WASHINGTON — For the wide array of groups that have been calling for the government to take action to spur broadband deployment, the bill introduced Thursday in the House that would allocate $6 billion in stimulus money to that goal was welcome news.
But there remains a lively debate as to just how that money should be used.
The American Recovery and Reinvestment Act would seek to kick-start the nation’s tattered economy with $825 billion in government spending and tax cuts spread across a variety of initiatives, including clean energy, transportation infrastructure and education. Appropriations Committee Chairman Dave Obey (D-WI) introduced the bill as a “crucial first step in a concerted effort to create and save 3 [million] to 4 million jobs.”
The Senate has yet to produce its own version of a stimulus package, but Republicans in both chambers quickly criticized House Democrats, both for acting unilaterally in crafting the bill and for favoring direct spending over tax incentives.
On Thursday, the House Energy and Commerce Committee is scheduled to begin marking up the bill in a full committee hearing that could see contentious debate. The committee will consider the portions of the bill that fall within its jurisdiction, which will likely include the broadband measures.
Here at the New America Foundation, a Washington think tank, representatives of several groups that have been lobbying Obama’s transition team on broadband stimulus offered their critiques of the House bill, variously praising it for aiming to help bridge the digital divide, and urging modifications to ensure that the money is used most effectively.
The battle lines they outlined could very well end up a preview of Thursday’s hearing.
A central rift in the debate concerns the extent to which Congress should attach conditions, such as minimum connection speeds and open network requirements, to the money it would disperse to ISPs to build broadband networks in underserved or unserved areas.
Rob Atkinson, president of the Information Technology and Innovation Foundation, a Washington think tank focused on technology policy, warned against using the stimulus bill to try to overhaul the ways that ISPs manage their networks.
“We have got to focus on what this is all about. This is not about broadband reform — this is about stimulus,” Atkinson said. “Stimulus has to have one goal, and that is to get as much investment in as fast a time as possible.”
The proposed bill contains provisions that would require ISPs to open access to the networks created with the stimulus money, but it does not clarify what open access would entail. It could fall along the lines of the Net neutrality principle of non-discriminatory network operation, or it could go a step further and require ISPs to sell smaller providers access to their networks at a wholesale cost.
“Underserved” defined.
As with other key terms such as “underserved” and “unserved,” the bill calls on the Federal Communications Commission to provide definitions 45 days after it is signed into law.
Some of the panelists called for a strong stance on openness, seeing an opportunity to further solidify Net neutrality as the law of the land and ensure that the infrastructure created through the stimulus is put to maximum use. After all, the public is paying for the build-out, so shouldn’t the resulting networks be designed to serve the public interest?
But Atkinson warned that broadband-reform conditions are “inversely correlated” with network build-out. Open access rules and steep speed requirements could deter some ISPs from participating in the stimulus programs at all, he warned, urging that the bill do as much as it can to encourage all providers to build as much infrastructure as possible in 2009.
S. Derek Turner, research director for the media reform group Free Press, dismissed Atkinson’s proposals as overly sympathetic to the incumbent cable and telecom providers. Those industries, long-time opponents of Net neutrality legislation, are likely to fight to remove provisions that would make stimulus funds contingent on certain network-management practices.
“We want to be building the kind of networks that led to the Internet being what it is today, and that is primarily because the network is open and a platform of innovation,” Turner said. “I am very glad that the concepts of openness are in this legislation, and I hope it’s not something that gets stripped out in the name of compromise.”
While Free Press has an ambitious agenda for broadband reform, Turner said the group is pragmatic enough not to expect the stimulus to tackle issues such as intervening to make the ISP market more competitive. But the open-access conditions that are so central to the Net neutrality agenda are what made the Internet such a dynamic engine of the economy, Turner said. And the primary goal of the stimulus, after all, is to create jobs.
(Next page: What’s the right funding model?)
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What’s the right funding model?
Aside from the conditions that could be attached to the funding, the panelists were also at odds over how the money should be dispersed. The House bill focuses primarily on direct government grants to broadband providers, leaving out the tax credits that some had hoped to see.
The debate over broadband tax credits versus grants is a microcosm of the broader discussion about the direction the stimulus package should take. Of the $825 billion proposed in the House bill, $275 would come in tax cuts, with the remaining $550 billion in the form of grants or other direct government spending. Republicans are looking to even out that ratio.
Echoing an oft-heard criticism of the Democrats’ stimulus bill, Atkinson said that tax credits are a more immediate catalyst for corporate spending projects that create jobs. His group has recommended a roughly even split of grants and tax credits, arguing that the latter would be the primary engine of job growth in 2009.
But others on the panel warned that tax credits don’t carry the accountability that lawmakers are adamant about including in this massive spending effort.
“I’m not very disappointed that the tax incentives are not in the bill that came out yesterday, primarily because it’s much harder to know what your money is buying in that instance,” Turner said.
Mark Cooper, director of research for the Consumer Federation of America, compared tax incentives to the now-infamous bank bailout, calling it a form of “corporate welfare.”
Who should get the business?
The bill would create different pools of money to be allocated to providers building networks in unserved and underserved areas, but with those terms left undefined, it remains unclear how far the stimulus money will go toward creating high-speed networks in rural areas.
Wally Bowen, executive director of the Mountain Area Information Network, a nonprofit ISP in rural North Carolina, warned that tax credits would result in the large incumbent providers building out their networks in the most competitive markets, which have higher population densities and are typically more affluent than rural areas.
“Any local economic development official, particularly in the neck of the woods where I live, will tell you that the big telephone and cable companies are the last place to look for shovel-ready projects in underserved areas — that’s just not where they’ve set their sights for all these years,” Bowen said.
Rather than giving incumbent providers tax breaks, Bowen sees funding for local planning agencies and state-level initiatives as the path to delivering broadband to rural America.
“My concern is that these proposed tax credits for the big cable and phone companies could turn out to be a bait-and-switch proposition,” he said. “If you’re the CEO of one of these Fortune 500 companies, your investment strategy is aimed at major corporate clients and affluent residential neighborhoods, where the return on investment is greatest. So the choice presented by the tax credit stimulus proposal is a no-brainer to that CEO.”
Atkinson countered that tax credits could be made available only on the condition that the provider committed to building out service in rural areas.
As it stands, the bill would establish one pool of $2.825 billion in grant money for rural broadband, to be administered by the Rural Utilities Service, a division of the Department of Agriculture. Some of the panelists expressed skepticism about that plan, claiming that the agency has a track record of mismanagement.
In many ways, the discussion was a typical wonkish Washington debate. The panelists all supported using stimulus money to promote broadband, which they agreed was a solid path to job creation. But beneath that broad-brush consensus, the devil, as they say, is in the details.
Debbie Goldman, research economist for the Communications Workers of America, a union representing 300,000 employees of companies like AT&T and Verizon, urged cooperation among the various interests, paraphrasing a common refrain of late, that this crisis is too valuable an opportunity to waste.
“I think the most important thing first of all is for us to find our areas of agreement, or else we’re going to blow this opportunity,” she said.
