Wednesday, May 17, 2006

Silicon Valley venture firms back start up planning universal wireless broadband service

WASHINGTON, May 16 (Reuters) - 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 percent 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.

Full Reuters story here.

The major questions here are how M2Z's backers define "near ubiquitous" service and what technology the service will utilize to overcome obstacles to wireless signals that make wireless broadband deployments challenging in hilly areas like El Dorado County.

1 comment:

CAOgdin said...

The principle of "lowest hanging fruit" is at the core of all Venture Capital investments. The entrepreneur is motivated to go after the largest, most lucrative markets first (especially while their start-up costs are high, and they've yet to conquer the "learning curve."). That means they're not going to bother starting with rural areas, where installation costs are higher, reliability is tougher to achieve, and the return-on-investment is lower due to the lower population densities.

That having been said, most urban areas are served, now. So, where is M2Z's market? It's among people who're willing to sit through advertising, and accept a mere 512 Kb/s service. Do rural markets represent such a backwater than we're willing to stand for this kind of high-cost/low-service model?

Oh, and the equipment is non-standard, which means it'll probably come with a hefty up-front sign-up fee.

Color me skeptical, even with the Top Tier VC firms sinking money into it.

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