Net neutrality advocates tend to list innovation at or near the top of their list of concerns when rattling off the reasons to keep the web open. The reason why might already be showing itself.
The argument looks a little something like this: By allowing Internet service providers to charge companies that use up a lot of bandwidth more to deliver their content to consumers, startups relying on those channels are put at a major disadvantage. While companies like Amazon and Netflix—the types of companies that would probably need to pay for these channels—can afford to do so today, they probably would have struggled to do so in their earliest days. (Netflix has already come to an agreement with Comcast to receive quicker service.)
In other words, if there was no net neutrality a few years back when these companies were coming to prominence, they would have had a much harder time coming to prominence.
FCC Chairman Tom Wheeler’s proposed new rules on net neutrality, written in response to a court ruling calling net neutrality laws illegal, would allow to some extent for this kind of pay-for-access ecosystem. The FCC is scheduled to vote on the proposal on May 15.
The threat that those rules could pass has already had the innovation effect net neutrality advocates warn of, according to the MIT Technology Review:
The cable industry says such charges are sensible, especially when a few large content providers like Netflix can take up a large fraction of traffic. But if deep-pocketed players can pay for a faster, more reliable service, then small startups face a crushing disadvantage, says Brad Burnham, managing partner at Union Square Ventures, a VC firm based in New York City. "This is absolutely part of our calculus now," he says.
Burnham says his firm will now "stay away from" startups working on video and media businesses. It will also avoid investing in payment systems or in mobile wallets, which require ultrafast transaction times to make sense. "This is a bad scene for innovation in those areas," Burnham says of the FCC proposal.
So some venture capitalists are already backing away from companies looking to leverage the tools that allowed today’s web-based household names to become so big.
Venture capital has a wide eye on the net neutrality debate. Earlier this week, noted VC Fred Wilson published a call-to-action on his blog, urging the innovation community to pick up the fight against the FCC’s proposal.