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May 30, 2008

FCC Proposes Free Wireless

By Gary Kim, Contributing Editor

The Federal Communications Commission is considering a plan that would require the winner of a planned airwaves auction to offer free wireless-Internet service to most Americans within the next few years, reports Wall Street Journal writer Amyb Schatz.

Details of the plan still have to be worked out, and it isn't entirely clear who might bid for the airwaves under those conditions. Nobody liked the idea of building a public safety network in the first place, which is why the spectrum hasn't been sold. Adding "free access" requirements on top does not seem calculated to raise interest.
M2Z Networks, a Silicon Valley start-up, last year asked the FCC (News - Alert) for a national block of 25 MHz worth of spectrum to offer free wireless-Internet services. The company business plan was that free users would be exposed to advertising while there also would be a subscription-based plan for consumers willing to pay more for faster service.
If that sounds like the model municipal Wi-Fi backers proposed, it is. The Commission didn't originally like the idea of giving away spectrum, and now proposes auctioning such spectrum instead, with a requirement that a portion of the network be set aside for free use.
The winning bidder would be required to build out its network to half of the U.S. population within four years and 95 percent within 10 years.
Internet traffic on that free area would also face content restrictions to prevent users from looking at pornographic or obscene material, according to FCC officials.
Other holders of licensed spectrum won't like the idea, of course. But it's an interesting idea, even if recent precedent provides small comfort. So far, municipal Wi-Fi operators have been unable to create workable revenue models based on advertising and paid access. Of course, those were limited, local access plans. Perhaps a national network would be more attractive. But it's still risky.
The FCC already has created a "public safety" requirement that investors didn't like. Adding yet another requirement for free access is not likely to improve the payback model, either. The only element that probably would entice new bidders is the expectation that spectrum costs would be quite low.
To have any chance of success the FCC would probably have to create a very-low minimum bid price, as the last reserve price got no bidders at all.
Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.
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