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FCC Free Internet Plan Faces Obstacles

Posted on: Wednesday, 3 December 2008, 07:35 CST

Experts say a plan to auction public airwaves could face major obstacles as the U.S. Federal Communications Commission plans to impose a mandate that the winning bidder set aside some for free Internet nationwide.

Many in the cell phone industry staunchly oppose the proposal.

FCC Chairman Kevin Martin is the main supporter of the plan. Martin is a Republican whose time as chairman is running short as the Obama administration prepares to take office in January.

The proposal faces hurdles from the cell phone industry, arguing that an FCC requirement for free Internet is not a feasible business model for most companies.

Free speech advocates also oppose the plan because they don't like a provision that would require the winning bidder to block pornography and other offensive content from the free Internet access.

Another concern is whether investors are willing to pay for the necessary infrastructure for free Internet access in the sluggish economy.

"Everybody likes the concept -- free broadband, free access to the Internet -- but in practice, the way the model is set up, it may present problems," said Ben Scott, policy director of advocacy group Free Press.

T-Mobile, a unit of Deutsche Telekom AG, said the free Internet component of the proposal would lead to interference with the adjacent spectrum, for which it paid $4.2 billion.

However, the FCC's office of engineering and technology argued there would be no significant interference with other airwaves.

Martin's proposal is very close to another offered by startup M2Z Networks, a group backed by investors including venture capital firm Kleiner Perkins Caufield & Byers.

M2Z President John Muleta envisions consumers buying a router for free Internet access at midlevel DSL speed and paying a fee to upgrade to faster service.

He said the plan would be successful because of a lack of competition and rising prices for Internet services are creating consumer demand for cheaper service.

"It is a difficult time in the general marketplace, but this is not the financial services sector," Muleta said. "This is not about subprime loans."

M2Z, which plans to bid if the FCC approves the auction plan, said its business model would use advertising to help fund the free Internet -- a revenue scheme not shared by most of the cell phone industry.

"I don't know of any other major players," that would bid with such an approach, said Sascha Meinrath, research director at the New America Foundation. "For a new player, you basically have to have all your capital up front."

AT&T Inc, Google Inc, unions and public interest groups called for a national broadband strategy on Tuesday that would offer affordable high-speed Internet to all homes and businesses that want it.

Members of the group combined forces to urge President-elect Barack Obama to spur investment in high-speed broadband by offering tax incentives, grants and low-cost loans.

They say the items should be included in a multibillion-dollar stimulus package Obama has asked Congress to have ready for his signature when he takes office.

Such investments would create a multiplier effect in the economy, said Rick Whitt, a Google lawyer. "These so-called innovation spillovers hold the promise to get our economy moving again," he said.

According to the Organization of Economic Cooperation and Development, the United States ranks far below many industrialized nations in access and affordability of high-speed Internet.

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Source: redOrbit Staff & Wire Reports

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