<html><head><meta http-equiv="Content-Type" content="text/html; charset=utf-8"></head><body style="word-wrap: break-word; -webkit-nbsp-mode: space; line-break: after-white-space;" class=""><meta http-equiv="Content-Type" content="text/html; charset=utf-8" class=""><div style="word-wrap: break-word; -webkit-nbsp-mode: space; line-break: after-white-space;" class="">Forwarded from another list:<br class=""><div class=""><br class=""><div class=""><span style="font-family: -webkit-system-font, "Helvetica Neue", Helvetica, sans-serif;" class=""><b class="">From: </b></span><span style="font-family: -webkit-system-font, "Helvetica Neue", Helvetica, sans-serif;" class="">Bill Woodcock <<a href="mailto:woody@pch.net" class="">woody@pch.net</a>></span></div><div style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px;" class=""><span style="font-family: -webkit-system-font, "Helvetica Neue", Helvetica, sans-serif;" class=""><b class="">Date: </b></span><span style="font-family: -webkit-system-font, "Helvetica Neue", Helvetica, sans-serif;" class="">December 1, 2019 at 10:01:19 PM GMT+1</span></div><br class=""><div class=""><div style="word-wrap: break-word; -webkit-nbsp-mode: space; line-break: after-white-space;" class="">Since I haven’t seen anyone else actually post this analysis yet, here goes:<div class=""><br class=""></div></div></div><img apple-inline="yes" id="CC38E21B-70F8-432A-B063-B34DC2AD22BC" src="cid:909F688F-3A16-421E-B821-6819DEC64186" class=""></div><div class=""><br class=""><div class=""><div style="word-wrap: break-word; -webkit-nbsp-mode: space; line-break: after-white-space;" class=""><div class="">Ethos’ offered purchase price is $1.135B. At that price, if they exercise the maximum 10% annual wholesale price increase, .ORG domains wind up at $26/year at the end of the ten-year period. If Ethos pays the actual cost of registry and DNS services, without the subsidies ISOC currently receives, but continues at the same level of quality, they’d make a total of $318M in profit over the ten years, or 8.59% annualized return. If they cut spending to the bone, using the crappiest available registry and DNS services and not caring how much downtime they had, they could increase their profit to $598M, or 9.71% annualized return.</div><div class=""><br class=""></div><div class="">If they were to do a single 10% increase, at the beginning of the first year, they’d lose $355M if they maintained current service levels, or $55M if they axed spending. If they maintained current prices, they’d lose $435M or $155M. Private equity doesn’t plan to lose money. Therefore the suggestions from the public that the deal be allowed to proceed “if they agree not to raise prices” or “if they only raise prices 10%” simply won’t happen.</div><div class=""><br class=""></div><div class="">The other implication of this is that if a non-profit were to buy from ISOC and maintain current prices, putting all available money toward ISOC and keeping nothing for themselves, they could only offer $700M, and that would be at the rate of $70M per year, “seller financed” at no interest. ISOC is currently chewing up $45M/year, but once they’re no longer dependent on .ORG, they could drop a significant chunk of their spending that’s going toward maintaining those interests. Let’s say that they could drop their spending to $30M. That would leave $40M in excess profits each year going toward an endowment:</div><div class=""><br class=""></div><div class=""><br class=""></div></div></div><img apple-inline="yes" id="B3C31C7C-1564-4045-9FBA-739E756074E3" src="cid:256BAD0B-2E97-45F9-8605-EF7C8095E9AD" class=""><div class=""><div style="word-wrap: break-word; -webkit-nbsp-mode: space; line-break: after-white-space;" class=""><div class=""><br class=""></div><div class="">At the end of the ten-year period, the endowment would stand at $626M, and interest from the endowment would be $50M/year. Which is more than they’re receiving right now. If they continued to just draw $30M/year, the endowment would continue to grow by $20M/year, making it safer and safer over time.</div><div class=""><br class=""></div><div class="">So, I don’t think it works to ask Ethos to not raise prices, but (putting aside the fact that they’ve already signed an agreement with Ethos, which ICANN or the State of Pennsylvania would have to stop) ISOC could certainly do well (not _as_ well, but much better than they’re doing right now) and be completely out of the domain name business, while giving .ORG registrants a guarantee of no price increases, and having .ORG become fully non-profit, rather than the odd non-profit/for-profit hybrid it is right now.</div><div class=""><br class=""><div class=""> -Bill</div></div></div></div></div></div></body></html>