The Bush administration is opposing a Federal Communications Commission spectrum auction plan that would require the winner to provide a free wireless broadband tier to 50 percent of the United States in four years and 95 percent of the country within 10 years. The FCC is expected to vote on the plan as early as next week.
In a Dec. 10 letter to FCC Chairman Kevin Martin, Secretary of Commerce Carlos Gutierrez urged Martin to reconsider the proposal in light of the Bush administration's position that spectrum should be allocated by markets rather than governments.
"The history of FCC spectrum auctions has shown that the potential for problems increases in instances where licensing is overly prescriptive or designed around unproven business models," Gutierrez wrote. "In contrast, open and highly competitive auction processes have supported both greatly expanded broadband services and the taxpayers' interests in spectrum license allocation."
Under Martin's plan, the airwaves to be auctioned would include 25MHz in the 2,155 to 2,180MHz advanced wireless services band. The proposed free broadband network would support itself by advertising and offering faster speeds on pay tiers. The free tier of broadband services would be family friendly, with the FCC requiring the winning bidder to filter out pornography.
In addition, the FCC wants to impose an open access requirement on the spectrum, allowing any device or software to plug into the network.
"The administration believes that the...spectrum should be auctioned off without price or product mandates," Gutierrez wrote. "The FCC should rely on market forces to determine the best use of spectrum, subject to appropriate government rules to prevent harmful interference."
Martin first proposed the idea in May but ran into stiff opposition from incumbent wireless carriers worried about interference with their own networks. In particular, T-Mobile, which paid $4 billion to win the airwaves adjacent to the spectrum that will be up for auction, fiercely opposes Martin's plan.
But an FCC engineering report released Oct. 11 concluded that two-way broadband service in the spectrum would not cause harmful interference to wireless services of other carriers.
"The analysis shows that ... [a] device operating in close proximity does not necessarily result in interference," the FCC report (PDF) stated. "And when factoring in actual operation under nonstatic conditions, the situation only improves."
Martin's plan closely mirrors a 2005 proposal by Silicon Valley start-up M2Z Networks. The catch, though, was M2Z didn't want to bid on the spectrum. Instead, M2Z proposed that the FCC lease the spectrum to the company in return for 5 percent of the gross receipts. M2Z now says it is now willing to bid on the spectrum. The company is backed by Silicon Valley powerhouse venture capitalist Kleiner Perkins Caufield & Byers.
AT&T and Verizon have also opposed the auction plan, as have the CTIA, the carriers' principal trade association, and several Republican members of Congress. In addition to interference concerns, the carriers have raised questions about M2Z's ability to raise the capital needed to build a nationwide wireless network.
Other members of Congress, though, have shown an interest in the M2Z proposal with Reps. Anna Eshoo (D-Calif.) and Chris Cannon (R-Utah) introducing legislation that would require the FCC to auction fallow spectrum (like the 2155-2180MHz band, for instance) to provide free, filtered broadband for 95 percent of the country within 10 years.
"The results of the 700 MHz auction disappointed many of us who hoped that a new entrant would emerge," Eshoo said in an April 16 statement. "Seventy percent of the spectrum auctioned went to only two carriers. While the auction required under this legislation is open to anyone, it is my hope that the bold conditions of requiring free, family friendly service will encourage the entry of a new kind of national broadband service provider."
John Muleta, CEO and founder of M2Z Networks, said Oct. 10 after the FCC report on interference was issued, "All of the policy and technical benchmarks have now been met and all that is needed is an affirmative vote by the FCC commissioners so that this spectrum can be auctioned and be put into productive use as quickly as possible."
Gutierrez insists a "government-mandated free nationwide network is not the most effective or efficient use was to assist underserved areas."