The Gentrification of the Internet?

In the chaos that was the end of 2019 and these early days of 2020, I’ve occupied a part of my brain with one very worrisome, terribly unsexy and potentially nerdy topic: Website domains.

Ethos Capital and the Cooperative Corporation of .ORG Registrants are two groups you and your credit union need to keep a very close eye on in 2020. There is a very good chance that one of these two groups could decide your credit union’s website future in the coming months. Yeah, months.

In 2019, the private equity investment firm Ethos Capital was formed. Typically, when you hear the term “private equity investment firm,” you might translate those four words as, “all about the money.”

In this case – spoiler alert – you would not be wrong.

On Jan. 6 of this year, the Cooperative Corporation of .ORG Registrants (I’ll just refer to this group as CCOR from now on) filed its articles of incorporation in the state of California.

Separately, the formation of these two groups aren’t much to look at. What’s newsworthy here is the fact that CCOR was created because of/in spite of/due to Ethos Capital’s creation and its entire purpose.

In the same way private equity firms gobble up prime real estate in downtowns all across the country, Ethos Capital is attempting to do the online equivalent of those same practices.

Ethos Capital, and its private investors, want to buy and thus control the dot-org online domain. They currently have a bid into the Internet Corporation for Assigned Names and Numbers (ICANN) to buy the dot-org space for $1.135 billion.

Think of it as the gentrification of the internet.

CCOR “is the cooperative organization that embodies and collectively represents the community of dot-org domain name registrants, who are its members. The CCOR is an organization created by nonprofits for nonprofits, to maximize the security and stability of the non-commercial internet,” according to a Medium blog post by the organization on Jan. 10. CCOR doesn’t have a website yet.

According to the Ethos Capital website, the firm “is a new investment company firmly rooted in the belief that prosperity can be built and shared with all the stakeholders in our investment ecosystem.” Reading that, you might come away thinking that this is a sweeter, kinder and gentler private equity investment firm.

Caught in the middle of this fight is ICANN. In my brain, I like to think of them as the Dewey Decimal governing system for organizing internet domains.

ICANN is a nonprofit group that has been in charge of organizing online domain items since the late 1990s.

Recently, we were able to get a somewhat closer look at the details of how Ethos Capital has been operating and/or negotiating this process with ICANN. On Jan. 10, ICANN posted a redacted PDF concerning Ethos Capital’s “anticipated acquisition” of the Public Interest Registry (PIR).

It gets a little confusing here, but PIR is technically the not-for-profit agency that is specifically in charge of managing top-level dot-org domains. PIR and ICANN both work together on domain issues.

According to these newly-released documents, Ethos Capital has already created an affiliate organization called Purpose Domains Direct, LLC which is expected to acquire 100% interest of PIR (a.k.a. all of dot-org land) and will change PIR’s name to Public Interest Registry, LLC – taking PIR from not-for-profit to for-profit.

Purpose Domains Direct, LLC and Public Interest Registry, LLC have been officially organized and certified in the tax-haven-friendly state of Delaware. Because of that, guess what? We cannot see who sits on the board of directors – their names and information have been redacted (see screenshot).

After reading the 27-page document, it appears this process of selling your dot-org domain to these series of for-profit LLCs is a lot further down the road than we initially thought. Financial terms of the potential transaction have already been laid out, according to the ICANN document. It states that the $1.135 billion price “will be financed through a combination of cash and equity partners and a $360 million term loan facility entered into by lenders to Purpose Domains Direct, LLC …” Those lenders? According to the ICANN document, they are “established U.S. financial institutions, each of which has in excess of $50 billion in assets” and aren’t affiliated with Ethos Capital.

We only have a few credit unions that could be potential lenders in this situation. And, we will ask them about it.

If this deal goes through and Ethos Capital via Purpose Domains Direct, LLC buys the dot-org world, what will this mean for your credit union’s website domain?

Well, Ethos Capital would literally own the rights to all dot-org domains and collect all of the annual fees from the more than 10 million dot-org websites in existence. They would have no contractual obligation to keep domain prices affordable. And, according to CCOR’s blog post, the group is concerned that Ethos Capital could censor any site as it saw fit. “We’ve seen other commercial domain hosts give in to censorship demands and degrade service in order to make or save money,” CCOR stated.

Ethos Capital has gone on record stating that these types of inflammatory statements are not true. Oh, to be able to believe statements from a private equity firm at face value.

Now, Ethos Capital wants to pay ICANN more than $1 billion to take over anything online that is dot-org. And CCOR has organized to basically beg ICANN to not take the money and please, please, please give dot-org control to them for free.

Several former members of ICANN either work for or are doing consulting work with Ethos Capital. CCOR also has two former ICANN members on its board. So both sides have that going for them.

What this has become is a battle between some extremely wealthy investors and a group of cooperative internet professionals trying to do what they believe is right. Who will win?

ICANNot say. But, ICANN is expected to make a decision sometime early this year.

If I were in charge of my credit union’s website, I’d be reaching out to CCOR immediately.

Final Note

I was sad to read that Neil Peart died. He was the reason I, and so many others, became a percussionist. For those Rush fans who know who I’m talking about, please take a moment to air drum to YYZ today.

Michael Ogden is editor-in-chief for CU Times. He can be reached at mogden@cutimes.com.