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29 Oct

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Net Neutrality Begone: Startups, stay out of Europe (for now)

October 29, 2015 | By |

A few days ago, the EU passed legislation around Net Neutrality that in name should have guaranteed net neutrality, but in the legal text has such huge loop holes that in fact it does the opposite.

This regulation was passed very much against expert opinion, and bears a very unhealthy resemblance to the language that telco lobbyists have been pushing for a long time.

This directive is a shame, and it kicks out one of the main drivers of innovation and equality in Europe. As of the moment of signing Europe, its citizens, and its companies will be disadvantaged citizens in the digital world. Europe has just been weakened tremendously as a place for digital innovation.

Please note that the following isn’t “just” my opinion as a citizen of the EU. It’s also my professional opinion as an analyst and consultant to organizations large and small, from startup to global corporation; as Managing Director of my own company, The Waving Cat; and as chair and founder of a number of technology & innovation conferences.

It is not a fringe opinion either – for a wide range of opinions that back up this criticism please jump on over to The Economist, The Verge, WIRED, ars technica, The Guardian or any other news source.

In all this, I don’t suggest malicious intent on the side of the parliamentarians: The topics are both complex and full of technical details; Most seem to believe they did the right thing and who can blame them. However, the results stand. They’re not good.

Digital commissioner of the EU Günther Oettinger, who infamously called those defending net neutrality – after all one of the founding principles of the internet – a “Taliban-like movement” kept pointing out that this new EU directive is balanced and that exceptions to the rule would only apply to special services like autonomous cars and remote robotic surgery. And that in fact Europe now has enshrined net neutrality (which is de facto not true):

First of all, once you introduce special services at all, the basic principle of net neutrality is already out the window. Secondly, the legal text does not confirm his statements as it does not specify what kind of services get special treatment. What was nominally intended for emergency services and video conferencing can be applied to just about anything.

It’s a free pass for telcos to charge extra without delivering anything new – and in turn creates incentives for them not to build the fastest service for everyone but just for those who pay. It is, in fact, the opposite of net neutrality.

This was one of the main criticism of critics of the new directive.

Today, not a week after it the new rules were passed, Deutsche Telekom was the first to confirm the worst worries: The new directive, in the words of Deutsche Telekom CEO Timotheus Höttges “a thoroughly balanced compromise: Against our wishes, there are rules on net neutrality and thus more regulation”, they announced new offers of privileged services to startups for a share of their revenue. It’s safe to assume that other telcos are going to follow suit shortly.

Of course a special offer like this suggests that rather than offering the best possible services to begin with, startups have to pay extra to get what they would’ve gotten anyway – in this case as a share of their revenue (or as tithe, as I like to think of it).

It means extra costs for startups, which is bad. It means perverse incentives for telcos, which is bad. It also means that one of the core tenets that made the internet the great force for good it is today was weakened – in a way I’d call unnecessary.

Usually, whenever I’m asked where startup founders should set up their company I sing the praise for Berlin: They might not get the same kind of government support as elsewhere, but access to core markets in Europe combined with a great and livable city that helps attract talent seems a good place.

With this new guideline in place, I won’t be able to recommend Germany, or Europe, as unconditionally anymore. In the future, as long as the startup needs to transmit any data online, I might just have to say:

Startups, stay out of Europe.

As it is, this legislation is a boon only to telcos. I’m hoping that this legislation gets revisited, and soon.