2014 Year in Review — Net Neutrality: Where We've Been, and Where We're Going

This post is one in a series of reports on significant issues for startups in 2014. In the past year, the startup community's voice helped drive notable debates in tech and entrepreneurship policy, but many of the tech world's policy goals in 2014, from net neutrality to patent reform, remain unfulfilled. Stay tuned for more year-end updates and continue to watch this space in 2015 as we follow the policy issues most affecting the startup community.

Of all the tech policy issues that got major airtime in 2014, few resonated so deeply with the general public as the fight over net neutrality. The net neutrality debate highlighted both the strength of the Internet community’s voice and the ample work we must still do to make sure Washington heeds our message. Thousands of companies that depend on the Internet’s open playing field and millions of Americans who recognize the threat posed by unchecked ISP gatekeepers mounted a sustained and effective campaign throughout the year to influence the FCC’s net neutrality rulemaking. While these efforts have been enormously successful in getting the FCC to take net neutrality seriously, the task is not yet finished.

This year’s net neutrality fight was not the first time the FCC grappled with these questions. Though the FCC in 2002 (wrongly, we believe) classified broadband Internet as an “information service” under the Communications Act of 1934, rather than a “telecommunications service,” broadband Internet has always been governed by net neutrality principles. Under such principles, ISPs are obligated to treat all sources of data equally and not block or degrade traffic from particular edge providers. The FCC enshrined these principles as enforceable rules in its 2010 Open Internet Order, which established regulations against ISP discrimination.

Earlier this year, an appellate court in D.C. threw out out these 2010 rules not because of any inherent infirmity with the logic of net neutrality itself but on something of a legal technicality: only “common carrier” services could be subject to bright line rules against discrimination, and since the FCC neglected to classify broadband as a common carrier telecommunications service, it could not now bar ISP discrimination. The court held that any rules issued pursuant to the FCC’s section 706 authority—a statutory mandate to enact policies that promote the adoption of broadband—could not include a ban on paid prioritization arrangements or other forms of access fees unless the FCC first reclassified broadband as a common carrier service under Title II of the Communications Act. Faced with this rejection of its 2010 rules, the FCC was asked yet again to reconsider how and whether to protect a neutral Internet.

Reports earlier this spring suggested that the FCC was not considering any plan involving reclassification, which signaled to the Internet community that the FCC was essentially turning its back on net neutrality altogether. The reaction to these reports was swift and effective. Engine, along with the Open Technology Institute at the New America Foundation  sent a letter to the FCC with nearly 200 major Internet company signatories demanding that the Commission issue rules sufficient to block discrimination and paid prioritization. The FCC got the message, and its notice of proposed rulemaking solicited comments on whether to reclassify broadband under Title II in order to establish meaningful net neutrality rules.

Even as the FCC discussed the possibility of reclassification in its proposed rules, few believed that reclassification had any chance of going forward. Unwilling to accept a world in which ISPs could abuse their gatekeeper power to impose rent-seeking access fees, the Internet community got to work. The path from toothless rules under section 706 to the imminent possibility of full-fledged net neutrality regulations under Title II was paved most visibly by a stunningly large public response. Nearly 4 million commenters wrote to the FCC about its consideration of new net neutrality rules, a majority of whom supported calls for stronger regulations to prevent ISP misconduct. Recognizing that the high cost of access fees that ISPs could charge edge providers would ultimately get passed on to consumers, citizens fought back against allowing ISPs to serve as gatekeepers to the Internet.

Startups also played a key role in shifting the FCC’s consideration of net neutrality rules towards more meaningful regulations under Title II. Despite having limited resources and time to devote to challenging the lobbying might of cable companies, startups from across the country worked hard to keep the Internet open for permissionless innovation, filing comments with the FCC, participating in an Internet-wide protest, and flying to Washington, D.C. to gin up political support for real net neutrality. As the dire consequences of abandoning net neutrality would be felt more deeply by smaller companies rather than larger, more established tech firms, startups took on an outsized role in the net neutrality fight.

In the face of this massive popular response, the FCC moved haltingly towards a Title II-based solution, leaking news that it was considering a so-called “hybrid” net neutrality proposal that relied in part on Title II authority, but would have entailed significant risk of being rejected again in court. Under such hybrid proposals, the FCC would divide every Internet communications into two distinct components—a communication between an end user and her ISP and a communication between the ISP and the edge provider the user wants to access—and regulating only this second communication under Title II. While news that the FCC was finally considering Title II in some form was encouraging, the Commission’s failure to recognize that full-fledged Title II reclassification represented a far cleaner path to strong net neutrality was frustrating.

With the FCC expected to circulate a final draft rule only weeks after news of the “hybrid” plans leaked, the time for action appeared to be running out. And then, almost overnight, the conversation changed when President Obama called on the FCC to use Title II reclassification to protect an open Internet. The President’s announcement was game-changing; the once-impossible prospect that the FCC would invoke full Title II reclassification became plausible, perhaps even likely. Politicians rallied behind the President’s plan in droves, and many of the largest tech companies in the country vocally supported the President’s call for full Title II. Even conservatives, often assumed to be opposed to net neutrality, overwhelmingly supported real net neutrality.

But, despite the FCC’s apparent shift from weak net neutrality under 706 to full-fledged Title II reclassification, the net neutrality fight is not yet over. All indications from the FCC suggest that it will circulate its proposed rule this spring. Though most believe that the FCC will propose reclassification (and apply net neutrality principles to mobile broadband—an important protection omitted from the 2010 rules), there is no concrete proof that the FCC will follow the clear will of the people and the Internet economy to enact real net neutrality. While it is crucial that the FCC makes sure that its new rules are strong and sufficient to withstand the inevitable legal challenge from ISPs, we must continue to pressure the FCC to do what’s right and do it promptly, lest carriers use the delay to sap the FCC’s courage to stand up to ISP malfeasance and protect the open Internet.

And, even if the FCC reclassifies broadband in order to craft strong net neutrality rules, the debate will likely continue in the new Republican Congress, which has already signalled its opposition to meaningful net neutrality. Whether Republican opposition is genuine or a knee-jerk reaction to the President’s statements remains to be seen. In the next year, we will keep the pressure on policymakers, reminding them of how crucial net neutrality has been to the momentous growth of the Internet economy and how the millions of Americans who have benefitted from the Internet’s prosperity are fully engaged and ready to fight to preserve the neutral Internet they know and love.

Rising Urban Inequality and the Role Technology Must Play

While the San Francisco Bay Area is home to many of the country’s most successful startups and innovations in technology, it’s also a region of staggering inequalities. NPR reported last year that one-third of the households in Santa Clara County, where Google, Apple and hundreds of high-tech startups have their headquarters, don’t earn enough to cover basic income expenses. And in the city of San Francisco, troves of data confirm the already apparent trends in rising income inequality, increasing poverty rates, and a shrinking middle class. With these realities, it’s not surprising that anger, resentment, and frustration, among longtime residents in San Francisco watching their neighborhoods become increasingly unaffordable have been directed to newcomers working for technology companies, both big and small. But, as many have suspected, tech startups may not be responsible for this kind of increasing inequality, after all.

That’s what renowned urban economist Richard Florida concluded in a recent study that examined the relationship between high-tech startups and increasing inequality in cities throughout the country. Florida and his partner at the Martin Prosperity Institute charted venture capital investment in startups against the two primary measures of inequality: wage and income disparity. In urban tech hubs across the country from Boston to Seattle, they found a fairly high correlation between wage inequality and venture capital investment. Notably, however, this same trend did not hold when charting venture capital investment against the more common measure of inequality: the Gini coefficient, a measurement based on income distribution within an economy. Income inequality didn’t necessarily increase as venture capital investment in a given area did.

These mixed results are evidently limited in the extent to which they can diagnose urban challenges. Perhaps these findings can only demonstrate that urban inequity is a complex matter with dozens of factors. Whether it’s simply correlation or more significantly (though not addressed in this study), causation, inequality has myriad historical, political, and economic sources, even city by city. (And for a formidable, detailed account of what's happened in the San Francisco Bay Area, check out this Tech Crunch article.)

To put it another way: the data shows us that urban tech startups aren’t worsening inequality—that means there’s a lot of room for startups to make things better for a wider range of citizens.

We already know these new businesses create jobs, supply municipal tax revenue, and can make urban life more efficient and convenient. Yet urban innovation—technology for local governments, neighborhoods, and schools; tools to create safer streets, smarter public transit, and more efficient energy use—may still be in its infancy.

As startup hubs continue to expand across the country, they’ll play an increasingly important role in the urban fabric of their host cities. For the sake of long term economic prosperity, it’s incumbent upon burgeoning entrepreneurs as well as urban policymakers to understand existing inequities and think about how technology can create a “more inclusive urbanism,” as Florida puts it.

This includes not only building tools for a more diverse and urban public, but also training a new generation of citizens to contribute to creating that technology. Examples of organizations already doing this work aren’t hard to find. In San Francisco, an organization called Missionbit offers public school students free coding classes. Another exciting pogram we’ve seen is the Coalition for Queens, an organization with the mission to “increase economic opportunity and transform the world’s most diverse community into a leading hub for innovation and entrepreneurship.” With the support of both local government and technology experts, the organization has launched an entrepreneurial and computer programming program for low-income New Yorkers called Access Code. As they grow and add alumni to their network, the Coalition for Queens and programs like it could serve as models for cities both new and established as centers for startups—in creating more diverse and participatory startup ecosystems and perhaps a new technologically-empowered middle class.

Entrepreneurs and Investors Sign Letter to the SEC

Today, we sent a letter signed by more than 200 entrepreneurs, investors, and members of the startup community to the Securities Commission to tell the agency it’s time it fulfills its statutory obligation and finalize rules to make the JOBS Act a reality. You can find the full text of the letter with its signatories below.

It’s been over two years since Congress passed the JOBS Act, yet much of its promise remains unfulfilled, because the SEC has simply not done its job. The Commission is now an astounding 700 plus days past the statutory deadline to issue rules that will enable equity crowdfunding for companies attempting to raise up to $1 million a year as well as additional capital-raising options for small private companies.

Until the SEC acts, opportunities for entrepreneurs to raise capital and for potential investors to contribute equity to new businesses remain grossly limited. Without these new rules, only a small subset of Americans who qualify as accredited investors can participate in driving capital to thousands of small, diverse, and promising startups across the country. Take Dinner Lab, a New Orleans-based startup: when CEO Brian Bordainick decided to tap into his existing customers and food-lovers as prospective investors, he had to turn half of them away because they didn’t qualify. And Alphaworks, a new equity crowdfunding platform with just a small number of deals, has already had to turn away hundreds of potential investors from contributing to companies on its site.

Capital access is often an entrepreneur’s greatest challenge, especially for businesses who find themselves on the outside the traditional hubs of venture capital and angel investors—whether they’re based in parts of the country where startup communities are just beginning to prosper or they’re simply not well-connected to investment circles. And while 13 states have now taken it up themselves to legalize equity crowdfunding and spur economic activity, these state laws only allow investment within a state’s borders.

The JOBS Act could unleash a new wave of entrepreneurship across the country. Yet without these rules in place, much of the JOBS Act remains an empty promise. We call upon the SEC to make what the JOBS Act set out to do a reality as mandated by Congress over two years ago. It’s time it finalize the rules without further delay.

Engine's Letter to the SEC

Want to join our efforts? You can still sign the letter and learn more about what we're doing at www.engine.is/jobsact.

A New, More Inclusive Approach to Startup Funding

You can also read this post on Medium.

Many immigrants who come to the U.S. to work in technology dream of starting their own companies, but the limited visa system makes this ambition near impossible to achieve. Other aspiring entrepreneurs may be U.S. citizens, but simply can’t incur the risks and costs of starting their own companies without a reliable salary or health insurance. The founders of a new angel fund, Unshackled, rethought what it means to support entrepreneurs who may face these obstacles despite showing great promise. The fund they’ve created will consequently enable a greater diversity of passionate entrepreneurs to take the leap into building their businesses.

“We saw an opportunity to be more inclusive from the funding side,” explained Manan Mehta who, together with his business partner, Nitin Pachisia, launched Unshackled just weeks ago. As experienced and solution-oriented entrepreneurs themselves, Manan and Nitin built an innovative kind of angel fund.

In addition to investing in the startup teams selected for funding, Unshackled will sponsor visas for entrepreneurs already authorized to work in the U.S., but “shackled” to their current employers. Most high-skilled immigrants come to the U.S. on H-1B visas, but if they leave their sponsoring company, they’re no longer eligible to remain in the U.S. This restriction thus bars talented, would-be entrepreneurs from devoting meaningful time to starting a new company. Madhuri Eunni, for instance, is originally from India and worked at Sprint for nearly 10 years. But when she decided to launch her own venture, she uprooted from the U.S. and moved to Toronto where she could more easily and quickly secure a visa.

Visa sponsorship isn’t the only benefit Unshackled offers. They also pay founding teams steady salaries and provide health insurance, aspects that may attract other potential entrepreneurs who would otherwise be unable to pay their student loans, rents, or health costs out of pocket while committing resources to their startups. This unprecedented fund liberates founders from what are debilitating yet unavoidable challenges for many people.

“The funding model has been the same for the last 50 years. How can we modernize it to reflect realities in our country?” asked Manan.

With a $3.5 million fund financed by heavyweights in the investment community, Unshackled plans to work with up to 25 teams of two to three founders over the next couple of years.

Like many other potential investors, Unshackled will evaluate a prospective startup’s founding team, business plan, and prototype in deciding whom they’ll accept. Selected startup teams will then become employees of Unshackled and receive a working space in the Bay Area, a salary that allows them to cover living expenses in the region, and benefits. Unshackled will cover legal costs, visa sponsorships--if and when necessary--and manage banking. And the fund will also connect entrepreneurs to an experienced network of mentors and advisors from the very beginning.

Unshackled is now accepting applications for prospective teams and Manan says they’re already attracting impressive proposals, which doesn’t surprise him. The high-skilled immigrants Unshackled may appeal to, as Manan points out, have “already had to beat out the best in their country,” to even be accepted to study at a U.S. university or acquire one of the very limited visas. They’ve already proven they “have the hustle and the passion to become the best entrepreneurs.”

And data overwhelmingly supports this: in one study the Kauffman Foundation concluded that immigrants are nearly twice as likely to start businesses in the U.S. as are native-born Americans.

Eventually, Congressional immigration reform could both expand and ease the visa process for high-skilled workers and aspiring entrepreneurs. President Obama’s recently announced plans for reform expressly recognize the enormous talent pool among our immigrant population and the economic importance of diversity among entrepreneurs. And one initiative the president has proposed could provide founders with a special exemption from the company sponsorship requirement if founders can prove they’ve created jobs. Yet a true “startup visa” similar to those in other countries starting to attract and retain entrepreneurial talent and innovation will require congressional action.

Meanwhile, Manan and Nitin plan to enable a pool of entrepreneurs who at this point in time may otherwise be excluded from accessing capital and growing their businesses here in the United States.

“I hope we can prove to not only the venture community, but the global community that America can retain the top talent by giving everyone an equal opportunity in innovation,” said Manan.

Utah v. Zenefits: The Case for Smart Disruption

“Disruption” is a word that’s thrown around often and without consequence, but when you take a second to think about what it really means—upending the status quo—you can understand why it’s so important that we encourage responsible disruption. Because, quite often, doing away with the status quo also means progress.

The latest battle that has our attention is in Utah: there, Zenefits is under fire from the state Insurance Department for offering free software from which people can obtain insurance and other HR-related services. The state claims that offering the free software violates state laws regulating insurance brokers. Yet, we find it hard to come up with any rationale for this decision, other than the fact that Zenefits’ product makes it harder for long-time insurance brokers to compete. (For what it’s worth, Utah’s Lt. Governor publicly stated last week that Zenefits has not been banned from the state, but it’s fair to say Utah is not a hospitable place for the growing startup right now.)

Here’s the thing about Zenefits: It provides an incredibly useful service. (We at Engine should know, since we use if for our own team.) Through an easy-to-use UI and streamlined process, Zenefits makes it significantly easier for startups and small businesses to navigate the HR and insurance process, which—as anyone who has tried to do that before can tell you—is a beast. This is a good thing for at least two very important reasons: 1) it allows small businesses to more easily give their employees access to not just health insurance, but other HR benefits (like FSAs, commuter benefits, etc.); and 2) it frees up valuable resources, primarily time, so that a business can get back to the hard work of building a company.

As we see it, Zenefits and other companies simplifying the HR process are good for just about everyone, except for those who benefit from a messy and expensive system that requires incumbents with entrenched market power to navigate. Which is why we’re so concerned about what’s going on in Utah.

This is not to say that the insurance industry should not be regulated, or that Zenefits should be able to compete without following smart regulations that exist to protect consumers. It is to say, however, that relying on antiquated regulation to stymie innovation—what the Utah Insurance Department seems to be up to here—sets dangerous precedent that will only harm our startup ecosystem and recovering economy.

Success of FCC Spectrum Auction Reflects Boom in Mobile Internet Market

The FCC’s auction of new wireless spectrum—the biggest auction of its kind since 2008 —has vastly exceeded revenue expectations, surpassing $40 billion in bids as of Wednesday morning. Considering most analysts predicted that the auction would fetch somewhere between the FCC’s reserve price of $10 billion and $15 billion, the auction appears to be a resounding success.  The auction is for mid-band spectrum that carriers can use to help deploy 4G LTE networks. The success of the spectrum auction is particularly notable in light of arguments from wireless carriers in recent months that the application of net neutrality rules to wireless broadband would diminish their incentives to invest in infrastructure. Although the FCC has indicated that it is considering applying net neutrality rules to both wireless and wired broadband, carrier interest in bidding on the available spectrum surpassed all expectations.

The reason carriers are scrambling to buy up available spectrum is quite simple: consumer demand for wireless data has exploded in recent years, due to a robust market for mobile applications and services. The global market for mobile apps and advertising was worth $38 billion in 2013, up from about $6.8 billion in 2010. This latest spectrum auction shows what the FCC has described as the “virtuous cycle of innovation” at work: the more and better wireless services and applications are available to customers, the more consumers will demand sufficient capacity to use these services, and the more incentive carriers have to invest and expand their networks. Startups and entrepreneurs always find creative ways to make use of greater bandwidth and faster speeds, creating new applications to harness advances in infrastructure, further increasing consumer demand for more applications and more network capacity.

The key to all this innovation growth, of course, is robust competition and sound policy managing the finite public resource that is wireless spectrum. To ensure that the the wireless market remains competitive and innovative, the FCC and other regulators must work to promote policies that encourage wireless providers to use their spectrum efficiently and fairly, including taking steps to protect Open Internet principles in wireless networks and preserving spectrum for unlicensed use. The success of the auction is an encouraging sign for the future prospects of the US wireless market, but regulators should continue to work to ensure that sufficient spectrum is preserved for unlicensed use and not exclusively controlled by a few carriers.

Fighting the Entrepreneurial Divide, One Latino Startup at a Time

You can also read this post on Medium.

Jesse and Edwardo Martinez are brothers from Houston, software engineers by training and co-founders of several startups. Jesse has been in San Francisco since the late nineties, but it wasn’t until 2010 that he realized there wasn’t a dedicated effort in Silicon Valley to connect Latino entrepreneurs in technology like himself. So, he and Edwardo took it upon themselves to host a Meetup of their own.

“We were all wondering, were there really that many Latino entrepreneurs?” said Jesse.

Turns out, there were, but no one had brought them together just yet.  

Since then, the Meetup has burgeoned into the Latino Startup Alliance with the mission of cultivating entrepreneurial spirit within the Latino community and increasing the amount of Latino led technology innovation. The organization is based in Bay Area and expanding to chapters in New York, Miami, Chicago, Los Angeles, and Austin next year. Jesse has now left his third startup to support the Latino Startup Alliance full-time.

The expansion seems ambitious, but LSA may just barely be tapping into the Latino entrepreneurial community in the U.S. at large. Latinos are far and away the largest minority group in the United States, making up 17 percent of the population. U.S. News reports the Hispanic student population at 4-year colleges and universities is spiking, with a 20 percent enrollment increase since 2010, and 2015 will be the most Latino Congress in history, with 29 Hispanics in the House and three in the Senate.

Nonetheless, the representation of Latinos in technology lags at only seven percent. And in California, the hub of tech innovation and where the Hispanic population is expected to become the largest ethnic and racial group in the state, Latino students represented less than 1.3 percent of computer science AP test takers in 2013.

Jesse thinks the problem is due in large part to education (or, more precisely, lack thereof). He wants LSA to help expand opportunity for more Latinos and inspire more to pursue both careers in technology and take the risks of becoming an entrepreneur. Like many startup networks, LSA supports entrepreneurs in its community through fostering connections, offering educational opportunities, and providing mentorship.

Take for instance Deldelp Medina, a San Francisco-based mobile app entrepreneur. Medina got involved with LSA and soon connected to several other Latina women in tech. With the support of the LSA community, she and Jesse founded a pre-accelerator for Latina entrepreneurs in the mobile application industry called Avión Ventures. Through training and programming, Avión will support Latina women with an interest and potential in building technology.

Jesse and Deldelp hope to see many more connections and new ventures, like Avion Ventures, emerge from LSA. This week, LSA is hosting its second annual summit in San Francisco featuring startup pitches, keynote speakers, and networking events. They’re hoping it’ll be their biggest event yet and a catalyst to inspire more Latinos to become leaders in technology.

A recent Pew Research Study showed that the “Digital Divide” in Latino community in the U.S. is rapidly shrinking: technology usage is higher than ever among Latinos and at pace with most other demographic groups. While it is encouraging to see that divide shrinking, the Latino community—and the nation at large—only stands to benefit when Latinos don’t just use, but also create, that technology.

Congressional Hearing Highlights Troubling Practices at the Patent Office

Bad patents hurt innovation. This is especially true when they end up in the hands of patent trolls, who often use them indiscriminately to extort settlement payments. While we are glad to hear the Patent Office (PTO) has been increasing its efforts to improve the patent examination process and, in turn, patent quality, a recent government oversight hearing in Congress on telework abuse brought to light several PTO management practices that can’t help but hurt progress toward increased patent quality.

Some background on the joint House Judiciary and Oversight hearing: The PTO has long been recognized as a leader in telework, allowing employees the flexibility to work from home, and has leveraged it recruit and retain examiners. A few years ago, serious allegations surfaced regarding time and attendance fraud and ineffective oversight regarding the telework program. In response, the PTO conducted an internal investigation and issued a report in July 2013. Unfortunately, that report was considerably watered down from a more critical draft report, which—perhaps not surprisingly—was never released.

At the hearing, Oversight Chairman Issa, who has a few dozen patents of his own, emphasized the importance of patent quality; he even joked that he was sure some of his patents were invalid. Judiciary Chairman Goodlatte and Congressmen Connelly and Cummings zeroed in on PTO practices that hinder quality, and called for a reassessment of performance metrics to ensure that quality is not sacrificed to quantity. We couldn’t agree more.

Chairman Goodlatte and others expressed concerns about the examiner “count system,” which creates a series of incentives for examiners, essentially giving them credit for accomplishing certain tasks, e.g., approving a patent application. The count system is often criticized for pushing examiners to not give patent applications the time they really deserve and, as a result, issue unworthy patents. There have been efforts to reform the count system, however any real change has gotten mired in negotiations with the Patent Office Professional Association, otherwise known as the Patent Examiners Union.

Another issue that came up was "end-loading” of work by examiners at the tail end of each quarter and how that practice undermines quality. Supervisors, who have limited time to review the quarter’s work, cannot effectively monitor the quality of work submitted when it comes in a flood of end-of-quarter submissions. Apparently, the practice is rampant. At the hearing, PTO representatives reported that they were in discussions with the Union to address end-loading, but no details were provided as to how or when that would happen.

The patent system in this country is not working, and startups and small inventors, faced with a growing patent troll problem, shoulder the resulting costs. As Congress and the courts work to fix the problem, the Patent Office, too, must do its part. The mismanagement that came to light during the recent congressional hearing leads directly to more low-quality patents, which are a patent troll’s favorite weapon.

The good news is that President Obama recently nominated Michelle Lee to direct the Patent and Trademark Office. Michelle Lee, who currently acts as the agency’s deputy director, would not only be the first woman and first minority to hold that post, but she has a background rare in a long lineage of PTO directors: a patent lawyer from Silicon Valley who has worked for and at companies who operate in the software space. For all these reasons, and more, we strongly support Michelle’s nomination, and recently said so in a letter to Senators Leahy and Grassley.

We’re hopeful that under strong leadership, the PTO can clean up the problems that plague it and, in turn, return to its core mission of issuing patents that actually incentivize innovation instead of hindering it.

The SEC Could Drastically Limit the Pool of Startup Investors

It’s no secret that the availability of capital is critical for early stage startups. While entrepreneurs may find some initial financial support by tapping into the generosity of friends and family, once those pockets dry up, they often turn to angel investors—individuals who put their own money into what they see as promising ventures. While a small cadre of wildly successful angel investors have made millions from betting early on companies like Google and Twitter, thousands more across the United States are investing in early-stage startups in dozens of industries every day.

According to the Angel Capital Association (ACA), angels provide 90% of outside equity raised by startups. And in 2013, this group invested $25 billion in 71,000 companies. That’s impressive. But this number could drastically change depending on if and how the Securities and Exchange Commission acts after their review of the accredited investor definition, a status most angels depend on to pursue these private investments.

Whether the Commission should revise the definition of accredited investor was one of the topics at issue during the SEC’s Government-Business Forum on Small Business Capital Formation held last Thursday at its DC headquarters. The Dodd-Frank Act—the 2,300 page financial regulation bill—mandates, among other things, that the SEC undertake a comprehensive review every four years of what some consider an outdated definition.

By current SEC standards that were originally adopted in 1983, an individual is qualified as an accredited investor if she makes over $200,000 in annual income, her household has made over $300,000 in income, or she’s worth at least $1 million in assets, excluding her house. While this income level far surpasses the median household income in the United States, over 7 million individuals or nearly 4 million households still qualify, for now.

One proposal on the table at the SEC suggests adjusting these thresholds for inflation, which means you’d need to make around half a million dollars in order to invest your own money in a startup. According to numbers analyzed by the ACA, raising the income bar for inflation would disqualify nearly 60% of the accredited investor population. A decision like this could significantly reduce the pool of capital available for early stage startups.

This possibility is alarming. So it wasn’t surprising to hear many of the participants from the business community at the SEC’s forum express outright opposition to raising this threshold, not only because it would eliminate existing investors, but also because an income threshold to begin with misses the point. The entire reason for defining this class of people is to protect them from making poor investment choices.

Yet income is hardly an indicator of financial sophistication in undertaking risky investments, especially in the world of novel startups and high tech. By today’s standards it would be illegal for a bio-chemistry PhD making $190,000 a year to invest equity in a biotech startup on a site like Angel List. And if adjusted for inflation, someone making even twice that amount would still be prohibited from investing.

Voices in the startup and investment communities have suggested an alternative set of criteria which could include years of experience, licenses issued by a qualifying test, or relevant degrees to measure investor sophistication rather than only relying on an income threshold that offers virtually no insight on an individual’s understanding of capital markets.

Whatever the ultimate criteria, there’s clear opportunity for the SEC to expand participation in the startup economy, and facilitate capital formation, by allowing those with both interest and knowledge in innovative new companies to support the entrepreneurs building them.

At the end of the forum, attendees gathered to submit recommendations to the SEC as they review the definition. We hope the Commission takes these recommendations seriously. If not, they could end up significantly stifling a community that’s been an enormous asset for the startup economy, instead of expanding opportunity in it.

And whether anybody can invest equity in startups through crowdfunding—well, that’s another question the SEC will have to consider, but rules to regulate the equity crowdfunding market have only been proposed thus far. As far as we can tell, the SEC first wants to figure out who’s accredited. Visit engine.is/jobsact to learn more about the crowdfunding part of the JOBS Act and why we think that’s important, too.

President Obama's Executive Order on Immigration: A Small But Important Step Towards True Reform

Tonight, President Obama announced that he will sign an Executive Order that will, among other things, expand immigration options for foreign-born entrepreneurs and make it easier for high-skilled workers awaiting Lawful Permanent Resident status to change jobs. While the President’s actions fall short of the legislation we had hoped for, we are encouraged to see some movement toward fixing a broken immigration system that plagues all aspects of our economy.

In particular, we applaud the President’s efforts to bring more high-skilled workers to the United States. As the President said, we must promote policies that allow immigrant entrepreneurs “to stay and create jobs here, create businesses here, create industries right here in America.” While the political debate on immigration has long been contentious, one thing has always been clear: there is widespread and popular support for expansion of the H1-B visa program and other efforts to bring skilled workers, particularly those skilled in technology, here.

We are simply turning away far too many talented people that want to come to the US to grow businesses. This year, more than 100,000 high-skilled workers were turned away because of limitations on the number of H1-B visas available. As studies show that immigrants are twice as likely to start businesses as native-born citizens, failing to accommodate the many immigrants that want to come to the US to start businesses unquestionably harms the American economy.

Our potential for growth is limitless when the world’s best and brightest minds are here in America, building American companies, creating American jobs, and recreating the American dream for every new generation.

We wish tonight that we could celebrate real, comprehensive legislation that would fix all facets of a broken immigration system, but policymakers have not yet been willing to take up the difficult, politically fraught task of true reform. While the President’s Executive Order is a step towards meaningful reform, some worry that the President’s actions make a bipartisan compromise harder to achieve in the short term. We remain hopeful that the enormous economic benefits that will flow from comprehensive immigration reform will encourage policymakers on both sides of the aisle can put party politics aside and take lead by finding solutions to the myriad problems with our immigration system that still remain.

Engine and R Street Release Study of Ridesharing Regulations

Few startup innovations in the past few years have been as influential and controversial as ridesharing technologies. The emergence and explosive growth of companies like Uber, Lyft, and Sidecar signaled the rise of the sharing economy, allowing virtually anybody to put their spare time, spare car, or spare room to productive use. Not surprisingly, incumbents operating in the markets that these new startups shook up have reacted strongly to their new competitors. Taxi interests in particular have fought hard against transportation networking companies (TNCs), lobbying for restrictions on their operation, and even getting cities to ban their operation entirely.

Regulators will always have a hard time keeping pace with the development of new technologies, but we believe that the great consumer value of TNCs and other sharing economy services warrants a balanced approach between promoting competition and protecting legitimate public health and safety concerns. To better figure out which cities were doing the best and worst to foster competition and innovation in transportation markets, Engine, in partnership with R Street Institute, released a report ranking US cities on how friendly their regulatory climate is towards ridesharing.

The study shows a wide range of regulatory approaches to ridesharing, with some cities like Portland banning them outright, and some like Washington D.C. creating a specific regulatory framework for TNCs that allows them to operate in the city under rules designed for their particular concerns. With this paper, citizens can learn more about what their representatives are doing to promote healthy transportation markets in their cities and figure out what other cities are doing right or wrong to encourage innovative startup activity in the transportation sector.

Along with the paper, R Street launched an associated website that maps out the cities in the study along with their grades and provides tools for citizens to ask their representatives to enact better TNC regulations.

The recent debate about how to treat ridesharing companies is a great case study for how startups can have a quick and meaningful impact on a city’s quality of life and how regulations have a hard time keeping up with the pace of innovation. With this paper, we hope that policymakers can learn about what works and what doesn’t when it comes to regulating the sharing economy.

President Obama Makes an Important Move on Immigration Reform

Looks like there’s more big news coming out of the White House: reports (here and here) say that President Obama plans to announce next week that he will take long-awaited executive action on immigration reform.

While the headlines all focus on what’s called “deferred action,” or the ability for undocumented residents to avoid deportation—like parents of American citizens or those who came to America as children—we’re most interested in what the President will do around high-skilled workers. The executive action will reportedly “expand opportunity” for those with high-tech skills, and we understand it should make it easier for those workers’ families to join them in the United States.

This simple reform is long overdue and basic common sense.

Take, for instance, the problem with H1-B visas. Only 85,000 of these—awarded to high-skilled, speciality occupations (often in tech)—are issued every year. In 2014, more than 172,000 people applied for 65,000 of these spots, which means more than 100,000 high-skilled workers who could bring their entrepreneurial and technical skills to the United States are being turned away. It’s time to let these people in.

Research from the Kauffman Foundation found that, in 2010, immigrants were twice as likely to start a business than their native-born brethren. Between 1995 and 2005, immigrants helped to found more than 25 percent of all high-tech firms. What’s more, our research shows that high-tech firms create more jobs than non-tech firms. These tech jobs have a reverberating effect in local economies, creating even more jobs—spurring nationwide economic growth.

President Obama’s executive actions alone cannot solve this problem. Only Congress, through legislation, can fix our broken immigration system. We hope that congressional members of both parties in the Senate and the House can put politics aside and take the President’s lead toward solving one of the biggest problems plaguing our economy, and our nation, today.

The JOBS Act Could Open Startup Investment to More Americans, but it’s Stuck at the SEC

One of the core promises of the 2012 JOBS Act is that it would open the doors for investment to many more Americans, and—in turn—many more worthy startups. Currently, only a so-called “accredited investor” can make investments in startups, which means that only individuals making $200,000 in annual income over the past two years or with over $1 million in assets, excluding their home, qualify to take part in investing in the startup community. This high threshold unfortunately guarantees that average Americans cannot take advantage of investment opportunity and, in turns, limits the money that makes its way to growing companies.

The JOBS Act intended to change this, but as the new lively podcast, Startup, explains, the JOBS Act has been “stuck” at the SEC for over a year now. The SEC simply hasn’t issued the  rules it’s required to under the law that would make this kind of investment—what’s been called equity crowdfunding—widely accessible. This is why we’re urging the SEC to finish the job Congress set out for them when it passed the JOBS Act in 2012 and allow supporters of great ideas to invest in ventures they care about, regardless of income level.

Take for instance Nadia, one of the podcast Startup’s listeners. As explained more fully in the episode, Nadia reaches out to the podcast producers and offers to invest in their new podcasting startup company (more on that below). It’s only then that the company’s founders realize that, as ridiculous as it sounds, they actually can’t take Nadia’s money.

If you haven’t listed to Startup, a new podcast from former Planet Money and This American Life reporter Alex Blumberg, then find time in your day to check out Startup. The “public radio journalist turned entrepreneur” Blumberg’s newest venture is a podcast network called Gimlet Media, a startup based on the idea that there’s a massive market opportunity in well-produced, journalistic storytelling via podcasts. And fittingly so, Blumberg’s producing a podcast, called Startup, on the efforts behind building this new company. In each episode, he documents the challenges familiar to many entrepreneurs—like raising money. You should listen to the whole series.

In the most recent episode, where we meet Nadia, Blumberg explores financing this new venture utilizing avenues provided by the 2012 JOBS Act.

As Blumberg explains, before the JOBS Act was passed in 2012, the SEC prohibited private companies from publicly soliciting investment. Businesses of any size seeking funding needed to have an established, pre-existing relationship with a defined accredited investor in order to raise money from them, or as Blumberg succinctly concludes, “Only rich insiders could invest in these companies.”

In an age of social media, near seamless access to information, and well, podcasts, this rule was clearly outdated. And on September 23, 2013, the SEC lifted the ban on general solicitation, making the primary intent of Title II of the JOBS Act effective. (Title I of the law addresses how startups pursue IPOs and went into effect immediately after the bill’s passage.)

The law now allows for the mass marketing—posting on social media, a crowdfunding website, or in a podcast—of these more common security offerings. Consequently, Blumberg invites listeners over the air to invest in Gimlet Media: “If you share in our vision, and you want to share in our business,” he asks you to check out their crowdfunding portal to invest. But here’s the thing: even still, you have to fit under the limiting definition of an accredited investor.

So while the JOBS Act originally set out to change the accredited investor requirement and make investing a possibility for a wider range and income level of Americans, this hasn’t yet happened. Experts have proposed rules based on experience or investor education as alternatives, yet there’s been no sign of progress at the SEC. “Today, to become an investor through one of those public solicitations, you need to be the exact same rich person you were before the JOBS Act was passed,” says Blumberg.

Blumberg’s business, Gimlet Media was able to raise $200,000 from accredited investors in the seedround announced on the podcast. Nonetheless, “there are still a lot of regular people who are not allowed by law to invest in our company,” says Blumberg, and for that matter, hundreds of other exciting ventures around the country.

We’re telling the SEC it’s time they issue JOBS Act rules and fulfill the promise of what Congress set out to do when it passed the bill two years ago: booster the startup economy and spur participation from a wider range of Americans. Sign and share our letter at engine.is/jobsact.

A Tech Bootcamp for Real Bootcamp Vets: How One Technology Company is Training Our Veterans

You can also read this post on Medium.

We’ve said it before and we’ll say it again: the unemployment rate for veterans is way too high. Nearly 250,000 Americans who have volunteered to serve our country and put their lives at risk are out of work entirely. Meanwhile, technology companies are actively seeking larger talent pools.

There’s enormous opportunity here to provide high-demand job training to some our our country’s most dedicated, disciplined, and hard-working citizens.

Karen Ross, CEO of Sharp Decisions, a strategic business and technology consulting services firm based in New York City, recognized this opportunity and decided to take initiative. In 2013, Sharp Decisions established a training program tailored exclusively to veterans. They hire, train, and deploy groups of veterans on client-based technology projects around the country.

Today, Sharp Decisions employs around 50 veterans who receive full salaries and benefits, and are hoping to expand their veteran pool to 200 by the end of next year, said Jared Baiman, a strategist at Sharp Decisions.

Their V.E.T.S. program—Vocation, Education and Training for Service members—recruits tech-savvy armed services veterans who undergo intensive training centered on quality assurance and software testing, a set of skills well-suited to military personnel with some level of technical background. "Vets have a unique skill set,” explained Jared. For one, they know how to perform in high-pressure situations.

Sharp Decisions hires veterans with a baseline of technical experience, whether from their positions in intelligence gathering, as operations specialists, or using highly classified technology unfamiliar to American consumers. During “technology bootcamp”, trainers use military terminology that resonates with vets: client projects are deployments, objectives are missions, and the client teams they put together are squads.

“A lot businesses don’t understand how veterans’ technology experience translates,” said Jared. But veterans are uniquely qualified for many kinds of work in technology: “They bring leadership, an unparalleled work ethic, strong self-motivation and a respect for each client’s unique culture and chain of command,” explains the V.E.T.S. website.

Veterans train together and offer one another support with a kind of no-man-left-behind mentality. Sharp Decisions then assigns them to client projects together, where they can continue to work in teams and support one another. In the past year, these veteran squads have been deployed on technology assignments in cybersecurity, quality assurance, and payment processing for major clients including EmblemHealth, Experian, and Freddie Mac.

With a 94% retention rate, Sharp Decisions is doing something right—and they’ve run the program without even touching the GI Bill. The GI Bill has been a critical part of educating our country’s veterans since World War II, but its benefits are only available for federally accredited programs. As we’ve written before, nearly all modern coding bootcamps and schools lack this accreditation, (though Galvanize recently became accredited through its partnership with the University of New Haven.) Where private companies like Sharp Decisions aren’t taking initiative, (and picking up the tab,) for educating veterans with today’s high-demand skills, a reformed GI Bill could. What Congress can and should do is create a special category of accreditation that would pave the way for veterans to receive this kind of technical training.

Despite GI Bill limitations, we’re excited to see programs like the one at Sharp Decisions as well as other companies team up with developer bootcamps to offer scholarships to veterans. General Assembly now offers an $8,500 scholarship sponsored by Microsoft for veterans through their Opportunity Fund, and Code Fellows has invited veterans to join some of their summer intensive coding programs.

As a country, we can do better for our veterans. We hope other companies and organizations can follow the lead of Sharp Decisions and come up with innovative ways to solve the vets job crisis. In this time of unprecedented opportunity in the technology sector, it would be a dishonor and a disservice to leave these men and women behind.

BREAKING: White House on Net Neutrality: Supports Title II

Big news out of the White House this morning: President Obama released a statement —in the form of a custom landing page on whitehouse.gov —laying out in no uncertain terms a strong defense of the kind of real Net Neutrality that we and the startup community have been long asking for from the FCC.

The statement makes clear that the White House supports reclassification of the Internet under Title II:

"So the time has come for the FCC to recognize that broadband service is of the same importance and must carry the same obligations as so many of the other vital services. To do that, I believe the FCC should reclassify consumer broadband service under Title II of the Telecommunications Act — while at the same time forbearing from rate regulation and other provisions less relevant to broadband services."

This isn't the first time the President has spoken in favor of an open Internet, but this is the first time he's publicly supported reclassification, which is the only way to ensure real Net Neutrality. Encouragingly, the statement also fully supports the extension of strong rules to mobile. (It's worth reading the full statement from the White House, which you can find here.)

The following can be attributed to Julie Samuels, Executive Director of Engine:

The White House's action shows that it has listened to nearly 4 million Americans who have made their voices heard in this important public debate and heard the concerns of countless startups who have made clear that only reclassification supports a level playing field where everyone has an equal chance to succeed. Which, of course, is the promise of the Internet.

We applaud President Obama's leadership on this issue and we look forward to working with the White House to ensure the FCC follows the President's lead. To be certain, the fight for an open Internet is not over. But this morning we've taken an important step that puts us one step closer to real Net Neutrality. We hope is a signal of things to come.

Why We're Writing the SEC

In 2012, Congress passed the Jumpstart Our Business Startups Act with resounding bipartisan support. For startups, entrepreneurs, and investors, the JOBS Act is easily one of the most exciting pieces of legislation to come out of Congress in the past few years. Among other things, the bill allows businesses—principally startups—to go public more quickly and raise money more easily. And many of its provisions have already had a significant impact on startup growth and capital formation. In the year after the Act passed, the rate of IPOs increased by 58 percent.

When Congress passed the JOBS Act, it recognized that the pre-existing laws dating back to the 1930s no longer reflected today’s financial system. It recognized that the growth of startups is essential to America’s long term economic vitality. And it recognized the potential for new investment platforms to spur participation in the startup economy from a wider range of Americans.

Despite this, in the two years since its passage, much of the JOBS Act’s promise remains unfulfilled. This is not because of bad legislation, but simply because the Securities and Exchange Commission has not done its job.

Two crucial pieces of the Act—1) making it legal to raise capital through online crowdfunding; and 2) allowing for companies to openly seek investment—will only take full effect if the SEC puts forth implementing rules. Such rules will clarify how companies can pursue these new investment channels that are vital to growing our country’s startup economy. 

It’s been over two years since the passage of the bill and months since the comments period has closed on SEC’s proposed rules. Yet, we’ve seen nothing from Commission. Without these rules in place, much of the JOBS Act remains an empty promise.

We now call upon the SEC to fulfill its statutory obligation and make what the JOBS Act set out to do a reality.

On behalf of entrepreneurs, startups, investors, and crowdfunding platforms, we’re asking the SEC to finalize the rules without further delay.

Check out our letter to the SEC, follow #JOBSActNow, and make sure you’re signed up for our email updates. 

At Hackbright Academy, No Men Allowed

You can also read this post on Medium.

Hackbright Academy is software development school in San Francisco exclusively for women. Launched in 2012, Hackbright has since graduated 163 women from its 10-week program. According to its blog, 90 percent of graduates land jobs in tech and 73 percent as software engineers.

Hackbright is one of dozens of new developer “boot camps” that have sprung up in the past few years to teach the essential skills of software development. Students in these short, fast-paced programs learn the basics of coding within a few months and soon after pursue, and often take, jobs at technology companies eager for more qualified applicants. According to a New York Times survey of 48 programs like Hackbright, over three quarters of graduates are now employed.

What’s distinctive about Hackbright, though, is that only women need apply. Deliberately acknowledging the gender gap—or what they refer to as the Dave-to-Girl Ratio (the ratio of guys named to Dave to women in computer science programs) on their site—Hackbright founders think a women-only computer science school is one way to start closing this gap.

Jane Williams graduated from Hackbright in August and recently took a job as an implementation engineer at OPower, a tech company that builds software for the utility industry. Jane had had some exposure to data analysis in her previous job, but felt she was missing out on the kinds of tools she could be building herself to make her work more efficient and also, more creative. Jane considered several programs but ultimately found Hackbright the most appealing because of the community it fosters. “They’re clearly committed to women,” she said.

Small classes, dedicated mentors, and a strong alumnae network all help shape this community. “The space that’s created when it’s all women tends to be nurturing, friendly, and supportive” said Paria Rajai, who works in marketing for Hackbright. “That just happens naturally.” And alumnae, like Jane, attest to this: “It’s a no-question-is-stupid kind of environment.”

Part of Paria’s job at Hackbright is to attract potential students by dispelling myths about learning computer science that discourage women from entering the field. “One is you have to be good at math,” Paria said and listed off others: that you need have been coding since you were young, that you’re introverted, that you’re the white guy in a dark corner at his computer all day. For many women, such perceptions are a deterrent from even considering a career as a software engineer.

These perceptions run deep in our culture, yet many women are shrugging them off altogether to make their way to Hackbright and other coding programs. Students range from recent college graduates seeking more employable skills than what their majors offered, mid-career women looking for a change or mothers hoping to re-enter the workforce with a new kind of expertise.

Hackbright’s 10-week program (which costs $15,000, though scholarships are available) includes structured content in python, javascript and other coding languages, plus algorithms, best practices and interview skills, followed by 5 weeks of project work. In those final weeks, students build their own tools and apps, then exhibit them at a demo day attended by prospective employers.

And employers are hiring from these programs. Hackbright has alumnae at Facebook, Pinterest, Indiegogo and Eventbrite. These companies are not only dedicated to hiring more women on their engineering teams, but are also devoting resources to continued training and mentorship, recognizing that graduates from accelerated coding schools--and any computer science program, for that matter--still have much to learn. Even so, Jane acknowledges she would not have been qualified for her new job without the skills she attained at Hackbright.

Woman by woman, Hackbright’s graduates are part of a movement to tilt the scale of gender equality in tech nationwide. It’s programs like this one that are lowering the barriers to entry, changing perceptions and empowering women with the skills necessary to be contributors and eventually, leaders in technology.

Engine's Response to FCC's Reported Net Neutrality Plan

After many months of public debate, the FCC appears close to deciding on new net neutrality rules to replace those vacated earlier this year. Though the issue has to date been framed as a binary choice between the Chairman’s original proposal featuring toothless rules grounded in the Commission’s authority to encourage the deployment of broadband under section 706 of the Telecommunications Act and strong net neutrality regulations based on a full reclassification of broadband as a common carrier service, recent reports suggest that the FCC is settling on what many think of as a so-called hybrid solution.

According to the Wall Street Journal (sub req’d), the FCC is leaning towards adopting a framework that treats all Internet communications as the product of two separate and distinct relationships: 1) a relationship between an end user and an Internet service provider (ISP); and 2) a relationship between an edge provider (i.e. an Internet content provider like Netflix or Amazon) and an ISP. These separate relationships would get different regulatory treatment, but in theory, the plan could support non-discrimination rules that protect both sides of the communication.

The biggest problem with the plan outlined in the Wall Street Journal article is not the authority the FCC may invoke to justify the rules it wants to create (more on that below), but rather the proposed rules themselves. According to the article, the Commission will not ban paid prioritization but will instead allow priority deals so long as they are offered equally to all comers.

In this sense, the FCC’s proposed plan as reported in the Journal is an abandonment of net neutrality principles and will put startups at an enormous economic disadvantage. Enacting net neutrality rules is a two step process—first creating a workable framework for agency authority and then using that authority to create meaningful rules—and the FCC’s proposed plan appears to fail miserably at this second step.

Now for the really wonky part: Under a so-called hybrid proposal, the FCC would regulate these two separate relationships—ISP/end user and ISP/edge provider—differently. The relationship between an ISP and end user will keep its current classification under rules that have been in place since 2002, while the FCC will recognize a new relationship between an ISP and edge provider and classify it as a common carrier service, meaning that the FCC could then impose strong net neutrality rules on ISP/edge provider activities, such as a ban on ISPs charging edge providers for access to Internet fast lanes. According to proponents of hybrid rules, because every Internet transaction necessarily involves an interaction between an ISP and an edge provider, regulating only the ISP/edge provider relationship under Title II is more or less the same as regulating all broadband under Title II.

If this all sounds hopelessly convoluted, that’s because in many ways it is. The legal approach that the FCC is considering is novel, untested, and conceptually complicated. The plan carries significant legal risk and could end up getting thrown out in court.

But, putting aside for a moment concerns about the legal viability of hybrid approaches, it’s important to recognize how far we’ve come in getting the FCC to this point. Hybrid rules are, after all, grounded in Title II and would likely give the FCC authority to block paid prioritization arrangements. Though full Title II reclassification would be a far easier and simpler way to preserve an open Internet, hybrid rules could offer functionally similar protections.

Any net neutrality rules absolutely must prevent ISPs from extracting rents from edge providers and creating Internet slow lanes. While we’re encouraged that the FCC is moving in the right direction in considering rules grounded in Title II authority, the FCC’s consideration of actions that do not include banning paid prioritization deals renders its move towards Title II meaningless. Whether the FCC opts for full reclassification or a hybrid approach, it must use its authority to establish rules that protect startups and consumers or its efforts will have been in vain.

In Colorado, the Future of High Speed Internet is Up to Voters

Nov. 5, 2014 Update: Boulder voters overwhelmingly approved the measure to give their city authority to create municipal internet. 

As truly high speed Internet access becomes more and more crucial for businesses and consumers, cities are stepping up to provide their citizens with the next generation fiber networks that the incumbent commercial ISPs are simply unwilling to build. But in the case of Boulder, Colorado, despite the fact that nearly 100 miles of high speed fiber already lie beneath its streets, the city is barred from investing in and expanding the network to the wider public. That’s because in Colorado, as well as in dozens of other states, prohibitive state laws—laws practically written by the large ISPs—block municipalities from building or operating competing networks.

On November 4th, voters in Boulder, as well as Yuma County in eastern Colorado, will decide whether to exempt themselves from the restrictive state law and give their cities the freedom to control the future of their own broadband infrastructure. With no vocal opponents, the referendums seem likely to pass.

For Boulder, the choice could not be more obvious. With the highest startup density and growth of any metropolitan area, the ability for Boulder to independently invest in and expand high speed Internet is integral to maintaining its ascendancy as a hotbed for new business ventures. “We’re in competition to attract and retain the highest quality employers and the highest quality talent,” said a spokesperson for Boulder Chamber of Commerce.

The law currently restricting both Boulder, and the much smaller Yuma County, from taking Internet access into their own hands—The "Competition in Utility and Entertainment Services” bill (or SB 152, as it’s commonly called)—passed in the state senate in 2005, and precludes municipal governments from providing broadband services to its citizens. Under the bill, however, a city may seek an exemption under the law and reestablish local control over broadband policy through a referendum. So far, only a few other other Colorado cities have done so. The city of Longmont, just 15 miles north of Boulder, opted out of SB 152 in 2011 and started construction in August to deploy fiber networks across the city. Its new service will be available to consumers November 3.

Just as ISPs lobbied hard to enact these anti-municipal broadband laws, they have fought equally hard against efforts to overturn them. Longmont first sought an exemption from SB 152 in 2009, but failed after telecom companies spent $192,228 to defeat the referendum, compared to only $95 from proponents of the measure. In 2011, Longmont tried again and the referendum passed, despite a record $300,000 campaign by Comcast to prevent it.

Comcast doesn’t seem to be putting money against the Boulder referendum, but has made its opposition to the measure known, writing to Boulder’s local newspaper, "Comcast does not believe that government-owned networks are a good use of municipal funds in areas where the private market is already providing services.” Yet the services they provide are not only slower and more expensive than what municipal gigabit networks pose to offer, the ISP also routinely ranks lower in customer satisfaction than any other company in the industry.

Thus, Comcast’s response isn’t surprising, especially considering its interest in maintaining near-monopoly power in the broadband market. As the proposed merger between Comcast and Time Warner Cable shows, large ISPs would much rather eliminate potential rivals through acquisitions and legislative restrictions than have to face competition.

As we’ve said before, municipal broadband networks provide consumers with alternatives in markets desperately in need of competition. With the US lagging behind its industrialized peers in fiber deployment and growth, we need to use every tool possible to generate competition in broadband markets and give consumers and businesses the high-speed broadband access they need to thrive in the Internet economy.

Municipalities like Boulder deserve the right to build fiber networks for its citizens when ISPs won’t. We stand behind Colorado voters next Tuesday when they head to the polls to vote “yes.”

FCC Pauses Review of Comcast - Time Warner Merger

The FCC once again slowed down its review of the proposed merger between Comcast and Time Warner Cable, indefinitely pausing the comment period because certain content companies—including CBS, Disney, Time Warner, and Viacom—refused to allow commenters to access information they deemed “Highly Confidential.” Most of the information that the content companies refused to disclose relates to agreements pursuant to which Comcast gets distribution rights for their content.

This is not the first time the Commission extended the review period for the mega-merger due to poor information disclosure by the companies at issue. In the beginning of October, the FCC pushed back its deadline for accepting public comments on the merger because Comcast dumped 850 pages of long-overdue data about the merger, but somehow still failed to include adequate responses to many FCC information requests.

These tactics should come as no surprise. Comcast—the “worst company in America”—is facing significant public opposition to its proposed merger, which would make Comcast-TWC the only provider of high-speed broadband service available to nearly 40 percent of current subscribers. The combined company’s monopoly power would be even greater in the market for truly high-speed broadband (>50 Mbps download speed). Giving a single company terminating access monopoly power over half of the country’s Internet users is an obvious problem that startups and consumers both recognize.

And yet, even as Comcast continues to obfuscate and intentionally conceal important information about the merger, it boldly argues that the merger should be approved because opposing commenters “don’t cite any credible, specific facts that refute the extensive evidence” Comcast has put forward. Withholding information while chiding opponents for not citing enough information is the definition of chutzpah.

Beyond engaging in shenanigans with its information production, Comcast’s case in favor of the merger is rather weak, claiming that the combination wouldn’t be anticompetitive because Comcast and Time Warner don’t currently compete in any single market, so merging the two companies won’t give consumers any less choice. Of course, this is really just a concession that the high-speed broadband market is already anticompetitive; Comcast is essentially claiming that competition won’t decrease because there isn’t any competition. Twisted logic aside, several of the country’s leading antitrust experts wrote a letter to the FCC cogently outlining the merger's anticompetitive impact and arguing that the merger “should be blocked in its entirety because it would substantially lessen competition...and is not in the public interest.”

Even with minimal information available to evaluate the merger, it is clearly a bad deal for startups, consumers, and the economy. Allowing Comcast and Time Warner to merge would greatly decrease their incentives to build faster networks and would give the combined company immense power to discriminate against startups offering competing services. The merger is a significant threat to the continued viability of the Internet economy and should be stopped at all costs.