Digital Drafting with Oliver Goodenough, via Vermont Law School…

Being the least connected state in the country earned Vermont the nickname of the Last Mile State. But it is precisely because of this reputation that Matt Dunne thinks Vermont can be transformed into a leader in connectivity, broadband competition, and innovation.

Dunne, a former state senator and current candidate for Vermont governor, is also Head of Community Affairs for Google and argued in a recent talk at the Berkman Center that Vermont is uniquely positioned to be a place of experimentation in high speed internet competition and the innovation that could come with it.

Citing Vermont’s mountainous and heavily forested geography, Dunne explained the difficulty Vermont has historically faced in deploying connectivity over the airwaves. As a result, most broadband and cell phone service providers have largely ignored the state.  The lack of connectivity has hurt Vermont’s ability to incubate startup entrepreneurs and has prevented established Vermont companies from attracting talent. In its education sector, the state is experiencing a decline in it student population, making high-speed internet connection critical for sharing teachers across the state’s widely spread out community-based school system. Connectivity also brings the promise of an improved overall cost efficiency to the state at a time when it is suffering from its largest deficit in history. “Connectivity is no longer only about getting ahead, it is about keeping up as well,” Dunne said.

However there are also several unique advantages Vermont has that would make the state particularly amenable to experimenting with broadband deployment. “The notion of community benefit and working in service of it is engrained in Vermont and that notion transfers into an expectation of private entities to do the same.” In addition, Dunne points to Vermont’s triple A bond rating which would allow the state the kind of capacity and autonomy to experiment in a way other states cannot and further argued that Vermont’s population of approximately 620,000 people would make for a compelling but still controlled demonstration project for those excited about the possibility of broadband competition to show you can deliver broad band at a much lower cost.

As part of his campaign platform, Dunne is proposing that the state make a long term investment with bonded dollars as well as guarantees from its triple A bond rating to entice the private sector to come forward with a commitment through either a municipal, non profit, or for profit mechanism to deploy broadband connectivity throughout Vermont while allowing for access to the broadband infrastructure at a reasonable and appropriate cost. “If you look at broadband in the broadest concept, agnostic to device, then you have opportunities to use a backbone and delivery system to not only deliver speed of information, VoIP, and other kinds of services to the home but also to be able with low aesthetic and environmental impact to deploy it anywhere along the roads where you have that pipe.”

Dunne is also encouraging exploring cost saving ideas in broadband deployment such as stringing glass along the lower part of utility poles and the potential for low frequency spectrum deployment. Low frequency spectrum is particularly of interest to Dunne because Vermont uses the smallest amount of the old television spectrum of any state. Because of the geographic difficulty of transmitting across the state, Vermont did not build many television towers and as a result now has an excess of spectrum available, which Dunne says will mean less pushback from potential critics about using the spectrum for experimentation in broadband.  Less pushback plus the resources and community sense to understand the importance of making connectivity open, accessible, and competitive for the long term will be key to Vermont’s ability to go from next to nothing in connectivity to leapfrogging into next generation technology.

To view the webcast and additional information, go to the Berkman Center’s Event page here.

The Internet is creating a new class of web-based, geographically-dispersed entrepreneurs. Digital communication allows work, capital, and knowledge to come together in a virtual world that can let go of the old necessities of handshakes and paperwork. Until recently, however, the legal frameworks available for structuring these businesses haven’t kept pace. With the advent of Vermont virtual business laws, and particularly the digital LLC, there are now forms that allow the legal formalities of setting up and running a business to be migrated entirely into cyberspace.

The Law Lab at Harvard’s Berkman Center for Internet and Society has been active in developing software applications that can make full use of this flexibility, while preserving the protections and stability of a recognized organizational form. We are now releasing ademonstration version of a digital LLC platform aimed at entrepreneurial start-ups with a relatively small core group of owners who want to use the ease and flexibility of digital interactions to form and manage their business. Starting a company may never be the same again.

These developments are, in a sense, overdue. In the commercial world, many kinds of transactions are safely and routinely handled via the web, from buying books to energy trading to selling the contents of our garage. Internet banking allows digital controls over transactions with a high need for security – and it all works remarkably well. Given this environment, it seems absurd to still be using the same paper-based means of documenting meetings and recording the decisions of companies that were developed in an age of steam and telegrams. But that is the basic orientation of most business organization laws. Even a web-based service like Legal Zoom sends you a physical minute book as the end-result of setting up a new corporation online.

Why are the traditional options for business organizations ill-suited to the needs of such web-based businesses? Some of the limitations have nothing to do with the potential of the digital world. For instance, under U.S. law, traditional partnerships may not survive past the death or departure of one of their members and do not afford their members limited liability. Traditional corporations provide greater permanence and are generally better in terms of the ability to raise capital but also impose cumbersome internal governance processes that are appropriate for companies with thousands of shareholders but that ill-suit the needs of a small, entrepreneurial ownership group. The limited liability company (LLC) form offers entrepreneurs much greater flexibility, streamlined governance, and pass-through taxation. However even with these structural advantages, an LLC in its traditional form is still tied to paper for its formalities, and so cannot fully meet the needs of a web-based, geographically dispersed team of entrepreneurs.

In 2009, Vermont led the way by passing groundbreaking legislation that for the first time offered a legal framework for virtual companies. These changes allow three critical aspects to take place. The first is digital interaction with the State, a step authorized in other states as well. Moving beyond this, however, Vermont has made two key additions, allowing digital originals of bylaws, operating agreements, and other primary documents, and by permitting the full use of any “sequentially structured” digital communication in its formal decision making. These steps permit the formal interactions to move entirely into the digital sphere. The availability of software to carry out these functions will lower the barrier to entry for entrepreneurs worldwide who might not have or be able to afford legal counsel when starting a corporation or LLC, and will open up the possibility for a “Cambrian Explosion” of new digital firms and start-ups.

In order to catalyze this new business environment, the Law Lab has developed Digital LLC, a web-based software platform that allows entrepreneurs to form and manage an LLC completely online. Where existing on-line “set up a company” sites typically just have a user fill in the initial filings with the state, Digital LLC aims to be an interactive forum for the entire length of a digital LLC’s existence. The software provides tools for negotiating the LLC structure and building the two main components that govern the management of an LLC – the Operating Agreement and the Articles of Organization. Once the business is set up, the software provides a framework for making and recording decisions and identifying and resolving disputes as they occur. (Please see the videos here.)Through Digital LLC, businesses can be established and run entirely through internet communication.

As the digital business sector grows and matures, the Law Lab will expand its work to focus on new ways to reduce barriers to entry, provide governance safeguards and efficiency, reduce formalities, and augment paper-free and nearly lawyer-free administration. Our aim is to help the ideas-based entrepreneurs of the 21st century. Digital companies’ flexible, non-terrestrially based nature will help make them a natural governance form around which geographically dispersed innovators can coalesce, unlocking a whole new wave of firm creation and entrepreneurial activity.

  Law Lab co-director John Clippinger discusses digital firms and Vermont’s digital corporate transactions law on Bank of America’s Future Banking Blog:

A prediction for the near future: One of the great disruptions of Web 3.0 technologies will be to unleash unprecedented powers of collective action. Information asymmetries between enterprises and their customers, between governments and their citizens, and between the credentialed and the uncredentialed will be dramatically realigned. Not just asymmetries in access to information, but asymmetries in coordinative capacities, and the ability to capture and direct personal and group agency. We first got a sense of this with the onset of “smart mobs,” “swarms,” “asymmetric warfare,” the “wisdom of the crowds,” the miracle of wikipedia, and the promise of peer production. It is simply amazing what supposedly dumb “mobs” and “non experts” can achieve given the ability to self-organize. My bet is it will not be long before “they” will want some form of legal organization to express themselves, and direct their collective agency to reap the rewards of their newfound powers.

Read John’s whole post at http://futurebanking.bankofamerica.com/digital-firms-net_769.