Broadband Plan Makes Free Broadband Part of Future Auctions

The FCC said in a bullet point in a press release Tuesday that it will “consider use of spectrum for a free or very low cost wireless broadband service” in the plan. FCC and agency officials said that cryptic bullet point hints at what will likely be one of the more controversial proposals in the plan, to be unveiled next week -– a proposal that free wireless broadband be made available to address “the affordability barrier” to broadband.

The broadband plan as circulated would investigate the possibility of requiring “an offering of free broadband service” as a condition for those buying spectrum in some future auctions. The plan says the FCC will require that devices “tuned to the applicable frequency bands” are “widely available at an affordable price and acceptable bandwidth levels” and that “sufficient capacity is available for the free service.” The requirements would apply only to licensed spectrum.

FCC staffers “have become very interested in the concept of conditioning a spectrum offering for broadband service,” said an industry source who supports the M2Z proposal. “I have been told that the FCC is actually working up real numbers as to what the cost savings would be to universal service if they had such a requirement.” There have active debates within the chairman’s office on what to do about AWS3 band. The compromise appears to be that the plan will propose that NTIA and the FCC jointly seek spectrum that could be paired with AWS3 in a future auction, with a deadline for wrapping up the search, the industry source said.

The source said NTIA came close to identifying 1755-1780 MHz, which is Department of Defense spectrum, for pairing with 2150-2175 MHZ, during the final days of the Clinton administration. But those efforts were dropped by the Bush administration as a result of Defense Department pressure. “As you hear people talking about a pair for AWS3, there is no pair,” the source said. “If the plan comes out and says we’re going to spend three months looking for a pair or six months looking for a pair, that is a victory for M2Z."

But a government official said the plan isn’t a clear win for M2Z. “The broadband plans has lots of wide ranging recommendations, some of which will be dismissed out of hand once the commission has a full recognition of what the plan says.” M2Z’s proposal has been fought hard by wireless carriers led by T-Mobile. A T-Mobile executive declined to comment Wednesday.

The National Broadband Plan “couldn’t overcome the glaring problem of connecting the over one-third of the population that cannot afford to connect to the most basic level of broadband” without a free offering, said John Muleta, CEO of M2Z. “Our reading of the data coming out of the FCC has been that unless you change the pricing dynamic significantly, those that can’t connect today remain unconnected and so a free service would make great sense."

The FCC faces a “conundrum” as it considers how to pay for free broadband, Muleta told us. Relying on universal service would mean more pressure on the fund and paying for broadband directly would further increase the deficit, he said. M2Z has proposed an advertising-supported model. “I think the challenge now is how quickly can the FCC act and make a choice about how to pay for it so this doesn’t simply remain a plan,” Muleta said. “The fastest way and cheapest way would be to use the spectrum auctions with public interest conditions that address the need for a very affordable basic broadband service."

"M2Z’s proposal always had a lot of political appeal,” said Paul Gallant, analyst at Washington Research Group. “The hard question for regulators is whether it will fly as a business matter. Because there is an opportunity cost of using the spectrum the way M2Z has proposed.”

"We would be very happy to see the public interest, rather than revenue, in the driver’s seat for spectrum policy. That is, after all, how Congress instructed the FCC to make these decisions,” said Public Knowledge Legal Director Harold Feld. “There are many creative ways the FCC could make free or low-cost wireless broadband access available, ranging from an M2Z-type service with a mandatory free tier for all, to a wireless ‘lifeline’ requirement for all carriers to provide free or low cost access to those who cannot otherwise afford the service. … The worst result would be to create a well-meaning program that is both difficult to qualify for and provides inadequate access and believe it solves the problem of affordability."

But Randolph May, president of the Free State Foundation, found less to like. “Conditioning the use of spectrum on the provision of free or low-cost service is not an efficient way to get broadband to the increasingly few who don’t have it,” May said. “Whenever the FCC engages in such spectrum conditioning, it inevitably is in the business of picking winners and losers, and preferred business models, a business the agency is not good at. It should be moving to grant more spectrum flexibility, not less. Subsidies can be targeted narrowly to low-income persons who might not subscribe to broadband absent some support."

Any free Internet plan has to be “carefully balanced and targeted in a way that advances universal broadband goals without undermining private sector investment, which could become more capital intensive if broadband operators heed policymakers’ entreaties and upgrade networks to offer faster speeds,” said analyst Jeff Silva of Medley Global Advisors. “Also, depending on the frequency bands involved, the FCC will have to address any potential interference risk that could impede wireless operations on top-dollar spectrum acquired at auction.”