Battle Lines Drawn in Broadband Stimulus Debate - Page 2

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What's the right funding model?

Aside from the conditions that could be attached to the funding, the panelists were also at odds over how the money should be dispersed. The House bill focuses primarily on direct government grants to broadband providers, leaving out the tax credits that some had hoped to see.

The debate over broadband tax credits versus grants is a microcosm of the broader discussion about the direction the stimulus package should take. Of the $825 billion proposed in the House bill, $275 would come in tax cuts, with the remaining $550 billion in the form of grants or other direct government spending. Republicans are looking to even out that ratio.

Echoing an oft-heard criticism of the Democrats' stimulus bill, Atkinson said that tax credits are a more immediate catalyst for corporate spending projects that create jobs. His group has recommended a roughly even split of grants and tax credits, arguing that the latter would be the primary engine of job growth in 2009.

But others on the panel warned that tax credits don't carry the accountability that lawmakers are adamant about including in this massive spending effort.

"I'm not very disappointed that the tax incentives are not in the bill that came out yesterday, primarily because it's much harder to know what your money is buying in that instance," Turner said.

Mark Cooper, director of research for the Consumer Federation of America, compared tax incentives to the now-infamous bank bailout, calling it a form of "corporate welfare."

Who should get the business?

The bill would create different pools of money to be allocated to providers building networks in unserved and underserved areas, but with those terms left undefined, it remains unclear how far the stimulus money will go toward creating high-speed networks in rural areas.

Wally Bowen, executive director of the Mountain Area Information Network, a nonprofit ISP in rural North Carolina, warned that tax credits would result in the large incumbent providers building out their networks in the most competitive markets, which have higher population densities and are typically more affluent than rural areas.

"Any local economic development official, particularly in the neck of the woods where I live, will tell you that the big telephone and cable companies are the last place to look for shovel-ready projects in underserved areas -- that's just not where they've set their sights for all these years," Bowen said.

Rather than giving incumbent providers tax breaks, Bowen sees funding for local planning agencies and state-level initiatives as the path to delivering broadband to rural America.

"My concern is that these proposed tax credits for the big cable and phone companies could turn out to be a bait-and-switch proposition," he said. "If you're the CEO of one of these Fortune 500 companies, your investment strategy is aimed at major corporate clients and affluent residential neighborhoods, where the return on investment is greatest. So the choice presented by the tax credit stimulus proposal is a no-brainer to that CEO."

Atkinson countered that tax credits could be made available only on the condition that the provider committed to building out service in rural areas.

As it stands, the bill would establish one pool of $2.825 billion in grant money for rural broadband, to be administered by the Rural Utilities Service, a division of the Department of Agriculture. Some of the panelists expressed skepticism about that plan, claiming that the agency has a track record of mismanagement.

In many ways, the discussion was a typical wonkish Washington debate. The panelists all supported using stimulus money to promote broadband, which they agreed was a solid path to job creation. But beneath that broad-brush consensus, the devil, as they say, is in the details.

Debbie Goldman, research economist for the Communications Workers of America, a union representing 300,000 employees of companies like AT&T and Verizon, urged cooperation among the various interests, paraphrasing a common refrain of late, that this crisis is too valuable an opportunity to waste.

"I think the most important thing first of all is for us to find our areas of agreement, or else we're going to blow this opportunity," she said.