Two months ago, Ethos Capital, a private equity firm, announced that it planned to buy the rights to a tract of internet real estate for more than $1 billion.
But it wasn’t just any piece of digital property. It was dot-org, the cyber neighborhood that is home to big nonprofits and nongovernmental organizations like the United Nations (un.org) and NPR (npr.org), and to little ones like neighborhood clubs.
The deal was met with a fierce backlash. Critics argued that a less commercial corner of the internet should not be controlled by a profit-driven private equity firm, as a matter of both principle and practice. Online petitions and letters of concern came from hundreds of organizations, thousands of individuals and four Democrats in Congress, including Sen. Elizabeth Warren of Massachusetts.
Rarely has the acronym-strewn realm of internet addresses — so-called domain names — stirred such passion.
Now, a group of respected internet pioneers and nonprofit leaders is offering an alternative to Ethos Capital’s bid: a nonprofit cooperative corporation. The incorporation papers for the new entity, the Cooperative Corp. of .ORG Registrants, were filed this week in California.
The goal of the group is not only to persuade the Internet Corp. for Assigned Names and Numbers (ICANN), which oversees internet domain names, to stop the sale. It is also to persuade ICANN to hand it the management of dot-org instead.
“This is a better alternative,” said Esther Dyson, who served as the first chair of ICANN, from 1998 to 2000, and is one of seven directors of the new cooperative. “If you’re owned by private equity, your incentive is to make a profit. Our incentive is to serve and protect nonprofits and the public.”
Since 2003, dot-org has been run by the Public Interest Registry, which is controlled by the Internet Society, a nonprofit that helps develop internet standards, education programs and policy. The registry holds a contract to manage dot-org, which was renewed last year for 10 more years. With a sale to Ethos Capital, the Internet Society would gain an endowment to fund its operations and get out of the business of operating dot-org.
In buying the Public Interest Registry, Ethos Capital would acquire the rights to run dot-org and collect annual fees from the nearly 10.5 million registered dot-org names, held by both nonprofits and domain-name speculators. Those yearly fees are $10 to $20 on average but can be far higher for big sites that buy several names to protect their brand and get added services like security against online attacks.
Opponents of the private-equity sale said they feared that to make an attractive profit on its pricey deal, Ethos Capital would have to raise prices, cut expenses, skimp on service — and most likely sell users’ data.
Ethos Capital said those concerns were unfounded.
In a blog post in December, Erik Brooks, the firm’s founder, said that “we understand that change brings uncertainty and concern,” which was reflected in “alarmist statements.”
Ethos Capital, Brooks said, wants to invest in dot-org “for the reputation of the platform and the values it represents in the marketplace.” He said his firm planned to build on that asset.
Big price increases have been a major concern for critics of the deal. When ICANN renewed the 10-year contract with the Public Interest Registry last year, it removed a price cap that limited price increases to 10% a year at most. That move was part of a broader ICANN policy to ease price controls across all internet domains.
Ethos Capital has pledged to adhere to the 10% cap, although it would have no contractual obligation to do so. In blog posts, the private equity firm said it planned to invest in new services and clamp down on spam, security attacks and other abuse launched from some illicit dot-org domains.
Some nonprofits worry that any cleanup effort could result in censorship, even if inadvertently. As the owner of the registry for dot-org, Ethos Capital would manage the acceptable business practices and conduct for dot-org domains. The same freedoms that open the door to extremist groups on some dot-org sites, nonprofit leaders say, also help protect free speech on public-interest dot-org sites in developing countries with authoritarian governments.
Ethos Capital said it would never facilitate censorship. It has also vowed to set up an independent “stewardship council” to monitor its management of the dot-org network.
Since the deal was announced, Brooks and top executives of the Internet Society and the Public Interest Registry have spoken with skeptics in person, in web sessions and on conference calls, seeking to reassure them that dot-org would be in safe hands. And Tuesday, they submitted a detailed response to the questions raised by the four members of Congress.
But whether the trust-building campaign has made progress is uncertain. Amy Sample Ward, chief executive of NTEN, a nonprofit that assists other nonprofits with technology, is unconvinced.
“The internet was meant to be this democratizing force around the world, and nonprofits do that,” Sample Ward said. By contrast, she said, Ethos Capital is a creature of the “capitalist-based internet industrial complex.”
For the Ethos Capital deal to succeed, ICANN must give its approval. In December, it sent out a request for more information about the proposed transaction. ICANN has not indicated the timing of a decision, but one is expected early this year.
The newly formed cooperative group is hoping it can keep dot-org out of the for-profit economy. “There is a common good here that is at risk of being undermined,” said William Woodcock, a director of the cooperative, who is the executive director of the Packet Clearing House, a nonprofit that provides internet operational support for domains.
The cooperative corporation, which would run dot-org, collect fees and distribute savings back to the nonprofit users, is an “alternative model with a long-term commitment to the open and noncommercial internet,” said Katherine Maher, a director who is the chief executive of the Wikimedia Foundation, the nonprofit parent of Wikipedia.
“There are some things that operate better noncommercially, and that’s OK,” she said.