Selling a Long-Shot Idea: Free Internet Access
Former Regulator Bucking Telecoms, Internet Giants and a Skeptical FCC

By Kim Hart
Washington Post Staff Writer
Monday, September 24, 2007

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.

"We're trying to make the cost of computing more affordable," he said. "Computers may be less expensive now, but a computer doesn't mean much without broadband attached to it."

Muleta, 42, started M2Z Networks two years ago with fellow entrepreneur Milo Medin, who was the architect behind a now-defunct broadband network called At Home Networks. They named the company M2Z after their desire to "move to zero" the cost of Internet access -- and it also stands for their children's initials.

They raised $800 million from heavyweight Silicon Valley investors John Doerr, an early backer of Google and Amazon, and Geoff Yang, who invested in MySpace and TiVo. But the money is contingent upon receiving the necessary spectrum for the business.

Muleta said M2Z would consider participating in an auction for the airwaves if the FCC establishes rules conducive to its ideas.

"We have big plans, but at the end of the day, they're just plans if we don't have the spectrum," he said.

Some say M2Z's chances have become slimmer. Some FCC staffers, who spoke on the condition of anonymity because they are not authorized to speak on the matter, said commissioners were initially intrigued by Muleta's ideas but have since been put off by what they consider aggressive lobbying and legal tactics.

Public-interest groups Public Knowledge and Free Press say they support some aspects of M2Z's proposal, including a provision that would allow third parties to lease capacity on the network. But M2Z's plan to block some Internet content could conflict with efforts to ban such restrictions by network operators.

"No one wants kids to look at pornography, but setting up content gatekeepers is a dangerous precedent," said Ben Scott, policy director for Free Press, an advocacy group that focuses on the communications industry. He also questioned whether M2Z would be able to offer speeds fast enough for downloading entertainment content.

During the Internet boom of the late 1990s, Muleta was a senior executive of networking giant PSINet until it folded in 2001. Muleta, who moved from Ethiopia to Iowa when he was 10 years old, holds degrees in engineering, law and business from the University of Virginia.

Other former FCC officials are also trying to gain access to spectrum for their start-up ventures.

Reed E. Hundt, FCC chairman during the Clinton administration, started a company called Frontline, also with the backing of John Doerr. With $3 billion of private investment, Frontline plans to bid for enough airwaves to build a nationwide broadband network open to public safety workers.

Morgan O'Brien, one of the co-founders of Nextel and a former FCC staffer, recently asked the agency to give his newest venture, Cyren Call, a large portion of airwaves for free. While his proposal was not successful, Cyren Call is still in the running to help build a public safety network as part of the upcoming auction.

M2Z has received some high-profile support. In a letter to the FCC, the Rev. Jesse Jackson said the agency has "a moral obligation to promote justice and equality by extending the critical opportunities of the information age to all Americans."

Several prominent politicians and rural phone companies have backed the plan.

Scott said it is unlikely M2Z will get everything it is asking for, but "there are many ways the rules can be set so M2Z can be a player in this."