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Comment by Traster | Hacker News Reader

This author is just outright naive.

>Even in the worst case, if Ethos considers dramatically increasing prices (which, to be clear, we do not expect them to do!), the Registry Agreement for .org requires a 6-month notice period during which domain owners can lock in a 10-year registration at pre-increase rates. This should seriously discourage Ethos from doing this, because it would take 10 years for the new high rate to even take effect for existing registrants, and new registrations would likely fall off right away.

No, the worst case scenario is that they jack up prices and then run a massive campaign FUD campaign about non-profits without .org addresses. Or they start selling of Oxfam.org to competitors. Or hell, they start doing differential pricing, gouging the people they think can pay.

>We're all trying to make the Internet a better place

No we're not. Don't be an idiot. Private equity companies are making money from investments they have no interest in making anything a better place and it's insulting to expect people to believe that.

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I think it's worse than naive. His two points are in impossible conflict. He wanted a pile of money for the Internet Society, enough to "secure that work's future". But the only way selling .org is worth a pile of money is if it gets extracted from nonprofits. With plenty of profits left over to feed the investors who put up the initial cash.

If the Internet Society wanted to secure their future, they should have raised a proper endowment. Or they could have kept .org and bumped the prices modestly so it made a profit equivalent to what an endowment would pay. Selling it to a PE company is guaranteed to be worse for .org registrants, because the amount of money extracted will be greater, and a PE firm will be way less accountable. Especially a shadowy one just created for this.

And for those not familiar with the horrors of PE, I recommend reading about what happened to Simmons Mattress once the financial engineers got a hold of it: https://www.nytimes.com/2009/10/05/business/economy/05simmon...

Sounds like what happens with drugs. The big name pharma companies avoid getting their names dirty by selling drugs to corps willing to bump prices past the absurd.

I sure hope the author got a kickback since his decision was not for the benefit of others. Only worse thing than corrupt board member, is a fool given authority.

Why could the Internet Society not have been the one raising prices by 10% ad infinitum. Need capital? Borrow it and pledge .org as security. There’s basically unlimited funds available in this manner because the .org cashflow stream is as reliable as anything.

How naive indeed. What a shame.

Because it's harder to justify being the person who raises prices that much, while claiming to "enable the internet for all" or whatever their mission statement is. With the right PR, you can sell out and try and keep a straight face.

Seems like they missed the right pr then?

In the short term, sure. But in the long term, they have a pile of cash they're not giving back and somebody else (who doesn't give a shit) takes the blame.

Outsourcing “being the bad guy” is fairly common in the business world.

Because they are a non-profit who can't pay themselves ridiculous salaries. Instead, they can now work at Ethos and draw ridiculous salaries.

And extracting money from nonprofits, while an easy point to communicate, is just the tip of the iceberg - there's a horrible conflict of interest between the adoption of .org and the mission of .org now.

As I've written before, what happens if a large country says "we will block .org domains, or .org DNS resolutions, if you don't suspend an activist organization's domain globally?" Beforehand, the Internet Society could say "we don't believe that precedent is in the interest of the global community overall, and your threat is empty to us."

But now, there's both a profit motive AND an obligation to shareholders to take down the domain GLOBALLY, as the value of the company would decrease if .org domains were blocked to a large market. And, while I'm not a lawyer, I believe this decision would be permitted by the new 2019 rules. This gives censors tremendous leverage to spread censorship and chilling effects around the globe. DMCA takedowns will seem like child's play.

In the face of losing a large market opportunity, if even Google, with all its market power and all its public scrutiny, is willing to build things like Dragonfly, how can we take Ethos at its word?

I'm all for the role of private equity in helping companies to grow - while there are certainly firms that operate in bad faith, the PE industry overall doesn't deserve the bad rap it gets in the media. Of all the things that the private market can do to drive innovation, the existence of PE is critical. (Not every company should IPO or be gobbled up by a strategic.)

But IMO this sale should absolutely be disallowed from a humanitarian and international security perspective. The incentives are just too badly aligned.

The ISOC-Ethos deal timeline is a conflict of interest story with executive musical chairs:

https://www.privateinternetaccess.com/blog/2019/11/isoc-pir-...

It stinks.

Help me understand what you mean by "worse than naive" here. Richard Barnes isn't going to see a dollar of this money and wouldn't need it anyways. I understand people disagreeing with him, but, despite being automatically disinclined to extend good faith to anything published at CircleID, I don't understand where anyone derives bad faith from this piece.

I thought it was tremendously useful, if only to understand what was in the minds of the people who unanimously voted to sell .ORG.

> Help me understand what you mean by "worse than naive" here

"Worse than naive" doesn't necessarily mean "bad faith" but possibly causing losses to other people without deriving a gain can still be "worse than naive". It's a quote rephrased for kindness.

> Help me understand what you mean by "worse than naive" here.

"Naive" in this context generally means they were overly trusting when there was no evidence to suggest trust was warranted. I'd interpret "worse than naive" as saying that they are actually evidence to the contrary.

The logic presented is, "We need more money, so we sold it to this private equity firm. But don't worry, they're not going to try to squeeze lots of money from it."

The starting point for any for-profit company -- no matter how ethically run -- is that they buy things because the expected value to them will be higher than the cash they paid for it. We must assume that the expected value of PIR to the equity company is higher than the amount they paid IS for it. Which means, either IS is actually getting less (or at best the same) money than they would have for keeping PIR, or it means that Ethos is going to charge significantly more than IS is. The fact that Ethos bought PIR is prima facae evidence that it's a bad deal for either IS or for the internet as a whole.

I mean, there are other possibilities, but none is really good. It's possible that someone at Ethos capital actually did want to do IS a favor, and way over-paid for PIR. But that's just a form of embezzlement; I certainly wouldn't feel any better to know that .org was bought by someone who was either incompetent or a criminal.

If you want to set up a long-term self-funding organization to do good rather than making money, you don't do private equity; you set up a foundation. Ethos, or whoever wants to make the world a better place, could provide a loan to such an organization.

And even if you do decide to buy something, you put your promises in writing in the form of a contract.

And even supposing Ethos really does mean all the things they say. Suppose something happens and they go bust and have to liquidate their assets. What happens then?

There are just so many red flags here, that "too trusting" doesn't even begin to describe it.

Your scenarios are not mutually exclusive. To maximize their expected value, you say that they could:

1. Earn less than IS would

2. Charge more than IS would

It's actually:

1. They could earn less than IS would, because they're generous, incompetent, or some other reason

2. They could earn more than IS would, because they increase the prices, run PIR more efficiently than IS would, increase the number of registrations more than IS would, or some other reason

In scenario two, which is the most interesting, they could jack up prices, but they could also run the business better, such as running the business more efficiently or driving more business through advertising. I agree with you that the former is likelier, but not necessarily the only reason why the deal would have a positive expected value for Ethos. It could be that the deal is a win-win one, where IS gets more money than they'd be able to make out of PIR, and yet, Ethos comes ahead too by running it better than IS could.

If you have some evidence that this is the case, feel free to give it. But they've already outsourced the running of the registry to somebody else, so any obvious efficiency gains have presumably already been taken. And if they haven't, there's no reason to think a fresh-minted PE company would do any better than hiring a competent manager.

I think Richard's piece leaves out everything of substance. I don't understand how this helps the ISOC mission, users of .org, the public interest of the Internet at large, or anyone at all except of course Ethos Capital.

PIR, the registrar in question generated $48 Million in support grants for ISOC in 2018 tax return. He's trying to make the case that selling this $50million revenue from grants is worth it. He think the governance of .org and the maximum possible cost increase will be fine.

What possible reasons has he given for any of that?

He vaguely indicates that it'll be fine, and instead asserts that $28/yr could be affordable? It is, but why not just jack up the price in the first place, if its a money thing? They could be getting $100-Million in ten years, why sell it off to a private capital investment firm with no track record of "Governance" and a mandate only to private shareholders and investors?

If you happen to check https://ethoscapital.mu/investments/ to read all about their clear mandate for Governance (whatever that means the the context of "Exposure to a Diversified Pool of Unlisted Assets") hopefully the irony[0][1] of their using the .mu (Mauritius) tld is not lost on you. Sorry if this last bit seems petty, but just wow. What about any of this makes anyone think this doesn't look like a gift to private equity? I would like to see the sale price.

[0] https://business.mega.mu/2013/07/29/internet-210-government-...

[1] https://web.archive.org/web/20141110042124/http://news.islan...

>I thought it was tremendously useful, if only to understand what was in the minds of the people who unanimously voted to sell .ORG.

That felt more like a smokescreen than a true insight into the process. It's a lot of fluff and empty grandstanding while not really justifying the sale in any coherent way. The way I read it he's basically saying "being a registrar for .org is our biggest activity and one that gives us a steady and stable income but we also want to do other things, so we decided to get rid of that for some short-term gains".

If that's truly what was in the mind of the people who voted to sell they need to test the water supply in that building, there was clearly something messing with their reasoning skills.

If there's truly a grand master plan that makes sense behind all of that then they should share it. For now the only plan that makes any sense to me involves several thick layers of corruption.

I mean what I say: I don't think he can possibly be as naive as this piece suggests, and I don't think any of the plausible alternatives interpretations (e.g., incredibly negligent, corrupt, a fool) is better than this babe-in-the-woods confection.

If you'd like to assert that he's really this naive, feel free to make a case for it. Or if you have some interpretation that's better, I'd be glad to read that as well.

I don't think that "nonprofit" = "good".

See

https://newint.org/features/2005/10/01/keynote/

we might be better off if Oxfam's domain name was sold off to somebody else.

People who liked that "phenomenon of bullshit jobs" essay might think that "working for a nonprofit" is "meaningful", but people who work for non-profits frequently suffer from moral injury, get burned out, underpaid, and wind up questioning their values.

Back when I was involved in third-party politics and had many social entrepreneur friends I made my own decision that I don't give money to 501c(3) organizations, since they are a privileged class that doesn't have to pay taxes -- being a 501c(3) organization also means sticking to rules that ensure that you will be working on the symptoms of problems rather than the root causes.

Particularly in the developing world, people would benefit from for-profit organizations that are responsive to their needs as opposed to non-profits who work for rich donors and mindless governments.

>Particularly in the developing world, people would benefit from for-profit organizations that are responsive to their needs as opposed to non-profits who work for rich donors and mindless governments.

If there was profit to be made there would an business filling that need.

A foodbank in Detroit or non profit school in Ethiopia for girls are there because business and the like aren't.

The definition of "undeveloped" is that institutions haven't been developed to meet a need.

People an an "undeveloped" area are going to have a bad year now and then when Oxfam will come and tell everyone what an important thing they are doing.

If an area becomes "developed" then for-profit businesses have been created to fulfill people's needs and they don't need Oxfam.

If the rich tip the scales so that all the money ends up in their pockets, they give a little bit to Oxfam. In a fair system, people would create the institutions that they need and we wouldn't need Oxfam.

Yeah this is a frankly insane take for me.

>For those who might be unfamiliar with the Internet Society, our mission is as follows:

Nobody cares, that's utterly irrelevant as long as operating .org doesn't go against the Society's mission statement (which it clearly doesn't). By the author's own admission "While it's true that running .org provided a relatively steady income stream, it effectively staked most of our revenue on a single business". So you are staked so heavily in a single business that instead of using the income and stability it provides to diversify you just get rid of it altogether? Utter nonsense. That's just greed and short-term gains.

I hope this is naivety and not pure gaslighting.

I also find it insulting that he belittles "leasing domain names" as beneath the mission of the Internet Society. Management of .org is actually extremely important to all of those who are involved in non-profits. So are we to assume that selling off .org to private equity for a quick cash grab is in line with their "mission"?

LOL

"The Internet Society supports and promotes the development of the Internet as a global technical infrastructure, a resource to enrich people’s lives, and a force for good in society.

Our work aligns with our goals for the Internet to be open, globally-connected, secure, and trustworthy. We seek collaboration with all who share these goals.

Together, we focus on:

Building and supporting the communities that make the Internet work; Advancing the development and application of Internet infrastructure, technologies, and open standards; and Advocating for policy that is consistent with our view of the Internet"

https://www.internetsociety.org/mission/

It's also hilarious, considering that they're only in that business because they asked to be [1]:

> ICANN circulated a request for proposals in May 2002 for a new organization to manage the .org domain. The Internet Society (ISOC) teamed with Afilias to put forth one of eleven proposals ICANN received. ISOC won an endorsement within ICANN and was recommended to the selection committee

[1] https://en.wikipedia.org/wiki/Public_Interest_Registry

How did they get to being in a position to make that decision if they are naive about such things?

Because he's not naive. Humans are self justification machines and he's just exercising the semi-delusional post decision making process we all frequently exercise ourselves.

"As an organization the WWF staked most of our revenue on a single business. That's why we've acquired a controlling interest in Raytheon..."

>This should seriously discourage Ethos from doing this, because it would take 10 years for the new high rate to even take effect for existing registrants, and new registrations would likely fall off right away.

It's the exact opposite of that. As soon as you announce a price hike, you don't get a giant loss of money, you get a giant flood of money as tons of people pre-pay for 10 years.

You even kinda get the best of both worlds, a cash infusion and more money in the long run.

The org TLD has 14 million registrations in it right now. If Ethos announces a 50% price hike (increasing the base charge from $9 to $13.50), my guess is 2% of the domains would be immediately renewed for the 10-year max at the old price.

So right off the bat, Ethos have 280,000 domains * ($9 * 10 years) = $25,200,000 in new cash. Now that means they've lost out on $37,800,000 from the price hikes but that was collected over the next ten years and assumes that all of those domains would have continued for ten years. They've no choice now; the money is paid.

If Ethos lose another 10% of org registrations because people don't want to pay the increased cost, that leaves 12,348,000 domains left. Assume another 10% of those either don't renew for some other reason or renewed for more than one year but less than ten. Now you're at 11,113,200 remaining domains that, in the year after the announcement, bring in an additional $50,009,400.

So just by announcing a price hike and not-so-subtly encouraging domain owners to "take advantage to lock in today's price for years to come," Ethos bring in $75,209,400 with two-thirds of that being new recurring revenue and the remaining third suitable for distribution as bonuses to all of the executives who made such a clever scheme what it is.

It occurs to me that I should probably extend all the .org domains I control (for a non-profit) to 10 years, now.

I have three org domains I really care about and have already bumped them out as long as currently-PIR will let me. Sucks to have to but two of these domains are so old, I have no idea what all would break if I let them go.

Also keeping in mind that if one locks in the domain for 10 years, they are going to be much more likely to renew at whatever the ungodly sum is when the 10 year period is over.

"The foxes have assured us that they will limit their consumption in the hen house for a ten year period"

This is the best summary thus far, lol

> during which domain owners can lock in a 10-year registration at pre-increase rates.

That is not what is written in the Registry Agreement.

"Registry Operator shall offer registrars the option to obtain domain name registration renewals at the current price ... for periods of one (1) to ten (10) years at the discretion of the registrar, but no greater than ten (10) years."

In practice, this says the same thing. There's no reason for registrars not to let their customers lock in the low price for 10 years. There's stiff competition among registrars and their margins on domain name sales are razor thin. They make their money by selling various add-on services. It's better for them if registry prices are low because that encourages people to buy more domains, and thus more add-on services.

For example, Namecheap came out strongly against removing .org price caps: https://www.namecheap.com/blog/ensuring-icann-keep-domain-pr...

The registrar can simply raise the registration price of Wikipedia.org to a million dollars a year, and keep the random ones the same price, to extract any value from .org websites that rely on their domain name. The 10% a year is not a legal commitment, just an easily breakable informal promise.

If their registrar did that, Wikipedia would change registrars to one that didn't - and they'd be able to keep their .org. There's competition among registrars, unlike registries.

Their margins on new domain sales are thin, but the cost of changing domain names for a big owner of a prestigious .org domain could be huge. So jack up the renewal price to gouge existing domain owners, then drop the prices again to entice in new registrants.

Or follow the model of banks profiting off of debit cards by charging exorbitant fees for common mistakes. They didn't need that a high percentage of their customers to pay overdraft fees before they were making billions. Forget to renew your domain on time? No problem, we've held on to it for you, just please pay this $150 "redemption fee".

If a registrar did that, the .org domain owner would change to a better registrar, and they'd be able to keep their .org domain. There's competition among registrars, unlike registries.

> I would encourage people to look at what Ethos themselves have said about their intentions with regard to .org > Make .org domain names "accessible and reasonably priced for all", including limiting price increases to no more than 10% per year

Just that statement alone means prices could double every 7 years.

Without explicit agreements/laws in place I have to sadly agree, and any natural monopoly will get abused at some point if owned by profit-seeking companies. That's just how it is. Doesn't matter if they are now sweet-talking you into doing this deal, the fact is that once they are in the position of power, they can do whatever they want. Of course there are some limits what the customers can take, but when their end-goal is maximizing profit extraction it's just dumb to assume it will be all butterflies and rainbows.

As an example if you even need any, the government of Finland decided to let government-majority owned electricity company (Fortum) to sell off their electricity distribution (Caruna) to some private investors. I don't know what the investors promised but quickly after the deal was made, the prices started to rise, the company structure was made that the company in Finland is paying ridiculously high interest rates (8.5%) on loans to some Dutch holding company, with an effective tax rate of couple %.

And even in general, why do they have to sell .org? I don't see any concrete benefits whatsoever for the normal user.

Yes unless it's regulated, any monopoly that is "for profit" will want to maximize profits. So they will walk the balance beam between raising prices and buying lawyers and lobbyists to insure congress critters don't regulate them.

Agree. Very naive. A 10% increase forever versus 10 year temporary stay of prices for some lucky few who manage to opt out.

10 is pretty small compared to forever.

I'll take the guaranteed 10% nest egg until retirement, please.

You're very nice, because "naive" is a very generous interpretation.

It's just funny to me that he felt the need to start listing out his credentials before explaining his stand.

That's reasonable in this case, people often complain (and sometimes reasonably so) that the people in this bureaucratic entities are far removed from the "real world" and don't really understand what they're dealing with.

Too bad his credentials did not make his argument good. I bet if he actually had a good argument ... well then nobody would be complaining that his argument is bad.

If anything it makes it worse, he can't plead ignorance.

Yeah, his argument and conclusion are so bad that they're more likely to make me do a double-take on the value of his credentials.

The funny thing is that despite his credentials, he made such a spectacular blunder. It makes one wonder when the other shoe will drop for "Let's Encrypt".

Well, they already only take bug reports from people who enter into a contract with Microsoft!?

Really? I've never heard of that. Can you elaborate?

Well ... try reporting a bug without doing so and see how far you get?!

The last time .org was up one of the bidders considered that Oxfam and redx (red cross ) where not valid users of .org

At the time I worked for one of the bidders Poptel, so I got to hear a lot of the inside stories

I'd like to hear the reasoning behind that.

I'd like to hear the reasoning behind that

Something like: Oxfam is a fundraising organisation that just does enough charity work to generate photos for their marketing. It’s a long way from what most people believe a charity is - volunteers doing good works and raising money to directly buy the supplies and equipment.

I agree the author seems very naive and you're right to zone in on the only substantive thing he did say. However I'm still unclear about some points. For example can they sell oxfam.org from under Oxfam's nose? How does that work?

They can't "sell it from under their nose", they just can demand any renewal price for it they like, and delete the domain if that price is not being paid.

Ok so they can arbitrarily set a unique price for a specific domain?

> > We're all trying to make the Internet a better place

> No we're not. Don't be an idiot. Private equity companies are making money from investments they have no interest in making anything a better place and it's insulting to expect people to believe that.

I'm kind of a conservative (read classical liberal) free market kind of guy - but this is a total shit-show IMO. I simply don't see anything that will prevent market failure in this case - there is nothing I can see that incentivises good behavior.

> there is nothing I can see that incentivises good behavior.

Competition with all the other registries?

For the most cost sensitive domain owners, they typically have a presence on social media and contact with users via email. And, of course, they're usually discovered by search engine rather than domain. So the switching costs are quite low and the demand extremely elastic.

A domain only has One registry

How much would it cost society as a whole if WikiPedia switched away form .org? Think of all the printed links, now defunct. Think of the value of that domain to an occupant with less scruples, once left behind. The confused people who will find themselves on a WikiPedia-esque, ad and scam ridden copy.

And that’s just WikiPedia.

This is a shitshow of historic proportions for the internet as a whole. It will be remembered as a landmark in the ever metastasising cancer of monetisation that is suffocating the World Wide Web from within.

Not all consumers are equal.

Wikipedia sized organizations would easily absorb the relatively trivial cost, so, they wouldn't switch. Their demand is relatively inelastic to price.

The people switching are going to be the far more numerous smaller operations, who are elastic to price.

And, of course, anyone signing up for a new domain is highly elastic.

Because there are lots of people who are highly elastic, the overall demand is highly elastic.

Wikipedia could absorb a trivial cost increase so it's likely that a PE firm would target them with more steep increases. From what I've read about their price increase limiting "agreement" it isn't one, it's just a statement and isn't laid out in any binding contracts.

Maybe Wikipedia gets it's registration price bumped up to 3 million because the PE firm thinks the org can absorb the cost.

It can't be laid out in a binding contract because it's a new contract each time you renew the name. This is something every renter has dealt with since forever.

So, yes, they could absolutely start trying to shake down the biggest non-profit organizations. Those are also organizations that are highly sympathetic and have literally hundreds of millions of viewers, and thus immense political clout.

It could be laid out in a binding contract for the purchase of .org that the PE firm is prevented from reoffering a name renewal above the rate they previously offered it and the agreed adjustment - it just appears that isn't actually contractually laid out anywhere and is simply a PR statement.

Contract law certainly isn't something to trivially walk into, but there are ways this could have been done.

Why wouldn’t Wikipedia hedge against this outcome by extending their domain for 10 years tomorrow, and paying $100 to do that?

What happens after the 10 years are up? I very much hope that Wikipedia will be able to stay on the Internet for longer than that.

The author is not naive. He is most likely malicious.

> This author is just outright naive.

No, it's you who is being naive. The author is a sly fucker who adeptly spins his atrocious sell-out.

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