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VC Pitches in a Year or Two (avc.com)
280 points by SethMurphy on Jan 15, 2014 | hide | past | web | favorite | 96 comments

This is already reality in some countries. Like India for instance.

1st Indian entrepreneur: I plan to launch a search engine that understands Indian languages and contexts better than Google.

VC: Well since Google has already paid telcos like Airtel (http://www.airtel.in/free-zone/) so their searches and even some results don't use up any of the data plan, we are passing.

2nd Indian entrepreneur: I have an idea for a social network that is better than Facebook.

VC: Sorry, Well since Facebook has already paid telcos like Airtel (http://www.medianama.com/2014/01/223-airtel-facebook-free-hi...) so their site/app doesn't consume data while being used, we are passing.

In Latin America too, and Facebook was part of that.

I don't know why this issue was not discussed earlier. If I remember well, it started with the facebook applications for mobiles more than 3 years ago.

Just a few times less developed countries predict what will happen in US (technologically speaking!)

Enterpreneur: I plan to launch an encyclopedia that people can edit, and it's better than Wikipedia

VC: Well, since Wikimedia Foundation has already convinces telcos to provide their data for free (http://wikimediafoundation.org/wiki/Mobile_partnerships), we are passing.

Now wait a goddamn minute. This doesn't make any sense. The alternative is even worse: no free access to Wikipedia. Is this what you're arguing for?

Is this trolling? Or a serious question where you just don't understand the difference between collaboration with non-profits to provide a public good and for-profit companies selling their customers to the highest bidder?

The difference is Wikimedia doesn't pay for this benefit, the telcos are doing it because they support Wikimedia's mission. Any company with a similar mission and better execution has a chance of talking the telcos into a similar deal.

The argument is that the paid types of mobile partnerships add another cost onto the already high barrier to entry into the market. This supports monopolistic practices by these companies, and reduces competition in the industry. That's the problem with removing Net Neutrality.

But this still breaks net neutrality. You don't get to treat some traffic differently because it's served by a 501c3.

> The difference is Wikimedia doesn't pay for this benefit,

In some markets Facebook, Twitter or YouTube don't pay for this benefit either - the free data deal runs as a free trial for limited time with the hope of converting you into a paid data customer.

> the telcos are doing it because they support Wikimedia's mission.

Maybe. Or in markets where data packages are still not widespread (even in smartphone era), using Wikipedia, Twitter or Facebook allows the telco to showcase the benefits of buying a data plan.

Yes. I'd rather have "better than Wikipedia" than "Wikipedia for free."

If browsing Wikipedia is too expensive, let's work on lowering data rates for all content, rather than giving Wikipedia special privileges.

That's been a view of some Wikipedians as well. The Wikipedia Zero program is generally popular, but has still caused some worry. One reason is that Wikipedia is not supposed to be only the website, but a free-as-in-freedom encyclopedia project that can be improved, reused, remixed, adapted, etc. Sort of how OpenStreetMap is not just the Mapnik renderer on openstreetmap.org, but the map data that can be applied to many uses. But when you introduce a data-price differential between the "canonical" and third-party hosts, it strengthens the centralizing tendencies that Wikipedia=wikipedia.org or OSM=osm.org, entrenching them as the correct way to access the data, and discouraging innovation in third-party uses of the data.

Yeah, although Wikipedia Zero does have real benefits, it is a bit problematic. I have wondered if a Creative Commons Zero policy might be better.

I'm not for DRM, but if we have to have licensing baked into the web, let's use it for good.

I'd rather have equitable access to everyone. Why should my traffic to use Wikipedia be supplied by taxing the people reading Fox News?

In all fairness, these are tactics to get people with no data plan to start using these services. Data is ridiculously cheap (1GB/month is ~ $4). People with data plans don't really care about google or facebook's data usage. Youtube and streaming music services are a big deal though. So yeah, the incumbents have a bigger addressable market in India, but data consumption is not the differentiator for the vast majority of apps.

The author is missing the point that the ruling was about the specific language of the FCC regulations. See: http://gigaom.com/2014/01/14/breaking-court-strikes-down-fcc...

"That said, even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order."

It seems very likely that the FCC will rewrite their regulations to fix this. Everyone knows that net neutrality is important, and this ruling is just an issue in legalese. It's a little early to resort to torch-and-pitchfork hyperbole.

I am "the author" and I do understand that but the point of my post was to simplify the issue for the vast majority of folks who don't get the net neutrality issue

Perhaps you're right when you say, "Everyone knows that net neutrality is important". My gut says otherwise.

There is a strong contingent on the hill to allow companies to do what they want. They want to make money like this. The government will allow them to do so. Heck the head of the FCC is one of the companies that want this. So I doubt she'll be running off to change phrasing anytime soon.

It seems very likely that the FCC will be slapped down a third time in court if they try to "rewrite their regulations" a third time. They're 0 for 2 so far before the DC Circuit.

"General authority to regulate" is a legal term of art. It probably won't take you as far as you like.

I think the pertinent question now is whether the FCC rewrites its rules to classify ISPs as common carriers. It seems to me, given the local monopoly or duopoly that the vast majority of ISPs enjoy, that this is an obvious move. But I have heard it barely discussed, which is distressing.

It's not an obvious move. Being classified as a common carrier carries a ton of baggage. The common carrier regulations are very much 1970's-style oppressive regulation, complete with extra taxes for providing service to rural subscribers, regulatory oversight of every business decision, etc. The FCC didn't want to impose that burden on ISPs in 1996, and they don't want to do it now.

As an aside, it's amusing to me how people trumpet common carrier status here on HN while also complaining how U.S. providers lag the rest of the world in speed and prices. Imposing the common carrier regime on ISPs won't make that situation better, it will make it worse. Look at Google's approach to building out gigabit: focus on urban areas where the density lets you hit more subscribers per mile of fiber. That's exactly what you can't do if you're classified together with the phone companies and are forced to spread capital expenditures thin over the vast swaths of rural America.

The current situation isn't ideal, but I think it's myopic to advocate treating telecom networks as regulated public infrastructure. I don't know if you have noticed, but public infrastructure in the U.S. sucks. One of the reasons it sucks is that we have a huge, spread-out country and gerrymandering that weighs rural votes about 2x as high as urban votes. We can't have nice high speed rail along the northeast corridor because politics mandates that Amtrak also has to support money-losing lines through rural Pennsylvania. Do you really want to bring the weight of all this ridiculousness down on the internet?

>extra taxes for providing service to rural subscribers

Extra taxes /if/ they provide service to rural subscribers, or extra taxes /unless/ they provide service to rural subscribers?

Seems to be the latter would actually be a /humongous/ win for the customer. And might actually make these bozos build out some decent last-mile infrastructure (like they were supposed to do over a decade ago, and never ended up doing).

I don't think the rural telephone surcharge is a necessary component of common carrier. For example railroads are all common carriers and they are under no duty to run rail lines to every single community in the U.S.

My understanding of common carrier is that is simply mandates that the provider must publish a single public rate card with objective criteria for the rates, and then charge everyone equally by those criteria. It's to prevent UPS (which I believe is regulated as a common carrier) from taking extra money from Amazon to slow down or lose shipments from Walmart.

The relevant sense of "common carrier" in this context is as a classification in the Telecommunications Act of 1996. It's a detailed set of regulations applicable to telephone companies. Classifying ISPs as "common carriers" would not just implicate all of those regulations, but implicate one of the animating principles of phone service under the Telecom Act of 1996, which is universal service.

"Common carrier" is also a classification for various services under common law, but that's not what the recent D.C. Circuit opinion was about. Those involve not formal regulations, but certain rights and liabilities under common law, which differ depending on the particular kind of service.

> The relevant sense of "common carrier" in this context is as a classification in the Telecommunications Act of 1996. It's a detailed set of regulations applicable to telephone companies. Classifying ISPs as "common carriers" would not just implicate all of those regulations, but implicate one of the animating principles of phone service under the Telecom Act of 1996, which is universal service.

You are conflating two related but distinct issues, and then compounding that by badly confusing the issue of universal service. Of the conflated issues:

First, is requirements that define a common carrier, which the FCC can apply to entities designated as "telecommunications providers" under the Telecommunications Act but cannot apply to entities designated as "information service providers" under the Act, per the DC Circuit ruling recently, those requirements include things like the non-discrimination/non-blocking rules in the recent Open Internet Order. Designating a new category of "telecommunications service providers" (provided such designation survives any challenge -- there are definitions of what consistutes telecommunication service in the Act and the FCC would have to have reasonable grounds for this designation) allows the FCC to apply provisions that are essentially common carrier rules to entities in the newly defined category.

Second, is the particular regulations that the FCC has applied to particular classes of telecommunications providers, such as landline telephone providers. Designating a new class of telecommunications service providers would not automatically apply any existing regulations that the FCC has adopted for previously-defined classes of telecommunications providers to the newly identifed class.

Finally, universal service is not an "animating principle of phone service under the Telecom Act of 1996". Universal service was adopted for phone service in the Communications Act of 1934. The Telecommunications Act of 1996 was notable in expanding the role of universal service to include "advanced telecommunication and information services". This expressly includes non-common carrier "information services" as well as common carrier "telecommunication services", so it is completely irrelevant tot he common carrier issue.

> "Common carrier" is also a classification for various services under common law, but that's not what the recent D.C. Circuit opinion was about.

Actually, applying the common law definition of "common carrier" to the particular regulations that the FCC adopted in the Open Internet Order to see if they conflicted with the Telecommunication Act's provision that common carrier rules could be applied only to "telecommunication service" providers and not "information service" providers (given the FCC's designation of ISPs as the latter rather than the former) was central to the DC Circuit decision.

I'm not really sure what distinction you're trying to create with the term "telecommunications service provider" versus "telecommunications provider" and "information service." The term "telecommunications service provider" doesn't appear at all in the D.C. Circuit's opinion.

Moreover, the phrase "common carrier" is more or less coextensive with Title II of the Telecommunications Act of 1934, which creates a heavy regulatory oversight regime. I'm not sure how the FCC could classify ISPs as common carriers and not bring them under the purview of Title II.

While Universal Service was not created in the 1996 Act, it is definitely an animating principle of the Act, because the Act expands the program. However, it doesn't go so far as to extend it to ISPs. Universal service contributions aren't totally coextensive with telecommunications provider versus information service classification, but are almost so. Anyone that provides something similar to voice telephone service (including cellular and VOIP), contributes, but internet providers do not.

I don't mention universal service to confuse the issue. I mention it as an example of the heavily-political, expensive, misconceived sort of program that becomes fair game when you bring internet service into the world of common carriers. The world of telecom has many different regimes. Not just from a legal standpoint, but from a philosophical and political standpoint. Phone service is considered crucial public infrastructure. It is subject to Title II. It is subject to USF. It is subject to extensive FCC oversight. It is the subject of political bellyaching about how people in rural America are entitled to have their high-cost service subsidized by everyone else. That's one regime. The other is internet and cable service. This is a land of ponies and cupcakes. Once you reclassify internet services as common carriers, you put internet service in a whole different bucket, not just legally, but philosophically and politically. And you don't want internet service in the same bucket as phone service. It's an awful place, full of people who think that companies shouldn't spend money building gigabit in New York when people in rural Alabama still have 256 kbps DSL.

Your point about the common law definition of common carrier is well-taken. It isn't irrelevant, because the D.C. Circuit did look to it in its opinion. However, it's indirectly relevant.

If you start at the last paragraph of page 45 of the opinion: http://www.cadc.uscourts.gov/internet/opinions.nsf/3AF8B4D93... you can see that the court is interpreting the statutory definition of "common carrier." Specifically the phrase: "A telecommunications carrier shall be treated as a common carrier under this Act only to the extent that it is engaged in providing telecommunications services.” 47 U.S.C. § 153(51). "Common carrier under this Act" essentially refers to Title II of the Telecommunications Act of 1934.

On page 47, the court notes that: "Offering little guidance as to the meaning of the term 'common carrier,' the Communications Act defines that phrase, somewhat circularly, as 'any person engaged as a common carrier for hire.' 47 U.S.C. § 153(11). Courts and the Commission have therefore resorted to the common law to come up with a satisfactory definition."

In other words, there are two definitions of "common carrier," one in the statute and one at common law, and because the one in the statute is underdefined, the court looks to the common law definition. But they are still separate definitions. 'snowwrestler said: "I don't think the rural telephone surcharge is a necessary component of common carrier. For example railroads are all common carriers and they are under no duty to run rail lines to every single community in the U.S."

The fact that the D.C. Circuit looked to the common law definition of "common carrier" to elucidate the statutory definition does not mean that the statutory definition cannot carry an independent set of obligations, different from the common law definition. Clear as mud?

You write about these two regimes (telephony and cable/internet) as if their separate existence is inviolate. In today's world, where voice is often just another application running on top of IP, the existence of two regimes seems backwards, enshrining a century-old technology (POTS) that already starting to disappear.

If we as a society don't want to impose a requirement that rural communities be connected to the nation's essential communication infrastructure, then let that be the case; let's get rid of the requirement and rethink the whole thing. But if we as a society believe that rural areas should have access to the country's communication infrastructure, then we should change the requirement that service be provided via a 19th century technology. In the 21st century, isn't it just as bad for Internet access to be expensive and slow, as it was 80 years ago for telephone access to be expensive or unavailable? Standards have changed.

It seems to me that (specific legalities of the decision aside) you are focusing too much on the technical aspects of common carrier status, and not enough on the underlying policy objectives of that regulation. If universal service regulation is to have any relevance today, it should align itself with the reality of modern communications technology (where access to the Internet, not telephone networks, is what matters), and with what it means today to be "connected".

A "universal service" policy that ignores the fact that TCP/IP-based broadband Internet has replaced telephony as the essential communication technology is just a farce.

> A "universal service" policy that ignores the fact that TCP/IP-based broadband Internet has replaced telephony as the essential communication technology is just a farce.

It is also not an accurate description of the status quo: the grandparent post talks a lot about the 1996 Telecommunications Act and its supposed foundations, but doesn't understand:

1) The distinction between "telecommunication services" and "information services" that controls where common carrier regulation can be applied, from that Act, or

2) The fact that the 1996 Telecommunications Act eliminated the "separate buckets" treatment of phone and other services for universal service, promoting universal service for access to "advanced telecommunication and information services" not just telephone service.

3) The fact that reforms to the regulations of the Universal Service Fund following and based on the 1996 Telecommunications Act mean that it is now used not just for telephone but also broadband access, demonstrating that -- whether or note ISPs are defined as "telecommunications service" providers subject to common carrier regulations and whether or not open internet / net neutrality rules are adopted -- broadband is already moving substantively into the same "bucket" as telephone service.

I was using USF as an example of the onerous, misguided sort of program that is imposed on telecommunication service providers regulated under Title II. I wasn't trying to imply that only telecommunication service providers can be subject to USF fees (frankly, I was trying to punt on explaining the distinction because in practice voice providers are subject to USF fees but broadband providers are not subject to those fees). The fact that USF money is now being used for broadband doesn't change the fact that internet service is not subject to the tax. Moreover, while classification as an information provider doesn't prevent internet providers from being subject to USF fees, classification as telecommunications providers would pave the way for them to be taxed.

While the regimes aren't inviolate, Congressional action would probably be required to change the status quo. Besides that, the fact that you can reimagine the legal rules doesn't change the philosophical and political positions that led to the existing status quo. It's a mistake to think that the drafters of the 1996 telecom act didn't understand what they were doing. They made a conscious effort to try and deregulate the industry while conceding to keep much of the existing regime applicable to voice service.

All this could be changed if you let Congress have another shot at the classifications, but you really don't want that. The forces that made telephone regulation the morass that it is will conspire to turn internet regulation into a morass as well. It sounds good to say that rural areas should have access to internet service, but opening that can of worms is a disaster in the making.

Infrastructure regulation in the U.S. is a disaster because of the disproportionate power of rural voters. It's not efficient to build infrastructure to rural and exurban areas, but rural votes, particularly in the Senate, hold infrastructure projects hostage unless inefficient infrastructure is built in those areas. That's why Amtrak is obligated to run a nationwide network when it should just run a train line from DC to Boston. Indeed, the desire to provide universal service is responsible for much of the dysfunctional aspects of the telecom industry to begin with. Many cable providers are monopolies because municipalities granted monopoly status as a concession for building service broadly instead of just to the profitable locations.

Look at the aspects of the telecom industry that are actually getting people excited. T-Mobile's new LTE network, for example. The reason it works is because T-Mobile avoids a whole bunch of capital construction by only focusing on urban areas. Cities get LTE, and everyone else gets HSPA or 2G. Or look at Google's fiber service: hitting major urban areas and avoiding anywhere that doesn't yield a lot of subscribers per mile of fiber. That's the right way forward--that's how we get internet speeds in the U.S. that match countries in Asia and Europe that are much more heavily urbanized. Treating internet service the way we treat other public infrastructure will destroy that.

With classic ISPs, not just anybody can start digging trenches and lay fiber.

With wireless, pretty much anybody can start renting the space from cell towers and resell their wireless capacity.

Then you have to rent spectrum somehow too. And I would assume the towers are often owned by wireless industry organizations with very... specific ideas about whose equipment is sensible and prudent to put up.

AFAICT (and please correct me if I'm wrong), the ruling actually disallows the FCC from regulating in anyway at all, including classifying ISPs as common carriers.

> AFAICT (and please correct me if I'm wrong), the ruling actually disallows the FCC from regulating in anyway at all, including classifying ISPs as common carriers.

AFAICT, you're wrong. In fact, the dispute between the majority and the dissent in the ruling is that the majority not only accepted that the FCC can regulate broadband providers, but allowed some of the regulation in the Open Internet Order at issue (just not the key rules for net neutrality.)

What specific language in the order gives you the idea you refer to?

I haven't read the decision, just secondary sources, so I am probably incorrect. The reply above yours linked to:


Which seems to do a good job explaining it. Specifically this bit:

> It’s those rules [the Open Internet rules] that Verizon is saying the FCC had no legal authority to enact. The reason that Verizon was successful was because of the basic incongruity I described to you at the beginning — that 10 years ago, the FCC deregulated these actors. And it can’t now simultaneously pretend to regulate them.

My original comment was incorrect: I meant they can either not regulate or classify ISPs as common carriers and then regulate. Again, totally open to being correct here, this is complicated and I could totally be wrong.

> My original comment was incorrect: I meant they can either not regulate or classify ISPs as common carriers and then regulate.

That's true of the non-blocking and non-discrimination rules in the Open Internet Order, which were ruled to be equivalent to common carrier rules and thereby foreclosed so long as the FCC designated ISPs as "information services" (which cannot be treated as common carriers under the Telecommunications Act) and not "telecommunication services" (which are common carriers under the Act.)

The FCC, under the ruling, still has power to regulate broadband ISPs in other ways, and the provisions in the Open Internet Order that were not found to be equivalent to common carrier requirements (and thus incompatible with the FCC designation of ISPs as "information services") were allowed to stand.

Gotcha, that makes sense. Thanks for the explanation. So wont the FCC just recategorize ISPs as Common Carriers or...?

Nice Q&A with law professor regarding what the FCC can/can't do related to this: http://recode.net/2014/01/15/whats-net-neutrality-what-happe...

Not the point of the article, but is anyone else annoyed by these "entrepreneur-sounding" ideas? I'm so sick of low-tech, solve-first-world-problem ideas and conflating that with entrepreneurship. If I were the VC, I'd tell them to get the fuck out, and it'd have nothing to do with Telcos.

You missed the point. The author was choosing startup ideas that compete with entrenched entities that are also potentially data-intensive. I don't think the ideas themselves were supposed to be judged, just that they fit a loose model of ideas that would be almost impossible to fund/execute without net neutrality.

He's right in the sense that all ideas were copying something out of big companies' playbook and were a hard sell to consumers who were sensitive to mobile data pricing.

What if the idea was around instant video conferencing with on-demand doctor or a lawyer? Would interested parties still be concerned about the (additional) cost of a data plan?

Would interested parties still be concerned about the (additional) cost

Yes. This is the whole point. The telcos' will extract rents from any profitable biz model. The more profitable, the larger the extracted rents will be. The net result is that, if people feel that the value they are creating will be expropriated by a third party on poor terms, those services will never make it beyond the cocktail napkin stage. And if...the founders are still optimistic and willing to let this happen...the VCs are not likely to play along...knowing what will predictably happen. As long as either of those two factors is in play, the economy ultimately will suffer in the sense that those services will "never happen" if people take that approach. Or, at least that's the argument if I understand correctly.

True, but I strongly believe zxcvvcxz started his/her comment with "Not the point of the article, "...

Yeah. I could have tried harder to come up with less frivolous ideas but I wrote this in about five minutes and I just went with the first ideas that were mobile bandwidth reliant I could come up with

Actually, the music playlist idea sounded pretty sweet to me!

I get why he dashed out some throwaway ideas to make the point. But yes, those business ideas seem so maddeningly trivial that I can't forward this on to non-industry people. I'm a giant fan of net neutrality and hate oligopolistic telcos deeply, but my first reaction to this was, "Well, anything that stops a gamified social Snapchat from seeing the light of day can't be all bad."

That's probably the biggest difference between you and VCs in the biz today. These ideas actually sound so legitimately like they could be funded today, and make mad bank while at it too. And that's all "normal" VCs care about, so there you have it.

I wouldn't even qualify this by saying "normal." VCs are hyper-capitalists. Other people give them money with the mandate to turn a profit...period. That's the whole job. Most of us "normal" tech folk get migraines looking at the silly crap that gets funded, but a VC's job really isn't about anything else, and couldn't be ethically, unless the people who pay into the fund wanted it that way.

The investors who do the stuff that I suppose one would call meaningful tend to be investing their own money or their friends' money, or it's a slice of a regular fund used in a way similar to corporate donations. Plenty of VCs do care about tech and meaningful endeavors, but that has to be secondary, unless they are playing with their own money.

There seems to be a lot of misconceptions about what the business of investment is, when it comes to venture capital, for some reason. I've spent enough time around the activity and the people that I can see what it is and the logic of it. I don't really like it, but then I don't like a lot of things in our culture.

Yes! My first thought was that if abolishing net neutrality forces entrepreneurs to develop less trivial ideas then it might not be such a bad thing.

Thanks Fred for explaining why the examples are so bad! And it's reassuring that even VCs don't have great ideas popping into their heads every time.

The issue of Net neutrality is a global phenomenon/risk. Telcos in Nigeria abuse their positions as the primary carrier of data and they are protected by having 'licenses'

MTN and Rocket Internet recently tied a deal. I wrote about the risk here


I'd like to believe that many European entrepreneurs will reconsider going to the US to start a company. The European Parliament and the Commission have been straight shooters with net neutrality and they will not consent telcos to play with the pipes.

Still, if you're located in Europe but want to target the US audience as well (a huge market), you're going to be affected anyway.

Yes, but it's rarely the case. US startups don't target any other places outside the US at first. The friction to start is in the US not in Europe.

I don't think that's true. Most consumer focused startups will target the US market, even if within the EU. It's by far the largest homogenous (well, relatively) market. Targeting "Europe" isn't really a thing - You have to target each country individually.

The blog places its argument on the basis that data plan cost is going to be high. Would this be the case in the future? What if data plan costs are that negligible that it does not matter?

Secondly, compare this to TV networks, consumers watch TV and pay for them too, a part of the cost is subsidized by advertisers who are willing to pay the network to reach the audience. The consumers are in that network only because of the content, remove the content providers or reduce the quality of the content then the consumer vanishes. An empty network is worth nothing.

Would telcos, not harm themselves and their whole data plan business by attempting to charge the content providers (Google et al) and would the content providers 'advertising model' margins justify paying out to the telcos just to get through their infrastructure?

Here’s the problem: what AT&T is doing does not violate any technical definition of net neutrality, unless we ad hoc append new parts to it.

This is the core problem of net neutrality arguments, which it is often defined as ‘I know it when I see it’. It amounts to principles, but if we are going to have an enforceable law, we need to do better than that.

AT&T is not offering any priority to any bits here. Nothing is being blocked or degraded. Content providers who pay for sponsored data do not get faster bits nor do they slow down anyone else’s.

It’s free shipping: http://clipperhouse.com/2008/06/03/the-long-game-on-metered-...

Now, I can understand objecting to it on its merits, and Fred is making that argument, which is great. And I can understand why it feels like a violation of net neutrality, but we need to do better than feelings.

Here’s how we test whether we’re defining net neutrality ad hoc: show me a clear, specific, widely accepted definition of net neutrality that describes AT&T’s behavior here, and that existed before this behavior was publicized.

Scary thing, this is same thing that created Rockfeller-era monopolies: they had right and did pay railways to create preferences (price-wise and otherwise) for their traffic, literally derailing competition. Internet is the bloodline of the post-industrial economy just like railways were of industrial one. That is much worse than most of you think.

Facebook already does this in india. I remember seeing an advertisement of a telco that said you wont be charged for data for facebook. Does this means that India already had this non neutral internet? It didn't change the scenario much here.

I remember here in the UK, Three (a UK mobile network operator) allowed for free access to Facebook. This was before the days of the iPhone though and it took you to a stripped down mobile site.

Three also offered free access to Skype. It used (uses?) a Three-specific Skype client (available for many, but not all, models of phone) to do the presence and signalling over data, and the voice over the normal mobile voice channel:


To protect revenue, SkypeIn was blocked, and SkypeOut was restricted to non-UK numbers.

Vodafone offer free access to Spotify or SkySports with some packages, although I am not 100% confident it's free data, or free service.

Most VCs would pass on these ideas regardless. They're all in mature, saturated markets. One of the signs of a mature, saturated market is that the incumbents have taken great lengths to create barriers to entry that are very high. This is a discouraging thing for VC investment because it increases the chances that a new entrant will fail.

Besides, you've had to pay for access for years. The big difference is that before, you had to go through a CDN like Level3 or Akamai. Part of what you paid them went to the ISPs to ensure fast connections. All this means is that the YouTubes of the world will begin to buy interconnects with the big ISPs. Small ISPs will likely just band together into a cartel and sell access that way.

Yeah, there will be a fast lane and a slow lane, but the advent of CDNs in the early 2000s already created that anyway. The data caps are disappointing, but not really unexpected if you look at the mobile market. We're reaching the point where in many major cities, there is no media consumption that requires a much faster connection than is already available. So why will consumers pay for more speed when their existing 50mbps cable modem is enough to stream 4k video from Netflix? Those speeds ARE possible today if you buy carriage through a CDN like Akamai (and I regularly get those speeds from Steam downloads) and the fact that Netflix hasn't is really more of an implication of their business model.

The most recent ruling really changes nothing, because net neutrality has been dead for 10 years anyway. While everyone on the internet was complaining about it, the business side moved on and built a few billion dollar companies around it. Capitalism at its finest.

And if pay to play had been in place when Google debuted against Lycos/Altavista? If we were stuck with that old search tech today, we'd be suffering.

Yes, current giants are going to continue consolidating and buying up businesses and amassing power. In America we used to have ways of dealing with monopolies but that is now passé -- we don't like the government "punishing" successful businesses (in the same way that taxes "punish" the rich). A lot of times I feel like something very bad will have to happen for things to change. Until then, hey.

I get that this is an issue, but I'm a little curious why AT&T's stock price didn't pop as a result.


While I hate the loss of Net Neutrality as much as the next person (as long as that next person isn't one of the incumbent carriers), this is the sort of thing that happens frequently in other markets. You want to see entrenched competition? Try launching a company in the Cleantech markets or in certain hardware or biotech or healthcare fields. Big pocket incumbents regularly flex their muscles here.

The loss of net neutrality is bad from many perspectives, but to be honest, there will ALWAYS be opportunities for startups and entrepreneurs in the space and VCs will not be want for good ones. All this does is shake out many ideas in favor of other ones.

I don't see why the VCs have reason to panic. And while I understand the Entrepreneur ideas were straw men utilized to illustrate a point, the quality of these ideas are pretty low. Maybe we should see the silver lining on this dark cloud in that it will shake out some of these deals from being funded when they probably shouldn't be anyways.

There seems to be an assumption in the original argument that not every company will be able to get access to sponsored data, e.g.

> Well since Spotify, Beats, and Apple have paid all

> the telcos so that their services are free on the mobile

> networks, we are concerned that new music services like

> yours will have a hard time getting new users to use them

> because the data plan is so expensive

If a new music service could make a deal with telcos so that their service is free too, wouldn't this problem go away? In other words, if sponsored data was open to all, does this address the concern described?

The real concern seems to be that the cost base of a new service will go up because it will be forced to pay for sponsored data in order to compete, and VCs aren't happy about having to cover increased costs of their portfolio companies.

A similar argument could have been made about CDNs. Because the big services use CDNs to provide a better service, startups have to pay to use CDNs also in order to compete, and hence their costs are higher.

So basically it will become even harder for startups to disrupt the established players. Until a disruptive telco comes along and everyone switches to them, while also learning an important lesson about net neutrality. Maybe the whole thing will even cause society to re-think the way we allocate access to the internet and cellular networks.

(A man can dream!)

Entrepreneur: I plan to launch a better [XYZ] hosted on Amazon AWS.

VC: Well since Amazon has paid all the telcos so that services delivered through AWS "telco-optimized elastic IPs" can be free on data plans, all you have to do is include Amazon's surcharges in your business plan.

I hear him, Internet could become a caste system for businesses. But from what I understood, the ruling was more about the FCC trying to bend rules to accomodate everyone with carrier types (common carrier?). Yesterday's ruling raised awareness but the game is far from over.

A friend of mine was part of the team that made the decision for UHC to participate in AT&T's new sponsored data program. When I found this out, I tried to point out the broader implications of a shift towards pay-to-play, but had trouble getting past the narrow vision of "but we just want to get our content out to people that can't pay for mobile bandwidth". Just wanted to say thanks for this article for demonstrating what some of the implications are of a shift to a pay-to-play model. Non-techies really seem to struggle to get their heads around what happens to the entire ecosystem if net neutrality dies, and articles like this are helpful for making the consequences clearer.

I am watching the reactions of non-technical people after they hear how this latest Net Non-Neutrality development affects them. Some are saying "Google, Apple, and the other big guys will step in for us". Others reply that when gas prices jumped to $3 everyone cried out and legislators started shuffling, yet we are now paying $4 and being thankful. Unless the outcry gets bigger this is going to pass through the cracks.

Do any of the big tech companies really have an interest in stopping this development? They could afford to buy themselves an "unrestricted by cap" deal with internet distributors and suffocate every other potential competitor?

What's interesting are the comments below the post about Net Noot. The problem really comes less about the fact that traffic shaping may not occur, but there are no safe guards if someone attempts to do so. In smaller markets, its more and more sounding like a small cottage industry will start because of the lack of existing laws to protect the consumer. The larger markets will have power in numbers, but mom-pop towns like Marion, AL with only a small regionarl carrier - not so much. Problematic and there is SOME truth to this in scale of economy.

While I agree with his premise, there are already industries that used to be startup focused where there is a gatekeeper. E-commerce has Amazon, advertising has Google (and possibly Facebook), which already destroy new startups before they really get started through this same VC mindset. It seems to me that the balance of power is just moving up the line a bit to industries where VC's have little to no power to influence.

The power isn't moving up, but turning the model into a pay-to-play one. The economics for US startups and businesses overall will change considerably (for worse).

In what way(s) is Amazon a "gatekeeper" to e-commerce?

Maybe I didn't word it properly. It is in the sense that VC's say, well Amazon could do that too, we'll have to pass. They are more of a gate that does not open.

Forget net neutrality, doesn't this reality already exist when you factor in data caps? Most of these startup ideas use a fair amount of data which is now being capped more often than it has in the past.

I may be alone in my worry that as we move to capped data plans, and the pay-per-bit model that many new ideas and concepts (say for example always connected appliances) won't be financially feasible for consumers.

So someone should plan to launch a VPN service that will pay telcos so its traffic doesn't use any of its customers' data plans. Configure the mobile device to route all data via the VPN, encrypted. It'll charge its customers for access to unlimited apps, sites and streams without incurring a data plan hit.

One problem with this plan is that it solves the problem only for a few relatively rich and aware people. The majority of people will continue to be screwed, which also means that new businesses trying to compete with incumbents will be screwed.

Also, there's a good question whether telcos will sell Google the ability to prioritize traffic, and then sell somebody else the ability to get out of that. The VPN provider will always be a minnow, so my guess is that if any of the whales object, the telcos will just never sign with the VPN provider.

Myself and some guys with a telecoms background spoke to various telcos about that ~2 years ago. Feedback was that they were already so over stretched with data usage they weren't going to embark on any projects likely to increase it until there had been a lot of network upgrades. May have changed since then though.

I think the biggest risk in doing this for a VPN service is that the usage is impracticable given its nature and secrecy.

With services like Facebook, Twitter, etc, the telcos know more or less what they can expect in average data usage from users (and plan/charge accordingly).

I don't follow. The VPN provider will still have to insist on limits, because the telco will insist on limits. It's not like Facebook is automatically unlimited, it's just limited to what Facebook is willing to pay for its users. It becomes Facebook's problem to understand data usage by its users and its apps and to pay accordingly (or not pay, and let the data start counting once the user is past the 'Facebook limit.')

Therefore, a VPN provider will be in the same position. So instead of paying AT&T for your data plan, you're basically paying the VPN people for your data plan plus privacy from AT&T.

I get the point you are trying to make, but it wasn't presented in a way that non-tech folk will appreciate.

My parents' reaction to your scenarios would be something akin to: "Really? For the monthly rate I'm already paying, I now get Netflix and Hulu included for free? NICE!"

If your parents were reading a VC blog, they'd get it.

Bandwidth isn't free. The universal all-you-can-eat model is very unfair to the bandwidth supplier.

Either customers will need to be charged by meter.

Or producers will need to pay by meter.

It's only capitalism.

By the way, why can't the VC say, "we love your idea, and we'll front the money you need to pay the telcos."?

Producers already pay by meter, including peering arrangements with higher tier ISPs than the consumer ends up dealing with.

What if the telcos won't allow anybody else to pay?

Agreed, regulations can address this.

Australia has been doing this for years for mobile data plans. Even though data plans aren't as expensive as they use to be, Facebook, Twitter, Foursquare, eBay, LinkedIn & MySpace are all "free" on the Optus network.

interesting. do you know if they are paying Optus? does Optus have competition in major Australia markets?

Optus is one of several major mobile telcos in Australia. Telstra also offers free Facebook, IIRC.

I'm not sure whether FB is paying Optus/Telstra, but I would think so.

This is the best possible thing that could happen.

Perhaps we'd see startups aimed at building out solar capacity, grid-scale storage solutions, electricity-to-fuels solutions, solar-powered airships, high-efficiency wind-steam hybrid shipping, high-efficiency retrofits to existing building stock, and management or treatment for TDR-TB, rather than an endless stream of privacy-invading "social" surveilices, games, and new forms of intrusive and annoying advertising.

Though building out an alternet that bypasses the telco's "authorized" channels wouldn't hurt either. Mesh and darknets.

Get cracking, HN!

Most of the startup community is aimed towards web-centric ideas for obvious reasons -- the gateway to entry is incredibly low. This doesn't mesh well with hardware, and only puts more reliance upon VC's.

Most of the startup community is aimed towards web-centric ideas for obvious reasons

Yes, and that's pretty much part of the problem.

I've commented before on how Kleiner Perkins' failure in cleantech is really sobering:


Actually, there was a whole post on the topic I seam to have missed "The Rent-Seeking Economy"


Source article: "Great Problems: The Rent-seeking Economy" http://intellectual-detox.com/2013/04/14/rent-seeking-econom... (Devin Finbarr)

I see financialization, increasing advertising focus (much of which is supported by ... wait for it ... the FIRE industries[1], and "software eats everything", all as elements of catabolic collapse[2]. They're extracting financial value from the economy and transferring that financial wealth, which changes who holds real physical wealth, but doesn't much increase it.

Finbarr's blog piece explores this in much greater detail.

The focus of Silicon Valley over the past decade and more on ephemera and trivialities is very much part of the problem. The fact that the only remunerative opportunities for talent are in the FIRE and social / advertising / gaming industries is not a good thing. And the fact that even VC with long track records of success in technological application fail when trying to operate in the Greentech / alternative space is should be read as exceptionally cautionary.

Yes, there's good news out there. Elon Musk is doing fascinating things with Tesla. Solar is absolutely exploding -- in the past two years, solar generation in the US hasn't merely increased, hasn't doubled, but is up seven times[3]. That's a rate of growth which, if sustained, would have solar being half of all electric generation within a decade. I'm skeptical that the rate of growth can continue, but even if it moderates significantly, doubling times of a year or two can grow a small base hugely, and we need all the help here we can get.

But I really wish that the hacker community would pull its collective head out of its collective ass on occasion and look around at what problems should be solved. And a choking off of the backbone for new trivial ventures really could be a powerful refocusing mechanism, all snark aside.



1. "What Are The 20 Most Expensive Keyword Categories In Google AdWords?" http://techcrunch.com/2011/07/18/most-expensive-google-adwor...

2. "How Civilizations Fall: A Theory of Catabolic Collapse" http://www.indiana.edu/~workshop/colloquia/materials/papers/...

3. EIA: "Table 7.2a Electricity Net Generation: Total (All Sectors)" http://www.eia.gov/totalenergy/data/monthly/pdf/sec7_5.pdf

I guess this makes open city WiFi networks much more compelling. In most urban areas, how often are people not within range of a WiFi network?

I guess we need a chrome extension to uuencode your next social network over FB status updates.

imho in the near future most countries will have unlimited data plans or similar, so this argument will be irrelevant.

Well, I'm no fan of losing net neutrality but if the worst thing that happens is that lame VC pitches are no longer funded, I'm OK with it.

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