EU Commission Seeks Input on Major Policy Regarding Online Intermediaries

Though the EU’s economy is the largest in the world in terms of GDP, its innovation economy has historically lagged behind the US and other international peers. Investment in EU startups has risen slowly but steadily in the past decade, but, the EU is home to only four of the top 20 cities for startups in Compass’s 2015 rankings. This is not just bad news for the EU economy, but also for US startups looking to expand overseas.

The sluggishness of the EU’s startup sector is due in no small part to the significant regulatory burdens involved in conducting business across member state boundaries. In fact, our research shows that how a country regulates its technology sector has an enormous impact on early stage investment in startups. In a study we published earlier this year, 88% of worldwide investors said they would be uncomfortable investing in digital content intermediaries in countries with an unfavorable or murky regulatory environment.

Fortunately, the EU is already well underway in devising a fix for its complicated regulatory hurdles in the form of the proposed EU “Digital Single Market”—essentially a uniform, trans-Europe market for digital goods and services. As part of its effort, the EU Commission recently issued a consultation asking for information and commentary regarding the value of online platforms and intermediaries in promoting innovation and economic growth. Since the Commission’s Digital Single Market strategy is still somewhat in flux, there is no guarantee that the new regulations it puts in place will work if the Commission doesn’t receive enough feedback explaining how crucial online platforms are in a well-functioning Internet economy, and how dangerous restrictive regulations would be to the viability of the EU’s burgeoning startup sector.

To maximize the potential of the Digital Single Market and foster startup growth throughout Europe, the EU Commission should ensure that its Digital Single Market strategy focuses on policies that support online platforms and intermediaries. Online platforms are critical to a healthy Internet economy by virtue of the core services they provide in connecting Internet users and facilitating the flow of information, but as the US tech sector shows, their real economic value lies in their ability to support interoperable startups that use larger intermediaries to build and promote their services. The Google Play and Apple App stores feature more than 1.8 and 1.5 million apps, respectively—a great many of which were created by the startups responsible for virtually all new net job growth. The economic value of this market is significant; by 2017, worldwide mobile app revenue alone is projected to exceed $77 billion. Assuming the EU doesn’t hamper the growth of this market by crafting regulations that impose undue costs and restrictions on online platforms, Europe stands to gain a significant portion of the app economy’s growth. Projections estimate that employment from the app market in Europe will increase from 1.8 million in 2013 to more than 4.8 million in 2018.

Of course, the app market represents just a small fraction of the value that online intermediaries provide in spurring startup activity. Social media platforms and search tools allow startups to easily and cheaply connect with customers and online payment platforms help lower startup costs by outsourcing payment systems; together, these intermediaries give entrepreneurs the ability to reach customers and turn their ideas into business realities. Online platforms are the hubs off of which countless startups have built their businesses, and the low cost of operating a business in this symbiotic, open model of innovation allows new entrepreneurs to build ventures with few resources. In this sense, allowing online platforms to operate effectively across the EU is critical to growing the EU’s startup ecosystem, not to mention to US companies looking to expand into international markets. As the EU collects information regarding the role online intermediaries play in Europe’s startup market, it’s important that the Commission hear from entrepreneurs and innovators on the ground who can speak to the value freely operating intermediaries provide to fledgling enterprises. The consultation closes December 30; interested parties can fill out the EU’s survey here.

UPDATE: The EU Commission is holding an event this Thursday in San Francisco at the Consulate General of the Netherlands (120 Kearny St.) with key stakeholders to discuss the implications of its online platform regulation strategy. This is an incredible opportunity to help shape the future of EU tech policy, so sign up while there’s still space.

Startup News Digest: 12/4/2015

Our weekly take on some of the biggest stories in startup and tech policy.

Trade Secrets Bill Resurfaces. On Wednesday, the Senate Judiciary Committee held a hearing on the Defend Trade Secrets Act (DTSA), a bill purportedly meant to help curb international trade secret theft by creating a federal cause of action for trade secret appropriation. However, like most intellectual property laws, trade secret litigation is rife with abuse as companies regularly use trade secret claims to stifle competitors and hinder employee movement. The proposed legislation would exacerbate these problems by creating an ex parte seizure procedure whereby a party can—without detailed factual inquiry and without a presentation of both sides of the case—ask a judge to seize a defendant’s property. In this regard, the DTSA goes well beyond what state trade secret law provides, making it a potent tool for incumbents to use the courts to unfairly hinder legitimate competition. And, international trade secret thieves will be able to avoid this federal law as they have avoided prior state laws by simply being outside of the US, it’s hard to see how this bill would actually address the problem it claims to address.

Net Neutrality Hearing. The DC Circuit Court of Appeals heard oral arguments today in the challenge to the FCC’s net neutrality rules. A group of telecom companies filed suit against the FCC shortly after the Commission issued its net neutrality rules this spring, arguing that the decision to reclassify violated administrative rules and exceeded the FCC’s delegated authority. While most net neutrality supporters believe that the Commission’s rulemaking is likely to withstand legal challenge, the DC Circuit is notoriously unpredictable. The hearing itself was not broadcast due to the DC Circuit’s strict rules on recording proceedings, so we’ll have to wait for reports from those in the room to get a read on how the judges received each side’s arguments. We’ll be tracking closely.

Starting Up the Broadband Economy. In an op-ed in re/code, Engine Policy Director Evan Engstrom elaborates on why policies that encourage a competitive broadband market are essential to the continued success of the startup economy. Increasing competition ensures America’s entrepreneurs can use their limited funds to build their businesses, rather than lining the pockets of a few huge incumbent providers. There is still a long way to go towards a robust, healthy Internet ecosystem. But we are working to ensure that startup voices are heard and that real reform happens now.

Trouble for ECPA Reform? The broadly supported Email Privacy Act ran into opposition from law enforcement authorities at a House Judiciary Committee hearing on Tuesday. Calls for an emergency exception and a carve out for civil agencies are nothing new, but they are preventing the committee’s chairman, Rep. Bob Goodlatte, from backing the legislation. Despite being one of the most popular bills in Congress with over 300 bipartisan cosponsors, it won’t move until Rep. Goodlatte gives the go-ahead. We’re tracking.

Add “Lobbying” to List of Startup CEO Responsibilities. Engaging with lawmakers is just another part of being a startup leader now, reports the New York Times. “In addition to knowing the language of computer code, founders are speaking the language of Washington, keenly aware of the potential regulatory battles that could be on the horizon.” In a shift from the historical status quo, startups are no longer eschewing politics, but increasingly embracing a dialogue with D.C. instead.

Patent Lawsuits Filed Set New Record. On November 30, 257 new patent litigation cases were filed—a new one day record. Furthermore, 196 of these cases were filed in the Eastern District of Texas, a notoriously plaintiff (and troll) friendly court. This is clear proof of forum shopping and further evidence that patent reform legislation should also address venue abuse. The mass amount of filings are likely tied to the fact that December 1 marks the effective date of significant changes in the Federal Rules of Civil Procedure for patent cases—i.e. going forward, plaintiffs may be required to provide more information in their initial claims.

Women in STEM. Michelle Lee, the Director of the US Patent Office, authored an op ed in which she cites a study that found that only 15% of all inventors are women. She writes, “The lack of gender parity is not just a social issue, it is an economic imperative.” In response, the Patent Office has launched, in partnership with Invent Now, an “All in STEM” initiative to get more girls interested in STEM and more women in flourishing STEM careers. Meanwhile, the latest diversity numbers from tech companies demonstrate the continuing need: women employed globally by Microsoft decreased from 29% to 26.8%.

Cities and Innovation Ecosystems. It takes years for cities to build up a “critical mass” of tech companies and workers to the likes of the Bay Area. But in some of the nation’s smaller cities, the environment has proven conducive to small companies and large companies cooperating in a way that has become engrained in the DNA of Silicon Valley—where startups are built off the API of large companies and interoperability is part of the culture. A recent report by the World Bank discusses what factors affect the growth of entrepreneurship ecosystems across different cities.

Conversations Around Capital Access. Before taking a break for Thanksgiving, Engine attended a forum hosted by the SEC on capital access issues for startups. Participants honed in on the JOBS Act rules: how they’re playing out in practice and whether there are policy modifications that could facilitate their success. Read Emma’s run-down of the discussions here.

Startup News Digest 9/25/15

Our weekly take on some of the biggest stories in startup and tech policy:

Startups Defend Net Neutrality Order. The FCC is facing ongoing litigation in the DC Circuit Court of Appeals over the net neutrality rules it passed earlier this year, and on Monday, the court received briefs from a variety of companies and organizations supporting the FCC’s rules. Engine filed a brief along with a group of innovative startups that included Dwolla, Fandor, Foursquare, General Assembly, GitHub, Imgur, Keen IO, Mapbox, and Shapeways. We argue that the FCC’s decision to reclassify broadband as a telecommunications service was necessary to preserve the continued growth of the startup sector, which has in turn driven consumer demand for broadband and incentivized companies to invest in their networks. The court will hear oral arguments in the case on December 4 and will likely render its decision sometime next year.

SEC To Finalize Crowdfunding Rules. Sources at the Securities and Exchange Commission have told Politico the agency is likely to finalize long-awaited crowdfunding rules in late October or early November. SEC rulemaking will put Title III of the JOBS Act into effect, which could radically expand capital access for startups—though the statute does contain some burdensome requirements for companies. While the startup community will be excited to see any action from the SEC in light of an extended delay, we need to ensure that whatever regulatory regime the SEC adopts is well-calibrated and accessible to the small, emerging companies that could most benefit from new sources of capital.

Bush Campaigns Against Open Internet. Most of the Republican candidates in the 2016 presidential race have come to realize that an overwhelming majority of the public supports net neutrality rules (including 81% of Republicans) and have refrained from loudly criticising the FCC’s Open Internet Order. But this week, Former Governor Jeb Bush expressed his opposition to net neutrality (a policy he onced called “one of the craziest ideas [he’s] ever heard”), arguing that preventing ISPs from abusing their gatekeeper power does nothing to enhance consumer welfare. Bush’s comments run counter to both the FCC and the conservative DC Circuit Court of Appeals, which have recognized that net neutrality rules and foster the growth of the edge providers and promotes investment in broadband networks, resulting in better and more affordable service for consumers. It’s a reminder that startups, consumers, and everyone else who benefits from the open Internet should keep a close eye on this presidential race. 

Administration Taking Steps to Promote High-Speed Broadband Access. On Monday, the Broadband Opportunity Council published its first report, which includes 36 actions that federal agencies will take to encourage broadband deployment.  These actions require no new funding, “but existing sources of funding are being opened up and barriers to deployment are being brought down.”  Of particular note is that the White House refers to broadband as a “core utility,” like electricity or water. We tend to agree - broadband is no longer a luxury. Connectivity is core to innovation and the ability of startups to reach customers and scale, and we are pleased to see the Administration taking these steps to bring access to underserved populations and areas of the country.  

White House Considers Encryption. Thanks to some leaked documents from the White House, it’s rumored that President Obama may come out in opposition to a law that would require firms be able to unlock their customer’s encrypted smartphones and applications. Up to this point, law enforcement has argued the need for backdoors to encryption to ensure national security and safety. This sort of advocacy from the White House would help repair global trust in the US government, countering the narrative in Europe that the US is trying to expand its surveillance activities. Meanwhile, the American Civil Liberties Union (ACLU) and other privacy advocates continue to push the importance of US government’s use of encryption to promote both personal privacy and national security.

“Facebook giveth and Facebook taketh away.”  The Wall Street Journal reported this week that dozens of startups have “shut down, been acquired or overhauled their business” as a result of Facebook’s new policies limiting outsider access to some of its users’ date. Facebook’s rules, which went into place in May, restrict what data can be used by third parties like startups, academics, politicians or organizations.  Other social media giants like LinkedIn and Twitter have enacted similar policies, signaling to the startup world that if you are building a product or service that relies on data from social media sites, that data may not always be available...

ECJ Advisor Deals Blow to U.S. Tech Companies.  In other data related news, a European Court of Justice (ECJ) advisor issued an opinion this week that the “safe harbour” agreement allowing for data transfers between the EU and the U.S. is “invalid” due to growing concerns around U.S. surveillance practices.  While the lawyer’s opinion is not legally binding, if cemented by a formal ruling it would create a headache for U.S. tech companies who could face data localization requirements in any EU countries.

Women Tech Leaders. Fortune profiles some of the powerful female talent Google has been able to attract at the executive level, including Ruth Porat, a recent addition who has led the transition from Google to Alphabet. Many of these executives after building their experience at Google have left to grow smaller tech companies. Meanwhile, Mary Lou Jepsen of Facebook has a different take: she sees many senior women leaving because they feel isolated by the tech industry.

Startups Fight to Defend Net Neutrality Order

Yesterday, Engine—along with a number of innovative startups including Dwolla, Fandor, Foursquare, General Assembly, GitHub, Imgur, Keen IO, Mapbox, and Shapeways—filed an amicus brief in the ongoing litigation over the FCC’s net neutrality order.

Engine and the companies on the brief have long been champions of net neutrality, working hard over the past year and a half to ensure that the FCC enacted the strongest open Internet protections possible. Convincing the FCC to pass bright-line rules against ISP blocking, throttling, and paid prioritization was a major first step in reestablishing the net neutrality rules that were thrown out in court in January 2014.

But now the country’s biggest ISPs have banded together, trying to get an appellate court to reject the FCC’s order. Their arguments range from claims that have previously been dismissed by other courts (the FCC has never considered any kind of broadband to be a “telecommunications service”) to arguments that are profoundly bizarre (despite more than 4 million comments, the FCC did not solicit enough public commentary about its rules).

Engine’s brief makes the case that the net neutrality rules that the FCC passed earlier this year are crucial to protecting the startup innovation that has helped drive the growth of the nation’s broadband infrastructure. It also argues that the entrepreneurs and investors that built the Internet economy have relied on the FCC’s work in protecting innovators from ISPs abusing their gatekeeper power over Internet access.

Oral arguments in the case are scheduled to take place this December, and the court is expected to issue its ruling sometime in 2016.

You can read the full brief here, and some key excerpts are below.

***

The “virtuous cycle” is made possible — and drives demand for broadband services — because of competition and innovation by edge providers.  Consumers do not seek broadband services because of some intrinsic desire to access AT&T’s (or any other broadband company’s) technology infrastructure.  Rather, they seek broadband services for one reason and one reason only: because they want to access the overwhelming universe of content, information, and services offered by edge providers, the vast majority of which either are, or began life as, startups. Consumers that want access to these services demand higher quality connections to take full advantage of the Internet’s full potential, prompting broadband providers to invest more money in their networks.  And creative entrepreneurs find new ways to utilize these faster, better, and cheaper broadband connections to build more innovative services that spur consumer demand even higher.  

***

The connection between net neutrality and the explosive growth of the Internet economy is not a coincidence.  Though Petitioners attempt to confuse the issue by conflating the regulatory classification of broadband with the actual regulations enacted pursuant to that classification, it is undeniable that the Internet has operated under a de facto net neutrality regime over the past decade, leading to a tremendous expansion of both edge provider services and broadband adoption—the virtuous cycle in action.    

***

The value of strong net neutrality rules and the logic of the virtuous cycle of innovation has been recognized time and again by the FCC and the courts.  So long as strong net neutrality rules remain in effect, there is little reason to believe that the virtuous cycle will slow with the change in the classification of broadband.

But if broadband providers are permitted to “deneutralize” the Internet, the consequences for startups — and, due to the “virtuous cycle,” for further investment in broadband infrastructure and further innovation at the edge — will be devastating.  

***

Without an open Internet, many of these companies likely would have never been started due to the increased costs and uncertainty that comes with discrimination and paid prioritization.  Others would have wilted in the face of their deep-pocketed competitors who would have been able to afford access to the “fast lane.”  To change the rules of the game now by permitting blocking, discrimination, and paid prioritization would disadvantage not only the amici, but also the hundreds of thousands of other startups and technology companies that have come to rely on an open Internet.

Startup News Digest 9/11/15

Our weekly take on some of the biggest stories in startup and tech policy.

CalECPA Letter to Governor Brown Urgently Needs Your Signature. On Wednesday, the California Assembly passed the California Electronic Communications Privacy Act (CalECPA) with broad, bipartisan support. The bill (which we covered in last week’s digest) would update digital privacy laws by requiring law enforcement to obtain a warrant before accessing an individual’s electronic communications. The bill now heads to Governor Jerry Brown for signature, but opponents are campaigning aggressively for a veto. We’re sending a letter to Governor Brown urging him to sign the bill and modernize an absurdly outdated privacy law. If you are a startup and would like to lend your voice to this fight, please fill out this form by noon on Monday, September 14.

Upcoming Tech Events. Catch our webinar on September 23, “How can startups work with government to promote innovation and new technologies?” Co-sponsored with Gide Public Affairs and ConnecTech, the webinar will look at how to incorporate a government relations strategy and leverage government resources to grow your startup, and how we can all advocate to protect the startup community. Click here to RSVP.

Intelligence Reauthorization Bill Still Held Up Over Terrorist Reporting Provision. As Congress returns to session, a bill to reauthorize funding for intelligence agencies continues to be held up in the U.S. Senate over a provision that would require social media and internet companies to police the speech of their users and report apparent “terrorist activity.” Opponents argue that the bill’s vague legislative language will result in a compliance nightmare for the wide range of companies that will be subject to the bill’s requirements.  Senator Ron Wyden (R-OR) has vowed to block the bill until these concerns are addressed.  We will be monitoring closely, as the currently ill-defined requirements could be overly burdensome and difficult to navigate for many startups.  

An Immigrant Entrepreneur’s Story. "Our immigration system hinders entrepreneurship, innovation and productivity," writes tech entrepreneur, Amit Paka, and we couldn't agree more. Paka shares his story of patiently navigating the irrationally complex immigration system to at long last obtain residency status and become a U.S. citizen. And in that time he also founded two companies, despite significant obstacles. This broken system impedes opportunities for entrepreneurs - the men and women creating new technologies and jobs in this country every day - yet it remains to be seen whether real solutions are in sight.

Patent Reform. Lot’s of news on patents this week. House Judiciary Chairman Bob Goodlatte expressed confidence that patent reform legislation would get a vote in the weeks ahead. The NY Times wrote in an editorial that “patent law should not be used to prevent consumers from reselling, altering or fixing technology products.” And the patent research platform Patexia launched a new initiative using crowdsourcing to help companies share some of the burdens associated with patent litigation. In case you missed it, check out our recent post on the status of patent reform efforts in Congress.

A Safety Net for the On-Demand Economy.  As lawmakers continue to grapple with the gig economy’s dramatic transformation of the American workforce, recommendations are emerging around which policies will best serve the growing class of on-demand workers. On Wednesday, the National Employment Law Project published a report calling on lawmakers to classify on-demand workers as employees and extend a number of protections and benefits to them. Freelancers Union founder Sara Horowitz proposed additional solutions in a New York Times op-ed published Wednesday, arguing for the creation of a “new system of portable benefits” to better provide a safety net for workers in the freelance economy. These are important conversations for the startup community to take part in as the debate continues around how to best support this new class of workers.

Diversity in Tech. African Americans face serious challenges in entering the tech field, even if they live just miles from Silicon Valley. Profiling several new organizations including the Hidden Genius Project, based in Oakland, the New York Times highlights how the tech community’s debates about its lack of diversity have spurred initiatives to educate, train and support underrepresented minorities to enter into and succeed in the industry. African Americans have become an especially important focus: they currently make up only 7 percent of the tech workforce and receive only 1 percent of VC funding. See more on Engine’s work to diversify tech here.

Tech Leaders in Politico 50. The Politico 50 is out, recognizing some of the people transforming American politics this year. The list includes a number of tech leaders, including Engine board member Marvin Ammori, along with Susan Crawford, Tim Wu, Michelle Lee and Chris Soghoian. Congrats to everyone who made the list!

Lessons from the First Weeks of Net Neutrality

For years, opponents of net neutrality ridiculed open Internet rules as a “solution in search of a problem,” even though examples of ISPs abusing their gatekeeper power are numerous. Well, it looks like the critics have once again been proven wrong. Less than two weeks after the FCC’s Open Internet Order went into effect, these purportedly unnecessary rules have already had a major impact. Here’s a look at a few notable lessons from the first few weeks of net neutrality.

An End to Throttling?

Within a few days of the rules going live, Sprint (one of the few ISPs to claim Title II-based rules wouldn’t diminish its investment incentives) announced that it would stop throttling data speeds for its heaviest users. Sprint has said it thinks that its policy would have passed scrutiny under the new rules, but decided to end its policy in an abundance of caution. On the heels of the FCC’s announced $100m fine levied against AT&T for false representations about its own data-throttling policy, it is no surprise that Sprint is keen on making sure it's in compliance with the new rules. We’ll be watching to see if other companies follow suit.

Interconnection Challenges

While some ISPs are treading lightly around the net neutrality rules, others will almost certainly test the breadth of the FCC’s rules and the Commission’s willingness to enforce new protections. Indeed, one such dispute is already queued up: Commercial Network Services, a streaming media company, has said it will bring a complaint against Time Warner Cable for charging excessive rates to deliver video to its customers.

This challenge is particularly interesting, as it implicates the FCC’s regulation of interconnection—the protocols and agreements through which large ISP networks agree to exchange traffic with each other—which was one of the more controversial aspects of the Open Internet Order. Unlike the FCC’s ban on throttling, blocking, and paid prioritization, its regulation of interconnection agreements will be hashed out on a case-by-case basis. The outcome of the dispute between Commercial Network Services and Time Warner could set a significant precedent for future enforcement actions, including those related to zero-rating and other practices the FCC will evaluate on an ad hoc basis.

New Net Neutrality Ombudsperson

That companies are already invoking the net neutrality regime’s discretionary provisions frames an important issue for how well the Open Internet Order will work to protect startups. Throughout the FCC’s rulemaking process, we argued in favor of bright-line prohibitions on discriminatory ISP activity because the cash-strapped startups that would suffer most from anticompetitive behavior are unlikely to have the resources necessary to challenge such practices. Ultimately, the FCC’s case-by-case consideration of discriminatory interconnection deals or zero-rating practices may have no value if they are too costly for startups to initiate.

Recognizing that such costs are a real threat to the efficacy of its rules, the FCC’s net neutrality plan established an Ombudsperson to field formal and informal complaints. The FCC recently appointed its first Ombudsperson, Parul Desai, who will serve as the primary point of contact for individuals and companies seeking to challenge ISP practices. While it remains to be seen how effective the Ombudsperson program will be in addressing complaints, having a low-cost protocol for consumers and companies to help enforce the FCC’s rules is crucial if the Commission’s net neutrality regime is to have any meaningful impact. Considering a new study “found significant [data speed] degradations on the networks of the five largest internet service providers,” it seems likely that the new Ombudsperson will have her hands full in ensuring the FCC’s new rules work as intended.

Overall, it’s been an exciting time for all of us that fought for net neutrality. But, even as the rules are proving their merit, the FCC’s entire open Internet regime is under attack, both in the courts and in Congress, where House Republicans are attempting to subvert the FCC by burying a provision in a large appropriations bill that would preclude the Commission from enforcing even the most basic net neutrality rules. With opponents of net neutrality willing to resort to shadowy tactics to undermine the open Internet, it’s as important as ever to highlight when the new net neutrality rules are working to promote fairness and innovation online and why it’s so vital that we fight to keep them in effect.

Statement on Court Denial of Attempts to Delay Net Neutrality Rules

 

The innovators and entrepreneurs that depend on an open Internet to drive our economy won an important legal victory today. In rejecting ISP attempts to delay the implementation of the FCC’s net neutrality rules, the DC Circuit helped ensure that the Internet will remain open during what will likely be a long period of litigation. Any departure from the non-discrimination principles at the heart of the Internet’s growth would seriously harm the startup economy and the good jobs it creates.

But, much work remains to be done. Just today, members of Congress opposed to meaningful net neutrality rules put forward an appropriations bill that attempts to use Congress’s budgetary authority to prevent enforcement of even the most basic net neutrality principles. Anyone who believes in the value of an open Internet and a smoothly functioning democracy should be alarmed by these tactics. Engine will continue to work with the startup community to prevent these efforts, and any attempts to undermine Americans' freedom to innovate.

 

 

 

 

Engine Response to Release of Net Neutrality Rules

Today, the FCC released its long-awaited Open Internet Remand Order that establishes the strongest net neutrality protections the Commision has ever enacted. While the rules are not perfect, they are an incredible victory for the many startups and advocates that fought so hard for the past year against some of the most well-funded corporate lobbying interests in the nation to preserve and protect the open Internet.

The Order is critically important for two main reasons: first, the FCC took the politically difficult step of reclassifying broadband under Title II of the Communications Act—essentially labeling broadband Internet as a “common carrier” service—in order to build its new rules on a legally secure foundation. While the FCC’s prior net neutrality orders had important protections that supported the growth of the Internet we enjoy today, the Commission has repeatedly seen its rules thrown out in court due to a failure to provide an adequate legal framework supporting the rules. The order’s reclassification of broadband as a Title II service is a necessary prerequisite for strong rules, as the court in Verizon v. FCC noted. The FCC had the courage to stand up to the powerful telecom lobby and do what was once considered politically impossible, and for that, all Internet users should be grateful.

Secondly, the Order contains strong, bright-line net neutrality rules and demonstrates a clear recognition of how important the open Internet is to startup activity. The FCC’s use of flat bans rather than case-by-case adjudication in dealing with paid prioritization, throttling, and blocking is meant to relieve “small edge providers, innovators, and consumers of the burden of detecting and challenging instances of harmful paid prioritization.” As the Commission recognized, bans on ISP discrimination are useless to startups if these small, cash-strapped companies must bear the burden of challenging violations. In addition, the order creates a “no-unreasonable interference/disadvantage” standard that is meant to give the FCC the flexibility to address future threats to the open Internet. It is unclear at this point whether the FCC’s general discrimination standard will prove effective in blocking future ISP activities that undermine net neutrality. Still, it is encouraging that in considering whether to allow these practices, the FCC will evaluate their impact on innovation and competition. Since the central value of an open Internet is the freedom to innovate and compete on the quality of one’s ideas rather than the size of one’s legal team, the FCC is right to put the concerns of innovators at the center of any inquiry into discriminatory ISP practices.

The rules, however, are not without fault. As we expected, the Order does not impose a flat ban on zero-rating schemes. Without such a ban, carriers may enter into agreements with large edge providers to exempt data from those providers from consumers’ data caps. Considering more than half of all smartphone users with data capped plans report altering their online behavior because of these caps, startups that have to compete with zero-rated companies will be at a huge competitive disadvantage, and future innovation may be stifled as a result. Similarly, the Order is somewhat unclear on how it will treat interconnection disputes, though it appears that the FCC will review claimed abuses on a case-by-case basis.

All in all, the Order released today is a monumental victory for Internet freedom. There is still significant work left to do fighting the inevitable legal challenges and congressional meddling that will seek to undo the FCC’s actions, but the plan appears to offer strong rules built on a solid legal foundation—the cornerstones of any successful net neutrality plan.

Statement on Historic Net Neutrality Vote

 

 

Statement from Engine Policy Director Evan Engstrom

Re: Historic FCC Net Neutrality Vote

 

Today the FCC took a momentous step to secure the future of an open Internet. With today's vote the FCC has stated loud and clear that the Internet must remain a level playing field. This decision will not only allow today's startups to compete and grow and create new jobs, but it will also allow future generations of innovators to develop world-changing technologies that we can't yet even imagine. And while these rules may not prevent all future exploitation by Internet Service Providers, they are a tremendous victory for the Internet community in its efforts to fight discrimination.

We're grateful to Chairman Wheeler and Commissioners Clyburn and Rosenworcel for their commitment to net neutrality. And we also know that none of this would have been possible without the unprecedented efforts of thousands of startups around the country. It was their hard work that turned back a potentially devastating defeat, and it was their voices that convinced the FCC to enact the strongest protections the Internet has ever seen. 

Today is a day for celebration, but our work is far from finished. In the months and years ahead we'll continue to harness the incredible energy of our startup community to combat future threats to an open Internet, and to ensure all startups can access the tools they need to thrive.

Startups Send Letter to FCC in Support of Title II

Today, Engine released a letter signed by over 100 startups making clear that entrepreneurs and innovators fully support Title II reclassification to preserve an open Internet. Earlier this month, FCC Chairman Tom Wheeler announced his plan to implement strong net neutrality rules. Fellow FCC Commissioner Ajit Pai—in a last ditch effort to argue against Title II reclassification—claimed in a press release that “small, independent businesses and entrepreneurs” did not support Title II. Startups from across the country, including Automattic, Dwolla, Etsy, Foursquare, Imgur, Kickstarter, Tumblr, and Yelp, wrote today to set the record straight.

Startup support for Title II and net neutrality is nothing new, as the letter notes: “Because net neutrality is such an important issue, the startup community has been engaged in the Commission’s Open Internet proceeding to an unprecedented degree. The clear, resounding message from our community has been that Title II with appropriate forbearance is the only path the FCC can take to protect the open Internet. Any claim that a net neutrality plan based in Title II would somehow burden ‘small, independent businesses and entrepreneurs with heavy-handed regulations that will push them out of the market’ is simply not true.”

These startups were built and thrived under a de facto net neutrality regime, and if the Internet economy is to continue its unparalleled growth, preserving an open playing field is crucial. Allowing ISPs to use their gatekeeper power to pick winners and losers on the Internet is the real threat to the continued viability of these startups, not a regulatory structure based in Title II.

Startups Head to DC for Final Push on Net Neutrality

Earlier this month, FCC Chairman Tom Wheeler announced a plan to reclassify broadband as a Title II common carrier service, prompting cheers from the Internet community. After a year of debate it appears that the pro-net neutrality movement has won the day. But while the Chairman has released broad outlines of his net neutrality plan, there’s no guarantee that the specific measures the FCC adopts will be sufficient to preserve an open playing field for startups.

To make sure that the FCC gets the details right, Engine and the Open Technology Institute at the New America Foundation organized a fly-in last Thursday, bringing a group of top startups to DC to make the innovator’s case for strong net neutrality rules. Representatives from Union Square Ventures, Bigger Markets, Capitol Bells, Etsy, Foursquare, Keen.io, Spend Consciously, and Vimeo spent the day at the FCC and on Capitol Hill meeting with key policymakers to discuss the future of the open Internet.

In the morning, the startups met with FCC Commissioner Jessica Rosenworcel and senior staff from Chairman Wheeler’s office to discuss the nuances of the Chairman’s proposal. We focused specifically on the need for rules that prevent ISP discrimination at interconnection points, and ensuring that the Commission’s general ban on discriminatory practices does not put an impossible burden on startups looking to challenge ISP activity.

The startups next moved on to the Hill, meeting with members of Congress and senior staff to discuss the proposed net neutrality legislation circulated in January. Pending FCC action renders legislation of any kind unnecessary, and the current draft bill fails to provide many basic net neutrality safeguards while simultaneously stripping the FCC of authority to protect against future ISP threats to the open Internet. The startups met with members of the House and Senate Commerce committees and let them know that startups did not view the bill as a good starting ground for a compromise, and that any legislation that offered weaker protections than those in the FCC plan would be viewed as a non-starter.

We are deeply grateful for the hard work of these startups and so many others, which has helped get the FCC to where it is today. It’s not easy for startups to take time away from their businesses to travel to Washington, but their efforts are paying dividends. With the FCC’s rulemaking in its final days, we must make sure the rules they issue are strong enough to keep the Internet open for generations of future innovators.

Statement on Startups Meeting with FCC and Congress on Net Neutrality

Representatives from several prominent startups joined Engine and New America's Open Technology Institute in Washington DC today in advance of the FCC's upcoming net neutrality vote. They met with FCC members and staff as well as legislative leaders to discuss the importance of an open Internet to the startup community, and the need for strong net neutrality rules and enforcement mechanisms.

Evan Engstrom, Engine Policy Director, and Alan Davidson, Director of the Open Technology Institute, released the following statement:

"Engine and the Open Technology Institute are proud to have organized a group of leading startups to continue championing a truly open Internet. FCC Chairman Wheeler's recent announcement that he intends to reclassify the Internet under Title II was a major victory for the startup community and all advocates for net neutrality. However, the battle is far from over.

"Today's meetings will allow us to push for specific rules that are strong enough to prevent any form of ISP discrimination and flexible enough to allow the FCC to preempt future threats to the open Internet. We have seen the tremendous impact that startups can have on the net neutrality debate. In the weeks ahead, we'll be working with these startups and many others to ensure that the Internet remains open for innovation for generations to come. The Internet has flourished as a space for innovation without permission, and strong net neutrality rules will ensure that remains the case."

Engine Statement on Proposed Net Neutrality Rules

In response to today's announcement on FCC net neutrality rules, Engine Policy Director Evan Engstrom released the following statement:

Today’s announcement from Chairman Wheeler represents a tremendous victory for the Internet and startup communities in the debate over net neutrality. Just one year ago, nobody imagined the FCC would reclassify broadband under Title II. And then the community mobilized. Engine was proud to work with hundreds of startups and other partners in urging the FCC use all available policy tools—including Title II—to protect the open Internet. Many of those startups spent the past year meeting with policy makers and making a public case for strong protections. The impact they had on the FCC’s rulemaking shows how powerful the technology community’s voice—particularly that of startups—has become in Washington.

 

While reclassification is a big win for startups, it’s only part of the equation. The FCC must now ensure that the rules it creates under Title II authority are strong enough to prevent ISPs from discriminating against startups and flexible enough to allow the FCC to preempt future threats to the open Internet. We at Engine look forward to being part of that process and making sure the voice of the startup community continues to be heard in Washington.

Net Neutrality Shake Up: Sprint Endorses Title II, GOP Introduces Legislation

Today marked something of a sea change in the net neutrality debate that has gripped the country for the past year. The reclassification of broadband as a common carrier service under Title II seemed all but dead on arrival just a few short months ago. This cast real doubt on the future of startups in this country, and the jobs and economic opportunities that they create.

Now, groups that once bristled at the mere mention of strong net neutrality rules are publicly embracing the tenets of an open Internet. Perhaps most exciting is Sprint declaring their support for Title II reclassification, making them the first national mobile carrier to do so. Sprint’s announcement is further evidence that reclassification would do nothing to chill investment in the expansion of broadband infrastructure.

The other big news of the day was the release of a net neutrality bill from House Republicans. This bill includes some encouraging provisions, including rules that prevent ISPs from blocking, throttling, or charging edge providers for preferential access to customers—the cornerstones of any strong net neutrality rules—and applies these rules to both wireless and wireline broadband. Of course the devil is in the details, and upon closer examination it is clear that the proposed legislation would do much to undermine the future of an open Internet.

For one thing, the bill appears to apply to only customer-facing prioritization, meaning that the rules will not prevent ISPs from using their gatekeeper power to extort money from edge providers at the peering/interconnection level. Since some of the most notable net neutrality violations in recent history involved interconnection, this loophole may be large enough to swallow the rules altogether. And, since the proposed legislation would prohibit the FCC from addressing any future avenues for discrimination, ISPs would simply have to be more creative in how they extract rents from edge providers.

The bill would also rescind an important tool that allows the FCC and state agencies to ensure broadband competition and deployment—Section 706. While 706 by itself is an insufficient grant of authority to effectively ensure an open Internet, it still has an important role in policing ISP malfeasance. As President Obama discussed earlier this week, the FCC can and should use its 706 authority to overturn laws (passed at the behest of large ISPs) that prevent municipalities from providing broadband for their citizens. Under the proposed House bill, the FCC will lose its ability to vacate these anti-competitive handouts to ISPs. Similarly, invalidating 706 as a grant of authority could diminish the role of the FCC and similar state agencies in reviewing harmful broadband consolidation, like the proposed merger between Comcast and Time Warner.

While it’s encouraging to see those once opposed to net neutrality start talking about rules that would protect an open Internet, it would be naive to think that the proposed legislation is anything other than an attempt by ISPs and their supporters to squeeze whatever benefit they can from what they see as a bad development: the FCC’s impending decision to reclassify broadband under Title II. The proposed legislation fails to offer the same strong net neutrality rules that the FCC can provide under Title II, and instead would make it impossible for the FCC to act in the future to protect a vibrant Internet.

The legislation as drafted seems to be little more than a last ditch effort by the opponents of net neutrality to prevent a reclassification that seems increasingly inevitable. Those of us in the startup community who have been fighting for an open Internet must continue to make a clear case to legislators, the FCC, and members of the public: Title II reclassification is the best way to guarantee net neutrality, not just in the short term, but for generations to come.

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.

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.

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.

President Obama Reiterates Support for Strong Net Neutrality

Yesterday, President Barack Obama unequivocally stated his support for real net neutrality, putting to rest any doubts about where he stands on the issue, emphatically opposing any rules that would allow ISPs to enter into paid prioritization agreements and create fast and slow lanes on the Internet:

"I know that one of the things people are most concerned about is paid prioritization, the notion that somehow some folks can pay a little more money and get better service, more exclusive access to customers through the Internet: that is something I’m opposed to," Obama said.

The President’s latest comments come as the FCC begins the process of sorting through the 3.7 million comments filed in response to FCC Chairman Tom Wheeler’s proposed rules to replace the Commission’s Open Internet Order that was vacated by a court ruling in January. President Obama’s position is consistent with the vast majority of those commenters, over 99% of whom want the FCC to institute strong net neutrality rules.

This is not the first time the President has publicly supported net neutrality. As recently as this summer, he trumpeted the importance of an open Internet. Yet the President’s strong words yesterday left no room for doubt: it is clear the Administration supports Title II reclassification.

Which is why, in opposing Internet regulations that would permit companies to pay ISPs for priority access, President Obama voiced his opposition to the FCC Chairman’s proposed net neutrality rules. Under the Chairman’s proposal, the FCC would permit any paid prioritization deals that were “commercially reasonable.” While it is entirely unclear what “commercially reasonable” paid prioritization deals would entail (one of many major problems with the proposal), the Court of Appeals that vacated the FCC’s prior rules made clear that, unless the FCC reclassifies broadband under Title II, any new rules will have to permit paid prioritization. If, as the President said, he wishes the FCC to refrain from promulgating rules “creating two or three or four tiers of Internet,” the FCC must act in accordance with the overwhelming tide of public opinion and reclassify broadband as a common carrier service under TItle II. Having the President reiterate his strong commitment to net neutrality rules should remind the FCC of the importance of its decision and the widespread desire for meaningful rules preventing ISP discrimination.

Speak Up—or Slow Down: Why We Need A Day of Action for Net Neutrality

Internet users, advocates, and major tech companies will come together next week to make their voices heard: the time for real net neutrality is now. A long-awaited decision from the FCC on the future of net neutrality is imminent, and we’re excited to see companies that depend on an open Internet rallying together to let the FCC know once and for all that an Internet with fast lanes and slow lanes is unacceptable.

On September 10, major Internet companies—including Automattic, Cheezburger, Dwolla, Etsy, Foursquare, General Assembly, Kickstarter, Meetup, Mozilla, Namecheap, Reddit, and Vimeo—will join Engine and other tech advocacy organizations for a Day of Action that will give a glimpse at what the Internet might look like if the FCC’s proposed rules go into effect, and net neutrality as we know it is left by the wayside. Under the FCC’s proposal, Internet providers will be free to charge for access to special Internet “fast lanes,” leaving startups and others unable to pay these new tolls in slow lanes. In such a world, startups that can’t pay for fast lane access could see their sites slow down, their traffic vanish, and their funding dry up, harming the Internet and the economy.

For the Internet Slowdown on September 10, many participating companies will install widgets on their sites displaying a revolving icon (a common signal of slowly loading content) to symbolize how the Internet would function in a world without net neutrality. Others, including Engine, will direct their users to call or email policymakers. With over one million public comments already filed with the FCC, much has been written about why the FCC’s proposed rules would damage the Internet, but the FCC needs to see firsthand how Internet fast lanes would devastate startups.

To help make sure the FCC gets the message, join Engine and companies like Automattic, Cheezburger, Dwolla, Etsy, Foursquare, General Assembly, Kickstarter, Meetup, Mozilla, Namecheap, Reddit, and Vimeo on September 10 to show why real net neutrality rules are necessary to the future of an open Internet. For more information on the Day of Action and to learn about other ways to get involved, visit Battle for the Net or email evan@engine.is.

Engine's Response to Today's FCC Hearing on Net Neutrality Economics

We at Engine watched with interest as the FCC held a hearing today on economic questions related to its proposed net neutrality rules, focusing on “incentives to provide high quality open Internet access service and the relevance of market power.” Distressingly, though the hearing tackled many important questions about the economic incentives new rules would affect, relatively little time was spent addressing the immense negative impact on investment in startups that would follow from an abandonment of strong net neutrality rules. Too many witnesses—with Professor Nicholas Economides of NYU and Professor Jonathan Baker of American University as notable exceptions—failed to grasp the chilling effect on innovation that the paid prioritization model would cause.

Contrary to Hal Singer from the Progressive Policy Institute’s stunning claim at the hearing that allowing paid prioritization schemes would have no negative impact on companies that could not afford to pay for priority access unless ISPs actively degraded all non-prioritized traffic in absolute terms, paid prioritization unquestionably harms startups. Even with a so-called “baseline” service requirement, startups will be disadvantaged if their Internet speeds drop relative to established companies. Myriad studies show that consumers respond to even the most minute changes in website speeds. Millisecond differences in loading times can be a huge detriment to a startup’s growing business.

Simply put, allowing paid prioritization would greatly increase the cost of application development. In turn, higher costs would discourage entrepreneurs from starting risky companies and dissuade investors from putting money into startups that operate in such an imbalanced marketplace where wealthier incumbents pay for priority access.

The threat to innovation isn’t hypothetical. More than 100 of the world’s most prominent venture capitalists explicitly said in a letter to the FCC that they would be less likely to invest in startups that compete in established markets if the FCC permitted paid prioritization. If the FCC fails to understand that allowing ISPs to create and profit from Internet slow lanes will necessarily disincentivize investment in the next wave of startups, it will be putting the future of these companies and the Internet economy in grave danger.