community Enablement Fund will be subject to approval of the PIR Board. It is anticipated that PIR will contribute $10 million to the Community Enablement Fund over the remaining life of the current Registry Agreement.

4.    Annual Public Report: PIR will produce and publish annually a report that assesses PIR’s compliance with the PIC commitments and the ways in which PIR pursued activities for the benefit of the registrants of .ORG domain names during the preceding year.

.ORG STEWARDSHIP COUNCIL CHARTER 

In addition to clarifying the role of the .ORG Stewardship Council in the PIC, Ethos has publicly released the .ORG Stewardship Council Charter (the “Charter”) outlining the principles and protocols that will govern the administration and operation of the Council.  

Key components of the Charter are as follows:

• The Council will have the power to veto changes to .ORG policies in two essential areas, consistent with the values of the .ORG community and with PIR’s Anti-Abuse Policy: (1) appropriate limitations and safeguards against censorship of free expression in the .ORG domain name space; and (2) appropriate limitations and safeguards regarding use or disclosure of registration data or other personal data of .ORG domain name registrants and users.  The Council will also have authority to veto any changes to the .ORG Stewardship Council Charter that would diminish the Council’s rights with respect to policies in these two areas.

• The Council will provide the PIR Board with independent strategic advice and recommendations to help guide PIR in considering and balancing the best interests of all .ORG stakeholders, in order to help the PIR Board assess how it can promote values that serve the mission-driven goals of the .ORG community. 

• The Council will provide recommendations and advice regarding the Community Enablement Fund established by PIR to provide support for initiatives benefitting .ORG registrants that are consistent with the mission and values of the .ORG community. 

The full text of the PIC and the Charter, which includes additional information about the Council’s duties and responsibilities and details its policies and procedures, may be viewed at www.keypointsabout.org/accountability.

PUBLIC INTEREST REGISTRY’S FUTURE

The acquisition will ensure a bright future for PIR and .ORG registrants and users. Ethos’ investment in PIR will deliver significant benefits to the .ORG community, including investment in value-added products and services that will strengthen and grow the .ORG brand. PIR will conduct market studies and surveys to help identify the products and services that can further build the online presence of mission-driven organizations around the world. 

“PIR’s mission has always been to serve the .ORG community, and this agreement with ICANN ensures that we will continue to do just that,” said Jon Nevett, CEO of Public Interest Registry. “The binding and enforceable commitments announced by Ethos today ensure protections that support Ethos’ pledge to be a responsible partner to PIR. On behalf of the entire team at PIR, we could not be more thrilled to be working with Erik, Nora and the Ethos team. It’s clear that they believe in our mission and support the values we’ve worked so hard to establish over the past 17 years. We hope to complete this transaction in the near future so that we can move forward on building an even stronger .ORG together.”

THE INTERNET SOCIETY’S FUTURE 

The transaction will allow the Internet Society to do more for the Internet. The Internet Society will invest the proceeds from the transaction and use the resulting investment income to power the organization’s mission of an Internet that is open, globally-connected, trustworthy and secure. The sustainable funding offered by the investments will ensure the Internet Society community efforts to build, promote, and defend the Internet can continue, and that these efforts reach far and wide. By decoupling from its reliance on revenue from the domain name industry, the Internet Society will also achieve a greater degree of independence, allowing it to be a more vocal champion for an open and inclusive Internet that is a force for good for everyone.

“With this announcement, Ethos shows that it has been listening to the questions some have raised.  Ethos has responded by embedding its commitments on pricing, censorship and data use policies in a legally-binding contract, and giving ICANN and the community the ability to hold Ethos to its commitments. They listened, and responded,” said Andrew Sullivan, President and CEO of the Internet Society. “With this in place, and as the Internet Society and PIR advance their missions, the Internet will become stronger, more secure, and more accessible.” 

.ORG COMMUNITY DISCUSSION

The principals from Ethos, PIR and the Internet Society will host a community discussion on Thursday, February 27, 2020 from 3:00 – 4:00 PM EST (8:00-9:00 PM UTC) to provide additional details on these important commitments. More information about this event may be found at www.keypointsabout.org/events. 

Ethos, PIR, and the Internet Society look forward to hosting additional community discussions in the coming weeks.

About Ethos Capital

Ethos Capital is a specialized investment firm that helps transform and grow established companies in today’s rapidly evolving digital economy. Ethos Capital’s Founder and CEO, Erik Brooks, has deep expertise and relationships across the business, technical, and social communities that protect and promote the Internet’s core founding values. As a mission-driven firm, Ethos Capital is committed to setting the gold standard of ethics and social responsibility for registry operations and supporting a globally connected and resilient Internet. For more information, please visit https://ethoscapital.com/.

About Public Interest Registry

Public Interest Registry (PIR) is a nonprofit corporation that operates the .ORG top-level domain—one of the world’s largest generic top-level domains with more than 10 million domain names registered worldwide. As an advocate for collaboration, safety, and security on the Internet, PIR’s mission is to serve as an exemplary registry and to provide a trusted digital identity. PIR strives to educate the global community to use the Internet more safely and effectively while taking a leadership position among Internet stakeholders on policy and other issues relating to the domain naming system. PIR was founded by the Internet Society (https://www.internetsociety.org) in 2002 and is based in Reston, Virginia, USA. Visit Public Interest Registry at https://pir.org.

About .ORG  

.ORG is the original purpose-driven “generic” top-level domain (gTLD) with more than 10 million domain names registered worldwide. .ORG is open to everyone, providing a global platform for organizations, associations, clubs, businesses and individuals to bring their ideas to life. For more than 30 years, .ORG has built an enduring legacy of trust, preserving an open and secure Internet where diverse communities can establish a trusted online identity and freely share ideas. Visit www.TheNew.org for more information.

About the Internet Society

Founded by Internet pioneers, the Internet Society (ISOC) is a non-profit organization dedicated to ensuring the open development, evolution and use of the Internet. Working through a global community of chapters and members, the Internet Society collaborates with a broad range of groups to promote technologies that keep the Internet safe and secure, and to advocate for policies and infrastructure that enable universal access. The Internet Society also provides a corporate home for the administrative entity that supports the Internet Engineering Task Force (IETF). For additional information, visit

https://www.internetsociety.org/.

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