Fate of Last-Mile Venture in FCC Hands

If M2Z Networks Inc. gets its way, then competitive service providers could have another alternative to incumbent lastmile access. By press time, though, the company was ready to go to court against the FCC, citing word that Chairman Kevin Martin is prepared to reject its proposal. Read FCC Opens Unused-Spectrum Proceeding, M2Z Appeals Dismissal for an update.

The Silicon Valley-based company wants to build a broadband wireless network in the 2155-2175MHz band so it can provide free Internet access to 95 percent of the U.S. population. The service would block objectionable content and be available at no charge at speeds of 512kbps, or six times faster than dial-up service, to anyone. Users wanting faster connections, however, would pay a $20 or $30 monthly fee for 3mbps.

M2Z also wants to offer wholesale IP connectivity to entities such as CLECs, ISPs and rural LECs. It would be doing them a favor, says John Muleta, M2Zs CEO and co-founder, and former head of the FCCs Wireless Telecommunications Bureau. The FCC really cut off the legs of all the CLECs and ISPs when it deregulated cable modem and DSL, he says.

In August 2005, the FCC deregulated DSL access a move that was foreshadowed just weeks earlier when the Supreme Court ruled against Brand X Internet LLC, freeing cable companies from network-sharing requirements sought by the ISP.

For service providers whose business customers have workers in the field, M2Z offers a money-saving option, according to M2Z. For example, when a wireless broadband network cant be extended from the CLEC to mobile, the CLEC could partner with M2Z to provide that connectivity. Instead of eating up pricey cellular minutes, companies could get inexpensive access to the M2Z-run network.

To date, M2Z has secured $800 million in private equity money from investors that funded Google, BigBand Networks and MySpace. M2Z also has equipment makers on standby; theyre ready to start making infrastructure as soon as they hear the projects a go.

But the holdup has come from the FCC. More than a year ago, M2Z asked the FCC for approval to build the network. M2Z wants to lease the spectrum from the government, instead of going through the typical auction process; it would then reimburse the U.S. Treasury with 5 percent of proceeds made from advertising support and income for premium subscriptions. Further, it would give public agencies access to the network during national emergencies.

The FCC was required statutorily to decide by May 5, 2007, whether M2Zs pitch is in the public interest. M2Z didnt hear from the FCC until early August, however, when Muleta says FCC Chairman Kevin Martin told the company he was asking fellow commissioners to deny M2Zs request. No reason apparently was given. Afterward, M2Z announced it would take the FCC to court; it said the agency hadnt given the idea fair consideration and had violated part of the Telecom Act by not doing so. The company called on the FCC to make a decision by Sept. 1.

The FCC doesnt comment on proceedings under consideration.

Supporters say a nationwide wireless broadband network would meet President George W. Bushs call for ubiquitous broadband and bridge the digital divide by making high-speed access available to nearly all Americans. Fans include the National Association of State Utility Consumer Advocates and Rep. Anna Eshoo, D-Calif. By press time, the FCC had collected almost 1,200 public comments on M2Zs proposition, many in favor.

The idea is bold and it does cause some in the industry to wonder how realistic it is.

Clearly, M2Z has its own angle on what the public interest should be, which I dont believe is necessarily in line with what the public interest actually is, says Current Analysis analyst Brian Washburn. What he questions is, is it fair for the FCC to award free spectrum, when the agency otherwise auctions bandwidth to the highest bidder? What happens if M2Z gets the spectrum, then does nothing with it, or, worse, builds a network and then closes shop? Is it fair, in a democracy, to block content? Washburn also says a free network could be more of a threat than a help to CLECs.

Still, Washburn says, Muleta and M2Z should be commended for finding unused spectrum and trying to do something good with it. That part, I think, is definitely worthy of respect, he says.

Opponents of the M2Zs proposal, not surprisingly, include wireless interests. For example, CTIA and the Wireless Communications Association International say the FCC must reject the bid on the basis that the agency has to auction spectrum and that 384kpbs doesnt constitute highspeed access.

There is a chance the FCC will address the M2Z matter after this issue of PHONE+ goes to press. If the agency approves the deal, M2Z says it would start rolling out the network immediately, making a new last-mile alternative that much closer to fruition.