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If we are in another tech bubble, the FCC just burst it

Column Net neutrality rules show we've learnt nothing from the past
Fri Apr 25 2014, 13:56

chris merrimanEARLIER THIS WEEK, David Einhorn at hedge fund Greenlight Capital told shareholders that the world is in the midst of the second tech bubble of the past 15 years.

"The current bubble is an echo of the previous tech bubble, but with fewer large capitalisation stocks and much less public enthusiasm," he explained, citing a lack of efficient valuation of company worth, coupled with huge price jumps after initial stock market IPOs.

"What is uncertain," he continued, "is how much further the bubble can expand, and what might pop it."

The FCC might have given us the answer.

Most of our readers will remember the dotcom bubble of the late 90s, and a fair few will remember the video game crash of 1983 that nearly killed Atari.

That bubble burst because of an influx of poor quality, uninventive copycat consoles. This one is set to be burst by high quality innovators who will be prevented from getting a foot in the door.

The US Federal Communications Commission (FCC) proposal to legitimise internet 'fast lanes' in its new net neutrality guidelines will strangle startups, pricing them out of the market by corporations paying for expedited access to customers and protecting the status quo, which it guarantees them like a free gift in the cereal box.

Twin lobbying from big businesses in Hollywood and Silicon Valley, driven in part by the rise in traffic caused by the success of media streaming services such as Netflix and Hulu, means the world's largest democracy is set to be the only country so far to, in effect, privatise the internet.

It actually makes a mockery of "the land of the free and the home of the brave". The internet is arguably one of man's greatest achievements, and yet the US will be abandoning its internet freedoms and allowing rich corporations to use their profits to smother its brave innovators.

In that kind of world, where is the next back bedroom success going to come from? The next Facebook or Fitbit, or even Microsoft or Apple? They were all startups once.

The pressure from parts of the telecoms and content industries to kill off net neutrality is killing the goose that laid the golden egg.

The silver lining, should the new rules be passed, is that the US loss will be our gain in the UK and Europe. With the EU committed to net neutrality, we can expect to see innovation flourish over here, and then be exported back to the US once it has proven its worth. It's a chance for us to lead the world.

But in reality there are no winners here. America will lose, as it will be forced to pay for that which should be free. The rest of the world will lose from the poor precedent and its reliance on US big businesses and server infrastructures that are responsible for much of the internet. Even the corporations will lose because the next generation of talent with the next big ideas will go elsewhere to use their skills.

This Saturday a team of excavators, accompanied by a TV crew, will begin digging at a concrete sarcophagus in New Mexico. Their quest is to find millions of unused Atari products, including the ET movie tie-in game, arguably the worst video game of all time. Atari buried its mistakes in 1983 as the video game crash was unfolding.

Despite the morbid curiosity I have to see what they find, it's tinged with a sadness that the buried mistakes of a previous technology bubble are being unearthed in the name of entertainment, at a time when we appear to have learned nothing from it.

The results of the dig will be broadcast in an exclusive documentary streamed on Microsoft's XBox consoles. The irony that streaming media, whose popularity has driven the ISPs' pressure for change, will parade the mistakes of the past as a circus sideshow, is perhaps the final kick in the teeth. µ


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