April 17, 2014

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Staying Off the Regulatory Radar

I just returned from a tech policy conference. It was off the record so I can’t tell you about what was said. But I can tell you that it got me thinking about what happens when a tech startup appears on policymakers’ radar screens.

Policymakers respond to what they see. Generally they don’t see startups, so startup products can do whatever makes sense from a technical and customer relations standpoint. Startups talk to lawyers, they try to avoid doing anything too risky, but they don’t spend their time trying to please policymakers.

But if a startup has enough success and attracts enough users, policymakers suddenly notice it and everything changes. To give just one example, YouTube is now on the radar screen and is facing takedown requests from national authorites in places like Thailand. (Thai authorities demanded takedown of an unflattering video about their king.) The cost of being on the policy radar screen can be high for online companies that have inherently global reach.

Some companies respond by changing their product strategy or by trying to outsource certain functions to other companies. We might even see the emergence of companies that specialize in coping with policymakers, making money by charging other tech-focused companies for managing certain parts of their technology.

Perhaps this is just another cost of scaling up a service that works well at smaller scale. But I can’t help wondering whether companies will change their behavior to try to stay off the radar screen longer. There’s an old strategy called “stealth mode” where a startup tries to avoid the attention of potential competitors by keeping secret its technology or even its very existence, to emerge in public at a strategically chosen time. I can think of several companies that wish for a new kind of stealth mode, where customers notice a company but policymakers don’t.

Comments

  1. Norman Yarvin says:

    I’m imagining an ad for one of those outsourcing companies: “Here at root-of-all-evil.com, we handle the dirty work for you. From our servers located in North Korea, we …”

    Of course it wouldn’t really be like that, at least not to start; but that is how a company to which controversial things were outsourced would be caricatured.

    Tough as it is, there’s no substitute for standing up for things yourself. It looks a lot better to say “We built this business because we believed in it, and it’s doing a lot of good, so please don’t kill the whole thing because of a few bad consequences” than it does to say “Don’t blame us; we subcontracted out the nasty part to root-of-all-evil.com”.

  2. Per Jonsson says:

    I don’t understand why US companies just move their servers. Why hassle with all this legal stuff brought by the “DMCA”.

    If I where YouTube, Digg or any internet radiostation I would put my servers in another more free country.

    Another interesting but not really related thing is the services which is soon launched in Sweden is “country swithching” or what you may call it. You connect to a server and it looks like you are browsing from a different country.

    All this blocking and take downs is just creating new services and other companies revenue.

    It’s a strange world.

  3. Tarkeel says:

    @Per: If Antigua goes through with nullifying their WTO responsibilities towards the U.S., I bet you will see some of those companies moving there.

  4. Tel says:

    Moving servers helps against a shutdown order or a seize and search operation but if the parent company is registered in the US and their money goes through the US then they have no protection against fines and/or criminal prosecution.

    I agree with Ed, the best thing to hope for is not to be noticed, or at least not to be controversial enough that anyone thinks there might be votes involved. If you produce the worlds best and fastest spellchecker then you tend to fall into the “who cares?” haze and no policy maker will see you. If you touch any key buttons like “free-porn” for example then the alarm starts ringing. By the time you are moving servers around looking for a free country, it is certainly already too late and actually going into court saying “ha ha my servers are safe from you” is going to start the big-daddy alarm bell ringing.

  5. Lawrence D'Oliveiro says:

    Any particular reason the conference was off the record? Was it because of the content, or the participants? If it was only because of the participants, then wouldn’t it be better if the content was made available under the Chatham House rule?

  6. Tester says:

    They do have some protection against fines and/or prosecution: a lot of the evidence that might be used to win a judgment against them is made inaccessible by moving the servers offshore. ;)