The $825 billion economic stimulus proposal includes $6 billion for improving U.S. broadband infrastructure - but no tax breaks.
A summary of the proposed spending released by House Democrats calls for the money to be used for "broadband and wireless grants in under-served areas to strengthen the economy and provide business and job opportunities in every section of America, with benefits to e-commerce, education, and health care. For every dollar invested in broadband, the economy sees a ten-fold return on that investment."
Phone and cable companies were hoping and lobbying for tax breaks, but the wireless industry considers the proposal a win since they wanted to be included in any broadband stimulus program.
Earlier in the week, Obama transition team member Blair Levin said that any monies which came from the economic stimulus package would likely use "existing structures" and programs to get money pumped into the economy in a timely fashion. The Wall Street Journal has tallied up a list of existing programs and departments that might be handing out the cash, including the U.S. Department of Agriculture's Broadband Loan and Guarantee Program, the Commerce Department's National Telecommunications and Information Administration (NTIA), and possible a one-time shot into the FCC's Universal Service Fund mechanism.
Public interest groups were hoping upwards of $44 billion to be spent, but $6 billion is a good start for Free Press - so long as tax dollars aren't used to fund "closed, proprietary networks that shut out content providers, control consumer behavior and encourage anticompetitive activity." Well! Free Press wants strings, including "mandatory requirements" to insure non-discrimination (i.e. Net Neutrality).
There's also likely to be a brewing dog fight over the definition of what broadband should be, with some companies and public interest groups calling for 100 Mbps download speeds, while others might be content to see a modest 10-50 Mbps download speed. Lower download speeds might allow Clearwire and other wireless broadband buildouts to fit in.
For more:
- Wall Street Journal reports on the $6 billion stalking horse. Blog.
- DSL Reports provides a little more detail here.
- And RCR Wireless has its stimulus package spin here.
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President-elect Barack Obama's call to improve the nation's broadband infrastructure has cable and phone company lobbyists maneuvering to get a leg up.
Lawmakers in Congress want a plan that will create jobs over the next two to three years while also tackling the longer-term goal of improving the availability and quality of high-speed Web access in the U.S. The U.S. has slipped to 15th from fourth place since 2001 in broadband penetration, according to the Organization for Economic Cooperation and Development. Advocates say broadband deployment is critical to the competitiveness of the U.S. economy.
Among the issues are what speed Congress should define as broadband and whether government money should be funneled only to areas that have no broadband access, or if it should also subsidize upgrades to existing networks.
Policies under serious consideration are corporate tax credits to build new wireless or landline infrastructure, government-backed broadband "bonds" and grants to companies or local governments, legislative aides and lobbyists close to the process say. There also is strong agreement that low-income consumers need to be encouraged to sign up for broadband -- for example, through vouchers to purchase computers or discounts on monthly service.
Senate Finance Committee and Commerce Committee members are drawing up a few options, as are House members such as California Rep. Anna Eshoo and Massachusetts Rep. Ed Markey, chairman of the telecommunications subcommittee. The Obama transition team's point person has been former Federal Communications Commission chief of staff Blair Levin.
"There aren't any quarrels about the need for more broadband," says Ms. Eshoo, who outlined a series of broadband stimulus options in a memo to the House leadership in October. "It's a matter of how we're going to do it and the actual language."
The Obama transition team declined to comment.
Large cable operators are seeking to increase the FCC's definition of broadband download speed to about five megabits per second, about 6½ times as fast as the current definition, according to people familiar with the situation. Internet-service providers building out "unserved" regions, where service of that speed isn't available, would be given the full benefit of tax incentives or grants.
The big cable providers also want to target "underserved" areas, where there is only one broadband provider or the service isn't widely available. In those markets, companies would get incentives to build out next-generation services. The download speed that would qualify as next-generation would likely be in the range of 40 to 50 megabits per second, people involved in the discussions say.
The cable plan would disadvantage phone companies, especially smaller ones whose digital-subscriber-line services are slower than cable modems. The Independent Telephone and Telecommunications Alliance, which represents midsize phone companies, is pushing for a slower broadband standard, in the range of 1.5 to three megabits per second. Curt Stamp, the group's president, says the federal largesse should be used to subsidize carrier investments in rural areas rather than to finance upgrades to their existing networks.
Wireless services will likely be able to qualify as broadband at a slower download speed than landline services. But if the mark is set above two megabits per second it could be a boost for Clearwire Corp., a start-up operator that is rolling out a WiMax network capable of download speeds of two to four megabits per second. Other carriers weren't planning major wireless upgrades until at least 2010.
Equipment makers such as Cisco Systems Inc. and Motorola Inc. stand to benefit if carriers undertake massive upgrades. Carl Russo, CEO of Calix, which supplies equipment to phone and cable providers, says Congress should define broadband as 10 megabits per second so the networks it builds now will be able to support bandwidth-hogging applications of the future, such as high-definition video.
"Remember, you only get to do this once, so you want to build the widest highway possible," Mr. Russo says. The Telecommunications Industry Association, which represents equipment makers, is pushing for a $25 billion grant program for Internet service providers. Under another proposal that is being discussed, grants could go to state and municipal authorities, which would build high-speed networks and then open them up to competing service providers. That would likely meet with considerable resistance from large carriers like Verizon Communications Inc., which have challenged attempts by local governments to build and operate their own wireless or high-speed fiber networks.
Steve Davis, senior vice president of policy for Qwest Communications International Inc., says the big phone company wouldn't object to public broadband projects in areas that currently have no high-speed Internet service, provided private operators have a right of first refusal in building the networks. "The first place the government should look is to the industry," Mr. Davis says.
Meanwhile, outside groups are offering various proposals to Congress. Consumer advocacy group Free Press released a 31-page broadband-stimulus proposal that calls for a $44 billion investment in Internet services over three years, much of which would be funneled through the FCC's existing Universal Service Fund, which subsidizes telephone services in rural areas and for low-income people.
Public-interest groups are clamoring for conditions to be imposed on carriers that receive tax credits, such as pledges not to degrade any Internet traffic, a principle referred to as "net neutrality."
—Vishesh Kumar and Amy Schatz contributed to this article.Although the Internet was started here, the U.S. can't seem to catch up with other developed nations when it comes to giving citizens access to high-speed connections.
For the second year running, the U.S. ranked 15th among the 30 members of the Organization for Economic Cooperation & Development in terms of broadband availability. Denmark ranked first again in the annual OECD survey, followed by a host of European and Asian nations. Indeed, while the number of Americans with access to broadband service rose 20% last year, to nearly 70 million people, the most in the OECD, that amounted to just 23 of every 100 residents. By contrast, the top five countries in the OECD ranking all sport per-capita penetration rates of better than 30%.
Why isn't the U.S. up to speed online? The U.S. Federal Communications Commission is quick to point out differences in population and geography that have made it more difficult for the nation to catch up with smaller countries. It is easier, after all, to deliver broadband in densely populated areas where the same cables can serve hundreds, if not thousands, of subscribers, giving phone and cable TV companies the financial incentive to upgrade their networks. The U.S. has rural areas where the revenue to be made from laying down fiber-optic cables to reach scattered households hasn't proven alluring to many providers. "It's easier to achieve a high penetration in Manhattan than Mississippi," said FCC Commissioner Deborah Taylor Tate in an Apr. 30 speech at the Broadband Properties Summit in Dallas.
But challenges of wiring remote communities don't tell the whole story. The OECD also found that U.S. broadband providers charge more than those in many developed nations. Broken down by megabit per second of download speed, U.S. rates ranged from $2.83 to $38.41 in late 2007. Rates in Japan started as low as 13¢ for one megabit per second, while France, Sweden, Korea, Finland, Australia, and others all start off at lower prices than the U.S. Furthermore, residents of European and Asian countries tend to have access to far speedier broadband options than Americans.
Consumer advocacy groups blame what they see as a market with little competition. They say the ability of major telephone and cable operators, such as Verizon Communications (VZ), AT&T (T), Time Warner Cable (TWX), and Comcast (CMCSA), to dominate their markets without sharing their lines with rivals has kept out new competition, enabling the companies to keep prices high and investments in faster technologies low. "All of these countries that are outpacing us have much more competitive broadband markets than we do," says S. Derek Turner, research director at Free Press, a media policy group. "You don't have the head-to-head competition like you do overseas where they have embraced open-access policies."
Turner and other consumer advocates are calling for the FCC to spur competition by requiring providers in certain regions to lease their high-speed lines at regulated prices to other providers. Otherwise, Turner says, would-be rivals will never enter the market, as they can't afford to tear up streets and run their own lines into households already wired long ago by cable and phone companies. Verizon, for example, is spending $23 billion to replace its copper wires with fiber-optic lines for its new high-speed FiOS broadband and TV services (BusinessWeek.com, 1/30/07). It hopes to have 7 million FiOS customers by 2010 in return for that hefty investment.
The FCC has rejected the argument that such measures are needed, saying Verizon and others would never invest that sort of money in network upgrades or in extending broadband to new communities if they were forced to then lease those lines to competitors. The government's role, says Commissioner Tate, is to have a "light regulatory touch," easing restrictions for broadband requirements to encourage competition and cracking down on acts that stifle competition, such as exclusive service deals between broadband providers and apartment building owners.
Regulators also hope that recent auctions of new wireless spectrum licenses will introduce new broadband competition over the airwaves. The problem with that argument, as consumer groups see it, is that broadband titans AT&T and Verizon were the auction's biggest winners (BusinessWeek.com, 4/21/08). "We fully expect that AT&T and Verizon will push things complementary to their existing services like mobile TV," says Turner. "We think there was a big opportunity missed."
Even if new rivals do emerge from the recent auction or another one being mulled to sell unused "white space" airwaves between TV channels (BusinessWeek.com, 3/24/08), wireless Internet access tends to be slower than a wired connection, says Turner. "It will make a difference," says Turner. "But, in the end, wireless spectrum just can't compete on a speed basis with fiber optics and hard-wired lines."
The U.S. has good reason to figure out some way to gain on the other OECD countries. A broadband connection is increasingly necessary to take advantage of the Web's interactive and rich media features, and is instrumental for e-commerce. "Broadband not only plays a critical role in the workings of the economy, it connects consumers, businesses, governments, and facilitates interaction," wrote OECD report authors Taylor Reynolds and Sacha Wunsch-Vincent. "Governments need to actively look for ways to encourage investment."
Check out the BusinessWeek.com slide show to see which countries claimed the top 15 spots in the OECD's ranking.
Holahan is a writer for BusinessWeek.com in New York.
Enterprise Corp. and the High Impact Program will hold an event this week to celebrate the success and potential of 13 area companies.
The event, called The Hot Dozen Holiday Showcase, will be held from 4:30 to 6:30 p.m. on Wednesday, Dec. 12, at the Old National Bank in Preston Pointe, 333 E. Main St.
The companies that will be recognized are: 3DR LLC, Conexxus, Dormbuys.com, Fulfillment Concepts, Genscape, Maximum ASP, Modern Gigabyte, Nomad Innovations, Peptides International, Resonant Vibes, Skyway USA, Smoothstone IP Communications and ZirMed.
Louisville Metro Mayor Jerry Abramson and the clients and partners of Enterprise Corp. and the High Impact Program will be in attendance.
The Hot Dozen Holiday Showcase is free to attend, but an RSVP is required by Monday, Dec. 10.
The High Impact Program is a public-private partnership formed by Louisville-Jefferson County Metro Government and GLI that identifies and serves fast-growth companies. The Enterprise Corp. is a division of GLI that supports entrepreneurship.
