Start-up wants to provide free broadband

M2Z is a small wireless start-up with a big goal: free broadband for the masses.

Milo Medin, M2Z's chairman and co-founder and a broadband pioneer, wants the ad-supported service to ultimately be available to 95% of the USA. To make that happen, the company must snag a chunk of wireless airwaves being auctioned next year by the Federal Communications Commission. If all goes according to plan, free broadband could be available as early as fall 2009.

The free service, if it launches, would run at 768 kilobits a second, 10 times faster than dial-up. Big wireless carriers currently charge a lot more — $60 to $80 a month — for a lot less, 400 to 500 kilobits or so. Premium services at higher speeds — 3 to 6 megabits initially, Medin guesses — would start at just $20 a month.

M2Z plans to have its services built into laptops, home routers and other portable devices. Medin says the company is "in discussions" with a number of major device makers but declines to say which ones. For consumers, built-in service means "instant installation," Medin says. "You'll go to Best Buy or Target, buy a (Web-enabled device), turn it on — and you're connected."

Right now, the U.S. broadband market is dominated by a handful of phone and cable TV companies. Though they compete vigorously for customers, they tend to move in lockstep on broadband, with similar monthly rates, data products and service packages.

Free broadband could seriously upset the status quo, says Blair Levin, a regulatory analyst at Stifel Nicolaus. "It would either cause the price (of broadband) to go down, or cause the current providers to really have to ramp it up" and improve their service offerings, he says.

Medin's deep-pocketed backers include venture-capital firm Kleiner Perkins Caufield & Byers in Silicon Valley. M2Z is also working with a number of partners, including networking giant Cisco.

The path to free service

M2Z's success hinges on whether it is able to buy wireless spectrum known as advanced wireless services-3, or AWS-3. The spectrum could fetch $50 million, at least. A number of companies are eyeing the block.

Wireless carriers are grousing about M2Z's plan, saying the new service could cause service disruptions for their data customers. The most vocal opponent, by far, is T-Mobile. It spent $4 billion two years ago to buy the AWS-1 block, which abuts the now-idle AWS-3 spectrum.

Medin says incumbents are just trying to throw out roadblocks. Why? Because they don't want to compete against free broadband, he says.

"If we are successful, it will force DSL and cable modem providers to work hard to give you more speed or charge less" for what they offer, he says.

Free broadband has been tried before. A few years ago, free Wi-Fi was all the rage as some communities pushed to set up systems. Today, some cities have deemed them unworkable and uneconomical. Medin says that Wi-Fi, because it is unlicensed (read: unmanaged), can be spotty. It also has range and capacity limitations. M2Z's service has none of these problems, he says.

Like Wi-Fi, M2Z's broadband services will be "portable" — but not fully mobile. That means you would be able to use M2Z services in any fixed location but not in a fast-moving car.

Why's that? According to Medin, M2Z's network would be engineered to have fewer wireless towers and base stations than conventional cellphone networks. As a result, he says, the network would cost a lot less to build, enabling M2Z to keep its prices low. But mobility would be limited.

"We're trying to compete with cable modem and DSL providers, not cellphone carriers," Medin explains. The difference, he says, "is that you'll have the ability to take broadband out of your house with you wherever you go."

Free broadband could come as a welcome relief to the 100 million U.S. consumers who don't have access to, or can't afford, broadband. Conventional DSL and cable modem services cost about $40 a month, on average. An additional 40 million use dial-up, which is too slow to handle advanced, interactive services. Mobile data plans are a lot more expensive, $60 to $80 a month, on average.

FCC Chairman Kevin Martin says he supports the notion of using free broadband to drive adoption across America. He plans to attach a condition to the AWS-3 spectrum that would require the winner to offer free broadband to 95% of the USA within 10 years. Only 25% of network capacity would have to be reserved for this purpose; the rest could be used for premium, paid services.

Paving the way

Martin says he doesn't care which company buys the spectrum. His only concern, he says, is that the winner be able to fulfill this requirement. Providing other commissioners agree, bidding rules could be in place by the end of the year, paving the way for the AWS-3 auction to proceed early next year.

M2Z plans to make wholesale broadband available to any service provider that wants it. That could enable dozens, if not hundreds, of new players to jump into the fray. The way Medin sees it, that sort of cross-pollination could lead to the creation of a new generation of cool — and affordable — services for consumers.

Right now, big broadband providers such as AT&T don't resell their broadband services to others on a discounted basis. (They fought hard at the FCC to win that right.) As a result, players of all sizes — from start-ups to big entertainment companies such as Disney — are basically iced out.

"A lot of people will wind up enjoying the benefits of M2Z without knowing we're providing it," he says.

Another fallout: Dial-up would die, Medin predicts. "If we are successful, there will be no reason for dial-up to exist," he says.

None of this happens, of course, if M2Z doesn't win that block of spectrum next year. Medin says he's confident the company will prevail. Even if it doesn't, he says, free broadband for the masses is an idea whose time has finally come. "Regardless of what happens, the idea is so powerful that it will happen sooner or later."