Wi-Fight By Chadwick Matlin Slate - The Big Money
Created 12/04/2008 - 5:54pm http://tbm.thebigmoney.com/articles/0s-1s-and-s/2008/12/04/wi-fight If John Muleta gets his way, the Internet will be as ubiquitous and accessible as any other public service in America. Muleta is the CEO of M2Z Networks [1], a Silicon Valley startup whose entire purpose is to build a wi-fi network for the entire country … without the help of the big telecoms … within 10 years … for free. Yes, Muleta’s a dreamer. But he’s not the only one. Muleta has two important allies in Washington to help turn his vision into a reality. Barack Obama is in favor [2] of finding a way to deliver broadband to every American. And on Monday, word leaked [3] that FCC Chairman Kevin Martin [4] was going to push for a national wi-fi network. But just because Obama and Martin want free wi-fi to happen doesn’t mean M2Z will be the one to implement it. And if a host of other things go wrong—namely Big Telecom playing dirty—it may not happen at all. The situation is as follows. On Dec. 18 [5], Martin is going to bring a proposal to FCC commissioners to pave the way for free wi-fi. It’s expected to be approved. Then, four to eight months later, the FCC would auction off a small band of spectrum that could carry a wireless data signal. From there, consumers would need to buy an air-card [6]-like device (or a computer with one built in) to grab that free-of-cost signal in the air. The auxiliary equipment is equivalent to buying a toilet to access the public sewage system. We don’t yet know what kind of auction it will be, but the most recent high-profile spectrum auction [7] was a 54-day marathon of anonymous bids. We could be in store for something similar this time. But there’s a crucial caveat. Whoever wins the auction will have to put at least 25 percent of the spectrum toward a free, public wi-fi network. Plus, the FCC told The Big Money that they’ll need to have a network that offers “virtually nationwide coverage” within the first five years. This plays directly into M2Z’s business plan. They were already planning on using more than 25 percent of the spectrum for free wi-fi. They’ll fund their service through local advertising and a premium-service tier that will offer faster speeds for full cost. (And yes, like the FCC demands, M2Z won’t allow porn to be viewed on the network. But that’s a story for another article.) Consequently, when the news leaked, the telecom companies voiced their expected apoplexy. Joe Farren, a spokesperson for the wireless industry’s lobby group, CTIA, told TBM that the FCC hasn’t created a true auction, not when “the rules are crafted to accommodate one bidder.” Farren’s concern was his clients’ concern: that if M2Z won the bid, a free wi-fi network could put the big guys out of business. When asked whether that meant any of the big telecom companies were even going to bother participating in the auction, he quickly responded that none of his clients disclose their bidding strategies. I could picture the head shot of Muleta that telecom CEOS had tacked to dartboards across the country. But the FCC has its reasons for the regulations. In past auctions, many of the big telecom companies have paid lavishly to claim a spectrum and then done nothing with its new toy as a defensive measure. It’s an imperialist mentality—they plant a flag on a spectrum not because they think it could be useful to them but because it results in a competitive disadvantage for somebody else. Meanwhile, all of the resources go untapped. The 25 percent/five-year mandate is supposed to prevent that from happening. Muleta is concerned that the telecom companies’ public moans could be concealing private machinations. Muleta seems to think that the FCC’s 25 percent regulation doesn’t go nearly far enough. It’s still possible for a telecom company to win the auction and do nothing with the service. When The Big Money asked the FCC what would happen if the winning bidder didn’t fulfill the 25 percent/five-year mandate, the commission said it “would reserve the right to reclaim or ‘clawback’ unused spectrum.” But, as Muleta suggests, that’s not a strong enough slap on the wrist. A company could feasibly buy up the spectrum and stand sentry to prevent a new company from entering the industry. All they have to lose is the price of the spectrum and the respect of the FCC. Certainly worth the cost if the company is concerned about a new competitor. This option is especially lucrative to T-Mobile, since it—at least publicly—is concerned that if somebody uses this new kind of spectrum, it would interfere with its current frequencies. The FCC’s engineers looked into T-Mobile’s complaint, and said they had nothing to worry about. So, to stave off both potential interference and competition, T-Mobile could purchase the spectrum, steel itself for the FCC’s wrath, and then go about its merry way. It will have protected the industry from a new, low-cost challenger for at least a few years. T-Mobile—which has long been telecom’s black sheep [8]—could become its white knight. To counteract this, the FCC could pass a complicated plan [9] that would release unused airwaves to the general public, free of charge. But it would still take five years before the spectrum would be freed from its captor. That’s decades in an industry as rapidly evolving as wireless telecom. So, much of this rests on the kind of plan the FCC passes on Dec. 18. Severe penalties for not reaching the 25 percent/five-year mandate could keep all but M2Z out of the auction. If the FCC shuts Big Telecom completely out of the process, they’ll be blamed for playing favorites. (A possible line of attack: nepotism. Muleta and Martin worked together at the FCC while Muleta was the head of the commission’s wireless bureau, but Muleta resigned a few months after Martin became the FCC’s chairman.) But the FCC can’t pander to the telecom companies, either, since its chair and its next boss—Obama—both want a free-wi-fi nation. So, the FCC is stuck in the middle, forced to interpret both sides’ dreams of America’s wi-fi future. Source URL: http://tbm.thebigmoney.com/articles/0s-1s-and-s/2008/12/04/wi-fight Links: [1] http://www.m2znetworks.com/ [2] http://www.washingtonpost.com/wp-dyn/content/article/2008/12/02/AR2008120203164.html?hpid=topnews [3] http://online.wsj.com/article/SB122809560499668087.html?mod=googlenews_wsj [4] http://en.wikipedia.org/wiki/Kevin_Martin_(FCC) [5] http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-287123A1.pdf [6] http://www.verizonwireless.com/b2c/store/controller?item=phoneFirst&action=viewPhoneDetail&selectedPhoneId=2730 [7] http://articles.latimes.com/2008/apr/05/business/fi-auction5 [8] http://www.betanews.com/article/TMobiles_owner_might_consider_buying_Sprint_say_analysts/1204925834 [9] http://online.wsj.com/article/SB122832671930476269.html?mod=googlenews_wsj -- ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 Mail: antunes at uh dot edu *********************************** * POST TO [email protected] * *********************************** Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
