M2Z Networks Sticks It To The Martin Man

[qi:074] It is not often someone decides to take on the Federal Communications Commission head-on, especially if you happen to be a start-up that is looking to get about 20 MHz of spectrum for free. But Menlo Park, Calif.-based M2Z Networks is willing to risk it all.

The company is ready to take FCC to the court, asking courts to intervene and get the FCC to become compliant with Section 7 of the Telecommunications Act and making a public interest determination on M2Z’s license application that has been pending for over 15 months. The FCC was statutorily required to make a public interest determination on M2Z’s license application by May 5, 2007. To date, this has not occurred.

It was in May 2006, when M2Z a company started by John Muleta, the head of the FCC’s Wireless Telecommunications Bureau, filed an application with the FCC, asking the commission to give it the fallow spectrum in the 2155-2175 MHz band for free. In exchange, M2Z has promised to build a nationwide broadband wireless network and operate it as a wholesale network, and cover 95% of the US population. In exchange, the company would give 5% of its gross revenues to the US Treasury. M2Z is backed by Kleiner, Perkins, Caufield and Byers, Charles River Ventures and Redpoint Ventures.

Over the last 15 months, M2Z says it repeatedly called on the Commission before the statutory deadline of May 5, 2007. FCC’s decision making process can be quite glacial. Milo Medin, architect of @Home Networks, one of the first cable-based broadband networks pointed out that by not moving on the application, FCC is showing that it doesn’t care much for increased competition in the broadband market. (Press Release.)

I have been skeptical of this broadband utopia for various reasons including the blue-sky nature of the network. It is not a trivial task, fraught with risks. In addition, there is no clarity on technology used for this network. More importantly, there is this little bit in their application, Mandatory Filtering of Indecent and Obscene Material, which seems to be a bit anti-Internet to me. My reservations aside, M2Z shouldn’t be denied its due process, and that’s precisely what FCC Chairman Martin seems to be doing.

According to Dow Jones News Wires, sometime last week, FCC Chairman Martin’s office had “circulated a proposed decision to the other four commissioners that would deny M2Z’s plan.” Muleta says if FCC Chairman can give a good enough reason to dismiss their application, so be it, but they are not doing that.

Muleta had some tough words for FCC Chairman Martin, and is not ready to give up without a fight.

Chairman Martin’s staff is using arguments that are nonsensical, not supported by the evidence in the record, and would not stand the light of day in a court. Martin’s staff proposed solution is “start a lengthy rulemaking” to determine what to do with this spectrum which is exactly what the incumbents have called for in opposing M2Z over the last 15 months since we went public(no new entrants and death by inaction).

Muleta says Martin hasn’t been able to do one job that he has been tasked to do by the US Congress: make a decision. By not taking a decision, “what they are saying is that they are afraid to make a decision that upsets AT&T and Verizon,” says Muleta. “I want them to tell me how free (broadband) is not in public interest.”

He argued that this slice of spectrum has been lying fallow for seven years and the FCC hasn’t auctioned it, now is time to put it to some use. The FCC for over a decade has been in favor of selling off the spectrum in auctions, and not give it away for free.

When asked why M2Z should get spectrum for free, Muleta said, “We are giving the US treasury 5% of revenue in perpetuity, so we are paying for the spectrum. What we are doing is fighting a process where company with $8 billion of cash flow is buying up spectrum and controlling it, and not using it.”