FCC Promotes Subsidized Wi-Fi

Published November 1, 2008

Federal Communications Commission Chairman Kevin Martin says he wants to create taxpayer-subsidized, free, high-speed wireless Internet in many parts of the United States, particularly in rural areas.

Martin says he wants to auction off a portion of the bandwidth spectrum not purchased by telecom companies in previous auctions. Those who submit the winning bids for licenses on these bandwidths would be required to dedicate some of the spectrum for free wi-fi—the goal is up to 25 percent—while using the rest for premium services.

Martin also wants FCC to require obscene content to be filtered out from the free wi-fi offered under the plan.

In an August interview with USA Today, Martin said a significant portion of his plan could be funded through the Universal Service Fund. That fund was established by the federal government in 1996 and is maintained by the Universal Service Administrative Company to keep the price of telephone service low in rural areas. Telecommunication companies offering services between states contribute to the fund each year, which distributed $6.95 billion in 2007.

Feasibility Questioned

Critics of Martin’s plan question whether achieving such a level of free wireless connectivity is technically possible without a major investment by consumers in new hardware.

Martin’s plan also has drawn criticism from service providers that paid billions of dollars to acquire broadband spectrum licenses in recent years. FCC held an auction between January and March of this year for licenses in the 700 MHZ band that yielded $19.5 billion in revenue.

The auction allowed 101 bidders to accumulate 1,090 exclusive licenses for different sections of this area of broadband frequency. After spending money for federal licenses, experts say, bidders such as AT&T, Cox Communications, and Qualcomm may object to Martin’s latest auction proposal that would give away part of the spectrum. As more licenses are issued in the future, the price per bid will rise in response to increasing scarcity of frequencies.

Not Really Free?

Researcher Ryan Radia of the Competitive Enterprise Institute is concerned the media are not covering Martin’s plan accurately.

“Based on my understanding of Kevin Martin’s plans and M2Z’s proposed network, referring to the network as ‘wi-fi’ is not entirely accurate,” Radia said. “Generally, the term wi-fi refers specifically to unlicensed networks operating in accordance with IEEE specifications. While the exact details of the proposed nationwide free wireless network are unclear, by all accounts the network would not be natively compatible with existing wi-fi devices. Notebook computers, for example, would likely need special equipment in order to function properly with the M2Z network.”

Brooklyn Law School Prof. Derek Bambauer disagrees with the idea of funding free high-speed Internet through direct fees and industry funds.

“If wi-fi is truly important to the economy or to the digital divide, it seems to make the most sense to pay for it from general tax revenues,” Bambauer said, adding the use of general funds is the approach “least likely to distort incentives in the Internet access market.”

Government Role Debated

University of Pittsburgh Law Prof. Michael Madison says a private-public collaboration to provide free high speed Internet may be the most effective way to enact Martin’s policy.

“The government’s role should be complementary to the role of industry because industry alone has not achieved levels of access that the chairman believes can and should be achieved,” Madison said. He sees analogies in the “construction of the Interstate highway system and rural electricification” when looking at the potential for free high-speed Internet.

“In both cases,” Madison said, “the federal government played an important and necessary strategic role.”

Radia disagrees, saying, “despite the significant chunks of spectrum available for advanced wireless networks, supply remains heavily constrained due to government policies.

“The less spectrum available for flexible use, the higher the cost of the remaining spectrum, driving up costs and resulting in higher prices,” Radia said. He argues the major problem is “artificial scarcity in spectrum” created by the federal government instead of giving a free hand to markets to determine the value of bandwidth through competition.

“Access to the airwaves depends on favors from Washington rather than market price signals and competitive forces,” Radia said.

Concerns Over Content Filtering

Analysts are also concerned federal government involvement in providing free high-speed Internet access will bring excessive oversight. Radia sees the potential for a “decidedly non-neutral wireless network” where “an R-rated movie would likely be blocked by this network.”

Bambauer foresees “strong pressure for free wi-fi providers to filter traffic in ways that run directly counter to net neutrality” if Martin’s plans come to fruition, saying, “many of the rationales for filtering will seem laudable: preventing the transmission of viruses, inhibiting copyright infringement, and so forth.”

Bambauer counters the presumed goodwill of these intentions by noting, “that type of content-specific traffic inspection is anathema to most conceptions of net neutrality.”

“[I see hypocrisy when] groups are willing to set aside the supposedly coveted principles of openness and neutrality in exchange for universal broadband access [from the FCC],” Radia agreed. “If an Internet service provider were to decide which materials were suitable for its customers to access, the net neutrality brigade would undoubtedly be up in arms.”

Bambauer said he hopes “free Wi-Fi will spur policymakers to be more precise and robust in how they define the elusive term ‘net neutrality’ at a technical level.”

Nicholas Katers ([email protected]) writes from Franklin, Wisconsin.