Nonprofits Sound Alarm on Sale of Dot-Org Domain to For-Profit Equity Firm

SAN FRANCISCO (CN) — Nonprofits anxiously await the fate of the dot-org domain, on the brink of being sold to the shadowy private equity firm Ethos Capital.

It’s a move they fear will stifle independent voices on the internet, as private ownership of dot-org could leave the domain vulnerable to economic extortion by authoritarian governments and rapacious corporations. 

“This is really a question about whether we can trust a private entity to be responsible for any entity fundamentally in service of the public interest,” said Access Now strategist Carolyn Tackett said on a press call Thursday. “Are we willing to hand over control to the dot-org domain, the foundation of online civic space, to another private company?”

Access Now is a nonprofit that advocates for privacy, security, and free expression on the internet.

The Internet Corporation for Assigned Names and Numbers (ICANN) is meeting Thursday to discuss the sale, and has until Monday to make a decision about whether Ethos should be allowed go forward with its bid to buy dot-org for $1.1 billion from its current steward, the Internet Society.

ICANN doesn’t have the authority to prevent the sale, but by voting to reject it the organization would destroy the value of the deal, said Cara Gagliano, attorney with the nonprofit Electronic Frontier Foundation. 

The Public Interest Registry, a nonprofit formed by the Internet Society (ISOC), has been managing the dot-org domain since 2002. If the deal goes through, the registry will be owned by Ethos.

“ISOC doesn’t have to continue its stewardship of dot-org if it doesn’t want to, but it should allow ICANN to find a new steward on merit, not sell it to the highest bidder,” Gagliano said. “It’s not something they own; it was something they were entrusted with. It’s not just a piece of real estate.”

The foremost concern for opponents of the sale is the risk of censorship once dot-org is sold to a profit-driven company with the power to suspend domains, effectively wiping out a nonprofit or nongovernmental organization’s website, said Mitch Stoltz, a senior attorney at the Electronic Frontier Foundation. Registries generally use their power to suspend domain names responsibly, he said.

“But because it’s such a powerful tool there’s always a temptation to regulate the content of websites,” Stoltz said. “There are powerful industries, corporations or governments that may want to pay a registry to do that, to regulate the content of the internet, or just browbeat them into doing it.”

Pharmaceutical companies are just one example, putting pressure on registries to suspend the domain names of competitors.

The nonprofit Public Interest Registry has so far resisted attempts to regulate speech, Stoltz said. But he fears that Ethos Capital, a company that will have $360 million in debt to discharge from the $1.1 billion deal, will be uniquely vulnerable to pressure from corporate interests and totalitarian regimes.

“That would give them an incentive to engage in censorship for profit,” Stoltz said. “And dot-org is a target-rich environment for censorship because it is thousands of nonprofits and NGOs that speak truth to power.”

It’s a threat Human Rights Watch executive director Ken Roth put in blunt terms.

“I fear that when you hand dot-org to a private equity firm, this is going to be a huge target for the Chinese censors,” he said. 

Roth said for the past year, Human Rights Watch has been tracking Chinese efforts to impose censorship overseas. He said the regime routinely uses economic force to silence critics, pointing to its suspension of business ties last year with the NBA over a tweet by Houston Rockets general manager Daryl Morey expressing support for dissidents in Hong Kong.

“Once you turn over the domain to a profit-driven firm you are inviting this kind of economic manipulation from China,” Roth said. “What we have here is a private equity firm. They’ve said, ‘We will only have westerners involved. We won’t have any Chinese people who own the domain.’ But that’s beside the point.”

Roth said investors in Ethos will still be expecting the firm to be profitable, which will make Ethos a target for Chinese censors looking to rein in troublesome nongovernmental organizations.

Ethos has said on its blog that it intends to establish a “stewardship council” to provide oversight, a proposal Stoltz said is “meaningless.” 

“A close look at what they’ve proposed really makes it look like window dressing,” he said.

The murky intentions of Ethos Capital’s ownership is also a concern. The firm appears to be run, at least in part, by former ICANN execs, according to reports from Wired and domain industry news site Domain Name Wire. 

Ethos is led by Erik Brooks, who recently left another private equity firm called Abry Partners, according to Domain Name Wire’s report. Abry owns Donuts, a company that operates more than 200 domain name extensions, including dot-movie, dot-theater and dot-company. It recently launched a partnership with the Motion Picture Association of America, granting it preferential treatment as a “trusted notifier” for claims of copyright infringement. 

Wired reported former ICANN CEO Fadi Chehade, who has also worked with Abry, is an adviser for Ethos and registered its domain name in 2019.

Stoltz said ICANN has made several requests to Ethos for information about those behind the investment. “The deal parties have not been forthcoming with information, particularly around the meaning of the five brand new Delaware shell companies they have created to own and control PIR once the deal goes through,” he said, using an abbreviation for Public Interest Registry.

But the sale could be doomed if U.S. courts get involved. Public Interest Registry is a nonprofit incorporated in Pennsylvania, and the state’s Orphans Court, which oversees charitable organizations, must approve any transaction that involves a Pennsylvania nonprofit. 

“The deal still cannot go through without approval by the Pennsylvania court, Gagliano said, adding that Pennsylvania Attorney General Josh Shapiro is also investigating the deal and could intervene to block the sale.

California Attorney General Xavier Becerra has also been a vocal critic of the sale, sending a letter to ICANN on April 15 urging it to reject the deal. He called Ethos’ evasiveness about how it plans to generate revenue to repay its $360 million debt, pay its taxes and cover Public Interest Registry’s operating costs “disturbing.” 

“While PIR currently has sufficient income for its operations, as a nonprofit it pays no taxes and is not saddled with a $300 million loan and investors who expect a rate of return. The unstable economic climate makes predictions of future revenue even more speculative,” Becerra added. “If the sale goes through and PIR’s business model fails to meet expectations, it may have to make significant cuts in operations. Such cuts would undoubtedly affect the stability of the .org registry.”

His office has investigated the deal and could take legal action to protect the dot-org domain. 

While some opponents to the sale aren’t thrilled by the idea of government intervention, Stoltz said it wouldn’t be necessary if ICANN did its job.

“The way to keep ICANN independent is for it to step up and take responsibility for non-profit internet users and show good internal governance,” he said. “If ICANN is simply going to be a rubber stamp on the decisions of domain name investors like Ethos Capital, then governments are going to feel compelled to step in.”

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