The FCC Report and Order that wasn’t
On March 12, the Federal Communications Commission released the 400-page Open Internet Report and Order. Think of this as part one of a dramatic miniseries on Internet regulation, which you would prefer to turn off after the first hour but are forced to watch nonetheless.
While some have rushed to proclaim this to be a bipartisan regulatory victory, most analysts yawned when they read the Order’s provisions. For example, on interconnection, here is the key finding in paragraph 203 of the Report and Order (footnotes removed):
“At this time, we believe that a case-by-case approach is appropriate regarding Internet traffic exchange arrangements between broadband Internet access service providers and edge providers or intermediaries – an area that historically has functioned without significant commission oversight. Given the constantly evolving market for Internet traffic exchange, we conclude that at this time it would be difficult to predict what new arrangements will arise to serve consumers’ and edge providers’ needs going forward, as usage patterns, content offerings, and capacity requirements continue to evolve. Thus, we will rely on the regulatory backstop prohibiting common carriers from engaging in unjust and unreasonable practices.”
So much for an interconnection “bright line” to create certainty or, in a more cynical light, so much for the commercial agreement process if the FCC is opening up a new interconnection “appeals court.” What the FCC should do is establish a rule saying “if a content provider streams more than ‘x’ gigbytes of content per day to any specific location, they need to place their content within ‘y’ kilometers of the interconnection point.” This would establish local peering points, which are sorely needed (see the EdgeConneX website for more information on how this is occurring without FCC intervention today). This would benefit backhaul and interconnection providers alike.
The most intriguing paragraph in my first read of the Report and Order is 391 (emphasis added):
“Today, consistent with our authority under the Act, and with the commission’s previous recognition that the ‘public switched network’ will grow and change over time, we update the definition of public switched network to reflect current technology. Specifically, we revise the definition of ‘public switched network’ to mean ‘the network that includes any common carrier switched network, whether by wire or radio, including local exchange carriers, interexchange carriers, and mobile service providers, that use[s] the North American Numbering Plan, or public IP addresses, in connection with the provision of switched services.’ This definition reflects the emergence and growth of packet switched Internet Protocol-based networks. Revising the definition of public switched network to include networks that use standardized addressing identifiers other than NANP numbers for routing of packets recognizes that today’s broadband Internet access networks use their own unique addressing identifier, IP addresses, to give users a universally recognized format for sending and receiving messages across the country and worldwide. We find that mobile broadband Internet access service is interconnected with the ‘public switched network’ as we define it today and is therefore an interconnected service.”
This paragraph makes a lot of sense. Facebook uses IP addresses for Messenger. Apple’s messaging product uses public IP addresses, and FaceTime already allows telephony integration. So does Google. All three of these network service providers (check out their capital spending levels in their recently filed annual reports) should be required to interconnect with all other elements of the public switched network, whether that’s FaceTime with Cortana (see here for Cortana’s recent foray into Apple products) or Hangouts with Join.me, Microsoft Lynx or Citrix’s GoTo Meeting.
Required communication applications interconnection is an intended result of the Report and Order. It’s going to create more expensive and complex communications services, and break apart Apple’s “closed system” development process.
Bottom line: In a legacy-driven attempt to solve problems with redefinition and case-by-case studies, the FCC has inserted itself as judge and jury over the Internet. Within months, the 400-page Order will bloom into 4,000 pages of new opinions, precedents and “hey, we should have thought about that” waivers. Apple, Google, Microsoft and Facebook will bear as much of the regulatory burden as AT&T, Comcast or Verizon.
Many thanks to those of you who participated in the Recon Analytics call last week on Auction 97 and the Open Internet Order. I received several comments from you about using a golf analogy on the call (which most of you know I like to play but have neither the patience nor the talent to play). Sometimes the best analogies come from experience, and perhaps I have, like the FCC, tried to use a five iron to complete a shot that was meant for much lighter club. The full replay of the call (thanks again to Roger Entner for putting it together) is here.
Jim Patterson is CEO of Patterson Advisory Group, a tactical consulting and advisory services firm dedicated to the telecommunications industry. Previously, he was EVP – business development for Infotel Broadband Services Ltd., the 4G service provider for Reliance Industries Ltd. Patterson also co-founded Mobile Symmetry, an identity-focused applications platform for wireless broadband carriers that was acquired by Infotel in 2011. Prior to Mobile Symmetry, Patterson was president – wholesale services for Sprint and has a career that spans over 20 years in telecom and technology. Patterson welcomes your comments at jim@pattersonadvice.com and you can follow him on Twitter @pattersonadvice. Also, check out more columns and insight from Jim Patterson at mysundaybrief.com.
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