FCC Shelves Free Internet Plan

Bowing to pressure from key lawmakers, Federal Communications Chairman Kevin Martin has canceled this week’s meeting, where the commissioners were scheduled to vote on a controversial plan to create a free, nationwide broadband network, among other items.

In a letter to the chairman delivered last week, the presumptive chairmen of the House and Senate Commerce Committees in the next Congress asked Martin to abandon his agenda to focus on the digital TV transition.

“The most important challenge for the Commission over the next nine weeks is to ensure the smoothest possible transition to digital television (DTV),” wrote Rep. Henry Waxman, D-Calif., and Sen. John Rockefeller, D-W.V. “At a time when serious questions are being raised about transition readiness, it would be counterproductive for the FCC to consider unrelated items, especially complex and controversial items that the new Congress and new administration will have an interest in reviewing.”

Martin, a Republican, had hoped to press forward with the long-simmering free-Internet plan, but now it looks like the issue will fall to the next chairman, one of President-elect Obama’s still-unnamed appointments.

“In light of the letter, it does not appear that there is consensus to move forward and the agenda meeting has been canceled,” FCC spokesman Robert Kenny said in a statement. “The items will remain on circulation and the commissioners can still vote on them.”

Free Internet with content filtering

Under the free Internet plan, Martin had proposed that the FCC auction off a slice of the wireless spectrum, known as AWS-3, with the condition that the winning bidder devote a portion of the airwaves to providing free service to 95 percent of the U.S. population within 10 years. The free network would also have a content filter blocking access to indecent content.

Wireless carriers, most vocally T-Mobile, had objected to the plan, warning that the new network would interfere with cell phone calls and data transmissions that pass through their spectrum on adjacent bands.

T-Mobile had proposed an alternative spectrum plan it claimed would mitigate the interference issue, but at a recent press conference Martin said that the FCC’s testing had shown that proper filters could address the concern.

The AWS-3 plan essentially mirrors a proposal submitted by M2Z Networks, a Silicon-Valley startup backed by VC firm Kleiner Perkins, among others.

M2Z noted that Waxman and Rockefeller did not specifically oppose the plan, but simply urged Martin to focus his attention on the pressing matter of the DTV transition.

The company called attention to recent remarks from President-elect Obama, who said that greater broadband deployment would be an important part of his economic plan.

Lawmakers have weighed in on both sides of the issue, some urging the FCC to move forward while others questioned the viability of the plan. Most recently, Commerce Secretary Carlos Gutierrez voiced his opposition to the draft order.

Next page: A question of implementation

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A question of implementation

Critics of the plan do not suggest that more broadband is a second-tier priority, but rather quibble with the way Martin proposed to tackle the problem in the AWS-3 item.

Instead of auctioning the spectrum off with conditions attached that could drive some bidders (including T-Mobile) away, why not sell it at an open auction that would not dictate the winning bidder’s business model, they have asked.

M2Z cites market research that values the spectrum in question at about $50 million. T-Mobile counters with a study that pegged it at $3 billion, if the free-service and content-filtering restrictions weren’t attached.

Opponents of the plan also question whether M2Z could actually raise the capital needed to build out the network it is promising in 10 years.

It is unclear if the FCC will try to hold a meeting in January, but in light of the pushback against the outgoing chairman’s ambitious agenda for the December meeting, it seems likely that the AWS-3 plan will fall to Martin’s successor.

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