Risking Another Frontline Disaster

The Wall Street Journal says in an editorial that FCC chair Kevin Martin is about to screw things up again on the public wireless Internet front. The first time around Martin tried to rig the D block auction to hand 700MHz spectrum over to Frontline Wireless, formed by former commissioner Reed Hunt. No private party wanted to play with Frontline under the restrictions the FCC put in place, the Journal says, and the auction crashed and burned.

Now its time for a new auction and this time the FCC wants to require the winner to offer free wireless Internet that filters out porn. Apparently the Journal wants these auctions to happen with no regulations, continuing the lack of public Internet infrastructure, but they do have a point on the question of whether Martin is rigging this auction for another favored player.

It just so happens that Mr. Martin's proposed auction seems tailor-made for the business plan put forward by M2Z, another politically connected Silicon Valley start-up looking to enter the wireless broadband telecom market. M2Z is backed by the venture capital outfits Kleiner Perkins, Redpoint Ventures and Charles River Ventures. It's also backed by Democratic Representatives Anna Eshoo of California and Ed Markey of Massachusetts, who've introduced legislation that would require the FCC to auction this spectrum to a company with a business plan that looks a lot like . . . M2Z's. Ms. Eshoo's district is home to Kleiner Perkins and Redpoint; Mr. Markey's is home to Charles River.

The Journal says these rules would result in an auction providing less revenue to the Treasury than an unrestricted auction. A suitable sentiment for the newspaper of corporate America.

The FCC's goal should be to reallocate government spectrum for commercial use in the most efficient way possible and for the highest possible yield for taxpayers. Auctions are the best vehicle for achieving this objective, but only if they're open and unencumbered, not rigged to favor the politically connected.

What the Journal forgets is that the FCC -- unlike corporations -- have a higher duty than maximizing shareholder return. The duty is to form policies that create solid telecom infrastructure and enable innovation, education and competitiveness. If it's a backroom deal, I'm suspicious. But I'm more suspicious of the sentiment that the free market will deliver what's needed if only the government sells off public resources without restrictions in exchange for handful of gold.