Last Friday afternoon, the FCC issued a report putting to rest worries about interference from a free wireless broadband service using the AWS-3 spectrum, paving the way for an auction sometime next year. However, opponents of the auction, including T-Mobile, aren’t going to give up without a fight.

The original proposal for the spectrum, put forth two years ago by a Kleiner-backed company called M2Z Networks, had asked the FCC for use of the spectrum in the 2155-2175 MHz band to create a wireless broadband service. M2Z offered the FCC 5 percent of its revenue in exchange for the spectrum. It also pledged 25 percent of its network for free broadband service at lower speeds. The company would charge more for faster speeds and would build out 90 percent of its network in 10 years at a cost of $2 –$3 billion.

In June the FCC issued its own rulemaking proposal, which hewed closely to the M2Z proposal. The FCC proposal would also restrict material that could be deemed obscene and “harmful” to children between ages 5 and 17 (i.e., porn) on the resulting wireless broadband network. Update: An FCC spokesman says that aspect of the proposal will likely get tweaked during the rulemaking process to allow adults to opt-out of such filters.

T-Mobile had argued against the potential auction and use of the spectrum on the grounds that it would interfere with services deployed on the neighboring AWS-1 spectrum, which T-Mobile leased for \$4 billion. But it appears that FCC Chairman Kevin Martin, isn’t buying into the argument now that T-Mobile’s filters have proven to be ineffective at keeping out content from the nearby spectrum. “You shouldn’t have equipment that reads spectrum you don’t own,” Martin told Dow Jones.

Damn! Who is this reasonable, carrier-smacking FCC chair? It’s nice to see a potential wireless broadband competitor making it out into the world, but the content limitations should give everyone pause. A whole mess of litigation will stand between this network and real use, as any government-created wireless broadband network should probably be free of censorship.

Meanwhile, a mess of litigation might still stand between an AWS-3 auction and the creation of a network, as T-Mobile seems inclined to release the lawyers if the FCC goes forth with its proposal. The company issued a statement from Kathleen Ham, VP of federal regulatory affairs, via email, but didn’t answer my question about suing to protect its interests directly. The statement read:

While we are glad the FCC engineers finally put their observations on the record, we have serious concerns that their analysis is flawed and relies on factors that were not the subject of the testing, while ignoring other important data in the record. In light of this, we are concerned that the result was predetermined unfairly. We and the multiple parties concerned about interference will strongly urge the FCC to provide for sufficient time for comment on their report before any FCC action on these rules.

I may have to eat my words about the unliklihood of wireless broadband competition, but I’ll wait until the networks are up and devices are out before admitting defeat.