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Oct. 10, 2008, 7:03 p.m. EDT

FCC chief to press for free Internet in new airwaves sale

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By Fawn Johnson

WASHINGTON (MarketWatch) -- Federal Communications Commission Chairman Kevin Martin intends to press the five-member body to sell a currently unused block of airwaves with a condition that the owners offer free Internet access.

FCC engineers released an analysis late Friday indicating that wireless Internet activity on the unused channels won't interfere with cellphone connections on an adjacent swath owned primarily by T-Mobile USA.

Citing tests conducted in September, the FCC's Office of Engineering and Technology said a T-Mobile phone and a test device operating on the neighboring airwaves, even when sitting next to each other, "does not necessarily result in interference."

"The engineers are confirming that this can be used for broadband services without interfering with spectrum users next door," Martin told Dow Jones in an interview.

Martin has proposed selling the unused airwaves to any bidder willing to devote at least 25% of the spectrum for free Internet access for 95% of the country.

Martin said T-Mobile's cellular connections will be unharmed if the Internet traffic on neighboring channels is kept below a certain power level and other layers of protection are put into place.

Martin said the interference standards the FCC will consider "are stricter than the interference standards that we've ever used."

T-Mobile, a unit of Deutsche Telekom AG /zigman2/quotes/213490072/composite DT -0.69% , has been aggressively lobbying the FCC against the idea, saying Internet uploads and downloads next to its own spectrum would cause dropped calls and wipe out weak T-Mobile cell signals.

According to Martin, part of T-Mobile's interference problem lies with the filters in its handsets, which inadvertently pick up neighboring channels. "You shouldn't have equipment that reads spectrum you don't own," he said.

T-Mobile has said the phone filters aren't the problem, noting that Internet traffic on neighboring channels would bleed into its own airwaves.

T-Mobile has also said it would bid on the spectrum in question if the free Internet condition isn't a part of the auction. T-Mobile is currently launching its own low-cost wireless Internet service that would compete directly with a free Internet option.

Martin said he wants to begin the auctioning process "as soon as possible," but couldn't state when the FCC would vote on an item detailing the rules for the sale.

If the FCC goes forward with its free Internet idea, T-Mobile has hinted it would sue. In a presentation to FCC officials earlier this week, T-Mobile executives noted that after their company paid billions to operate in its spectrum swath, the FCC has an "enforceable contract" with the licensees to ensure minimal interference.

M2Z Networks Inc., a startup that wants to use the now-fallow airwaves for nationwide free Internet service, says that with reasonable standards, interference on T-Mobile's network would be so minimal it wouldn't be noticed.

T-Mobile, along with members of Congress, had pressed the FCC to give its own spin on tests conducted at T-Mobile's facilities in September.

Until the engineers' report on Friday, T-Mobile and M2Z had offered widely different views of the results.

-Contact: 201-938-5400

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