Start-up banks on making money from free broadband

For the past three years, a start-up called M2Z Networks has been figuring out a way to blanket the nation with a free wireless broadband network to ensure all Americans have access to basic high-speed Internet connections.

Along the way, the company has found support in powerful corners of Silicon Valley and Washington. It has attracted funding from several of the Valley's top venture capital firms. And it has captured the interest of Kevin Martin, the chairman of Federal Communications Commission, who is backing a plan essentially mirroring the M2Z proposal as a way to promote universal broadband.

Finally, this month, the company was nearing a breakthrough. Martin pushed for a full FCC vote on his plan, which would set the rules for auctioning off the slice of wireless spectrum that M2Z wants to put its ideas into action.

But opposition forces gathered steam, deferring M2Z's dreams for now.

Led by T-Mobile USA, the nation's wireless carriers have been lobbying to defeat Martin's proposal, which they say would interfere with their own services. The Bush administration wasn't happy either: It urged the FCC not to proceed with an auction that would favor one company's business model. And some key Democrats on Capitol Hill called on the agency to hold off on controversial items — which would include the M2Z plan — until the Obama administration takes over.

Facing such objections, Martin canceled the Dec. 18 vote on the free broadband idea. The proposal remains on circulation at the FCC, and M2Z is suing the agency to gain access to the slices of the airwaves that it needs. But now it looks like the company will have to wait until next year to know its fate.

Although Obama has not taken an official position on M2Z, he has said that wireless services could be one important channel for bringing broadband to all corners of the country. And that could yet be good news for M2Z.

What's at stake, insists M2Z co-founder Milo Medin, is a "lifeline" wireless broadband network that would provide basic connections for people who cannot afford the premium services offered by the big phone and cable companies or live in places where those services are unavailable.

"We Americans are creating a two-tier digital society," Medin said. "If you're not connected today, you're really at a disadvantage. But we can remove barriers that isolate people from the digital domain."

It's not clear exactly how many Americans have no access to broadband. According to a survey conducted in August by the Pew Internet & American Life Project, 57% of Americans subscribe to broadband at home. More people could get it, but choose not to buy it or can't afford it.

One major advantage of wireless technology is that it could bring broadband to rural areas that the big phone and cable companies have abandoned as too sparsely populated to justify the necessary network investments. That's because it costs less to blanket large areas with a wireless signal than to lay down wires.

Martin has proposed that the FCC auction a large chunk of airwaves to a company that would set aside 25% of the capacity for a free broadband service. Under his plan, the winning bidder would have to make that service available to 50% of the population within four years and 95% of the population within 10 years — or risk losing any remaining spectrum not yet being used.

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