Profiting from Nonprofits? The Sale of Dot-Org

You're probably familiar with websites that end in .org, which is one of the original domain names that the Internet started out with back in the 1980s.  Historically, it was used to distinguish nonprofit organizations from those whose URL ends with .com, which presumably were in it for the money.  That distinction is no longer observed, as anyone with enough money and an idea for a .org domain name that nobody's thought of yet can get one, profit or no profit. 

Nonprofits that got in early and want to keep their .org domains thought they had something to worry about when an Associated Press report came out this week regarding the sale of the Public Interest Registry (PIR), the nonprofit organization that oversees .org.  The buyer is a for-profit entity called Ethos Capital, and they are reportedly paying over $1 billion for the PIR and its rights to receive registration and renewal fees for .org domains.  There were even some protesters with signs outside the Los Angeles offices of the Internet Corporation for Assigned Names and Numbers (ICANN), the umbrella organization that turned over .org to the PIR in the first place and presumably must approve the sale of PIR to Ethos. 

As protests go, this one was small potatoes—about 20 people.  On Friday, Jan. 24, by contrast, a whole lot more folks than that showed up in Washington, DC, for the annual March for Life protesting the 1973 U. S. Supreme Court decision Roe v. Wade legalizing abortion.  The fact that these events got roughly the same coverage says something about media priorities, but that's a discussion for another day.

What's interesting about the protests surrounding the sale of the .org domain operation to Ethos is the concern that Ethos will jack up prices and fees to the point that nonprofits will be unable to keep their domain names.  Theoretically, that is a possibility.  But the point I would like to make is that just as anybody nowadays can buy a .org domain name with enough cash, anybody can organize as a nonprofit and do almost anything a profit-making entity can.  And that's not right.

The phrase "non-profit" itself, as modifying "organization" or "corporation" dates back only to the 1920s.  Before that you might have called them charitable organizations, or charities.  But as life got more complicated, outfits arose that were not strictly motivated by compassion or mercy (the root meanings of "charity"), but nevertheless were not founded simply to make money.  And as corporate tax laws cast an increasingly greedy eye on profits, it became advantageous to operate under the label of a nonprofit, and so more organizations did so.  The only taxes nonprofits pay are typically employee taxes such as Social Security and Medicare, but otherwise they are exempt.

Back when I was young and innocent (now I'm old and not quite so innocent), the word "nonprofit" conjured up in my mind the image of a small, storefront place where the roof leaked and the people there all ate beans out of a can for lunch, because any money they got went into the Cause, whatever the Cause was, and not their own pockets.  The Sisters of Charity founded by Mother Teresa still hews to this model pretty much, I am told, but it's now the exception rather than the rule. 

Some nonprofits are huge multinational corporations with multimillion-dollar budgets.  And, to be fair, many of them still have the nonprofit spirit of keeping as their highest priority a goal other than making money:  relieving poverty, encouraging education or spiritual growth, or any number of other worthy goals that are not monetary profit. 

But just because you have "nonprofit" in your charter doesn't mean you can't pay some extremely remunerative salaries.  A few years ago, the American Red Cross was in the news for the poor accounting it made of donations given to Hurricane Harvey relief, and it was pointed out that their CEO makes $500,000 a year, which they said was in the mid-level of CEO pay for large nonprofits.  Cecile Richards, the former head of another large nonprofit called Planned Parenthood, reportedly was paid over $1 million in the fiscal year 2017-2018.  Clearly, these folks are not eating canned beans for lunch.

Such organizations might reply that one of the main functions of their CEOs and high-level officials is fundraising, and the person asking for money has to be able to hold up their head in a moneyed environment, which you can't do on a $20,000-a-year salary.  And while executives of nonprofits don't expect to be paid at a rate competitive with the for-profit world, they will put up with only so much of a pay cut before they will decide it's not worth it and go somewhere that pays more.  There's competition for executive talent among nonprofits too.

All these are valid arguments in the current environment.  But in view of the almost vanishing distinction between some nonprofits and profit-making entities, I would tell those who have .org domain names to cool your jets.  Obviously Ethos Capital isn't paying a billion dollars for the .org domain system out of the kindness of their hearts.  But these days, nonprofits can be just as rapacious and exploitive as profit-making companies can be.  It appears that some former ICANN members are also involved in Ethos Capital, so the most likely outcome will be that things will roll along more or less as they've always gone, perhaps with even better service regarding domain-name registration and renewal.  After all, the market does work well in most cases, and profit-making outfits in a competitive environment often outperform nonprofits that are not competitive.  The domain-name business is not competitive in that sense—if you don't like the service you get from Ethos in trying to obtain a .org domain name, you will be out of luck—but they may come up with other profitable activities that will synergistically make their services better.

So for now, I don't expect any big changes in this area.  And I also don't expect the CEOs of big nonprofits are going to start eating beans for lunch any time soon either, as the phrase "nonprofit" is just a label now, not a guarantee that its people have taken a vow of poverty. 

Sources:   The Associated Press story about the purchase of the Public Interest Registry by Ethos Capital was carried by a number of newspapers, including the Sacramento Bee on Jan. 25, 2020 at https://www.sacbee.com/news/business/article239596008.html.  I also consulted the website https://www.etymonline.com/word/non-profit regarding the ancestry of "non-profit" and the Wikipedia websites on ICANN, Ethos Capital, https://www.reno.com/story/news/local/2012/06/04/does-red-cross-ceo-get-exorbitant-pay/28936535/, and https://www.texasrighttolife.com/planned-parenthood-abortion-biz-paid-ceo-1-million-last-year/ regarding the CEO salaries at the American Red Cross and Planned Parenthood, respectively. 

Internet Technical Governance: ICANN Says "I can," But Can It?

At a time when politics seems to have gotten into everything, like sand after a trip to the beach, it's not too surprising to hear that Senator Ted Cruz and some state attorneys general have seized upon a largely technical issue involving the Internet domain name system (DNS), specifically the transfer of supervision from the U. S. Department of Commerce to an independent non-profit organization called ICANN (Internet Corporation for Assigned Names and Numbers).  This matter highlights a little-known fact about engineers:  they often handle political matters a good deal better than many politicians do.

I still think the best definition of politics is one I heard from my eighth-grade civics teacher:  "Politics is just the conduct of public affairs."  In the nature of something as widespread and influential as the Internet, in one sense every issue affecting its operation and integrity is political, in that it could potentially affect every user.  But that is not the usual sense in which the word is used.

The facts of the issue are these.  When you type in a URL that uses letters that stand some chance of being understood by a normal human (e. g. www.google.com) the Domain Name System is sort of like a phone book in which network computers look up the URLs that are linked to numbers that computers actually use.  Up until a couple of weeks ago (Oct. 1, to be exact), certain operations pertaining to the assignment of domain names and other more technical matters were performed under the supervision of the U. S. Department of Commerce's National Telecommunications and Information Administration (NTIA), through a contract with the already-existing ICANN, a nonprofit organization based in California.  This tie to the U. S. government was viewed by some as a liability, in that it has led in the past to calls from Russia and China to transfer supervision of ICANN to a United Nations agency called the International Telecommunications Union (ITU).  (You can tell there's engineers involved by the number of alphabet-soup outfits in this piece.)  Partly to counter this, for many years both Democratic and Republican presidential administrations have been moving to cut the last formal ties between the Department of Commerce and ICANN, and finally a date was set:  October 1 of this year.

For reasons known best to themselves, but possibly having to do with businesses which were not happy with how domain-name disputes turned out, the attorneys general of the states of Arizona, Nevada, Oklahoma, and Texas filed suit to block the transfer.  But a federal judge denied the request and for two weeks now, ICANN has been running without its former Department of Commerce supervision.  I for one have not noticed any big changes, but it was never the kind of thing that was supposed to lead to the sudden appearance of massive censorship on the Internet in the first place.

While the assigning of Internet domain names and keeping them straight on the "root servers" could conceivably be manipulated for devious or sinister purposes, I am unaware of any major instances of this.  As numerous reports pointed out, Internet censorship of the type that goes on in China or Egypt from time to time is committed by the host governments, not ICANN, and there's nothing ICANN can do about it if a sovereign government chooses to pull their Internet plug.  I won't say that the concerns of Sen. Cruz and company are entirely without merit, but it's one of those things that can't be predicted in advance. 

So far, ICANN, and many other technical matters pertaining to the Internet, seem to have been run in a way that is familiar to many engineers, but little known outside the engineering community.  There is not a single term that describes this process, but the phrases "consensus," "just-in-time governance," and "ad-hoc committees" pertain to it.  It is most prominent in the development of engineering standards, which the Internet vitally depends on.

           

Many times in the course of engineering history a need for a standard has arisen.  Technology gives rise to a new capability—precisely-machined screw threads, or radio transmissions, or computer networks—but it will work in a widespread way only if the parties making and using the technology agree on certain standards so everybody's screws will fit, or everybody's computer can talk to the others without a lot of fuss.  So engineers have learned to form standards committees whose members have in mind both technical knowledge and the interests of private and public entities concerned with the new technology.  These committees are very lean organizations—usually the members' firms or departments pay for their participation, so there is little or nothing in the way of staff, buildings, or tax money involved.  The committee meets as long as it takes to figure out a standard, agrees on it, and then publishes its results and in effect says, "If you want to play this new game, here are the rules."  The committee disbands, often, and life goes on, only better than before because now there's a new standard that engineers can use to implement a new technology.

Because these standards committees work almost entirely out of the public eye, most people don't even know they exist.  But without them, we wouldn't have, well, most of the highly sophisticated technology we have.  Wireless networks depend on standards.  The Internet depends on standards.  Electric power depends on standards (the battle of Westinghouse's AC versus Edison's DC was in large part an issue of standards).  And all these things get done almost invisibly, without much publicity or public expense.

Some political scientists have floated the idea of adopting the engineering-standard style of governance to more public matters, and they may have a point.  As anyone who has attended standards meetings can attest, they are not without controversy.  But by and large, standards organizations and technical outfits such as ICANN operate in this mode successfully and efficiently.  And unless future events prove otherwise, it's likely that the fears of Sen. Cruz and company will turn out to be groundless.

I hope ICANN can keep doing its generally good job without the Department of Commerce looking over its shoulder any more.  Instead of politicians making politics out of what looks to be a smoothly-functioning situation, perhaps we could encourage them to ask how engineers deal with technical matters that have political aspects, and learn something about how to get work done.  But at this point in history, it might be too much to ask.

Sources:  CNET carried two stories to which I referred on the transfer of ICANN to an independent status:  one on Sept. 16 at https://www.cnet.com/news/why-is-us-giving-up-control-of-the-internet-dns-icann-domain-ted-cruz-faq/, and one on Oct. 1 at https://www.cnet.com/news/us-internet-control-ted-cruz-free-speech-russia-china-internet-corporation-assigned-names-numbers/.  I also referred to the Wikipedia article on ICANN.