Promising Elements of the Net Neutrality Decision

01/04/2011 05:10 pm ET | Updated May 25, 2011

During the extended holiday season, families gather around the modern day hearth to watch football. Everyone has a favorite team, or alma mater, to cheer for, and a most loathed to root against. People find themselves pitted against their friends and colleagues if they support the wrong team. About the only thing that every fan agrees on is hating the referees.

It is hardly a surprise that, with the Federal Communications Commission serving as the net neutrality line judge, both sides jumped off their respective couches and shook a fist at the ref on TV. But, with all the cajoling of players and berating of refs, we risk missing the significance of this achievement.

As a supporter of net neutrality, one must appreciate how difficult it was for the FCC to navigate numerous competing interests to reach a decision that establishes protections for content and competition, while leaving room for emerging markets to flourish. While I could have written a decision that better suits my priorities, and I'm sure many others also feel this way, there is a lot for consumers and industry to be happy with in this decision.

Thankfully, the internet has evolved far beyond the conditions that originally led to the demand for network neutrality. Back in 2005, when the CEO for a major phone company inquired, "why should [Internet upstarts] be allowed to use my pipes?," there was a concern that the Internet, operating three times slower than today, could be throttled by carriers to prevent certain sites from loading or working efficiently. Content providers worried about degraded service and bloggers feared the suppression of their commentary.

The FCC decision effectively addresses these concerns in the context of our current infrastructure capabilities. The new regulations require providers to be transparent in how they manage their networks, prevents them from blocking websites, and puts in place protections so they can't restrict applications that compete with their own voice and video services. Meanwhile, carriers will be able to reasonably manage their networks in a way that improves service without limiting content delivery.

The decision also provides space for the most important growth area in the online marketplace - wireless. While some have voiced objections over the different standards applied to wireless and wireline communications in the decision, wireline Internet is at a far more mature stage and the FCC's regulatory approach here is directed at established market factors. The mobile internet market, in comparison, is still in its nascent stages and growing rapidly. To apply too firm a regulatory touch now in the wireless market could stunt or distort its development.

The recent emergence of this marketplace has fostered remarkable innovation. The iPhone (and more recently the Android and Windows Phone 7) created an entire new marketplace for mobile computing and applications, far beyond just porting old software to a smaller screen. There are tremendous opportunities for U.S. software developers to create and sell consumer and business-ready applications in this market. With only 25% of Americans owning a smartphone, and penetration in Asia still below 10%, there is considerable room for growth as demand is steadily rising.

Unfortunately, the dramatic rise of the mobile online marketplace poses a very distinct and worrisome problem. There are physical limits to how much information can fit into our existing spectrum. Even as we improve our ability to greater compress the data that our airwaves carry, we still have limitations to the number of devices that connect to a cell tower before interference becomes a problem. Spectrum is a scarce and finite resource - gains usually come from finding new ways to stuff two pounds of meat in a one-pound bag.

Wireless network engineers have been focused on these problems for a considerable time, and have incorporated lots of new technology into the LTE standard for which we are all anxiously awaiting. This includes technologies that allow for variable speed packet delivery depending on use, higher-speed capabilities that don't interfere with regular internet traffic, and network management tools to help shape traffic if customers are hitting a single YouTube video all at the same time - or if one customer is hogging an entire tower just to bittorrent the latest episode of "Community".

What most people don't realize is that only 500 MHz of spectrum is available for all of the wireless devices we have today. For everyone who suffers from dropped calls, or has faced painfully slow downloads on their 3G iPad, Ericcson's prediction that 50 BILLION devices will soon be connected to the wireless network should be alarming to us all.

Growth in the smartphone and tablet market is already putting considerable pressure on existing spectrum resources. Now imagine those 50 billion devices all competing for the same cell tower in your neighborhood - "can you hear me now" is replaced by a silent scream. Network management isn't a novelty, it's an urgent necessity. For internet users to continue to enjoy browsing, email, Facebook, gaming, streaming music, TV shows and movies, there will need to be effective spectrum management.

While the FCC's limits on prioritization at the wireline level will ensure that content providers operate on a level playing field, the absence of this regulatory structure for wireless will allow providers to efficiently manage a finite resource so that users don't suffer such dramatic performance shortfalls that they abandon the medium before it matures. There's also the possibility that, in the absence of a strict regulatory regime, wireless technologies will emerge that render these rules unnecessary.

What we can be sure of with the FCC's decision is that it provides carriers and developers the regulatory certainty to move on and create exciting new apps and programs that help make us better informed and more productive, letting us take our entertainment with us wherever we go.

Morgan Reed is executive director at the Association for Competitive Technology (ACT). Representing more than 3000 small and mid-size information technology firms from around the world, ACT is the only advocacy organization focused on the needs of small business innovators from around the world. ACT advocates for an environment that inspires and rewards innovation while helping its members leverage their intellectual assets to raise capital, create jobs and continue innovating.