Weak net neutrality won’t scare investors away from Internet startups

[Commentary] The Federal Communications Commission's proposal to let Internet service providers charge Web services for a "fast lane" probably isn't a good thing for the Internet -- even the FCC said so itself in 2010 when it warned that such payments would give ISPs "incentives to allow congestion rather than invest in expanding network capacity."

But it's important not to exaggerate the potential effects of the proposed rule.

We have seen headlines such as "The FCC’s new net neutrality proposal is already ruining the Internet" and "Net neutrality ruling scaring VCs away from investing in certain startups."

Right now, there are no network neutrality rules in place in the US. The rules the FCC issued in 2010 were overturned by a federal appeals court, and now the FCC is writing new ones that will probably be weaker than the original plan.

It may well be true that startups will have a tougher time competing against the Netflixes, YouTubes, and Hulus of the world if and when those companies purchase a faster path from ISP data centers to consumers' homes. But it's hard to believe that venture capitalists will suddenly ignore Internet startups in any great numbers.

There's still a huge opportunity for startups to upend the cable TV business model that consumers hate, venture capitalist Joel Yarmon of Draper Associates told Ars. Draper has invested in Twitch.tv, SocialCam, and other online startups.

"You'd better believe I'm looking for companies that are going to disrupt that [TV market] and you better believe that whether I fund them or not, people are going to start companies that disrupt [it] because that is an opportunity," he said.