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Startups Love Obama's Internet Proposal, But Cable Industry Calls It 'Draconian'

Jessica Palombo

This week President Barack Obama proposed reclassifying the Internet as a public utility. Some Floridians are applauding the idea as a way to protect startup businesses and consumers. But the cable industry is fighting back, saying the level of regulation the president proposes would stifle investment and potentially limit service to those same consumers.

The Ping-Pong table in the lobby confirms it: This is a startup incubator. The sleek-looking shared workspace is called Domi Station. It’s just off the Florida State University campus.

“Right now we’re in the open lounge. It has a nice bar that usually has beer on tap for happy hour Friday,” says Ryan Kopinsky. He comes here to run his startup, Shop X. It’s an app that lets people make shopping lists by talking to their Google Glass eyepieces.

“And as a startup founder, it really inspires me to kind of disrupt the Internet market, and that’s not possible without net neutrality,” he says.

Net neutrality. Those words have been buzzing around the nation after a proposal by President Obama recently stoked a longstanding debate. The president wants the Federal Communications Commission to reclassify the Internet as a public utility like phone service.

“In plain English, I’m asking them to recognize that for most Americans, the Internet has become an essential part of everyday communication and everyday life,” Obama said in a video posted on the White House website.

To keep Internet content and traffic flowing freely, Obama wants the FCC to allow more regulation of service providers. Those include cable companies like Comcast and so-called Internet backbone providers like Verizon.

Kopinsky says new entrepreneurs want those extra checks in place to ensure providers don’t allow deeper-pocketed companies to pay to fast-track their web services to customers. In industry speak, that’s called “paid prioritization.” Some have referred to it as creating Internet “fast lanes.”

Kopinsky says, “Because right now, since I have the same privileges on the Internet as a Google or a Netflix, I can create a startup, and within a year or two, I can have the same volume of traffic and still be a competitor. I have a fair chance at fighting the big boys. Now, when you have everyone in a different league where I have to pay up my way, that is not really scalable, especially as an early startup. You cannot scale when you have to pay up so much just for access.”

The FCC’s own Open Internet proposal would require providers to disclose their policies and prohibit them from blocking content, among other edicts. But critics have said it doesn’t go far enough because it still allows paid prioritization.

Florida State University Telecommunications Policy Professor Steve McDowell says the Obama proposal, to redefine the Internet as a telecom service, is generally seen as the more customer friendly option.

“In a sense it’s a different set of rules, but it’s meant to promote competition and promote service and promote access,” McDowell says.

On the other side of the debate are free-market advocacy groups including the Associated Industries of Florida, whose CEO, Tom Feeney, says net neutrality is not in the best interest of Florida’s economy.  

But Time Warner Cable board member and former Sen. John Sununu (R-NH) says service providers do support net neutrality, just not the way the president is proposing.

“This isn’t about supporting net neutrality or not supporting net neutrality,” Sununu says. “This is about imposing harsh, draconian regulations that were designed 80 years ago on the modern Internet.”

He dismisses Obama’s proposal as a liberal attempt to expand government power, and he imagines a worst-case scenario.

“They could set prices for everyone,” he says. “And price controls are the surest way to destroy any incentive to invest in new infrastructure because you’re going to limit the ability of any company, big or small, to get a return on their investment. And that would terrible for consumers because less investment means less innovation and fewer products and services.”

Sununu says net neutrality can be achieved without the public-utility approach. And restrictions on paid prioritization are possible using a different legal remedy available to the FCC.

The final FCC rule is expected soon. But if Obama’s proposal is adopted, industry experts say to expect service providers to challenge it, so it could be years before Americans get an answer to the question, “How neutral should the net be?”