Broadband Stimulus Could Top $9 Billion

By Kenneth Corbin

January 28, 2009

Up to $9 billion could find its way into the pockets of rural ISPs, either in direct spending or tax breaks, but critics say the investment is still too small to make a valuable economic impact.

Now that both chambers of Congress have produced drafts of an $825 billion economic recovery package, the role that broadband will play in that massive stimulus effort is becoming a little clearer. Just a little.

The Senate bill would send 50 percent more money than the House bill to ISPs to build out their networks in rural and underserved areas. The bills vest authority for dispersing the funds in different sectors of the government.

There also remains a lively debate over how the money should be dispersed, what conditions should be attached to the grants, and whether straight grants--versus tax breaks--are really the best way to create jobs in the short term.

At a midday presentation before Hill staffers and others with a stake in the broadband stimulus, one of the groups that has been knee-deep in the debate urged lawmakers to revise several key provisions of the drafts as they work toward a consensus.

Before President Obama took office, his transition team asked the Information Technology and Information Foundation (ITIF), a Washington think tank, to prepare an economic analysis of investing stimulus money in broadband to create jobs.

The report estimated that an investment of $30 billion in broadband would create nearly one million jobs in the first year, but only if the money was allocated prudently.

The actual numbers--$6 billion in the House bill, $9 billion in the Senate version--were a good deal smaller, but ITIF President Rob Atkinson praised Congress for making a down payment on the country's digital infrastructure, even if the impact would be "relatively modest."

Catching up to the rest of the world

With several recent studies indicating that the United States is falling behind its foreign competitors in connection speeds and adoption, broadband has vaulted to the top of the administration's tech-policy agenda. Advocates defend its place in the stimulus for the "shovel-ready" jobs it would create in the short term as ISPs continue to expand their networks.

They also tout the farther-off opportunities it could create by connecting more Americans to the modern economic infrastructure, just as in previous generations, when railroads and the interstate highway system brought remote areas into the commercial pipeline.

But to Atkinson, the stimulus proposals currently on the table are deeply flawed. The House bill, which is farther along the legislative curve than the Senate version (about which little more than the total funding allocation has been released), makes some of the funding contingent on specific conditions, which Atkinson sees as a mistake.

"I think we have to think about what is the goal of stimulus in broadband," he said. "For me the goal should be getting as much broadband built out in '09 and [2010] by as many players as possible. The more requirements there are on that, the less broadband is going to be invested in."

The conditions Atkinson was referring to involve minimum connection speeds and open-access requirements, which Net neutrality advocates have cheered, but have run into stiff opposition from network providers.

The House bill would also make a substantial portion of the grants and loans contingent on building networks with minimum downstream connection speeds of 45 Mbps, which Atkinson warned would deter many providers from even applying for the funds. The result could be that a substantial portion of the government money for broadband would not be allocated, and that portion of the stimulus would be a failure.

As a compromise, Atkinson proposed a revision to the language that would prioritize providers who could meet the minimum connection requirements, but not disqualify those that could not.

Finally, Atkinson took issue with the heavy reliance on grants and loans. Tax credits, he argued, would be a swifter catalyst for cash-strapped providers to invest in their networks. Both the House and Senate bill allocate all the broadband funding in the form of grants and loans.

The tax portions of the bill, seen by some as a concession to the Republican minority, could grow at the expense of direct government spending as lawmakers try to hammer out a compromise.

Obama has called on congressional leaders to pass the bill by mid-February.

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