FCC spectrum sell-off may require free internet service

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The US Federal Communications Commission (FCC) is to consider a plan that will force the winning bidder in its forthcoming wireless spectrum auction to set aside some capacity for a nationwide free internet service.

The move, likely to be popular with the public, is staunchly opposed by the US mobile phone industry.

The plan is championed by FCC Chairman Kevin Martin, a Republican who will likely be replaced by incoming president Barack Obama.

It faces several hurdles. The mobile phone industry, for example, is arguing that an FCC requirement for free internet is not a feasible business model for most companies.

Also lining up against Martin's proposal are free speech advocates, who don't like a provision that would require the winning bidder to block pornography and other offensive content from the free service. Another concern is whether investors are willing to create the needed infrastructure for a free internet service in the recession-hit 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.

The US arm of mobile phone operator T-Mobile contends that the free internet component of the proposal would lead to interference with the adjacent spectrum, for which it paid $4.2 billion (£2.85 billion). The FCC's office of engineering and technology has said there would be no significant interference with other airwaves.

Martin's proposal is similar to one offered by start-up M2Z Networks. Its president John Muleta sees consumers buying a router for free internet access at mid-level DSL speed and paying a fee to upgrade to faster service. A lack of competition and rising prices for internet services are creating consumer demand for cheaper service, he said.

"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 component - a revenue scheme not shared by most of the mobile 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."

The auction is being watched closely by Ofcom, which also plans to auction off spare 3G spectrum next year.

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