VC Leery of Net Neutrality Ruling’s Impact on Startups

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Venture capitalist Fred Wilson at New York’s Union Square Ventures worries that the recent federal court ruling striking down the FCC’s net neutrality rules could put a kibosh on tech startups. In a blog post, he describes the ruling as a “nightmare” and predicts that the “telcos will pick their preferred partners, subsidize the data costs for those apps, and make it much harder for new entrants to compete with the incumbents.”

Wilson offers up a couple of mock pitches and what a VC might say in the way of the decision. For example:

Entrepreneur: I plan to launch a photo sharing service where the faster your friends like the photos, the faster they disappear. It’s gamified social snapchat.

VC: Well since Facebook, Instagram, Twitter, and Snapchat have paid the telcos so the photos that are served up in their apps don’t use up any of the data plan, I worry that users won’t want to use any other photo sharing services since they will have to pay high data costs to use them. We love your idea and would have funded it right here in the meeting back in the good old days of the open Internet, but we can’t do that anymore. We are passing.

Last week, the U.S. Court of Appeals for the District of Columbia sided with Verizon and basically reversed the FCC rules requiring open access to the Internet. The ruling gives broadband Internet service providers the ability to charge different rates based on access speed, or even block Internet traffic. The FCC says it will likely appeal the ruling.