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Critics Question Effectiveness of Broadband Stimulus

Several groups praised the U.S. Congress for including billions of dollars for broadband deployment in a huge economic stimulus package, but critics questioned whether the broadband provisions will create jobs and bring high-speed Internet access to a significant number of U.S. residents.

Negotiators for the U.S. Senate and House of Representatives late Wednesday approved a compromise bill after both chambers passed huge economic stimulus packages in the past three weeks. The new stimulus package, with a price tag of about $789 billion, includes $7.2 billion in grants and loans for broadband providers to roll out service to rural and other unserved or underserved areas.

Lawmakers released details about the compromise bill Friday, the same day that the House and the Senate are expected to vote on the final package.

The $789 billion compromise bill is down from about $819 billion in the House version and $838 billion in the Senate version. But tech provisions avoided the chopping block; the broadband spending stayed about the same as was in the Senate version and is about $1.2 billion more than was in the House version.

Some critics questioned why broadband was part of the stimulus package, intended to create jobs and boost the U.S. economy out of recession. There's little evidence that the broadband portion of the package will immediately create jobs, or that government spending on broadband was necessary,said Barbara Esbin, director of the Center for Communications and Competition Policy at the Progress and Freedom Foundation, a conservative think tank.

"There is no market failure, there's no lack of private investment in broadband at the current time that warrants government expenditure in this area," Esbin said. "Normally when the government intervenes when there's not a market failure, it does more harm than good."

Other critics supported broadband spending in the bill, but questioned some of the provisions. The bill missed an opportunity to create immediate economic stimulus by dumping tax credits for broadband providers, which had been in the Senate version of the bill, said Rob Atkinson, president of the Information Technology and Innovation Foundation (ITIF), a Washington, D.C., think tank. The money in the bill will go toward grants and loans, but a grant program could take months to set up, he said.

The lack of a tax credit in the final bill is "disappointing because it will mean that there will not be much stimulus effect for the near term," Atkinson said. "It's too bad that some public interest groups opposed tax incentives since the result of not including tax incentives will be less broadband to Americans who don't have it now."

Groups against the tax credits "put other agendas ahead of the most important one: using the opportunity presented by the stimulus package to get the most broadband to the most Americans to create the most jobs," Atkinson added. "This is critical because while the $7.2 billion is an important and needed down payment on getting all of America connected to broadband the costs of doing this are much higher, and absent additional public subsidies, the job will unlikely not get finished."

But many supporters of putting broadband into the stimulus package praised the end result. Free Press, a media advocacy group, had called for $44 billion in broadband spending over three years, to reach the 5 percent to 10 percent of U.S. residents who do not yet have service available. But the grants and loans that are in the bill will help, said Derek Turner, the group's research director.

Turner praised lawmakers for keeping provisions in the bill that prohibits broadband providers receiving grants under a new program from discriminating against some Internet traffic and from refusing to connect with other providers. A $4.7 billion grant program administered by the U.S. National Telecommunications and Information Administration (NTIA) must include net-neutrality requirements adopted by the U.S. Federal Communications Commission in 2005, the bill says.

The bill requires the NTIA and FCC to develop nondiscrimination and interconnection rules.

"The legislation is a clear sign that Congress is committed to connecting our country and maintaining an open Internet," Turner said. "This is not going to solve the rural broadband problem ... but it is a good shot in the arm."

Atkinson and Esbin suggested the net-neutrality rules could scare off some potential broadband providers, although Atkinson was encouraged that the bill does not seem to include open-access requirements along with net-neutrality requirements. Open-access requirements could have required broadband providers to share their networks with competitors, critics said.

In addition to the $4.7 billion for the NTIA, the bill gives $2.5 billion to the U.S. Department of Agriculture's Rural Utilities Service to provide grants and loans to broadband providers targeting service in rural areas. Some broadband advocates had called for all the broadband money to be administered by one agency, instead of two.

Free Press and some consumer advocacy groups had also pushed for Congress to include speed requirements in the broadband grant program, but the compromise bill does not include specific speed requirements. The House version of the stimulus bill had set speed requirements of 5M bps of download speed for some of the money and 45M bps for another portion of the money, but negotiators stripped that out of the final bill.

The groups that pushed for speed requirements said government funding should be used to create high-speed networks that will soon be needed to conduct business online or view high-definition video.

But the speed requirements, combined with net-neutrality rules, could have driven away broadband providers that would be otherwise interested in the money, Atkinson said. Few broadband providers are able now to deliver 45M bps service, he said.

The congressional negotiators involved in working out the bill's final language seemed to agree, but they encouraged the NTIA to give grants to broadband projects providing the "highest possible, next-generation broadband speeds to consumers," the conference report says.

"The conferees are mindful that a specific speed threshold could have the unintended result of thwarting broadband deployment in certain areas," the negotiators' report says. "The conferees are also mindful that the construction of broadband facilities capable of delivering next-generation broadband speeds is likely to result in greater job creation and job preservation than projects centered on current generation broadband speeds."

Dumping the speed requirements is an important change, Atkinson said. "It will mean that, if there are not enough grant applications that would have meet the original House speed requirements, they can still be funded and spur broadband deployment and jobs," he said.

Craig Settles, a wireless broadband analyst and consultant, praised Congress for putting money into broadband. The final bill addressed some concerns he had that the broadband grants would have too many strings attached and that small broadband providers would be left out.

"This actually turned out better than I thought it would because the language isn't overly prescriptive," he said. "It allows communities to develop proposals that they feel are in their best interests as long as it meets the key objectives outlined in the bill."

Settles said he was also encouraged that the bill requires the FCC to develop a national broadband strategy by next year. "I can't emphasize how important this is," he said. "At the moment, the U.S. is rudderless in its approach to broadband. But with a national strategy, the country can marshal efforts and resources toward a common set of goals."

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