In net neutrality dispute, investors come out in support of small companies

The investors have written to the US FCC saying startups would be hurt by charges for preferential access

Venture capitalists and angel investors are unhappy with net neutrality rules proposed by the U.S. Federal Communications Commission, they said in an open letter published Thursday.

The letter, signed by about 100 investors, stated that if established companies are able to pay for better access speeds or lower latency than newcomers, then the Internet will no longer be a level playing field.

The controversy over the rules deepened as two FCC commissioners from different sides of the political spectrum asked that a May 15 vote on the new rules be postponed.

FCC Chairman Tom Wheeler is planning new net neutrality rules that according to some reports could in some cases allow providers to charge Web services for priority, fast lane traffic arrangements. The new rules are being proposed after an appeals court threw out an earlier version of the rules in January.

Over 100 tech companies including Google, Microsoft, eBay, Facebook and Amazon.com also wrote Wednesday to the FCC to warn of "grave consequences" if it fails to protect the openness of the Internet. The FCC intends to propose rules that would allow phone and cable Internet service providers "to discriminate both technically and financially against Internet companies and to impose new tolls on them," their letter said, citing recent news reports.

"Entrepreneurs will need to raise money to buy fast lane services before they have proven that consumers want their product," wrote the investors, who said that their investment decisions had been based on the certainty of a level playing field and of assurances against discrimination and access fees from Internet access providers.

If the rules come into effect, investors will demand more equity from entrepreneurs to compensate for the risk, according to the letter.

"We need simple, strong, enforceable rules against discrimination and access fees, not merely against blocking," the investors wrote.

FCC Commissioner Jessica Rosenworcel, a Democrat, asked Wednesday that Wheeler postpone the consideration of the rules by at least a month because of the public debate on it. Cutting off the period of public comment, after a so-called Sunshine Period kicks in this week, would also be a mistake, she said. "So again, at a minimum, we should delay the onset of our Sunshine rules," Rosenworcel said in a speech to Chief Officers of State Library Agencies.

Rosenworcel said she had "real concerns" about Wheeler's proposal and was glad that all options were still up for discussion, including "what a 'commercially reasonable' Internet fast lane looks like."

Another commissioner, Ajit Pai, a Republican, on Thursday said he favored postponing the vote to the next week as he had "grave concerns" about the chairman's proposal on Internet regulation.

The FCC will extend the public comment period to May 14, it said Thursday, but maintained its plan to consider the new Internet rules at a meeting on May 15.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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