|Rockefeller Stim: Sensible or Giveaway (Editorial)|
|Monday, 26 January 2009 15:41|
2/13 Update:At the last minute, dropped from the bill. Saul Hansell's Times article deserves credit. Jay Rockefeller's coming broadband amendment might be sensible or could be a massive giveaway to the six carriers with 80% of the U.S. lines. He's proposing billions in tax credits for broadband. This will be his first defining act as new head of the Senate committee.
If he does it right, the tax credit goes to additional network building that will create jobs in construction, equipment and operations. I'd strongly support a reasonable subsidy for Verizon, for example, to build 5 million lines of FIOS rather than the 3 million they have announced.
But no jobs are created by a tax cut for upgrades that would happen anyway. Without a penny of government subsidy, Comcast and Cablevision are set to offer DOCSIS 3.0 to half the country by 2010, their entire territories. Verizon is on track for 6M lines of FIOS in 2009-2010, and AT&T for 13M lines of U-Verse.
It's easy to know whether spending is incremental, because large companies tell Wall Street their capital spending plans. The four largest – 60% of U.S. lines – will maintain flat (AT&T, Verizon, Time Warner) or slightly increased spending on broadband. The rural areas already are set for most of the $6B already approved; they can't build enough in 24 months to use even that much sensibly, because it takes time to ramp up large network builds. There's no reason to think the companies in the middle, like Cox Cable or Qwest, will have a significantly different trend in their capital spending.
Therefore, a simple rule – that the subsidy only apply to increased spending on broadband – will do an excellent job of separating a sensible use of public money from one that will not create many jobs. Rockefeller is 71 and has just been easily re-elected to another six-year term, so he has freedom from the typical pressure from lobbyists and contributors. The main recipient of the money in West Virginia would be Verizon, which is likely to upgrade anyway because cable is clobbering them. Verizon can also take advantage of the very generous subsidies for the rural parts of their territory.
I've reported the news of broadband since 1999 as Editor of DSL Prime, and wrote a book DSL: A Tech Brief (Wiley 2002.) Getting people connected to the fast net is a good thing. Creating jobs as 20,000 a day are lost is the right priority for the stimulus. Helping companies like Verizon hire more people and build more is good public policy.