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Market Phobia Comes to Cyberspace


Remember the panic over net neutrality? Pressure groups convinced millions that strengthening market competition in broadband would “end the internet as we know it,” exposing web users to corporate exploitation and control. Federal Communications Commission Chairman

Ajit Pai

needed a security detail.

The policy went through and none of the abuses happened, but many who ginned up the hysteria have found a new capitalist threat to the internet. This time the targets are Ethos Capital, a private-equity firm that announced its intention to buy the .org web-registry, and the Internet Corporation for Assigned Names and Numbers (Icann), which has to sign off on the sale. Antipathy to markets is again misleading the public and opening the door to regulatory abuses.

Some background: All websites have a domain name—a virtual address that allows them to be located online. The most familiar “top-level” domains include .com, .net, .org and .edu. Each is managed by a registry. The .org registry is owned by the Internet Society (ISOC), a nonprofit corporation that aims to expand internet access, among other causes.

In November ISOC announced it is selling the registry to Ethos. Some in the .org community, led by vocal left-leaning nonprofits, are outraged. Scores of articles and blog posts have denounced the “private-equity takeover” of .org. Icann has had protests outside its headquarters. Democrats in Congress asked Icann in a January letter to block the sale.

The most common concern is cost, as Ethos will seek a return on its $1.1 billion investment. Yet the current annual cost of owning a .org domain is about $10, and Ethos has committed not to raise prices more than 10% a year on average. A $1 per year cost increase is negligible even for the smallest nonprofit.

Even without this commitment, market pressure would contain the price. There are more than a thousand domain-name middlemen, like GoDaddy, which sell addresses directly to consumers. There are also dozens of competitor for-profit registries, and the largest, .com, faces regulatory caps on price increases. If Ethos jacked up the price, it would cause groups to leave .org and deter new ones from joining. Yet expanding .org’s presence beyond the U.S. is key to Ethos’ business strategy.

ISOC says it decided to sell .org partly because it was not equipped to deal with this business environment. New domains (like .us and .site) have come online, and more people are accessing the web through apps. ISOC hoped a for-profit could be a more versatile steward. To protect its investment, Ethos will need to invest in services to enhance .org’s appeal to consumers.

Those most sensitive to price increases are speculators who own thousands of domains and sell them off. Nearly two million .org domains turn over each year, and the Internet Commerce Association, which represents domain holders, was one of the first to howl about the sale. It would be ironic if protests against the “capitalist-based internet industrial complex,” as one nonprofit CEO told the

New York Times,

serve the interest of domain-name arbitrage.

Another irony comes from the appeals to free speech online from the likes of

Elizabeth Warren.

The Senator has made suppression of political speech on social media a tenet of her presidential campaign, demanding

Facebook

remove ads critical of Democrats she deems misleading. Yet her letter to Icann paints the Ethos acquisition as a free-speech threat, citing registries’ intervention in trademark disputes.

Trademark infringements are covered by Icann’s dispute-resolution policy which won’t change when the .org registry is sold. Registries disable sites only in extraordinary circumstances—a contrast to the heavy-handed approach many on the left are demanding of Big Tech firms. In any case Ethos has less cause to suppress speech than a nonprofit and says it will create a “Stewardship Council” that will “ratify strong rules protecting freedom of expression.”

There’s a larger point here about “stakeholder capitalism,” which is coming into fashion. Ethos emphasizes its commitment to all “stakeholders,” not just its owners, and apparently will give some teeth to those commitments in its charter for the .org registry. Yet that’s not enough for many activists, who see private capital as inherently exploitative rather than a source of value creation and technological progress enjoyed by all.

The nonprofits raising a fuss over Ethos are vehicles of political interests. The real danger is that Icann will be intimidated, hurting the reputation for political independence of what should be the web’s honest broker.

What, if anything, did the Democrats accomplish? Image: Sean Rayford/Getty Images

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