Senate Panel OKs Broadband Credits

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Years of persistent lobbying paid off for the telecommunications industry when a Senate committee on Nov. 15 approved a multibillion-dollar economic stimulus package that includes a pair of temporary tax credits to promote the expansion of broadband infrastructure.

The measure, sponsored by Sen. John D. Rockefeller (D-W.Va.), includes a tax credit that covers 10 percent of expenses related to deploying broadband services in rural and underserved areas.

Another tax credit compensates companies for 20 percent of the costs of launching next-generation broadband services for residential customers.

The tax credits - intended to immediately stimulate the slumping economy and to make broadband services available to a larger swath of the population - expire one year after their enactment.

The Congressional Budget Office projected that the tax credits would cost a combined $413 million. Rockefeller's office estimated that total at about $540 million.

Industry groups argued that the economic benefits of the tax credits would far outweigh their costs. The Telecommunications Industry Association estimated the credits would spur broadband companies to inject an additional $2 billion into the U.S. economy, while indirectly spurring computer industry sales.

By increasing the availability of broadband-enabled services, the tax credits will "open up a new level of prosperity through the faster transport of information," TIA President Matthew Flanigan said. "This legislation will help to extend the productivity gains of high-speed Internet access to homes and small businesses across the United States, increasing economic output significantly."

Not everyone shared Flanigan's enthusiasm. Information Technology Association of America vice president Mark Uncapher said lack of demand was the key reason why broadband services have not been deployed in some parts of the country.

The meaning of a 10 percent tax credit over such a short period is unclear, he said.

"Is it going to do it all by itself? No," Uncapher said. "It might tip the balance at the margins. It creates a short-term [deployment] incentive."

And Uncapher was more skeptical that a one-year tax credit would spur the launch of next-generation services. A better means of encouraging deployment of cutting-edge broadband technologies would be to focus on demand, he argued.

"The 20-percent [credit] might not really make that much difference in the short term," he said.

Similar tax credits were proposed in 2000 in the House and Senate.

With the economy faltering - and the telecommunications industry looking especially vulnerable - Rockefeller's Broadband Internet Access Act was inserted last Thursday into the Senate economic stimulus package. The Finance Committee then approved the measure on a party-line vote.

The full chamber was expected to consider the plan last Tuesday.

The House last month passed stimulus legislation that does not include the broadband tax credits. Industry sources said it was unclear how the credits would fare in conference.

States News Service

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