Selling a Long-Shot Idea: Free Internet Access

Former Regulator Bucking Telecoms, Internet Giants and a Skeptical FCC

A start-up founded by a former telecom regulator hopes to someday build a nationwide network offering free high-speed Internet with family-friendly content filters.

But M2Z Networks' proposal hinges on a big condition: It needs free airwaves from the government. Such airwaves are usually sold at a premium, and to stake its claim, M2Z may have to beat out deeper-pocketed wireless companies and Internet giants.

To be better positioned to press his case, M2Z chief executive John Muleta -- former head of the Federal Communications Commission's wireless bureau -- has temporarily shifted the company's operations from Menlo Park, Calif., to Arlington.

If granted the airwaves, M2Z says it will build a network that offers free Internet service to anyone with a computer or cellphone. M2Z would make money by selling advertising on its free service and charging for a higher-speed service. In return for the free airwaves, M2Z promises to give 5 percent of its revenue to the government.

The proposal, submitted in May 2006, has stirred up interest in a forgotten piece of the radio spectrum, catching the attention of companies such as AT&T and Google.

But the company's idea hit a roadblock three weeks ago, when the FCC dismissed M2Z's application. This month, Muleta sued the agency, claiming that it dismissed M2Z's request without properly evaluating it.

Last week, the FCC asked for more input to determine the best use of the spectrum, sparking renewed debate about how consumers should be able to connect to the Internet. M2Z plans to resubmit its proposal.

The debate over the airwaves sought by M2Z comes six weeks after the agency set rules for auctioning a separate portion of the spectrum potentially worth billions of dollars. That auction pits Internet companies like Google and Yahoo against traditional phone companies, all of which are rolling out increasingly sophisticated online content.

Telecom giants AT&T and Verizon Communications said M2Z should not be allowed to bypass the FCC's standard procedure of selling airwaves to the highest bidder. Google asked the agency to consider other uses for the spectrum eyed by M2Z. The FCC has said it hopes to make a decision within nine months.

"There's no reason it should have taken this long for an answer," Muleta said. "Commissioners say they want a new entrant into the market. We're saying, 'What about us?' "

Muleta said M2Z could convert a resource currently held by companies such as Sprint Nextel, Verizon Wireless and AT&T into a high-speed Internet service for rural areas and disadvantaged communities. He's also pitching it as a family-friendly network that would filter out profanity and X-rated material.

The free service would be available to anyone with a laptop, cellphone or wireless router embedded with a chip developed by M2Z. People using the service would be required to register so partnering search engines could provide targeted advertising. Consumers could also choose to pay for a faster, ad-free service.