I spent the last two days in meetings with FCC Chairman Tom Wheeler and his staff, discussing their proposed Open Internet rules (aka net neutrality). Monday’s meeting was with a group of NYC VCs, and Tuesday’s meeting was with group of NYC startup CEOs and GCs.
Coming out of these meetings, and after working on this over the past several months, a few things have become increasingly clear. Specifically, what we mean when we talk about the “freedom to innovate” and why it’s important for the future of the internet (both infrastructure and applications).
The question that the Chairman opened both meetings with was: how can the FCC achieve the dual goals of “access” and “flexibility”. ”Access” meaning the ability for websites, startups, apps and content providers to reach end-users (and vice versa), and “flexibility” meaning the ability for internet access providers to expand and improve their networks in new (and potentially unexpected) ways.
Access: innovation without permission (on the network)
Yesterday’s startup meeting led off with each company talking about why the open (non-discriminatory, non-prioritized) internet mattered to them — in particular, why it mattered to them when they were just starting out.
Eli Pariser from Upworthy put it perfectly, when he said: “I’m here because I’ve thought a lot about the tests you have to go through as a startup CEO. And I’m very thankful that one of the tests I *didn’t* have to pass was the Knows How To Negotiate A Complex Deal With A Large Telecommunications Conglomerate Test. I’m not sure many of us could have passed that test in the early days of our companies.” Amen.
Many companies noted how long they had operated before they need to hire a biz dev person or an in-house counsel. David Karp from Tumblr noted that their GC was hire #37 (this was considered early) and they didn’t hire a biz dev person until the company was 7-1/2 years old. Chad Dickerson from Etsy noted that their first GC was hire #500. Erik Martin, GM of reddit noted that they he is their policy person (out of a staff of about 50). Every company in room was able to reach and serve millions of users and customers without having to negotiate a pay-to-play deal with a carrier first.
The buzzword idea is “innovation without permission” — the ability to launch an app, try out an idea, start writing, start competing with the big boys, start gaining real users, just by hitting enter. Anyone — a 16-year-old kid with an app or a 75 year-old grandmother with a blog — can simply start. No need to hire a lawyer, negotiate a deal for access, or (in the worst case) file and litigate a complaint with the FCC.
Then, as David Pakman put it in the VC meeting, “the users can king-make the apps” (as opposed to the carriers charging, and picking, winners).
This is what brought us the internet we have today, and this is the world I want to live in.
Flexibility: freedom to innovate (in the network)
Regardless of whether we want ISPs to “innovate” in the first place, a central and critical question in the open internet debate is how to stimulate ongoing investment in our internet infrastructure. To make internet faster, cheaper, and better for everyone.
This is the contentious issue. Some argue that open internet rules would remove incentives for investment in infrastructure, by limiting the ways internet access providers are allowed to charge.
In the VC’s meeting on Monday, my colleague Brad said the following (as published in the forthcoming FCC ex parte filing — emphasis mine):
Mr. Burnham pointed out that the relationship between innovation in the network and innovation on the network is more nuanced than often assumed. For example, integrating the network more closely with applications by making the network application-aware may be advantageous from a business perspective, because it allows access providers to control the economics and the innovation at the application layer. Mr. Burnham recalled that when he worked at AT&T, at a time when that company introduced several application aware network architectures in an effort to compete with Internet, the network engineers there were so worried that changes in the network would break applications, that innovation in the network was very rare. At the same time, investment and innovation in and on the Internet was growing exponentially because the Internet’s layered architecture separated the applications from the network and allowed each to evolve independently. He argued that regulatory policy that continues to separate the network and applications layers by requiring ISPs to manage their networks in ways that are application agnostic will promote innovation not limit it.”
In other words, separating the applications layer from the network layer actually stimulates investment in both, by giving both the freedom to innovate.
The Virtuous Cycle
This brings us to a central idea:the “Virtuous Cycle” of innovation and investment:
This theory of innovation and investment — in both the applications layer and the network layer — is the core idea behind the FCC’s 2010 open internet rules. And, contrary to what many critics argue, this rationale was not overturned in the recent court case vacating the rules. Rather, the court simply ruled that the FCC could not enforce those rules without reclassifying ISPs as “telecommunications services” under Title II. From the court’s decision:
"Internet openness, it reasoned, spurs investment and development by edge providers, which leads to increased end-user demand for broadband access, which leads to increased investment in broadband network infrastructure and technologies, which in turn leads to further innovation and development by edge providers." (link)
"[The FCC’s] justification for the specific rules at issue here—that they will preserve and facilitate the "virtuous circle" of innovation that has driven the explosive growth of the Internet—is reasonable and supported by substantial evidence. " (link)
So that’s where I’m at right now. I believe in the power of innovation without permission. And I believe that we need to stimulate expansive and ongoing investment in our internet infrastructure. And I think the best way to do that is to align everyone’s incentives and give everyone the freedom to innovate.
 Companies attending the 7/15/14 meeting: BuzzFeed, Codecademy, Dwolla, Etsy, Foursquare, General Assembly, Gilt, Kickstarter, Meetup, Reddit, Spotify, Tumblr, Upworthy, USV, VHX, Vimeo, Warby Parker
Re: Open Internet Remand, GN Docket No. 14-28
June 30, 2014
Dear [FCC Secretary] Ms. Dortch: I attended a roundtable discussion on June 25 with Chairman Tom Wheeler and other representatives of the startup community in San Francisco. The participants are listed in the ex parte letter by Gigi Sohn, dated June 27. I am writing a separate ex parte to emphasize a few of the points we made. First, the Chairman told us that:
- he was an entrepreneur and investor, not just a former lobbyist for the cable and wireless phone industries.
- he agreed with us that the cable and phone companies should not be allowed to create a two-tiered Internet with a fast lane and slow lane.
- he did not believe that Title II permitted him to ban paid prioritization.
- he believes it is politically more difficult to rely on Title II.
- though he believes paid prioritization arrangements are harmful, he also believes that it is politically more difficult to make rules that deem paid prioritization and other forms of discrimination unreasonable, per se.
We think the Chairman should not focus on what’s easiest to do in Washington, DC. Rather, the FCC Chairman should begin with the correct policy, which is keeping access to the Internet open and neutral as it has been historically. Before 2005, Title II regulation applied to DSL and phone networks, ensuring nondiscrimination on such platforms. Since 2005, FCC policy statements, merger conditions, enforcement actions, and other oversight have largely stopped discrimination and prevented the emergence of paid priority arrangements. We call all see the vibrant, open Internet that developed as a result, and the primary goal of any FCC rulemaking should be to preserve this. The only effective way to do so is with anti-discrimination rules, which can only be adopted under Title II.
In 2010, the FCC found that pay-for-priority arrangements would be a “significant departure from historical and current practice.” The FCC also recognized that what made the Internet a platform for innovation and free expression was the fact that it was a level playing field not marked by technical discrimination by ISPs favoring some sites over others. We agree that such discrimination is contrary to what has made the Internet great, and the Chariman’s currently proposed rules don’t do enough to prohibit them. Indeed, the FCC’s proposed rules would authorize discrimination and even exclusive arrangements for priority. While that may be politically expedient, it is terrible economic and civic policy. Indeed, it would be highly disruptive to everyone who relies on neutral access to the Internet.
The FCC should do everything in its power to maintain the openness of the Internet rather than pursuing the short-term politically expedient path.
Sincerely, Paul Sieminski
I spent the day Tuesday at the Civic Media conference, put on annually by the MIT Center for Civic Media and the Knight Foundation. In addition to being a gathering of a fabulous community of civic hackers and builders, it’s also where Knight announces the winners of the NewsChallenge grant contest each year (here are this year’s winners, in the category of “strengthening the internet”)
Closing out the conference was Joi Ito, head of the Media Lab (and also on the Knight board). I always love listening to Joi speak, and reading his writing. He is like the Yoda of open innovation. The force is strong in him.
In his remarks, he lays out his 9 principles for guiding the Media Lab into the future, which really double as 9 principles for open innovation. They are:
This video is the best example of how I try to think about the world, and how I try to work, as I can think of. It’s speaks to the USV investment thesis, to the ideas behind Regulation 2.0 (in particular resilience over strength and emergence over authority), and to the impacts that the web is having on every sector of the economy.
Here’s his talk — it’s 27 minutes worth watching, for a pure dose of Joi’s philosophy of innovation and the internet: