Thursday, April 16, 2009

The $100 Billion Issue: Cisco Lobbies to Clarify "Buy American" Clause in Federal Stimulus Package 04/16/09 Boston - As seen in a publicly disclosed e-mail message from Cisco Systems, Inc. (NASDAQ: CSCO) to the National Telecommunications and Information Administration (NTIA), the San Jose based networking equipment market leader is lobbying against a strict interpretation of the "Buy American" provisions of the American Recovery and Reinvestment Act of 2009 (ARRA).

We believe the Cisco statement to the federal agency is extremely significant. Far more than the $7.2 billion in "broadband stimulus" funds in ARRA could be subject to the Buy American clause.
We believe that upwards of $100 billion in information technology (IT) appropriations are contained in all of the tech-related programs and funding lines in the Act. 

As outlined below, we believe that strict application of ARRA provisions meant to apply to roads, bridges, and public buildings can not reasonably be applied to the IT / telecom sector if appropriations from the Act are going to be spent on technology deployments, as intended.

Our analysis of IT funding portions of the Act agrees with that of several legal and market research analysts who have done detailed reviews of the legislation. We believe the approximate $100 Billion IT figure is reached when considering total appropriations, additional to the $7.2 billion, for: healthcare record computerization, smart grid electric distribution control technology, federal computer system upgrades, public safety communications, intelligent transportation system (ITS) tech within the massive funding for road and bridge construction, computer learning and educational technology, and possible broadband rewiring of subsidized and public housing.

e-mail message, reproduced on the NTIA's public disclosure site reports that Cisco's Jeffrey A. Campbell had an Ex Parte telephonic discussion with NTIA Senior Advisor Mark Seifert on March 23, 2009 to lobby NTIA against strict interpretation and enforcement of the Buy American language contained in Section 1605 of the Act (Section below, full ARRA text in .PDF, here).

Mr. Campbell, based in Cisco's Washington office, is the firm's Senior Director for Technology and Trade Policy, within the corporate Global Policy and Government Affairs division. As stated in his e-mail, he specifically sought clarification from NTIA that any network facilities built with BTOP funds not be "...constituted a "public work" which would subject them to the "Buy American" requirement." Alternatively, Campbell sought "a public interest waiver of the "Buy American" requirement...for all electronics equipment used in broadband networks."

The report by the retained lobbyist who initiated the telephone discussion, and its public disclosure, are both mandated by the Obama Administration's new disclosure rules for lobbyists seeking to influence any federal agencies relative to grant or loan expenditures from the ARRA. President Obama issued a Memorandum on March 20 which contained the strictures. As reported by the government watchdog group The Sunlight Foundation, the disclosure regulations set off a firestorm of concern on K Street when they were promulgated.

Our analysis
: 1. To date we have only seen published stories on the Cisco meeting in Brad Reese's column on Cisco in Network World, and on Democratic Underground. Cisco itself has not commented yet, although its government affairs site routinely stakes out free trade positions, as is common in the high tech sector. We believe the Cisco argument will receive far greater review and feedback from not only other electronics manufacturers, but from the telecom carriers that purchase their products, and from the bevy of trade associations representing the American high technology industry in Washington. Cisco itself has been instrumental in supporting the work of as many as 32 technology trade groups, including TechNet, in addition to its own robust lobbying presence.

2. The reality is that many components of any microelectronic array, and most semiconductors found in virtually any networking equipment, are fabricated abroad. Virtually no telecom network operating today in the United States, supporting either a public service provider or an enterprise, could function without the existence of global supply chains feeding into the final hardware product. We hope that review of the Act's Sec. 1605 by NTIA will reasonably look at the realities of global manufacturing and trade in the telecom sector, as do current domestic content regulations of the USDA's Rural Utilities Service.

3. Cisco and its supported high tech trade groups, like TechNet (the folks that lobbied for a 100 Mpbs national broadband goal back in 2002), have been in the forefront of pushing for a progressive national broadband policy for years. Cisco understands the equation of greater broadband deployment equals greater economic activity and higher employment levels in the American economy. Cisco's push for clarification of the "Buy American" provision is a reasonable and an ultimately practical request. The goal of an effective national broadband strategy is within reach, in large measure thanks politically and technically to Cisco.

The Buy American language of ARRA is found under Section 1605 of the Act:


GOODS. (a) None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public
work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.

(b) Subsection (a) shall not apply in any case or category of cases in which the head of the Federal department or agency involved finds that—

(1) applying subsection (a) would be inconsistent with the public interest;

(2) iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or

(3) inclusion of iron, steel, and manufactured goods produced in the United States will increase the cost of the overall project by more than 25 percent.

(c) If the head of a Federal department or agency determines that it is necessary to waive the application of subsection (a) based on a finding under subsection (b), the head of the department
or agency shall publish in the Federal Register a detailed written justification as to why the provision is being waived.

(d) This section shall be applied in a manner consistent with United States obligations under international agreements.

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