Startup may sue FCC over handling of wireless plan

M2Z Networks Inc. may sue the U.S. Federal Communications Commission after the agency turned down its request for radio frequencies for a national broadband wireless network.

On Aug. 31, the FCC rejected M2Z’s plan to roll out free and paid services reaching at least 95 percent of Americas. For that service, M2Z asked for 20MHz of spectrum for which it would pay the government 5 percent of its annual gross revenue. M2Z proposed the plan in May 2006.

The FCC didn’t rule on the plan within a year and apparently didn’t look at M2Z’s supporting documents because it never commented on them, according to M2Z Co-founder and CEO John Muleta. Legally it had to do both, Muleta said, so M2Z is considering filing suit in a federal appeals court.

The issue of wireless spectrum is heating up as the FCC heads toward its planned January auction of frequencies in the 700MHz band being vacated by analog TV stations. Google Inc. and others wanted the FCC to require wholesale access to that spectrum so multiple providers could offer services. It eventually included a provision for some spectrum to be usable for any application on any device.

M2Z wants to use spectrum between 2155MHz and 2175MHz, a band previously used for microwave links between carrier facilities, which the FCC set aside for AWS (Advanced Wireless Services) in 2000. The agency has no plan yet for how to assign the spectrum. In its order rejecting M2Z’s plan, the FCC said “the public interest is best served by first seeking public comment on how the band should be used and licensed.”

The order turned down M2Z’s plan “without prejudice,” meaning it didn’t stop the company from proposing it again, according to Muleta. M2Z plans to participate in the future public comment process but believes FCC’s indecision has gone on too long already. “They took 15 months to decide that they really couldn’t make a decision,” Muleta said. Meanwhile, the country still lacks sufficient broadband competition, he said.

M2Z wants to deliver a free service, supported partly by locally targeted search advertising, at 384K bps (bits per second) downstream and 128K bps upstream. People would only have to give a valid e-mail address or phone number to use it. Like broadcast TV, the free service would be “family friendly,” meaning it would filter out content that wasn’t appropriate for children. A paid service on the same network would offer 3M bps and access to anything on the Internet.

Muleta knows who he’s up against. He was chief of the FCC’s wireless bureau from 2003 to 2005. M2Z, founded in 2005 and based in Menlo Park, California, is backed by Silicon Valley venture capital firms.

One wireless analyst said the free service wouldn’t be fast enough for most consumers. He also questioned its “family friendly” content restrictions.

“At that point, you’re not really giving Internet service,” said Sascha Meinrath, research director for the Wireless Future program at the public policy group New America Foundation.

But even if its service never gets turned on, M2Z has done its part to foster broadband competition, Meinrath said.

“M2Z has pretty single-handedly shifted the debate,” Meinrath said. Its plan to pay for spectrum through royalties rather than up front, as well as to make more efficient use of spectrum and offer a free service, are likely to show up in future spectrum allocation plans, he said. More efficient wireless networks should mean more bandwidth at lower cost, a better deal for consumers, Meinrath said.

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