Month: July 2018

11 Jul 2018

Enterprise software investments may be tepid now, but they’re poised to engage

Have we reached “peak software”?

Just like the idea of “peak oil”—the hypothetical point at which global oil production could max out—you could say we’re approaching a saturation point for venture-capital investments in software companies.

Recent data from Pitchbook shows that venture investing in software companies has plateaued: The amount of VC money invested in these companies–$32 billion last year—remained roughly constant over the last four years. The actual number of venture-backed software investments, mostly for business-focused companies, has actually declined, from 4,068 in 2014 to 2,980 last year.

But software is not, in fact, a declining industry. As I explore with my colleague Neeraj Agrawal in a recent report called Software 2018, released last month, a closer look at the Pitchbook data shows that the falloff in software deal volumes is primarily in the Bay Area, where an overheated market has boosted valuations and caused some investors to temporarily pull back. Investment in other U.S. regions, and globally, is actually going up. Investment in software companies based in Europe, Canada and Australia/New Zealand, for example, was $5.4 billion in 2017, up nearly 69% from the previous year.

Perhaps more important, a number of broader, global mega trends continue to fuel software innovation today, promising more new companies and more new jobs. These trends include everything from the rise of artificial intelligence, which is pushing software into new fields like autonomous driving, to the recent corporate tax cuts in the U.S., which could free up hundreds of billions of dollars for big corporations to buy up software startups.

In Mary Meeker’s annual, consumer-focused Internet Trends report in late May. But some of the key trends we see shaping the global, mostly business-focused (or enterprise) software market may signal a rebirth.

 (Photo by Tomohiro Ohsumi/Getty Images)

Softbank: Not just for consumer companies anymore

Softbank’s new, $100 billion Vision Fund has had a huge impact on the technology industry already, given the Japanese firm’s ability to essentially play kingmaker in a given technology market by making a huge investment of hundreds of millions of dollars in one company. This, obviously, makes it extremely difficult for competitors to keep up in terms of building market share. And if a company declines Softbank’s money, there’s the potentially lethal possibility that Softbank could fund a competitor, essentially snuffing out the first company.

What’s less noticed, however, is that Softbank is investing in many business-focused software companies, not just big consumer names like Uber, FlipKart and SoFi. In the last two weeks, Softbank put $2.25 billion into GM’s Cruise business unit for autonomous driving and $250 million into secondary storage vendor Cohesity*, for example and has backed other B2B players such as construction/building-software outfit Katerra; real-estate software company Compass; and workplace chat app Slack.

With these investments and others, Softbank is accelerating the pace of growth in many key software markets and likely also dampening these companies’ IPO prospects, since companies receiving several hundred million dollars from the Japanese company face less of a financial need to go public. Softbank is essentially taking the place of an IPO.

Image: Bryce Durbin/TechCrunch

More software means less hardware, more robots

The continuing march of software innovation isn’t great for everyone—losers in this picture could include hardware vendors and people with jobs that can be automated by smart, software-powered robots. (Yes, even lawyers and doctors could be affected—it’s not just truck drivers.)

The implications of artificial intelligence on the job market, and the auto industry, have been widely discussed. Less noticed, though, are the shifting growth rates in cloud-based IT gear versus traditional IT hardware, the technology that powers large corporations and other organizations. IDC predicts that by 2020, corporate spending on cloud-infrastructure software will finally exceed spending on non-cloud IT infrastructure—meaning all those boxes inside corporate data centers from vendors like Dell, IBM, Cisco, H-P etc. Many of those companies are trying to figure out their cloud services approach to stay relevant. 

Lower taxes = more software M&A

Not everyone loves the Trump administration’s policies, but if you’re a software CEO, you might be a fan of the administration’s new tax bill. That’s because the 2017 bill could be a boon for software-industry M&A. Two key components of the new law—the reduced rate charged to companies to repatriate cash from overseas, and the lowering of the corporate tax rate to 21% from 35%–could leave many big tech acquirers with new war chests, analysts believe.

According to investment bank Qatalyst Partners, both changes could leave a group of the largest traditional tech-company acquirers with an additional $400 billion to spend, if they repatriate money from overseas. This would be enough to buy 50 leading software companies today, according to Qatalyst. We have already seen some this with the recent acquisitions of GitHub by Microsoft ($7.5B) and Adaptive Insight by Workday ($1.55B) and Q1 deals like MuleSoft by Salesforce ($6.5B) and CallidusCloud by SAP ($2.4B).

The traditional tech acquirers could be more receptive to acquisitions than ever these days, given that the easy, low-cost cloud business model has allowed a range of young tech upstarts to attack many parts of their businesses from all angles. Often, the easiest solution is for the big tech companies to buy the upstarts.

Niche is nice for software

As software transforms big, well-known corporate markets—like datacenter software, and technology for functions like human resources, sales and marketing—it is also making inroads into much more narrow industries and corporate functions. The low cost of the cloud makes it easy for every industry, from physical therapy to prison management to mortgage lending, to grow its own, customized software, usually deployed for tasks like operations and customer management. Often there are multiple firms vying for customers (and investor dollars) today in these specialized fields.

Similarly, software is fueling extremely specialized companies to serve business needs inside companies today. These include companies as varied as DocuSign, which has built a multi-billion dollar public company focusing exclusively on document signing, and Carta, which sells technology to help companies manage their financial cap tables.

Mary Meeker is right that consumer Internet trends like the rise of online wallets, subscription services for certain goods and increasing oversight of social media by regulators will have big economic implications in the years to come. But we humbly offer that business software is a pretty big economic driver too—you just have to work a little harder to figure out the implications for businesses and the markets.

11 Jul 2018

Casper opens a storefront for $25 naps

Casper is opening a storefront designed specifically for sleepy New Yorkers in need of a nap.

In The Dreamery, you can reserve nooks for 45 minutes at a time, at a cost of $25 per session. These nooks are basically giant wooden “O”s with curtains and soundproofed backing, and of course they’re stocked with Casper beds.

It’s easy to dismiss or giggle about a nap store, but it seems a lot less funny when it’s a warm afternoon and you’re having trouble keeping your eyes open at work. In fact, I will happily confess to taking advantage of the TechCrunch New York couch after a big lunch, or after a morning that started stupidly early thanks to deadlines and embargoes.

The Dreamery, of course, is a lot fancier than the office couch, as I discovered when I dropped by for a quick tour. Beyond the nooks themselves, there are also lockers to drop off your stuff, private washrooms to get cleaned up, a lounge for hanging out and drinking coffee before or after, plus additional amenities like pajamas and Heaspace “sleepcasts.” (And yes, a Casper spokesperson assured me that the sheets are changed between each session.)

The Dreamery

“The Dreamery is about making sleep and rest a part of our regular wellness routines — similar to how many people prioritize a workout class,” ​said COO Neil Parikh in a statement. ​“The concept enables us to pilot new ways of bringing better sleep to more people and to more places — whether that’s here, the workplace, airports, or beyond.”

Oh, and this new storefront is located on the same New York City block as a Casper sleep store, so it should be a pretty quick walk if love the experience so much that you want to take a mattress home.

11 Jul 2018

Uber lays off self-driving car operators in SF and Pittsburgh

Uber has let go all (about 100) of its self-driving car operators in Pittsburgh and San Francisco, Quartz reports and has been confirmed by TechCrunch. This comes after Uber officially pulled the plug on its operations in Arizona in May, following a fatal car crash involving one of its autonomous vehicles in March.

Despite how this may initially look, Uber is still working on resuming autonomous vehicle testing in Pittsburgh this summer. Those affected by the layoffs can apply for one of roughly 55 new advanced operator positions that Uber calls Mission Specialists in either San Francisco or Pittsburgh. Mission Specialists are trained for on-road and test track operations, and are responsible for giving feedback to developers. There are also other open roles that don’t involve the operation of self-driving cars.

“Our team remains committed to building safe self-driving technology, and we look forward to returning to public roads in the coming months,” an Uber spokesperson told TechCrunch.

Uber suspended its self-driving car operations in all markets following the fatal Tempe, Ariz. crash, but operators were still employed by Uber and receiving regular pay. Now, those vehicle operators get first priority at applying for a Mission Specialist role, which requires some more technical expertise.

In California, Uber decided in March not to re-apply for its self-driving car permit in the state, but Uber is still in fact intending to resume testing in the state at some point. A couple of months later, at Uber’s Elevate conference, Uber CEO Dara Khosrowshahi said he expected self-driving cars to hit the streets again within the next few months. Self-driving testing is also on hold in Toronto, but it seems that the employees behind the wheel were already in Mission Specialist-like roles.

You can read more of TechCrunch’s coverage of Uber’s autonomous driving below.

11 Jul 2018

Dirt Protocol raises $3M for a decentralized, blockchain-based approach to information vetting

The team at Dirt Protocol is using blockchain technology to create a new approach to verify information.

The startup doesn’t plan to launch its platform until later this year, but it announced today that it has raised $3 million in seed funding from General Catalyst, Greylock, Lightspeed, Pantera Capital, Digital Currency Group, SV Angel, Avichal Garg, Elad Gil, Fred Ehrsam Linda Xi and others.

Founder Yin Wu previously created lockscreen startup Echo (acquired by Microsoft in 2015) and laundry startup Prim. She told me that after becoming interested in the cryptocurrency industry, she was concerned about the fear, uncertainty and doubt around coin offerings — after all, we’ve covered several ICOs where companies appear to have disappeared with people’s money.

“The market today is still unregulated, with high incentive for people to spread misinformation for personal gain,” Wu said.

Her solution? Build databases where anyone can contribute information, but where they have “skin in the game,” so there’s a financial penalty if they’re not truthful.

Dirt Protocol isn’t trying to create a single, definitive data repository, but rather to provide the tools for developers to build their own databases. Those databases might focus on things like ICOs (providing information like the team, the investors and the number of tokens in circulation), or online publishers (to help advertisers avoid bots), or professional listings and membership lists.

dirt protocol

There will be a single token that works across the Dirt platform. Users will need to stake tokens to add new information to databases, to challenge an entry or to vote in disputes — you’ll be penalized (by losing tokens) for adding misinformation and rewarded for weeding out misinformation.

While that should create an economic incentive for people to not just avoid inaccuracies but also to actively remove them, it doesn’t fully address the question of determining the truth — who, ultimately, gets to decide whether an entry is accurate? Wu said Dirt will support a variety of different “governance structures,” whether that’s centralized moderation, free-for-all voting or a system where votes are weighted by reputation.

Wu also suggested that the system is designed in a way to discourage concerted misinformation campaigns. For one thing, hoaxers will probably want to target the more popular databases, but those are also the ones that should attract more active moderation. Plus, she said, “The more valuable the network, the more people are contributing information, the more expensive [it becomes to contribute].”

A recurring theme in our conversation is the advantage of a “decentralized” approach to data verification. Wu said that isn’t always the right way to go, but she said it makes sense when there’s a big platform with the centralized vetting that works too slowly, or in situations where “you can’t trust the curator” of information, or with data sets that are just proprietary and expensive to access — while you have to buy tokens to contribute information, Wu said that Dirt Protocol data sets should be freely accessible, and “no single party owns that information and can shut off access.”

In a similar vein, she said Dirt Protocol isn’t currently focused on making money. Ultimately, the business model will probably involve some combination of giving the software away for free and charging for additional services.

“We’re focused on creating this open data set that anyone can use,” Wu said. “If we achieve that goal, I’m confident that some monetization will arise.”

11 Jul 2018

Broadcom acquires CA Technologies for $18.9B in cash

Broadcom, the massive semiconductor supplier you may remember from its failed attempt to acquire Qualcomm, today announced that it has reached a definitive agreement with CA Technologies, a major IT management software and solutions provider. The price of the acquisition is $18.9 billion in cash. CA’s shareholders will receive $44.50 per share, a 20 percent premium over the closing price of the company’s stock today.

It’s a bit of a surprise to see chip manufacturer Broadcom acquire a major software and services company. “This transaction represents an important building block as we create one of the world’s leading infrastructure technology companies,” Broadcom CEO and president Hock Tan explains in today’s announcement. “With its sizeable installed base of customers, CA is uniquely positioned across the growing and fragmented infrastructure software market, and its mainframe and enterprise software franchises will add to our portfolio of mission critical technology businesses. We intend to continue to strengthen these franchises to meet the growing demand for infrastructure software solutions.”

This comment doesn’t exactly explain the rationale behind today’s acquisition, but Broadcom is clearly trying to diversify its offerings. Earlier this year, the company walked away from its proposed hostile takeover of Qualcomm after the Trump administration blocked it. At the time, Broadcom was willing to pay $117 billion for Qualcomm, which would have greatly extended the company’s semiconductor business. Today’s move sees Broadcom enter a completely new business.

The company expects the acquisition to close in the fourth quarter of 2018. It’s unlikely that Broadcom will face any major headwind from Washington this time around.

11 Jul 2018

Supreme Court nominee Brett Kavanaugh’s brutal education in net neutrality

DC Circuit Court Judge Brett Kavanaugh has been nominated for the position of Supreme Court Justice, and on this occasion I think it warranted that we revisit in detail the sound intellectual thrashing this man suffered at the hands of his colleagues just last year on the topic of the internet and net neutrality. Because Kavanaugh was very, very wrong then and gives every indication that he will take his ignorance unapologetically to the highest court in the land.

To set the scene: In 2015 the United States Telecom Association sued the FCC, alleging the Open Internet Order that passed earlier that year, establishing net neutrality as we know it — or rather, knew it — was illegal.

This highly watched case was heard late in 2015 and the decision was issued six months later, in June of 2016. DC Circuit Judges Srinivasan, Tatel and Williams ruled against the telecoms, essentially finding that the FCC was well within its jurisdiction in establishing net neutrality rules to begin with, and also that the rule as written was lawful.

Unsatisfied with this ruling, the USTA petitioned to have the case reheard “en banc,” meaning with all active circuit judges present. This petition was denied, primarily because the Open Internet Order was by that point in peril of replacement, and new deliberations would as likely as not soon be rendered moot.

But two judges had dissenting opinions to bruit, and so the court published them alongside the denial — though unfortunately for them Srinivasan used the same opportunity to demolish their arguments. It would have been better for them, in retrospect, if they had remained silent, rather than raising their profound ignorance like a dirty flag to be mocked and pointed at forever — as we do here today.

I covered this disaster in less detail then, because it was only one case and news story among many having to do with net neutrality, and having no official consequences (the motion, after all, was denied) it was only worth touching on in brief. But now, with Kavanaugh ascendant, I feel it is important to resurface his late folly as evidence of his unsuitability for the position to which he has been nominated. His dissent deeply misinterprets multiple Supreme Court decisions, demonstrates a profound lack of understanding about how the industry works and produces absurd results if taken to its logical conclusions.

I’ll present Kavanaugh’s arguments in good faith, since they were offered that way, and then summarize their point-by-point demolishment by Srinivasan, the FCC or common sense.

Wrong on jurisdiction

Kavanaugh’s first argument is that the FCC’s rule is illegal to begin with because it does not have authority to issue it. He cites what he calls the “major rules” doctrine, which is that an agency like the FCC requires clear and explicit permission from Congress to issue “decisions of ‘vast economic and political significance.’ ”

This makes perfect sense — there have to be limits so serious questions of policy aren’t defined by a small group of commissioners. He writes:

If an agency wants to exercise expansive regulatory authority over some major social or economic activity–regulating cigarettes, banning physician-assisted suicide, eliminating telecommunications rate-filing requirements, or regulating greenhouse gas emitters, for example–an ambiguous grant of statutory authority is not enough. Congress must clearly authorize an agency to take such a major regulatory action.

Congress has never enacted net neutrality legislation or clearly authorized the FCC to impose common-carrier obligations on Internet service providers.

As this is primarily a question of authority and precedent and not technology, I won’t go too into detail here. If you’re curious, this article goes into the various court and agency decisions that led to the 2015 rules.

In brief, however, the question comes down to whether Congress has authorized the FCC to make a decision like that made in the 2015 rules: to classify broadband providers as common carriers and exert its powerful Title II authority over them. Srinivasan explains that it most certainly is:

We have no need in this case to resolve the existence or precise contours of the major rules (or major questions) doctrine described by our colleagues. Assuming the existence of the doctrine as they have expounded it, and assuming further that the rule in this case qualifies as a major one so as to bring the doctrine into play, the question posed by the doctrine is whether the FCC has clear congressional authorization to issue the rule. The answer is yes. Indeed, we know Congress vested the agency with authority to impose obligations like the ones instituted by the Order because the Supreme Court has specifically told us so.

And it told us so in a 2005 decision known as Brand X — which Kavanaugh himself cites. In Brand X it was decided that the FCC could in fact define DSL as telecommunications but cable internet as an information service (again, the piece above has more context for these terms).

Kavanaugh argues that Brand X shows that the 1996 Telecommunications Act, from which the FCC derives its authority, is ambiguous in its definition of internet services. This ambiguity, he says, means there is no specific mandate from Congress to create a major rule such as net neutrality.

“That analysis,” Srinivasan explains in his enjoyable prose, “rests on a false equivalence: it incorrectly equates two distinct species of ambiguity.”

“Whereas Brand X found statutory ambiguity on whether ISPs are telecommunications providers, the decision found no statutory ambiguity on whether the FCC gets to answer that question,” he writes (emphasis mine). And once the Supreme Court decides something is legal, he concludes, “our inquiry is over.” Ouch.

It’s important to note here that Brand X isn’t some obscure case — it’s extremely influential and well-studied. Kavanaugh’s interpretation of it is exceptional in its backwardness, attempting to wring the complete opposite conclusion from what has been accepted for more than a decade. This kind of poor reasoning isn’t the kind you expect to find in a Supreme Court Justice.

Wrong on tech and wrong on free speech

But the question of jurisdiction is only prefatory to the main event, in which Kavanaugh truly embarrasses himself.

“Imposing common-carrier regulations on Internet service providers violates the First Amendment,” he writes. And to be clear, he’s talking about the First Amendment rights of the internet service providers. He cites the Supreme Court again, this time two cases from the ’90s involving Turner Broadcasting.

Some readers may already be exhibiting signs of skepticism. Turner Broadcasting? In the ’90s? Wasn’t that a completely different era and industry? It was, but Supreme Court decisions can be surprisingly broad and durable; precedents may stand for decades, if not centuries. So let’s hear Kavanaugh out, shall we?

The cases, he explained, had to do with Turner Broadcasting challenging “must-carry” rules that required cable operators to carry certain programming — local stations, for instance. Turner argued that the government requiring it to broadcast certain information infringed on its right to free speech. And indeed, although the court ultimately decided that the must-carry rules should be enforced, it was also acknowledged that Turner does indeed exert free speech rights when it decides what content to broadcast or not broadcast.

“The First Amendment’s basic principles ‘do not vary when a new and different medium for communication appears,’ ” he writes, “Although there of course can be some differences in how the ultimate First Amendment analysis plays out depending on the nature of (and competition in) a particular communications market.”

Starting from this solid ground, Kavanaugh immediately drifts into the hard vacuum of ignorance. Please remember that the following was written by someone nominated to be a Justice of the Supreme Court. I really can’t condense it because every sentence has, as Srinivasan might put it, a distinct species of ignorance (emphasis mine).

Here, of course, we deal with Internet service providers, not cable television operators. But Internet service providers and cable operators perform the same kinds of functions in their respective networks. Just like cable operators, Internet service providers deliver content to consumers. Internet service providers may not necessarily generate much content of their own, but they may decide what content they will transmit, just as cable operators decide what content they will transmit. Deciding whether and how to transmit ESPN and deciding whether and how to transmit ESPN.com are not meaningfully different for First Amendment purposes.

Indeed, some of the same entities that provide cable television service – colloquially known as cable companies – provide Internet access over the very same wires. If those entities receive First Amendment protection when they transmit television stations and networks, they likewise receive First Amendment protection when they transmit Internet content. It would be entirely illogical to conclude otherwise.

Setting aside the unprofessional and unjustified bravado that concludes this breathtaking little salvo, it really would take hours and thousands of words to explain satisfactorily, to Kavanaugh himself, all the different ways he is incorrect. I’ll attempt to satisfy the demands of posterity and brevity in summarizing them.

1. Packet-based internet service is fundamentally different from cable broadcasting, even if the latter has converted to packet-based transmission over the last decade. What they have in common is that they are transmitted as electrical impulses, sometimes over wires. It’s akin to the level of similarity between a telephone call (mostly also packet-based now) and a cable television signal.

2. The idea that because things are transmitted via the same medium, they are legally identical, is so mystifyingly naive and backwards that I’m surprised to see it in a legal document of any kind, let alone a judge’s official dissent in a major case. Just as a basic counter-example, what about radio waves? They are used in countless different capacities by countless different devices, many of which are differently regulated, subject to different laws, possessed of different capabilities and so on. What about DSL? It runs over telephone lines; should it be regulated like phone calls?

3. Outside some very basic and well-understood limits, internet service providers do not decide what content to deliver to users. And in many cases, thanks to encryption, they are totally unable to track (and therefore unable to control) what data they are providing. If all the traffic on the internet was encrypted and ISPs only transmitted data that was totally unintelligible to them, they would still be able to advertise and provide the exact same, highly valuable service to their users.

Kavanaugh does touch on, and dismiss, some of this as follows:

[T]he FCC argues (and the panel agreed) that Turner Broadcasting does not apply in this case because many Internet service providers do not actually exercise editorial discretion to favor some content over others… I find that argument mystifying.

It may be true that some, many, or even most Internet service providers have chosen not to exercise much editorial discretion, and instead have decided to allow most or all Internet content to be transmitted on an equal basis. But that “carry all comers” decision itself is an exercise of editorial discretion. Moreover, the fact that the Internet service providers have not been aggressively exercising their editorial discretion does not mean that they have no right to exercise their editorial discretion.

We have already established, of course, that ISPs not only do not decide what content to transmit, but that in many (approaching all) circumstances, it cannot do so. But beyond this elementary oversight, Kavanaugh has also failed to comprehend, or perhaps even to read, the rule he is railing against.

Because his exact argument is preemptively dealt with in the text of the rule itself, which in the first place defines entities affected by the rules as advertising and providing “the capability to transmit data to and receive data from all or substantially all Internet endpoints” — a definition that precludes editorial control. And if that’s too ambiguous for Kavanaugh, several paragraphs are dedicated to addressing his concerns in detail. Some excerpts:

As a factual matter, broadband Internet access services are nothing like the cable service at issue in Turner I.

Cable operators… both engage in and transmit speech with the intent to convey a message either through their own programming directly or through contracting with other programmers for placement in a cable package.

Broadband providers, however, display no such intent to convey a message in their provision of broadband Internet access services—they do not engage in speech themselves but serve as a conduit for the speech of others.

There’s more (paragraphs 544 to 549 or so) in the Open Internet Order if anyone (for instance, Judge Kavanaugh) is curious. And in case you are worried that these definitions and assertions have been found wanting by others or challenged by the parties affected, allow Srinivasan to set your mind at ease:

An ISP has no First Amendment right to engage in those kinds of practices [i.e. editorial content control]. No Supreme Court decision suggests otherwise. Indeed, although the two dissenting FCC Commissioners objected to the agency’s adoption of the rule on multiple grounds, neither suggested the rule poses any First Amendment issue. Similarly, the principal parties challenging the Order in this court, who collectively represent virtually every broadband provider—including all of the major ISPs—bring no First Amendment challenge to the rule.

Considering especially the length and thoroughness with which now-Chairman Ajit Pai excoriated the original rule, it may be expected that if there were free speech considerations, he would have brought them up. Likewise the many ISPs and trade organizations, which would have loved to have something like Constitutional grounds to challenge the order.

The only ones who bring up the issue are Kavanaugh and a tiny ISP in Texas called Alamo, which wanted to offer a “family-friendly” edited subset of the internet to its customers.

Funnily enough, this is permitted! And by publicly stating that it has no intention of providing access to “substantially all Internet endpoints,” Alamo would exempt itself from the net neutrality rules! Yes, you read that correctly — an ISP can opt out of the rules by changing its business model. They are, to Kavanaugh’s evident bafflement, essentially voluntary. But here’s Srinivasan again enlightening his colleague:

There is no need in this case to scrutinize the exact manner in which a broadband provider could render the FCC’s Order inapplicable by advertising to consumers that it offers an edited service rather than an unfiltered pathway. No party disputes that an ISP could do so if it wished, and no ISP has suggested an interest in doing so in this court.

In the event that an ISP nonetheless were to choose to hold itself out to consumers as offering them an edited service rather than indiscriminate internet access—despite the potential effect on its subscriber base—it could then bring itself outside the rule. In that sense, the rule could be characterized as “voluntary,” [as Kavanaugh describes it], but in much the same way that just about any regulation could be considered voluntary, insofar as a regulated entity could always transform its business to such an extent that it is no longer in the line of business covered by the regulation.

Wrong on the slippery slope

Lastly, not content to be wrong on several Supreme Court cases, the technical basis for the industry he is writing about or the rule itself he is suggesting is unconstitutional, Kavanaugh felt the need to offer, as a rancid cherry on top, a dose of FUD suggesting that if this rule (which as he sees it permits government tampering with free speech without evidence of monopoly) were lawful, the government could move on to regulating the speech of edge providers from Google and Facebook to this website:

If market power need not be shown, the Government could regulate the editorial decisions of Facebook and Google, of MSNBC and Fox, of NYTimes.com and WSJ.com, of YouTube and Twitter. Can the Government really force Facebook and Google and all of those other entities to operate as common carriers? Can the Government really impose forced-carriage or equal-access obligations on YouTube and Twitter? If the Government’s theory in this case were accepted, then the answers would be yes. After all, if the Government could force Internet service providers to carry unwanted content even absent a showing of market power, then it could do the same to all those other entities as well.

The vast and numerous differences between a broadband internet provider and a service like Facebook, let alone a press outlet like The New York Times, are perhaps unsurprisingly lost on Kavanaugh. Once more Srinivasan explains it concisely:

Those companies evidently do not share our colleague’s concern—all but one is a member of a group that supports the rule in this court.

That may be in part because those companies, in contrast with broadband ISPs, are not considered common carriers that hold themselves out as affording neutral, indiscriminate access to their platform without any editorial filtering.

The real slippery-slope concerns run in the reverse direction. Under our dissenting colleague’s approach, broadband ISPs would have a First Amendment entitlement to block and throttle content based on their own commercial preferences even if they had led customers to anticipate neutral and indiscriminate access to all internet content.

That’s the last thing on the long list of things about which Kavanaugh needed to be schooled in order to issue even a reasonably incorrect opinion on this subject.

This has been a rather long exposition, but I thought it was important that everyone see, in Kavanaugh’s own words, exactly how poor of a study he is, at least as far as this issue is concerned, and how little he seems to think through both his own arguments and those of others.

As Srinivasan notes, what Kavanaugh essentially suggests is that, against the explicit findings of several Supreme Court decisions, the regulators, and the regulated industry, internet providers should be granted free speech rights that allow them to arbitrarily limit the free speech of their users.

Is this the type of twisted logic, inadequate research and shallow understanding that we want in a Supreme Court Justice? I think not. Kavanaugh’s brash and embarrassing failure on this case alone is in my opinion generates sufficient doubt regarding his competence that his nomination should be denied.

11 Jul 2018

Come see Uber CEO Dara Khosrowshahi at TC Disrupt

In the days of Uber 1.0, the ethos seemed to be about doing all the wrong things. Now, with former Expedia CEO Dara Khosrowshahi at the helm, Uber is clearly on its way to becoming a sort of Expedia for transportation. Though, Khosrowshahi has previously likened Uber’s business to aligning more with the idea of an Amazon for transportation.

At TechCrunch Disrupt San Francisco in September, Khosrowshahi will join me to discuss Uber’s big plan to own the entire transportation experience for people, the highs and lows of his first year on the job, Uber’s upcoming initial public offering and much more.

Under Khosrowshahi’s leadership, Uber officially became a multi-modal transportation platform with its acquisition of JUMP Bikes for about $200 million, the launch of UberRENT and a public transportation partnership with Masabi.

Oh, and Uber is also working on electric scooters, as well as flying cars via its Elevate program. Just like residential and buildings have gone three-dimensional, Khosrowshahi said at a tech conference in May, “you’re going to have to build a third-dimension in terms of transportation.”

For Uber, Elevate is its “big bet” on that third-dimension of transportation, he said. The big plan with all of these modes of transportation — whether that’s bike sharing, electric scooter sharing, ride sharing, flight sharing or whatnot — is to become a multi-modal transportation service.

Under the leadership of Khosrowshahi, Uber also seems to be moving into an era where the company works with governments, instead of in spite of them. This is quite the 180 for Uber. Before the days of Khosrowshahi, Uber was reluctant to share data with cities. Now, Uber is expanding Movement, a platform that anonymizes and aggregates Uber data to map travel times, to 12 new cities across five continents. The intent is to help urban planners, local leaders and civic communities make more informed decisions.

While Khosrowshahi is making positive moves in a business direction, it’s worth noting the company is still in need of a chief financial officer, and there have been some high-level departures that have continued under his leadership. In June, for example, Uber’s chief brand officer, Bozoma Saint John, left a little after one year of joining the company.

At the time, Saint John told me that while “nothing horrible or terrible happened,” Uber’s corporate culture has not “righted itself 100 percent.” At Disrupt, Khosrowshahi and I will also discuss Uber’s corporate culture and what it’s going to take to fully recover from its 2017, which entailed reports of sexual harassment, mismanagement and a toxic work environment. Then, just this month, Uber’s chief people officer, Liane Hornsey, resigned following an internal racial discrimination investigation.

This should go without saying, but there will be a lot to discuss. Tickets to Disrupt SF, which runs September 5-7, are available here.

11 Jul 2018

YouTube TV goes down during the World Cup

Croatia scored and the score is now 1-1 against England. If you’re a YouTube TV subscriber, you might not know that because YouTube TV has been down for around 40 minutes. Update: It’s back just in time for extra time.

People who pay $40 a month to subscribe to live TV on YouTube are arguably mad. One of the main reasons YouTube TV makes sense is that it lets you watch live sports. You won’t find any soccer match on Netflix or HBO Now after all.

YouTube has tweeted about the issue, but this isn’t a quick downtime. As Owen Williams tweeted, if Google can’t keep the live stream up during the World Cup, it’s unclear which company can do it.

Maybe our live-streaming future is not ready yet.

11 Jul 2018

Space tech has outpaced space law, and we’re at risk of killing innovation

“Disruption” is a term (over)used in the technology world to describe some development or product that is inherently good. The formal definition of the term, however, is at odds with its casual use: a disruption is a ‘disturbance or problem that interrupts an event, activity, or process.’ Right now, space tech is currently experiencing both flavors of disruption.

Reliable estimates indicate that, within the next 5-7 years, the inhabitants of the Earth will launch more satellites into space than have been launched in the history of our planet up until now. This is a disruption in the best sense, however, there’s a serious problem: we’re at a very real risk of crushing our own excitement and stalling our progress towards the stars. Space policy hasn’t been high on our government’s to-do list, and this unfortunate regulatory neglect means that today’s most innovative companies’ plans are being disrupted by stuffy, antiquated rules and regulations.

Image: Bryce Durbin/TechCrunch

Existing space policy

For those who haven’t recently brushed up on existing space policy, a widely adopted international agreement called the “Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space including the Moon and Other Celestial Bodies” was negotiated, signed, and drafted in 1967 by the United Nations. Commonly referred to as The Outer Space Treaty, the agreement dictates that each nation be responsible for all and any of the space activities originating from their nation — whether they’re conducted by citizens, companies, or the government itself. Each must also maintain full jurisdiction and control over all space objects originating from their country.

It is noteworthy that, at the time the treaty was signed, nobody could fathom that commercial companies might want anything to do with outer space, let alone launch their own satellites

Permits… and the FCC

OK, so the US government is responsible for our space activity and space objects, right? That means it somehow needs to know — and track — anyone and anything that goes up, and this is no small task. It’s not like we can perform mandatory vehicle inspections when satellites cross the Karman Line, marking the border between atmosphere and space. So how do we track them? By issuing permits before they launch. And while we’re talking about word definitions, ‘permit’ loosely translates to ‘huge government bureaucratic morass.’

The current system in place involves getting permission from the FCC, which is strange because when you think ‘satellites’, I highly doubt that the FCC comes to top-of-mind as the appropriate expert agency. The logic goes that if you’re planning to launch an object into space, then surely you’re planning to communicate with it somehow — whether by beaming up commands or beaming down data — and this requires the use of radio frequencies, which are coordinated by the FCC. If you’re going to be making a call to the FCC anyway, then this might be an appropriate place to conduct a ‘vehicle inspection’ and put a permit sticker on the back of your satellite.

The problem is that the FCC now becomes the gatekeeper for all things related to satellites, extending to many checkboxes that have nothing to do with radio frequencies. For instance, the FCC requires all permit applicants to prove that their satellite won’t cause injury or harm when/if it re-enters the Earth’s atmosphere. You may not be surprised to learn that such a calculation involves more than a couple of dubious assumptions and some fuzzy math, and perhaps another agency (ahem, NASA?) might be better suited to checking this.

Among the many checkboxes, the FCC also requires launch permit applicants to prove that their satellites will be ‘trackable’ in space so that they can be monitored ostensibly, to foresee potential collisions with other satellites. It was this requirement that disrupted satellite manufacturer Swarm Technologies, who applied for FCC permission to launch their tiny SpaceBee satellites to disrupt the Internet of Things from space (see what I did there with ‘disruption?’). Now, these satellites are smaller than pretty much anything ever put into orbit — an enviable innovation! — and so the FCC determined that they might not show up on the usual radars used to track satellites. Permit denied. Which is confusing, since smaller satellites have been permitted and launched by the same agency.

Consequences for startups

The logical path forward is to appear before the FCC with hat in hand and appeal for a legitimate permit. This is the way things have been done in the past, when it took 10 years for giant aerospace companies to build a satellite; there was plenty of time to wait for bureaucracy.  But put yourself in the seat of a disruptive startup who is building an entire small satellite in a few months: your company is consuming venture cash at a steady burn rate towards zero and you need to demonstrate your tech in space to get your next pile of cash. If you take a number in the FCC lobby and wait your turn, then the likely outcome is that your permit will be delivered to the address of a bankrupt company.

Faced with the prospect of this, there’s no doubt that ambitious and bold startups will be tempted to push the boundaries and see just how severe the penalties will be for operating sans permit (and in fact, that seems to be the path taken by the Swarm team). At this point, nobody really knows what the real consequences are. In the worst case, they will destroy the entire business of the startup that dares, but then bankruptcy might have been pretty much guaranteed anyway, based on the undetermined time of the FCC appeal process.  An interesting alternative exists: a company can try to export their satellite to another country and try their hand in that country’s space permitting process. Needless to say, federal regulations that encourage US companies to take their tech offshore are not how we want to do business, and oh-by-the-way satellite export laws are such a mess they make the launch-permitting process look like buying an entrance pass to a national park in comparison.

Archinaut, a robotic system developed by Made in Space, can manufacture, assemble and repair satellites, spacecraft or other large equipment in zero gravity.

Fixing a broken system for the new space era

How do we fix a broken system? You can bet we won’t alter international treaties any time soon, so it’s safe to assume we’re stuck with what’s set forth by The Outer Space Treaty. One foreseeable option by the government would be to put stronger teeth into existing policies and laws, so that devastating penalties are issued to any renegade companies. The effect of this would be predictable: emerging startups with exciting new ideas will be stifled, while the corporate giants of the space industry’s old guard will remain untouched. On the other hand, the government could choose to look the other way and merely slap wrists, but this could invite even more dangerous and egregious violations down the line that would prove hazardous to the responsible space actors.

Because of the Outer Space Treaty, the US will always be required to monitor and track all satellites from our nation. Concepts like the space-equivalent of the FAA have been proposed, as have mandatory radio-beacons on each satellite, self-identifying them like ships at sea.  So far, this is all just chatter and nothing has been enacted. In the meantime, the New Space renegades will continue to explore the boundaries by pushing them, while the old guard will express outrage over the insolence of the disrespectful youngsters. It may be that the only solution is for the new explorers to self-organize and self-police to bring order to the chaos.

In any case, we are in dire need of a forward-thinking approach to space policy and regulation that includes and goes beyond just Earth-orbiting satellites. If our government continues to ignore the need for comprehensive space policy that is expandable to pervasive commercial activity, it’s just a matter of time before a major civil, commercial, or international dispute occurs in space that could prove legally catastrophic.

11 Jul 2018

Catch the next wave of tickets to the TechCrunch Summer Party at August Capital

Our 13th annual TechCrunch Summer Party at August Capital takes place on July 27, and we’re happy to announce we’ve just released a fourth batch of tickets to this fun Silicon Valley tradition. These tickets have been moving at a brisk pace, so if you’d like to join us in Menlo Park, be sure to buy your ticket today.

Come and spend a relaxing evening of cocktails and conversation with your peers. Celebrate your shared entrepreneurial spirit in a beautiful setting (gotta love that deck) at August Capital. Meet and greet new, interesting and influential people — who might one day make your dreams come true.

We love to tell the story of when Box founders Aaron Levie and Dylan Smith met one of their first investors, DFJ, back when our founder, Michael Arrington held these TechCrunch parties in his Atherton backyard. You just never know who you’ll meet at the TechCrunch Summer Party at August Capital.

Check out the party particulars:

  • July 27, 5:30 p.m. – 9:00 p.m.
  • August Capital in Menlo Park
  • Ticket price: $95

If you’re a founder of an early-stage startup, you might consider another way to network at this event. Get a Summer Party demo table and showcase your early-stage startup at this legendary soiree. In addition to the demo table, you get four attendee tickets. Learn more about demo tables here.

Food, drink, conversation, possibility — it’s all on the menu at the TechCrunch Summer Party. And it wouldn’t be a TechCrunch event without door prizes, including TechCrunch swag, Amazon Echos and tickets to Disrupt San Francisco 2018.

Tickets are available on a strictly first-come, first-served basis, so don’t put it off any longer — buy your ticket today.