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ICANN: We reject $1.1bn sale of .org registry to private equity firm

Transfer to a for-profit private equity firm would create "unacceptable uncertainty" for the registry.
Written by Liam Tung, Contributing Writer

ICANN, the non-profit in charge of web addresses, has rejected the proposed $1.1bn sale of the non-profit registry that controls .org domain names to private equity firm Ethos Capital. 

The Internet Society, which operates the non-profit Public Interest Registry (PIR) for .org domains, announced plans in November to sell the registry to Ethos Capital. 

There were immediate concerns that the registry would have incentives not to act in the public interest under Ethos Capital. PIR has over 10.5 million .org domain names registered, mostly used by non-profits, including the Red Cross, Médecins Sans Frontières, and the United Nations. 

At the time, Sir Tim Berners-Lee, the creator of the web, said it would be a "travesty" if the registry for .org ended up not being required to act in the public interest. 

Another concern was that Ethos was funding the deal with a $360m term loan. Some feared that to satisfy shareholders it would have to raise prices above the 10% per year cap it had promised.   

ICANN's board broadly agreed with those concerns in a statement on its decision to deny the transfer. 

"The ICANN board finds that the public interest is better served in withholding consent as a result of various factors that create unacceptable uncertainty over the future of the third largest gTLD registry," ICANN said in a statement

ICANN said the transfer would mean "a change from the fundamental public interest nature of PIR to an entity that is bound to serve the interests of its corporate stakeholders".

"The $360m debt instrument forces PIR to service that debt and provide returns to its shareholders, which raises further question about how the .org registrants will be protected or will benefit from this conversion," ICANN added. 

ICANN was under pressure to withhold consent for the transfer. In January, California attorney general Xavier Becerra launched an investigation into ICANN's role in approving the transfer of the .org Registry Agreement from PIR to Ethos. 

Earlier this month Becerra's office, which regulates non-profits in the state including ICANN, wrote to ICANN warning it to reject the sale to Ethos, citing "serious concerns". 

"ICANN must exercise its authority to withhold approval," Becerra wrote. 

ICANN said Becerra's letter was "one aspect of support for the reasonableness of withholding consent from the requested change of control, but the letter does not alone determine or require this outcome."

The Electronic Frontiers Foundation has applauded ICANN for rejecting the transfer of PIR to Ethos. 

"The proposed buyout was an attempt by domain name industry insiders to profit off of thousands of nonprofits and NGOs around the world," EFF said

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