Start-up seeks spectrum for free U.S. network

M2Z Networks says it wants to provide free wireless across U.S.

A venture-backed start-up wants to help the U.S. government meet its universal broadband goal by taking over a large piece of wireless spectrum for a free, nationwide wireless service.

M2Z Networks Inc. last month applied to the U.S. Federal Communications Commission for a 15-year exclusive national license to the radio spectrum band between 2155 MHz and 2175 MHz, saying the agency should bypass typical regulatory steps to help get the network up quickly. Rather than buy the license at auction, the company would pay the government 5% of its gross revenue from a premium subscription service. The band is underutilized, M2Z said in its FCC filing.

The FCC does not have current plans for an auction of that spectrum, an agency spokeswoman said. She declined to comment on M2Z.

The company is jumping in at a tough time for seeking breaks from the government for new networks. Plans for municipal wireless projects in Philadelphia, San Francisco and other cities have faced heated controversy, and spectrum just below the band M2Z seeks is expected to sell for billions in an Advanced Wireless Services auction starting in June.

The M2Z network would provide 384Kbit/sec. of data downstream and 128Kbit/sec. upstream for free, supported by advertising, and offer higher speeds to paying subscribers, according to the filing. Within 10 years of the start of service, the network could be built out to reach 95% of the country's population, it said. Customer devices for accessing the network would cost no more than $250 in the beginning, and prices would go down over time through economies of scale, M2Z predicts.

The company, started by former FCC wireless chief John Muleta and @Home Networks founder Milo Medin, aims to help meet the agency's goal of giving all Americans affordable access to broadband with no cost to taxpayers. In its filing, M2Z compares itself to early radio and TV broadcasters that were granted spectrum by the FCC to provide free over-the-air broadcasting. In order to offer a family-oriented service, M2Z would build in filters to protect children from pornographic or other indecent content on the free service. In addition, public safety agencies would get an interoperable secondary data network.

M2Z is based in Silicon Valley and has backing from major venture firms there, such as Kleiner Perkins Caufield & Byers, Charles River Ventures and Redpoint Ventures. The company could raise more than $400 million to help construct and operate its network, the filing said.

The spectrum band thatM2Z is asking for would be good for the kind of network it wants to build, which most likely would use WiMax, said Tad Neeley, a wireless analyst and principal at Gemini Partners. He doubts users would pay hundreds of dollars for a modem to reach a 384Kbit/sec. service, but said a subscription service at 10Mbit/sec. might draw customers.

However, facing opposition from cellular operators, other wireless providers and the incumbent carriers, M2Z would be lucky to get the plan approved, he said.

"It would be quite a coup for them," Neeley said. "If you take the amount of opposition that the city of Philadelphia got from the Verizons of the world, it would be that on a nationwide level."

Copyright © 2006 IDG Communications, Inc.

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