FCC Nears Vote on Free Internet Plan for U.S. - Page 2

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However, T-Mobile and M2Z interpret the FCC's September testing differently. The carrier is adamant that interference will remain a significant issue at times of peak call volume, and that the filtering mechanism required to maintain signal integrity is an insurmountable technical challenge.

T-Mobile also is skeptical that a startup like M2Z could deliver a nationwide network in 10 years, given that incumbent carriers have yet to achieve that.

"That is an incredibly aggressive build-out requirement," Kathleen Ham, T-Mobile's vice president of federal regulatory affairs, told InternetNews.com. "I find it fanciful to believe that M2Z can really do what it says it wants to do."

There is a provision in the FCC's draft order to address that issue. The order states that the winner must deploy coverage to 50 percent of the population within five years -- and if they fail, they forfeit their claim to remaining spectrum.

"If you fail to meet the interim benchmark, then you would also lose any of the spectrum that you failed to build out," Martin said.

The forfeited spectrum would then either become available for unlicensed use, or be returned to the FCC, which could then reallocated it. Martin circulated two versions of the draft order to include both contingencies. Before the meeting, the commission will select one version to vote on.

But to T-Mobile's Ham, the free Internet plan raises a deeper concern about the commission kowtowing to one company's business model. If the spectrum was to be auctioned off without conditions, more companies -- including T-Mobile -- would be likely to bid, which would put more money in the government's coffers.

"What they [M2Z] want is the government to actually create their business plan as part of the rules, so that other people who have other business plans would be deterred from bidding against them," said Ham, herself a former, 14-year veteran of the FCC. "It ends up being about a plan to keep others out of bidding rather than a very pro-competitive, pro-market approach."

"I'm doubtful that this is anything more than a spectrum ploy," she added.

T-Mobile and M2Z also differ significantly on the market value of the spectrum. Based on the value that similar spectrum fetched in previous auctions, Muleta said that the AWS-3 airwaves would be worth about $50 million.

"The $50 million figure does not represent any discount based on license conditions but simply what the market rate was for unencumbered spectrum bands," he said. "The market will determine the cost of the AWS-3 spectrum, not M2Z. Whatever figure the market agrees on, M2Z plans to bid aggressively."

Citing a study by the Brattle Group, T-Mobile pegs the spectrum's value at around $3 billion.

Patrick Welsh, T-Mobile's senior corporate counsel, said that the difference between the two valuations would amount to a "$2.95 billion that the taxpayers would be paying to subsidize the M2Z plan."

Ham, who called the $50 million valuation "ludicrous," said that T-Mobile will continue the fight to derail the plan.

"I think we will likely file for either what they call reconsideration or ... a court appeal."