Monthly Archives: August 2014

August 28, 2014 | News, Statements

Statement on Ridesharing Compromise (AB 2293) in California

Sacramento, CA – Today, Robert Callahan, The Internet Association’s California Executive Director, issues the following statement on the recent compromise to keep ridesharing in California:

“The Internet Association applauds Governor Brown and the California Legislature for showing leadership by finding an acceptable compromise that navigates California’s unique insurance regulatory framework and keeps ridesharing platforms like Uber and Lyft on the state’s roads. Ridesharing has revolutionized the way we move around our communities, and Californians have embraced it as a safe, innovative, and cost effective transportation option.”

August 22, 2014 | ICYMI, News

ICYMI- Web Firms are Learning how to Play Politics

Sacramento Business Journal
Web Firms are Learning how to Play Politics
Posted: Friday, August 22, 2014, 3:00am PDT

Robert Callahan is the Internet Association’s California executive director.

T-shirt culture meets a button-down world

A cavalry of drivers in cars adorned with giant pink mustaches blared their horns while circling the Capitol one sunny June morning. On the steps of the statehouse, a crowd of mostly young people were rallying against regulations for Uber and its mustached competitor Lyft — the online taxi alternatives now enjoying a ballistic rise in business.

But the chanting that day was less about a company and more about an idea: that Internet businesses need freedom to innovate.

Staging political theater like this is old hat to many industries, but completely new to Internet companies. To get to this important milestone, those companies — and the entrepreneurs who drive them — had to recognize that they can no longer afford to ignore state lawmakers and regulators.

That change in mindset hasn’t been easy, said Adam Werbach, 41. He’s founder of Yerdle, a website that allows people to exchange goods for free.

“You’re looking at a clash of radically different cultures,” Werbach said. “Everyone in my office right now is wearing a T-shirt. When we interact with people in government, they’re all in suits.

“Startup thinking exists in hours or days,” he said. “Government thinking is in months or years. It’s different.”

Bridging the gap

Internet companies are learning to bridge the gap. In Sacramento on that bright June day of the ridesharing rally, standing below the protesters were several suited lobbyists and communications specialists hired this year by Uber and Lyft.

Their focus was on an upcoming committee hearing. A fatal accident last year involving an Uber driver in San Francisco awakened some entrenched interests of Sacramento — taxicabs, insurers, consumer attorneys — to a debate over who can be sued when a ridesharing driver gets in a catastrophic accident, and for how much.

The ridesharing regulatory struggle isn’t over but, as the first statewide political skirmish involving the so-called sharing economy, it shows a maturation of an industry.

The issue has opened an important door for the Internet Association, the first lobby group mostly made up of household-name Internet companies like Facebook and Netflix. The group launched in Washington, D.C., in 2012 and in Sacramento this year.

Robert Callahan, the association’s California director, called this year’s ridesharing fight a “historic case study” because lessons are being learned by both politicians and techies, and they underscore the dual mission of his organization.

Operating out of a small, windowless office leased from a trade group for manufacturers, the Internet Association aims to persuade legislators that an unrestricted Internet is vital to everyone, not just the industry that is commercializing it.

“If California goes in a direction that really negatively impacts those homegrown startups, Callahan said, “that’s going to be a tough lesson learned.”

The group also must push its own members and potential members into political engagement.

The message to tech companies is that unlike hotels, taxis and other industries being trampled by Internet innovations, government isn’t so easily disrupted.

“If you’re not well known in Sacramento,” said Callahan, “you’re going to have a tough road ahead of you.”

Ugly battles to come?

It’s not that the titans of Silicon Valley aren’t politically involved: Google spent more than $5 million in federal lobbying in the second quarter of this year; Facebook spent over $2 million.

But some in the tech world say those who work for California’s booming Internet companies remain disengaged from government.

The mentality is, “We’re building a better universe. Get out of my way,” Werbach said.

Werbach, who at age 23 was the youngest person ever elected as national president of the Sierra Club, calls himself an outlier in tech because he doesn’t view government as an “unnecessary annoyance.”

When it comes to regulations colliding with Internet commerce, he predicts “a lot of ugly battles to come. Everyone has a sense that government systems don’t match our economic opportunity.”

Resolution only will come when the worlds of Sacramento and San Francisco grow up, said Jamie Wong, founder of Vayable, a San Francisco startup that connects tourists with locals who want to give a paid tour of their city.

“A blatant disregard for government and regulations is damaging here, and that’s cloaked as progressivism and rah-rah innovation,” Wong said. “But pushing back and forcing government to look at old policies … is absolutely critical.”

New to the political realm

Internet startups may be new to the political process, but the larger tech industry is not. In 1943, David Packard, cofounder of Hewlett- Packard, helped form the West Coast Electronics Manufacturing Association to aid technology companies in landing government contracts during World War II. After several incarnations, the group grew into TechAmerica, a fixture on Capitol Hill that now boasts over 34,000 members.

But it wasn’t until 2012 that a trade group arrived specifically for web companies like Amazon and Twitter, said Michael Beckerman, president and CEO of the Internet Association.

The organization wasn’t formed over a single issue, Beckerman said. But the group launched amid the online piracy debate that pitted Internet companies like Reddit against giant telecommunications firms. It became clear that the Internet needed its own space.

The association now represents 39 companies, from Airbnb to Zynga. The group opened a California office this year — its first state office — because the Golden State is perceived as a policy trendsetter and most of the association’s members are based here.

“It was the natural first spot,” said Beckerman, who previously spent 12 years as a Congressional staffer, most recently for the House Energy and Commerce Committee.

Beckerman says he prefers lobbying for Internet businesses to representing traditional industries. “In a way, the Internet brings real democracy. Our issues are on the side of people and democracy. When they get involved, it makes the system work better.”

New challenges for lawmakers

When it comes to governing the nascent Internet industry, the job for lawmakers is to understand when regulations are needed to protect consumers or society, said Joe Simitian, a Palo Alto Democrat who served in the state Legislature from 2000 to 2012.

In other cases, he said, disputes often are simply about old-guard industries trying to protect their turf from Internet upstarts.

“Some of these are plain old-fashioned market-share and profitability issues,” said Simitian, now a Santa Clara County supervisor. “Some of these debates really are about important public policy questions. In the years ahead, it will be the challenge for legislators is to understand which is which.”

Simitian, who represented Internet companies while in Sacramento but also challenged them on privacy issues, acknowledged that the incremental nature of government has trouble keeping pace with the speed of innovation.

“I think the industry has to some extent been a little slow in coming to the realization that decisions are made at the state level that are critical to their future,” Simitian said.

“But I think there’s a growing awareness in the role states play in regulating the industry, and I think the industry has figured out that if they aren’t at the table, they may be on the menu.”

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August 20, 2014 | ICYMI, News

ICYMI- Don’t let Sacramento Stifle Innovative New Businesses like Uber and Lyft

LA Times.com
Don’t let Sacramento stifle innovative new businesses like Uber and Lyft
Posted: August 20, 2014 @ 18:30

Just as Silicon Valley is a hotbed for innovation, Sacramento is a hotbed for regulation. Those two impulses are clashing now over a new generation of tech companies that uses smartphone apps to connect ride-seekers with drivers. If lawmakers aren’t careful, the regulations they’re poised to impose could snuff innovation across the sharing economy.

At issue is whether the Legislature will impose a second layer of rules on companies such as Uber, Lyft and Sidecar in addition to the ones the state Public Utilities Commission has been setting over the past year. To its credit, the commission recognized that these “transportation network companies” are fundamentally different from taxi companies, despite similarities in the services offered. The commission’s rules for driver and vehicle safety recognized the risks to passengers, but also that the drivers were freelancers using their own vehicles on a part-time basis, not full-time employees using cars dedicated to carrying passengers.

Nevertheless, some lawmakers allied with the taxi industry are now arguing that what’s sauce for the goose should be sauce for the gander. With little or no evidence to show that the ride-sharing services are as risky as traditional taxis, they nevertheless are pushing to make the former comply with several of the regulations that apply to the latter — or even more stringent ones.

The current version of one bill, AB 2293, proposes that ride-sharing companies carry more insurance coverage when their drivers have no passengers than cab companies in L.A. are required to carry when their taxis are full. The amount is also many times larger than what the commission is moving to require. Another bill, AB 612, would require Uber and its ilk to use the same drug-testing procedures and background checks that taxi companies do, on top of the zero-tolerance policy and background checks mandated by the commission. The relative merits of the two approaches are debatable, but there’s no sense in demanding both. Still, it’s better than an earlier version of the measure, which would have required drivers for the new companies to carry, full-time, the same commercial insurance policies as cabbies, rendering the whole idea of providing the occasional ride to generate extra income economically unfeasible.

Advocates of the state’s entrepreneurial high-tech industry warn that the flawed logic behind these measures could just as easily be used to choke off other emerging businesses that enable people to make occasional commercial use of their personal property or skills. That’s a scary thought in a state whose reputation for nurturing technological innovation is one of its most powerful magnets for investment and employment. Rather than trying to force more rules onto ride-sharing companies because their service looks like a cab company’s, lawmakers should let the utilities commission enforce its new rules unless and until there’s real evidence that they don’t work.

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August 19, 2014 | News, Press Releases

Video: Sen. Booker Discusses the Value of an Open Internet

Beckerman: “The Internet has been a bright spot of innovation and economic growth in our economy. Policymakers should strive to maintain an open Internet and the positive economic benefits that come along with it.”

 

Washington, D.C. – As Congress continues to look for ways to grow the economy, Sen. Cory Booker recently sat down with The Internet Association at the “Small Business Tech and Social Innovation Forum” to discuss how innovation online drives economic growth and opportunity for Americans. “We live in a powerfully interconnected globe. Now you can access information, you can access capital, and you can access work, all from using the Internet,” said Sen. Booker. “It is critical that lawmakers understand the potential and possibility of the Internet.”

 

“The Internet has been a bright spot of innovation and economic growth in our economy,” said Michael Beckerman, President and CEO of The Internet Association. “Policymakers should strive to maintain an open Internet and the positive economic benefits that come along with it.”

The Internet Association partnered with U.S. Senator Cory Booker in July to host a forum focused on using the Internet to grow small businesses in New Jersey. “Small Business Tech and Social Innovation Forum,” was held at the Stevens Institute of Technology in Hoboken, NJ. Michael Beckerman, President and CEO of The Internet Association, led a panel discussion with Association member companies Google, Facebook, and Yelp. Association members Huffington Post, Uber, and Etsy were also in attendance to help small business owners in breakout sessions.

August 18, 2014 | ICYMI, News

ICYMI- It’s Hard To Be Neutral About Network Neutrality For Health

Health Affairs.org
It’s Hard To Be Neutral About Network Neutrality For Health
Posted: Monday, August 18 @ 2:00 PM

Network Neutrality (NN) has been in the news because the FCC is considering two options related to a neutral Internet: either regulation forcing NN, or an approach that creates a “fast lane” on the Internet for those content providers that are willing to pay extra for it.

Network Neutrality reflects a vision of a network in which users are able to exchange and consume data, as they choose, without the interference of the organization providing the network basic data transport services. The second option, preferential service, entertains the possibility that the Internet could become what the National Journal describes as “a dystopia run by the world’s biggest, richest companies.”

However, the problem of network neutrality is more complex. Full network neutrality could also lead to a tragedy of the commons in which application developers compete for the use of “free” bandwidth for services to win customers while clogging networks and lowering performance for all. Key stakeholders providing basic transport Internet service such as Comcast, Verizon, or AT&T, and large Internet savvy content providers like Google have a clear understanding of the debate and what they stand to gain or lose from network neutrality.

Lesser known and of potential concern is the extent to which other stakeholders—especially those in the health care sector such as care providers (e.g. hospitals, academic medical centers, ambulatory care), cloud Electronic Health Records (EHRs) vendors (e.g. Athenahealth, CureMD, Practice Fusion), content providers (e.g. National Library of Medicine, universities offering distance health care-related education) and others—understand the implications of the network neutrality debate and outcomes.

Network Neutrality and Health Care

Network neutrality impacts the triple aim—improving quality and the patient experience, reducing costs, and improving population health—because virtually all of the information collected in these areas is transmitted through some type of Internet service provider. Leaders in health care must understand that how and when they access the Internet may shape the flow and type of information transmitted to them and even their patients. How will NN affect health care delivery and innovation to improve patient care while reducing costs? Does a user own his health data or does the network?

This commentary considers the effects of Network Neutrality on the adoption of general telemedicine services including wireless monitoring of vital signs at home, the adoption of Personal Health Records (PHRs) and EHRs, and access to health education for patients and providers.

In our article, “Why common carrier and network neutrality principles apply to the Nationwide Health Information Network (NWHIN),” published in the January 14 issue of JAMIA, we define and discuss how NN may be considered with regard to health care:

One particularly challenging policy question regarding health information exchange is deciding what businesses or services need to operate for the good of the public (rather than purely for private profit), and how they should be managed. There are some businesses or services of such absolute necessity to the public good—roads, water, electric utilities, and bridges—that they must be offered to the public in a non-discriminatory manner. For example, owning the only ferry with access to an island puts the owner in such a position that he or she could affect the economic well-being of many. Under the law of common carriage, the ferry owner must sell the services in a fair and unbiased way. Should health information exchange services operate in a similar manner?

Network neutrality may still include concepts of prioritizing certain types of information through regulation. If so, health information deserves access to the fast lane. However, the FCC should insure a neutral approach based on categories of service rather than vendors prioritizing their own applications. This means that if the end user pays for a certain quality of service from the network (e.g. speed and delay in the network), they should receive that quality of service from the network provider from all content providers.

A World Without Network Neutrality

Without NN, patients and care providers are disadvantaged because the provider of the basic Internet service can dictate its choice of health care services. For example, Verizon would be able to give preference to network traffic from their Oncare home monitoring service, allowing Oncare to provide better service than competing home monitoring solutions.

This could influence patient preferences based on the quality of the network, not the features and attributes of Oncare compared to other similar medical services. One can imagine many similar conflicts in which patients and care providers might be influenced against picking a service that better meets their needs because of network attributes such as bandwidth (speed of the network) and latency (delay in the network).

Ensuring Equal Access To Health Information

The first step is to build awareness, educating health care leaders and technology experts on network neutrality, and the trade-offs for a neutral or a non-neutral network for their organizations and end users. Bring the topic up to your CIO, the professional associations in which you are involved, or even your elected officials.

While network neutrality is not being widely discussed as a topic of concern among health care leaders, many CIOs may be familiar with key organizations dedicated to promoting network neutrality such as the Internet Engineering Task Force (IETF) and the Berkman Center for Internet and Society at Harvard University. These issues are especially important in regions of our country—particularly rural and urban core areas—in which a single service network provider may be the only choice. Disparities in access to care are often greater in these areas, and without network neutrality, they may be exacerbated.

We need health care leaders who can bridge the gap between the clinical and the technical at the forefront of the debate over network neutrality, fighting for an Internet that keeps health care accessible and efficient for clinicians and patients alike in the current and any future Internet created as the FCC considers new ways of regulating the Internet. If there is any fast lane in the Internet, it should be used for the public good—such as transmitting medical data in real-time during medical emergencies—not because Netflix wants faster streaming for their videos.

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August 7, 2014 | ICYMI, News

ICYMI- A small business ‘crawl’ in Fresno

Capitol Weekly
A small business ‘crawl’ in Fresno
Posted: August 7, 2014 @ 11:45

The Internet is rapidly changing how small businesses in California thrive. Business owners can reach a larger audience in more compelling and authentic ways and engage in more frequent communication and relationship building with customers. The Internet also enables the creation of virtual marketplaces and platforms that offer new ways for consumers to interact, buy, rent, barter and exchange. Small businesses and start-ups alike are among the greatest beneficiaries of the Internet’s sweeping influences across California.

The Internet plays a large role in positioning California as the world’s eighth largest economy. California reaps the benefits of the Internet economy on a daily basis; these benefits are felt statewide, far beyond Silicon Valley.

It’s critical we ensure California continues to remain a leader in technology, and that policy decisions we make here in Sacramento support innovation and help grow Internet economies across the state.

Tomorrow, I will join The Internet Association for a walking tour of several local businesses in my home district to witness first-hand how local entrepreneurs have harnessed the economic power of the Internet. The Small Business Crawl will take place in Fresno’s popular Tower District, the City’s exciting hub for dining, arts and cultural experiences. The Tower District’s character is set by a wide variety of businesses including, restaurants, cafes, nightclubs, performing arts venues, theaters, galleries, bakeries, delis, plus a unique blend of specialty retail establishments that are all within walking distance of one another. The tour will showcase some of the great local businesses we have in Fresno, including:

  • Chase Flower Shop, a local floral shop established in 1947. The shop’s professional florists deliver flower arrangements throughout Fresno and nationwide through their trusted florist network.
  • Frosted Cakery, a local bakery owned by Beverly Gable. Frosted Cakery was started in February of 2009 when Beverly and Megan Gable, mother and daughter, noticed there was a need for creative cakes in the Central Valley.
  • Dusty Buns Bistro Bus, a local Fresno restaurant that operates a brick-and-mortar Bistro in Fresno’s Tower District as well as a Bistro Bus. Dusty Buns Bistro is all about using local and organic produce to deliver some of the best sandwiches around town.
  • Piemonte Italian Delicatessen, a local Fresno deli that has been providing fresh, high-quality Italian food to the Central San Joaquin Valley for over 80 years.

The tour will highlight how participating businesses are making the Internet an important element to the success of their operation. All four merchants represent very different aspects of the business community in the Fresno region. These small businesses and others like them throughout the community, provide jobs in my district and boost the local economy, so I look forward to meeting with them to better understand how Fresno is exploring and leveraging new innovative opportunities.

The Internet helps every business sector in every region across the state, especially in Fresno and throughout the Central Valley. While the region is often known for agriculture, it should also be recognized for some of the exciting restaurants, art venues, and specialty retail stores that are flourishing in the area as well. Simply put, it’s an exciting time in Fresno and throughout the Central Valley. The region is working hard to shape a future that’s blending the benefits and charm of our traditional qualities while thrusting forward to create a strong and successful economy. We have more work to do and some challenges to address; nonetheless, business and community leaders have used that unique California entrepreneurial spirit to create, and benefit from, their very own internet economy.

That’s why it’s critical we ensure California continues to remain a leader in technology, and that policy decisions we make here in Sacramento support innovation and help grow Internet economies across the state. The Small Business Crawl, which is tomorrow, August 8, from 10 a.m. to Noon, is a great way to step outside of the Sacramento policy bubble to hear directly from local business owners and get a sense for how the Internet is serving as a local economic engine. It’s important to recognize the great things our small Tower businesses are doing. The internet plays a big role in publicizing their day-to-day activities and we are pleased to highlight their work.

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August 6, 2014 | News, Statements

Statement on Recent Developments to Allow Ridesharing in Virginia

Washington, D.C. – The Internet Association’s President and CEO, Michael Beckerman, issues the following statement on recent developments to allow ridesharing in Virginia:

“The Internet industry applauds the temporary authority granted by the Commonwealth of Virginia to allow innovative and popular ridesharing services like Uber and Lyft to operate on Virginia’s streets. This development is an important first step towards embracing competition, innovation, and consumer choice in transportation, but it must be followed with permanent authority for rideshare platforms to serve residents of Virginia.

“Consumers have overwhelmingly embraced rideshare platforms as a safe and reliable transportation option, and cities and states should work to integrate ridesharing into their communities, instead of using outdated regulations to protect monopolies and restrict choice.”

August 6, 2014 | News, Statements

Comments on “Big Data” to Department of Commerce

Washington, D.C. – The Internet Association’s President and CEO, Michael Beckerman, issues the following statement on comments on “Big Data” to Department of Commerce:

“The United States’ existing legal and self-regulatory frameworks provide the necessary flexibility to protect consumers while promoting the innovation economy. Any effort to evaluate our nation’s policies around “big data” must be premised on an effort to maintain consistency with existing policy and legal frameworks and to focus efforts on areas where real gaps exist. To address actual harms arising in the “big data” context, we support a self-regulatory framework that focuses on avoiding harmful uses of data rather than on restricting analysis that may benefit the public interest.

“The Internet’s underlying structure is based on inclusion rather than exclusion, and our member companies continuously innovate to provide services that benefit all of their users. A shift in policy and regulatory focus towards responsible use will allow users to enjoy the economic and societal benefits afforded by data analysis while better identifying harms such as discrimination.”

August 4, 2014 | News, Press Releases

Groupon Joins The Internet Association, a Leading Voice For Internet Issues

WASHINGTON, D.C. — Today, The Internet Association, the unified voice of the Internet economy, welcomed Groupon (NASDAQ: GRPN) as its 27th member, joining other major internet companies to forge a common voice in advancing public policy solutions to strengthen and protect Internet freedom, foster innovation and economic growth, and empower users.

“We’re very excited to join The Internet Association. It’s important that e-commerce companies have a cohesive and aggressive voice on high-level policy issues affecting the current and future state of the Internet,” said Brock Wanless, Groupon’s head of government affairs. “We believe The Internet Association is this cohesive voice, and we’re happy to add Groupon’s experience as an innovative, disruptive market force to their efforts.”

Groupon is a global leader of local commerce with a presence in more than 48 countries around the world. To date, Groupon has worked with more than 650,000 businesses––bringing tens of millions of customers through their doors. By leveraging the company’s more than 200 million subscribers and significant mobile and Web presence, Groupon has become one of the most effective marketing platforms for local businesses.

“The Internet Association welcomes Groupon to our strong, central voice on Internet policy. Groupon’s unique platform connects local merchants and customers. Its e-commerce efforts positively disrupt the traditional ways that Main Street businesses market products and bring customers to storefronts across the globe,“ said Michael Beckerman, The Internet Association President and CEO. “Groupon exemplifies how the Internet can be a remarkable growth engine for small businesses, creating jobs in every sector of the economy. Groupon’s policy perspective will add tremendous value as we amplify the Internet’s voice in Washington.”

August 3, 2014 | ICYMI, News

ICYMI- Sizzling Tech Economy is Fueling Urban Renaissance

USA Today
Sizzling tech economy is fueling urban renaissance
Posted: August 3, 2014 @ 14:16 EDT

SAN FRANCISCO — In cities across America, a sizzling tech sector is fueling an urban renaissance.

As the digital revolution broadens and deepens, tech has emerged as a mighty force creating jobs, spurring redevelopment of once-blighted urban cores, and giving cities an economic and cultural jolt.

But the boom comes at a price. For lower-income people and the squeezed middle class, soaring rents and home prices are pushing some cities out of reach, turning them into playgrounds for the privileged.

Rents in the top 10 largest U.S. metropolitan areas, where Internet and computer occupations play the biggest role in the local economy, rose 8% in the year ended June 2014, almost 40% faster than the gain in other metro areas, according to Trulia, a Web-based real estate company.

The winners in the new digital gold rush include longstanding high-tech names such as San Francisco, Seattle and Austin. But there are surprises, as well.

Since the recession ended five years ago, New York has added more tech jobs than any city except San Francisco, and Brooklyn has emerged as a tech hub in its own right, with hundreds of young code writers and content producers lining up at food trucks for lunch.

Even New Orleans is riding the wave. Tech jobs there rose by almost a third from 2007 to 2012. The sector’s growing clout was celebrated Big Easy style when a coalition of local digital media companies sponsored the main stage at the city’s 2014 French Quarter Festival.

From suburbs to cities

The trend marks a major turnaround from the early days of information technology, when growth was centered in sprawling suburban office parks in places such as Silicon Valley and Route 128 outside Boston. In the past five years, San Francisco’s rate of tech job creation has far outstripped Silicon Valley’s, and the pattern is repeated in Seattle, New York and elsewhere.

These days, even companies firmly rooted in the suburbs, such as Google, Apple and Microsoft, offer free daily bus or van commutes to employees who crave city life. What’s more, to attract the young and the hip, many companies based in the suburbs have expanded their city offices.

Eric Butler, 28, rides a company bus from a stop near the flat he shares in San Francisco’s Bernal Heights neighborhood to his finance job at one of Silicon Valley’s biggest corporations. “It’s a lot more fun here,” the San Diego native said as he parked his bicycle on San Francisco’s Market Street on a recent Saturday. “There’s more things to do, more night life.”

There is no single definition of what makes a city a tech center. Trulia ranks tech hubs based on the share of local employment in Internet, computer and software-related occupations. Michael Mandel, chief economic strategist at the Progressive Policy Institute, a Washington, D.C., think tank, has constructed an index based on the rate of growth of tech and information sector jobs and the size of the tech sector relative to the local economy. The Milken Institute defines tech hubs as metropolitan areas that are centers of research and innovation, and have high concentrations of skilled tech professionals, entrepreneurs and venture capital.

What all researchers agree on, though, is the biggest economic impact is being felt in cities such as San Jose, San Francisco and Seattle, where the tech sector is large and growing fast.

The fact that so much tech growth now is happening in cities reflects the evolution of the Internet. The rise of social networking, online media and digital commerce is putting a premium on design and creativity, making workers at Internet companies more like the artists, writers and media professionals who have always gravitated to cities. In addition, old urban industrial spaces are better suited for Web-style collaborative work than tech’s traditional cube farms.

“For modern Internet companies, building in a multifaceted creative environment is crucial,” said Chad Dickerson, CEO of Etsy, an online marketplace for handcrafted goods. Etsy is headquartered in Brooklyn’s Dumbo neighborhood, across the East River from Manhattan. This area of old workshops and factories is a magnet for fashion designers, architects and ad agencies, and has become New York’s trendy, have-to-be-there tech hub.

For cities, tech expansion can be a gold mine. No less than 13 of the top 25 cities in the Milken Institute’s “Best-Performing Cities 2013” report are tech hubs. “These jobs pay as much as 20% greater than other starting salaries in our area,” said Aimee Quirk, an economic adviser to New Orleans Mayor Mitch Landrieu.

The face of urban landscape is transformed

As well-heeled tech workers flock in, local economies are revitalized, and the face of the urban landscape is transformed. Those employees spend their paychecks on everything from designer hoodies to restaurant dinners. Apartments are built to house them. And the taxes they and their employers pay help balance municipal budgets, fund redevelopment projects and pay for a range of amenities.

“Areas with a faster-growing tech sector tend to have faster-growing non-tech employment, as well,” Mandel said. Nationwide, private-sector non-tech wage and salary employment rose 5.4% from 2009 to 2013. But in the 10 large U.S. counties where growth of tech jobs had the biggest economic impact, non-tech jobs rose 10%, almost twice that rate, according to Mandel’s preliminary analysis.

As techie ranks swell and the overall economy expands at a faster pace, demand for shelter heats up. That leaves more and more people priced out of the housing market.

“There are more bars, restaurant and museums,” said Stanford University economist Rebecca Diamond, who has studied economic inequality in cities with large numbers of highly paid, college-educated workers. “But these cities are so expensive that all these great things are going to the high-skilled worker.”

San Francisco is the extreme case. Tech jobs there have skyrocketed 56% in the past five years, more than any other large city in the nation. Overall, the city added more jobs than 47 states. The unemployment rate is down to 4.4%. Meanwhile, housing prices are rising at a 20% rate and the average rent in 2013 was $3,396 per month, the highest of any city in the country, according to a study by the Boston Consulting Group.

San Francisco’s Mid-Market Street area, stretching a mile between the downtown shopping district and City Hall, has long been a no-go area, lined with vacant storefronts and empty offices, the haunt of crack dealers, street people and a few gritty urban pioneers.

Microblogging giant Twitter cut a tax break deal with the city and moved in two years ago, bringing hundreds of employees and a handful of other tech companies in its wake. Now Mid-Market has rushed headlong into a frenzy of demolition, new construction, and repopulation, producing surreal scenes of bedraggled men lounging next to shopping carts under signs touting luxury condos.

City officials say they are keenly aware of the danger that San Francisco will become a monochrome city of people who can afford high housing costs. They stress that surging tax revenue is helping the city fund affordable housing programs to preserve diversity.

“We’re in a much better position to tackle these challenges,” said Todd Rufo, director of San Francisco’s Office of Economic and Workforce Development.

Analysts argue that low- and middle-income people are better off when tech boosts overall growth. They may no longer be able to live in Manhattan, San Francisco or Seattle, but it may be easier to find decent, higher-paying jobs.

Tyler Macmillan, executive director of San Francisco’s Eviction Defense Collaborative, a legal aid group, said most of his clients are moving to places across the San Francisco Bay, where they face long, expensive commutes to their jobs.

“Who gets to live in a place like San Francisco?” he asked. “That’s a really tough question.”

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Top Internet Business Leaders Confirmed To Speak At Internet Association’s Third Annual Virtuous Circle Summit BECKERMAN: “The value of the Virtuous Circle Summit is the conversations that take place when you bring together the leading voices in the internet innovation and policy space.” Washington, DC — Today, Internet Association announced its initial list of confirmed speakers Read more »

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