M2Z Networks has asked a federal appeals court to reverse a recent FCC ruling that denied the fledgling company 20 MHz of 2.1 GHz spectrum needed to make its vision of offering a free, family-friendly broadband wireless service nationwide a reality.

In the lawsuit, M2Z Network claims the FCC on Aug. 31 unlawfully dismissed its license application for the 2155-2175 MHz spectrum and the company’s forbearance petition filed on Sept. 1, 2006. M2Z Networks asked the FCC to grant it the license to the fallow spectrum at no upfront cost, although the company vowed to pay the U.S. Treasury 5% of its revenues as payment for the frequencies. The company also vowed to allow public-safety entities free access to its proposed WiMAX network.

In the lawsuit filed in the U.S. Court of Appeals for the District of Columbia Circuit, M2Z Networks claims the FCC failed to follow its own rules by not adequately considering whether the M2Z plan would be in the public interest, by concluding that the proposal was not a “new technology or service,” and by opting to begin a new proceeding instead of making a “substantive decision” on the forbearance petition in a timely manner.

“Because the FCC failed to make a statutorily-required public-interest determination within one year after M2Z … presented its proposal to the FCC, the proposal should be deemed to be in the public interest as a matter of law,” the lawsuit states.

“Basically, what the commission decided was to not decide anything,” M2Z Networks CEO John Muleta said yesterday, noting that the FCC still has not initiated the promised proceeding regarding the spectrum in question.

When the FCC made its ruling, FCC Chairman Kevin Martin issued a public statement that M2Z Networks did not submit the only proposal for the spectrum, so a new proceeding is appropriate.

“Many have suggested that we should auction this spectrum, while still others suggest that due to the high demand for this spectrum we should consider unlicensed use of the band,” Martin said. “Each of these proposals has merit, and consideration of either would be inappropriately foreclosed by granting forbearance in this instance.”

Although the FCC dismissed M2Z Networks’ license application, it did so without prejudice, so the company’s proposal still could be considered in the proceeding.

Yesterday, M2Z Networks announced support for its proposal from Broadband Wireless Partners, a consortium of 20 rural wireless carriers wanting to use M2Z’s wholesale offering for broadband roaming, because large nationwide carriers are required only to provide roaming for voice services.

“At the end of the day, what they’re saying is, ‘We’ve only heard from one credible player how the spectrum can be used; nobody else out there is willing to do this with the rural carriers,’” Muleta said. “We think this announcement is material to the NPRM, because the NPRM—first and foremost—is going to decide what the highest and best use of the spectrum is.”

Muleta said M2Z Networks is not a “spectrum speculator,” so it has no interest in bidding on 700 MHz frequencies that will be auctioned early next year.

“We want to focus on this [2.1 GHz] band,” Muleta said. “If the commission decides that a free, fast, family-friendly network is not something it wants to do, I’ll smack my head in amazement and move on to do something that [is] more appreciated by the public interest that the statute talks about.”