M2Z Networks’ plans to build a nationwide WiMAX network are still up in the air—literally and figuratively—as the FCC moves ahead with a rulemaking procedure to determine the best use for fallow 1.255-2.175 GHz spectrum in which the network would run.

M2Z thinks it has the best use for the spectrum, which is now being vacated by mobile backhaul users, and would like to see things move a little faster, said John Muleta, the company’s co-founder-CEO.

“We want to provide a free nationwide network using WiMAX technology. We want to be able to provide wholesale services at high speed. We don’t want any USF money and we’ll pay five percent (estimated anywhere from US$30 million to $130 million annually) for leasing the spectrum from the U.S. government,” Muleta said. “The FCC has done everything with this spectrum but actually put it to use.”

That makes it tough to assess whether M2Z’s plan, which has attracted support from 20 rural carriers, has merit, said Peter Jarich, principal analyst–wireless infrastructure at Current Analysis.

“It’s a classic chicken-and-egg scenario. If they get the spectrum, vendors will develop the equipment, and if they get the spectrum they get the funding, but without the spectrum you’d have a hard time having the other things follow,” Jarich said.

Muleta agrees that everything’s hinging on the feds, who will take at least nine months to decide what’s best for the spectrum.

“We have raised a minimum of $800 million so far to build a network … using a combination of real smart antenna technology to make use of this spectrum in a way that would create a competitive network,” he said. “We would use the existing tower infrastructure, potentially build our own infrastructure to be able to support our services (and) we’ve been working with people like American Tower and Crown Castle to put up our infrastructure on existing towers and deploy the service.”

M2Z has submitted a timeline to the FCC proposing to build a third of the U.S. population in three years; two-thirds of the population in five years and 95 percent of the population by 10 years. The network would be free to end users but paid through a wholesale model to ISPs and through an advertising market model to Internet portal providers.

“When you type in pizza on Google today the Internet doesn’t know where you are. The big carriers today that have wireless systems have that information but don’t want to pass that on because they believe that would make them effectively a dumb pipe,” Muleta said. “We don’t mind being a dumb pipe; we’ll pass that on to Google, Microsoft, Yahoo! and Ask.com and the user gets better service because when he types in pizza he’ll know whether the pizza is in a neighborhood in Chicago or in Washington, D.C. We think we can make enough money to pay for the network that way.”

The idea, he emphasized, is not to compete with mobile voice services but to add a mobile broadband capability that enhances existing DSL and cable high-speed data capabilities.

“We’re looking at a whole new level of markets developing for nomadic portability for laptops, PDAs, walking speed mobility,” he said.

To get this kind of mobility from existing players using EV-DO and UMTS, costs “between $60 and $90 a month” and “there’s a sweet spot where if you provide the service for free and people have the devices … then they will take the service,” he said. “We don’t think that people are going to drop their home broadband connections just because M2Z is there, but they will take on M2Z as a free service to have the flexibility to have DSL-like services outside of their homes.”

The key, he said, is freeing up the spectrum.

“The worst outcome for the spectrum would be to sit there without any identified users, basically in the FCC’s inventory,” he said. “The other thing that would be worse would be to be in the inventory of AT&T and Verizon and they sat on it with no use, effectively blocking the competition. If we fail to make our commitment to the Treasury … the spectrum would revert back to the FCC. What we said was give it a try.”

It is worth at least taking a look, said Jarich.

“There is an interest out there. I’ve talked to some people on Wall Street who think they (M2Z) know what they’re doing but they’re in a holding pattern and the gating factor is that spectrum. We’re going to have to wait until that happens to see where it goes from there,” he said.