By Mike Montgomery
There’s no question that the tech companies in California are the leaders in innovation – almost all of the great technologies that touch your daily life began in California, and before you have your morning coffee, you probably interact with a dozen of them. That’s why it’s so disconcerting that here’s a controversy playing out far from the sunny shores of the Golden State that could threaten California’s leadership in innovation. The threat stems from the FCC and the debate over “Net Neutrality” – a philosophy in the tech world that means information on the internet should be treated equally. But like most things in politics, it’s more complicated than it sounds:
As part of its attempt to shape the concept of net neutrality, the FCC has begun proceedings to redefine a small piece of law written over a decade ago. Title II of the 1996 Telecommunications act (great grandson of the 1934 Communications act which created the FCC) enforces specific regulations against telecommunications carriers but not against carriers providing information services – this is what the FCC wants to change – they want the authority to regulate information services.
In technical terms, Title II is basically the argument about how to regulate data and bits (data rides on the bits) – either together or separately. Today, data and bits are treated the same under decades of FCC regulation – the idea being that not regulating transmission will spur investment and innovation. The new FCC believes there is a difference though between data and bits. They would like to separate the two, and turn any information provider into a common carrier. For example – under Title II, Apple would have to contribute 15% of their iTunes income into the Universal Service Fund.
Now for the easier way to understand Title II: Think about it in terms of your local pizza place. When you order a pizza, you pay one price for the pizza and the delivery. That’s how the internet works – when you buy a song on iTunes, you pay not only for the song, but for the delivery of that song to your computer. When the internet was first debated by the federal government nearly 40 years ago, they decided that to spur investment and innovation in the tech sector they should not regulate the transmission of data – the delivery of an iTunes song to your computer. That’s the crux of the Title II issue: the FCC wants the power to regulate not just the pizza, but also the delivery of that pizza.
If something touches the internet today it’s generally unregulated, meaning there are few if any government regulations driving costs or governing innovation. If Title II is changed, the FCC will have the power to determine what it regulates. The result could be increased costs for technology companies, passed on to consumers and taken out of our economy in the form of lost jobs and investment in innovation.
CALinnovates is dedicated to supporting innovation and technology throughout California. We are concerned that the adoption of the proposed changes to Title II will undermine the very innovation that the FCC should be protecting. Two years ago eBooks were unheard of, today Amazon sells more digital books than paper books – this same scenario is playing out across the tech sector – there’s no problem with the internet and innovation, so why is the FCC trying to fix it? We’re not convinced they should be.
Just a few years ago California communities were bombarded with advertisements from dozens of VOIP telephone companies springing up across the country with the promise of cheap hassle-free telephone and conference calls – then the FCC regulated them – and all but a few disappeared. The FCC’s solution in search of a problem put companies out of business and Californians out of jobs.
The slippery slope doesn’t just end with our economy – tinkering with Title II could lead to problems with data transmission as large companies and start-ups alike try to cut costs; we could face several presidential election cycles of policy gridlock resulting in a chilling effect in angel and venture capital; innovation in the cloud, which today has seen unprecedented growth, could slow, or worse, stop.
Consider Netflix for a moment. Just today they announced that more than 60% of their users are streaming movies. Without even realizing it, Netflix customers now expect the company to provide data storage, fiber optic transmission capabilities and signal quality all for $8.99 a month – but if the FCC subjected Netflix to the common carrier requirements of Title II those low monthly fees would be history.
Even Google has entered the fray. Yesterday they fired off a policy missive to the Federal Trade Commission saying that new regulatory proposals could undermine the functioning of a healthy marketplace and stall the pace of change.
The current framework governing the tech industry has worked well for 40 years. For most of that time the California tech industry has felt almost immune to actions in D.C. – but we can’t afford to keep our heads in the Cloud any longer. CALinnovates is concerned about Title II and it’s potential impact – and we want to hear from you. Through blogs and emails, phone calls and status updates, we want to hear your thoughts and opinions on Title II.
As a tech community, we should be concerned about the federal government tinkering with the laws that could impact our industry. We should require them to use the same scrutiny and diligence to change laws that we use before releasing a product or investing in an idea. In order to stay on the forefront of the global marketplace and make certain that California stays competitive, we need to continue to find ways to work with policy makers to foster growth, innovation, and economic activity in order for us to continue to be the tech global leader.
Mike Montgomery is the Executive Director at CALinnovates.