Startup to Pitch Free, Nationwide Wireless Broadband Internet Access

A San Francisco Bay Area company has submitted a request for spectrum to launch a free high-speed broadband Internet service across the entire United States.

Startup M2Z Networks, Inc. on May 5 submitted a request to the Federal Communications Commission for a license to a vacant 20-megahertz band in order to broadcast free high-speed broadband Internet across the country.

To pick up the signal, users would need to purchase a M2Z-certified reception device that the company estimates will cost $250 or less as the technology evolves.

According to the company, M2Z would be free to sell advertising across the network, as well as use the spectrum for other purposes.

The concept of metropolitan Internet access began in 2005, when Philadelphia decided to offer its residents free Wi-Fi access. Tempe, Ariz., and other cities soon followed suit, while San Francisco's decision to procure a free Wi-Fi network from Google generated intense debate.

Meanwhile, technologies such as WiMAX have also emerged as potential metropolitan wireless solutions.

What's different about M2Z's proposal, however, is that it would create a privately-funded wireless backbone across the U.S., something never proposed before.

"I think something needs to be done to deal with the broadband gap we have in the U.S. compared to other nations," said Bruce Sachs, a founding board member of M2Z and managing partner of Charles River Ventures. "Here we are at 35 percent broadband penetration, and countries like [South] Korea are twice that. Ultimately that gap will lead to gaps in everything from education to commerce. I think the project really addresses a big need in this country."

The odds are against the startup, however. The FCC declined to comment on the status of the application. However, Blair Levin, former chief of staff with the FCC and telecommunications policy specialist for brokerage firm Stifel Nicolaus, says that it is unlikely that the FCC will accept the application as is.

"I don't think it's a slam dunk in either direction," Levin said. "The commission won't just look at this and say 'Go away.' I think they will want to evaluate it but at the end of the day, if you put a gun to my head, if I had to guess, I would say it's more likely that they turn it down."

M2Z is not offering to pay for the rights to the frequencies, nor are they willing to, Sachs said. Instead, the company is asking them to be handed over, free of charge, for a minimum of 10 years.

A free grant of spectrum would be unusual, Levin noted. In July 1994, the FCC began auctioning off frequencies for millions, sometimes even billions, of dollars. But the M2Z proposal points out that the specific frequencies it is requesting are an "unpaired, undefined and uncluttered block of spectrum in need of a long-term useful occupant".

M2Z will use time-division-duplexing (TDD) technology to broadcast its wireless signal nationally. TDD is a transmission protocol that uses a single block of spectrum for sending and receiving information, and a technology common to both WiMAX and some 3G networks.

M2Z's business model allows it to offer free Internet based on the same model that the TV and radio industries use: advertising revenue.

It also proposes to offer a premium service with connections that are significantly faster than the 384 kilobit-per-second connection that the regular service would provide.

Five percent of the gross revenue from the premium service would voluntarily be paid out to the U.S. Treasury, which Sachs says is a model also borrowed from the TV industry.

"We're not looking for a handout," he said. "It's totally within the FCC's jurisdiction to give us a license for this spectrum. Basically they just have to decide it's in the public interest."

The M2Z proposal says that, once approved, it will begin an "aggressive build-out" phase, bringing 33 percent national coverage within three years, 66 percent after five years and 95 percent after 10 years. But it all depends upon how long the FCC takes to give the green light.

"Typically this process could happen in six to nine months and it could be more like nine to fifteen," said Sachs.

Sachs' company is one of three venture capital firms behind M2Z. The other backers are Kleiner Perkins Caufield & Byers and Redpoint Ventures.

M2Z was founded in 2005 by Milo Medin, who also founded @Home Networks in 1995, and John Muleta, former partner and co-chair of the communications practice at Venable LLP.

"There are two entrepreneurs here that have tremendous track records and credibility about how to manage and how to build out a very competitive service," said Sachs.

If granted, the M2Z network would be accountable for the same content regulations as radio and television. The proposal commits to "block access to indecent content to all free access service users."

"How you define indecency is a debate we'll have now, we had it 20 years ago and we'll have it 20 years from now," says Levin. "If you're a broadcaster you don't have to run everything. That's one of the many interesting things that will be debated."

Levin says that although his gut tells him that the FCC won't grant M2Z carte blanche access to the frequencies, this proposal will bring the U.S. closer to the free Internet access that so many of technology's marquee players are racing to provide.

"I think the M2Z proposal raises a lot of issues that are very concrete," he said. "One can bemoan America's broadband penetration but it's not quite clear that there were concrete proposals before this that could have changed that. This is a concrete proposal that has the potential to change. It will provide fodder for a very, very interesting and lively debate."