Why not have a comparative hearing while you’re at it?

by on May 18, 2006 · 2 comments

Today there are reports that a startup headed by former FCC Wireless Bureau chief John Muleta and @Home founder Milo Medin has asked the FCC to give it a spectrum license to offer a national wireless broadband service. No auction, just an assignment. According to Reuters, “Most wireless spectrum is auctioned to the highest bidder but M2Z has offered to pay the U.S. Treasury 5 percent of its gross revenues from the premium broadband service it plans to offer alongside free, but slower, Internet access.” You can read their filing here (PDF).

If this deal goes through, we will have officially learned nothing. The FCC Spectrum Policy Task Force Report found that “To increase opportunities for technologically innovative and economically efficient spectrum use, spectrum policy must evolve towards more flexible and market-oriented regulatory models.” But this would cut in just the opposite direction. Spectrum would be licensed for one particular use and wouldn’t be flexible. The five percent kickback to the U.S. Treasury is eerily reminiscent of the uncompetitive franchise fees that cable operators have paid to municipalities for a local monopoly. And what would this do to the natural development of a market in wireless broadband when every other competing network has to bid for spectrum at auction? M2Z was able to raise over $400 million in venture capital, so why can’t it put it’s money where it’s mouth is and buy the license?

  • Daryl

    While Mr. Brito makes some good points, the $400M raised so far is primarily for network buildout and M2Z will need at least $600M more in VC to provide the footprint it wants to offer.

    There’s a couple reasons why it can’t simply buy the spectrum. The slice it is asking for has been allocated to AWS, but it not slotted for any upcoming auction and might not be available at auction for years to come. Moreover, at current prices, if it was to purchase the spectrum, it would have no capital nor incentive to buildout its network to underserved America. So the whole point is to avoid the huge upfront capital cost and create a free nationwide broadband network in the process.

  • Daryl

    While Mr. Brito makes some good points, the $400M raised so far is primarily for network buildout and M2Z will need at least $600M more in VC to provide the footprint it wants to offer.

    There’s a couple reasons why it can’t simply buy the spectrum. The slice it is asking for has been allocated to AWS, but it not slotted for any upcoming auction and might not be available at auction for years to come. Moreover, at current prices, if it was to purchase the spectrum, it would have no capital nor incentive to buildout its network to underserved America. So the whole point is to avoid the huge upfront capital cost and create a free nationwide broadband network in the process.

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