Why the Stimulus Bill Discounts Broadband

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Those jobs would then indirectly spur the creation of another 166,000 jobs from companies that supply and service the communications carriers and equipment makers. The really big gains would come years later when the so-called multiplier effect kicks in, as broadband technology enables the creation of new services and businesses such as e-commerce or telemedicine.

It all underscores the point that there may be an inherent conflict between the short-term goals of the stimulus and the long-range goal of upgrading America's technology infrastructure. "Serious technology upgrades require more than a three-year window and more resources," says Richard Whitt, Washington telecom and media counsel for Google (GOOG). "It may be this is not the right platform for creating a 21st century infrastructure."

Tech advocates are furiously lobbying the Senate for more money and other incentives for broadband. Policymakers involved in some Senate committees are considering amendments that could provide up to $9 billion in broadband grants and tax credits. Senator Jay Rockefeller (D-W.Va.), chairman of the Commerce Committee and senior Finance Committee member, is supporting a proposal that would provide credits of 10% to 20% for broadband investments. Rebecca Arbogast, a principal at investment bank Stifel, Nicolaus (SF), says broadband may end up with as much as $8 billion in grants and subsidies.

Wary of Tax Credits

The leading broadband providers, such as AT&T (T), Verizon Communications (VZ), and Comcast (CMCSA), are in favor of tax credits being included in the final version of the stimulus bill. However, one senior-level Democratic staffer who has spoken with the Obama transition team says the President is wary of tax credits. "They were really down on tax credits," says the aide. "They saw it as corporate welfare. Even if you wrote strings about investments, their books were so complicated that you weren't confident it would markedly change their behavior."

Another hope is that broadband could see some spill-over money from the other technology components of the recovery package. The stimulus included $32 billion in proposed spending to fund a so-called "smart electricity grid" and $20 billion for health information technology.

William Lehr, an economist and researcher at Massachusetts Institute of Technology's Communications Futures Program, says smart grid and health-care modernization both hinge on broadband technology lines. "You can't take advantage of a lot of these things without information technology," he says. "It's the spice necessary to make the whole meal work."

Ante is the computers department editor for BusinessWeek.