Net Neutrality: What if a Fast Lane Does Scare Investors?
There seems to be a fundamental disgreement between writers at MIT Technology Review and Ars Technica. The former camp has lit a fire under the Internet news world by proclaiming that, if the FCC creates a “fast lane” by altering net neutrality rules, some venture capitalists may shy away from funding startups if their businesses will require fast broadband connections. The latter believes that, despite new rules that may work against them, startups will still receive enough funding to help them compete in a sea of corporate giants.
The whole scene began yesterday when Technology Review posted its piece, "Talk of an Internet Fast Lane Is Already Hurting Some Startups." In his article, Editor David Talbot first outlines the situation of which many Internet-savvy Americans are already aware:
“Proposed rules being drafted by the FCC’s chairman, Tom Wheeler, would allow ISPs to charge content providers like Netflix to ensure speedy service,” he says, “so long as those charges are 'commercially reasonable.' The rules are scheduled to be released for public comment May 15.”
Some ISPs are already making so-called “fast lane” agreements. Netflix recently agreed to pay Comcast for a better quality of service, for example. And the argument for an Internet fast lane lies in the heart of how organizations like Netflix operate. Simply put, Netflix requires that Comcast allocate more bandwidth to users who wish to stream videos on its site. Users often pay for faster connection speeds by choosing plans from their ISPs through tiered pricing, and now Netflix is paying for something similar.
Technology Review quotes Brad Burnham, a managing partner at Union Square Ventures, who said that his company will potentially avoid startups in the video, multimedia, and mobile wallet businesses because they will all require superfast connections. Under new FCC rules, this could mean that such startups will end up paying ISPs in a manner similar to how Netflix is currently paying Comcast. This will inherently drive up the cost of business for the startups and it will increase the amount of money funders such as USV will need to invest in them.
“This is a bad scene for innovation in those areas,” Burnham said.
Aside from FCC Chairman Tom Wheeler, who obviously supports the implementation of the rules he has proposed, there are those people arguing that moving the Internet away from a state of neutrality will not necessarily cause undue harm to startups. Jon Brodkin, who yesterday printed the article “Weak net neutrality won't scare investors away from Internet startups” for Ars Technica, says plainly that “it's hard to believe that venture capitalists will suddenly ignore Internet startups in any great numbers.”
There is just too much potential on which investors can capitalize. Startups are the companies that can work quickly to build products and platforms that drive innovation. It is seen in the numbers, Brodkin says. Overall, “Internet-specific companies” received $7.1 billion in funding last year – a higher level of funding than analysts have seen since 2001. Furthermore, he points to companies that build mobile apps, stating that the second-largest venture capitalist investment last year was with Uber Technologies, the ridesharing services organization whose mobile app connects passengers with drivers.
What if Technology Review, Talbot, and Burnham are right, though? What if investors do have second thoughts about where they place their investments? It is altogether possible that a lack of investment could lead to security issues within the Internet community. It is a lack of funding that ultimately lead to the recent OpenSSL Heartbleed crisis, and even though OpenSSL is not a startup, it is representative of the state of organizations that do not have enough money to support their endeavors.
In order to make a worthwhile product, startups need capital so they can purchase supplementary materials and pay employees for their time. They need funding to ensure that they release an end product that is as good as they imagine it will be and as good as the public expects. I certainly do not want a set of rules working against the products and technologies that will influence my future. Even if Brodkin's opinion ultimately comes out on top, why risk supporting a system that could potentially crash the structure of the entire Internet, one that fundamentally works against the present system which has worked exceptionally to this date?
What do you think?
Image courtesy of Jared via Wikimedia Commons