Video killed the bootstrapper: Why the Netflix-Comcast deal is bad for entrepreneurs
Matt Hudson didn't have many options.
The son of a paralegal and a secretary, Hudson grew up "very poor" in Springdale, Arkansas, a community that's no stranger to poverty. His parents noticed his interest in computers at an early age, however, and scrounged together the money to buy him a computer when he was 12. By 18, he'd built his first website for a client, a local chiropractor. Hudson had no idea how much to charge, but his $450 rent check was due so that became his fee.
"For a poor kid from one of the poorest kids in the union, being able to work my butt off to learn the things I need to learn (about computers)? Everyone deserves to have that."
That's why recent developments surrounding net neutrality scare him. Last month, a DC district court ruled that the Federal Communications Commission can no longer regulate Internet Service Providers (ISPs) like Comcast as if they were "common carriers" (basically phone companies). Theoretically, that allows ISPs to slow down or speed up websites based on any number of factors, but first and foremost, how much money sites can pay the provider. The truth is, ISPs have found ways to effectively throttle sites since long before the net neutrality ruling. And just yesterday Netflix announced a deal where it would pay Comcast for faster access to the provider's customers.
So why does that matter to poor coders from Arkansas?
Because now ISPs can bully sites into paying more for faster access. This "pay-to-play" model benefits bigger websites that can pony up the cash, while smaller players may be left in an Internet ghetto, bogged down by slower speeds. That gives big incumbents an advantage so even if a startup comes along that can do what Netflix does more cheaply and in a more user-friendly way, it will struggle to outbid Netflix for faster access to customers.
In other words, starting an Internet business may no longer be the engine of upward mobility that it was for Hudson and others. If you thought hacking your way out of homelessness was a difficult prospect before, it could become damn-near impossible if we see more deals like the Netflix-Comcast one.
"The Internet is the only true leveling of the playing field that there is in our country," Hudson says. "It's the only thing that gives the small guys the chance to compete."
Hudson's philosophies about democracy and equality are fundamental to the company he now runs. VoteRockIt is a platform designed to help smaller political candidates who lack the funds or connections of incumbents to launch powerful, attention-grabbing online campaigns. The site is hosted on Amazon Web Services, and certainly big-spending Amazon can afford to be in ISPs' good graces when it comes to fast hosting.
But what if Amazon strikes an exclusive deal with, say, Verizon that precludes Amazon from having a similar arrangement with Comcast? Now Hudson's site may struggle to gain ground with Comcast customers, which represent a huge slice of his potential audience. If nothing else, Amazon would likely pass the extra costs involved with paying ISPs along to Hudson.
Hudson also worries that ISPs will slow down sites under political pressure. He imagines a situation like Chris Christie's "Bridgegate" fiasco only instead of blocking car traffic, a politician could block web traffic.
"Chris Christie can decide, 'My competitor is on so-and-so's host.' I can get him throttled." That hurts not only the political rival, but also anyone else on that host.
Meanwhile, customers may notice, but providers have plausible deniability. "There's nothing you can do," Hudson says. "Your traffic would be slow but there could be a million people who could be blamed. It could be your router or hub..."
Everyone's talking about net neutrality, and the importance of treating all sites the same. But the scary thing about the Netflix-Comcast deal is that it doesn't even violate net neutrality in a traditional sense, so old or existing laws can do nothing to stop it. As Timothy Lee points out at the Washington Post, it "makes net neutrality obsolete."
The conventional network neutrality debate implicitly assumes that residential ISPs receive Internet traffic from one big pipe. Network neutrality advocates want rules prohibiting ISPs from divvying this pipe up into fast and slow lanes based on business considerations.
But in a world where Netflix and Yahoo connect directly to residential ISPs, every Internet company will have its own separate pipe. And policing whether different pipes are equally good is a much harder problem than requiring that all of the traffic in a single pipe be treated the same. The FCC would be forced to become intimately involved in interconnection disputes, overseeing who Verizon interconnects with, how fast the connections are and how much they can charge to do it. The Internet has historically been a place where anyone could post content or offer services to the same global audience, regardless of whether you're a kid from Arkansas or a multi-national corporation. But it's becoming more like cable TV where content providers have to bring loads to cash to the table before companies like Time Warner and Cablevision will bring that content to millions of eyeballs.
That could leave small-time players like Hudson stuck on the Internet equivalent of grainy, limited-audience public access TV.