M2Z Needs FCC Win and $5 Billion

Next Thursday, the Federal Communications Commission will vote on the creation of a nationwide filtered wireless broadband network (unless politics cause the issue to be struck from the agenda). The most likely beneficiary if the FCC approves the plan is a Kleiner-backed startup called M2Z Networks, which had proposed a plan very similar to the one the FCC is scheduled to vote on.

The plan would be to auction off spectrum in the AWS-3 and allocate it for two wireless broadband networks. One would be a free network delivering speeds of 768 kbps to 95 percent of the country with some kind of content filter, and the other would be a faster paid network that M2Z envisions selling access to for $20 to $30 a month. John Muleta, CEO and founder of M2Z Networks, chatted with me earlier this week to defend the low speeds of such a network and to talk about the realities of building out such a network.

When pressed about critics who claim that 768 kbps is barely broadband today and won’t be able to surf the web by the time the full network is deployed (that could take up to 10 years, although 50 percent of the population must be covered in four years), Muleta points out that this service is still better than nothing and it would be free. The very act of providing a free, inferior service would still put pricing pressure on those providing broadband data, he argues. He may be right, but if a majority of users gravitate toward free, slow broadband,  online applications and services may have to pander to the slowest common denominator — potentially hurting innovation.

As for a buildout, Muleta said he imagines network costs will be about $3-5 billion, which is a higher number than the $2-3 billion estimate the company offered back in 2007. M2Z will also have to convince chipmakers to create a WiMAX chip in the spectrum band and make sure low-cost devices will be available to access the network — something that can make or break the success of a network. The network would be open on both the free and the paid side, according to Muleta, and will likely be more accessible than Verizon’s open network created as part of the 700 MHz spectrum auction this year. However, with the FCC approving the white spaces broadband, which could offer higher speeds and cheap unfiltered service, I’m not sure this proposal makes the best use of the available spectrum.

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