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[ NNSquad ] [IP] Senate Finance Committee's tax credits for broadband

----- Forwarded message from David Farber <dave@farber.net> -----

Date: Thu, 5 Feb 2009 06:51:17 -0500
From: David Farber <dave@farber.net>
Subject: [IP] Senate Finance Committee's tax credits for broadband
Reply-To: dave@farber.net
To: ip <ip@v2.listbox.com>

Begin forwarded message:

From: Stephen Ronan <sronan@panix.com>
Date: February 5, 2009 12:31:42 AM EST
To: David Farber <dave@farber.net>
Subject: Senate Finance Committee's tax credits for broadband

For IP if you wish -s

The broadband portion of the Senate Appropriations Committee's stimulus 
package bill (1) ameliorated certain aspects of the House bill (2) that had 
been criticized on the IP list and elsewhere (e.g., by providing more 
flexibility to NTIA rather than writing speed requirements and references 
to the FCC 05-151 statement on Net Neutrality into the law). And the Senate 
Appropriations Committee provisions seem to have bipartisan support, with 
the whole package winning some Republican votss on the Appropriations 
Commiteee and Sen. Kay Bailey Hutchison (R-TX) on Meet the Press this past 
Sunday saying she agreed with broadband and electric grid elements of the 

However, the Senate Finance Committee has sought to supplement the  
Appropriations Commitee's work by adding tax credits for broadband  
equipment and installation (3). I haven't seen much discussion of the  
provisions, though Saul Hansell in the NY Times blog pages seemed  
skeptical (4). Perhaps a prime reason for the absence of discussion is  
that the bill's language is somewhat opaque.  I have asked around as to 
whether any party has yet tried to fully explain in clear language what it 
means.... what its impacts would likely be in regard to cost, jobs created, 
number of subscribers likely to receive broadband service who would not 
otherwise have broadband service, or whose broadband service quality is 
radically improved, and the short term and long-term effects on competition 
among broadband providers and, relatedly, affordability for subscribers. 
But haven't yet unearthed any such clear explanation.

I see that its language largely derives from "The Broadband Internet  
Access Act of 2000", S. 2698 sponsored in 2000 by the late Senator  
Moynihan et al. The bill has been repeatedly introduced since then with a 
few modifications (e.g., increased bit rates), for example:  HR 1818 "The 
Broadband Deployment Acceleration Act of 2007".

Along the way from 2000 until now, the bill has been stripped clean of  
pro-competitive aspects. The original S. 2698, sponsored in 2000 by  
Moynihan, Rockefeller, Snowe, Baucus et al. included this language


(a) SENSE OF CONGRESS. It is the sense of Congress that in order to  
maintain competitive neutrality, the credit allowed under section 48A of 
the Internal Revenue Code of 1986 (as added by section 3) should be  
administered in such a manner so as to ensure that each class of carrier 
receives the same level of financial incentive to deploy current generation 
broadband services and next generation broadband services.

(b) STUDY AND REPORT. The Secretary of the Treasury shall, within 180 days 
after the effective date of section 3, study the impact of the credit 
allowed under section 48A of the Internal Revenue Code of 1986 (as added by 
section 3) on the relative competitiveness of potential classes of carriers 
of current generation broadband services and next generation broadband 
services, and shall report to Congress the findings of such study, together 
with any legislative or regulatory proposals determined to be necessary to 
ensure that the purposes of such credit can be furthered without impacting 
competitive neutrality among such classes of carriers.


Nothing of such language or sentiment remains in the current version. And 
in 2000, when these tax credits were originally proposed there were 
requirements in existing FCC regulation that the deployed fiber or copper 
would be unbundled and potentially shared among competing providers, 
requirements since largely or entirely dissolved.

While the bill may be promoted as encouraging broadband access for  
unserved people in underserved areas, it seems unlikely that the credits 
would largely derive from such activity. As Hansell noted, the credits for 
"next generation" broadband could derive from service to "any residential 
subscriber." And the credits for "current generation" broadband could be 
obtained from serving anyone who lives in a rural area.

So, in regard to tax credits for 100 Mbps by 20 Mbps "next generation"  
service, it appears that if a broadband provider's current business plan is 
to bring fiber to the very wealthiest residents of urban mansions, 
townhouses or condos and to estates in the poshest suburbs or rural areas 
and to charge the customer an arm and a leg for doing so, the bill would 
provide a 20% tax credit for making the "last mile" connection to 
subscriber, whether or not the provider offered any service whatsoever to 
unserved or underserved persons or rural areas and whether or not an 
additional job were created beyond the current plan.

And, in regard to "current generation" service (5/1 wired or 3/.768  
wireless), if the broadband povider is already planning to persuade the 
richest residents of rural areas to switch their connection from, say, DSL 
to cable or from cable to wireless (according to NTCA, 9 out of 10 rural 
youth have a mobile phone and 90% have an Internet connection, half have 
more than 100 channels of video) 
>, the provider could get a 10% tax credit for doing so, regardless of 
whether it connected an additional person beyond the current plan,  
connected anyone who currently lacks a connection, lowered anyone's  
subscription cost, improved the speed of anyone's connectivity or created 
an additional job.

I'd be interested to know if there are any folks on this list who believe 
that the bill is worthy of support in its current form?

Stephen Ronan

1) Senate Appropriations Committee bill (S. 336):
See: "01/28/2009 Text of S336, the American Recovery and Reinvestment  
Plan", especially: pp 10-11, 36-38, 47-56 for broadband provisions.

2) House Appropriations Committee stimulus package bill:
See pp 38-40, 45-47, 49-58 for broadband provisions.

3) see: "Legislative Text of The Senate Finance Committee Provisions for 
The American Recovery and Reinvestment Act of 2009". 
http://finance.senate.gov/sitepages/legislation.htm Part VIII is "Broadband 
Internet access tax credit." That can be found at pp. 61-82.

3) "Verizon Could Get $1.6 Billion in Senate Stimulus Plan" by Saul  
Hansell, Jan 30, 2009

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