A Threat to Startups

We believe that Google and Verizon’s proposed policy principles to preserve an open Internet came out of a good faith effort to bring some clarity to the market for Internet applications and access. But we fear that this agreement is a compromise that does not serve the next great startup enterprise well.

Google, eBay, Facebook, Twitter, and Foursquare are just a few of the thousands of companies that flourished on the Internet, precisely because there were no gatekeepers and no toll takers. That market architecture is the result of the original layered architecture of the Internet.

With the move from dial up to broadband and with the deployment of packet inspection technology by the telephone companies and cable companies that now provide internet access to most American consumers, the integrity of the layered architecture of the Internet is threatened. Google and Verizon’s proposed policy principles, while well intended, do not restore the integrity of the Internet’s layers. Instead, they seek to manage the problems created by their demise.

We have two key concerns.

  1. At a time when more and more Internet services are accessed wirelessly from mobile devices, the Google/Verizon proposal offers no guidance. On wireless Internet access, it calls only for transparency. There is no assurance that consumers will be able to get to the applications and the content on their wireless devices. There is no restriction on network management practices that discriminate against specific applications.
  2. The proposed framework for wireline Internet access is complex and not easily enforced. The access providers are prohibited from discriminating against specific applications providers only if it would cause “meaningful harm to competition or to users.” The network management provision provides broad latitude for Internet access providers to interfere with applications layer services.

Between the lack of any protection on the wireless side and the qualifiers and complexity on the wireline side, young startup companies will have difficulty finding financing and building businesses of scale. If an Internet access provider discriminates against a startup directly or through its network management practices, it is unlikely the startup could afford a long and expensive process to seek redress. So this proposal favors the incumbent applications and access providers.

(reposted from the NYTimes.com series Who Gets Priority on the Web)

Updated: Albert (Net Neutrality Is Critical for Innovation) and Fred (Regulation Strangulation) chime in.