Silicon Valley backs U.S. wireless broadband plan

By Jeremy Pelofsky

WASHINGTON - Three Silicon Valley venture capital firms are backing a project

to grab a slice of valuable U.S. wireless airwaves to offer nationwide

high-speed Internet service, according to a recent regulatory filing.

Kleiner Perkins Caufield & Byers, Charles River Ventures and Redpoint

Ventures, each with more than $1.5 billion under management, are financing a

firm called M2Z Networks Inc. to launch the project.

Most wireless spectrum is auctioned to the highest bidder but M2Z has offered

to pay the U.S. Treasury 5 per cent of its gross revenues from the premium

broadband service it plans to offer alongside free, but slower, Internet access.

M2Z is trying to capitalize on President George W. Bush's call to have

universal access to high-speed Internet, known as broadband, by 2007. The United

States recently fell to 16th in world rankings for broadband penetration.

"M2Z's ultimate goal, through its own service, is to drive development

of the broadband marketplace so that access is affordable and future penetration

levels are near-ubiquitous throughout the country," the company said in a

filing with the Federal Communications Commission.

M2Z asked the FCC to grant it a 15-year license so it can offer free 512

kilobits per second broadband service that would be supported by advertising.

Consumers would have to buy a "low-cost" receiver to use the service.

Faster rates of broadband access would also be available for a subscription,

the company said.

The company was founded by the former head of the FCC's wireless bureau John

Muleta and cable executive Milo Medin who created AtHome Networks. M2Z said it

would be able to obtain more than $400 million to help build and operate the

network.

An FCC spokeswoman declined to comment. M2Z executives have already met with

agency officials to discuss the proposal. Muleta was not immediately available

for comment.

The airwaves, 2155 megahertz (Mhz) to 2175 Mhz, are being vacated and have

been allocated for advanced wireless services. M2Z argued they would lay fallow

for years since they are not paired with other airwaves.

M2Z's plan could be controversial since the FCC usually sells wireless

airwaves through auctions. Next month, the agency is slated to auction nearby

airwaves for advanced wireless services, a sale that analysts say could raise $8

billion to $15 billion.

M2Z could also face challenges from the wireless telephone, traditional

telephone and cable industries, which are fiercely competing for broadband

customers.

"We see no reason why the FCC should revisit their decision to allocate

and auction this valuable spectrum for advanced wireless services," said

Joseph Farren, a spokesman for CTIA, the trade association that represents major

wireless carriers.

But M2Z said an auction was not required and it was prepared to make several

commitments to quell concerns.

In addition to offer some of its revenue, and in a nod to concerns by parent

groups about pornographic content on the Internet, M2Z offered to include

"state of the art filters" to block access to some sites.

M2Z also cited the FCC's decision almost two years ago to swap airwaves with

Nextel Communications, which was later bought by Sprint Corp., as a precedent

for not auctioning the airwaves, a ruling on which Muleta worked.