FREE BROAD BAND INTERNET? FCC CHAIRMAN SAYS: NO WAY!

UPDATE: FCC Opposes Silicon Valley VCs' Free-Broadband Plan8-15-07 5:14 PM EDT
(Updates with comment from Rep. Anna Eshoo, D-Cal., in the fifth paragraph.)

By Corey Boles

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- The Federal Communications Commission is seeking to shut the door on a plan by a group of Silicon Valley entrepreneurs to offer free wireless broadband Internet service everywhere in the U.S., the chief executive of the group said Wednesday.

M2Z Networks Inc. issued a statement Wednesday in which it said it would take the FCC to court in an attempt to force the agency to conduct a thorough analysis of the plan before it determined whether it would back it or not.

The company has proposed taking 25 megahertz of spectrum that is currently vacant and using it to build a wireless broadband Internet network to provide free service to 95% of Americans within a decade.

In addition to the backing of well-known Silicon Valley venture capitalists who count among their earlier investments Amazon.com Inc. (AMZN), Netscape, Google Inc. (GOOG), social networking site MySpace and TiVO Inc. (TIVO), the plan has the backing of a number of prominent lawmakers.

"Every American should have access to high-speed broadband Internet service," said Eshoo in a statement. "It's beyond me why the chairman of the FCC would be circulating an order within the Commission to kill the M2Z application."

According to John Muleta, a former head of the FCC's wireless bureau and now chief executive of M2Z, the group was informed last week by FCC Chairman Kevin Martin's office that he had circulated a plan with the other four commissioners to deny M2Z's plan.

"We strongly believe that the FCC should fully and fairly review the detailed record associated with M2Z's license application...and make a decision consistent with the law Congress enacted," said Uzoma Onyeije, vice president of regulatory affairs for M2Z.

In order for the M2Z plan to succeed, it would require the FCC to hand over 25 megahertz of spectrum, which goes against a principle established a decade ago that the agency should sell off any spectrum in an auction.

In exchange for being given the spectrum M2Z would return 5% of any gross revenues its network derived to the U.S. Treasury.

The company would then use that spectrum to construct a wireless broadband network covering 95% of the U.S. population within 10 years.

The Menlo Park, Calif., company would seek to gain a return on its investment by offering access to the network on a wholesale basis. A group of high-tech companies including Google, Intel Corp. (INTC), eBay Inc. (EBAY) and Yahoo Inc. (YHOO) had aggressively lobbied the FCC that it mandate that another swathe of spectrum being sold early next year be operated on a wholesale basis. The companies were ultimately unsuccessful in their campaign.

M2Z would also offer a premium broadband service that it said would be faster than current DSL speeds offered by the telephone companies like AT&T Inc. (T) and Verizon Communications (VZ), for which it would charge between $20 to $30 a month.

It has pledged to filter indecent content distributed on the network and it would offer free access to the network to any federal, state or municipal public safety organization.

M2Z filed its plan with the FCC in May 2006, and until this week, hadn't heard anything back from the agency.

Muleta said the FCC was obliged to determine whether the proposal is in the public interest by May 2007, something it has so far failed to do. He also said it was facing a separate deadline of Sept. 1 to decide whether it approved of the plan.

In a filing to the FCC made this week, M2Z said one its advisors was contacted by a legal advisor to Martin, who said that the chairman's office was going to circulate a decision to the other commissioners that would deny the M2Z petition.

At the same time the Martin advisor said a rule-making procedure over what to do with the 25 megahertz of spectrum would be initiated.

An FCC spokesman declined to comment for this article.

Public interest groups have been strong advocates of the M2Z plan. Andy Schwartzman of the group Media Access Project said he was disappointed that it appeared the FCC had decided against M2Z's plan.

Noting that Martin has repeatedly publicly stated that it is a key policy objective of his to promote more rapid deployment of broadband, Schwartzman said the FCC should be willing to "take chances to enable broadband deployment."

"We think M2Z has a creative and potentially viable concept and we think the FCC should be promoting experimentation," he said.

Incumbent companies like Verizon and AT&T have lined up in opposition to the plan.

In March, CTIA, the wireless industry's Washington lobby group, urged the FCC in a filing to "move immediately to dismiss or deny M2Z's application."

The group opposes the proposal because it said it would circumvent the agency's auction process.

-By Corey Boles, Dow Jones Newswires; 202-862-6637; corey.boles@dowjones.com


(END) Dow Jones Newswires
08-15-071714ET
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