Startup News Digest 9/25/15

Our weekly take on some of the biggest stories in startup and tech policy:

Startups Defend Net Neutrality Order. The FCC is facing ongoing litigation in the DC Circuit Court of Appeals over the net neutrality rules it passed earlier this year, and on Monday, the court received briefs from a variety of companies and organizations supporting the FCC’s rules. Engine filed a brief along with a group of innovative startups that included Dwolla, Fandor, Foursquare, General Assembly, GitHub, Imgur, Keen IO, Mapbox, and Shapeways. We argue that the FCC’s decision to reclassify broadband as a telecommunications service was necessary to preserve the continued growth of the startup sector, which has in turn driven consumer demand for broadband and incentivized companies to invest in their networks. The court will hear oral arguments in the case on December 4 and will likely render its decision sometime next year.

SEC To Finalize Crowdfunding Rules. Sources at the Securities and Exchange Commission have told Politico the agency is likely to finalize long-awaited crowdfunding rules in late October or early November. SEC rulemaking will put Title III of the JOBS Act into effect, which could radically expand capital access for startups—though the statute does contain some burdensome requirements for companies. While the startup community will be excited to see any action from the SEC in light of an extended delay, we need to ensure that whatever regulatory regime the SEC adopts is well-calibrated and accessible to the small, emerging companies that could most benefit from new sources of capital.

Bush Campaigns Against Open Internet. Most of the Republican candidates in the 2016 presidential race have come to realize that an overwhelming majority of the public supports net neutrality rules (including 81% of Republicans) and have refrained from loudly criticising the FCC’s Open Internet Order. But this week, Former Governor Jeb Bush expressed his opposition to net neutrality (a policy he onced called “one of the craziest ideas [he’s] ever heard”), arguing that preventing ISPs from abusing their gatekeeper power does nothing to enhance consumer welfare. Bush’s comments run counter to both the FCC and the conservative DC Circuit Court of Appeals, which have recognized that net neutrality rules and foster the growth of the edge providers and promotes investment in broadband networks, resulting in better and more affordable service for consumers. It’s a reminder that startups, consumers, and everyone else who benefits from the open Internet should keep a close eye on this presidential race. 

Administration Taking Steps to Promote High-Speed Broadband Access. On Monday, the Broadband Opportunity Council published its first report, which includes 36 actions that federal agencies will take to encourage broadband deployment.  These actions require no new funding, “but existing sources of funding are being opened up and barriers to deployment are being brought down.”  Of particular note is that the White House refers to broadband as a “core utility,” like electricity or water. We tend to agree - broadband is no longer a luxury. Connectivity is core to innovation and the ability of startups to reach customers and scale, and we are pleased to see the Administration taking these steps to bring access to underserved populations and areas of the country.  

White House Considers Encryption. Thanks to some leaked documents from the White House, it’s rumored that President Obama may come out in opposition to a law that would require firms be able to unlock their customer’s encrypted smartphones and applications. Up to this point, law enforcement has argued the need for backdoors to encryption to ensure national security and safety. This sort of advocacy from the White House would help repair global trust in the US government, countering the narrative in Europe that the US is trying to expand its surveillance activities. Meanwhile, the American Civil Liberties Union (ACLU) and other privacy advocates continue to push the importance of US government’s use of encryption to promote both personal privacy and national security.

“Facebook giveth and Facebook taketh away.”  The Wall Street Journal reported this week that dozens of startups have “shut down, been acquired or overhauled their business” as a result of Facebook’s new policies limiting outsider access to some of its users’ date. Facebook’s rules, which went into place in May, restrict what data can be used by third parties like startups, academics, politicians or organizations.  Other social media giants like LinkedIn and Twitter have enacted similar policies, signaling to the startup world that if you are building a product or service that relies on data from social media sites, that data may not always be available...

ECJ Advisor Deals Blow to U.S. Tech Companies.  In other data related news, a European Court of Justice (ECJ) advisor issued an opinion this week that the “safe harbour” agreement allowing for data transfers between the EU and the U.S. is “invalid” due to growing concerns around U.S. surveillance practices.  While the lawyer’s opinion is not legally binding, if cemented by a formal ruling it would create a headache for U.S. tech companies who could face data localization requirements in any EU countries.

Women Tech Leaders. Fortune profiles some of the powerful female talent Google has been able to attract at the executive level, including Ruth Porat, a recent addition who has led the transition from Google to Alphabet. Many of these executives after building their experience at Google have left to grow smaller tech companies. Meanwhile, Mary Lou Jepsen of Facebook has a different take: she sees many senior women leaving because they feel isolated by the tech industry.

Why Broadband Competition Matters to Startups

Last week, at the annual U.S. Conference of Mayors meeting in San Francisco, Minority Leader Nancy Pelosi identified the two policy issues she most wanted the mayors in attendance to focus on: sequestration and spectrum. As Pelosi noted, issues surrounding sequestration will hopefully get sorted out relatively quickly, but adjusting our national broadband infrastructure to maximise innovation and economic growth is a far more difficult task.

In most markets in the country, consumers and businesses have access to only one or two wired Internet access providers. The situation isn’t much better in the fast-growing mobile Internet space, where the two dominant wireless companies, AT&T and Verizon, control nearly 75% of the low-band spectrum in the country—the type of spectrum most valuable for mobile Internet use. Given this concentration of key resources in the hands of a few companies, it is no surprise that the U.S. recently ranked 26th out of 29 countries in terms of wireless broadband speed.

As Leader Pelosi noted, in a country where “only 37 percent of our nation’s schools [have] enough broadband for digital learning,” increasing broadband access and affordability would help grow the economy by training a generation of entrepreneurs with the technical skills needed to thrive in the digital world. But, improving wireless broadband speed, price, and coverage through greater competition would grow the economy in myriad other ways, perhaps most profoundly through its impact on the startup sector.

We at Engine are fond of reminding policymakers that startups are responsible for virtually all new net job growth in America, and in light of this reality, policies that help increase startup activity are policies that create jobs. Simply put, actions that increase competition in broadband markets—like expanding the spectrum reserve in the upcoming low-band spectrum incentive auction—will go a long way towards spurring startup activity and the economy more generally. That’s because better competition in mobile broadband helps startups in a number of key ways:

1) A bigger customer base. At any pitch meeting, one of the first questions an entrepreneur will get from potential investors is about the size of the company’s addressable market. That is, how many consumers will your business reach? The bigger the market, the higher the company’s potential value. Citizens that are either not online at all or do not have access to broadband of adequate speed or capacity are citizens not participating in the startup economy.

According to the FCC’s Seventeenth Mobile Wireless Report, in 2014, 0.3 percent of the U.S. population “lived in census blocks that received no mobile wireless broadband coverage.” That may seem like a small percentage of the population, but it amounts to approximately one million people without any mobile wireless access. Amongst people with access to some mobile broadband coverage, a huge percentage of the population is dramatically underserved. A recent Pew study found that seven percent of the public—or more than 22 million people—have no home broadband service and have a limited number of ways to get access beyond their cell phone. Considering how poorly U.S. mobile broadband fares in terms of speed, data availability, and affordability, many if not all of these citizens likely cannot use any of the amazing technologies and services that startups provide. Giving these folks access to better, cheaper mobile broadband will greatly expand startups’ addressable market and consequently boost startup activity. And, increasing competition amongst mobile broadband providers is really the only feasible method of improving broadband penetration.

2) Lower costs for startups. The archetypal image of the startup as one or two scrappy inventors in a garage isn’t all that far from the truth for most companies. While there are a few outliers that find substantial funding early in their life cycles, most startups have to get by with minimal funding as they develop their core business. Failing to raise adequate seed funding to launch an enterprise is one of the most common pitfalls for entrepreneurs. Since every dollar counts, lowering the amount of money it takes for entrepreneurs to start businesses directly results in more startup activity. And, according to a report from the Internet Innovation Alliance, access to quality broadband can save startups an average of more than $16,000 annually—a significant number for startups trying to get off the ground. Making mobile broadband more efficient and affordable will further help drive down costs for startups and in turn improve competition in the startup sector.

3) New technologies. It’s impossible to predict precisely how the innovators that drive our startup sector will harness the power of faster broadband technologies like gigabit WiFi, but it’s a guarantee that they will find ways to generate entirely new companies and services that take advantage of whatever broadband resources are available to them. This innovation represents the real economic growth potential from increased mobile broadband competition. Just look at the value of startup products and services riding on unlicensed spectrum technologies like Bluetooth and WiFi, which are estimated to add $222 billion to the U.S. economy each year. If startups had access to ubiquitous, ultra-high speed mobile broadband, the value of the technologies and services they could create would be staggering.

The importance to the startup economy of advanced broadband infrastructure is hard to overstate, and yet opportunities to promote the type of competition necessary to spur faster and cheaper networks are in short supply. The upcoming FCC low-band spectrum incentive auction represents one such opportunity. Failure to take adequate steps to promote competition through auction safeguards will put at risk the untapped economic potential of future generations of startups and the millions of jobs they could create.

Statement on Termination of Comcast Merger Agreement

 

In response to Comcast's announcement that it had terminated it's merger agreement with Time Warner Cable, Engine Policy Director Evan Engstrom issued the following statement:

"This is a major victory for the future of the Internet, and for the startups and families that depend on high-speed broadband access to work and study and innovate. The proposed merger would have given Comcast monopoly control over Internet access for a huge swath of the country, effectively removing any incentives to increase speeds, lower costs, or expand coverage. The death of the merger is a step towards broadband policies that favor competition over conglomeration. If Comcast wants to expand in the future, it will need to do so by competing with its rivals, rather than simply buying them. Engine is proud to have worked with so many great organizations to prevent the merger, and in the months ahead we will continue to fight for policies that expand broadband access and make the U.S. even more competitive in a global economy."

CPUC Commissioner Proposes Denying Comcast Merger

On Friday, Commissioner Michael Florio of the California Public Utilities Commission issued a proposed decision rejecting Comcast’s attempted merger with Time Warner Cable—an important step towards blocking further consolidation in the broadband market. Commissioner Florio’s decision is particularly significant, as the CPUC was close to voting on an alternate proposed decision approving the merger with minimal conditions. That Commissioner Florio felt compelled to write a decision rejecting the merger speaks to how problematic it would be for California’s broadband future.

In his proposed decision, Florio writes: “There are a number of concerns about post-merger scenarios, ranging from possible to the probable or certain, that lead us to conclude that this transaction is not in the public interest. These include (but are not limited to) the potential lowering of quality of service and customer service standards to a lower common denominator, an increasing monoculture in the fixed broadband market in California, concerns about privacy, less competition in the special access market, and—most importantly—less competition in the broadband market, both the retail segment of that market and the segment that allows edge or content providers to reach retail subscribers.”

Commissioner Florio expresses specific concerns about the impact of the potential merger on California’s broadband market and it’s larger tech economy. He writes: “Were the post-merger Comcast to exploit its bottleneck position between its retail subscribers and edge providers, as it has shown the inclination to do, it would likely make broadband less attractive to a mass audience, make the investment in and provision of online services (VoIP competitors) and content (Netflix, Amazon, etc) less attractive to edge providers, and dampen the ‘virtuous cycle’ of innovation, investment, and broadband deployment.”

The proposed decision also addresses the economic harm that occurs when edge providers have fewer pathways to reach customers: “In more concrete terms, the proposed merger between Comcast and Time Warner reduces the possibilities for content providers to reach the California broadband market. Many of these content providers are located in California, and a reduction in their ability to reach their intended markets would likely to have a negative impact on the California economy. Such a negative effect on the economy is, itself, likely to discourage the deployment of broadband.”

These concerns echo many of the points raised by Engine and other organizations that support the growth of startups and entrepreneurship. As the decision explains, a post-merger Comcast would be the sole provider of 25 Mbps speed Internet access for 78% of California census blocks and would face only one competitor in the remaining areas. Putting such vast control over broadband connectivity in the hands of one company—particularly one voted the “worst company in America”—would diminish Comcast’s incentives to invest in expanding and improving its broadband infrastructure. The consolidation of mega-ISPs in a market already starved for competitive offerings will only make it less and less likely that California and the U.S more generally will catch up to international peers in terms of Internet speed and affordability. The next generation of innovative startups that depend on high-speed, low-cost Internet access to attract customers and develop innovative services will face a much more difficult competitive landscape if Comcast is allowed to swallow up all potential competitors.

Commissioner Florio concludes that the proposed merger would cause myriad competitive harms that cannot be mitigated through conditions, and therefore, the merger is antithetical to the public interest. “In sum, we find that placing conditions on the merger, even assuming that those conditions could address all of the potential harms associated with the merger, is unlikely to succeed in doing so. And based on our review, it is not clear that any conditions, however well designed, well intended, well enforced and fully implemented, could mitigate the harms associated with the merger.”

This proposed decision is big news, and not just for residents on California. Since much of the merger’s value to Comcast lies in acquiring Time Warner’s California customers, a CPUC rejection would likely kill the merger nationwide. But while Commissioner Florio’s proposal offers hope, it does not by itself spell the end of the Comcast merger. The full CPUC still has to vote, which could happen as early as May 21.

Anyone concerned about our nation’s broadband infrastructure needs to make their voices heard. The CPUC will be accepting comments on the proposed merger until April 30. If you believe that America’s broadband future is too important to be left in Comcast’s hands, send your comments to the CPUC Public Advisor at public.advisor@cpuc.ca.gov and encourage them to reject a merger that would pose an incalculable risk to innovators everywhere.

FCC Chairman Takes Steps to Undo Anti-Community Broadband Laws

Even though a favorable net neutrality ruling from the FCC appears imminent, the vibrancy of the Internet economy remains at risk so long as it’s tethered to a few, powerful oligopoly Internet Service Providers. These ISPs have tacitly divvied up geographic markets across the country, blocking competition and offering far lower speeds and higher costs to both consumers and businesses than those in peer nations. Due to aggressive ISP lobbying, nearly 20 states have laws on the books that prevent municipalities from providing broadband networks. ISPs sought these rules to prevent competition for broadband customers. Though net neutrality grabbed most of the telecom policy headlines over the past year, the FCC and the White House have both signalled an interest in overruling these anti-competitive bans on community broadband. Today, FCC Chairman Tom Wheeler decided to take action, circulating a draft decision that would preempt such laws in North Carolina and Tennessee.

We’re heartened by the FCC’s recognition that laws like these provide no public benefit and only serve to protect local cable monopolies. A lack of competition in broadband markets is one of the key reasons the U.S. ranks so poorly in global Internet affordability and speed. With the FCC having recently modified its definition of broadband to reflect the changing needs of a globally connected society, it is no surprise that the FCC would use all the tools at its disposal to promote broadband competition in order to bring U.S. speeds up to global standards.

Cities like Chattanooga, TN, Danville, VA, and Lafayette, LA are perfect examples of why communities should be given the option to build networks for their citizens. Unwilling to wait for the incumbent ISPs to upgrade their networks, these cities took it upon themselves to provide fiber infrastructure for their communities, drawing startup activity and growing the local economy, in addition to providing a much needed service to residents.

The FCC’s authority to overturn anti-community broadband laws flows from Section 706 of the Telecommunications Act, which gives the Commission authority to promulgate rules to promote the deployment of advanced broadband. Those closely following the net neutrality debate know that Section 706 is insufficient by itself to protect an open Internet, but giving the FCC the authority to prevent ISPs from using their monopoly power and lobbying might to crush potential competitors is still hugely important. The net neutrality bills discussed in Congress last month would have completely negated the Commission’s Section 706 authority, preventing it from overturning anti-community broadband laws. If the proposed legislation’s loophole-ridden net neutrality “protections” weren’t reason enough to oppose the bill, its attempt to protect ISP monopolies by preventing the FCC from addressing anti-competitive muni broadband laws surely is.

The FCC is scheduled to vote on the order at the end of the month, and while the proposal is targeted to only two states, it sends a clear message that the FCC will do what it takes to promote competition in broadband markets. Working to ensure that broadband markets feature multiple competitive providers is a daunting task, but Chairman Wheeler’s plan to preempt anti-competitive state laws banning municipal broadband is a step in the right direction.

Tech in New York - Governor Cuomo’s 2015 Opportunity Agenda

With Engine having recently expanded to New York, we’re paying closer attention than ever to the decisions being made in Albany and their impact on the state’s tech sector. New York is home to one of the largest and most rapidly expanding startup communities in the country, so local and state level policies on investment and regulation have implications for the future of tech in all fifty states. This afternoon, Governor Cuomo laid out his vision for 2015 in a combined State of the State and budget address, along with a 500-page policy book that included additional proposals and details. While the presentation covered a wide range of topics from criminal justice to transportation infrastructure, the Governor did include several initiatives of particular interest to the startup community in both the education and economic development sections of his speech. For example, the Governor discussed his recently announced New NY Broadband Program, which would provide matching funds for internet service providers that invest in high-speed broadband in underserved areas. Access to broadband is essential not just for consumers, but for growing and potential startup communities as well. By using state funds to leverage private investments, this program could go a long way towards supporting innovation around the state. At the same time, the Governor avoided mention of the proposed merger of Comcast and Time Warner Cable, which would do much to undermine efforts to improve broadband access here in New York and around the country. Giving Comcast that kind of monopolistic control over broadband would remove almost any incentive for them to provide the higher internet speeds necessary for startups to thrive, and for us to remain competitive with other countries. Governor Cuomo has previously indicated his concerns about the proposed merger, and the state’s Public Service Commission is currently reviewing the deal to determine if it would benefit or harm New Yorkers. We urge the Governor and the PSC to oppose this deal, and continue to champion high-speed access for all New Yorkers. The Governor also talked about expanding a number of programs that would provide startups with access to capital, technical support, and other incentives. One proposal particularly worth noting is doubling the NY State Innovation Venture Capital Fund from $50 million to $100 million. The Fund is overseen by Empire State Development, and provides two types of investments: small pre-seed stage investments of up to $100,000 to startups associated with universities in state; and investments of up to $5 million in businesses in strategic tech industries. This additional capital, and the private investment it can leverage, could make a big difference for some startups that would otherwise have trouble accessing funding. And the state can do even more to help New York startups access capital. In his campaign policy book released in October, Governor Cuomo declared his support for equity crowdfunding, which provides financing opportunity for businesses that have a hard time attracting traditional venture capital. Crowdfunding has proven to be especially beneficial to women and minority owned startups. And while the real solution is federal authorization of equity crowdfunding, New York could join more than a dozen other states that have already authorizing intrastate crowdfunding. This would not only provide greater opportunities for diverse startups in Queens or Albany or Rochester, it would help build momentum towards federal action. We hope to see more support from the Governor on this subject in the months ahead. The Governor also discussed a package of proposals to improve higher education in ways that would better prepare students for tech jobs and help startups access the talent they need in order to grow. He talked about creating partnerships between community colleges and employers, and rewarding schools who use those partnerships to provide students with real-world job skills. He proposed an Employee Training Incentive Program that would provide tax incentives for companies that provide on-the-job training. And perhaps most exciting, Governor Cuomo proposed changes that would streamline approval of new programs and degrees both at higher education institutions and high-quality proprietary schools. Recognizing that the skills many new employers need change on a yearly or even monthly basis, he said that “it can no longer take two years for a new degree or training program to be approved.” With startups in constant need of new talent, we welcome the Governor’s commitment to providing students in New York relevant skills. And since startups account for all net new job growth in the United States, making sure those jobs go to New Yorkers is good local economic policy. As more decisions around the details and implementation of these proposals get made, we’ll be working to ensure that startups play a meaningful part in the conversation. And we’ll continue looking for other ways policy makers here in New York can support innovation throughout the state.

President Obama Outlines Plan for Competitive Networks, Muni Broadband

The President’s speech yesterday in Cedar Rapids, IA called needed attention to the nation’s serious broadband problem—namely, that little to no competition exists when it comes to broadband networks. Even with a favorable net neutrality ruling from the FCC seeming imminent, the vibrancy of the Internet economy remains at risk, tethered to a few oligopoly Internet Service Providers. These ISPs have tacitly divvied up geographic markets across the country, blocking competition and offering lower speeds and higher costs than those in peer nations. Increasing competition in broadband markets won’t be accomplished overnight, but the plan the President has outlined offers some key strategies for getting competitive broadband options to cities throughout the country.

Echoing sentiments from FCC Chairman Tom Wheeler earlier this year, the President called on the FCC to overrule anti-competitive laws on the books in 19 states that prevent municipalities from providing broadband networks for their citizens. These laws—typically enacted at the behest of large ISPs—provide no public benefit, instead merely shielding ISPs from competition at the expense of local choice. As cities like Chattanooga, TN, Danville, VA, and Lafayette, LA have shown, building next-generation networks helps draw startup activity and grow the local economy, in addition to providing a much needed service to residents. Free from competitive pressures, ISPs have shown little interest in building the high-speed networks that will soon be necessary to compete internationally. The President’s plan to free cities from ISP-driven bans on municipal broadband is a long-overdue step towards getting the U.S. back on track with peer nations.

The President outlined other creative measures to prompt broadband infrastructure investment, including grants for rural areas to build high-speed networks, and a program to remove regulatory red tape that slows down broadband investment. All in all, it’s heartening for the startup community to hear concrete policy proposals to fix a broadband competition problem that is getting increasingly hard to ignore. The President’s plan is a strong step towards making the U.S. a leader in broadband innovation and ensuring that entrepreneurs can continue to create good tech jobs in cities and towns across the country.

FCC Chairman Wheeler Signals Support for Title II Reclassification

Big news on net neutrality: FCC Chairman Wheeler all but confirmed today that he plans to propose a rule reclassifying the Internet as a Title II telecommunications service next month. If you’ve been following the debate over net neutrality, you know what this means. And if you haven’t, well, this is huge.

Last year, when a federal court threw out the FCC’s 2010 Open Internet Rules, it essentially told the FCC to go back to the drawing board. The FCC, a federal agency, had a couple of choices: attempt to rewrite rules that would protect an open Internet using the same legal authority the Court already said wouldn’t work, or reclassify the Internet as a telecommunications service under Title II. Only under that second option would the FCC have the legal authority it needs to enforce real net neutrality. Which is, of course, why the cable companies and entrenched interests hate the idea. And why we love it.

Which brings us back to today. Despite months of lobbying by net neutrality opponents, today Chairman Wheeler, in a speech at the annual Consumer Electronics Show in Las Vegas, made his most emphatic statement to-date in favor of Title II reclassification. He told the packed room that his thinking has evolved, and while he originally believed that he could protect an open Internet using a “commercially reasonable” standard without reclassification, he’s changed his mind. Instead, he came to the conclusion—with which we agree— that "commercially reasonably" would really mean "commercially reasonable for ISPs," not the true innovators who depend on an open Internet. Chairman Wheeler also noted that the next wave of innovation would depend even more heavily on open access, particularly for innovations surrounding the Internet of Things. And with that, he signaled his support for what we have long believed is the only path forward: reclassification under Title II.

We are encouraged by the Chairman’s words today and look forward to seeing his proposal in writing early next month. But this fight is far from over. Many in Congress have promised to block any attempts at reclassification, so even with a victory at the FCC, our work here isn’t done. We promise you this, though: we’ll keep fighting on behalf of startups and their users to protect the open Internet and all that it means not just to the economy, but to all who use it. Today we got one step closer to that goal.

Success of FCC Spectrum Auction Reflects Boom in Mobile Internet Market

The FCC’s auction of new wireless spectrum—the biggest auction of its kind since 2008 —has vastly exceeded revenue expectations, surpassing $40 billion in bids as of Wednesday morning. Considering most analysts predicted that the auction would fetch somewhere between the FCC’s reserve price of $10 billion and $15 billion, the auction appears to be a resounding success.  The auction is for mid-band spectrum that carriers can use to help deploy 4G LTE networks. The success of the spectrum auction is particularly notable in light of arguments from wireless carriers in recent months that the application of net neutrality rules to wireless broadband would diminish their incentives to invest in infrastructure. Although the FCC has indicated that it is considering applying net neutrality rules to both wireless and wired broadband, carrier interest in bidding on the available spectrum surpassed all expectations.

The reason carriers are scrambling to buy up available spectrum is quite simple: consumer demand for wireless data has exploded in recent years, due to a robust market for mobile applications and services. The global market for mobile apps and advertising was worth $38 billion in 2013, up from about $6.8 billion in 2010. This latest spectrum auction shows what the FCC has described as the “virtuous cycle of innovation” at work: the more and better wireless services and applications are available to customers, the more consumers will demand sufficient capacity to use these services, and the more incentive carriers have to invest and expand their networks. Startups and entrepreneurs always find creative ways to make use of greater bandwidth and faster speeds, creating new applications to harness advances in infrastructure, further increasing consumer demand for more applications and more network capacity.

The key to all this innovation growth, of course, is robust competition and sound policy managing the finite public resource that is wireless spectrum. To ensure that the the wireless market remains competitive and innovative, the FCC and other regulators must work to promote policies that encourage wireless providers to use their spectrum efficiently and fairly, including taking steps to protect Open Internet principles in wireless networks and preserving spectrum for unlicensed use. The success of the auction is an encouraging sign for the future prospects of the US wireless market, but regulators should continue to work to ensure that sufficient spectrum is preserved for unlicensed use and not exclusively controlled by a few carriers.

In Colorado, the Future of High Speed Internet is Up to Voters

Nov. 5, 2014 Update: Boulder voters overwhelmingly approved the measure to give their city authority to create municipal internet. 

As truly high speed Internet access becomes more and more crucial for businesses and consumers, cities are stepping up to provide their citizens with the next generation fiber networks that the incumbent commercial ISPs are simply unwilling to build. But in the case of Boulder, Colorado, despite the fact that nearly 100 miles of high speed fiber already lie beneath its streets, the city is barred from investing in and expanding the network to the wider public. That’s because in Colorado, as well as in dozens of other states, prohibitive state laws—laws practically written by the large ISPs—block municipalities from building or operating competing networks.

On November 4th, voters in Boulder, as well as Yuma County in eastern Colorado, will decide whether to exempt themselves from the restrictive state law and give their cities the freedom to control the future of their own broadband infrastructure. With no vocal opponents, the referendums seem likely to pass.

For Boulder, the choice could not be more obvious. With the highest startup density and growth of any metropolitan area, the ability for Boulder to independently invest in and expand high speed Internet is integral to maintaining its ascendancy as a hotbed for new business ventures. “We’re in competition to attract and retain the highest quality employers and the highest quality talent,” said a spokesperson for Boulder Chamber of Commerce.

The law currently restricting both Boulder, and the much smaller Yuma County, from taking Internet access into their own hands—The "Competition in Utility and Entertainment Services” bill (or SB 152, as it’s commonly called)—passed in the state senate in 2005, and precludes municipal governments from providing broadband services to its citizens. Under the bill, however, a city may seek an exemption under the law and reestablish local control over broadband policy through a referendum. So far, only a few other other Colorado cities have done so. The city of Longmont, just 15 miles north of Boulder, opted out of SB 152 in 2011 and started construction in August to deploy fiber networks across the city. Its new service will be available to consumers November 3.

Just as ISPs lobbied hard to enact these anti-municipal broadband laws, they have fought equally hard against efforts to overturn them. Longmont first sought an exemption from SB 152 in 2009, but failed after telecom companies spent $192,228 to defeat the referendum, compared to only $95 from proponents of the measure. In 2011, Longmont tried again and the referendum passed, despite a record $300,000 campaign by Comcast to prevent it.

Comcast doesn’t seem to be putting money against the Boulder referendum, but has made its opposition to the measure known, writing to Boulder’s local newspaper, "Comcast does not believe that government-owned networks are a good use of municipal funds in areas where the private market is already providing services.” Yet the services they provide are not only slower and more expensive than what municipal gigabit networks pose to offer, the ISP also routinely ranks lower in customer satisfaction than any other company in the industry.

Thus, Comcast’s response isn’t surprising, especially considering its interest in maintaining near-monopoly power in the broadband market. As the proposed merger between Comcast and Time Warner Cable shows, large ISPs would much rather eliminate potential rivals through acquisitions and legislative restrictions than have to face competition.

As we’ve said before, municipal broadband networks provide consumers with alternatives in markets desperately in need of competition. With the US lagging behind its industrialized peers in fiber deployment and growth, we need to use every tool possible to generate competition in broadband markets and give consumers and businesses the high-speed broadband access they need to thrive in the Internet economy.

Municipalities like Boulder deserve the right to build fiber networks for its citizens when ISPs won’t. We stand behind Colorado voters next Tuesday when they head to the polls to vote “yes.”

FCC Pauses Review of Comcast - Time Warner Merger

The FCC once again slowed down its review of the proposed merger between Comcast and Time Warner Cable, indefinitely pausing the comment period because certain content companies—including CBS, Disney, Time Warner, and Viacom—refused to allow commenters to access information they deemed “Highly Confidential.” Most of the information that the content companies refused to disclose relates to agreements pursuant to which Comcast gets distribution rights for their content.

This is not the first time the Commission extended the review period for the mega-merger due to poor information disclosure by the companies at issue. In the beginning of October, the FCC pushed back its deadline for accepting public comments on the merger because Comcast dumped 850 pages of long-overdue data about the merger, but somehow still failed to include adequate responses to many FCC information requests.

These tactics should come as no surprise. Comcast—the “worst company in America”—is facing significant public opposition to its proposed merger, which would make Comcast-TWC the only provider of high-speed broadband service available to nearly 40 percent of current subscribers. The combined company’s monopoly power would be even greater in the market for truly high-speed broadband (>50 Mbps download speed). Giving a single company terminating access monopoly power over half of the country’s Internet users is an obvious problem that startups and consumers both recognize.

And yet, even as Comcast continues to obfuscate and intentionally conceal important information about the merger, it boldly argues that the merger should be approved because opposing commenters “don’t cite any credible, specific facts that refute the extensive evidence” Comcast has put forward. Withholding information while chiding opponents for not citing enough information is the definition of chutzpah.

Beyond engaging in shenanigans with its information production, Comcast’s case in favor of the merger is rather weak, claiming that the combination wouldn’t be anticompetitive because Comcast and Time Warner don’t currently compete in any single market, so merging the two companies won’t give consumers any less choice. Of course, this is really just a concession that the high-speed broadband market is already anticompetitive; Comcast is essentially claiming that competition won’t decrease because there isn’t any competition. Twisted logic aside, several of the country’s leading antitrust experts wrote a letter to the FCC cogently outlining the merger's anticompetitive impact and arguing that the merger “should be blocked in its entirety because it would substantially lessen competition...and is not in the public interest.”

Even with minimal information available to evaluate the merger, it is clearly a bad deal for startups, consumers, and the economy. Allowing Comcast and Time Warner to merge would greatly decrease their incentives to build faster networks and would give the combined company immense power to discriminate against startups offering competing services. The merger is a significant threat to the continued viability of the Internet economy and should be stopped at all costs.

What We Can Learn from Rockport: On Fiber Networks and Our Economic Future

If you’re anything like me, you don’t exactly have an abundance of choice in broadband providers. In virtually every market in America, your options are limited to the local cable monopoly or the local telephone monopoly (and if we’re being realistic on what speeds are sufficiently fast to be considered “broadband,” you’re really stuck with cable). Economically, this dearth of choice comes as no surprise. High upfront investment costs make it incredibly difficult for competitors to unseat the incumbent provider, leaving that provider with the market power to charge high rates for relatively slow speeds.

Broadband markets simply aren’t competitive, and this lack of competition has caused the US to fall behind other industrialized nations in access to ultra-fast technologies like fiber, which provides symmetrical upload and download speeds many times beyond what cable can offer. Because it’s expensive to build fiber networks, and because your local broadband provider is likely the only game in town, ISPs have been reluctant to invest in fiber networks. Fiber options remain distressingly rare in America, accounting for only 8.16% of broadband connections, well behind other industrialized nations with robust tech sectors. Worse, we don’t seem to be in any hurry to catch up, as fiber connections grew only 12% in the US from 2012-2013, again lagging behind other industrialized nations.

Here’s the good news: in the absence of ISP fiber offerings, some municipalities are taking action to bring fiber to their citizens themselves. Today, Rockport, Maine, with the support of Sen. Angus King, a vocal champion of Internet access policies, launched a municipal fiber network with gigabit per second connections. That means Rockport citizens—in a town a of 3,300—can get download speeds almost 35 times faster than what I have access to in San Francisco, the supposed heart of the tech world. In doing so, Rockport joins cities like Chattanooga, Tennessee, which has positioned itself as an emerging tech hub by installing a gigabit fiber network in 2010. Chattanooga’s fiber network has already proven attractive to businesses, with 5,000 business subscribers and an emerging startup community. Companies like Claris Networks are moving operations to Chattanooga to take advantage of the municipal network, which provides equally fast upload speeds crucial to business success.

Municipal broadband networks provide consumers with alternatives in markets desperately in need of competition. Not surprisingly, monopoly incumbent ISPs have fought hard to block municipal broadband networks, helping pass laws in 20 states preventing communities from building their own broadband networks. The telecom lobby has also worked to prevent municipalities from operating or leasing fiber networks that have already been built but lay dormant. These laws have prevented Chattanooga from expanding its fiber network, and the city filed a petition with the FCC, asking the agency to step in and preempt these anti-competitive restrictions.

Access to ultra-high-speed Internet is quickly becoming necessary for business success, and as the US continues to lag behind peer countries in fiber access, startups will soon face significant competitive disadvantages without greater access. Since telecom incumbents have been unable or unwilling to provide fiber access, towns like Rockport have stepped in to create needed competition and provide fiber to its citizens.

If we hope to stay competitive in the world economy, we need to make sure that citizens and businesses have adequate broadband access, whether through private or municipal networks. To achieve that, we need to ensure that Rockport, Chattanooga, and other forward-thinking municipalities investing in connectivity become the trend, not the exceptions, in the marketplace.

President Obama and Rise of the Rest Both Highlight Pittsburgh

We were excited to learn that this week the President traveled to Pittsburgh to celebrate innovation with a visit to TechShop -- the firm that helps entrepreneurs and inventors build low-cost prototypes of their creations. Next week, we too will be in Pittsburgh and at TechShop as part of the Rise of the Rest road trip with Steve Case.

Signalling his support for more policies that encourage entrepreneurship, the President announced three executive actions designed to support advanced manufacturing and innovation:

• $5 billion worth of advanced equipment in federal R&D facilities will be made available to innovators and startups to develop new technologies and launch new inventions. For example, entrepreneurs may be able to access NASA’s National Center for Advanced Manufacturing to produce the high-strength, defect-free joints required for cutting-edge aeronautics, and DOE’s Manufacturing Demonstration Facility at Oak Ridge National Laboratory for collaborative projects in additive manufacturing, composites and carbon fiber, and other leading clean energy technologies.
• Five Federal agencies will invest more than $150 million in research to support the Materials Genome Initiative, increasing the Administration’s investment in the manufacturing of game-changing advanced materials. The aim of the The Materials Genome Initiative is to cut in half the time it takes to develop novel materials that can fuel advanced manufacturing and bolster the 21st century American economy.
• In response to the President’s call to action, more than 90 Mayors and local leaders have committed to the ‘Mayors Maker Challenge’. The promise is to expand access to physical locations and new manufacturing and prototyping equipment, support manufacturing entrepreneurship, and inspire young people to pursue careers in manufacturing and engineering.

Just as the President and leaders across the country are recognizing “makers”, and the importance of supporting entrepreneurship, we can’t wait to celebrate what’s being built right here in America. Check out our infographic here!

Watch Steve Case tell the story of what we’re doing and join us in Detroit, Pittsburgh, Cincinnati, and Nashville, June 24-27.

In the Internet Revolution, We Can’t Afford to Leave Part of the Country Behind

This piece originally appeared in VentureBeat

Too many communities have been left behind as the Internet revolution marches on. In much of the country, communication, access to information, and business are powered by the Internet. But in areas underserved by broadband networks – where it might also be too expensive to own a personal computer – adults who went to school too long ago and have not pursued re-skilling programs, and students who do not have Internet access at home or at school, are in danger of never catching-up.

Efforts originating in the public and private sectors are trying to change this narrative, but we need to do more. The President’s ConnectED plan to reform E-Rate aims to connect 99 percent of classrooms and libraries within five years. As I’ve argued before, this program is essential for educational equality, and equality of opportunity post high-school, and it needs broader support.

On the private side, the Red Hook Initiative (in Red Hook, Brooklyn) has installed free WiFi routers at churches, schools, and other community spaces. With a complimentary program in local schools focused on leadership, employment skills, and STEM training, the initiative has empowered the community to develop services in the present, and students are also better prepared for their futures in the modern economy. With support from local and state governments, successful programs like this could be rolled out to more places where they are needed.

One model for public-private partnerships worth following is what Etsy is doing in the post-industrial community of Rockford, Illinois (at the request of the town’s mayor, Larry Morrissey), and underemployed communities in New York City. Working with local groups, Etsy has a “craft entrepreneurship” program to teach basic business and computer literacy by boosting existing craft and manufacturing skills.

According to Etsy’s site, “many low-income groups have long had craft and manufacturing skills, but are unsure of how to unlock the potential of these skills for income and wellbeing in this day and age.”

In this program, the idea of unlocking existing skills for “this day and age” is the key. While a third of Etsy sellers use the income from selling their handmade goods to cover some household expenses, and 20 percent use the money to boost their savings, this program isn’t fully about money, and it’s not about Etsy either; it’s about bringing more people into the Internet economy and empowering communities to use the Internet as a platform to better themselves and their families.

People are learning how to run a business -- even just a small one -- with marketing, photography, pricing, and growth strategy lessons; they are making the most of their existing skills; and when the course is complete they are left with an Etsy store that might just provide the supplemental income to push their family over the poverty line.

But the primary and enduring benefit of this program, and others like it, is access to the Internet economy and the pride that comes with being able to do a little more than you could yesterday. Essential connectivity and basic education lay the foundation for individuals to retake control of their careers. First it’s an Etsy store, but then maybe it’s SideCar, UberX and finally a brand new startup business.. For the wellness of our economy, and our society, more communities need access to high-speed broadband and the knowledge that will help them harness the power of the Internet. Tech should support ConnectED and then work with government to ensure universal access.

Image Credit: spirit of america/Shutterstock

Unlicensed Spectrum Can Drive Innovation

Engine has filed a comment with the Federal Communications Commission (FCC) encouraging broader allocation of unlicensed spectrum in the 5 GHz band. If that sounds confusing, don’t worry; spectrum management is a highly technical area of public policy. We’re speaking up because innovators need spaces to develop their ideas for new technologies and devices.

Let’s take a step back. Spectrum is allocated to commercial users through one of three main methods. It’s auctioned, as is the case with most cellular voice and data airwaves. It’s assigned, a method that has fallen out of favor since the rise of the FCC auction system but had been widely used for television broadcasters. It is also opened up, allowing users to operate on the same wireless frequencies by setting standards to prevent interference. You’re probably familiar with some unlicensed standards; they include technologies like WiFi, Bluetooth, and RFID.

Why does unlicensed spectrum matter to startups? While spectrum is a public resource, it’s tightly regulated to keep different users from broadcasting on top of each other. As a result it’s also very hard to access. In addition to regulation, the FCC has raised billions of dollars from spectrum auctions over the last twenty years, and Congress in turn has prioritized bringing in money for the federal government, putting new auctions at the front of the policy agenda. While steps have been taken to free more spectrum for unlicensed use, very few new technologies have been deployed on opened frequencies.

It’s critical that government sees unlicensed spectrum as an investment in the future. Wireless policy is as much about opportunity as it is about utilization. Just as policy decisions laid the foundation for the deployment of LTE technologies, more needs to be done for innovators looking to roll out compelling point-to-point technology, internet-of-things technologies like smart grid, and even faster, more robust WiFi standards.

Spectrum management is not a zero-sum game. Allowing innovators access to more spectrum with fewer regulatory limitations won’t necessarily crowd out existing users. We will continue to work with regulators and legislators to find opportunities for innovators to make the most of this critical public resource.

Photo courtesy of Colin Howley.