VC Pitches In A Year Or Two

Entrepreneur: I plan to launch a better streaming music service. It leverages the data on what you and your friends currently listen to, combines that with the schedule of new music launches and acts that are touring in your city in the coming months and creates playlists of music that you should be listening to in order to find new acts to listen to and go see live.

VC: Well since Spotify, Beats, and Apple have paid all the telcos so that their services are free on the mobile networks, we are concerned that new music services like yours will have a hard time getting new users to use them because the data plan is so expensive. We like you and the idea very much, but we are going to have to pass.

Entrepreneur: I plan to launch a service that curates the funniest videos from all across the internet and packages them up in a 30 minute daily video show that people will watch on their phones as they are commuting to work on the subway. It’s called SubHumor.

VC: Well since YouTube, Hulu, and Netflix have paid all the telcos so that their services are free via a sponsored data plan, I am worried that it will hard to get users to watch any videos on their phones that aren’t being served by YouTube, Hulu, or Netflix. We like you and your idea very much, but we are going to have to pass.

Entrepreneur: I plan to launch a photo sharing service where the faster your friends like the photos, the faster they disappear. It’s gamified social snapchat.

VC: Well since Facebook, Instagram, Twitter, and Snapchat have paid the telcos so the photos that are served up in their apps don’t use up any of the data plan, I worry that users won’t want to use any other photo sharing services since they will have to pay high data costs to use them. We love your idea and would have funded it right here in the meeting back in the good old days of the open internet, but we can’t do that anymore. We are passing.

This is Internet 3.0. With yesterday’s court ruling saying that the FCC can not implement the net neutrality rules they adopted a while back, this nightmare is a likely reality. Telcos will pick their preferred partners, subsidize the data costs for those apps, and make it much harder for new entrants to compete with the incumbents.


Comments (Archived):

  1. Bica

    Is this just going to be Facebook paying for their content to be delivered more quickly across the board or are we going to start seeing things like Facebook is faster on one service but due to a partnership with a competitor Facebook won’t be as fast on service 2? Will we see something like Apple paying for all content delivered to an ipad is faster so that it makes more sense for me to use that device than my Dell laptop?

    1. jacopogio

      I think so

  2. Dave Hopton


  3. Dave Hopton

    powerful. This is a great way to explain the danger

  4. Q

    who has come up with billions of dollars of investment in networks?

    1. Q

      Sue Walmart for the best spot in the rack?

  5. Dave Pinsen

    Think of the me-too consumer start-ups we’ll never get to see. Maybe future entrepreneurs will head for greener pastures. Doesn’t sound like the worst possible outcome.

    1. Dan Ramsden

      So funny, although I do understand Fred’s meaning, part of me was thinking: so is this pro or con? On a more serious note, maybe the ruling pushes the innovative forces into fields like network efficiency & infrastructure, and maybe even (gasp!) clean-tech…

      1. LE

        Economy and entrepreneurial dreams will adapt.After being in business so many years and seeing so many threats come and go you roll with the punches.Of course that doesn’t mean you lay on your belly and do nothing either.Fred is doing the right thing and the cause is definitely one to fight.But a business I sold before the internet has been completely devastated by the internet. (If I write a book (I won’t) I will spin this as “well you see I saw that coming so that is why I …”) Sucks to be him, huh? Business opportunities come and go. Timing and getting in and out is critical. VC’s will have plenty of things to invest in and make money from even if this ends up being a problem (and the story is not over yet that this will be a problem). Not anything to loose sleep over.

    2. LE

      Maybe future entrepreneurs will head for greener pastures.Was thinking of the positive unintended consequences of this the same way. Maybe more people will not even do the startup thing. I’ve seen people with good degrees throw them away (or drop out) and gamble at the startup casino.That said it’s a bit like my ex wife getting into a car accident because she drove in bad weather and getting a new car with the insurance money. She still should be careful and not get in the accident.

  6. sigmaalgebra

    Once a guy in business said, “There are only twoways to make money in business, bundling andunbundling.”. Hmm ….

  7. JamesHRH

    Really strong scenarios.What is really scary is that the established brands have the $$$. It is the mobile equivalent of Coke buying shelf space @ Ralph’s.What is really terrifying – for entrepreneurs & VCs at least – is that John & Jill Q Public actually don’t care very much about tertiary innovation in a mature consumer space.It still happens, but it will have to be based on a product quality vector or a very strong differentiation – Gatorade, Boston Beer Co are retail examples that come to mind.

  8. PrometheeFeu

    How is that different from say, Amazon offering free delivery? Sure, it makes their service better and therefore harder to compete with, but assuming the prices are set intelligently, (pay for the bytes you deliver to the user rather than a flat fee identical no matter your traffic size) this will just be part of the cost of the service.Also, according to other sources… the decision might leave the FCC with more palatable options than reclassifying broadband providers as common carriers.More generally I think the whole issue could be solved by greater competition in that market. Hopefully, experiments such as Google Fiber expand and start forcing Comcast and Verizon to fight for your business rather than know you have little choice.I think the negative impact of such a ruling is likely to be mitigated.

    1. Timothy Meade

      Possibly, but another possibility is that Google Fiber is a judo move like bidding on 700 Mhz spectrum was. Verizon simply reused spectrum they already controlled the license for (I refuse to say ‘owned’) for LTE and now are unloading it onto T-Mobile.

    2. Laura Yecies

      Amazon didn’t get a public good such as airwaves or a licensed oligopoly such as cable. I do agree with your point about more competition being the ultimate solution.

      1. PrometheeFeu

        The airwaves are decidedly non-rival and therefore far from being a public good. (Also, they are not covered by the Open Internet Order) And the oligopoly nature of cable is not due to licensing requirements, but rather the price of digging trenches.Furthermore, in my analogy, Amazon is not your ISP. You and Amazon are sitting on two ends of a network which delivers packages. What’s wrong with Amazon saying it will pay for the whole delivery as opposed to splitting with you?More generally, I’m not sure net neutrality is likely to survive even in a competitive environment, nor that we would want it to. Packet priority is a highly rivalrous good. Bumping up the priority of my packets implicitly bumps down the priority of yours. And certain packets are much more time-sensitive than other packets. I want the packets for my live video call ASAP, but I can wait a bit longer for the packets carrying my email. So of course, we could have individual consumers setup what priority they want to assign to different inbound packets, but that’s not a particularly scalable solution. (Most people won’t know how) Letting websites bid for packet priorities would allow ISPs to reduce the price to consumers which they would want to do since then a higher priority on their network will be more valuable.Of course, poorly-behaved monopolies will screw everything up. But they’ll screw things up whether there is net neutrality or not. So that’s a problem we need to solve either way.

  9. Jordan Thaeler

    I would argue that these are laughable examples of web 3.0 ideas.

    1. JimHirshfield

      You might be missing his point if you’re focusing on the viability of his examples.

    2. fredwilson

      designed in a few minutes of writing as such

  10. LIAD

    First they co-opted RSA – and I didn’t speak out because I don’t understand RSA.Then they co-opted Gmail – and I didn’t speak out because I don’t use Gmail.Then they co-opted Facebook – and I didn’t speak out because Facebook sux.Then they co-opted my bandwidth – and I didn’t speak out because my plan was maxed out.Then they co-opted the internet – and I didn’t speak out because WTF is net neutrality.

  11. Mark Birch

    Certainly sounds like a nightmare scenario for content oriented consumer startups. Though, I do not believe this is the end of the story for net-neutrality. If you read the decision, it is more of a categorization issue than anything else, which was mostly of the FCC’s doing in the first place. Plus, there is still room for the FCC to take action against those firms that abuse their power.Ultimately though, the telcos are not rushing into this new world anytime soon. In fact, they already have SIP-level technology and controls in place to monitor and control usage, all they need to do is add charging. It will be some time before the telcos even tread into this, and when they do it will be more of a tax on the largest users rather than a toll for entry for all.

  12. Markus Hallermann

    There are costs for providing infrastructure and transmit data. Fine that someone pays for it (or the state operates the infrastructure like for water – still someone pays). I don’t like exclusive deals with no access for startups (different for amazon – a startup also can cover the costs).I think it is more about transparent offers everyone has access to.

  13. reece

    grim, but we’ll all figure something outthat’s what we do

  14. JimHirshfield

    Would this be as big an issue if we didn’t have sucky slow bandwidth in the first place???? US bandwidth speeds are a joke compared to many other countries.

    1. jacopogio

      the problem remains : “who is going (or not) to descriminate between competing services and why ?”

      1. Dieter Engel

        These are two sides of the same question. The reason we have low bandwidth and the reason people are discriminating is because there is no free market for internet access in the USA. And I’m not complaining about a few regulations, I’m pointing out that all internet access is via monopolies- cable or telco. See my longer comment for details.Monopolies don’t care, they don’t have to.

        1. jacopogio

          agree. What I was pointing out is that even with huge bandwidth for the end user, Telcos could descriminate between services offered to end users. Situation is the same all over the world.

      2. JimHirshfield

        They could. But they might be less inclined to slow my stuff down if I had options to choose from: other providers with wicked fast service.#abundanceNOTscarcity

    2. LE

      Do you remember when the gold standard test for IBM clones was “will it run Lotus”? [1]So to me the gold standard test of “how much bandwidth is enough” is whether you can stream netflix, youtube, or the PBS website.I can do that from both my home or the office if I want.To me this is a non issue. I’ve got bigger fish to fry! [2] I shit bigger than that!!! (How many more cliches can you add?).[1]…[2] Property and income taxes in NJ are a killer. And now the big man (without the saxophone) might be going to the big house.

      1. JimHirshfield

        Cliches – please make it stop. ;-)Your bandwidth – Lemme guess, you’re 1 guy with fat pipes.

        1. LE

          With my own bathroom and control of the HVAC. I think the pipe is like $180 per month.That said you aren’t going to get sympathy from me as far as needing extra bandwidth for entertainment purposes.In a business setting with shared access are you claiming that the majority of business users (guys in office buildings) which have broadband are running into problems with sending email and viewing websites that are necessary for their day to day functioning? And if you have many people doing this there is no viable workaround to getting faster speeds for those people? Not talking about startups in silicon alley and the shit they might use bandwidth for (legit or non legit). That is a small part of the picture and demand.(This is a serious question by the way..)

          1. JimHirshfield

            With my initial comment, I had my home bandwidth in mind. At times, streaming Netflix sucks.At work, in Manhattan, service can fail or be slow at times. And it’s not because of a lot of music streaming. Just crappy service.

          2. LE

            I can’t even begin to imagine the difficulty of stringing fiber in Manhattan. I think it’s one of the drawbacks of living/working there vs. in other places. In other words “it comes with the territory” or “the cost of doing business” (today is cliche day..)You have high real estate prices, congestion, traffic jams (I mean it takes me 3 minutes by car to get to my office) but yet you wouldn’t trade it for other places where you can have everything but not the things that makes NYC so special.So the bottom line I don’t think it’s “crappy” service as much as the density [1] and the way business works. The food place on the NJ Turnpike can serve crappy food. Because you have to eat there. It’s a business reality.[1] For example I’m in a medical complex in the suburbs. And things are dandy here all the time because the doctors aren’t using much bandwidth. Probably the same equipment as you have but with 1/100th of the people trying to use it and when they do they aren’t doing much.

  15. Mark Cancellieri

    This court ruling was a victory for private property rights, a concept that is surprisingly unpopular. Or I should say, people think *they* should have their property rights protected, but violating the property rights of others is just fine and dandy so long as *I* benefit.

    1. pointsnfigures

      I am for private property rights over collective rights because it allows the Coase Theory of Economics to be applied easily. The arguments for net neutrality that I have seen in the past all have been adverse to innovation and private property rights. How is this decision a victory for property rights-especially if we think about the Bill of Rights and Constitution with regard to eminent domain?

    2. Michael Elling

      Mark, the networks run on public rights of way (RoW) and frequencies. They are granted licensies either through lottery, application, or purchase/auction. The point is they should all be held to an open access standard since they use public goods.At the same time, technology is changing so rapidly and demand bifurcating infinitely that the vertical silos of old simply do not scale in the long-term. We are going towards horizontal scaled digital networks and yesterday’s decision is a step backwards.

      1. Mark Cancellieri

        Well, we disagree on that. First of all, it’s not government property that they are using. More importantly though, Internet providers should be able to use *their* assets anyway they wish. It is *their* property. If customers don’t like the terms of the agreement, they are free not to do business with them.

        1. pointsnfigures

          Then they ought to de-regulate the entire space; phone, tv, radio, cable, etc and let them compete with no barriers.

          1. Michael Elling

            Failure of TA96 was unilateral application. Should have been applied to ALL layer 1-2 providers; wired and wireless, incumbents and newcomers alike.

        2. Michael Elling

          AT&T Austin is tying up Google Fiber, even though they only own 10% of the poles. And those 10% are on public land. So the city will have to go to court to force AT&T to provide access. Simply put, we took the wrong fork in the mandated interconnect road 100 years ago with the Kingsbury Commitment. Who knows what the 20th century might have looked like but for that fateful (and farcical and fraudulent) moment.It’s a misnomer to call AT&T, Comcast, TW, Verizon et al internet service providers. They are access providers to the applications, content, websites, datacenters, WAN transport, etc… the true internet services. Henceforth we should refer to them as IAPs so there is no (or less) confusion between upper and lower layers, core and edge and the role each plays.

  16. Guest

    I hope the examples you gave are not what the majority of pitches sound like. I picture being a VC as a job where you hear revolutionary ideas that could change the world especially at USV which is pretty reputable…..more funny, music, and picture services don’t exactly excite me anymore.

    1. Dieter Engel

      I think people with revolutionary ideas know enough not to bother pitching VCs. VCs want the me-too startups. Imagine if Satoshi Nakamoto had walked into USV or anybody on sand hill road in 2007 with his idea for a crypto-currency where the “business model” was that he’d be an early miner, but he’d give everything away for free.Wait, not even the business model would be the problem, they wouldn’t get that far. The response would be “ecash was tried in the 1990s, it failed, pass.”Satoshi’s share of BT is worth over $1B, thus that business model has proven to be successful… while VCs are falling over themselves to fund me-too bitcoin startups.VCs still haven’t noticed this contradiction.

      1. markslater

        yep just like evan williams, dennis crowley, david karp, mark pincus, the guys from etsy, kickstarter, soundcloud, coinbase and on and on did.I’ll rewind you to 2005-2008 when fred an team were making a bunch of these investments and being called clowns for it.there is a preposturous pitch behind every one of those stories above.

  17. William Mougayar

    Why does the Tech industry keep getting out-wrestled by the traditional lobby groups, and seem to be always catching-up or re-acting to bad things, like this one, and previously SOPA/PIPA?We live in our own online world, and just because we voice our opinions online, that doesn’t mean that the regulators and political powers are getting influenced by us, or getting the message. It seems that the real power plays are still happening in the physical world, in hearings, meetings, hallways, and by favoring established relationships.Fred, does this mean we urgently need this new movement that you mentioned last week on Albert’s blog, and it seems that you or Albert are going to do something about it?

    1. Matt Zagaja

      I think Larry Lessig’s latest musings on money and politics are worth reading for a basic understanding of some of the pitfalls of the political process. It does not help that many people in politics are simply not literate in science and technology. It was not and is not their field. Also organizing is a big component. Union labor is a small percentage of the labor market as a whole but they get a large voice because their members donate to politicians and show-up to do important political work like phone bank. (Dirty secret, money only goes so far in politics, organizing and showing up is just as important.)What can we do about it? Engage the politicians and policy makers that are interested or you know. Face-to-face meetings are always the most effective. Many times this might mean paying to attend or host a fundraiser to get a chance to chat but there are other opportunities too. I’ve been attending “Civic Hack Night” meetups (my first meetup!) in New Haven and as a result our group invited the CT state comptroller to give a talk on open government at the end of this month and meet developers interested in using it.When issues important to people in the tech community are being heard in state house hearings you have to have someone show-up and testify. I was at a hearing where I testified on an issue related to money and politics earlier this year, and they also were hearing on some legislation that impacted Google adwords. Google paid money to fly out a person to testify at the hearing, and when they did that they only got 3 minutes.

      1. William Mougayar

        good points. maybe the tech industry needs to be more aggressive that way too.

        1. Dieter Engel

          You will never protect your wallet by begging the mugger to give it back. You have to support a force that scares the mugger enough to not take it in the first place.So long as you’re supporting the muggers it doesn’t matter how many meetings you show up (Where you don’t get a vote) to plead your case.

          1. William Mougayar

            So, we should name them Internet Service Muggers instead of ISP’s.But do I have a choice? Where do I switch to?

          2. Dieter Engel

            Sorry, the Muggers in my assertion were the politicians who use the violence of the state to extract money from you whether you want their service or not.At least even if your town has given a cable company and monopoly on that region, you can choose to not subscribe to cable.Those drones killing american teenagers and other innocents in afghanistan, you have no choice but to pay for them. (to use an example hopefully you will get because I presume you don’t agree with killing american citizens without due process.)So, my point, really is this:You cannot beg for politicians to stop violating your rights. They are in power and will continue to do so. We have had significant opposition to political actions in the past of all stripes- from the 2008 bailout and “stimulus” to wars under bush, etc, the TSA, etc. They do not listen because they do not have to.We have elections but the elections are not fair, not since 2000. The ballot counting issues that came to light in 2000 have not gone away (check out “black box voting”) and only gotten worse… but even if the votes are counted correctly, the two parties control the debates they control who can run on their platform, and the election laws are set up to exclude third parties (look at the struggle the libertarians and greens have had over the past year) effectively preventing us from exercising choice at the ballot box.If you genuinely want to switch away from the muggers, check out SEK3’s New Libertarian Manifesto. But the TLDR version is this: there’s a reason the black market ended the USSR.

          3. Musical Missionary

            The solution is campaign finance reform. Without it, not even libertarian leaders have much of a chance at enacting real reforms. Anything they might change that challenges entrenched incumbent interests can be undone after said interests flood the next election cycle with money to elect their cronies. Too bad so many libertarians oppose campaign finance reform because it entails a form of government intervention. If we could all just realize we share a common interest in meaningful campaign finance reform – requiring candidates to raise their money in small amounts from the masses rather than massive amounts from a few – we might actually have a chance at saving this country from destroying itself.

    2. leigh

      I was speaking to a big mucky muck political lobbyist in Toronto – he said, social media is making his life hell and that even huge projects that have been approved are getting cancelled bc of consumer backlash (i helped get a mega quarry squashed recently and it was interesting process)The average Joe/Jane has no idea what net neutrality is and why they should care. They need to become part of the movement. It’s too niche and people don’t get it.

      1. William Mougayar

        I remember the quarry one of course, it’s in my area too. But the online groundswell was accompanied by physical protests and lots of legal actions.

        1. leigh

          The legal actions were ineffectual — all they did was buy time to get the groundswell. In person protests however are key as is online video and influencers (Margaret Atwood and her tweet that changed the world 🙂

          1. William Mougayar

            Interesting. I thought it was all 3 aspects: online, physical and legal feeding off each other. True, some online voices are more powerful than others, i.e. case of Margaret Atwood.

          2. William Mougayar

            Btw – side point, I would have liked to see more public outrage vs. Mayor Ford. The business, intellectual, cultural elite/leaders were mostly silent on him.

      2. LE

        that even huge projects that have been approved are getting cancelled bc of consumer backlashI’m actually not a fan of things like that. Because it’s to easy for people to vote yay or nay with so little effort that either don’t fully understand the issue or make their decision based on biased information.That’s the one of the reasons why it’s not a good idea to have “the people vote” on every single issue. People aren’t smart enough to do that. And they will make snap emotional judgements without looking at the big picture. There needs to be some buffer, even an imperfect buffer.

        1. leigh

          NIMBY is very problematic for sure. And democracy in it’s purest form would in fact have people vote on every single issue. If they aren’t smart enough to do that, i can’t see why they are qualified to elect people in in the first place.

      3. pointsnfigures

        Mayor Bloomberg wasn’t a fan either.

    3. Dieter Engel

      Too risk adverse is the problem. Freedom to practice technology necessarily means the risk that it could go wrong. Every startup needs the freedom to try something new, but that comes with the risk of failure. We get that, right? However, when it comes to individual freedom, economic freedom, tech people all to often presume that any risk at all means we can’t allow freedom.We need to join the already existing movement. There is a political party and broader movement that supports individual freedom (e.g.: gay marriage, ending the drug war), opposes foolish things such as going to war over oil, and supports free markets for technology. It’s the libertarian movement.Frankly, anyone who is interested in science and technology should be supporting this movement.Unfortunately, being literate in science is often inversely correlated with supporting a libertarian political ideology because these people are too often persuaded by propaganda from those who want to control everything and thus oppose liberty.Tech people often throw the freedom baby out with the insecurity bathwater when it comes to politics.Economics is a science, and one of the conclusions of this science (that goes against the lie told by pendants) is that when you give people freedom to do startups, the overall result is higher levels of prosperity.A free market “allows” someone to not have health insurance or be poor, but results in few people, at the end of the day, unable to get coverage or under the poverty line.That’s why tech people end up supporting parties that undermine their interests.They are too risk adverse to tolerate freedom.

      1. JLM

        .You have made some very brilliant comments today. I feel like I should send you a tuition check or other honorarium.Do you take bitcoin?Well played.JLM.

        1. Dieter Engel

          Thank you. I wish I had a bitcoin address, as I would like to have some bitcoin sometime. But please, if you’re on twitter, follow me (dieter75)

        2. Morgan Warstler


        3. Perpetuelle

          Second that!

      2. ShanaC

        Economics is too dismal to be a science. Plus I still want to meet a pure homo econominus

    4. Timothy Meade

      Hmm, almost replied to Fred’s comment, good one William.The problem with the pirate party is it’s essentially an anarchist’s statement: All of this content should be free and if you don’t make it free, we’ll take it.It’s hard for somebody to call themselves a member of the pirate party without endorsing services such as The Pirate Bay.I like the idea of a technically inclined alternative organizing force, and the effectiveness of something like the pirate party in a parliamentary system, but that would not work here.This is why things like the ‘coding’ initiatives are so important, we don’t even share the same language with members of the public when it comes to technology. People who believe that the internet is defined by the ‘signal’ they receive cannot even understand the arguments we are making about ‘network neutrality’ so we have to resort to inaccurate abstractions.How hard is to explain that when you make a request in your browser it’s broken up into smaller pieces call packets that a bunch of computers controlled by different companies then direct through a maze to another computer, which then breaks the response up into more packets and they are directed back to your browser, which reassembles and displays them?

      1. Dieter Engel

        > ” People who believe that the internet is defined by the ‘signal’ they receive cannot even understand the arguments we are making about ‘network neutrality’ so we have to resort to inaccurate abstractions.”I see this as a strong indictment against the idea that these people should at all be involved in regulating industry.It’s sometimes shocking how low class and uninformed elected people are, and I don’t know a way to change that, I’m not sure it can be changed.But it does mean we should unite against having those people take the power to dictate who wins and who loses, whose allowed to do business and who isn’t.Look at the retardation of the space industry which, for 40 years, was shut down by NASA, and only now is flourishing since a method to achieve orbit that does an end run around nasa was developed (Eg: Virgin Galactic is plane launched so they can launch from anywhere, which is why they are being allowed to launch from the USA… if they had won the prize with a traditional launch vehicle, NASA would never allow them to have a business.)

    5. pointsnfigures

      Here is my experience. In the 1960’s the futures industry was much maligned. Leo Melamed started a political action organization to begin to remedy that. He got members to write checks, and then the PAC would donate to candidates on committees that had sway over futures. Simultaneously, he started an independent effort to have independent regulation over the futures industry to get the bad actors that were polluting it. (National Futures Association)The organization grew. I became involved with the PAC in the 1980’s and resigned yesterday (not because I didn’t believe in the mission but because I am too fragmented to give it serious attention)The PAC doesn’t have a ton of money compared to other PACs, but because it’s existed for a long time, and doesn’t couch the issues in a slanted way-it has a lot of credibility on the hill. Doors are always open and the opportunity for interaction is available.It doesn’t mean the futures industry always gets what it wants. It doesn’t. But they get a fair hearing of the issue.It is hard not to be cynical when dealing with politics and money. Very hard. My experience is most of the politicians are not bought-they usually have deep set feelings and beliefs about the votes and causes they support. I have had some very deep discussions with politicians on both sides of the aisle that enlightened both of us.Good politicians know that they don’t know everything. The danger in forming a PAC is it is difficult for the PAC to represent all views of the PAC participants-and once DC gets their paws on money, it’s awfully hard to turn the spigot off.

    6. sigmaalgebra

      Recall that for decades AT&T was a wildlysuccessful regulated monopoly, For BellLabs, they just added that cost in with therest that the rate police accepted.Well, my view has been that the Baby Bellshave wanted to stay with such close governmentrelations and have been good at it from thelong practice of AT&T. The Baby Bells stillwant the good old days with black phones,4 foot cords, and all expenses covered. Andthere was also a very happy union.So, that AT&T history with government maypartly explain current Telco interest ingovernment.

  18. leigh

    WIFI everywhere.TELCO’s be damned.

    1. fredwilson

      hell yes

  19. Brandon Burns

    Well that shook up my morning. A masterful piece of writing, Mr. Wilson!

  20. jacopogio

    At the beginning of the Internet, the “closed web à la AOL” was the preferred solution by the Telcos-Cables (and the easiest way to get their share). When it broke up, they went for Mobiles and their inflated data plans. Now that all the web $ are sucked by the Web pure players (that they could not join) they put all on their last bet: let’s “tax the data usage”. As their main competitive advantage is, and was, their “regulatory strength”.

    1. Michael Elling

      @jacopogio:disqus this is not exactly how it happened. Independent ISPs flourished in the 1980s-90s due to commercial factors that resulted from divestiture (low cost WAN transport and expanded flat-rate dial-up in the MAN) as well as policy factors restricting data/content discrimination (Computer 2). The wireless networks in the US benefited from a “forced” interconnect policy for A/B cellular providers extended to digital PCS entrants and a hands-off standards process that led to multi-medium competition and hybridization.Other open access factors that got us to this point include must-carry (cable) and wifi (which is the open access standard Steve Jobs forced AT&T to accept for the iPhone). The large players have been trying to erect doors in the last and first mile of access over the past 15 years.

  21. MelkiSch

    Hey Fred, do you already see a lot of startups highlighting the fact that their service/product work offline? Would you expect startups to already factor that in their strategy?

    1. fredwilson

      that seems like going back in time, not forward

  22. csertoglu

    Will perhaps lead to innovation in connectivity and/or compression?

  23. Dieter Engel

    The thing Net Neutrality proponents forget is that every ISP (or “Telco”) is paid by the end user to provide data access. Nothing in the above scenario stops sub humor from launching, and if I want to connect to it (Because I heard about it on google news or some other big media site that can pay for preferred bandwidth), but my ISP isn’t giving me enough bandwidth to watch the videos, I am going to be upset.Most users are not sophisticated enough to get the idea that netflix can stream but sub humor cannot. As far as they are concerned “the internet doesn’t work” and “I paid for 10Mbps a month but I can’t even watch videos on subhumor!?!?!?”I’ve lived in countries with an unregulated, free economy. One where there would be nothing to stop people from traffic shaping, and where the bandwidth issues people have are due to the entire countries access coming over a couple optical strands.And yet, despite the telcos being absolutely in control there, they didn’t engage in traffic shaping, they didn’t block access to popular “abusive” services like bit torrent, etc.The people paying for it would not have stood for it (or understood) fi they had.The problem in the USA is not that we have too free of a market allowing people to violate net neutrality– but that we don’t have a free market at all.How do people get access to the internet? Primarily two types of ISPs:Telcos- these are the mobile providers who are all operating under a quasi-monoplistic licensing scheme where no more than 3 spectrum licenses are allowed in any major metropolitan region. This artificially reduces competition and drives up prices since these licenses are themselves worth billions, when the scientific reality is that modern spread spectrum technology would allow hundreds of carriers in a region (provided they can afford to put up the towers… there is a natural equilibrium that is probably less than 100 carriers, but it’s certainly more than 3!)Cable Companies- The very definition of an artificial monopoly where the local government has given one company a monopoly on the right to run cable, in exchange for hefty payouts to the coffers of the city or county.Monopolies are not a “Free market”.When you look at the backbones and peering arrangements which are much less regulated you find that people work out peering arrangements that are mutually beneficial.The problem in the USA is too much regulation and artificial monopolies, not a lack of regulation.

    1. Matthew Baker

      We don’t have shaping in other infrastructure like the power grid because they were started as public/private partnerships. Private entities built them up, and the Government gave them a monopoly until they made their money back, at which point it became a public utility.Does anyone know why this hasn’t been applied to telecommunications infrastructure?

      1. Dieter Engel

        That’s not quite an accurate description of the history of infrastructure in the USA. Yes, it’s true that in many cases they were started by private entities– including the postal service, police and fire services, as well as power and water utilities. The idea that government “gave” them a monopoly until they made their money back is not true at all as a general principle. This may have occurred in some situations, but it seems like you’re making a post hoc ergo propter hoc rationalization.What government has done, in the case of mail, police and fire, is nationalize the services and made them “public”, giving itself a monopoly on the service. For instance, at the time the USPS was created, government gave itself a monopoly on first class mail, putting many dozens of private mail carriers out of business.This is a good example as it is a network that could involve traffic shaping, but it did not because the person sending a letter cares that it gets there.I suggest you read the essays of Lysander Spooner, specifically No Treason, for some history of this situation and why it is bad for the country.Fortunately for the internet, the infrastructure developed quite rapidly before government could get in and start regulating it, which would have killed it in the crib.You may be too young to remember but there was a decade where people were dubious about the internet like they are dubious about bitcoin now.We’re better off without government nationalizing the internet, or regulating it.The Snowden revelations alone should be sufficient to prove why this is the case.Can you imagine the Obama administration with control over the internet? It wouldn’t just be the IRS harassing political enemies, but suddenly you can’t get to republican campaign websites. “oops!” And of course it would all be run with the efficiency and quality of!

        1. Matthew Baker

          I’m referring less to the examples you mentioned, and more to thinks like electricity, natural gas, water, and sewage.Either way, I don’t view telling telecoms that they can’t backbill a net destination as akin to nationalization, but I’m not saying it’s trivial. Creating a fine-oriented punishment culture would just make violating the law a business decision commensurate to the risk a fine puts on a business’ bottom line.An example is power utilities avoiding tree-trimming requirements. If it costs $1m to keep the trees trimmed, and $50k each time the power goes out because of trees encroaching the lines, it makes business sense to just wait for the fines. It doesn’t make it right, but it happens

          1. Dieter Engel

            I submit that there is a superior methodology to “regulate” telcos, etc. that has worked historically very, very well, and has triumphed repeatedly in cases where government regulation has failed. That methodology is the free market.I know the free market gets bashed constantly these days because there’s a financial incentive for people who oppose it to try and pin all the ills of the world on it.Regulation is popular with regulators who get compensated by the companies they regulate in a manifold of legal and illegal ways.However the free market works. IF your company is not giving you good access to sub humor, you will want to go to the competition– if you’re allowed.With tree trimming, once again, you point to a government granted monopoly and show people evading it. You cannot use this as an example of a free market. It is not a free market.If people had choice in where they get their power from, they would obviously choose the one who keeps the power on, rather than the one who lets the power go out due to not trimming trees.

          2. Mike Henderson

            What is this “free market” of which you speak? Markets are a social construct developed by humans. As far as I am aware, markets do not exist in nature. A market must be based on some set of rules, otherwise it would be called “survival of the fittest” – if I want what you’re selling, I just take it by force.Once you start introducing rules, you distort the market in some way. And these rules will end up incentivizing the participants to act in a particular way. So the market owners will have to decide what behaviors they want to maximize. Take the secondary stock market for example- do they want to maximize trading volume, maximize liquidity, minimize trading costs, etc? Their goals will dictate what rules they enact. (hint- stock markets want to maximize trading volume because that’s how they make money, but that is changing). Or take a farmer’s market- ever wonder why they don’t allow every stand to be an artisanal cheese stand (or whatever had the highest profit margin)? If you were to let the “free market” dictate, every stand would be a cheese stand. And the result would be that only a small portion of the previous shoppers go to the market. This would become totally unsustainable and the market would shut down. So those who run the market only allow a certain number of cheese stands (or flower stands, or whatever). This maximizes the amount of goods that are sold at the market as a wholeNow back to your argument that multiple cable companies should be able to run a cable line into my home. First off, if I’m only going to pick one provider out of many, what provider in its right mind would run a cable into my home?? The provider would have a huge capital expense without a guarantee of future income. And if you allow 10 cable providers to do that, then you only recoup your investment 10% of the time?? Do you have any idea how much they would have to charge to make a profit? And guess what- in the end, there would be no cable providers at all because either they couldn’t make enough money to justify the cost, or there would be no customers willing to pay the huge monthly fees. Or the customer could connect to telco backbones himself, but good luck finding someone to shell out $20k for that… Satellite TV is different because its cost per new customer are much smaller and they can just move the dish to a different subscriber if you cancel your subscription (same deal with wireless providers).For most businesses, a competitive market will make things better for customers. But I don’t think you can make an argument that free markets are always better (and that doesn’t even begin to touch on the idea of information asymmetry, market manipulation, etc)

          3. poorrichardsheartache

            what free market are you referring to? The ISP’s hold literally monopoly power in the each market, there is no free competition or we would have faster service at a lower cost.

          4. Mike Henderson

            ok. assume that your local government decides to break the monopoly of your local ISP. So 3 new ISPs decide that they are going to offer service in your city. you decide that you want to switch to one of the other ISPs. What happens next? How do you start getting your internet from the new ISP?

        2. Matthew Baker

          And I concede that I may very well be partially wrong or only indirectly correct on the specific history regarding initial infrastructure buildout.

        3. Mark

          The IRS didn’t harass political enemies. That’s not a real thing.

        4. Mark M.

          One correction: you mention the postal service as being started by a private entity. It’s actually established in the United States Constitution in a clause known as the Postal Clause.…Maybe establish is too strong a word, but the power to setup the postal service is specifically given to the government in that clause.The first postmaster general was Benjamin Franklin.

      2. ShanaC

        Ma bell is the exception to the way public-private partnerships developed.

    2. B12N

      I wonder what you think about Google Fiber and their forays into providing internet access (and super fast at that)? It may not negate the hypothetical discussions Fred mentions, but…

      1. Dieter Engel

        Google was smart to announce the program and get cities to bid on it. In doing so, the cities had to work out how they were going to allow google to enter into their territory and offer a competing cable service. (Google fiber offers TV, at least in KC). I think the slow roll out of google fiber is partly due to the existing cable contracts. I don’t know if google is getting the monopoly in those regions or if it is only participating in regions where there is no monopoly.The cable company as a local monopoly claim is generally true, but I am not asserting that every city in the country grants a local monopoly like that. Just that it tends to be the case. (And has been in every city I’ve looked at in the USA, which covers quite a few.)

        1. Musical Missionary

          Exclusive cable franchises have been illegal under federal law since 1992.

    3. andyswan

      I was using all of my powers not to comment on this post. I had just given in, and then I saw your comment, which is pitch perfect. Spot on. Better than I would have written, as I would not have taken the trouble to explain the alternative reality which would necessarily result (more competition) and the reasons for the current atmosphere where that is not already occurring and therefore NN regulation is considered “necessary” (gov’t overstepping).Monopolies cannot exist for long without government sponsorship. Companies cannot subvert the will of the end user without government sponsorship.Thank you for writing what you wrote. Why should the FCC be stopping someone from creating a “no porn guaranteed” ISPf or concerned parents, or a “no steaming ISP” for extremely low budgets….Opening it all up IS the right direction. May the best idea for code-delivery win.

      1. LE

        I was using all of my powers not to comment on this post.Godfather 3. Michael Corleone couldn’t resist either.

        1. sigmaalgebra

          > all of my powersThat was also in or only in GF 2 when Michaeltold his wife that he would use “all of my powers”to keep her from taking their children.One of the things that really got me in that wholestory, thank you Francis Ford Coppola, was theextreme contrast in strong marriages: (1) Vitoyoung in NYC, dirt poor, had a rock solid marriage,kept a rock solid marriage for life, and his wifewas a good grandmother even after Vito was gone, e.g., at the big party at the beginning GF2. (2) All the other marriages in the story,Fredo’s, Sonny’s, Michael’s, Tom’s, SenatorGeary’s, Roth’s, were junk. Looks like the bestthing a rich guy could do to have a good marriagewould be to get a wife from the old country, awife that mostly doesn’s speak English, andlive in a tiny, walk-up, cold water flat in a dirtpoor neighborhood and then only slowly lether know he’s rich. Bummer. Somehow Ibelieve that Coppola was correct. He put alot of insight into those movies.

          1. LE

            I’m not remembering that Hyman Roth’s were junk. Roth was married to a kindly woman who brought them tea or coffee and quacked like Vito’s duck didn’t she? Or am I remembering incorrectly?That said Vitos wife (be seen but not heard) didn’t really do a good job with Connie did she? Pox on her. I mean shows the contrast of the younger generation and all but that is atypical in a strong mother type I think (in that day and age we are not talking the 60’s here).By the way my Dad was an immigrant and all his friends gave him a hard time because he married an American when he came here (not for citizenship there were no issues with that back then). They thought he was to big for his britches for doing that. Like he thought he was better than they were. True story my mom had to teach my dad how to shake hands. Anyway the non american wives (like Mrs. Vito) were definitely more subservient than an American like my mom even back then (the 50’s). I hear about that even today.

          2. sigmaalgebra

            You are partly right about Roth’s marriage: Icalled his marriage junk because his wife wasdepicted as a toy, who made tuna sandwiches andbrought tea, wore the most absurd full skirt everseen in the 1950s, wore some tight long pants thatshowed her ‘trophy wife’ figure, seemed not to havea clue what her husband was up to, and otherwise gottold to take a hand full of quarters and play theslot machines.You’re right that Vito’s wife was not very good iflook at the kids. Connie might have made a wifemore like Vito’s — maybe if circumstances had beenright. One big, huge difference was that the youngVito was MUCH brighter, astoundingly bright, thanthe young Carlo, who was short several cans in a sixpack.That at her wedding, early in GF I, Connie ran fromher wedding party and screamed out “I love you” tothe Johnny Fontaine character (Frank Sinatra?) was abit poor in discretion and decorum! Not a goodsign!At the big party early in GF II, Connie was a ditsytramp, but later she played the role of a good auntto Michael’s kids and a good peacemaker with Kay.So, there Connie is illustrating the theme that sucha woman needs to be kept busy by outside demands orwill drift off into nonsense — I’ve seen too muchsuch nonsense, “Idle hands do devil’s work”, close,far, from Hollywood, etc.Coppola seems to have written the story from anotebook collection of common US personality flaws– he has quite a collection. Indeed, at thewedding at the beginning of GF I, Vito, Tom,Michael, Vito’s wife, the undertaker with thedaughter that got attacked by two dirt bags, andmaybe the 2 seconds or so from the opera singer,maybe count Don Barzini, maybe count one of the FBIguys, looked like the only level headed people inthe place with everyone else several broken eggsshort of a good dozen.Loyalty was a big problem: Pauli soon set up Vito;Carlo soon set up Sonny.It looked like Vito, now wealthy, wanted to crossover to the good side and try to look like arespectable citizen, wanted to be liked, wantedMichael to be a senator or governor, let his guarddown, quit paying good attention to reality, andthen got into a lot of trouble. “Pride goeth beforethe fall?”.That Sonny basically threw Connie and Carlo togetherwas one more in the long list of zero judgment casesfrom Sonny.In GF II maybe Coppola is trying to hint at some ofwhat happened in the Corleone parenting: Michaelwas Vito’s favorite. Fredo was sick, and laterFredo related how his mother had insulted him. Vitohad four kids, but only Michael seemed to have hisIQ above his grade point average.I’m not sure that just subservience really explainsjust why Vito’s wife was so good as a wife if notwith such a good track record as a mother. Near theend of GF II, she did show some simplistic but goodunderstanding of the importance of family, “You cannever lose your family.”. Michael responded “Timesare changing.”. Yup.Lesson: To have a good romantic relationship, haveto be poor.Actually, I don’t have much of an understanding ofjust why some poor, immigrant families or USfamilies some decades ago seem so much stronger thanrecent US families. Maybe the US is too much of a”fat country” and would have stronger families iftimes had been rough. As supposedly the AmericanIndians observed, the wolves kept the deer herdshealthy!At times, some parts of Hollywood are quite good atmaking clear some of the awkward aspects of currentfamilies:At the beginning of ‘Jurassic Park II’ a wealthyfamily is on an expensive yacht cruise where thehusband has his head in ‘The Financial Times’ orsome such and patronizing his wife while his wife isdoing a ditzy neurosis with paranoid and patronizingovertones of their daughter.Lesson: To have a good romantic relationship, haveto be poor.In ‘Independence Day’, the David Levinson character(played by Jeff Goldblum), the electronics guy, wasa very devoted husband, even three years after hisdivorce, while his former wife was having an OCDcase of looking for security from praise,acceptance, and approval from the public for being”part of something special”. Yup, and her husbandhad given her and the White House about 6 hoursnotice on just to the second when the aliens wouldattack, but his ditzy wife ignored the information,said “If you haven’t noticed, we’re having somethingof a crisis her. You’re just being paranoid.” andhung up the phone, thus costing “millions of lives”.The poor President had to be house husband, and wasa good one, to their only child while his wife wasout doing ‘public service’ or some such.The only good romantic relationship in the movie wasthe black couple, a bit short on cash, livingtogether with a child from another father.Lesson: To have a good romantic relationship, haveto be poor. Extracting defeat from the jaws ofvictory for no good reason. Bummer.In part looks like Hollywood pandering to theiraudience, 99% of whom are not in the 1%.

      2. dotpeople

        What’s your position on municipal broadband?E.g.…”Everyone knows that companies like Comcast throw money around to protect their interests, but it can still be surprising how far they’ll go. The Switch has a report showing how the cable lobby will pour money into even the smallest elections to prevent cities from getting a toehold into the fast broadband market. In some cases, the results are absurd. In tiny Longmont, Colorado, for instance, cable companies “spent over half a million dollars trying to prevent four percent of city households from gaining access to municipal fiber on any reasonable timescale.”

        1. andyswan

          Local issue…. if local governments want to turn themselves into ISPs that’s their problem not mine. Mobility FTW

      3. Anon

        Monopolies cannot exist for long without government sponsorship. Companies cannot subvert the will of the end user without government sponsorship….That’s not at all how monopolies work. You CAN have government sponsored monopolies, but the entire reason we have antitrust legislation at all is because firms in the real world can acquire dominant market positions and leverage them into monopolies. There’s nothing magic about capitalism that prevents monopolies.

        1. RichardF

          absolutely correct. In fact it is oligopolies that are more of a threat as in the case of the telcos because it appears that there is competition in the market place but in reality there is not.

        2. andyswan

          Actually there is. Pls name one that has occurred without gov

          1. haruspex

            Ford, Carnegie, Rockefeller… the government had to stop their monopolies. The free trade capitalism of the time encouraged their monopolization of their respective industries. That’s not a judgement on capitalism, but it provides 3 massive examples where some legislation was necessary to stop as oppose to protect monopolies.

          2. andyswan

            Can you provide a citation to Ford being a monopoly that was broken up by the US government?

          3. haruspex

            Sorry, Ford is the exception here. He was an example of a monopoly (just as much as Rockefeller) that was allowed because of perceived positive aspects. His monopoly did not require government intervention to create or keep alive, and neither did the government try to break him up. Your request was to name monopolies that occurred without government, and I named three, but muddled the fact that 2 I named were brought down and 1 was not.Either way, the point stands that you also erred in believing that monopolies require governments to help make them.

    4. Fuck Larry Seltzer

      Are you stupid? Cable Internet monopolies make consumer choice (and thus power) all but moot. When there is one, and ONLY ONE, viable option for Internet access, it doesn’t matter if consumers are paying a subscription or not, because OF COURSE they are. They don’t have any other choice. Are you waiting by the mailbox for your telco check or do you have direct deposit? Man, fuck you!

      1. andyswan

        Do you ever ask yourself WHY there are cable internet monopolies or are you just programmed this way?

      2. Dieter Engel

        I’m sorry, I’m unable to figure out what position you’re taking, let alone what your argument is. But, I can assure you with some certainty, that I am not, in fact, stupid. At least, according to the tests and what everyone who knows me tells me.

    5. LE

      Cable Companies- The very definition of an artificial monopoly where the local government has given one company a monopoly on the right to run cable, in exchange for hefty payouts to the coffers of the city or county.Are you aware of the cost of running a pipe the final mile into someone’s house? It’s quite a barrier to entry.How about if Oil companies drill for oil and then once they find oil everyone says “hey that’s not fair give us a piece”. Or that billboards once erected on public highways have to allow access to any company that can sell advertising on that billboard? Or companies that develop cell sites?Back to monopolies. Monopolies help get companies to take gambles. A deal is a deal. Cable has been around for a long time this wasn’t a system that was slipped in by a shady deal in the night.In business more people fail when taking gambles then succeed. (Won’t point to any research to support it but then again I can’t point to any research that shows that men prefer women without mustaches either or that men like breasts.)

      1. andyswan

        Footnotes for LE comment:Gueguen N. Women’s bust size and men’s courtship solicitation. Body Image. 2007 Dec; 4 (4): 386-390.Guéguen N. Bust size and hitchhiking: a field study. Perceptual and Motor Skills, 2007 Dec; 105 (3 Pt 2): 1294-1298.

        1. takingpitches

          haha. And great citation form!

        2. LE

          Ibid!Is there a study that correlates looks of the opposite sex with levels of alcohol intoxication? Maybe there is an idea here a crowdsourced way to find examples (research or otherwise) that you can use to cite in examples (journalists, bloggers, disqus users).Anyway you’re a bourbon guy, right?What did you think of Suntory buying Jim Beam?

      2. Dieter Engel

        > Are you aware of the cost of running a pipe the final mile into someone’s house?You are assuming that because it costs some vaguely “large” amount of money to do something, only one company should be allowed to do it, to incentivize that company to do it? But to support this hypothesis you need to show that nobody would do it without the “Subisdy” of granting them a monopoly.Your hypothesis is disproven by DirectTV which went to the extraordinary length of launching satellites in order to end run around this monopoly. Keeping a satellite constellation in orbit is expensive, more expensive than running cable the last mile (if it weren’t, then the cable companies would be launching competing satellites since its cheaper and would allow them to reach locations where they don’t have a monopoly.)Drilling for oil on private property and putting up billboards on private property are covered by property rights. Those are not monopolies– except to the extent that, yes, I have a monopoly on my own body and no, you don’t have a right to use it against my will.Cable has been around for a long time, but it was, in fact, a deal that was slipped in in a shady way. In fact, it is the very definition of corruption.Regarding “A deal is a deal” by which I guess I’m supposed to assume you’re arguing that the deal was made and cannot be changed now… I would like to point out, since you seem to not be aware, that this “deal” is not forever. The cable monopoly is for a limited time in all of the jurisdictions in which I’ve lived, and comes up for renewal every so many years, which is always a chance for the cable company to offer the politicians even more money (which we all end up paying.) After all, why would a politician enter a deal that they couldn’t renegotiate later? So, no, the deal is not a “deal”, it is not permanent, it is an ongoing travesty.A government granted monopoly is using state force, that is to say, violence, to force out competition in a given area in favor of a state preferred supplier.What could be more corrupt than that?You have not actually rebutted anything I’ve said, you’ve done hand wavy and given assertions but no real arguments.

        1. LE

          Your hypothesis is disproven by DirectTVOh great I will start to say that something is possible just because Steve Jobs did it or Bill Gates.You must separate “possible” from “probable”.Some people climb to the top of mount Everest but it is not probable for most people.Cable has been around for a long time, but it was, in fact, a deal that was slipped in in a shady way.Well that “shady way” worked all over the country far and wide in diverse communities over multiple years. They didn’t bribe one government department nor did a patent clerk screw up.that is to say, violenceWhat country are you in? Violence??? Ralph Roberts wears a bow tie for god sakes (sorry not relevant I know but I had to slip that one in).But to support this hypothesis you need to show that nobody would do it without the “Subisdy” of granting them a monopoly. Great we will just delay progress and commission a study each time to make sure everything is fair. That’s what needs to happen government needs to work slower so that no stone is left unturned.

          1. Dieter Engel

            Wow. You’re the one who asserted that without a government monopoly nobody would do it, and thus me proving someone going to extraordinary lengths to get around the monopoly does, in fact, rebut your assertion.Seriously, if you’re going to participate, please make arguments. If you really believe in your position you should be able to make definitive statements that you stand behind and then defend them with facts and arguments.This kind of response that is all attitude and spin and doesn’t really make any arguments is just setting up someone who responds seriously (as I did) for mocking (As you just have with your bow tie comment) which makes me believe that mocking is your only goal.So please, make arguments, and defend them, and honestly respond to my arguments and defenses.You claim it has “worked” all over the country, and yet all over people are complaining bout their bills, and in fact, the primary complaint that Fred is making is one that is a direct result of the monopoly you are endorsing, proving that it is not working for Fred to the point where he wants legislation to fix it.All government actions are backed by violence. To deny this is to evade simple reality. I understand that someone who is advocating violence to get what he wants (as you seem to be doing) does not want to believe himself an evil person, and thus will seek to evade that reality… but that’s the thing about reality. If you attempt to put in a cable company despite the town giving the monopoly to someone else, and you persist, you will be met with violence.I put it in such stark facts because one of the ways that people who don’t intend to be evil end up supporting evil is by confusing symbols for reality.I find it humorous that you would complain about “relying” things to be “fair”. I’m talking about rights here and economics… and the reality is when you violate the laws of economics you delay progress and undermine fairness both. They kinda go hand in hand.Which is why across the USA people pay way too much for their mobile phone service and way too much for their cable service and get far less choice and lower quality than they should. Ultimately resulting in much slower progress of technology….But hay, since you are unanchored to anything you can call that delay “progress” and call a proposal to remove the roadblocks to innovation “delay”, and there’s not a thing I can do to stop you!

    6. LaVonne Reimer

      Not at all surprisingly, Fred’s post and the comments, especially this one, trump anything I was reading in the news last night. Admittedly I was getting a bit buried in the ins and outs of the danged DC Circuit Court of Appeals. Yes this is bigger than judicial appointments but they are part of the problem for sure.

      1. Dieter Engel

        Alas, several years ago, I happened to take a position that Fred did not agree with and was banned from commenting. I’m doing the same thing here, in the same tone, and I appreciate you appreciate it, but I’m afraid that I may be banned again for the same reason, since I am, at least in part, disagreeing with Fred.

        1. LaVonne Reimer

          Not aware of that and had no intent to dive into a hornet’s nest. I’d think you’d simply be pleased that an interesting dialog has emerged from your comment today.

        2. fredwilson

          that is hogwash. nobody has ever in the >10 year history of AVC been banned from commenting here. the only blocking I have ever done is on spammers.

          1. pointsnfigures

            cue the Monty Python music

          2. markslater

            there was one chappy back in like 07 that one of your bartenders barred. cant remember the user name…

          3. fredwilson

            that’s not allowed. they don’t have that power.

          4. j

            This is actually false. I’m not the person above, but I was banned at one point, at least my ISP was blocked from leaving comments. This was near the beginning of the reign of Wm. the Community Moderator. I used to give him shit because he was thin-skinned in his role. Maybe that’s spamming, but I don’t think so.

          5. fredwilson

            that is blatantly untrue. we don’t block anyone who is not a comment spammer. your comment may have gotten inadvertantly marked as spam but nobody, not me, not william, not shana would ever block a real person from commenting here

          6. j

            This is absolutely true. Ask William about it. I have the comment thread in which William confirms as much. Am happy to send it your way if the exchange was later scrubbed.

        3. JamesHRH

          Just to check, there is ‘getting run’ (someone intellectually blows you up so you leave0 & their is getting banned (you are somehow physically unable to post).AVC does not ‘review posts for …….’ so you cannot get banned unless you are spamming.Hate speech & other garbage may get pulled by moderators to clean things up though (@wmoug:disqus have I got that right?)

    7. JamesHRH

      This is a terrific post.The ‘no regulation needed’ country you lived in: tropical?

    8. warcaster

      What if they do like AT&T’s “sponsored” plans, where the user *doesn’t* have to pay for Netflix data (but Netflix does). Wouldn’t that deter you from trying other services where you DO have to pay for the data usage?I think it would.

    9. Musical Missionary

      Exclusive cable franchises have been illegal under federal law since 1992. Cable monopolies are natural monopolies. Once an area is “served”, nobody wants to spend the absurd amount of money to overbuild for the prospect of having to share the area’s subscribers with the incumbent.Except maybe municipalities, which are happy enough with breaking even over a longer time period while providing their local communities with advanced communications services that incumbents starve them of. That’s why my hope for solving the net neutrality issue, and many others, is proliferation of municipal/public networks. But with 19 states already restricting such networks (thanks to industry lobbyists), we’ll need FCC and/or congressional action on this front too.

    10. George Polak

      If users are getting slow download speeds on SubHumor but then flip to YouTube to find they can stream videos just fine, they won’t conclude that “the internet doesn’t work”, they will think “SubHumor is crap”.

    11. sigmaalgebra

      > modern spread spectrum technologyI’ve heard that, but I’ve never gotten an outline of justwhat was intended. One approach would be to have a tricky antenna pattern that put nulls toall the users except the one intended, but thatwould be a lot of work and I doubt that that is whatpeople have had in mind. Another approach is to use shift register sequences to encrypt thedata so that only intended parties could receiveit, but that would not in effect generate morebandwidth. Another approach is jumping amongdifferent frequencies, but that would not createmore bandwidth. With that list I’m running out ofwhat I’ve heard about ‘spread spectrum’.What’d you have in mind?

    12. ShanaC

      Yes and I’m surprised constantly that the FTC has done nothing. Why is the FCC in this area when this is a trade issue

    13. gzino

      “The problem in the USA is too much regulation and artificial monopolies, not a lack of regulation”. Perfect line.And I would add that the outcomes we are most worried about – harming the little guys in order to build their own profits – are not nearly as likely as we fear.With or without NN regulation, the ISPs would do it if they could do so in a sustainable, profitable manner. 15 years of VoIP experience tells me that they can’t.And, if I am wrong, and they can, then they would find a way to do it around the regulation, w/ the regulation being costly, full of unintended consequences, and hard to unwind when the world changes. See the current PSTN landscape for a perfect example.

  24. jared14

    Nearly every time in the US, the short-term, rich special interest beats the short- and long-term common good.

  25. Anthony Serina

    free market? ha

    1. pointsnfigures

      It’s not totally free, but it’s freer than most places.

  26. Richard

    Fred your gut instincts for challenging this as being anticompetitive are correct , but you need to show the that is a form a collusion that will result in higher prices AND lead to fewer options for the consumer. Show that the surviving group as a whole unfairly benefits by surpressing competition and that it provides the “time and space” to ultimately raise prices.

    1. Michael Elling

      @richweisberger no one foresaw the price declines that accompanied digitization of the WAN, data and wireless in the 1980s-90s ex ante. They all resulted from open access or mandated interconnect of one form or another. The rule of thumb is that performance/price of the networks should follow a combination of moore’s and metcalfe’s laws (or 20-50% reductions) annually.This is the only way we’re going to get to a 4K interactive future in 20 years to the vast majority of people. We just moved that future out by 20-30 years.

  27. jay

    I do not think a telco contract would ever force user behavior unless and until they degraded the service for everyone else other than signed services – which would be stupid.It would also be if the service was a utility and there was distinguishable difference between one offering or the other . The reason for customers to choose a service in the first place is if the offering is great , their friends are on it and there is nothing comparable that they are using in the first place ( nothing close to it at least ). A scenario is telcos signing myspace offering the service free because its the next big thing and users are talking about it and then figuring out that everyone and their mother is signing up on this new kid called Facebook.

  28. Perry Ismangil

    I suppose this would be the equivalent of TV or radio broadcasting then, where it is hard and expensive to get into.

  29. markslater

    This is the single greatest negative externality to hit our industry and is a clear and present threat to ecosystem of innovation.Our industry – its platform and framework on top of which we invest and innovate is in danger of capture.The irony of this regulatory capture that threatens us all is that its being proxied by the very institution the founding fathers identified as our greatest governmental vehicle of protection – the courts.The FCC – by proxy of the court will be captured by the interest groups (who by proxy represent the telcos) – allowing them to behave in ways that are thoroughly injurous to the public.

    1. pointsnfigures

      I am not entirely sure I agree with you, but not entirely sure I disagree with you either. I think this is an extremely complicated issue that can only be solved efficiently by the government DEregulating the entire industry, and then letting the players bargain amongst themselves to find a solution. Part of that bargaining will be launching new entities that compete with one another. It will be messy and confusing in the short run, but better in the long run if you are interested in getting the most choice, the best service at the lowest price.

  30. Oo Nwoye - @OoTheNigerian

    The issue of Net neutrality is a global phenomenon/risk. Telcos in Nigeria abuse their positions as the primary carrier of data and they are protected by having ‘licenses’MTN and Rocket Internet recently tied a deal. I wrote about the risk here…Hopefully, data provision will not be protected by licenses and competition will allow things to operate how they should.

  31. Timothy Meade

    While all of the nightmare scenarios that Fred laid out are possible, I think we need to give the telco industry more credit and consider them as rational actors.The problem with ‘network neutrality’ is that it creates two extremes, a network where the carrier (sorry, ‘information service’) chooses the winners and losers, and one where everything is free and equal. It pretends on the one extreme that companies that sell ‘Internet’ access really want to be in the same business as America Online, and control everything that passes over their network.Certainly there are executives at some of these carriers that seem from public appearances to be deluded enough to want that. They speak of ‘applications’ as a service that the carrier offers it’s customers. They complain about ‘free riders’ while ignoring the fact that they are the ‘free riders’ riding on the freely available content and services of the sorts Fred mentions and packaging them as a complete package within the mythos of the ‘the internet.’The other extreme is an illusion, one where every address on the internet is equally accessible, but that isn’t really the case either. Peering agreements, CDN points of presence, and content caching all go together to maintain the illusion.So let’s assume for a second that the carriers are reasonable actors, and they want to offer a strategic CDN service. Or a video service over private networks such as Uverse, using multicast IP address but not over the public internet. Let’s assume that they do it by partnering with Youtube, or by acquiring a video streaming focused CDN and integrating it more directly into their network. They are already doing this, and startup companies are already paying for their content to be delivered by these CDNs. They are doing that to get it to their users as efficiently as possible. Remember, Youtube started out with low bandwidth Sorenson and similar encoded videos delivered through the lowest common denominator streaming software, conveniently built into Macromedia Flash.I realise the scenario that Fred presented is one where the door is completely closed to new entrants, but the rational actor scenario assumes that the costs of improved carriage will be competitive, and that the concern that certains services would be blocked completely would be worked out eventually through carrier customer demands. (Though the idea of a carriage fight similar to the retransmission wars is a very scary thought.)The FCC explicitly went down this path when they declared DSL service to be an information service, and they did so because the cable internet providers had already been declared to be information services. They did this to explicitly even the competition between the two major delivery platforms for home internet access. The previous administration FCC set up this ruling today, though the idealists in the current FCC tried to roll it back with some feel good ‘Open Internet Order.’We really have two ways to play this, we can scare the general public with horror stories about news sites not being available on their internet connection, but this has not generally been an effective strategy to win the public and these concerns remain a niche interest of technology enthusiasts.The other way is to address the FUD the carriers are laying down, get the public up in figurative arms about how slow their internet is, and how slow the monopolies that control it are in responding to their demand. (Witness the CTIA ad from a few years back ‘you wanted it and we said “ok.”’ Tell me when the last time the wireline carriers could credibly make that claim.)

    1. FlavioGomes

      “and one where everything is free and equal” It doesn’t have to be free, but fair and relative. The question is not about subsidizing, but allowing every content provider the ability to do so on relative terms. Not just sponsoring a single category leader in other words.

  32. PsychSignal

    Ummmmm that “gamified social snapchat” idea is a pretty great idea!

    1. fredwilson

      my 22 year old daughter hates the idea

      1. PsychSignal

        Well there go my hopes of a VC career 😉

  33. panterosa,

    This is depressing. I’m rooting for Robin Chase’s idea of cars with hotspots and similarly in homes/businesses.

  34. Sebastian Wain

    Beyond this specific court ruling, I wonder why, in general, we are discussing this right now, Facebook and others have been violating (or being part against) net neutrality for years. I saw this kind of partnership between telcos and companies for years in Latin America.

  35. Bruce Warila

    I was going to record a record and put it onto my website (exclusively).However, since SoundCloud and YouTube are paying the telcos and I can’t, the only way to deliver it reliably is through them.

  36. gregorylent

    america is a sick country, seemingly bent on ending it all via suicide

    1. pointsnfigures

      We are on the wrong course currently, but we can get her back on track. Have faith in Americans to do the right thing.

      1. baba12

        In this climate to do the right thing today means having a critical mass of folks who care to challenge the status quo and are willing to have a real non violent civil disobedience movement. Unfortunately that is not going to happen for another 25 years, there is too much blubber that needs to melt and thus the critical mass wont form for a while. We can shout and bark all we want but it wont change much, currently whatever is being done be it with the environment or challenges to big business etc is just pissing on a forest fire. So just do what you can and hope you are able to survive till that critical mass builds up.

        1. pointsnfigures

          Unless we change a political party and begin to melt the blubber from within. Republicans probably have a better shot at changing than Democrats. (Unions, and there are starting to be some true libertarians rising in Republican ranks)Sometimes mass movements are wrong. Occupy Wall Street was a movement with its heart in the right place, but goals and objectives were totally wrong.Obamacare is a movement with the right goal, cheaper and expansive healthcare for all, yet the implementation of the programs are totally incorrect and will result in more expensive and less healthcare.

          1. baba12

            Unfortunately your views are limited in thinking that Republicans/Libertarians have the real solution and that Democrats and their unions are detrimental etc. That would be the simplistic view.You have to understand that if you have a society that is based on the libertarian ideology then we would not have the internet or have had many cures or treatments for many diseases. Nothing in absolute seems to work well when it comes to humans interacting and living in a society.As for your take on Obamacare lets just say that the idea was good, but the hors trading and dealing has diluted the final product that rapes and pillages. So we the people pay for the creation of a marketplace for private insurers to sell their for profit products while mandating that everyone has to buy a product from one of these sellers. Would we like it if had drivers licenses that are mandatory to drive a vehicle be issued/managed and serviced by for profit service provider.We the people have become numb and dumb and therefore we have what we have. Time will tell how fast we change… For now it is just moving at the same pace as it did in 18th century.

          2. Nkem Modu

            @baba12:disqus , this issue can be divide along party lines. Just not in the way @pointsnfigures:disqus is suggesting.@pointsnfigures:disqus in the context of net neutrality (NN), you’re comment that “Republicans probably have a better shot at changing than democrats…” should be met with suspicion.Not only did House Republican’s try to kill NN as part of their debt ceiling deal (…, but they are also of the opinion that the FCC must not reclassify broadband services as ‘common carriers’:”…In comments Tuesday night, both Rep. Greg Walden (R-Oregon), the chairman of the House Energy and Commerce Committee’s telecom panel; and two GOP senators warned Wheeler [Tom Wheeler, FCC chairman] about following the reclassification path. “As I have said in the past, reclassification would be a step backwards to an era of government intrusion into communications networks,” Walden told TheWrap. “Regulation as a common carrier would be antithetical to the Internet as we know it and would negatively impact its ability to innovate and grow to meet the needs of consumers in the 21st Century.”—-As has been repeated in every article covering Tuesday’s ruling, all the FCC has to do is reclassify broadband services as common carriers as opposed to informational services. How any representative can classify Tuesday’s ruling as one that enhances our “ability to innovate and grow to meet the needs of consumers in the 21st Century” is beyond me.

          3. pointsnfigures

            That’s because the way NN was going to be implemented was going to infringe on FREEDOM of SPEECH. ISP’s were going to stop right wing websites from having access.If you want to make the argument that big money from braodband carriers is lining pockets of Republicans and so they are bottling it up-you’d have an empathetic ear.The only way to solve the mess in my opinion is to deregulate everything. Go to the Wild West. Let private companies bargain and try to get market share the best way possible. As consumers, we would get more access, cheaper service, and better stuff.

  37. pointsnfigures

    My experience with government is no matter the industry, the big players win. Big government is there for big industry. Farm, finance, drug, internet, heavy equipment, etc. The regulatory agencies favor the large international players. My experience with political parties is that Democrats and many Republicans favor big government solutions, but have different favorites. For example, Dems might favor unions in farming and meatpacking, Republicans would favor Monsanto and ADM. Neither is for the small independent farmer trying to revolutionize the business and it shows.There is a growing segment in the Republican party that is rising up against bigger and more expansive government. Some of that is the Tea Party but you see it in Senators like Rand Paul, and Ted Cruz; governors like Scott Walker.The VC business supports the little guy, and wants them to become big. They build these Frankensteins that can eventually bite them in the ass. Do the VCs care about Facebook or Google today? Or would they rather back a company that could disrupt them? Meanwhile, if VCs are supporting companies that could potentially threaten the business model of Facebook and Google, don’t you think those big ass companies would do everything in their power to stomp them out?Dodd-Frank=benefitted the big too big to fail banks and killed community bankingObamacare=benefitted big insurance, and killed independent medical facilities and rations careSarbanes-Oxley=killed IPO market and benefitted big companies that could afford triple accounting costsFarm Bill=benefits big corporate farmers, big milk coops, and kills independentsetc etc etc

    1. FlavioGomes

      “Do the VCs care about Facebook or Google today? Or would they rather back a company that could disrupt them? Meanwhile, if VCs are supporting companies that could potentially threaten the business model of Facebook and Google, don’t you think those big ass companies would do everything in their power to stomp them out?”I would suggest that VC’s wouldn’t refuse a healthy check from Google or Facebook to acquire members of their portfolio. Disruption and Payout are not mutually exclusive.

  38. Farhan Lalji

    Entrepreneur: I dislike Net Neutrality and believe every individual should be able to connect to the sites they want and expect good service, I plan on launching a city wide p2p wifi network to enable each individual internet user to be able to stream what they want when they want at a good speed using p2p wifi as an underlying technology.VC: ?

    1. Michael Elling

      @farhan, what you describe is a metro-access network (MAN). How does the individual access the content and applications stored and processing inside vast, low-cost, distributed datacenters over the wide-area network (WAN)?

      1. Farhan Lalji

        Not proclaiming to know the answers, I just believe the networks will continue to be commoditised to the point where there’s an alternative on a mass scale.I believe there will be new tech on the infrastructure side that will make the companies currently providing access obsolete in 10 years (or less) and that infrastructure will need investment, more now than it will in 3-5 years, but I believe that if the US gov’t continues to squash the neutrality side than the industrious, innovative entrepreneurs will come up with a solution.What that solution will look like and how it will work is beyond me.

        1. Michael Elling

          Their business models and networks are already 10 years out of date. In another 10 years they will be 30 years out of date. Time for major rethink. Markets haven’t done the horizontal math of disintermediation between the upper, middle and lower layers. There is actually more value to be realized than today. They are just afraid of pulling an IBM of the early 1990s.

  39. Aviah Laor

    Ahmm. The mutual company issue, again. Who is Version? where it’s value comes from? However, judging by my two teenage daughters, Facebook has a **huge** problem, which no court ruling can solve.

  40. Michael Elling

    The DC Court paved the way for gates to be built in the first mile of the internet. 15 years ago, we started down the path of erecting gates in the last mile and as a result we have the performance/price differentials of TWC in NYC vs Google fiber in KC and 4G LTE vs 802.11ac. We are heading in the wrong direction on the policy front. I noticed that Om implored you yesterday to act. We may be well beyond that point; as your article suggests.Throughout history wealth flows to those who control the gateways, tollroads, etc…. of networks. Opening up the new digital networks is the key to spreading the wealth. Cheap, universal access is critical. 5 major open access/interconnect initiatives have led to the booms over the past 30 years: dial-1, A/B interconnect extended to PCS, Computer 2, must-carry, and wifi. We need open access/interconnect in the last mile to open both gates that have been erected.

    1. pointsnfigures

      The largest concentration of millionaires pre Civil War was in what town? New Orleans, they controlled the Mississippi River.

      1. Michael Elling

        If our friend Chairman Wheeler doesn’t know this, given his expertise on all things Civil War related, someone should tell him. I wouldn’t be surprised if he likens the current upper vs lower layer struggle over net neutrality with that North/South conflict. Who knows, maybe he’ll draw from Lincoln’s playbook.PS I like to say that we need balanced settlements (not to be confused with the 2-sided takings expected of the broadband providers given yesterday’s decision) in order to clear demand and supply both north-south and east-west in the informational stack. Current IP settlements and bill and keep will result in network balkanization.

  41. Julien

    Entrepreneurs from the rest of the world? What do we do?

  42. JLM

    .There are very few people in America who woke up today and had any understanding of the significance of that ruling and its portent for the economy, American business, the Internet and any of a host of current and future stakeholders.It is “inside baseball” and thus the debate is being controlled by a handful of self-serving participants who are trying to make traffic and access into huge sources of revenue and ultimately wealth. They are trying to get government to “pick winners” through public policy and purchased judicial outcomes.One does not get justice on the merits of one’s arguments — you get the justice you can afford. This is the big boys wallowing around and getting ready to tilt the playing field in their direction. They are acting in concert.While it is a quaint notion to suggest that there is the potential for a new political organizational approach, that — to me — is an invitation to play their game. They have been playing it at a very high and expensive level for a long, long time.With the advent of recent SCOTUS rulings, it is pretty damn easy to “rent” a Senator or Rep. Citizens United case. They desperately want to be rented with the rent simply being the funding necessary to be elected, re-elected and re-elected forever. It is a fairly low hurdle rate really.Perhaps the only way this is ultimately to be rectified is to return the Federal government to a steady diet of fiscal responsibility as a prelude to putting that big fat ass government on a diet and streamline it to a size that makes it responsive again to the citizenry rather than a cesspool of corporate largess.Excuse me, I had a moment of light headed giddiness. Sorry.We have a system that is so corrupt that outcomes can simply be purchased and just sometimes you have to rent a Senator or Rep or two along the way.When big fat ass bully politicians are shutting down bridges as dirty tricks, the access to the Internet does not have a chance.JLM.

    1. LE

      When big fat ass bully politicians are shutting down bridges as dirty tricksThe only question I have about the fat man who loves Springsteen (he’s obsessed with him did you know that?) is whether this is nature or nurture.Was he always like that?Or did he become that once he took office?He was a US attorney you know. Otoh perhaps he replaced part of the food addiction with a power addiction. You know what they say about addictions.Sorry for being so harsh. Outcome of this for Christie doesn’t look good.As with Clinton and Monica I’m more upset with the naivety of doing that and feeling you won’t get caught (or surrounding yourself with people who would do that) than I am with the fact that he might have done that.I mean how can you think that so many people keep a secret? Doesn’t that defy everything you know about human nature? Loose lips sink ships?

      1. JLM

        .There is a fine line between being assertive and being a bully. Well, not really. Sorry for that platitude. But you know what I was trying to say.I want to love Christie because of his relentless prosecution of bad NJ politicians but unfortunately I am afraid he is just big bully.He is thin skinned and has clearly set a tone that nonsense like punishing — not the Mayor of Ft Lee — the citizenry crossing that damn bridge is possible. Chicken shit to the extreme.This is exactly what happens routinely in the Obama administration. The tone is set from the top and the tone allows things to happen without specific direction because the people anticipate the tone and the leader’s real sentiments. This is how the IRS mess started.The funny thing about bullies is that when called out they seldom are equal to the task. I’d like to — figuratively speaking, of course — poke my thumb in his left eye, chop him across the throat, break his nose and tear his right ear off. Not my fault really, just that Ranger hand to hand combat training kicking in again. Sigh.I do not want to be lead by people who continually lie and who are bullies. I miss Ronald Reagan and Jack Kennedy and Dwight Eisenhower.JLM.

        1. LE

          but unfortunately I am afraid he is just big bully.Armchair he was most likely bullied as a child. While sometimes that can result in being more sensitive to bullying other times it’s the exact opposite and the person becomes a bully themselves. That’s my armchair on it.The tone is set from the top and the tone allows things to happen without specific direction because the people anticipate the tone and the leader’s real sentiments.Bingo. (That’s a level above “I agree!”) I’m a big big believer in things like this.Happens in businesses as well. The people on the front line take on the attitude of those above them (I’m talking here more specifically about a small business).An example I can give is a local plastic surgeons office vs. a local GI office in the same condo complex.I go into the plastic surgeons office asking if I can look around and see how they renovated to get ideas. The receptionist says sure and takes me immediately though the space while the doctor is seeing patients Just like that. Very nice and no reason (other than my good looks?) to give me a tour. Do the same thing in the GI office (on the same day) and the receptionist gives me a suspicious look like “what the fuck?”.Later I meet the mother of the plastic surgeon. Totally kind old lady the type of woman you have respect for. Never met the plastic surgeon but I can easily infer from my treatment that he is a really nice guy and at ease with the world. And is nice to his employees.I’ve got many examples like this as I’m sure you do. I found many cases when I was in the printing industry of employees parroting their bosses behavior and wishes. No boating accident.

    2. fredwilson

      that’s why i wrote this post Jeff. i figured it might open a few eyes to what is actually going on

  43. Dan Kantor

    This is so upsetting.

  44. Nir Dremer

    Do you think such a change can lead to startups addressing markets outside the US (at least) for their initial traction in order to avoid the cost bias?

  45. howardlindzon

    I picked a great week to retire. Back to digging coal for me.

    1. William Mougayar

      Marshall McLuhan once said: “The future of the future is the present.” Makes you think.

  46. Guest

    What do you think about this pitch to a VC *today*.Entrepreneur: I am going to raising money to pay for consumers’ bandwidth so they can watch TV for free on my app.VC: What’s your wiring instructions? Let’s double the raise to make sure no one beats us to the punch!

    1. fredwilson

      i don’t like it

  47. Ben

    does that mean people should start pitching better ISP services?

  48. Robert Heiblim

    I agree with your views on the threat. This frees up the idea of tiered pricing for data consumption so it is not so much traffic shaping or blocking as placing the cost of these services at the users feet. As you describe, those services with preferred or prepaid arrangements will have advantage and so scale will once more be a blocking factor. This is a challenge to models like Pandora though audio is not a lot of bandwidth and to some extent Netflix though they may be able to offset much better. As you put it, if left here we will see a lot of partnerships and fees paid to the telcos and MSOs for carriage.

  49. baba12

    Since the FCC rules state that the telcos are information service providers and can’t be regulated maybe the local municipalities will rollout their own fiber broadband networks. Charge $100 a year on your local taxes to pay for it and maintain it. Oh but that is socialism and we don’t like that. So guess if you are not rich or super power you you accept it, wave the flag and be proud….

  50. Informerly

    I was fairly neutral in this debate (I swear, no pun intended) until I read: The Master Switch by a prof who popularized the term Net Neutrality. It completely changed my perspective and idealism of how the internet can develop. It’s an incredible history of information industries (telephone, film, etc) and how they started idealistically and were co-opted by seemingly benevolent monopolists. In many cases the monopolists even probably meant well.Strong, strong, strong recommendation for anyone interested either in the Net Neutrality debate, or just the business of tech-media in general:

  51. Elia Freedman

    I don’t know what to think of this ruling, but here is an alternative opinion from someone who used to work at the FCC. He thought the FCC got what they needed:…Quote:But right now I will take a longer view. I am reasonably confident that if I were a member of Verizon’s board of directors and someone could have accurately predicted the content of today’s opinion before Verizon filed its lawsuit, as a director I would have said, “Then let’s not file the suit and let’s hope no one else does, either.”

  52. Mɐx Bulger

    As terrible as it is, Internet 3.0 ruling will also create opportunities. Those wise enough will find new ways to leverage the network. ISPs placing artificial constraint on bandwidth will be disrupted as fiber technology improves. The more network hardware we virtualize and data center efficiency that arises, ISPs will lose marketshare for trying to squeeze too hard. There would likely be a rough period, first, much like what you’re describing above, but I’m sure the open and distributed network would overtake the closed and fragmented.

  53. Nathan Lustig

    In Chile, Virgin Mobile just entered the market to compete against three quasi-monopolies. one of their most successful strategies has been using “unliminted whatsapp” as a marketing ploy.If you have a dataplan of any amount (even 50mb/month), you can use whatsapp no matter if you have data left over or not. Interestingly enough, I think they haven’t figured out how to only offer unlimited whatsapp, as my imessage works even if I’ve run out of data, but the rest of my internet/twitter/mail gets blocked.In the end, it should go one of two ways: public utilitiy where you can’t favor one data over the other, or elimination of monopoly status to allow someone to come into the market that will offer open internet to all.

  54. Twain Twain

    Does this make Telefonica and other telco operators decision to create incubators like a GENIUS strategic move in retrospect?Part of their rationale — aside from fostering local ecosystems and preventing “brain drain” of talent to US — was as a defensive strategy to shore up against pipeline penetration by Google, Apple et al.So this is an interesting development…Maybe the telcos will be the VCs and VCs will be disintermediated?

  55. Devang Patel

    Possibility of preferential treatment is real concern here. Think about this way, What if your electric utility company charges you for electricity usage based on home appliance brand and not necessary based on energy consumption by the appliance.

  56. Jim Bob

    I wish to point out, the the court decision can be reversed by action of the FCC.The FCC merely must re-assert and reverse its years-ago decision to *not* regulate internet network providers as common carriers (as telephone companies used to be regulated).Once that decision is made, it is possible for the FCC to issue a rule for net neutrality. The FCC capability and authority is simple on this topic. To do so, politically, not so simple.

  57. tubby_bartles

    It sounds like the ideal solution is to allow the telcos to do anything they want – but ban payments from content providers as anti-competitive (Google can’t pay to be faster than any competing search engine, etc.) and don’t allow treatment of telcos services different from other companies.This will prevent the content providers from paying to block out competitors, but allow individuals to opt to pay for what they want. Of course, since the idea of “traffic shaping for business purposes” is absurd, the users would opt for “net-neutral” plans anyway.The FTC could declare that and we’d be back to a net-neutral world as long as consumers did in fact value it.

  58. Steve

    This ruling is anti-competitive in that it allows regulated monopolies (let’s not forget the “regulated” part) to skew the competitive landscape in favor of entrenched interests and artificially to raise the the barrier to entry by new competitors whose ideas or technology may be superior, but who don’t yet have the financial resources that the favored interests do.

  59. Dave W Baldwin

    Truly sobering. Once again, someone like Senator Wyden is going to need to become involved and everyone will need to help.

  60. George Polak

    Fred, how do you think this will impact apps/sites that offload the majority of their bandwidth to Amazon or other cloud providers?Your theoretical Instagram competitor will only serve the tiny API calls via their own servers, but the app will pull the heavyweight images directly from Amazon’s S3. The image traffic will be seen coming the AWS domain, not the app’s.

    1. fredwilson

      those images still need to get to my phone

      1. George Polak

        What I was getting at was that most apps don’t have a single domain for all the traffic they generate.In the best case, AWS has paid up with the telcos and your app will be quick even if you didn’t.In the worst case, even if you did pay the Verizon toll, you app can still appear to choke because one of the half-a-dozen services it relies on (AWS, Flurry, Twillio, etc.) did not.

  61. Morgan Warstler

    I trust the market.Let google get out there and run Fiber like its life depends on it. It can stomach 5 years of net losses with no moonshots while it wire up the top 40 metro Areas.I have been waiting for someone to be desperate enough to do HAV Blimps for almost 10 years. – they make satellite broadband access work.Most people will not stand for being cut off from the real Internet, and those that will, well they probably need lots of free services.

  62. Terry A Davis

    I made a PC operating system. If not God’s official temple, ignored. If yes God’s official temple, gang busters success. VC doesn’t help. Just wait. I might be in CIA prision. God has to kill CIA and FBI.

  63. Chris Mack

    And a few years after that: “Who cares? It’s just the US market which pales in comparison to Asia, Africa and South America.” A dying empire in real-time.

  64. SanoKeno

    This is gonna be really good when you think about it. WOw.Anon-VPN dot com

  65. Peter Renshaw

    “.. Telcos will pick their preferred partners, subsidize the data costs for those apps, and make it much harder for new entrants to compete with the incumbents. …”Will this make the US less competitive to overseas companies?

  66. David Silver

    Internet is a luxury for a lot of people, so if the telcos want to provide subsidized-but-restricted service, and people want to take advantage of that, I see that as a win. Not for the entrepreneurs and VCs Fred writes about, but for society at large.

  67. obiwanginobli

    sky is falling much?

  68. Jerome Camblain

    Entrepreneurs, it seems that you can either (most certainly both) fight for Net Neutrality and/or focus on B2B ideas. From what I read, there would be a huge shift toward innovation for entreprises and continuing “consumerization” of IT. The SMEs of the world would become the new targeted users…and they are used to pay for services.

  69. georgeou

    Bandwidth has always cost money. Even if the FCC rules weren’t shot down by the courts, ISPs are allowed to offer paid peering or (charge for higher performance peering).Level 3 complained to the FCC because Comcast wouldn’t give them 20 private 10-gigabit links for free but even the previous FCC chairman wouldn’t do anything about it.http://www.digitalsociety.o…Later on Netflix tried to play hardball by threatening ISPs that they would withhold full HD (1080P) content to that ISP, but the ISPs wouldn’t budge and Netflix flinched and backed off. Conversely, ESPN commits “reverse Net Neutrality” by charging ISPs per broadband subscriber even if they don’t watch ESPN’s web streaming service. So it’s really a question of who has the negotiating powers.…All this non-neutral stuff has been happening all along on the Internet and it’s how things have always worked. “Net Neutrality” means a lot of things to lots of people but one of the fundamental themes is Network Egalitarianism. But the Internet has never been egalitarian.

  70. Muj Naqvi

    While I abhor this ruling it was very tough to read this line over and over:”We like you and your idea very much, but we are going to have to pass.”it’s a huge grin f#%k…why do you guys always say that! 🙂

  71. Matt McCormick

    Seems to me like it might then be in a VCs interest to fund a new type of Telco that promises never to throttle bandwidth. Isn’t that the point of a free market economy? If you don’t like the way something is done, build a better competitor.Google is doing that in KC and the city of Chattanogga did it for themselves.I’m not happy about this ruling either but it’s not like we’re stuck in a world that can never change unless the politicians say so.

  72. Greg Gentschev

    I’m not convinced that somewhat higher bandwidth costs for startups are a big deal. We’ve all seen the costs of starting a company go down perhaps 100x since the late nineties, but costs don’t always go down. If an entrepreneur has to raise a 20% bigger round because of bandwidth costs, I think that’s ok. Incumbents have economies of scale in various areas, but that’s not going to stop someone with a better mousetrap.If the marginal (meaning on the margin between success and failure) new social network or photo sharing site fails as a result, I’m ok with that. If bandwidth costs can kill your startup, odds are good it’s not that great anyway.

  73. NA

    These are market cycles, and they are real. Monopoly telcos are an area that could really be manipulated, but we still have to consider exceptions. Look at the internet, crushed Monster, and they didn’t spend money on advertising.

  74. Robert Holtz

    Net Neutrality is vastly misunderstood. Fred, you depict the consequences vividly. Unfortunately, wireless has evolved very differently from the Internet. Wireless providers are used to being gatekeepers and their networks are in effect walled gardens. Their networks are anything but neutral and they’ve even been caught red-handed selectively throttling their own throughput to game user’s individual available bandwidth. The heart of the problem is that for users the convergence of mobile with The Internet has already happened but under the hood, in practice, and most importantly, regulatory, these are private networks we’re riding on when we sign up with one provider or another and those network operators are used to making their money as toll booth operators. They aren’t giving up their control that easily… and if they do, you’re going to see those subsidies drop and device prices soar.

  75. Mark Gavagan

    “There is an even easier solution for net-neutrality fans. The FCC could decide it has the political cover and popular support to declare broadband providers utilities, like landline phones or roads. This would make Internet providers subject to so-called “common carrier” rules, which would keep them from discriminating against certain services, such as Netflix.”from The Atlantic’s “No, Netflix Is Not Doomed By the Net Neutrality Decision. In fact, neither is net neutrality”…(not sure this is exactly correct, or how I feel about it yet)

  76. Max Yoder

    Way to boil this ruling down to real-world outcomes, Fred. I went from being mad to being pissed, and that is a good thing.

  77. Devin Elliot

    Is this an assumption that data will be throttled or a given? I see the possibility of a scenario where a big player like Netflix pays for data to get to me for free so I then use more of their service. Doesn’t that then leave more data plan for me to spend on other companies, to in fact try more services?I’m not for ending current arrangements but I want to be wary of claims that the sky is falling when it’s merely one perspective of a multifaceted situation.I don’t see the incentive for a telecom to pursue a strategy that picks and then cements winners by squashing newcomers. If you provide a leader the ability to reward their users that’s good for telecom and Netflix but it’s also good for a consumer because now I have more data plan to go around which in turn is also good for the telecom because those new services grow up and buy more bandwidth preference and the entire pie increases.Disclosure: I’m also making assumptions and I really hate the telecoms

  78. Boss Hogg

    If I like it, I’ll pay for it. If I don’t, I won’t. Much like today.

  79. Mark Gavagan

    MIT Tech Review article “Around the World, Net Neutrality Is Not a Reality – In much of the world, the concept of “net neutrality” generates less public debate, given there’s no affordable Net in the first place.”Link: http://www.technologyreview

  80. Fakeer Namee

    I disagree with your sentiments concerning net neutrality. I started my first biz when I was 17 years old and made a great success of it too, without anyone’s help (truly) and only MY money. Before I started the business I went out and got a client (a large area print shop) who liked my work from my then job with a small ad agency (I’ve been in the work world since the age of 12 and am now 65). I worked out a contract with him (that I learned from my dad who had his own business when I was still living at home, I left at 12). Took that contract to my bank, where I’d had an account since 12 (emancipated minor). THEY loaned me the money to get me started in that small graphic design biz that I grew in 3 years to 17 employees. I paid them back in the first six months too. First time I was a millionaire I was 18.5 years old and then at 21 I lost most of it due to my risktaking ventures. I got back that millionaire status at 25, and never lost it again. Since then I’ve started four other businesses and all but one (the original one) are still thriving, under MY leadership. “Startups” are just new businesses. YOU care about anything that will take away from your ‘endgame’… making money. You don’t really care about the startups per se. The reality is that today too many young people think that if they have a ‘bright idea’ for something that makes them ‘geniuses’ and that they ‘deserve’ to become ‘overnight billionaires’. Bah humbug! Even as a real genius I knew without a shadow of a doubt that I was entitled for WHATEVER I WAS WILLING TO WORK MY BUTT OFF for, and sometimes not even then. That life is short & difficult and we all die at the end of it. The best thing in life is not money (I knew that b4 I had mega-money), but other more valuable things like a sense of accomplishment, like knowing that people trust your word because you ARE trustworthy, that being ‘authentic’ is far more valuable than owning a jet plane, or a $100,000 car, or any other of the trappings of ‘new money’. My life has been a grand journey and I am so very grateful to God for giving me the free rein He has, and the journey’s reward has been all the people who have benefitted from my courage to BEGIN and my steadfast nature to CONTINUE. The best things in life really do come from standing fast in reality and using your God-given Gifts to help others, but not by ‘enabling’ others, but by being a positive example, and by helping others to stand tall and not falter on their own journey. If a startup needs broadband for their business, they can put that expense upfront in their business plan. The last thing anyone needs to start a business is ‘startup money’ from ‘venture capitalists’. My 90 something uncle thinks I should become one of the ‘Shark Tank’ folks (aka like YOU) but I refuse. I told him that life is too short to make things EASY. Nothing great that ever happened to me came EASY, it came by hard work and overcoming my own fears that were trying to prevent me from leaping across the chasm created by those fears to what turned out be exactly as one might imagine: a bigger, broader, multi-dimensional world of joy and satisfaction. Praise the Lord!

  81. Sam Beal

    Welcome to the world that most non-internet companies face with large encumbants. Innovate around them or sell SubHumor to one of them.