The Big Story: Tens of thousands weigh in on net neutrality rulemaking
The Federal Communications Commission received nearly 40,000 submissions to its comment period that closed Thursday as part of its effort to reinstate net neutrality rules. Engine was among those filing comments, highlighting the importance of an open Internet where startups can compete and succeed. Net neutrality rules prevent Internet service providers from engaging in blocking, throttling, paid prioritization, and other business practices that negatively impact startups’ ability to reach their users, making them critical to fostering a level playing field.
The FCC’s current effort to restore net neutrality rules is part of a long, fraught history going back decades. The ongoing effort is substantively similar to the Obama-era open Internet rules adopted in 2015, which were repealed in 2017 under then-Chair Ajit Pai. Startups and investors have consistently weighed in over the years to underscore the importance of net neutrality for the startup ecosystem. Startups need to stretch every dollar of their limited budgets as far as possible and can’t afford to pay extra to reach users. What’s more, investors want their resources to be put toward growth, not siphoned off to infrastructure costs. That’s why over 1000 startups and investors from all 50 states signed an open letter opposing the removal of the rules in 2017 and supporting a free and open Internet.
Internet service providers and other opponents of net neutrality argue that the rules are not needed because startups have continued to thrive even with their 2017 removal. But there has been a constant stream of regulatory, legislative, and legal action over the last nearly two decades, as well as the controversy and public attention that follows any perceived attempts to undermine net neutrality. The FCC should move ahead with its proposal to put net neutrality rules back on the books to ensure the free and open Internet that fosters a fair and competitive online landscape.
Policy Roundup:
Fearless Fund appeals decision preventing support for Black women entrepreneurs. Attorneys for the Atlanta Black-women led VC firm, Fearless Fund, last week filed to appeal a federal ruling barring them from operating a grant program in support of Black women founders. The appeal counters allegations from a conservative activist group that the Fearless Fund’s program violates federal civil rights law by highlighting the historical discrimination in venture capital funding for Black women. In an op-ed this week, founder and CEO of Durham, North Carolina-based Courtroom5 Sonja Ebron discussed the challenges faced by Black and brown women in the civil court system that she sees as a justice tech platform and the importance of having dedicated resources for founders of color, like the Fearless Fund.
Senators try to rush through overbroad, innovation-threatening AI bill. This week, Sens. Josh Hawley (R-Mo.) and Richard Blumenthal (D-Conn.) tried to hotline their AI bill, S.1993, the No Section 230 Immunity for AI Act, which would harm AI innovation, content moderation efforts, and expression online. Senator Ted Cruz (R-Tx.) blocked the bill—which has not received a hearing—and suggested that the legislation would impede innovation and harm U.S. leadership in AI development. Ahead of their maneuver, Engine joined eighteen civil society and industry organizations in sending a letter to Senate leaders warning how the bill would reward malicious actors while harming AI innovators, like startups.
Congress heads home without moving key tax provisions for entrepreneurs. Members of the House and Senate this week reignited last minute talks on a potential tax package that would include fixes vital for the startup ecosystem, like restoring immediate expensing of research and development (R&D) investments and an expansion of the Child Tax Credit (CTC). Changes to R&D expensing that recently took effect as the result of a 2017 tax bill have created large, sometimes unexpected tax bills for startups, leading to strained budgets and layoffs for some companies. Support for women and working mothers is critical—and enables more women to pursue entrepreneurship—but Congress failed to pass meaningful support for working mothers, through an improved CTC or renewed child care stabilization funds which expired at the end of September. When Congress returns in January, they should quickly advance a tax package that includes these important provisions for the startup ecosystem.
European Union reaches a deal on the artificial intelligence rules. Late last week, European Union lawmakers reached an agreement on their AI Act, the world’s first AI legislative rulebook, which will apply extraterritorially and impact all AI companies—including U.S. startups—with European exposure. The final agreement departs from the initially proposed risk-based approach, and it includes obligations for general purpose AI models above certain computing thresholds and exempts most open source systems. The final text will be published sometime in 2024, will take effect sometime in 2026, and is likely to create significant additional costs for AI startups.
U.S. maintains support but softens stance on key digital trade policy for startups. This week, the Biden administration adjusted its stance on the e-commerce moratorium on the imposition of customs duties for electronic transmissions, which allows trade in digital goods and services without tariffs. In remarks this week, Deputy United States Trade Representative María Pagán suggested extending the moratorium "for now," a softening from the historical U.S. preference for the moratorium to be made permanent. This shift follows the October withdrawal of U.S. support for other key digital trade policies for startups, like free data flows. The moratorium will lapse without renewal at the 13th World Trade Organization Ministerial Conference, taking place February 2024.
Extension to Internet spying program passes as part of defense bill. Both chambers of Congress this week passed the National Defense Authorization Act, an annual defense bill, which included a four-month extension to the controversial spying program called Section 702. Last week, House committees advanced two competing bills on Section 702, including one that would significantly reform the program, but neither of those bills received a vote before lawmakers left town for the holidays. The extension extends just past when current certifications—which last for a year—for the program are set to expire, meaning they could be renewed, making the four-month extension actually a 16-month extension. Section 702 impacts startups thanks to the role it has played in upending critical international data transfer pacts, concerns that could be helped through significant reforms.
Startup Roundup:
#StartupsEverywhere: Chicago, Illinois. HAAS Alert connects first responders, towing and recovery fleets, and roadway workers with vehicles and motorists through real-time digital alerts on its Safety Cloud® platform to prevent collisions and enhance road safety for everyone. We talked to Founder and CEO Cory Hohs about interconnected transportation, the technology that fuels it, and the future of roadway safety.
