By DIBYA SARKAR, AP Business Writer
The Federal Communications Commission at its June 12 meeting will likely vote on an order setting terms of the spectrum auction that could include the free Internet service provision. A similar proposal was rejected last year.
"We're hoping there will be increased interest (in the proposal) and because this will provide wireless broadband services to more Americans it is certainly something we want to see," said FCC spokesman Rob Kenny.
Kenny said he didn't know when the auction would be held and details must still be worked out. However, he said the resulting network must reach 50 percent of the population four years after the winner gets a license and then 95 percent after 10 years, he said.
Under the plan, the winning bidder would provide free high-speed service on a small portion of the spectrum that potentially could be available on millions of Americans' phones and laptops.
Jessica Zufolo, a telecom analyst with Medley Global Advisors, said the plan is "risky."
"While it (the public interest component) is hugely laudable and really fulfills a lot of public policy objectives of both Congress and the FCC, from a business standpoint it's very difficult to justify," she said.
Two years ago, a wireless startup, M2Z Networks Inc. based in Menlo Park, Calif., asked the FCC to let it use those underutilized airwaves so it could offer free nationwide broadband service.
In exchange, M2Z — co-founded by John Muleta, former head of the FCC's wireless telecommunications bureau — would pay the federal government 5 percent of sales generated from advertising on the resulting network.
The FCC rejected the proposal because it meant giving the airwaves to the company without it bidding against other carriers for the rights.
Supporters of the plan say it could help widen competition in a market dominated by wireless carriers, such as AT&T Inc. and Verizon Wireless.
"If you have a service where you can have competitive access to different handsets, that is going to be very attractive compared to a wireless industry that makes you have to sign up with AT&T if you want an iPhone," said Andrew Jay Schwartzman, president and chief executive of the public interest group Media Access Project.
He acknowledged the technology is still in the laboratory stage and infrastructure costs to deploy a network in urban and very rural areas could be high, but said it's worth the risk.
The wireless industry, which opposed M2Z's proposal, has said imposing conditions on any auctioned spectrum would shrink the pool of bidders.
"We support flexible auction rules that allow any and all entities to bid," said Joe Farren, a spokesman for CTIA — The Wireless Association, whose members include AT&T, Sprint Nextel Corp. and Verizon Wireless, a joint venture between Verizon Communications Inc. and Vodafone Group PLC.
The FCC earlier this year tried to auction off a portion of spectrum in which a winning bidder would have been required to build a nationwide emergency communications network for public safety agencies. No one stepped forward.
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