An ambitious and unorthodox proposal has been floated at the FCC by three Silicon Valley powerhouses to build a nationwide wireless broadband network. Kleiner Perkins Caufield & Byers, Charles River Ventures and Redpoint Ventures are financing a firm called M2Z Networks that would use spectrum being made available in upcoming wireless auctions to build a nationwide broadband wireless network.
“M2Z’s ultimate goal, through its own service, is to drive development of the broadband marketplace so that access is affordable and future penetration levels are near-ubiquitous throughout the country,” the company said in a filing with the Federal Communications Commission.
In a twist, however, M2Z is promising to offer free broadband service of 512 kbps download rates along with faster, premium broadband options. In another twist, M2Z is asking the government to let it buy the spectrum outside the usual bidding process — it promises to pay the U.S. Treasury 5% of its gross revenues from the premium broadband options.
The company, which says it has access to $400 million to build this network, is headed by John Muleta, former chief of the FCC’s wireless bureau, and broadband pioneer Milo Medin, who was key to the launch of cable high-speed consortium @Home.
Not everybody, however, is buying this vision. So many companies have tried to build national wireless broadband networks (anybody remember the costly flameouts of boom-era fixed wireless providers Teligent and Winstar?) and have failed miserably. Too much capital is required and too many years are needed to get the job done.
Moreover, M2Z would be building out into an increasingly competitive market dominated by powerful cable and phone companies, which also carry a lot of swack at the FCC.
Om says it succinctly
The blue-sky proposals such as this one, always make me queasy. It is easy to plan such massive scale networks, except when reality comes knocking. @Home comes to mind. What was the name of that ill-fated nationwide WiFi network backed by IBM, AT&T (the original), and a score of others.. Cometa was it?
Though earnest in its desire, the M2Z plan, is quite likely to be stuck in the quagmire called the Beltway. The spectrum owners - the wireless phone companies and others like Clearwire - would ensure that this plan doesn’t even get off the ground. Others who are planning to buy spectrum in a forthcoming auction would raise holy hell, if this deal was approved. But more importantly, the duopoly with its enormous clout in DC, is going to work hard to ensure that this remains a Silicon Valley dream.
Still, wouldn’t it be cool if M2Z managed to accomplish its goal? Wireless broadband access is such an iffy proposition, as any business traveler knows well. And, without quixotic ideas, big things don’t get done.
Update: Somehow I missed this in Om’s piece but Silicon Beat takes an even dimmer view of the venture. Calling M2Z a Hail Mary pass, Matt Marshall says:
Frankly, we find this a little bizarre, because of the competitors out there, and because ten years is a long time to plan in this industry, especially when telecom service is tending toward zero cost (look at Skype and Vonage blood battle over VoIP).
Cynthia Brumfield at 8:17 AM|Comments(3)
You guys need to get your facts straight. The filing is available on M2Z's website -- www.m2znetworks.com
Maybe you should read it rather than relying on Reuters (which also messed up). As far as I can tell, the proposal will help solve a lot of problems in a piece of spectrum that no one wants. In essence, the FCC has nothing to loseand a whole lot to gain.
Posted by: Jim at May 21, 2006 9:01 PM
It looks like I misspoke in my earlier comment. According to the Reuters story, M2Z is targeting 2155-2175 MHz, which is NOT part of the spectrum being auction next month, but is adjacent to the high end of that spectrum band. So that makes the company's plan to obtain the spectrum without an auction at least slightly less far-fetched.
The Reuters piece also notes that M2Z cited the FCC's Nextel spectrum deal as a precedent for not auctioning spectrum (and that John Muleta, one of the company's founders, worked on the Nextel ruling). But, as I recall, that deal took a long time to happen in the face of intense resistance from Nextel's competitors. And, importantly, Nextel had substantial leverage in that situation, since it involved the company returning some spectrum the FCC wanted pretty desperately to reclaim as part of a realignment that impacted public safety users. M2Z's offer of free 512k service and 5% of gross revenue may have some appeal, but not the urgency the FCC felt in the Nextel situation. Nevertheless, it will be interesting to see if the company's filing gains any traction and supporters.
Posted by: Mitch Shapiro at May 18, 2006 2:00 PM
I agree with Cynthia and Om that the chances of this proposal surviving the gauntlet of intense opposition it will face on the regulatory front seem very slim. Trying to bypass the auction (I assume we're talking about the AWS auction, which starts in late June), while admirable in its chutzpah (as is the business model), doesn't seem wise if they are really serious about making this happen, especially with the auctions set to start so soon.
But it could raise some interesting questions about spectrum policy and business models for new broadband spectrum. Some (but not all) of this spectrum is for pretty large regions, so putting together a national footprint will be relatively simple for those slices of the spectrum.
It'll be interesting to see who steps up and bids on this spectrum, including M2Z. I've seen references to non-telecoms like Google and Microsoft, and assume that, if they bid, they'd go after the blocks with larger geographic coverage areas. There's also the consortium of large cable MSOs, as Cynthia has reported here (http://www.ipdemocracy.com/archives/001531cable_operators_eye_wireless_spectrum_purchases.php). And, of course, there are the major mobile players, who may bid here and/or in the 700 MHz broadcast spectrum auction coming up in a few years.
If nothing else, this proposal is a reminder that the AWS auctions are worth watching and that, Om's cautionary references to @Home and Cometa notwithstanding, there may be room for new and viable competition on the wireless broadband front--and that it could come from some interesting places.
Posted by: Mitch Shapiro at May 18, 2006 11:53 AM
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