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As FCC's AWS-3 auction moves forward, industry largely unconcerned

With the proposal for a free national Internet access network moving forward, many industry veterans are unconcerned, except for worries the network might add interference to the airwaves.

The FCC and private companies have high hopes for a new national free wireless network, but incumbents and analysts alike remain skeptical the project will succeed.

The idea has broad popular appeal: The FCC currently plans to auction off 25 MHz of spectrum in the 2155 MHz band, known as Advanced Wireless Service 3 (AWS-3). The winning bidder will be obliged to roll out free, national wireless Internet access on the spectrum. Presumably advertising would support the free access.

M2Z Networks has been one of the biggest proponents of the move. In May 2006, the company first asked the FCC to give it the spectrum free of charge under a profit-sharing plan.

The FCC rejected M2Z's original proposal, but it has been keen on the idea of free national access.

"We need to reserve some spectrum for free broadband services," FCC chairman Kevin Martin told the Washington Post earlier this month. "This would be lifeline broadband service … that would be designed for lower-income people who may not otherwise have access to the Internet."

And so, earlier this month, FCC engineers endorsed the proposal and rejected the telecom industry's contention that the proposed network would cause undue interference with existing wireless networks.

Few of the auction's opponents, which include T-Mobile and AT&T, are satisfied with the FCC's findings.

"While we are glad the FCC engineers finally put their observations on the record, we have serious concerns that their analysis is flawed and relies on factors that were not the subject of the testing, while ignoring other important data in the record," Kathleen Ham, vice president of federal regulatory affairs for T-Mobile, said in a statement. "In light of this, we are concerned that the result was predetermined unfairly."

But even if the proposal succeeds and the wireless network is created, many smaller competitors are not too worried about competing with free Internet access.

"It's certainly not the first time it's been tried," said Greg Jarman, COO of rural wireless Internet provider Omnicity. "NetZero was NetZero because they were free, and now they're not."

Jarman has seen firsthand what a free, ad-supported competitor can do to pay-for-service operators, and the results were surprising.

"When I was with a dial-up provider in [1995] to 2000, NetZero … just did not affect us a bit," he said. "As a matter of fact, the advertising of that service educated our users, and for them having someone local who could support their needs was more valuable than just a free service."

Jarman has also seen the challenges of rolling out a wireless network to cover vast, sparsely populated areas, which could be one of the key challenges for the winner of the AWS-3 auction: The proposal mandates coverage for 95% of the nation's population within 10 years.

The capital expenditures to outfit wireless access are just the beginning of the story, according to Jarman. Educating users on how to access and troubleshoot the service, teaching them the value it provides, and supporting users new to the Internet are all labor-intensive activities that require feet on the ground for everywhere-access to succeed.

"Putting feet on the street in every town in the U.S. is a big effort," he said. "The support level of a wireless solution [for people who] have never had a fast Internet connection, who have had dial-up their entire lives, is just grueling. To do that in a market where it's free is just very difficult."

And while the idea has a broad appeal to the popular imagination, there are indications that few in the industry are taking the idea very seriously, aside from concerns about interference.

"This is the same kind of interesting story we have been hearing time and time again over the last 15 years," said Jeff Kagan, an independent telecom analyst. "Unfortunately, they never make it …. At this point, I don't know how many are really watching this."

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