One of the most controversial initiatives in the US wireless industry is the planned auction of AWS-3 spectrum, which the FCC wants to earmark for a company that will provide a national free broadband service. It now looks as though a new FCC will have to take on the issue, after the agency’s current chair, Kevin Martin, cancelled the meeting on December 18 when a vote was set to be taken on the issue.
The delay is unlikely to kill the free wireless plan, which is heavily supported by the Democrats and will fit into the broader telecoms strategies of the incoming administration, geared to universal broadband and open access. So it will not necessarily please opponents of the scheme, notably the cellcos ‘ which fear new competition ‘ and particularly T-Mobile, which claims it fears interference with its adjacent AWS-1 spectrum, used for its ongoing 3G build-out.
However, it may disappoint M2Z Networks, a start-up set up specifically to bid for the license. Although the FCC had previously refused M2Z’s request to hand over the license without contest, to support its free broadband plans, it has still been accused of putting M2Z in a preferred position that does not leave the auction open to other bidders with different business models. A new FCC, while still favoring the free network concept, may be less impressed with M2Z’s approach.
Senator Jay Rockefeller and Representative Henry Waxman, who will chair the committees overseeing the FCC in the next Congress, sent a letter asking Martin to delay the AWS-3 vote, in order to focus all the meeting’s attention on the complex issues associated with the digital TV transition, set for February 19 2009.
The free wireless internet proposal would create a nationwide license in the 2155-2180MHz band and require the winning bidder to open up 25% of its network for free access with an anti-pornography filter. But last week Commerce Secretary Carlos Gutierrez indicated that the White House also opposes the plan, and the bid to impose the free network condition.
M2Z said the delay constitutes a violation of statutory deadlines and the Communications Act, and while the new administration is almost certain to find a way to push a free broadband plan ahead, the company ‘ headed by former FCC Commissioner John Muleta ‘ may see real challenges to its business model. Some real issues ‘ separate from the political self-seeking of the cellcos ‘ have been raised around the M2Z approach, which have been somewhat glossed over by Kevin Martin’s enthusiasm, but may be scrutinized more closely by a new FCC. The worst result, after all, and one not without precedent in the US, would be to promise free wireless access to all, only to find that the model failed ‘ like a grand sized version of the disappointment with many municipal free metrozones projects over the past few years.
As with those metrozones, the AWS-3 free wireless plan is seeking to tread an uneasy balance between supporting social justice through affordable, universal internet access; and not paying for that out of taxpayers’ pockets, far less acceptable in the US than in many European countries. So a commercial model has to be found that can support a private operator’s profits sufficiently that the operator can also afford to offer the free basic service, yet in very few cases in the metro experiments was such a model successfully identified (except where the municipality effectively underwrote the network by being an ‘anchor tenant’, guaranteeing a certain level of fees for local government and/or public safety applications). So the FCC and M2Z may, as their critics say, have underestimated the cost of building and operating their network, and the difficulty of funding this largely through advertising and premium services, the usual options ‘ advertisers will generally prefer networks that target higher value customers, while premium services will be competing with the more sophisticated systems of cellcos and other operators.