Later this month, the Federal Communications Commission (FCC) is scheduled to take up a plan that would rig wireless Internet auction rules in favor of companies that promise to provide a tier of free, nationwide wireless Internet service. What it wants in return is a G-rated World Wide Web.
The proposal, to be voted on Dec. 18, is a pet project of FCC Chairman Kevin Martin, who sees it as a double-whammy, a chance to get the government involved in regulating both Internet business models and Internet content.
Although Martin has not singled out any particular company as an example, M2Z Networks Inc., a California start-up, claims to have a business plan that mirrors Martin’s idea and uses its Web site to urge support for it.
Companies like M2Z would benefit greatly from such a plan because the established wireless companies-AT&T, T-Mobile and Verizon Wireless-whose business models, not to mention the sunk costs, make it difficult for them to offer free service and thus would likely sit out the bidding. That means the FCC’s winning bidder would stand to pay a lot less for its spectrum than it would in a true open auction. It’s this discount that offsets the potential loss of revenues from free service. But the discounts come at the expense of taxpayers-the U.S. Treasury would get far less for the frequencies than they are worth. Free wireless isn’t really free. The public is indirectly subsidizing it through the rigged auction rules.
In return for these regulatory-based discounts, Martin demands that the winner block any and all Internet and Web content deemed inappropriate for children. The winner will be required to block access to Web sites at the server end, as is done in China and other countries that censor the Web.
Although users can already do their own filtering with parental control software, Martin’s plan wants central control. The proposal’s language is sweeping. Not only must the licensee block “obscenity” and “pornography,” it will be required to block “any images or text that otherwise would be harmful to teens and adolescents.” In an Orwellian twist, the proposal defines a teen as any child aged 5 to 17.
This standard is so subjective it is impossible to meet. It’s a false promise by the government to make the idea of a taxpayer-backed Internet more palatable to conservatives who would otherwise resist this level of government involvement in the market.
For example, Apple’s iTunes carries R-rated movies and music recordings with warnings of explicit lyrics. Will iTunes be blocked because it fits the definition of content inappropriate for children? You can argue that it does. You can find several versions of the Kama Sutra on Amazon.com. Some have cover art that would fit the definition in Martin’s plan, too. The FCC clause could be used to block any newspaper, blogs or video sharing site that gears news, commentary and entertainment for adult tastes. Who’s going to be the arbiter?
Other than the colossal censorship requirements, the FCC will ask very little of the auction winner. Free service is only required to operate at a paltry 768 kb/s, compared to the 1 to 2 Mb/s current wireless systems deliver and the 6 to 10 Mb/s cable modems provide. The FCC will also allow it to be advertiser-supported – which means a lot of pop-up ads and other screen clutter. Given how downscale the “free” service will be, it sparks a question as to whether the winning company simply will use it as a marketing ploy to hook customers who they can then migrate to their paid tier of services.
This is a common enough tactic, and normally there’s nothing wrong it. The problem here is the government will be propping up the free service through a discounted spectrum. This is unfair to consumers, whose tax dollars will be supporting a competitive Internet service they may not ever use. It is also unfair to other companies who paid full price for their spectrum and have designed business models to account for it.
Furthermore, companies like Google are already experimenting with free wireless models that don’t need government help. On top of that, users would keep the right to choose what content they wish to filter. So the market may yet deliver on Martin’s idea without regulatory interference.
While ‘free Internet’ will sound cool to many, the FCC’s plan will amount to a rent-sought bonanza for the winning licensee. Given the requirements in the proposal, the FCC’s mandated “free” service will be slow, shoddy and censored. Nonetheless, it will provide the winner with a database of millions of potential customers for its for-profit competitive Internet access service with none of the usual start-up or customer acquisition costs. Those will come courtesy of you and me.