Madison: Thinking Big with Small Town Hearts

This week we’re traveling with Steve Case on the Rise of the Rest road trip to celebrate entrepreneurship, in all its forms, across America. Every day we’ll post dispatches from the cities we’ve seen. Stay tuned for updates from Minneapolis, Des Moines, and Kansas City.

Madison, Wisconsin is home to the University of Wisconsin-Madison, the state capital, and a growing and proud community of startups. We kicked off the second phase of the Rise of the Rest tour in Madison and found a tight-knit, collaborative, and supportive community of emerging businesses. Startups in Madison are creating new products in healthcare and education, taking advantage of local expertise in some of city’s top industries. They’re launching online marketplaces to revolutionize local rental markets and building platforms that crowdsource knowledge and passion for hobbies like craft beer and fishing.

On Monday, we visited many of these companies on a whirlwind tour of Madison. In addition to the innovative ideas coming out of each business we came across, we also experienced a real sense of pride and community here. One of the entrepreneurs explained the Madison ethos: “Thinking big with small town hearts.” “Madison is a perfect playground for validation because everyone’s on a first-name basis,” said a partner at 100state, a co-working space and organization supporting startup community.

Madisonians are energized about their city’s possibilities, thanks to established and engaged institutions like the Chamber of Commerce, the 43,000-student university, large anchor companies like American Family Insurance and Epic, and newer incubators and accelerators (including the local gener8tor). In fact, according to Capital Entrepreneurs, a local organization fostering the entrepreneurial environment, Madison startups raised over $44 million in 2013. Coupled with an affordable cost of living, that money is poised to go a long way here.

Our visit to Madison wrapped up with a pitch competition, where nine local companies vied for a $100,000 investment. We were encouraged to see that nearly half of pitching companies (including the winner, Solomo) were led by women—a more diverse group than we’ve seen yet.

We loved the friendly spirit and vitality of Madison, and we can't wait to see what great things they come up with.

Watch this space for more updates this week: we’re off to Minneapolis, Des Moines, Kansas City, and St. Louis!

Speak Up—or Slow Down: Why We Need A Day of Action for Net Neutrality

Internet users, advocates, and major tech companies will come together next week to make their voices heard: the time for real net neutrality is now. A long-awaited decision from the FCC on the future of net neutrality is imminent, and we’re excited to see companies that depend on an open Internet rallying together to let the FCC know once and for all that an Internet with fast lanes and slow lanes is unacceptable.

On September 10, major Internet companies—including Automattic, Cheezburger, Dwolla, Etsy, Foursquare, General Assembly, Kickstarter, Meetup, Mozilla, Namecheap, Reddit, and Vimeo—will join Engine and other tech advocacy organizations for a Day of Action that will give a glimpse at what the Internet might look like if the FCC’s proposed rules go into effect, and net neutrality as we know it is left by the wayside. Under the FCC’s proposal, Internet providers will be free to charge for access to special Internet “fast lanes,” leaving startups and others unable to pay these new tolls in slow lanes. In such a world, startups that can’t pay for fast lane access could see their sites slow down, their traffic vanish, and their funding dry up, harming the Internet and the economy.

For the Internet Slowdown on September 10, many participating companies will install widgets on their sites displaying a revolving icon (a common signal of slowly loading content) to symbolize how the Internet would function in a world without net neutrality. Others, including Engine, will direct their users to call or email policymakers. With over one million public comments already filed with the FCC, much has been written about why the FCC’s proposed rules would damage the Internet, but the FCC needs to see firsthand how Internet fast lanes would devastate startups.

To help make sure the FCC gets the message, join Engine and companies like Automattic, Cheezburger, Dwolla, Etsy, Foursquare, General Assembly, Kickstarter, Meetup, Mozilla, Namecheap, Reddit, and Vimeo on September 10 to show why real net neutrality rules are necessary to the future of an open Internet. For more information on the Day of Action and to learn about other ways to get involved, visit Battle for the Net or email evan@engine.is.

Engine's Response to Today's FCC Hearing on Net Neutrality Economics

We at Engine watched with interest as the FCC held a hearing today on economic questions related to its proposed net neutrality rules, focusing on “incentives to provide high quality open Internet access service and the relevance of market power.” Distressingly, though the hearing tackled many important questions about the economic incentives new rules would affect, relatively little time was spent addressing the immense negative impact on investment in startups that would follow from an abandonment of strong net neutrality rules. Too many witnesses—with Professor Nicholas Economides of NYU and Professor Jonathan Baker of American University as notable exceptions—failed to grasp the chilling effect on innovation that the paid prioritization model would cause.

Contrary to Hal Singer from the Progressive Policy Institute’s stunning claim at the hearing that allowing paid prioritization schemes would have no negative impact on companies that could not afford to pay for priority access unless ISPs actively degraded all non-prioritized traffic in absolute terms, paid prioritization unquestionably harms startups. Even with a so-called “baseline” service requirement, startups will be disadvantaged if their Internet speeds drop relative to established companies. Myriad studies show that consumers respond to even the most minute changes in website speeds. Millisecond differences in loading times can be a huge detriment to a startup’s growing business.

Simply put, allowing paid prioritization would greatly increase the cost of application development. In turn, higher costs would discourage entrepreneurs from starting risky companies and dissuade investors from putting money into startups that operate in such an imbalanced marketplace where wealthier incumbents pay for priority access.

The threat to innovation isn’t hypothetical. More than 100 of the world’s most prominent venture capitalists explicitly said in a letter to the FCC that they would be less likely to invest in startups that compete in established markets if the FCC permitted paid prioritization. If the FCC fails to understand that allowing ISPs to create and profit from Internet slow lanes will necessarily disincentivize investment in the next wave of startups, it will be putting the future of these companies and the Internet economy in grave danger.

It's Time to Talk Net Neutrality for Mobile

Last week, two of the FCC’s five commissioners came to Sacramento for a public hearing on the future of net neutrality regulation. While most of the debate regarding the FCC’s proposed rules issued earlier this year centered on how and if the Commission should implement net neutrality rules, the Sacramento hearing—organized by California Congresswoman Doris Matsui, a vocal proponent of net neutrality rules—took a step back from arguments over Title II vs. Section 706 (the main legal debate surrounding net neutrality) to think about the broader policy goals that the FCC should focus on in deciding on rules to replace the now-vacated Open Internet Order, regardless of what regulatory mechanism they decide to use.

We praise Rep. Matsui and the commissioners who joined her. Considering how important net neutrality is to citizens and businesses throughout the country, it’s necessary that policymakers tasked with charting a path for the future of the open Internet take the time to discuss these issues with people outside of the Beltway who will be impacted by the FCC’s decision.

In her opening remarks, Commissioner Mignon Clyburn addressed a key net neutrality issue—one that has received short shrift in the debate thus far: the need for net neutrality regulations that apply to wireless Internet service. Under the 2010 Open Internet Order that was vacated in January by the D.C. Circuit Court, the FCC’s rules against ISP blocking and discrimination applied only to wired Internet service, leaving wireless Internet service outside the scope of the rules. While, as Commissioner Clyburn correctly noted, non-neutral wireless broadband presents significant problems for low-income Americans and communities of color (many of whom rely exclusively on wireless broadband for access to the Internet), the lack of any net neutrality rules impacting wireless threatens every community of Internet users, especially the startup community, much of which heavily relies on wireless to connect to new customers and users.

In 2010, when the FCC issued its Open Internet Order, the FCC decided not to apply to wireless carriers the full anti-discrimination and anti-blocking rules it created to regulate wired broadband. The FCC justified this action on the grounds that the mobile broadband industry was still rather young in 2010; there was more competition amongst mobile carriers than their wireline counterparts; and operational constraints on mobile networks necessitated a more lenient notion of “reasonable network management” practices. These arguments were weak in 2010, and as the mobile broadband marketplace has changed, the FCC’s logic for exempting mobile from its net neutrality rules makes even less sense today.

As Commissioner Clyburn noted, the mobile broadband market has grown significantly in recent years, with LTE deployed to more than 120 million subscribers today, up from just 200,000 when the Commission issued its 2010 order. Not surprisingly, this increased mobile access has spurred a tremendous boom in the mobile application market. The global market for mobile apps and advertising was worth $38 billion in 2013, up from about $6.8 billion in 2010.

Some may point to these encouraging figures and conclude that there is no need for net neutrality rules in the mobile space. But, part of the reason the application market has boomed so much is because mobile ISPs have not yet engaged in widespread discriminatory activity—a norm that is beginning to change. Recently, mobile carriers have been entering into deals with some edge providers whereby use of these edge providers’ services does not count against a consumer’s data caps. While this may look like a great deal to consumers who are finding themselves being pushed into capped data plans, it will have the same crippling effect on startups that the creation of fast and slow lanes on the Internet would. Upstart companies will find it difficult or impossible to compete with large incumbent applications that consumers can use without incurring data charges, discouraging entrepreneurs from entering the market and investors from funding new application startups. Consumers may initially like having low cost access to popular apps, but consumer popularity alone isn’t synonymous with sound policy. Consumers also probably like the low prices a monopolist can charge to undercut new entrants and stave off competition, but permitting monopolistic behavior will ultimately ruin markets and consumer choice, threatening—as President Obama said—“the next Google and the next Facebook.”

Whether the FCC goes forward with its currently proposed ill-advised “net neutrality” regulations or uses Title II to enact meaningful non-discrimination rules, it must apply such rules equally to wired and wireless service. Failure to enact rules governing mobile broadband carrier discrimination—including zero-rating schemes—will stifle the booming market for mobile applications and allow mobile carriers to serve as gatekeepers for the millions of Americans who rely on wireless Internet access.

We’re Hitting the Road Again

As our representatives in Congress take to the campaign trail for the November elections, we’re taking a little road trip of our own. Next week, Engine will join Steve Case, Revolution, UpGlobal, and Google for Entrepreneurs on the second phase of the Rise of the Rest Road Tour.

Earlier this year, we joined this roving group visiting four diverse and vibrant cities—Detroit, Pittsburgh, Cincinnati, and Nashville— to highlight, energize, and celebrate entrepreneurship. And we found that startup communities are thriving all over the country. They’re building great new products, creating jobs, and revitalizing parts of the country that were hit hard by the economic downturn. We know this narrative holds true in other cities as well—we’ve seen it ourselves in places like Portland and Memphis, too.

That’s why we’re so excited to hit the road again. This time we’ll be stopping in some of the cities that make up the so-called Silicon Prairie.

We’re starting in Madison, Wisconsin, then will make our way to Minneapolis, Des Moines, Kansas City, and St. Louis. At each stop, emerging businesses and their founders, civic leaders, and local personalities will gather for conversation with Steve Case, participate in a $100,000 pitch competition, and come together over happy hours. And we’ll be on hand to remind startups how important it is to be engaged in policy issues (let us know if you’d like to catch up in any of those places!).

What we already know is that Silicon Valley and New York City aren’t the only hubs for new economic activity—and that incubators, accelerators, and innovation districts are sprouting up across the country. We’re excited to see in person just how these new and emerging startup communities are, as Steve Case put it, “innovating in ways specific to the economic heritage of their region.”

These cities have long-established industries in health sciences and financial services to build from, strong networks of colleges and universities from which to source talent, and support from local governments thrilled to welcome new business opportunities. That’s not to mention how the cost of living in cities across the Midwest makes them attractive for putting down roots.

We’ll be posting highlights from each city throughout the week. Follow us as we go and we’ll let you know what we find!

More information on the Rise of the Rest road tour, including times and locations for specific events in each city, is available at www.riseoftherest.com and by following #riseofrest on Twitter and Instagram.

Startups Head to Washington to Petition for Net Neutrality

After a week that saw a nationwide day of action prompt more than 300,000 phone calls to Congress regarding net neutrality and more than 3 million comments filed with the FCC in response to the Chairman’s problematic net neutrality rules, startups from around the country came to Washington to make the case for meaningful net neutrality rules in person. With all the attention paid to net neutrality in recent days, we had to make sure that voices from the startup community—including and especially the small businesses who need an open Internet—were being heard in the debate. Representatives from Etsy, Imgur, Meetup, Kickstarter, General Assembly, Dwolla, Vimeo, and Distinc.tt spent the day on September 17 meeting with key lawmakers and officials, explaining to policymakers why an open Internet is so important to their businesses and why the FCC needs to protect the innovative landscape of the Internet by enacting real net neutrality rules.

The startups began the day with a meeting at the White House, discussing their concerns about the Chairman’s proposed rules with key members of the President’s Office of Science and Technology Policy, including an appearance from newly-named CTO Megan Smith and Deputy CTO Alex Macgillivray.

While the President has already publicly expressed support for net neutrality rules that prevent ISPs from creating fast and slow lanes, the startups made clear to the White House that such rules are only possible through Title II reclassification. Having the President publicly support strong net neutrality rules earlier this summer was an encouraging development, and we are hopeful that the President will continue to pressure the FCC to make the correct decision on Title II reclassification.

The startups next made their way to the Capitol, where they participated in a press conference with Sen. Ed Markey—one of the most prominent and longstanding supporters of Title II reclassification—to further educate the public on the importance of the FCC’s decision. Sen. Markey was joined by Kickstarter’s Michal Rosenn, Dwolla’s Jordan Lampe, and Vimeo’s Michael Chea, each of whom eloquently made the case for Title II reclassification as the only way to preserve an open Internet for future innovators. The afternoon was spent in meetings with key members of Congress and staff, including representatives from both parties’ telecom subcommittees, net neutrality supporters like Sen. Markey and Minority Leader Nancy Pelosi, along with members like Reps. Hakeem Jeffries and Joe Crowley.

The eventful day was capped with a meeting with Leader Pelosi, who—in between coordinating her delegation’s voting on significant foreign policy issues—sat down with us to discuss her strong support of net neutrality. Her recent letter in support of Title II reclassification showed her willingness to stand up to the powerful cable company lobby and do the right thing to keep the Internet open and competitive for startups in her district and throughout the country.

We are incredibly grateful to the participating startups for taking the time out of running their businesses to let Washington know that, despite not having an army of lobbyists constantly campaigning on their behalf like the ISPs, startups throughout the country are committed to doing what it takes to ensure the FCC enacts meaningful net neutrality rules.  

DC Tech Breaks Out: Why Community Support for Startups Builds Better Ecosystems for Growth

In the three years we’ve been building Engine, growth in entrepreneurism and startups has increased at a breakneck pace, with new opportunities for growth popping up in cities and towns all across America. That growth has also been a political focus point, with supporters across the political aisle lining up to support new technologies and innovations. In this political climate hungry for opportunity to promote success, it’s not surprising that we have seen rapid growth in tech entrepreneurship in our nation’s capital, Washington, DC.

With organizations like our friends at 1776 supporting the local ecosystem and a renewed focus on innovating right in the heart of government, DC has quickly become a hotbed of entrepreneurship, attracting local startups and as well as transplants, like the Austin-bred RideScout. The best way to sustain and increase this growth is through lasting connections made through a healthy entrepreneurial ecosystem.

Enter DC TechDay. A “science fair for startups,” TechDay started in New York and will have their first DC event on October 2 that will bring emerging, high growth companies together with sponsors to learn about what’s being built in their own community. More than 150 exhibitors will gather with over 3,000 attendees to talk about their products, growing their businesses, and why they’re building in DC.

It’s also a great opportunity, as we have done with our Startup Day on the Hill events, to bring together policymakers and entrepreneurs to talk about what’s driving success and what both sides do to turn connection into growth. But with DC TechDay, that opportunity is all the more powerful with these entrepreneurs working just blocks away from Congress, the White House and regulatory agencies.

We’re proud to support efforts like DC TechDay. Contact us if you’re a DC-based entrepreneur or a policymaker looking to learn more about growth happening in your community, and get more information at dctechday.com.

Net Neutrality Reply Comments: Startups Unified in Support of Title II

With the reply comment period on the FCC’s proposed net neutrality rules closed as of last Monday and over 3 million comments filed with the FCC, it has become clear that protecting an open Internet is a massively important issue for the public at large. Just as citizens everywhere expressed unified support for Title II reclassification, startups from around the country made their voices heard this past week, calling on the FCC to pass real net neutrality rules.

On Monday, Engine filed reply comments with the FCC highlighting how the startup community has been clear and consistent in their demand that the FCC reclassify broadband as a common carrier service to protect the future of the open Internet. Startups of all sizes, from all parts of the country, and in all sectors understand that rules that allow ISPs to charge new access fees to Internet companies for preferential speeds and the ability to reach ISP customers will disrupt the essential character of the Internet and drastically curtail the innovation and economic growth the Internet has provided.

In their own comments with the FCC, larger companies like Tumblr, Kickstarter, and Etsy shared the same concerns as smaller startups like Lendup, Distinc.tt, and General Assembly, noting that the Chairman’s proposal would facilitate the creation of fast and slow lanes that would diminish investment in future startups, drive fledgling companies out of business, and make it impossible for companies being discriminated against to challenge improper ISP practices.

As the FCC reviews the millions of comments on its proposed rules, it’s crucial that the Commission understands that the startup community is aligned in its support of strong net neutrality rules. Startups throughout the country have demanded the FCC reclassify broadband as a Title II service; it’s time for the FCC to take their concerns to heart.

A Free and Open Internet Needs Some Regulation: Why Even Free Market Advocates Should Agree

We’ve heard a lot of good arguments by now in favor of net neutrality, including those from the 40,000 unique websites who participated in last week’s Internet Slowdown day, the millions of people who have filed comments with the FCC, comedian John Oliver on his show, “Last Week Tonight,” and members of Congress like Senator Angus King, Senator Patrick Leahy, and Leader Nancy Pelosi. By the deadline this Monday, the FCC had received a record 3 million public comments. And we’re hoping they’re taking these calls to protect the free and open Internet seriously.

Of course, those opposed to the FCC implementing rules to protect the Internet from discrimination have their own arguments. And these naysayers include not only the the obvious ISPs, but also many groups who claim that Title II option amounts to “dangerous” regulation.

But, as we’ve said before, they have it all wrong, at least from a free market perspective.

We caught wind of a remarkably well-argued and well-researched piece by blogger and software developer James J. Heaney. He makes a free-market defense of net neutrality, which indeed requires the“R” word—regulation. While regulation can occasionally be heavy-handed and overbroad, regulating ISPs under Title II doesn’t necessarily implicate these concerns. So as complicated as the laws surrounding net neutrality are, it may come as no surprise that the assumption that net neutrality guaranteed under Title II is in opposition to free market principles doesn’t quite add up.

If you have the time (and an interest in a short lesson on the invisible hand), we recommend reading the post for yourself, but in short, Heaney explains why an open Internet that operates within our notions of a free market should be protected by the FCC from monopoly takeover—under Title II.

He points out that nearly every believer in the free market system understands the importance of government’s role in reigning in monopolies, the mega-companies that stifle any and all competitors. And whether they’ve meant to or not, the ISPs we depend on every day have become natural monopolies. This gives them an unfair amount of power over consumers, not to mention every startup in the nation in need of an Internet connection (which we’re pretty sure is every startup).

Reclassifying ISPs under Title II as common carriers would make the Verizons and Comcasts subject to some government regulation, but what free marketers and any entrepreneur trying to create the next technological sensation should recognize is that such regulation would reduce the further monopolization of the Internet and, in fact, keep the marketplace open.

The FCC has broad flexibility to implement only the Title II regulations that make sense in the context of the broadband market. And applying Title II with sensible forbearance will actually give the FCC less discretion to regulate at its whims than what it could do under the rules the Commissioner proposed this spring. 

Startups seeking cost-effective ways to store data, fast channels to reach new customers, and open access to tools that will help them build their businesses deserve to operate in an environment protected from favoritism and the exploitation of power, a power that would allow ISPs to create fast lanes and arbitrarily raise prices.

We enjoyed Heaney’s important take on the issue, but whatever your ideology or however strong your feelings about the free market, supporting the Title II option, and with that, some regulation, is a necessity for the Internet—and our economy—to continue as we know it.

Dream Deferred: President Obama Delays Further Action on Immigration

As the 114th Congress hurtles toward the finish line of the November elections, we have watched--with great disappointment--the failure to fix the immigration issues plaguing our economy. Despite Congressional intransigence on the issue, it appeared earlier this summer that President Obama was planning to step into the void and take sweeping executive actions to address the growing crisis of our nation’s broken immigration system. Alas, we can now chalk up further inaction as, best case, another election year casualty; worst case, failure at all levels of government to fix a broken immigration system.

Earlier this week, the Obama Administration quietly deferred further action until after the November elections, apparently in an attempt to shore up politically vulnerable members of their party in hotly-contested seats. In so doing, they have left the millions of families already ravaged by government inaction in further limbo. Once again, they lessened our ability to remain competitive in a global marketplace by still failing to keep the gifted immigrant thinkers and doers--trained in our schools--here building companies.

It would be easy to write this off cynically given the electoral climate for the President and his party, but we must make this an opportunity to ask the Administration to do more, to live up to its commitments and to not sit idly by while families struggle with their status and businesses flounder without talent to drive their goals. Simply put, we can’t wait and wonder when inaction will turn to action, and we must resolve to send a message in this election season that delay won’t cut it.

As candidates return home this month and engage in their reelection campaigns in earnest, find them at the town hall, in the supermarket, when they visit your startup, wherever it may be, and ask them: how much longer we have to wait for them and the Administration to lead? Because we have waited too long already, and it is time for this President and this Congress to put people and opportunity ahead of politics and party and pass common sense immigration reform now.

A Bit of Change, and Many Thanks

I’m writing today because my day-to-day role with Engine is ending in late September, and I have a lot of people to thank. From the early days of SOPA/PIPA, through JOBS Act, through the release of our first economic reports, Startup Days on the Hill, Keep Us Here, Fix Patents, Net Neutrality and so much more, I'm proud that Engine has built lasting impact in our community and I’m confident that, going forward, Engine will continue to be a leader at the intersection of technology and policy and politics. And while I could not be more proud of helping shepherd that growth to this point, I also know we didn’t do it alone, and it is a testament to the hard work of this startup community across the U.S. that we, as a community, are better today and positioned positively for tomorrow and beyond.

If you have made a phone call, signed a petition, sent a tweet, advised privately on what’s important to you, met with a member of Congress, or gotten involved in the myriad other ways so many entrepreneurs have, I want to express my gratitude that Engine could be there in some small way to help turn those thoughts and actions into a national network for change for a community providing the backbone of America’s economic recovery. To our association and affiliate partners in these endeavors, it has been my highest privilege and distinct honor to fight these battles alongside you, and I look forward to doing so for many years to come.

And to my colleagues, who have taken a chance, have worked with us and helped this organization grow, I am particularly proud to be able to say we stood shoulder to shoulder, doing what we could in hopes of making our community and our country better.

While my day-to-day role is coming to a close, I’ll remain active as part of Engine’s advisory board, and look forward to continuing to grow this organization and support this community in that role. Now, more than ever, I’m confident in Engine’s continuing role in shaping this community’s further success, and can’t wait to see the results.

Make the Call for Net Neutrality

As you’ve likely heard, the Internet Slowdown, an Internet-wide Day of Action in support of net neutrality, begins tomorrow. Companies including Kickstarter, Netflix, Mozilla, Etsy, and Foursquare will have banners on their sites calling attention to the devastating Internet slowdown that will happen if net neutrality isn’t protected.

Support for real net neutrality rules is gaining momentum, with major political leaders like Nancy Pelosi joining millions of citizens in demanding that the FCC reclassify broadband as a Title II common carrier service. But, if we have any hope of protecting an open Internet, policymakers need to hear from startups about how important net neutrality is to their businesses. Net neutrality is more than a free speech issue—it’s also an economic issue. Contrary to cable company assertions, net neutrality has been the norm on the Internet for most of its existence, and it’s because of this openness that the Internet has been such a hotbed of economic innovation.

Without net neutrality, the next Google or Facebook may be throttled out of existence. We need you to take action to make sure the Internet is open for the next wave of innovators. Join us tomorrow by making a phone call to your senators asking that they encourage the FCC to reclassify broadband to protect net neutrality. Or, help spread the word by tweeting about the Day of Action and the need for an open Internet.

We hope you’re all planning to join! If you’d like more information, shoot me an email at evan@engine.is.

Speak Up—or Slow Down: Why We Need A Day of Action for Net Neutrality

Internet users, advocates, and major tech companies will come together next week to make their voices heard: the time for real net neutrality is now. A long-awaited decision from the FCC on the future of net neutrality is imminent, and we’re excited to see companies that depend on an open Internet rallying together to let the FCC know once and for all that an Internet with fast lanes and slow lanes is unacceptable.

On September 10, major Internet companies—including Automattic, Cheezburger, Dwolla, Etsy, Foursquare, General Assembly, Kickstarter, Meetup, Mozilla, Namecheap, Reddit, and Vimeo—will join Engine and other tech advocacy organizations for a Day of Action that will give a glimpse at what the Internet might look like if the FCC’s proposed rules go into effect, and net neutrality as we know it is left by the wayside. Under the FCC’s proposal, Internet providers will be free to charge for access to special Internet “fast lanes,” leaving startups and others unable to pay these new tolls in slow lanes. In such a world, startups that can’t pay for fast lane access could see their sites slow down, their traffic vanish, and their funding dry up, harming the Internet and the economy.

For the Internet Slowdown on September 10, many participating companies will install widgets on their sites displaying a revolving icon (a common signal of slowly loading content) to symbolize how the Internet would function in a world without net neutrality. Others, including Engine, will direct their users to call or email policymakers. With over one million public comments already filed with the FCC, much has been written about why the FCC’s proposed rules would damage the Internet, but the FCC needs to see firsthand how Internet fast lanes would devastate startups.

To help make sure the FCC gets the message, join Engine and companies like Automattic, Cheezburger, Dwolla, Etsy, Foursquare, General Assembly, Kickstarter, Meetup, Mozilla, Namecheap, Reddit, and Vimeo on September 10 to show why real net neutrality rules are necessary to the future of an open Internet. For more information on the Day of Action and to learn about other ways to get involved, visit Battle for the Net or email evan@engine.is.

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.

Copyright Damages: A Capricious System That Stifles Innovation

The last time Congress enacted significant new copyright legislation, only about one quarter of U.S. households had Internet access. It’s not surprising, then, that the current copyright regime isn’t exactly suited to our digital age. Copyright law is meant to provide incentives for creators and innovators. This principle is in the Constitution, which gives Congress the power “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” In other words, we give creators limited monopolies over their works—patents and copyrights—in order to encourage them to create.  

Lately, however, this concept has started to backfire. Laws meant to foster innovation have in fact discouraged technological innovation by imposing the threat of ruinous financial penalties on entrepreneurs for engaging in perfectly legal activities that lawmakers couldn’t have envisioned when drafting the Copyright Act.

Copyright law can be confusing, particularly because many of the ways we create and share content today didn’t exist in the 1960s and ’70s, when Congress wrote most of the current Copyright Act. But, one aspect of the law is clear: a court may levy damages of up to $150,000 for each instance of infringement. This means that you could be on the hook for $150,000 for illegally downloading a single song, or for reusing or repurposing content in a manner that you believed was totally legal—until you found out it wasn’t.

The uncertainty resulting from this huge potential liability touches innovators of all kinds, not just traditional content creators. If you’re a startup and host any third-party content, you could find yourself unwittingly facing the threat of outrageous damages. Even if what you’re doing is legal, just starting your business may not be worth the risk.

Recognizing the need to reform copyright law to better protect the new types of creativity that technological changes have allowed, Congress held several hearings in recent weeks evaluating different aspects of the copyright regime, from term lengths to music licensing to the first sale doctrine. Most recently, and perhaps most importantly, the Judiciary Committee held a hearing to discuss possible changes to the nature and scope of the remedies available in copyright infringement actions.

Under virtually all U.S. laws, plaintiffs can only collect money from defendants to the extent that they were actually injured by the illegal activities. Copyright law, however, is different: plaintiffs don’t have to show any economic injury from infringement whatsoever in order to collect money from defendants. Instead, a copyright plaintiff can ask the court to award a fixed amount of money—between $200 to $150,000 per work infringed—whether or not the plaintiff was actually harmed. Juries have significant discretion to award damages within this range, and, as juries are wont to do, they often issue awards that are wildly unpredictable and many times larger than the plaintiff’s actual injury.

While it’s certainly important to deter blatantly infringing conduct, the chilling effects of these large statutory damages have unintended consequences. Copyright law doesn’t have a lot of bright lines separating conduct that is infringing from conduct that isn’t; this flexibility is necessary to ensure that new, beneficial modes of creative expression aren’t outlawed under statutes that couldn’t predict future innovations. This, of course, means that it’s often difficult for innovators to know with certainty whether their conduct is infringing or not, and the threat of hundreds of thousands of dollars in damages for failing to accurately predict what a judge or jury will say will necessarily deter a lot of non-infringing conduct.

For example, the rules surrounding liability for companies that provide content distribution services (e.g. BitTorrent, YouTube, etc.) are decidedly unclear. The law does provide “safe harbors” for content intermediaries, but those harbors are hardly safe if, like YouTube, you have to spend seven years and untold millions in court to determine whether you’ve qualified. The risk of a high statutory damages award, even if it is unlikely that any infringement has occurred, can be enough to discourage entrepreneurs and investors from entering the market.

The disincentivizing effect of massive statutory damages awards isn’t limited to startups hosting third-party content. The rules regulating software copyrights are incredibly confusing, even for copyright experts. Considering so much software development revolves around building off preexisting code, uncertain copyright liability is a risk for virtually any entrepreneur who wants to innovate by transforming existing code. In the wake of the Oracle v. Google ruling, using simple APIs to ensure interoperability raises the risk of huge statutory damages liability, even if the use of such APIs causes no damage at all.

The existing statutory damages framework seems to have lost sight of the ultimate purpose of all copyright laws: “To promote the Progress of Science and useful Arts”—essentially, to promote innovation. When considering changes to the Copyright Act, Congress must reconsider the statutory damages framework to make sure that discouraging infringement doesn’t also discourage innovation by subjecting entrepreneurs to undue risk from the threat of irrational statutory damages awards.

Thanks, President Obama: President Speaks Out Against Slow Lanes

The latest politician to add his voice to the growing coalition supporting Title II reclassification and strong net neutrality rules is none other than U.S. President Barack Obama. The President, in remarks given at this week’s U.S.-Africa Summit in Washington, made a strong statement in favor of real net neutrality, saying, “I personally, the position of my administration, as well as a lot of the companies here, is that you don’t want to start getting a differentiation in how accessible the Internet is to different users. You want to leave it open so the next Google and the next Facebook can succeed.”

Here’s the thing: the only way to ensure there is no “differentiation in how accessible the Internet is to different users” is to reclassify the Internet as a “common carrier” under Title II. The crux of the current debate surrounds under what legal authority the FCC can protect an open Internet, one without paid prioritization and fast lanes. The FCC Chairman, in public statements, has signaled his intent to work under the current legal structure--called Section 706--but, simply, the law will not allow that.

The D.C. Appellate Court has made it abundantly clear that the FCC must reclassify broadband as a “telecommunications service” under Title II if it wants to ban the type of behavior President Obama spoke out against.  According to that Court, the FCC’s prior rules preventing ISPs from discriminating against or blocking access to disfavored companies were “per se common carrier obligations,” and only services subject to Title II can be treated as common carriers. Quite simple, in fact.

Which is why the President’s statements are so important. It’s now clear that the President must support reclassification. And those comments came at a particularly important time. As you likely know, the FCC, and its Chairman, Tom Wheeler, are currently evaluating a number of proposals dedicated to protecting the Internet, and keeping it free for innovation.

In making his comments, President Obama joins with hundreds of our country’s leading startup companies, Fortune 500 corporations, technologists, advocacy organizations, Internet users and supporters across the world in calling for the Internet to be reclassified under Title II. We look forward to continuing our work with the Administration to protect and “leave open” the Internet to ensure that all startups, especially the “next Google and the next Facebook can succeed.”

The Drumbeat Continues: More Startups Call for Title II Reclassification

Today, 10 more startup companies across the United States called on the FCC to reclassify the Internet and keep it free and open for innovation. While Congress has gone home for the August Recess, the process on Internet rulemaking continues at the FCC, where startup companies continue to make their voices heard. The companies, which represent a broad swath of growing businesses all across the country, once again focused on the only real choice available for Chairman Wheeler to preserve the ability for these companies to hatch, grow, and scale in the marketplace, and that is reclassification under Title II.

Take, for example, the story of San Francisco-based microfinance startup LendUp. Their story, according to co-founder Sasha Orloff in the filing, is only possible because the rules governing the Internet allowed for free and fair competition. As Orloff writes, “Competition within this industry is fierce and, if we were founded under the rules laid down in the Chairman’s proposal, our initial cost projections could have proven prohibitive. We would have needed to pay a substantial premium in order to ensure customers could find and access us within a crowded marketplace.” Instead, LendUp is now able to provide financial assistance to people in need, while also educating their customers about the positive benefits of responsible financial behavior, all because of technology they could build on an open Internet.

We get a bit of a global influence in this batch of comments as well, because despite Europe’s having recently fought -- and won -- its’ own battle for Net Neutrality, the FCC’s proposal could have deleterious effects on global companies doing business in the United States. Publitas, an Amsterdam-based company working to optimize and present digital content in the retail space, writes that not only would the company never have been gotten off the ground in the world envisioned by the current proposal, their future is under threat as well. U.S. influence on the Internet has global reach, and because of that, Publitas Founder and CEO Guillermo Sanchez warns that “[i]f the FCC had enacted policies which infringed upon net neutrality, the Netherlands might have enacted similar ones” which would have put the original idea under threat. But also, with a “data intensive” business like Publitas, “our business would be seriously hobbled if we were in a slow lane.”

The current proposal could also have negative influences on new marketplaces, writes Shapeways, a New York-based leading marketplace for 3D Printing images and blueprints. They are responsible for 18,000 Shapeways shops already, and with 3D Printing continuing its massive growth curve, the market they empower is continuing to foment further entrepreneurial gains in the economy on the whole. But that future is uncertain because of the proposal which Shapeways says, undermines “the great equalizer.” Everyone has the same access, anyone can float their own “crazy idea.” By creating two-tier access, you sacrifice this core tenet, throttle the spirit of freedom, and ultimately kill the power of wild innovation this nation is founded upon.” They lay out their proposed solution plainly, asking the FCC to reclassify the Internet as a utility, “which it is.”

These comments and more are available on our site, and we have again extracted multiple key quotes below. For more like this, sign up at startupsfornetneutrality.org and our work to reclassify the Internet continues over the course of the summer, we’ll keep you updated with all the news and views you need to help support a better proposal and a solution that keeps the Internet free and open for innovation.

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Distinc.tt

We currently spend considerable resources ensuring that our users can quickly access the content that they need. They view high-resolution photos of restaurants, events, and people; as well as geolocation data to help with coordination. They find out what places around them are most popular and who is currently there. These tools help LGBT people stay connected and maintain a sense of community in this rapidly changing environment. As you can imagine, the amount of bandwidth that this takes up is exponentially related to our growth and success. Having to negotiate with ISPs for the same access that our competitors would enjoy is simply not an option at our stage as a startup, we neither have the time nor the money.

Badger Maps, Inc.

There are a lot of costs to starting a business, and investors and venture capitalists are only interested in funding certain types of businesses. An entrepreneur needs to pay peoples' salaries, pay for servers, buy software, pay for space to house workers, buy Ramen and peanut butter, etc. So by adding another cost — paying off Internet service providers, to keep them from putting a gun to companies’ heads — you will get less innovation in the American economy.

LendUp

Beyond competition, core aspects of our business depend on Internet speed and efficiency. From underwriting to transaction processing, we rely on large amounts of data flowing quickly to meet customer needs and ensure accuracy and security. Speed also enables our value proposition as no customer is going to sit through a credit education video that takes too long to load. Again, with competition so intense and the alternative lenders so lacking our benefits, the consequences of a borrower abandoning us for a less compliant lender that could pay more for bandwidth are high. Furthermore, as investors evaluated the potential of our business, if these would-be risks had been a reality, I am confident conversations would have been different.

Linear Air

I am a serial networking entrepreneur and inventor.  I have four Internet patents, and prior to Linear Air, I spent a decade as the CTO of a networking company (Ipanema Technologies) whose product was designed to guarantee good performance across the Internet. That makes me, as it happens, one of the world’s foremost technical experts on Internet performance, the matter at the heart of this proposal, and I can state definitively that the only way to create a “fast lane” on the Internet is to slow everything else down. Anyone who claims differently is either mistaken, or lying.

MobileWorks

We need strong network neutrality rules that keep the Internet as a level playing field. FCC Chairman Tom Wheeler should not preside over the transformation of the Internet from a level playing field that has been the greatest engine of innovation and growth the world has ever seen to being a discriminatory, heavily tolled platform controlled by an largely uncompetitive ISP industry. The Chairman’s proposal would allow ISPs to create new barriers to innovation that would harm startups like ours—and all those who may benefit for our services. It harms consumer choice, entrepreneurship, and will kill jobs.

Publitas

We need the protection of bright-line rules. We cannot make do with the FCC’s vague commercial reasonableness standard. We have no telecommunications lawyers on staff; big ISPs have hundreds at their disposal. We simply don’t have the resources to fight a legal battle on the basis of presumptions. We urge the FCC to enact bright-line rules which prohibit blocking, technical discrimination, paid prioritization, and access fees, applicable to both fixed and mobile connections, and to reclassify broadband providers under Title II of the Communications Act.

RebelMouse

The FCC’s proposal will parch the Internet ecosystem, constricting our revenues. It will also force us to pay whatever we must to put ourselves in the fast lane, and to negotiate individual deals with multiple ISPs. That is time and money that we could have spent on hiring, innovation, and growth. We also face the threat of exclusive deals, hammered out between our competitors and ISPs, giving them and them alone the right to a fast lane. We could not afford to purchase such a right, which undoubtedly would be very expensive. If any of our competitors bought the exclusive right to a fast lane, we might have to go out of business.

Shapeways

Over the past twenty years, American innovators have created countless Internet-based applications, content offerings, and services that are used around the world. These innovations have created enormous value for Internet users, fueled economic growth, and made our Internet companies global leaders. This innovation happened in a world without discrimination. An open Internet has also been a platform for free speech and opportunity for billions of users. Shapeways would not have come to life without the Internet, and the FCC’s proposal threatens our future to provide an open platform for independent businesses to flourish, even those with an inventory of one product. The proposal will further harm competition by quelling innovation among small businesses in all sectors by creating financial barriers to entry.

Fred Trotter

The Digital Divide is getting narrower but steeper, there are fewer on the ‘wrong’ side but life is getting worse and worse for those few. Our country is betting on digital health interventions working to rescue our economy but this model relies on consistent connectivity between consumer grade doctor ISP connections and consumer grade patient ISP connections. If we allow for the creation of Internet “fast lanes” we will force at least some patients and doctors into the slow lane. This will deepen the Digital Divide and significantly damage the healthcare reform efforts that are designed to rescue our country’s economy.

Poll Everywhere

Many of the concerns we would have had at our founding remain problematic today. We still run on a tight budget, and we’re not sure whether we could afford to put ourselves in a fast lane. Even if we could, that would only mean diverting money away from hiring and growth.

Meanwhile, we are terrified by the threat of an exclusive deal, forged between ISPs and a giant producer of clickers. We certainly could not afford such a deal, which would come at a great cost. If that deal forced us to the slow lane, it would be hard for us to draw in new users. We might even lose our current ones, frustrated as they would be with our slow and patchy service.

Startup Day Across America 2014

The story of startups isn’t just happening in the Bay Area or New York City. It’s happening all over the country, as we’ve learned through our growing “Startup Cities” initiative, our recent road trip with Steve Case highlighting the “Rise of the Rest,” the labor economic research we’ve done to highlight the growing impact young companies have on communities, our political work in Washington and around the country urging policymakers to support and create better conditions for startup growth.

At Engine, we’re committed to fighting from and for the startup community to grow opportunity and strengthen communities. And that’s why, for the second year running, we’re working with the Congressional Innovation Caucus and friends in our own community like 1776 and the National Venture Capital Association to come together and celebrate startups with Startup Day Across America. Startup Day is an opportunity for Members of Congress, their staff and other policymakers to meet with entrepreneurs, tour their businesses, and get a sense for how they are creating economic opportunity, right at home.

Last year’s Startup Day gave more than 100 members of Congress the opportunity to meet with startups in their home districts. This year, with events starting today, we’re hoping for even more participation from new places and new faces. We’ve got events on tap throughout the country, from Kansas City to Columbus, Brooklyn to Seattle and everywhere in between, with more being announced each day.

We’ll be pulling together highlights from these events throughout August both here and on our social channels. Make sure to follow #StartupDay on Twitter to watch startups and government coming together to learn from each other.

And, if you’re interested in hosting a Startup Day event in your hometown this August, let us know and we can connect you with your local Congressional office. (And if you call and do it on your own, let us know and post on #StartupDay!)

RFP-IT: Making It Easier for Government to Support Startups

Our Federal Government spends a lot of money. I mean, a lot of money. And with that money, they purchase many goods and services. Increasingly, many of those purchases have intersected with technology: technology that makes existing products more efficient, solutions for new and existing problems, new infrastructure to help the government manage its processes, and so on. In fact, the government buys so much stuff, whole industries (yes, plural) have been built with the singular goal of selling to the government. While these processes and industries are largely pretty boring, every once in a while something happens, the system stops functioning properly, and it becomes news.

That is exactly what happened with the mangled rollout of the much-maligned healthcare.gov website late last year.

Among the many problems uncovered by the process, we realized that those systems in place to spend the aforementioned sums of money are not always best at finding the most efficient projects, programs, and services to buy. In fact, healthcare.gov was just latest high-profile example of the problem. Many, if not most, of the issues faced in federal government procurement are situated squarely in the fact that these laws and regulations represent a different time, and have been made archaic by advances in technology.

Stepping into that breach with an innovative solution of her own is Silicon Valley’s own representative, Anna G. Eshoo. The Democratic Congresswoman, a longtime supporter of the technologies that lead the world from her home district, today introduced the Reforming Federal Procurement of Information Technology (or, RFP-IT) Act which seeks to make these processes more open, easier to navigate, and more accessible to startup companies looking to sell to the Federal Government.

The bill, co-sponsored by a bipartisan coalition of Rep. Eshoo’s House colleagues, has three specific goals. First, it will enhance competition in the marketplace by enabling more small businesses to bid on federal IT contracts without having to spend thousands on compliance costs by lifting the threshold for a streamlined contracting process from $150,000 to $500,000. According to Eshoo’s summary of the bill, “expanding the use of simplified acquisition procedures will shorten procurement lead times and help level the playing field for start-ups and small businesses – a critical factor in an IT marketplace that is characterized by the constant influx of new entrants and rapidly evolving IT products and services.”

Second, the bill takes a number of steps to promote innovation, including codifying the popular Presidential Innovation Fellows program, and asking the General Services Administration to recommend how to slim-down certain procedures.

Finally, the bill moves to ensure more accountability by establishing a Digital Government Office within the Office of Management and Budget, strengthening the existing CIO office in the White House and improving transparency and oversight.

You can read the full text of the (very short!) bill here. We thank Rep. Eshoo and her colleagues for highlighting one of the ways our government functions, and working to bring more efficiency and innovation into the process.