Tuesday, March 31, 2009

Big Telcos: "Thanks, But No Thanks" to Broadband Stimulus 03/31/09 Boston - is reporting, in a copyrighted story by Washington reporter Molly Peterson of today's date, that the two largest incumbent local exchange carriers (ILECS) in the US, AT&T (NYSE: T) and Verizon (NYSE: VZ), most probably will not seek any grants or loans under the "broadband stimulus" provisions of the federal stimulus package.

Formally called The American Recovery and Reinvestment Act of 2009 (ARRA), the legislation signed by President Barack Obama on February 17, of this year appropriates a total of $787 billion in federal funds for a wide variety of projects, including a total of $ 7.2 billion for broadband stimulus programs.

For those paying attention, the Bloomberg piece, which quotes industry analysts and corporate flacks at both ILECs, comes as no surprise. The big telcos have been cool for years to the entire government broadband incentive agenda for unserved and underserved areas. Just as they have consistently fought community broadband and municipal network efforts, lobbying in numerous states to make illegal "government owned networks", they have never lobbied for direct grants or loans for rural broadband. The ILECS instead have always pushed for tax incentives, including tax credits and accelerated depreciation schedules for new capital expenditures on high speed networks.

Famously, the Congressional mark-up process for the ARRA featured several tax break packages for the ILECs. As Seth Hansell posted on his Bits blog in the New York Times on January 20, analysts estimated Verizon alone could capture $1.6 billion should then draft tax incentive language become law. Verizon's policy blog reflected its support of the Senate Budget Committee's tax proposal at that time. Analysts looking at the tax provisions during the Committee mark-up process, like Jacqueline Emigh over on betanews documented that "next generation" network developers, those building facilities delivering speed at 100 Mbps and over, would receive tax incentives of up to 40% of eligible capital expenditure. 

Those tax portions of the stimulus package were removed, despite the efforts of Senate Commerce Committee Chairman, Senator Jay Rockefeller (D-WV), who has pushed for such tax changes for rural telecom for over a decade.

As distinct from the large telcos, small to medium sized telcos and cable operators, and wireless Internet service providers (WISPS) prefer direct grants and loans as codified in the ARRA for rural broadband efforts. These smaller providers have less ability to secure investment capital, and a reduced ability to take advantage of increased tax incentives.
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