Greetings from Seattle, Kansas City, and Dallas, the site of Jesuit College Prep’s 16^th Annual Rugby Tournament (pictured).  Given the requirements of the week (and specifically this weekend where I am serving as a field warren), this week’s Sunday Brief will be significantly shorter than previous editions.

Many thanks to those of you who participated in the Recon Analytics call last Monday 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.

Before diving into the FCC Report and Order, a quick shout out to Boulder-based iPosi, one of my clients who is leading the way with innovative in-building location services.  They have come from nowhere to be a meaningful competitive alternative to NextNav, True Position, and other more expensive and complex in-building solutions.  This week, they were named to ABI Research’s “Hot Tech Innovators” list, which includes a broad range of companies (EyeVerify, CloudOn, Lyft, Smartbin, Zwipe, others).  ABI concludes their section on iPosi with “The company still has a strong play in the timing and synchronization market, but the combination of E911 and new network rollouts could transform the company into a major location player.”

The Report and Order That Wasn’t

On Thursday afternoon, the FCC released the 400-page Open Internet Report & Order.  Think of this as Part One of a dramatic miniseries on Internet regulation (e.g., “Winds of War”, “War and Remembrance”) 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 & 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 allows telephony integration already).  So does Google.  All three of these network service providers (check out their capital spending levels in their recently filed annual reports to see how much they are spending) 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.

Next week we will cover T-Mobile’s business announcement (March 18) and also see if/how the New York State PUC tries to “one up” their regulatory bretheren in California on the Comcast-Time Warner Cable merger.  We’ll also have some initial comments on first quarter drivers.  Until then, if you have friends who would like to be added to The Sunday Brief, please have them drop a quick note to sundaybrief@gmail.com and we’ll subscribe them as soon as we can (and they can go to www.sundaybrief.com for the full archive).

Thanks again for your readership, and have a terrific week!