Net Neutrality Is Pro-Business

The WSJ has a story this morning that FCC Chairman Julius Genachowski has decided to move forward with an effort to "regulate broadband Internet." Many people, including readers of this blog, think regulating the Internet is bad for business. I don't and here is why.

The FCC is already on record that they have a very lightweight regulatory framework in mind for the Internet. In 2005, the FCC proposed four very simple rules:

• Consumers are entitled to access the lawful Internet content of their choice. 

• Consumers are entitled to run applications and use services of their  choice, subject to the needs of law enforcement. 

• Consumers are entitled to connect their choice of legal devices that do not harm the network.  

• Consumers are entitled to competition among network providers, application and service providers, and content providers.

In late 2009, Chairman Genachowski proposed two more rules:

• Non-discrimination: ISPs must not discriminate against any content or applications;

• Transparency: ISPs must disclose all their policies to customers.

The six principles are the sum of net neutrality regulation. That is it. This is what Chairman Genachowski intends to push forward on.

But of course, the telcos and cable companies don't want to be subject to these rules and they have been fighting them tooth and nail for years. They complain that they won't be able to invest in their networks. They say that business interests don't support these rules.

Well first and foremost, let me say that I am in business too. And I very much support these rules. And without these rules, investors like me who invest in the "open internet" will not be able to invest anymore. So you can choose between telcos saying they won't be able to invest under one set of rules vs VCs who say they won't be able to invest under another set of rules.

But if you look at history, you can see that telcos have invested very heavily in their networks while under the threat of net neutrality regulation or even in instances when they were under direct net neutrality regulation. The argument is specious and their actions have show that.

But if you look at VCs, you see another story. Look at the mobile Internet from the late 90s until the advent of the app store. Many VCs such as our firm would not invest in the mobile Internet when it was controlled by carriers who set the rules, picked winners, and used predatory tactics to control their networks. Once Apple opened things up with the iPhone and the app store, many firms changed their approach, including our firm. And if you look at the hundreds, maybe thousands, of mobile Internet firms that were VC funded in the first decade of the mobile Internet, when the business was controlled by the carriers, you will see an enormous failure rate and certainly negative returns for the entire sector. Contrast that with the current environment and the difference is striking.

So a lightweight regulatory framework for the Internet is good for business, particularly the businesses that are getting funded today. And it is not bad for the carriers' businesses. There is no mention of pricing in the six principles. The carriers will be able to charge whatever they feel is necessary to finance their network buildouts. But what they will not be able to do is charge on both sides of the network, where they could stifle innovation at the edge. The bottom line is we want the carriers to be able to make money, invest in their networks, and build the broadband internet. But we do not want them to be able to control it and turn it into the kind of Internet that existed in the mobile environment in the past decade.

That is what this fight is all about. And so I would encourage all you business leaders working and investing in the open Internet to stand up and say that net neutrality is pro-business. Because if you don't, the FCC could lose this fight and we'll be in a much worse place. 

#Politics#VC & Technology

Comments (Archived):

  1. JimHirshfield

    Seems to me that the carriers could reap big benefits from net neutrality. Embrace it and sell more services; fight it and watch the market find a way to make you irrelevant.

    1. Dan Lewis

      Not really. If they fight net neutrality and win, there’s no real market any more. I have the choice of maybe three high-speed ISPs here (Verizon, Time Warner, and I’m sure I can find a third if I try). What happens when one blocks site A and the other blocks site B? How do A and B fight it out, or are they just soldiers in a bigger war? And what happens when site C tries to fight? Does Verizon step in to help their partner?

  2. Byron Darlison

    Thank you! If your ever in need of a new project Canada needs you! We are even further behind. North America, the US and Canada, needs net neutrality now.

  3. Andy

    I wish someone would be more specific with regards to what new costs this will create. Granted, all the claims of ‘new costs’ are disputed among the various parties arguing for/against the move. What are they purported to be for the providers, consumers, for publishers, web services, ISPs, app-makers, etc…and what are the conflicting claims? There is a lot of grand-standing on these arguments, but no specifics.

    1. fredwilson

      i think what this regulatory regime means is nothing changes from what exists now

  4. Scott Carleton

    I don’t think it’s a question of if there’s regulation, there will be. The internet needs to have some regulation so that the devices in the system that cause harm all of the time are marginalized. I just feel the need to fight tooth and nail for all possible freedoms so that the compromise will be slanted in the consumer’s favor.Net neutrality is equivalent to anti-trust acts a century ago. The internet is becoming a fundamental right to citizens in advanced countries such as the US and we cannot allow the companies who provide the backbone for it to also control it.

  5. Satish Mummareddy

    Would people who argue against net neutrality also argue against electric supply neutrality for homes? :)If an electric company decides that on top of charging you for the electricity, they would charge you based on the appliances you had at home. If you had an 50″ LCD TV at home, or any other items that they considered inefficient use of electricity, you pay twice the price for the electricity.If you buy GE, you get a price break in electricity, you buy Phillips you are charged twice the price for electricity.

    1. Scott Carleton

      You make a very good point Satish, but be careful in these times with the electricity market. There are many people that want the ‘smart grid’ to do just what you proposed. Except with harsher rules that would allow you to run, oh say your washing machine or air conditioning only when the demand is low such as at night.I’m an advocate for energy abundance which allows freedom for people to use it, make mistakes but learn and discover in the process. This is very similar to how I feel about net neutrality as well. Freedom of information and access to that information is important to facilitate learning and further progress.

      1. ShanaC

        It would just change when/how something is being used. You’ll see demand go up at night (and potentially even out). In turn it hopefully would change pricing…etc etc

        1. Scott Carleton

          I’m completely fine with a utility charging more when demand is higher. I worry more about a ‘smart grid’ forcing sanctions such as when I can use certain devices. To cut costs, many businesses do energy intensive processes at night, when demand is low, such as aluminum smelting. The economics are what should govern choices, not ideologies in the name of conservation. Attempting to change people’s perceptions will never work in a large scale environment.Broadband regulation is important in this regard. The carriers should not be allowed to discern what the pipes are being used for. However, they should be allowed to price the output according to demand.

          1. Satish Mummareddy

            Agree. !!

          2. ShanaC

            Welcome to tech-tools are complicated. Sometimes there are days you wish you didn’t have them (if you think too long)

    2. Dan Ramsden

      This is a flawed analogy, because paying for use is exactly what the electricity business model is based on.

      1. Scott Carleton

        Currently yes. I personally hope for – and can envision – the possibility of paying a monthly fee for unlimited electricity instead of paying for what you use. This is all based on a model where fuel and operating costs for a power plant are at a minimum. This is impossible when dealing with coal or natural gas but can work with certain other alternatives. Namely hydro and nuclear.

        1. Satish Mummareddy

          I do that. Just that my landlord is the one who pays my monthly electricity bill while I pay her a set fee every month. 😛

          1. ShanaC

            Lucky you.

      2. Satish Mummareddy

        Data on mobiles is also pay per use. In the early days of the internet, we all paid for data packages. The problem is charging differently for the same quantity of data based on what the data is being used for. And that to me is the problem.I’m not saying charge two people the same if one used 10GB every month while the other uses 1GB every month. But if three people use 1GB every month, then dont charge one person twice because they are using the 1GB for VOIP, and another 4 times because the 1GB is used for streaming video.

        1. ShanaC

          I don’t think people would mind going back to that system as much as we think (in fact we still have parts of that system if you need it). It’s the fee/amount used is a little out of line (as in mobile- most people were way overusing the “typical median set” plan)Paying Per Gigabit metered (over the course of a day or month, at a flat this is 1 gb price) sounds like a plan to me. I still would want partial regulation (I don’t want derivatives shenanigans, and as soon as someone does this en mass, you’ll see em.)

          1. Satish Mummareddy

            And Id love carry over bits like ATT carry over mins. 😛

  6. TomCoseven

    Regulating the Internet may, or may not be good for business. Controversial action from the FCC is not.The FCC make up is very political, with 3 members from the majority party and 2 from the minority. The majority party can always ram something through, and then it ends up in the courts for 3 years. In that time, if the country changes political leadership, the controversial policy of the previous FCC gets reversed.Controversial policies are best set by Congress to avoid repeated setting and resetting the regulations. Constantly changing the rules is bad for business, and the FCC cannot craft a net neutrality regulation that will stand the test of time. Even this watered down “third way” proposal will be challenged in the courts, and if it is allowed, the next FCC can just revoke it. How is this good for business?

  7. Tereza

    If it’s as simple as that, it’s a no-brainer.If for no other reason than we know jobs will not be coming from cable and telco’s, but from firms that innovate. That ain’t them.

  8. andyswan

    Wait….is this the same FCC that determines fines for content that they determine to be obscene or offensive on television and the radio?Is this the same government that told us regulation of the auto-industry would be “lightweight”….before enacting CAFE, MPG and other “standards” that pushed our automakers out of business (and put taxpayers on the hook?)Sorry, but the “they just want to regulate it a little bit….and it’ll be good for you!” pitch is tired and almost to the point of being offensive.

    1. fredwilson

      well i believe that pitch andy

      1. andyswan

        I know you do….that’s what makes it interesting here!Citizens of Fredland must realize that I will take the other side of ANY trade, even if only for the honest and intelligent debate about its merits that follows. Plus, it’s usually profitable to take the other side of popular trades. :)p.s. Disqus, I love you but get it in gear….there is NO REASON I should have to wait all the way from the 17th green until I get home to know what “pitch” Fred is referring to when I see his comment email. PLEASE start including the “in reply to…..” text in your email alerts!

        1. Tereza

          yes andy that’s what makes you Swantastic.

      2. FU

        While you may have a friendly regulatory environment now and in the near future, entrusting freedom to a regulatory body like the FCC makes me nervous because there is a lack of accountability to the end user. The thin end of the wedge is being driven into free exchange of information under a number of pretences – here in New Zealand the government went direct to the ISPs to create an upstream filter under the flag of screening out “child abuse images”. This is absurd for a number of reasons – but any vote against filtering was painted as a vote for child abuse!So, I guess my point is that it is possible to be for “net neutrality” without handing that responsibility to the FCC because what they say *now* seems reasonable.There does need to be a form of regulation for all the reasons you state, but it needs to be entrenched firmly. Rights, not regulation!

  9. steveplace

    I’m assuming this post is related to cuban’s:…I disagree with about 80% of what he says on his blog, which is why I read it as it challenges my thinking. In this particular case, the analogy he uses is tenuous at best and he magnifies the “bandwidth scarcity” problem that I don’t think exists.

  10. Morgan Warstler

    Fred, where you come down on this will explain a lot:1. Big Cable decides, since they know your home address, to launch an opt-in ad network.2. They will give you 100Mbps instead of 50Mbps for the same price, if you join their ad network…. everyone starts to accept.3. Their ad network is cached at their headend, it enables banners to blossom instantly into 10Mbps full screen mind-boggling video / data sites FAR BEYOND what advertisers are able to provide right now.4. They allow any publisher they agree has acceptable content to insert code that replaces their current display ads, and instead show off Big Cable’s banners.#3 is the point here. In order to participate, the brand’s new 10Mbps site has to be cached with cable, Akamai can’t come close. Cable is providing an “information” service precisely what you say they are not providing now. They are flexing their muscles in the market, showing what they really can do – GOOG is fucked.This is NOT net neutral. But it is ALL opt-in. And Publishers LOVE it, they are suddenly making double what they made before.Explain to me how the FCC getting involved here doesn’t fuck up this future. Explain why you aren’t self-interested in this fight.

    1. andyswan

      Excellent. The assumption that telcos will remain unchallenged, uncompetitive and won’t innovate—and MORE importantly that there won’t be a NEW kind of provider that is very different and still subject to the rules of a political body— is an enormous leap that flies directly in the face of the history of capitalism.

      1. Morgan Warstler

        Mark my words, Fred will not really take the time to get into this. He’ll make a sentence or two, and go right on lobbying government for his portfolio to have unfair advantages.My example above, can also be achieved with MSFT, so it isn’t a monopoly play.What’s worse is that Big Cable has historically been incredibly pro-consumer. They have stood headstrong against countless efforts to limit, censor, tax what we use the pipe to get and make.Fred should fight fair, and he’s not. It is incredibly dis-heartening to see the VC community doing this. It shows how far from the source of techno-libertarian hacker we’ve all gotten.Fred’s cozy with “communism” now. Ugh.

        1. andyswan

          I disagree with Fred often on the role of government, but I have always respected his positions as sincere and his responses as thoughtful.I have yet to see ANY reason to question Fred’s honour (sic). Doing so only undermines your original point and significantly decreases the odds that you will be engaged in serious, thoughtful debate.

          1. Morgan Warstler

            nothing but love. nothing but love. He’s a genius. But, we all did just fine without VC investing in whatever they weren’t investing in before Apple made it ok.Since I’m right. what do I say? “Fred just doesn’t understand” that’s dis-respectful.We all admit self-interest. Everyone has personal reasons to petition the government. Everyone thinks their view aids the world. Our gentleman’s agreement, indeed our own county’s formation, was based on the idea that we don’t go running to the government for anything other than contract adjudication.The truth is, if your investments, your ideas require the force of the gun, you don’t have good ideas.

          2. ShanaC

            We’re not on pure common law anymore. And how do you know what is legal in a contract?

          3. fredwilson

            i stated my self interest right up front in my posti couldn’t invest in the mobile web until it was opened upi don’t want the web to go in that direction

          4. fredwilson

            but we weren’t doing fine before apple “made it ok”the experience on the phone sucked

          5. Tereza

            +1 Andy

          6. ShanaC

            You may be a super randian- you are an honorable guy. Morgan, I get the point, but watch the language- remember everyone has the right to further their interests in the semi-classic influenced blog world that we live in. If he does lobby, it is in his best interest, and on some level, he is fighting fair. We’re asking people be more open than average with their interests, and that is all.(It’s not like Cable doesn’t have a lobby)

        2. jd

          I stopped reading at “Big Cable has been incredibly pro-consumer”. Dumbest comment I have read. Ever.

      2. Keenan

        Andy your statement here is wrong. It doesn’t fly in the face of history. Telcos innovating is not in there DNA especially when they can control the network. History prove this out. Having been in this industry for years I have seen it. Before the break up of ATT in 1986 the most advanced innovation in telephony was the push button phone. 80 years of monopoly and that was the biggest consumer side innovation. It took the 96 telecom act to get us BROADBAND in the form of DSL and it WASN’T from the Incumbent Telcos as they didn’t want to cannabilize their dial up business and make the incestment. It took the defection of some frustrated Incumbent carrier execs who left and started their own DSL companies ex: net-rhythms. Mobile is the most recent example. Look at the speed of innovation in the mobile phone space since Apple chose to jump in and had the weight to convince ATT to play with them. This last 3 years has seen more innovation in the mobile space than the previous 15 years combined.If left to control the Telco’s will not innovate at the pace toads technology enables. Telco history proves that out.

        1. andyswan

          Fine…then they’ll be left in the dust by another type of provider. That’s my point…capitalism gets rid of slow, unresponsive movers one way or another. The ONLY thing that can prevent this is government involvement.One way to insure that no one innovates is to write their product offering into LAW.

          1. Satish Mummareddy

            The problem is half way regulation. For example: spectrum. If the govt auctions off the spectrum and gives the rights to one company and then puts no regulations then the consumer loses. Either you have a completely open system for everyone to compete or you regulate. If you have an open spectrum there needs to be governance so that the signals of multiple vendors dont screw up each other by having coding etc. There is going to be some form of governance. Its just a matter of who does it.But the problem with infrastructure is that there is no easy way to build multiple sets of infrastructure. Lets say we took the same approach to roads. The first company to build roads got in and locked in. There is no more land to build an alternate set of roads. So the govt has to take that part over. 🙂 Imagine if google wants to lay fiber and they dig up the whole city to lay fiber. Then next year, msft wants to lay their own fiber and then they dig up the whole city again. And everyone suffers from the digging.

          2. Keenan

            Where would be with out breaking up ATT in 86? Where would we be with out the 96 Telecom act.The Sherman laws recognized that capitalism isn’t alway efficient. It’s a balance. There is a “negative” tipping point.

          3. ShanaC

            Oddly, that point has been proved by an economist. Part of the reason has to do with inefficient distribution of information in an economic system. There are actually certain situations where a socialist/communist system will work as efficiently because of the need to distribute information to make decisions by individuals.It is one of the reasons people really hate Joseph Stiglitz- unfortunately, he got a Nobel for it.There is automatically inefficiency due to information disparity. Assume that, you’ll do ok. Law is supposed to be a counterbalance, which is why the Sherman Act et al do work so well.

          4. fredwilson

            andy – nobody is going to compete with the duopoly in the last mile, at least not with a wired solution

          5. andyswan

            Def not wired.

        2. Aaron Klein

          There are plenty of good arguments for this proposal without resorting to the “end justifies the means” play, my friend. That’s a very slippery slope that we do not want to be on.Broadband providers should have the freedom to innovate, freedom to tier pricing, freedom to offer X quantity of broadband at X price. Let’s not allow these telcos the equivalent of letting the power company tell me what I can use electricity for and cannot, or the water company telling me what I can use water for and not, etc.This proposal for very limited regulation is about promoting open competition and letting the free market win, not about picking who can innovate better and giving them all the power.

    2. Matt A. Myers

      Just to play devil’s advocate a bit…Should they even be allowed to take on the role to be more than just a base provider? Let someone else do the fancy business tactics stuff..

      1. Morgan Warstler

        We don’t start from that assumption, in fact just the opposite… we start from, “let he who can do the most, do it.”Big Cable is a giant organization of cable pullers. Really. It takes them a while to see what everyone else is doing BECAUSE they are so busy MASTERING the art the pulling cable.But, wham – they own NBC. They DESERVE the fruits of their labor.Fred wants to steal it and act like he’s not a thief.

        1. fredwilson

          they were given monopolies by the government and that naturally comes with regulation. i am not trying to steal anything

          1. Morgan Warstler

            I wish we could very specifically focus on the example I’m using. It says:1. They can create a superior information service based on their advantage in network architecture.2. They have assumed they have this right, by previous contracts and regulatory approaches.3. Their investors have as much claim to maximize their returns as USV’s.#2 is the rub.You are acting like all your previous investments didn’t happen in the age of cable modem dominance. So obviously, this isn’t like cellular. But let’s get past that:You could easily approach Big Cable, as countless other VC backed companies have, and gain access. You could ramp around them, go big on something like INVIDI, you could rebuild Boxee so it doesn’t run on x86, and push into TV’s. You could go really big on blimps. Take Freemium Fiber to market.The are countless plays, but instead it’s off to DC to tell the government to screw all the previous decision making authority that has lead to you having 50Mbps.And why? Because of a single Bit Torrent incident? Really?

          2. fredwilson

            As long as they let any app run on it I’m fine with this idea

          3. Morgan Warstler

            Ok then, how do you keep a “freemium” information service from Big Cable, from being called a tax / toll by GOOG?If your wide band access is cheaper if cable gets to serve the ads instead of GOOG, will you tell GOOG to go screw, and start paying for my Internet to compete?

          4. fredwilson

            If I use google to search then they should be able to serve the adsBoxee doesn’t strip hulu ads outIts just not right to do that

          5. Morgan Warstler

            Fred, I’m not talking about stripping ads out of GOOG’s domain (adwords)I’m talking about Cable competing with GOOG adsense and more importantly Doubleclick.The idea is publishers, like all the blogs, all the newspaper sites – they might get paid more for their ad space because cable knows these ads are going into Fred’s house, and when he clicks on them, he can see some sick stunning ads. Along the way, cable can make GEO-IP look stupid.It’s all Opt-In. But opt-in advertising from cable could actually terrorize GOOG, leaving them with just search… no display.And that in my opinion would be very very healthy… and you are jeopardizing it.

          6. fredwilson

            i am all for thatmore competition is good for google and the web

          7. jd

            Morgan, can you summarize your position in plain english? How does cable compete with Adsense? How does cable know that an ad goes to Fred but not-cable does not know? How does cable make GEO-IP look stupid? How does opt-in ads from cable terrorize Google?

          8. Morgan Warstler

            Sure, cable knows your home address, so they can match it to your IP address. They alone can make this connection. People won’t mind, as proven by their love of GPS check-ins, as long as they get something awesome.The ads served by doubleclick, or adsense – with a small script deployed by publoisher can first check to see if you are an opt-in cable ad network subscriber – if so, your banners, etc can come from cable – which has them parked just a mile from you – and when you click on them, they can come in full UDP glory in giant interactive click-able video intensive ads that simply aren’t possible from akamai.

          9. Differance

            Hello Morgan — I have a vague sense that some may be feeling unfair competition from Google, but I don’t really understand how that manifests itself in their experience. This is all from Google being the main page people tend to think of when they want to search the web?That’s just to give me a better picture of why you seem to feel this unfair competition. You propose that cable is in a position to compete with Google by offering value in the form of kewl ads.Fred and Morgan: The problem with the FCC’s version of NN is that it’s not real NN — real NN is the natural outcome of competing autonomous routers on a common communications medium: if they are truly competitive, yet still must interoperate to take part in the Internet, then they can’t prejudge what sorts of applications the end users served by those other routers, are deploying. The general tendency not to prejudge applications came from the initial public rollout of the Internet over lines that were shared, and which therefore supported many competing ISPs. Individual ISPs might experiment with various types of “special treatment,” but innovation at end points regularly reasserted the general purpose nature of the IP layer.When the decision was made to stop line sharing on the other media besides cable (which from the outset had special status that let them operate without line sharing), all the competing ISPs on the shared lines disappeared — and that was when the incumbents began rumbling about doing what they now could do without ending up not being interoperable (at least within the US) with independent, competing autonomous routers.The problem with the FCC’s current apparent stance is that they are apparently planning to use Title II for authority, but not to use that authority to impose Title II (line sharing requirements). Their plan is thus apparently to set up a regime that does (at first blush to me) seem to enable them to play a discretionary regulatory role, judging what’s good and bad, with creep over time as they establish their new premises and precedents.The first significant attack on NN was the CALEA stuff, that proposed to establish rules for an arbitrary protocol (IP-based telephony) at the application layer.It’s certainly possible for individual networks to try out variations on application-agnostic packet transmission, and it might even be possible that some scheme might actually be devised that would provide for special treatment of packets based on what kind of thing they’re doing, and that would also interoperate well with the rest of the network, continuing to support the general purpose nature of the current IP layer. It’s just important to recognize the tradeoffs so incumbent (which includes cable, with their special status under the Communications Act) offerings don’t override the general purpose nature of the platform.If we can’t have common carriage then one thing we can do is make sure that special offerings that aren’t general purpose connectivity, are distinguished from what we get from the design of the IP layer (for instance, the legislative proposal at shows one way that could be accomplished — the one thing it does is make sure we don’t lose track of what we have)

    3. kidmercury

      absolutely brutal morgan. almost as lethal as when you put yochai in his place and made him cry. damn.

    4. Satish Mummareddy

      I have been surprised that they haven’t done this for the last 8 years after they saw how much of a killing google was making. I don’t see anything wrong with what you suggested. I think it is net neutral. 🙂 Treat all data equally. Let the content providers and users opt in. I feel that the cable providers are not sure if they will recover the money they give up in the data plan upfront so they keep focusing on taking money from consumers rather than on taking money from goog. :)I’m also shocked that MSFT didnt do the same by inserting ads directly into the browser bar when they owned the entire browser market instead of trying to compete by building bing.

      1. Dan Ramsden

        I have to believe that GOOG is deeply entrenched behind all this, and no coincidence that FCC issues its statement around same time that FTC seeks to come down on AAPL… “Neutrality.”

        1. Aviah Laor

          If yes, it’s not necessarily a bad thing. Everybody else has a strong incentive to close the systems and rip consumers with monopoly-like power:1. Apple – prefer application than web, and cuts 30% which even “evil” MSFT never dare to do 2. Media/Music companies with Apple help – love the closed system. Push the “consumed content” devices, and kills Flash for a patent protected video encoding. 3. Cables/telecos – protect their old business from free communication4. Government – we will see. Not easily trusted in this issues.5. Microsoft – they would like to close us in, but can’t anymore. They did try to keep their own type of non-standard browser and delay the move from applications to the web.Google is the only player that benefits from real internet freedom, since they don’t care what or where you use – as long as you use it.

          1. ShanaC

            Aviah- it would be extremely interesting, albeit really bad for consumers, if we did get good infrastructure and started to regulate packet delivery by derivatives. I know everyone hates Enron for accounting shenanigans, but the fact is, they were on the money for Energy derivatives (especially for a really deregulated market). If there are this many people with interest, plus speculators, that would make for one wild market…

          2. Aviah Laor

            endless opportunities. endless. If people complain they don’t understand that current financial products, they haven’t see nothing yet. Not to mention the non net-neutral bills. 😀

          3. ShanaC

            right- the kinds of bets people would make would be outrageous. So much unknown to hedge for… from what I hear energy trading is super-risky, even with a lot of regulation- this is the sort of thing that could be worse, since you are effectively betting both for and against innovation timelines that you can’t fully predict.It would be amazing to watch though….

    5. ShanaC

      And what is stopping me from screwing the cable company at the last last mile (my computer) and installing Adblocker++? Dude! Free Internet! Ignored Ads! Awesome!!!!!!It’s not going to happen because when there is a better alternative- it’s called voting (in this case really fleeing) with your feet. The better alternative is to pay. Publishers know already they are not cable companies. Why do you think we saw standoffs with Cablevision earlier this year? You think they are going to go all in on profit sharing when *yoink* the cable companies can go “bye bye” on them? Same with consumers.Ad technology even from a cable company would have to push so so far just to serve the ads. I remember getting free ISP (for non-broadband), both from my library (which dropped after an hour, but you could redial in, and practically no one used it, so that was awesome) and Prodigy(?) (it was pre-high school, it’s been a while). Prodigy sucked. The ad serving stopped me from where I wanted to go.My ISP now, if things aren’t set up nicely, will redirect you to it’s own search page if you misspell/mistype something in your http bar. And I hate it. I go to google just to get away. The thing never helps. Just to explain- yeah, I would try to avoid giving my cable company ISP a dime through a click…

      1. robertavila

        It is an interesting fact about advertising on the Internet that almost no one likes it at all. In other media there were always good and bad ads. Some people watch the super bowl just to see what the ads are going to be. We have all seen print ads which have caught our eye long enough to notice the advertisers name. Coke and Pepsi radio jingles lingered in the culture for decades. But name one culturally successful internet ad. When one happens we will all know it, and it will not be just something mapped from another medium. So far one could argue the only unqualified success from an advertisers POV has been Craig’s list which went for the absolute bottom of the advertising market.

        1. ShanaC

          It’s interruption based, not immersion based. Like what does the banner ad really have to do with what I am reading- considering the presentation of the page. It’s not like I am flipping through and immersing myself in the vision of banner ads (versus a magazine ad). Even with TV- while still an interruption, each ad is its own tiny world. It’s about something enclosed in and of itself. Great ads are successful just as little stories or movies.Banner ads are none of the above. Contextual ads work somewhat in a search-engine (find me a cheap brightly colored sun dress in a size 2! means something to an advertiser- it’s essentially a form of paid search and find.)Most successful advertising on the internet is accidental (ala a youtube video that is viral), or marketing in disguise. if you hid from endgadget et al every day for a month- a lot of gadget cravings would go away, for example- it’s part of people’s immersive worlds, after all….

    6. Aaron Klein

      I don’t see how your scenario would be incompatible with the FCC’s proposal. The cable provider isn’t blocking anyone else’s content. They’re not slowing the transmission of anyone else’s content.Of course their own content will load faster – it’s hosted on the same local pipe as opposed to being transmitted over the net. That’s not discrimination, it’s physics.I think we can keep an open and free internet and broadband providers can still retain the freedom to do exactly the kinds of innovation you describe, if they ever figure out how to spell the word.

      1. Morgan Warstler

        Aaron, you’d be talking about certain websites that pay a tax i.e. become advertisers on a cable company’s ad network.GOOG would scream that their ad network was being “limited” by the cable company simply because the cable’s ad network could reside inside the headend.Again, Fred keeps saying that cable wants to be paid on both sides of the transaction, and that is not the thing he’s actually trying to end.He’s ending the ability of cable to exploit their own opportunities, basically so Fred can feast on them.Apple’s growth of a “off deck” store (app store) around the cellular providers PROVES that the market works.It couldn’t have happened faster. The cellular guys weren’t able to support an explosion of data usage, they are still struggling…. the technology is still playing catch up.

        1. Aaron Klein

          I couldn’t really give a flying leap whether GOOG is screaming or not, nor (with all due respect) what Fred wants the telecom revenue streams to look like.My point is that the proposal doesn’t seem to bar telecoms from having information services of their own. It simply doesn’t allow them to use their pipe to block Google or Apple or anyone else to have information services too.Boil it down: telecom networks are often monopolies or duopolies. These rules appear to create the best conditions for a free market of competition among broadband providers, and a separate free market of competition among information services.It’s not saying the same company can’t do both. They just can’t use a near-monopoly position in one market to pick the winners and losers in the other. Fair and free competition.

          1. fredwilson

            that’s exactly right Aaron

        2. ShanaC

          Google is doing a dark network- and something to think about- Cable can’t do anything involving targeting without targeting at people, as individuals. Just because they have my address, doesn’t mean they are targeting me.See there has to be a step between 3 and 4- knowing thine customer really really well. We’re still screwing up there. The app store, even in a really limited sense, just delimits what cannot be seen- it doesn’t choose what will be seen by the consumer on the phone (it doesn’t say- this is what will be served to you)Unless you are saying, you think advertising will look like that (you’ll have both free internet and opt out advertising based on what you like provided by a cable company?) Right now, the only people to pull this off is Google. And even then, they know most of their advertising fails. A lot. And has to be specific to you independent of location.

          1. Morgan Warstler

            I don’t want to get too deep into it, it’s just that your pipe is throttled by what you pay for… so right now Fred buys 50Mbps. It doesn’t take much anything to double it, when he clicks “YES.”At that point, trust me the whole world know everything about you: the old school way, mailing lists you are on, political donations, family, Claritas – you name it.The cable company can then turn to advertisers and say pay a premium to be one of 50 big brand advertisers who host full screen take over style experiences that blow TV commercials away.And turn to publishers and say, “hey when one of our users arrive, strip out your goog / doubleclick banners, run banners from our brands, and get paid far more than what you currently make.”——The point is that this stuff really does exist right now, the Internet is architected this way, the closer the content the faster comes, the less latency between clicks….think what a struggle little youtube has playing videos right now – people see buffering all the time.A cable ad network would have no such issue. none. Publishers could make more money, users could get cheaper access.And Fred hates that kind of Freemium? Why?

          2. ShanaC

            So a funny story about all of this and why this wouldn’t work:As has come up a few times: I grew Orthodox Jewish in a mostly orthodoxjewish small town in Long Island.If you looked at all of the traditional data, you would never know this. Itwould look like a middle to upper-middle class town on Long Island. Aperfect place for Outback Steakhouse to open, especially when you knowalready that the local William-Sonoma is doing a ton business.So Outback* did, back when I was in middle school/early high school (I don’tremember). And closed down in under 6 months. No one walked in. The townhas a long tail problem of information. You had to know that the area waspretty Jewish, and the vast majority of people would never walk into anOutback.That’s the kind of data you could gather from say a pool of local emails. It’s long tail. And everyone has long tail issues. It’s trying to gatherthe differences in the way I brew coffee between me and my neighbor.Why would I pay attention to an ad that isn’t long tail- the best ones ongoogle are often long tail. The question is how to reach the long tail-since for the top 30 advertisers doing the same over the top campaign, it’snot going to cut it.And I feel for the youtubes and hulu’s of the world. It’s how do yousegment down that information into the tiniest of slices that will startsolving problems. (And it will kill parts of advertising along the way)

          3. fredwilson

            i only hate a world where we invest in a company and TWC says “pay us or your service isn’t going to be available to our users”as long as they can’t do that, i am basically happy

          4. Morgan Warstler

            But that doesn’t happen! You’ve been investing all along, without that happening. Why the sudden freak out now?The thing is IF you could just get that one thing – HOW do we protect their right to make their pipe sing in ways that pipe owners can’t?I don’t want to lose “what’s really possible” just because it might be better than want happen on the regular internet.

    7. fredwilson

      that doesn’t sound like the open internet to methat sounds like some kind of private network

      1. Morgan Warstler

        It sounds to me like the guys who pulled the cable taking advantage of their hard work… they wouldn’t be limiting anyone on the Internet, but they’d be building something VERY cool for:1. themselves2. consumers3. publishersWho wouldn’t benefit? VC?

        1. fredwilson

          forget VCs, we are not the issueentrepreneurs are the issuezuckerberg, larry and sergey, bezos, omidyar, etc would not have a level playing field in that world

          1. Morgan Warstler

            ? No one is limiting any of them.Those guys are trying to sneak off with the harvest of millions of workers, start-ups, investors – none of whom are calling for GOOG to fork over their secret sauce, none of them are screaming for Amazon to fork over their customer DB.Your efforts are exactly what will lead to Government telling Zuckerberg he can’t own Web-ID.If you do this, and good god win – EVERYONE will become a rent seeker.

  11. andyswan

    To use a previous example:Basically, you’re saying that if I want to start an NO FILTER NEEDED ISP for Mosques, Churches, Home-schoolers and Synagogues that guarantees no offensive (to them) content or content contradicting their faith/approach will appear on their computer (or 10x your money back!!)…..I shouldn’t be allowed to?

    1. ShanaC

      I know some people who would be pissed off at this comment-You would then trample on the rights of individuals of said groups to make individual decisions. What if you are Fundamentalist Latter Day Saint. And you then read on the internet about, college at age 14 because you stayed up late and snuck on a secret computer, or snuck into town…. And it gives you: A goal.That, is the power of information- freedom of association BY CHOICE!Do companies have a right to limit my freedom of association irrelevant of my physical place?I could tell you some interesting stories about the good and the bad that comes…

  12. robertavila

    It is a curious fact that everyone is in favor of a rule of law and that everyone is suspicious if not opposed to regulation. Laws are created by the legislature but tn our economy there are two venues in which the interpretation and implementation of legislation takes place: the courts and the agencies charged with regulating. If property rights are thought of as that extensive list that enumerates what one is and is not allowed to do with the stuff one has legal title to, then laws,courts and regulations define exactly what it is that we all own AND THUS have a MAJOR impact on the nature of our wealth. It should not be a surprise that many large businesses can get a greater return on their investment in lobbying than in R&D. The public rants for and against “regulation” are not against the rule of law but simply an attempt to assure that the property rights are defined in ones own favor as opposed to someone else’s. I happen to agree with Fred on how property rights vis a vis the Internet should be defined, but see the situation as simply a 21st century land grab or enclosure movement and not an evils of regulation debate….

    1. Keenan

      Completely agree Robert this is an issue that doesnt fit today’s trendy “smaller gov. down with socialism, no regulation” diatribes.It’s about rights and managing rights has always been the role of the government. It’s exactly where I want them.

      1. andyswan

        You’re trampling on the rights of providers in the process.

        1. Tereza

          Rights of providers?Their rights are that the govt has granted them a license to make money.

          1. andyswan

            Awesome. We’ll have dumb pipes forever because government did someone a favor and didn’t restrict their right to be in business, and therefore had the right to restrict how they do business, forever.

          2. Tereza

            Hey I won’t be engaged in this throughout the day bc I’ve got a business to (start and) run here, plus Morgan killed my mood for spirited debate (and Andy BTW thank you for calling him on it).My engagement here is purely self-serving based on two things.1. My observation is that many of the providers operate with the the approximate efficiency of the government. Decisions are by committee and innovation progress, especially ones that could generate new revenue off their existing platforms, is a joke. Ask anyone who does TV ad buying about Canoe and you’ll see raised eyebrows, lots of promises, nothing to show. I’ve worked with almost every major media buying agency on high-level TV/cable buying (Nat’l and local) where there are massive ad dollars to be spent and it’s a given that the cable co’s can’t get out of their own way. They are leaving billions on the table, despite many millions they’re investing in it. Everyone knows it. People are getting paid lots to solve it, for years, and getting nowhere. It’s a sinkhole. And that REALLY gets my craw.2. I am an entrepreneur. So the other side of the equation is that — I admit — I am eager to give small innovators a leg up. Or at least an even playing field.

          3. ShanaC

            Fair is Fair- so what is the pushover for their said billions?

          4. Tereza

            What do you mean?

          5. ShanaC

            Well, if they are leaving billions on the table, and everyone knows it, I’m sure they won’t mind if I take one or two. So where do I find them?

          6. Morgan Warstler

            Tereza, it’s just not true. And I have vested interest in seeing cable move fast, fast, fast.My company brought something totally untried to Big Cable on the ad side, we ran into a wall, but it took remarkably little time (less than a year), to get them to essentially automate something in their system just so we, a little bit player, could test out a theory. They spent likely near a thousand man hours of high level time, to shoe horn our thing into their system.CANOE: The issue with canoe was not cable not getting its act together, its that the other two players at the table Advertisers and Networks both have to agree into a binding longterm shift of economics.When suddenly all ads are local, but it costs money to deploy the new system – networks FREAK OUT because wait, what if advertisers only want to buy the rich neighborhoods? “What if advertiser only need half as much time?” Advertisers freak out, because “what do you mean targeting is going to cost more” and “WAIT – I still want to have big massive 30M viewer buys”Look, eventually Visible World et al are going to have it hammered out.It isn’t a sinkhole, outside influences drive this stuff – when real brand ad dollars leave for the web, innovation will happen faster.I do know this – I’ve spent 15 years doing video online and off, and as a guy who salivates about the future of the video web, and after it all I’m 100% certain it is about using Cable’s Video Architecture, and the Internet just for data and intelligence. Forgoing the power of the Cable Video architecture is ludicrous…. It’s like souping up a 4cyl car and pretending it’ll beat a jet engine.the government and anyone arguing for it, is going to screw our pooch royally and we as entrepreneurs should tremble at anything that removes the incentive for Big Cable to build out the web side.It benefits us immensely for our customers to pay up that $150 bucks a month… more than all the tax dollars in the world.

          7. fredwilson

            so you have a vested interest too morgan and you are calling me names for having an interest even though i stated it right up front in the post?it is fine that you are in bed with the cable companiesbut i am not a thief for wanting them regulated

          8. Morgan Warstler

            I’m not calling you names. It is “rent seeking” – as in petitioning the government to take from someone and give it to you. Angel investing is in a precarious position – fighting that is the opposite of rent seeking. Funding start ups to remake GOV2.0 – is not rent seeking. Hacking education is not rent seeking.And I’m not “in bed” with cable. I just want to see the COOLEST stuff come to market, and Cable’s architecture needs to be webified – it doesn’t need to be turned into dumb pipe. We’ll lose countless advantages.

          9. Tereza

            You’re calling my credibility into question and I must set the record straight here.I have worked deep in the TV ad space for 18 years, all underthe theme of hacking it. I have transformed markets. I have sold advertising. I have guided agency buyers, I have worked with easily a hundred of the world’s top advertisers. I have made some people very rich. And I have developed killer plans that unwieldy committees have turned down because they don’t have the guts. And I’m also fresh off a tour of the country talking to 80 some-odd TV buyers at the local as well as national level.I get that you have a vested interest. I too, for years, have been engaged in and passionate about the potential can be unleashed by these people (often I’ve left disappointed). And I am pleased that you’ve had luck getting their engagement. And I have no problem with your having a vested interest, as long as you’re honest about it.But to swing an appendage around and suggest that someone else doesn’t have a very, very robust fact base from which to draw conclusions strikes me as naive.

          10. Morgan Warstler

            I am not calling your expertise into question. Jeez. I’m telling ya what I experienced. There’s gotta be 50 companies off the top of my head, all VC funded who deal with cable.My truly vested interest, is like theirs, (and Fred’s) is in not turning the start up industry into another thing run and guided by government.Apart from that, it sounds like we oughta be doing business together.

          11. fredwilson

            exactly. they were granted a monopoly by the gov’t

        2. ShanaC

          Yes, but if you read a classic such a Locke- it is still about managing rights to provide the most access to individuals (however individuals are described as such in society)

        3. Keenan

          See my stand alone comment. Precedent has already been set on this one. When the social good is at issue, the rights of business are subjugated.I do believe this is a social issue as much as it is a business issue.

          1. andyswan

            I think that the social good would be served, and obesity rates would fall, if all PSIA Certified Ski Instructors were required to offer lessons for $15/hour from 8am to 6pm, Wednesday through Sunday to anyone interested.Let’s take a vote!

          2. Tereza

            Points to Andy for creative debate engagement.I knew you kept your ski hat on in May for something!

          3. kidmercury

            lol you know back in the day andy had another avatar, a picture of him smiling, happy, enjoying life, without a ski hat. then he traded that in for a ski cap and a frown and started beefing with people all over the place. i support the new tough guy andy — he’ll put you in your place if you try to steal the free markets! 😀

          4. Keenan

            Not a good analogy, a better one would be let’s pass a law that says all PSIA certified Ski instructors have teach everyone who wants to be taught regardless of how obese, clumsy, non-athletic, they are.I’d support that.//keenan

          5. andyswan

            Would the greater good not be further achieved by standard, regulatedoperating hours and minimal prices? After all, the social good is at stakehere….who are you to deny this experience to others based purely on yourgreed for more money or free time?

        4. robertavila

          “rights” is a tricky word in part because of the concept of “natural rights” and the idea that there is something innate rather than political about a right. Political support for one set of rights relative to another may be marshaled by an analysis of the expected consequences of one set relative to another BUT the process is still political. I prefer the sausage making approach of our representative democracy to the physical bloodshed which characterized most settlement of rights throughout history, BUT rights are still the result of politics, indeed that is all that politics is about: what set of rights will be enforced. We may like it more when the results are the greatest good for the greatest number, or when they are inline with the traditions we are used to but these are but examples of many possible political preferences.

          1. ShanaC

            Thank you for the honesty about natural rights- even if conceptually they are a little unnatural.

        5. akharris

          Corporations are not accorded the same rights as individuals, and they should be treated differently as a result. I’d rather subordinate their needs to the individuals rights any day of the week.

  13. Dan Ramsden

    At the core of this debate, and the subject that is nevertheless brushed over, is that media/telecom is a commercial segment that is governed by the same economics as any other. In short, somebody needs to pay somebody else for a product or service along a supply/customer chain. What complicates things in the case of the “open web” is that it is fundamentally based on “free of charge”. This is the root of the problem, in my opinion, and the debate is mainly about how to finance the gap and how to split the bill. I wish that the ongoing discussion, presentation, and all the pro/con argument, would be more straightforward along these lines.

    1. kidmercury

      open does not equal free. google is widely regarded as a fairly open network. ebay is a fairly open network. the more open these systems become, the more economic value they generate.

      1. Dan Ramsden

        Agreed, and there are other good names you could have listed (although eBay is ecommerce and not really comparable). But my point was that much of the open web has not yet found a sustainable or compelling revenue solution. Net neutrality helps to alleviate a potential increase in costs… and that’s not necessarily a bad thing, by the way. I’m only saying, let’s call it what it is. Neutrality? Not really, it’s a question of whose dime.

      2. Vikram

        “The more open these systems become, the more economic value they generate” – That’s exactly right. More and more companies are following this model as it eventually generates more value.

      3. akharris

        While I’d like to wholeheartedly agree that open = greater economic value, I just don’t think that’s always true, or, rather, that it depends on whose economic value we are discussing. Closed markets and effective monopolies generate a huge amount of economic value for the controllers of those markets. We see that in the russian oligarchies, and in the managed economy in China. In fact, monopolies are the product of open markets without any regulation. They’re the natural extension of Adam Smith style capitalism.The net at large is a very different thing than the companies you point out. Each of those is built on the infrastructure itself, and that infrastructure needs to remain open.The thing is, I don’t trust the companies to do that themselves, and they have the kind of sway and power right now that means they don’t have to listen to me. If the government makes the right kinds of regulation (and I agree, it does seem farfetched), then competition and evolution are a lot more likely.

  14. Mark Essel

    Feels bill of rights-ish. Why do organizations always have to tell us what we’re allowed to do a far as “rights” go. How about just outlawing the impinging acts and call it a day.How would an FCC regulated Net play out globally? Would our Net be more like China’s or Australia’s?How about a free market Net where there is no regulation, how do I buy into that?Well if I have to weigh in, I vote the least external interference necessary, as in fine adjustments. Over correcting control systems always end up crashing.

    1. ShanaC

      Niether nor- the fact is there already is no such thing as Net Neutrality if you think about it as part of customary law. If I post something here and I defame someone in Britain under their laws I better not go to Britain…

  15. kidmercury

    Many people, including readers of this blog, think regulating the Internet is bad for business.misleading. most of us think bad regulation is bad for the business. there are very few anarchists, and i don’t recall seeing a single one here at AVC.proper regulation requires a regulatory system that functions properly and efficiently. we do NOT have that. the regulatory apparatus must be fixed in order to get proper regulation. curiously, i don’t see you doing much to advance that. presumably it is not “exciting” enough. or at least not as exciting as asking for a taxpayer funded handout. (in all fairness, though, fred does make more political posts than most of his peers, and is certainly a leader in that regard. so i gotta give some props on that front. but that is more indicative of how irresponsible and immature others are)it is also extraordinarily short-sighted to think that giving the FCC the power to override the courts is a good idea. you may think it’s good now. let’s see how much you like lawlessness when it doesn’t work to your favor. (of course this isn’t to your advantage either, but that’s a different story). again, this illustrates just how broken the regulatory apparatus is when some bureau (the FCC), whose powers are very nebulously defined (i’ll argue it’s unconstitutional, but then again most things are, so i guess unconstitutional is just how we roll these days) can override the courts. And without these rules, investors like me who invest in the “open internet” will not be able to invest anymore.false. i’ve already illustrated how open source makes net neutrality a virtual non-issue. you have open source investments. net neutrality is about taking power away from ISPs and giving them to SaaS companies. i’ll argue that open source disrupts SaaS — and thus, net neutrality is blocking the disruptive process. if the disruptive process is blocked, that is what will really screw VCs and innovation at large. also, let us remember that there is currently no net neutrality legislation, and you continue to make investments. so, at least at this point in time, your argument is contradicted by your actions. last but certainly not least, there is the cost issue. this is going to cost money, just like the national broadband plan, just like everything else government does — because, alas, there is no free lunch in life. how much is it going to cost? i’m not so sure why you are so fond of asking for public money without mentioning how much it will cost. it undermines the credibility of your argument.

    1. Mark Essel

      +1 Kid.I’m with you, certainly dug your kidney punch to the disruption blocking balanced by your props for Fred getting political.We need Seth G. to show us the marketing masters approach to saying “bigger bureacracy disconnected from capitalistic forces here isn’t going to help”.We need competition for cheaper, faster and more seductive (that’s all me, *cough* pr0n) Internet. Over seers translate into control and when that control is disconnected from Net users we have a problem.We need a fully data agnostic Net, where bits are paid for. You want 5gigs a month up and down? Pony up $50 bucksthat’s 100 mbits for a buck- booya.

    2. George A.

      KM, very well said.I won’t bother with the business case against NN since you have never been willing to even debate its merits (which is essentially using big business to subsidize broadband deployment in lieu of having the consumer foot the entire bill). I will only say that draconian ultimatums (“we won’t invest in the open internet anymore”) that NN supporters throw out as a scare tactic belong more to the political genus than the business one. I am surprised to see our beloved FW fallen prey to such hyperbole.I have said this before in response to your campaign here: show me the problem and I will opine on the fix. As of yet, NN is chasing shadows. There are no problems. Yeah…that feels like a good time to get big government involved.

      1. fredwilson

        in a political fight you have to get play the same game that your opponents are playing

        1. CJ

          This is often overlooked, the high ground is a wonderful thing, but often it won’t win you the war. Sometimes you have to play in the mud with the pigs if you want to win. (As my daddy used to say)

    3. Keenan

      Kid,Can’t get behind you on this one.This isn’t an argument on whether the net will be regulated or not, but an argument on WHO will regulate the internet, the carriers or the government.In this case I’ll take the government. The carriers are self motivated, as they should be, but we lose in the end. The government may be inept at regulation but there is little conflict of interest. See my reply to Andy Swann, the history of innovation from the carriers when they have control is terrible.It’s all going to be moot anyway. Even if the FCC loses, the minute the carriers block something or prevent access to something the current detractors to NN want, this whole debate will fall to the side.

      1. Dan Ramsden

        “The government may be inept at regulation but there is little conflict of interest.”Seriously though, you know who has no conflict of interest? The market.

        1. Keenan

          The markets are not universally efficient. Despite what you suggest. Our society is littered with examples of regulating at just the right level.What the FCC is requesting falls far short of egregious government over site. This is a great example of exactly where gov intervention in moderation is appropriate.//keenanSent from my iPad – therefore please excuse any blatant spelling or grammatical errors, I blame the on-screen keypad.

    4. ShanaC

      agree with the first part. The second part is shady. It is how do you serveA) The last chunk of people that had to be served by ma bellB) Mobile service on limited Air- even if you stuck lots of pipe in the background? (at some point consumers will scream how they are the same, even if they are not quite)Both A & B require packet shaping to some degree at this point to serve the market. You can’t be speedy to the last mile. You can’t be speedy to the bazzillions of people using a small amount of bandwidth. You can do things to make it seem so based on usage patterns.The question is how- a totally deregulated market would be a mess. See: Enron and California. No open source stack can stop a derivatives market on packet usage in spokane, washington. If someone was really out there, why not cause a sudden price hike?Again- that’s why I agree with A. This is a matter of how we do this. With Good measure so we don’t do something silly like cause sudden price hikes and drops in broadband.

    5. Matt A. Myers

      Thanks for putting in the time for the reply.P.S. I like the highlighting. 🙂

  16. James Gillows

    I think this country is going to become a communist regime – Thanks Fred!Make capitalism work – let the best service win for the right buck – dont say VC’s do this and VC’s dont do that and Telco’s do this and Telco’s dont do that etc….There will always be folks who want to misuse the net [like folks who want to do wrong things on wall st and other places in the brick and mortar land] and we need to have capitalistic based approaches [as in private digital security firms analogous to the ones in the brick & mortar world] to help prevent that.We have seen what happens when the folks who lay down the railway tracks try to control it [train services that lease the line get hammered every time and the consumers who ride those trains are always left in the dark] and if the government tries to control it then we are in for another big problem [analogous to bridges running out of warranty!!]. Let the market drive it…

    1. fredwilson

      markets aren’t perfectjust look at the subprime market to see thati am a red blooded capitalist and i believe in markets more than gov’tbut there are times when the market will not solve the problem

  17. andyswan

    Fred I see your point about mobile internet as actually working against your argument. You state that the providers had too much control and stifled innovation….and then BOOM….someone sees that as an opportunity and completely changes the landscape (without FCC intrusion!?!!) as a result.This is what markets do. It’s not instant, but it happens….and we don’t need a lobbyable, political entity with zero expertise in innovation regulating yesterday’s problems.

    1. ShanaC

      And how long did that take for the Diamond market….

    2. fredwilson

      guess what the chairman of the FCC was before he was that?a VCand before that an internet entrpreneurhe’s got more expertise in innovation that you andy

      1. andyswan

        Cool, I don’t have to worry about him (in theory).Unfortunately, the authority does not expire with the person, so I DO have to worry about any of the next 8 FCC chairmen being political hacks and over-reaching (see FOMC, SEC, FHA, etc). As we all know, authority, influence and interference NEVER decline.It’s not a level of power I want anyone to have over the internet, even myself.

  18. Peter Fleckenstein

    I have some great “Pro-Business” Regulatory Frameworks in honor of FCC Chairman Genachowski;All auto manufacturers must make the exact same car for everyone. (Auto Neutrality)Apple must open up the iPhone to all carriers at the same price and terms. (Phone Neutrality)All software companies must provide equal access to their source code for all developers. (Code Neutrality)All mobile carriers must provide the same price for all cell phone plans (Price Neutrality)All VCs and Angel Investors must meet with any startups who want to talk with them. (Access Neutrality)Any VC or Angel Investor must provide the same terms & funds to all startups. (Investment Neutrality)This is all based on Chairman Genachowski’s foundation of entitlement.Bottom line – The Net Neutrality is about regulation. It’s just the start for the government in promoting other stupid regulations in other areas of commerce. Haven’t we had enough stupid regulation coming out of DC to last us for generations?

    1. Dan Ramsden

      I initially thought you were serious when I saw iPhone neutrality at the top of your list, because that is actually being considered.

      1. Peter Fleckenstein

        Really?!! That’s actually being considered? Let the Neutrality Entitlement Games begin!

        1. Dan Ramsden

          I was taking some poetic license, but not that much. Here is more info:

    2. Matt A. Myers

      Communism / socialism?But as you show here, the wrong regulations will stifle innovation. But maybe society should be more conservative with innovation for awhile and bring equality to people?Revolution anyone? 😛 It’s sort of happening with the social web now anyway…

      1. Peter Fleckenstein

        Yes let’s conserve on innovation and work on equality. After all, it’s worked brilliantly for Greece.

        1. Matt A. Myers

          FTA: “Their unhappiness at the cuts was matched with rancor toward a generation of politicians who they say spurred the crisis with decades of corruption, kickbacks and accounting legerdemain aimed at obscuring to the EU the true level of Greece’s annual deficits.”I’m not sure how you’re attributing their current issues being caused by working on creating equality? 🙂 Please enlighten?

          1. Peter Fleckenstein

            GreeceAll Greeks can retire at 55 and receive 100% pension(equality) yet they don’t have the funds to pay for it. (sound familiar?)Greece wanted to join the European Union and in turn adopted the Euro. (Equality)Now Greece wants the members of the EU and the world to participate as equals in the solution to bail them out. (Equality)Finally, could you please tell me one thing Greece has innovated in the past 40 years?

          2. Matt A. Myers

            I wouldn’t say putting yourself on the same playing field (joining EU) is creating equality – it’s perhaps more the precursor to being able to reach. And apart of being apart of the EU is a safety net that can be offered such as money. They’re by no means a lost cause.Regarding retirement age and pension, I believe the same issue exists around the world as baby boomers are now retiring. Tie this together with many decades of corruption and of course they’ll be worse off.And no need to hate on someone (or a whole nation) for not having overly visible worldwide innovations; I’m sure they must have some though.Corruption has existed in history and has caused long-term problems for those people. It still exists today, but once the corruption is more pronounced and dealt with then proper changes can have a chance to take place.. and perhaps Greece needed more outside eyeballs paying attention, with vested interest such as loans, in order to allow that change and their economy to become healthy.

          3. Peter Fleckenstein

            You made the comment that we should conserve on innovation and work on equality. I merely pointed out how that’s worked out great for Greece.Wait, being a part of the EU is a safety net that can be offered in the form of money? You mean like taking from one to provide for another that will never return it back? Don’t you love equality? Let’s go and talk to Greece who has basically been banned from private lending and had governments tell them we’re not helping out.It doesn’t really matter that everyone is retiring. The point is that through government regulation and frameworks put in place that are false to begin with we now have no way of paying for them. Social Security is a perfect example. It seeks to give everyone pretty much an equal pay but is now bankrupt and there is no way to continue supporting this equality ponzi scheme.I didn’t hate on anyone for not innovating. I asked if you could provide me an example of Greece innovation. You see, Greece hasn’t innovated in anything locally, regionally, or globally. What they’ve done is continually tried to reach for equality while producing nothing at the expense of others.Corruption will always exist. Greece cooked it’s books and no amount of outside eyeballs would’ve changed that.When you step back and look at the root cause of everything that is happening right now you can see the problem quite clearly – Growth and expansion of government resulting in stupid regulations and ponzi programs all in the name of equality.

          4. jd

            Not sure how Greece is relevant to anything under discussion here.

          5. Peter Fleckenstein

            We went off down a tangent when discussing equality, neutrality, and innovation.

          6. Matthew V

            Reading most of your comments has led me to believe you are incapable of stating a valid argument.Suggesting Greece has had no innovation because of equality is such a crap argument.Explore the possibilities.Greece has a different culture to most self satisfying dog-eat-dog western countries. It’s not about making money or innovating, but more about being generally happy with life.The UK, my country, is part of the EU. We have the wonderful NHS and a national pension scheme, yet under your argument, we cannot innovate because we are slightly socialist (equalisation). Let me point out that the UK does innovate.

          7. Peter Fleckenstein

            Yes we can all see how happy Greece and it’s citizens are right now. Slightly socialist? You have a national health system that is in shambles. Your pension scheme is unsustainable.Finally, please do point out exactly what the UK innovates on.

          8. Matthew V

            Where are you from? US?If you’ve had no experience with the NHS and believe all you hear from the media, I don’t believe you are qualified to judge the performance of the NHS, which is outstanding.And I’ll leave this conversation there, I can see I’ll never change your mind.

          9. Peter Fleckenstein

            Matthew, I don’t have to be from England to know that the NHS budget has skyrocketed for decades and the quality of care isn’t even close to the U.S. I also don’t need to be from England to know that the NHS is failing in meeting cancer survival rates or that NHS’s National Institute for Clinical Excellence denies cancer patients widely available cancer drugs. How N.I.C.E. of England.If you want to change my mind then please try to bring better examples rather than talk about Greece being focused on happiness as the world watches it literally burn and go bankrupt before our very eyes.You can also stop lecturing me about England. Instead you should be focusing on how “Great” Britain is following the path of Greece and how to stop it. You know…innovate.

      2. andyswan

        “But maybe society should be more conservative with innovation for awhile and bring equality to people?”I can’t believe I just read that and it wasn’t sarcasm.Well, I guess we’re lucky they didn’t try that once the horse-drawn buggy was perfected, and so many went without it, huh? Goodness.

    3. Aaron Klein

      Peter,You and I often agree, but I think this case is different and I’m not so sure the FCC isn’t right here. This is not your typical Obama administration overreach – that would be to classify all broadband services like telco lines and put in price controls and other so-called “pro-consumer” regulations that are in reality anti-consumer because they restrict the marketplace from providing choices.Instead, we’re simply talking about requiring fair competition from broadband providers – and fair competition is a fundamental building block of capitalism.This is the equivalent of not letting power companies control what devices you’re allowed to power with the electricity you buy. Or water companies control what acceptable uses of water are. Or letting a toll road company strike a deal with Government Motors and ban all non-GM vehicles from the road.I’m all in favor of trying to foster broadband competition and that requires the freedom to compete and make solid profits off investment in a network. These companies should have absolute freedom to offer tiered pricing, or slow connection speeds based solely on usage caps rather than the type of usage (T-Mobile is doing that with their new no-overage plan…go over 5GB and the speed just slows down).But the Internet has been one of the greatest drivers of freedom and I’m not willing to surrender that freedom to big business any more than I am willing to surrender it to big government.Aaron

      1. Peter Fleckenstein

        Thanks for the reply Aaron. I see your POV and respect what you are putting forth just like I respect Fred for what he’s put forth in this post.I have one question for the pro-net neutrality people:What has stopped anyone from fair competition and freedom on the Internet before?I would posit that no one is surrendering freedom currently without the FCC Net Neutrality framework. Your example of T-Mobile is proof. If a person likes that no-overage plan then they buy it from T-Mobile. The profits T-Mobile gains can be used to build out their networks and provide better, richer, service for anyone who wishes to subscribe.I’m Administration neutral on this. To me, the mere imposing of this “Net Neutrality Framework” actually restricts innovation and the ability to provide choices.One final thought – The FCC and Fred, correctly or incorrectly, states this is a “Framework”. Frameworks are control mechanisms meant to be built upon and grown. I can tell you that is exactly what government wants to do here. If anyone doubts my assertion here one merely has to look at the legalistic phraseology and veiled mandates within the FCC’s six rules.Again, I really appreciate your thoughtful response Aaron.

        1. Aaron Klein

          I agree with you on the need to be wary of growth in government’s capacity to regulate, but I’ll return to my previously stated mantra that government should regulate three things and three things only when it comes to business: companies must (a) tell the truth, (b) do what they said they were going to do, and (c) compete fairly.There is no doubt that these are difficult issues and precise consistency on them is hard to achieve. I’m mindful of the slippery slope that exists here.But I think the best time to close the barn door is before the horse gets out. We’re just getting to the scale where the billions of dollars at stake online could drive an information service to cut a billion dollar deal with a telecom to monopolize their pipe and kill their competitors. That’s not fair competition in my book.If every American had a multitude of quality broadband providers to choose from, I’m betting we wouldn’t be having this discussion. At least one of those providers would compete on “open” and would win a lot of customers on that basis. But we’re not there and I don’t see us getting there in the next five or six years. Maybe after that with 4G wireless – but it remains to be seen and I’m skeptical.Take my house for example. Yes, I choose to live in a rural area, but so do many Americans. I have no cable service and no DSL service available. We get satellite TV, and our choices for broadband are either satellite internet (very poor quality) or mom-and-pop wi-fi providers (at best, very uneven quality).I’ve tried Verizon’s Mi-Fi…but the 5GB cap + overage charges would put me at an unaffordable monthly cost of about $200. I’m going to try out T-Mobile’s service (I could buy two of their $40/month plans for less than I currently pay the wi-fi provider) but I’m fairly sure I’m in the EDGE service area and the speeds will be awful.If AT&T decides to get their act together and become the monopoly provider of DSL to my community, why should they be able to tell me that I can use Twitter but not Facebook, or Hotmail but not Gmail? Any more than my power company could tell me that they won’t power my refrigerator because they’ve decided it’s too old and is harming the environment?This is what I mean when I said “I’m not willing to surrender that freedom to big business any more than I am willing to surrender it to big government.”Edit: Make that an “unaffordable” monthly cost of $200. 🙂

          1. Mark Essel

            I’m convinced Aaron, the sole source for Internet should have no say over what flavor of data you get. It’s more precious than education.

        2. fredwilson

          and why have the telcos been spending a fortune putting packet detection systems into their networks in the past few years?

          1. Peter Fleckenstein

            The reason Telcos have been spending a fortune putting packet detection systems into their networks is because the network bandwidth has exploded exponentially. They could be putting it in to manage data running across their networks and have the ability to provide better service for the consumer. They could be using it to analyze traffic so they can offer new data plans to consumers. They could be using it to increase the security of their networks. They could be using it to plan for network growth.If the net neutrality framework had been in place, I’m willing to bet that the iPhone would still not be a reality. Jobs would still be shopping it around. Even though AT&T and Jobs structured a 5 year exclusivity deal the market is forcing Apple and AT&T to reconsider.I’m not an expert in any of this. I just don’t see the necessity for any net neutrality framework. The market has been proving this out.

          2. jd

            Your bit about the iPhone makes no sense. Why would the iPhone not exist? How does network neutrality even apply to wireless?

          3. Peter Fleckenstein

            According to the Net Neutrality rules Apple would not have been able to make an exclusivity deal with AT&T (A telco). It would not be net neutral.A smartphone, iPhone, provides internet access and services to consumers across a network.

        3. jd

          We know exactly what the world looks like without net neutrality: AOL, Compuserve, Genie & Prodigy. Is that really what you want? Net Neutrality is anti-free-market and you know what? It’s better. Thank you US government for TCP/IP and Euro government for HTML/HTTP. Private industry could *never* have delivered the internet.

          1. Peter Fleckenstein

            Sorry, last time I checked we still don’t have “Net Neutrality Rules” in place and where are AOL, Compuserve, Genie, & Prodigy now?”Net Neutrality is anti-free-market and you know what? It’s better.” Did you really say that? Ok, tell you what, let’s have Car Neutrality, Wage Neutrality, Job Neutrality and a host of other neutralities. It’s better as you say.Wait, I forgot one important Neutrality – Home Ownership Neutrality – where everyone regardless of their ability to pay can own a home. That’s worked beautifully.

    4. fredwilson

      c’mon, don’t be stupid

      1. Peter Fleckenstein

        I’m dead serious. Fred, I respect you. Flat out. Respect. You’re a smart mofo and you innovate, create, and help others grow.But let’s look at this net neutrality for what it is. Control.You say in your post “There is no mention of pricing in the six principles.” No, the word “pricing” is not there. Let’s take one of those rules to see how the government could very well institute pricing.”Consumers are entitled to access the lawful Internet content of their choice.”Now, as you say the carriers can charge whatever price they want too. However, lets say that a group of people cannot afford to pay what one or many carriers charge. According to the above rule the FCC would have the ability to say that consumers do not have the ability to access lawful Internet content of their choice and thus we have to implement price controls. This is not just speculation, this has happened in government many times before.As for Apple opening things up with the iPhone and the app store? Really? We have a company who designed a proprietary phone, permitted only one carrier to provide services, officially prohibits anyone from unlocking the phone, and puts extreme limitations on developers. Shouldn’t, in the spirit of neutrality, every carrier have the ability to put the iPhone into their product mix? Shouldn’t consumers, in the spirit of neutrality, be entitled to use the iPhone on the carrier of their choice?It’s interesting to note that you and USV have made outstanding investments WITHOUT these net neutrality guides. Why? I’m guessing because of innovation in the market and not regulation from the government.Again, I respect your post and where you’re coming from based on what you want to accomplish. I just think thats heading down a slippery slope.

        1. raycote

          So let me get this straight, citizens being subject to social regulation for the greater mutual public good is a legitimate concept but all corporate interests get a sacrosanct exemption from any form of social regulation, even for the purposes of limiting damage to the wider community of business?

          1. Peter Fleckenstein

            I never said that.

        2. Aviah Laor

          I agree it’s Econ 101. Free markets are good since they maximize individuals and business utilities in the equi. point. A monopoly can rip off everybody since it set flat supply curve and has to compromise nothing .Now if Apple suggests it’s own search engine and ATT&Apple decide to double charge you for Google searches, you can grab an Android device.This is not the case with the cables infra, and if we didn’t have Android it would not be an imaginary scenario.

        3. fredwilson

          then don’t mock me with a bullshit comment like you left at the startand saying that “they might do this” is also irritatingi might do a lot of things toobut i don’t

          1. Peter Fleckenstein

            Fred, I’m sorry that you took my comment as mocking you. I didn’t mock you at all. In fact, if you look at my comment I left at the start you’ll notice I framed my comment in honor of the FCC Chairman. I used the net neutrality rules and applied them to other industries. If I’m guilty of anything then it’s my use of rhetoric and “snarkiness” to make a point.You asked me why the telcos are spending a fortune putting packet detection systems in and I answered you with “They could be…”. Now your telling me it’s irritating? Every one of the examples I listed is a valid use of packet detection systems. I will put them in bullet points without the phrase “They could be” next time.

          2. fredwilson

            i am dead serious about the need for regulation of the internet to protect innovation from the monopoly carriers who control the last mile. i am open to serious debate and discussion. but i believe sarcastic humor is mocking me, particularly on an issue i care so deeply about.

          3. Peter Fleckenstein

            Fred, I am dead serious about the need for smart regulations when they are needed. Are you willing to trade the free-market for government controlling the last mile? Because that is exactly what the Net Neutrality Framework is – A doorway for the beginning of the government to control first the last mile and then move forward until the control the whole infrastructure.This is an issue I care deeply about too. My original comment was delivered in a manner to quickly illustrate how ridiculous this Net Neutrality Framework is. Nothing more, nothing less. As I pointed out previously, my original comment was directed at Chairman Genachowski and not once did I reference you. I didn’t tell you “c’mon don’t be stupid” or that your post was mocking me because I believed differently. If you took my comment to be mocking because this issue is one you care about so deeply then that’s on you.I’ve responded to others and to you directly and sincerely through out this post. I have stated directly, that I have the utmost respect for you. You have chosen to tell me not to be stupid, tell me that I’m mocking to you and irritating, and suggest that you’re open to serious debate and discussion.I respectfully submit to you that you read all my comments and the replies to my comments. You’ll see that serious debate and discussion has been taking place all along.I’m just not looking at Net Neutrality in relation to the last mile. I am looking at Net Neutrality like I see the forest through the trees – clearly.

          4. fredwilson

            I read every single comment on this blog. I don’t skip any of them. I can’t reply to all of them though. That would take a lot more time than I can give.I don’t agree with. And you don’t agree with me.I can live with that

          5. Mark Essel

            I didn’t get the mocking “tone”, I got the here are some extrapolations, or reductio ad absurdum.I was anti regulation but Aaron convinced me above with his situation (no choice).

      2. raycote

        Thanks you for putting your foot down and drawing an epistemological base line in the sand!

    5. PhilipSugar

      Good post to get the juices going, but in my mind its binary:If you have a government granted franchise i.e.:1. You use public spectrum2. You can dig up my front yard, put cables in my cities conduit or poles3. Access the Fed Discount RateAmong others….You have to provide a level playing field and transparency on everything else.Sorry otherwise negotiate with every single, every single person that you have to deal with:I..e1. Get approval from every person that has property in your spectrum2. Every person that you dig up their front lawn3. Every person that pays taxes…..I don’t think so.

  19. RichardF

    How does what Fred is backing (light regulation of broadband) differ in rationale, if it does differ, from regulation in the utilities markets in the US (power/water)?I’m asking this question from a naive and unbiased perspective because I don’t live in the US and know nothing about regulation of utilities in the US.

    1. Scott Carleton

      You’re getting at the crux of the issue Richard. Broadband is a similar commodity to utilities such as power and/or water. In a country such as the US we are at a point where everyone should be able to have access to broadband such as they have access to electricity. However, we stand here at a point to set forth the rules and regulations governing broadband for the future and hope to avoid the pitfalls we have made in the utility sector over the last century.We should learn about what has worked for the utilities in the past. Was the government-controlled Tennessee Valley Authority (TVA) successful before it was (partially) broken up? Does the fact that most of us don’t have a choice in our utility provider factor in? Are utilities and therefore broadband becoming a right to every citizen such as health care is and therefore is it the government’s job to ensure a flat, competitive playing field for all consumers?I think we could learn a lot on how to proceed with broadband by focusing on the history of government regulation and interference with utilities.

    2. Mark Essel

      You bring up a tough to argue point.Although I’m not a fan of regulation, I do think that everyone should have access to broad band Internet if they wish it. It’s more fundamental than education systems in my opinion. If it must be regulated, I’d hope for light regulation though.I’m worried like education, government regulation can do more harm than good in this area.

      1. RichardF

        It is a tough one. We are electing a new government here in the UK today and it is one of the issues that all the parties here are campaigning on. So I’m watching this space.

  20. Keenan

    I agree with Roberavila on this.This is ultimately about rights or access.Not to go all racial on you but the debate falls on an interesting line similar to the Jim Crowe laws. (the access part vs, the right of a business owner to do what they want with their business, their invested capital)When it comes to the greater good of society, business loses. The Jim Crowe laws of the 50’s and 60’s are an example of where the greater good of society trumps the rights of the business owner.It would be hard pressed for anyone to argue today a business owner should have the right to serve or NOT serve anyone he wants based on race, religion, color etc. Although the business owner has made the investments in his business, and it’s his property, we’ve learned that the rights of individuals and the benefits to society as a whole out way the businesses individual rights.The argument that government regulation doesn’t have it’s place here is just false.I see the similar argument here. (NO IM NOT COMPARING THE INTERNET TO RACE!!!!) The civil rights laws are just the best example of where social benefit and unimpeded business trumps the rights of business owners. Remember it was the Interstate commerce clause, a business law, that cut the legs out from under Jim CroweThis isn’t about regulation or no regulation it’s about WHO regulates. Does the government do it or do the carriers get to regulate themselves.To me it’s a no brainer. History shows, the carriers will stifle innovation and act as gatekeepers.I remember how hard it was to get an application into the carriers walled garden just 5 years ago. I watched a number of small start-ups crash and burn, not because their apps weren’t good, but because they were crushed by the bureaucracy of working with and through the carriers.The 6 simple objectives outlined by the FCC are not onerous and are exactly what we need to keep the Internet open while still allowing the carriers to play, to play anywhere, with the pipe or with the apps.This is about access and rights and the social benefits. It’s in all our best interests.As I said in my reply to Kid.It’s all moot anyway. If the FCC loses, the minute the carriers prevent something, or block something that is important to the current detractors, the debate is over. And that will happen.It’s easy to be for or against something until it affects you, then it’s a different story.

    1. ShanaC

      The line about who regulates is by far the truest thing said. And in truth, if we all stepped in, we probably would have the best regulation. (it would serve the most equitable interest)The question is, how do we get all in, particularly those who are afraid, or not educated in the ways of the internet (there are people like that), etc. and give them a voice, and the ability to have an opinion. And it may not be my opinion either. That’s where the magic happens in some of these issues though- and for this, I would say, probably.

    2. kidmercury

      well, i actually think entrepreneurs should have the right to serve/not serve whoever they want to, even if it is based on race (no, i am not racist — i am, however, very interested in protecting the rights of entrepreneurs, even if i disagree or find their views unpleasant). i would much rather see the free market “punish” entrepreneurs who implemented such policies by having customers avoid going there, and by seeing other entrepreneurs use this to their advantage (if a competitor is committing a social crime, that is basically free marketing ammo). for instance, rather than the government intervene, i’d like to simply see a boycott of such an establishment — and i would be happy to participate in such a boycott. active citizenry is awesome.more importantly, to continue using the example of the racist entrepreneur, let’s say there was a law saying you have to serve everyone equally. could that really be enforced? i’ve gotten service before that i am 99% sure was poor because they didn’t like my race (especially outside of the USA….man as much as i find this country to be a disgrace the US is a much better “melting pot” than other countries, especially the urban locations…..not the same overseas in my experience). likewise, enforcing net neutrality is a whole other issue.why not create stimulus packages to create more ISPs, and thus break up teh big ones that way? i’m not a fan of government intervention, but i find that to be far more appealing than net neutrality. those types of ideas are never even seriously considered or advanced, unfortunately IMHO.

  21. Erik M Jacobs

    But if you look at VCs, you see another story. Look at the mobile Internet from the late 90s until the advent of the app store. Many VCs such as our firm would not invest in the mobile Internet when it was controlled by carriers who set the rules, picked winners, and used predatory tactics to control their networks. Once Apple opened things up with the iPhone and the app store, many firms changed their approach, including our firm.So if I paraphrase this, what happened is that a large corporation spent an awful lot of money to invest in a new product that was untested and had no precedent set. This investment resulted in a paradigm shift in the mobile technology space, and spawned new innovation.It sounds to me like Apple acted as the VC for their own startup. And what you said is that many VCs, like your firm, did not choose to make these types of start-up investments. Why not?And if you look at the hundreds, maybe thousands, of mobile Internet firms that were VC funded in the first decade of the mobile Internet, when the business was controlled by the carriers, you will see an enormous failure rate and certainly negative returns for the entire sector. Contrast that with the current environment and the difference is striking.So now what you’re saying is that the VC industry was not able to do what Steve Jobs and Apple did. Or, what you’re admitting is that the VC industry, in this case, was not as visionary as Steve Jobs to be able to see the possibility of something like the iPhone and the app store.In either case, whether it was lack of vision or lack of capital or what have you, there’s a true summary of the situation. Despite the fact that carriers were “predatory,” “set rules” and “picked winners”, a free-market solution in the form of the iPhone and the app store evolved and caused paradigm shift, without the help of VCs. This occurred without any regulation. But here you are saying that net neutrality is needed in order for VCs to be able to do great things, when the greatest thing that seems to have happened came about without the help of any VCs.I’m not against VCs, against you, or anything like that. I think the VC industry is extremely important. But please don’t sit here and opine for regulation when you seem to yourself have proved that great paradigm shift and success is entirely possible without it, and, if anything, demonstrated that, at least in this case, it wasn’t even the VC industry that created it.

    1. fredwilson

      first of all this is not about VCsthis is about entrepreneursand very few, if any, entrepreneurs have what Apple hada startup would never have succeeded at that

  22. Kenneth R. Carter

    Fred, while I agree with your conclusion, I have to take issue with several of the points you make along the way.To begin, the four (soon to be six) broadband policy principles are not light touch regulation. They are broad, sweeping pronouncements of policy and are completely unenforceable. It is like having a policy of “drive safely”. Am I breaking the law at 55 MPH? At 65 MPH? In the original Comcast order, the FCC tried to enforce the policies without actually having crafted any rules. It was like Kafka in Wonderland (…. This approach probably would have failed in the DC Circuit had the court not decided the case more narrowly on subject matter jurisdiction.Network Neutrality is really a competition issue, not a fairness one. Ensuring competition in the underlying access networks will address most of the major issues regarding Network Neutrality. Competition is preferable to regulation because it deputizes consumers to vote with their wallets. It also sets better incentives. In a competitive market, anticompetitive practices are punished by firms loosing business as customers switch. That said, in network industries with high fixed, sunk costs, regulation is needed to ensure competitive entry. It might also necessary to incite competition on the applications and content side.I disagree with your contention that the iPhone is truly open. I just bought one and am disappointed with the things I cannot do with it. It is only open to the extent that you can buy more things from iTunes with it. By contrast DoCoMo’s original i-mode ecosystem in Japan was far more open. DoCoMo eventually faced far more competition.I could not agree with you more about investment and regulation. Firms invest to a level based on the anticipated Return on Investment. RoI is based on the cost of capital and the demand for the products and services which the investment can produce. Regulation is at best a tertiary decision when it comes to investment. Encouraging investment is not necessarily a public policy goal – it is corporate welfare. The US tried promoting investment in communications networks. It was called rate of return regulation and it was a failure – “gold plating the network”. What is an acceptable objective is promoting innovative services at marginal cost. Investment might be a necessary element to that, but it is not the objective. However, lobbying for certain policies can generate terrific profits. So, firms threaten to withhold investment to get certain regulatory outcomes. However, the regulator should respond – go head hold your breath, your shareholders and competitors will punish you in the long run.Back to Network Neutrality. Part of what we are seeing in the Network Neutrality wars is the public face of a private bargaining game. Players in the value chain are using the political and regulatory process as they struggle to gain a larger share of that chain. We need to ensure a level playing field (and that no one is drawing the chalk lines) in the underlying networks. Then competition will resolve most Network Neutrality issues. However, this might imply a return to unbundling, structural/functional separation, or other pro-competitive policies, which might be unpopular in this political environment. This is not necessarily “hard-touch” regulation. Any regulation should be just strong enough to accomplish the desired outcome. Anything more is wasted effort.Sorry for being so long winded. If I had more time, I could have written a shorter post.

  23. Jerry Neumann

    Yochai Benkler in his recent EconTalk podcast makes the interesting point that it’s not a question of regulation or no. The industry is already tightly regulated, so it’s a question of which regulation to prefer.Worth a listen.

  24. ErikSchwartz

    I so have way too much work to do (and since I’m on the west coast these days I get a late start) to get into this discussion now other than to say;WOW!Net Neutrality, Locke, Natural Law all in the same discussion. I love this place.I’ll read it all tonight while I watch hockey.

  25. Geoff P.

    Folks, isn’t it pretty much econ 101 that regulation is appropriate in cases where the market fails? That usually happens for two reasons: nobody owns the thing (and then consumers screw it up; see commons, tragedy of), or too few people own the thing (and then the owners get all greedy; see monopoly, oligopoly).It’s pretty clear to me that broadband suffers from the latter problem, and therefore some measure of regulation to get them to *behave themselves as if it were actually a competitive market* is not only reasonable, but highly beneficial. The impact on the VC business aside, I for one am not too high on waiting for the market fairy to show up and sort this one out.Then again, I’m from Canada so quite possibly a socialist 🙂

    1. Zachary Girod

      I hope you realize how silly your thought process is. It is 2010 and the FFC is still proposing solutions to regulate the internet. Whether it be with Apple and the app store or from public backlash there have been many times that the free market has worked in the past 20 years. Yet, you don’t want to wait for the free market to sort it out. Guess what, it already has!

  26. kenberger

    6 “principles” 😉

    1. fredwilson

      ugh. i need a copy editor

  27. Glue Gun

    I don’t trust the government getting involved here in any way shape or form. Somehow if they manage to get involved in “protecting” consumers the opposite will probably happen and big businesses will somehow benefit over this. I believe in absolute freedom online and think that the market should decide the winners or losers. Whether it’s company’s shaping traffic to protect other consumers or postings about individuals that may seem immoral, I still strongly feel that freedom should reign and the government should NEVER get involved in anything online here. The big boys have a lot to lose though and will likely strongly disagree with this because they can manipulate the government into protecting their interests.

  28. AgeOfSophizm

    I think a better title to this post might be that NN is “Pro Markets” rather than “Pro Business”. There is an important distinction.

  29. Zachary Girod

    What is funny is that you are in favor of government regulation of a problem that the free market already solved. While the market is not perfect, Apple with the app store did change the game and leveled the playing field. What the free market solved in the 90s the FFC is still only planning to propose solutions to in 2010!The main problem with the government regulating the internet is not that it infringes on freedom, which it does, but that it is not an effective solution. The government moves slows and passes law that last long past their time; while the pressures of the free market are quicker and more adaptable. In an industry full of new advances, technology changes and surprising shifts I rather have an adaptable solution than one that never changes.

  30. goldwerger

    The business arguments are dead one, and of utmost importance.For me, though, this goes deeper to the very meaning of freedom of choice.Letting a few gatekeepers decide which content or applications I may access restricts my personal freedom.A government that is by the people and for the people must act to safeguard these rights.Eyal GoldwergerCEO, TargetSpot

  31. Aviah Laor

    The backbone of capitalism is FULLY INFORMED. For the first time in history we are getting close to it. Anything that stands between the individual and the information, including arbitrary pricing or the telecos/gov interests, is anti-capitalism.While the thread is divided on the proper solution and the mechanism to ensue that we will be fully informed, it seems that most of the responses agree about the nature of the problem.

  32. sigmaalgebra

    Could we have some more clarity on the problems, threats, and need for more regulation of the Internet?I’m not being facetious here; instead, I don’t ‘get it’.That Apple made a special phone and a special deal with AT&T strikes me as not much about the whole Internet.I’m not an expert on the whole Internet. To me I run a CAT 5 Ethernet cable with RJ-45 ends from my mid-tower case computer to a 100 Mbps port on a cable modem that connects to the coaxial cable to my house. The signal goes to my cable TV company that puts it on the Internet. My guess is that they have a collection of IP routers and some optical fiber, with 10, 40, or 100 Gbps per wavelength and dense wavelength division multiplexing (DWDM) to an Internet ‘point of presence’, with more IP routers, on the Internet ‘backbone’ with border gateway protocol (BGP) or some such, and there the signal goes to one of the peering sites, maybe MAE East. From there the signal goes through more IP (or maybe just BGP) routers and, thus, on its way to anywhere in the world.My guess is that for the ‘backbone’, companies lease bandwidth on optical fibers in cables on rights of way, possibly railroad lines, electric power distribution lines, pipelines, highways, or rivers or daisy chain along ocean coast lines, etc.My guess is that there are a lot of companies involved for the rights of way, the cables, lighting the fibers, operating the routers, etc.Yes, some years ago, some Internet users were downloading movies from Bit Torrent or some such, and some ISPs claimed that these users were ‘hogging bandwidth’. Gee, they were just getting movies. Now it’s accepted that people use the Internet for motion video. We know we are on the way to using the Internet instead of broadcast TV. So, what’s the big deal about movies?When I had a ‘phone’ from a ‘phone company’, they sent me thick bills with lists of phone numbers I had called and minutes I talked, etc. No I just pay a flat rate for unlimited US and more voice telephone, and the bill is just one line. If my ISP doesn’t want to bother to bill me based on phone numbers I call, why bother based on IP addresses I connect to?Then there are the old ‘phone companies’. They had an old ‘culture’ where they hired lots of semi-bright ‘marketing analysts’ to ‘partition’ the market to charge more in various ways. They were a regulated monopoly and went wacko over bureaucratic nonsense. Their businesses aren’t doing well, and I won’t do business with them. If they do something against ‘network neutrality’, then they can RIP.So, how could my ISP want to charge me extra for connecting to, say, Google instead of Bing? And, why would they want to? They’d torque me off. They promise me 15 Mbps download bandwidth, and that’s about what I’m getting, quite reliably. They don’t seem to care if I look at text from news sites, video clips at YouTUBE, blogs, search results, etc. or download 500 MB of files from Microsoft.On the server side, whose going to charge Google extra? Google’s big enough to get any bandwidth they need right to, say, MAE West and from there to the rest of the world. It’s not like Google has to call up AT&T and ask for another T-1 line in another six months.For my running a Web server, I’ve got several bids on bandwidth, with upload bandwidth options of 5 Mbps, 15 Mbps, 100 Mbps, up to GbE and 10 GbE, and I don’t see any lack of ‘network neutrality’ in those bids or need for regulation.So, except for the last mile, where is the great Internet ‘market power’ that needs regulating, now or in the foreseeable future? Where’s the threat? Where’s the beef?Or, if it ain’t broke, don’t fix it.I do see a threat: I see too many people in the current Administration rushing to take control of everything they can — health care, electric power generation, our financial system, local education, the auto industry (try driving bricks to a construction site in a light truck that gets 35 MPG), and more possibly including the Internet. To me, that’s a ‘takeover’ and a threat. Their view is, for any problems to be solved, the only feasible solution is DC, and if DC can’t get it done, then the problem won’t be solved. They really believe this nonsense.What I see for the FCC is talk about a National Broadband Strategy, one effort at regulating the Internet that lost in the courts, and now another effort. Looks like they want to get paid by the number of regulations they can put in place and, then, basically just take over the Internet, make it ObamaNet. Then there would be more excuses for more regulation until our Internet would look like China’s and much of the power of the Internet for our economy and our informed citizenry would be gone. For any power hungry politician, the Internet is a beautiful apple and a terrible threat they will strain to pick, regulate, tax, shakedown, etc.I don’t trust Obama or his FCC farther than I could throw an 18 wheel truck.For the Internet, what’s broke? Where?

    1. Aviah Laor

      “except for the last mile”. everything is about the last mile.

  33. Electronic Cigarette Girl

    Your points are very valid considering the FCCs statement. But dont you think once net neutrality is in place, the FCC can just add more and more regulations which can be bad for all of us?I may be paranoid, but I kind of see this as a foot in the door for them. Once thats there, how can we be sure more and more wont be piled on?Great post.-Bella

  34. Peter Fleckenstein

    I’ve raised a couple of eyebrows with my comments here. I’ve been told that I can’t put a coherent idea together, that I’m mocking and irritating.The main thrust of my comments here have been that in no uncertain terms do we need this Net Neutrality Framework. In my mind, it is the beginning of the government to own and regulate the internet.President Obama was kind enough to give a commencement speech today confirming exactly that:”You’re coming of age in a 24/7 media environment that bombards us with all kinds of content and exposes us to all kinds of arguments, some of which don’t always rank all that high on the truth meter,” Obama said at Hampton University, Virginia.”With iPods and iPads and Xboxes and PlayStations, — none of which I know how to work — information becomes a distraction, a diversion, a form of entertainment, rather than a tool of empowerment, rather than the means of emancipation,” Obama said.He bemoaned the fact that “some of the craziest claims can quickly claim traction,” in the clamor of certain blogs and talk radio outlets.”All of this is not only putting new pressures on you, it is putting new pressures on our country and on our democracy.”You can read the whole article here: other words, the investments in innovation and technology are a distraction. They are unnecessary as far as Obama is concerned.In other words, only certain content is worthy of the President and the Administration. The rest of the investments & innovation in technology, i.e. Zynga, Twitter, iPad, xBox, etc. are distractions.So think carefully out there – Is your next investment or innovation in technology going to be favorable or unfavorable for this administration or any future adminstrations.Finally, I thought this article in the WSJ summed up my thoughts on Net Neutrality quite well:

  35. thewalrus

    i am constantly amazed by the many black/white views on anything to do with gov’t in the US. how can anyone other than an total anarchist say that gov’t should stay out of everything (i.e. not exist)? i kinda like the fact that the gov’t has made laws and rules that protect some commonly agreed fundamental rights….just because the gov’t is deemed bureacratic or incompetent or screws up profits or whatever, doesn’t mean we should go back to being cavemen. we need to be able to discuss in the grey area.personally, i see net neutrality = free speech. infra providers shouldn’t be able to dictate whether each of us can read fred’s blog or not. companies that are given exclusive rights to provide critical infrastructure must have limits to what they are allowed to do with those exclusive rights. the same way that roads, water, electricity, police services, etc shouldn’t be able to shut anyone off indiscriminately.

  36. paramendra

    Net neutrality is the Internet’s DNA. Take that away and you have cable television.

  37. Differance

    The problem with the FCC’s version of NN is that it’s not real NN — real NN is the natural outcome of competing autonomous routers on a common communications medium: If they are truly competitive, yet still must interoperate to take part in the Internet, then they can’t prejudge what sorts of applications the end users served by those other routers, are deploying. The general tendency not to prejudge applications came from the initial public rollout of the Internet over lines that were shared, and which therefore supported many competing ISPs. Individual ISPs might experiment with various types of “special treatment,” but innovation at end points regularly reasserted the general purpose nature of the IP layer.When the decision was made to stop line sharing on the other media besides cable (which had a special status that let them operate without line sharing), all the competing ISPs on the shared lines disappeared overnight — and that was when the incumbents began rumbling about doing non-neutral things without ending up losing interoperability with independent, competing autonomous routers (because they mostly no longer existed) (That is, within the US; they still have the need to interoperate with routers outside their “territory”).The FCC’s current apparent stance is apparently that they are planning to use Title II for authority, but not to actually impose Title II (the chief purpose of that section is line sharing). Their plan is thus apparently to set up a regime that does (at first blush to me) seem to enable them to play a more discretionary sort of oversight role over the incumbents, rather than simply assuring that the communications medium they provide is open to ISP competition. It does seem to be the sort of thing that would experience creep over time as they establish their new premises and precedents. It also seems to be amenable to application-specific (or type-of-application-specific) sorts of general rules that would impair innovation and the flexibility of the platform.The first significant attack on NN was the CALEA stuff, that proposed to establish rules for an arbitrary protocol (IP-based telephony) at the application layer.It’s certainly possible for individual networks to try out variations on application-agnostic packet transmission, and it might even be possible that some scheme might actually be devised that would provide for special treatment of packets based on what kind of thing they’re doing, and that would also interoperate well with the rest of the network, while continuing to provide for the general purpose nature of the current IP layer. It’s just important to recognize the tradeoffs so incumbent offerings (which includes cable, with their special status) don’t override the general purpose nature of the platform.If we can’t have common carriage then one thing we can do is make sure that special offerings that aren’t general purpose connectivity, are distinguished from what we get from the design of the IP layer (for instance, the legislative proposal at shows one way that could be accomplished — it makes sure we don’t lose track of what we have already).