Broadband Bill Disappoints Nearly Everyone

Critics say there's not enough money in the bill and that distributing funds through grants instead of tax credits will hamper job creation

By Spencer E. Ante and Arik Hesseldahl

The initial stab by the U.S. government to promote high-speed Internet access has something to disappoint nearly everyone.

Most communications companies and consumer advocacy groups say the $6 billion in broadband stimulus measures contained in the House Democrats' $825 billion economic recovery package are a good first step. But they warn that the money won't be nearly sufficient to meet incoming President Barack Obama's objective of providing affordable high-speed Internet access to all U.S. households.

"I was incredibly impressed how quickly the House moved," says Shirley Bloomfield, senior vice-president for federal relations at Qwest Communications (Q), a Denver-based communications provider that serves 14 Western states. "They've got some good concepts. But $6 billion is not going to get you to ubiquitous broadband."

Job-Creation Effectiveness Questioned

Communications providers and various advocacy groups have pegged the cost of creating universal broadband in the tens of billions of dollars. A December 2008 report by the Free Press, an organization devoted to reforming the media, estimated that a broadband infrastructure development program would cost $44 billion over three years. Similarly, the Information Technology & Innovation Foundation (ITIF), a Washington (D.C.) think tank, projected that providing Internet service to much of the unserved territories in the U.S. would cost about $12 billion. "It's definitely not enough money," says Robert Atkinson, founder of the ITIF.

Moreover, some communications providers warn that the package as designed in the House bill may get bogged down by too much government bureaucracy, and fail to create jobs quickly—a key objective of the federal stimulus. Under the House Democrats' plan, approximately $3 billion in broadband stimulus would be administered by the Rural Utilities Service of the Agriculture Dept., while another $3 billion in grants would be awarded by the National Telecommunications & Information Administration, a small bureau of the Commerce Dept.

One big issue is that the House bill is focused on using grants, loans, and loan guarantees, but it doesn't use tax incentives at all. Grants would likely take many months to be distributed, whereas some companies say they could act much more quickly if they knew they could receive tax credits for their investments. "With grants it is eight months of bureaucracy before any money gets to its destination," says an official for a large communications provider. "If you are looking for a quick stimulus hit, tax credits would be better."

Just What Is "Open Access"?

Another issue of concern under the House bill is that there are a lot of rules and approaches that still need to be defined by the Federal Communications Commission, which oversees everything from telecom policy to broadcasting standards. Obama's pick for FCC chairman, Julius Genachowski, has just been nominated and won't take his seat for weeks, if not months. The negotiation over rules will have to come after that and could delay the spending for many months.

The most contentious issue will likely revolve around the definition of "open access." Recipients of the grants are required to operate their networks on an "open access" basis. That term is not defined in the House bill, which instead says the FCC will have the authority to set the requirement. If open access is interpreted to mean what tech insiders call "network neutrality," or barring carriers from discriminating or slowing content from particular Internet companies, that may not be a significant issue, says ITIF's Atkinson.