FCC Weighs Free Internet Plan

By Amy Schatz
Wall Street Journal

In the quest to increase Americans' access to broadband Internet, federal regulators are considering a new plan: get someone to give it away free.

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.

Details of the plan still have to be worked out, and it isn't entirely clear who might bid for the airwaves. Most of the major carriers have already bulked up their spectrum holdings through recent FCC auctions or acquisitions, and start-ups may have difficulty raising enough capital to not only win the auction but build out a network.

If it works, however, the FCC's plan could represent a major step forward in U.S. broadband policy since it would provide at least bare-bones wireless-Internet service to millions of Americans who either don't have access to high-speed Internet services or aren't willing to pay for them.

In the past seven years, the U.S. has dropped from fourth to 15th among 30 developed nations in the percentage of households that subscribe to broadband Internet, according to the Organization for Economic Cooperation and Development.

"We believe this is a good idea and demonstrates the [FCC's] commitment to supporting initiatives that have a positive impact on the next phase of broadband innovation," said Rob Kenny, an FCC spokesman. "Particularly with Wi-Fi it would give consumers greater choices to access the Internet."

M2Z Networks Inc., a Silicon Valley start-up, first proposed a similar plan last year.

The company asked the FCC to give it a national 25 megahertz slice of spectrum to offer free wireless-Internet services. The company hoped to pay for its expenses through advertising and a subscription-based plan for consumers willing to pay more for faster service. The company said it would have voluntarily paid 5% of its revenue to the U.S. Treasury for use of the airwaves.

The FCC originally dismissed that plan. Last week, however, Mr. Martin floated a new proposal. It is similar to M2Z's original plan except for the part about giving away airwaves free.

Mr. Martin wants the FCC to auction off the airwaves instead, with the stipulation that at least a portion of the network be set aside for free use. The company would be required to build out its network to 50% of the population within four years and 95% 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. Details about how to define what content would be unacceptable for viewing over the free network is still under discussion.

Wireless companies generally oppose the FCC giving away spectrum, mostly because they have spent billions of dollars scooping up airwaves to provide phone and next-generation wireless data services. CTIA, an association representing wireless companies, opposed M2Z's plan last year.

"CTIA supports flexible auction rules that allow any and all entities to participate," said CTIA spokesman Joe Farren.

Early skeptics of the plan note that the FCC's last attempt to place strict conditions on an auction didn't work out very well. Earlier this year, wireless companies spent upward of $20 billion to buy airwaves that will be left vacant in 2009, when the U.S. transitions to digital-only television broadcasts. But bidders stayed away from one block of airwaves, which the FCC had set aside to be shared with police and firefighters.


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