TechKnowledge No. 111

“Free” (Filtered) Broadband?

By James Plummer
January 24, 2008

This month sees the long-awaited Federal Communications Commission auction of “beachfront” wireless spectrum in the 700MHz range to companies looking to provide broadband Internet services. But there’s already a battle brewing concerning another chunk of spectrum. The disposition of the band from 2155-2175 MHz may ultimately be settled in the federal courts. According to the FCC, it is for “fixed and mobile services and designated for Advanced Wireless Services (AWS) use.” But a firm called M2Z Networks wants the FCC to turn it over, free of any upfront charge.

So, who is M2Z and what does it want to do with this spectrum? M2Z is headed by former FCC Wireless Bureau staffer John Muleta and backed to the tune of $400 million by a consortium of Silicon Valley venture capitalists. M2Z proposes to use the spectrum to build a wireless broadband network and offer free-of-charge access to 95 percent of the country within 10 years.

M2Z first filed its proposal in May 2006, after waiting several years for an FCC decision on what to do with the frequencies. Although the FCC is supposed to issue timely responses to such petitions, it wasn’t until August 31, 2007 that the FCC finally denied M2Z’s petition and issued a Notice of Proposed Rulemaking seeking comment on possible permanent uses of the spectrum. M2Z then filed suit challenging the FCC’s action in October, and the case is currently wending its way through the federal court system.

By dangling the promise of “free,” “public interest” services in front of the FCC, the M2Z proposal parallels the widely touted and largely adopted proposal submitted to the FCC by now-defunct Frontline Wireless regarding the disposition of the 700MHz wavelengths. Such rhetoric has evidently become boilerplate for firms seeking to pay less than a market rate for the right to use spectrum.

To that end, M2Z has leaned heavily on rhetoric regarding the so-called “digital divide”—the fact that the richer you are, the more likely you are to have broadband access. The assumption is that broadband access is akin to indoor plumbing or telephone service, an essential good that no American home can do without. It is an assumption with little basis, though. A recent survey revealed that almost one third of households see little point in having Internet access at home in the first place. It found that more than half of U.S. households have broadband services at home, up from virtually zero 10 years ago. Only 11 percent of the 29 percent with no home Internet access (that’s 2.3 percent overall) cite the cost of access as a sticking point. M2Z wants to bridge this divide by using the spectrum to provide free-of-charge, advertiser-supported consumer broadband.

To further the “public interest,” this free service would be hobbled by content filters that M2Z touts as “family-friendly.” Unfortunately, M2Z has not specified whether or not the filters would screen out such things as “hate speech.” Many Internet filter services do, but the “hate speech” moniker has been used as figleaf to cover for the blocking of objectionable political content, such as pro-Second Amendment websites. M2Z’s broadband vision is analogous to the present situation with broadcast television, where spectrum-subsidized broadcasters offer sanitized entertainment and circumscribed political debate relative to the more freewheeling cable and satellite providers.

Any such plan raises serious questions: Would M2Z tweak its filters to curry favor with the FCC commissioners who vote on whether or not it is meeting its obligations as the spectrum licensee? Current FCC chairman Kevin Martin has shown a sudden zeal for extending its regulatory power to cable television, and a similar impulse toward control can be found in other commissioners and possible future chairmen—even if their specific agendas are different. Their subsidized, censored media could crowd out uncensored information and a true marketplace of ideas.

But some critics would say that even that scenario gives the M2Z plan too much credit. It would offer 384 kilobits per second downstream and 128 kbps upstream within 10 years, which will be obsolete by the time the network is built. In some places, a three megabits per second connection already can be gotten for around $30 per month. AT&T is now offering 768 kbps DSL in some areas for $15 per month, and Verizon has a 15 Mbps service (40 times faster than the M2Z plan) for $53/month. Even wireless networks are rolling out “3G” data networks that will be faster than 384 kbps. Consumers may just ignore the chance to use free, slow, sanitized wireless.

M2Z also wants to offer a pay service, with no filters and no advertising, which would offer faster speeds, with five percent of the revenue going to the FCC. This reveals the heart of the M2Z plan: Get a hold of spectrum by pitching a “free” service in “the public interest,” then convert it to a for-profit network, using spectrum assets it otherwise would have had to buy.

Although M2Z has characterized the spectrum in question as “fallow,” there are in fact several users on the frequencies which would have to be moved, at some cost. Mobile-radio and cell-phone networks use the wavelengths to move traffic within their network backbones, just not directly to consumers. Those services ultimately serve the public as well.

The M2Z business plan for subsidized, sanitized, “free” wireless Internet access simply has no special moral claim to the 2100MHz spectrum. M2Z is correct when it says that the notoriously inefficient FCC needs to stop playing games and decide once and for all what to do with the spectrum. But that’s not for the sake of M2Z. Participants in this month’s spectrum auction are not acting on complete information because they don’t know when or if there will be another spectrum auction—or a giveaway—for another competitive consumer broadband offering.

James Plummer is the research assistant for Telecom, Internet and Information Policy Studies at the Cato Institute. To subscribe, or see a list of all previous TechKnowledge articles, visit www.cato.org/tech/tk-index.html.