FCC Scraps Free National Wireless Plan

Published September 24, 2010

The Federal Communications Commission recently pulled the plug on a proposed free coast-to-coast wireless service.

According to the proposal, the national service would have been offered at the low end of the 2GHz band and was to pay for itself via advertisements and by selling commercial access to various portions of the license area.

M2Z Networks, the company proposing the plan, had committed to building out the project in a decade in return for paying 5 percent of its annual revenue to the United States Treasury.

FCC Seriously Considered It
The idea was given serious consideration for four years before finally being scrapped, an action that telecom experts such as George Ou, policy director for the Digital Society in Washington DC, largely applauded.

“The FCC woke up before it was bitten hard,” said Ou. “M2Z was offering to do this in exchange for free spectrum. [The FCC] has the experience that when you give out free spectrum, good things don’t happen. It’s a lot like municipal wi-fi—there Earthlink invested millions, then eventually offered someone money to take it off of their hands. No one did.”

‘Municipal Wi-Fi on Steroids’
“This struck me as municipal wi-fi on steroids,” said Rick Rotundo, vice president of marketing for Xg Technology in Fort Lauderdale, Florida. “It was not viable.”

The “free” broadband would have been incredibly slow compared to what’s available at McDonald’s, Starbuck’s, Panera Bread, and several other free wi-fi hotspots across the country, Ou noted.

To get comparable speeds, users would have had to pay a fee. And with readily accessible free wi-fi, there was little chance these fees would have been paid, said Ou.

“So if the FCC hadn’t pulled the plug, M2Z would have had some very valuable spectrum, which could be much more valuable if auctioned off than if given in exchange for the relatively low fees that M2Z was offering to pay,” he said.

‘Taxpayers Stuck with Bill’
M2Z’s offer of a royalty payment to the FCC in return for the spectrum was highly suspect because the royalty would have come out of profits, Ou said.
“They know the routine,” Ou said. “Companies ask for millions of dollars of spectrum, then offer to pay a small fee. When it doesn’t work, the taxpayers get stuck with the bill. The FCC has been bitten hard by deals like this in the past.”

Any profits would have been hard to come by, even with paying customers, because part of the venture’s premise was to rely on advertising revenues, said John Bambenek, an IT security researcher and public policy consultant based in Champaign, Illinois. He noted prices for advertising across all types of media have dropped sharply in the last few years,

Plus, “The advertising itself would have been invasive,” Bambenek said. “Users of the free service would have to click through the advertising to get to the content. While that might be acceptable to someone who goes to the New York Times or another site with content of interest, users of a slow wi-fi service were unlikely to stand for it.

“The fewer users, the lower still the advertising rates,” he noted.

Phil Britt ([email protected]) writes from South Holland, Illinois.