Next Wireless Spectrum Sale Likely to Come With a Catch

Fresh off an ambitious wireless spectrum auction that could help create a new marketplace for high-speed wireless services, the Federal Communications Commission will soon consider another auction with a significant twist that could help close the digital divide.

The new spectrum sale would come with the requirement that the winning bidder offer free wireless high-speed Internet access nationwide on the frequency.

The FCC will take up the proposal at its upcoming meeting on June 12, according to spokesperson Chelsea Fallon.

Free Access, No Porn

The plan is one of several ways the FCC hopes to “support initiatives that have a positive impact on the next phase of wireless growth and innovation,” Fallon told the E-Commerce Times. “The commission is interested in proposals that will give consumers greater choices to access the Internet.”

The plan involves selling off 25 megahertz of spectrum in the 2155MHz band. Though the details are still being worked out, the buyer would have to guarantee that it would roll out free access over time, reaching at least half of the U.S. population within four years of the license purchase and 90 percent or more within 10 years.

The free wireless access would likely be a restricted version of the Internet, with some content — such as pornography — filtered out.

The commission may believe the wireless spectrum holds the key to closing the digital divide, the gap between people with access to high-speed Internet access and those who do not because of financial or geographic reasons. Wireless could be a solution because it can be made to reach more remote areas at a lower cost than building fiber optics networks.

Auctions Aplenty

The FCC recently wrapped up a closely watched auction of 700 megahertz spectrum, a major portion of which was bought by Verizon and other major telecommunications companies. Under pressure from Google and others, the FCC conditioned part of that sale to require the winning bidder to open the network to all devices and services.

The agency is now considering two additional auctions. One involves attempting to lure buyers to the so-called “D” block of spectrum, the only major portion that didn’t sell during the recent auction. Part of that block is designated for use by public safety agencies, and only one bid was submitted that did not exceed the US$1.3 billion reserve. The FCC is currently fielding input on how to restructure that block so that a buyer will come forward.

The free Internet plan, meanwhile, is similar to a plan the FCC considered and rejected in the past. Two years ago, wireless startup M2Z Networks asked the FCC to grant it access to the underutilized airwave spectrum in exchange for the promise to provide free broadband service nationwide.

The network would have been advertising-supported, and M2Z offered to pay the federal government 5 percent of all ad revenue going forward. The commission turned down that offer in part because it felt the airwaves need to be offered to all interested parties through the auction approach first before they could be granted to any individual carrier. Since then, other companies have brought proposals to the FCC for free wireless Internet access.

Falling into the Gap

Whether the free Internet access plan would work will likely be determined by how much value potential buyers see in the advertising-supported business model. Advertising would need to be lucrative enough to support building the network out — using new or existing towers and other infrastructure — and operating it over time.

It’s also not clear how much demand remains for spectrum that comes with such restrictions, Forrester Research Analyst Charles Golvin told the E-Commerce Times.

Heading into 700 MHz auction, a number of possible new entrants into the mobile space were preparing to be players once the bidding started. By the end, however, most of the newcomers, such as Google, walked away empty-handed, with traditional telecommunications companies the ones who dished out the dough. Verizon ended up buying the block that includes the open-to-all-devices restriction.

“A company will have to have either deep pockets or investors who buy into the notion of an ad-supported system,” Golvin said. An established wireless firm may be interested if the numbers can be made to work, while Google could also become a player again if the price is right.

“We’ve seen in other countries that wireless can play a role in connecting people to the Internet who otherwise would remain shut out,” he added.

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