Carriers Reaction to Broadband Package Illustrates Why The Stimulus Won’t Work

Barack Obama has a dream of affordable broadband internet for every American household and six billion dollars of the Democrats stimulus package is earmarked to that end.

Broadband carriers say it’s too little and it will be too late.

“I was incredibly impressed how quickly the House moved,” says Shirley Bloomfield, senior vice-president for federal relations at Qwest Communications (Q), a Denver-based communications provider that serves 14 Western states. “They’ve got some good concepts. But $6 billion is not going to get you to ubiquitous broadband.”

…some communications providers warn that the package as designed in the House bill may get bogged down by too much government bureaucracy, and fail to create jobs quickly—a key objective of the federal stimulus.

…the House bill is focused on using grants, loans, and loan guarantees, but it doesn’t use tax incentives at all. Grants would likely take many months to be distributed, whereas some companies say they could act much more quickly if they knew they could receive tax credits for their investments. “With grants it is eight months of bureaucracy before any money gets to its destination,” says an official for a large communications provider. “If you are looking for a quick stimulus hit, tax credits would be better.”

Do you mind if I repeat that?

“If you are looking for a quick stimulus hit, tax credits would be better.”

Just as giving free money to banks doesn’t guarantee they will lend it out, internet network providers may not be interested in stimulus money conditioned with government mandates, further diminishing the stimulus’ potential impact on growth.

However, some organizations such as Public Knowledge are hopeful that open access will mean that network builders—such as Verizon Communications (VZ), AT&T (T), Time Warner Cable (TWC), and Comcast (CMCSA)—must allow rivals to use their networks at wholesale prices.

“You would be required to lease space over these networks the way we used to do.”

If this is the case, ITIF’s Atkinson warns that many broadband providers would not participate in the program. “You’ll effectively have a boycott,” he says. “You’ll see very, very few takers.”

Internet access is a boon to the free flow of information, education and free enterprise, but high-speed access is not a right of every American citizen. Spending billions of dollars so more Americans can access their email, update their Facebook page and surf porn more efficiently has dubious value for the incremental creation of jobs.