Expanding tech talent, intellectual property protection, AI and automation, and net neutrality.
The technology sector has been on edge, waiting to see if the new administration will make the reforms needed to spur innovation and startup activity, or whether it will make policy changes that end up stifling it. There are a few key areas of tech policy that are top of mind for tech CEOs and other industry participants, including four key issues: Expanding tech talent, intellectual property protection, AI and automation, and net neutrality.
Ever since the last election cycle, there has been some optimism that regulations inhibiting startups will be modernized, now that there is theoretically less gridlock in government and an unconventional president ready to make drastic reforms. A recent study by TechNet found that if federal, state and local policymakers put in place a litany of pro-startup policies, one million jobs could be added to the U.S. economy each year, in both Silicon Valley and in emerging startup hubs across the country.
The potential of the technology industry in the U.S. is restrained by governance systems that grasp onto the status quo, out-of-date government programs and the protection of established interests that often lobby against disruptive innovation to stall their impending decline. After all, large companies benefit from regulations and the tax code due to the high barriers to entry it creates. As the cliché goes, there are no lobbyists for startups that do not yet exist.
Further, according to the World Bank, the U.S. now ranks 46th on the ease of starting a new business — after Afghanistan. The answer to this is less regulations, not more, and that remains one of the positive elements of this political cycle as the U.S. aspires to move beyond the era of 0-2 percent annual GDP growth to 4 percent or higher.
Expanding tech talent
Expanding access for talented programmers to come to the U.S. is at the top of the list of issues for many technology companies. As such, it is believed that the major technology companies are reserving much of their political capital to fight for expanded H-1B program for high-skilled workers, with several executives recently sharing their views on the topic in one-on-one meetings with the president.
In a “Tech Week” document circulated at the White House on June 20, the administration posed the question: “How can the H-1B visa program be modified to ensure that visas are issued to the highest-skilled and highest-paid workers, while also eliminating examples of the program’s abuse?” If President Trump (as well as Congress) listens to the recommendations of Silicon Valley and policymakers on both sides of the aisle, we should expect an increased number of H-1B visas, an expected STEM-focused green card for those with master’s degrees and above, and fewer obstacles overall for employers seeking to hire tech talent.
According to the U.S. Bureau of Labor Statistics, tens of thousands of technology jobs go unfilled due to inability to meet the high demand with the existing labor pool. However, there was a setback in July, when the administration delayed the rollout of the International Entrepreneur Rule, which would have granted foreign entrepreneurs entry for 30 months.
Intellectual property protection
Today’s patent policy favors the patent trolls and disfavors scientific progress, often in a way that gives large companies with resources — and also bad actors — a huge advantage over the startups doing much of the innovation. Today’s patent system is a far cry from its constitutional purpose of “promoting the progress of the sciences and useful arts.” In many cases, it has arbitrarily sanctioned legal monopolies on things that are merely common sense (i.e., Apple’s patent on rounded rectangles, or a vague patent on Wi-Fi inside of coffee shops). Additionally, the tech industry is pushing for fixing the DMCA, revising statutory damages and fair-use laws, and shortening copyright terms overall, among other options for reforming the patent and copyright system.
AI and automation
How can technology be a vehicle of job creation and not job replacement? That is the proper question to ask. Concerns about increased automation, innovation and disruption of old-school industries causing job displacement and further inequality are certainly real. However, this is no different from any other time of transformation. In 1900, agriculture, construction, manufacturing and mining composed 70 percent of employment. Those jobs have now been replaced by better ones, as well. The pace of change may be increasing, and this has caused many to feel unmoored, partially leading to today’s global populist movement. AI could also enable self-improving regulations that close the gap between the pace of regulatory response and the pace of technological change, in real-time cost-benefit evaluations.
The FCC’s new Republican leadership is not likely to enforce net neutrality rules against zero-rating, which prevented exempting certain internet content — streaming music and video — from customer data caps. The premise of net neutrality is that content would be treated equally on a platform-neutral basis, as opposed to a “fast” lane for companies willing to pay higher interconnection fees. Net neutrality as defined by the FCC “protects and maintains open, uninhibited access to legal online content without broadband Internet access providers being allowed to block, impair, or establish fast/slow lanes to lawful content.”
The FCC did rule in favor of net neutrality in 2015; however, current FCC Chairman Ajit Pai is arguing to end internet service providers’ status as common carriers (on par with utilities), and instead “reestablish” market forces in regulating the internet. His view is that this would increase infrastructure investment and innovation among the aging broadband networks. This is not surprising, given President Trump’s view on this as a “top-down power grab,” drawing analogies to the FCC’s Fairness Doctrine.
The FCC also recently ruled that AT&T and Verizon would now be allowed to let their own video services stream without a cap. Nonetheless, ISPs have started to become less concerned about the debate, as usage patterns would likely not change and many of them are diversifying into media and other revenue streams.
Jeffrey Fraser is a vice president at Leonis Partners, a technology-focused investment banking firm. He previously founded Sebonac Advisors, a similar tech-focused firm that he merged into Leonis Partners in April 2017. Fraser has also worked in private equity roles at TPG, Kayne Anderson and GTG Capital, where he focused on investing in software companies and deal sourcing.