Senate Broad Stimulus & Avoiding Federal “Strings”

Aside from the fact that the Senate lacks the necessary votes to pass its version of the stimulus, the bill does actually have a much more in-depth plan for broadband expansion into unserved and underserved areas of the country.  In stark contrast, the House version has no concrete plan.

The Senate version of the stimulus raises the amount of money spent on broadband up to $9 billion, much more than $2.825 billion in the House version.  But either amount is a dangerous giveaway to broadband providers.  Already we’ve seen banks that have been similarly “stimulated” subject to strings attached to federal dollars.  CEO pay is being limited, and more micromanagement by the administration and regulators is sure to follow.  The same will be true for broadband providers should they choose to accept federal funds.

The Senate bill also providers tax credits for companies that receive grants to build these networks in rural areas.  This is determined by the grantee adding 10% of the expenditures for current generation broadband (this is adjusted to 20% of the expenditures if the network is being introduced to an unserved area) to 20% of the expenditures for next generation broadband.  The resulting total is the tax credit that the grantee can apply for.  In the bill, current generation broadband has been defined as a 5 Mbps up and 1 Mbps down, and next generation broadband as 95 Mbps up and 20 Mbps down.

All of this amounts to a convoluted way of subsidizing the broadband industry, risking the “strings-attached”  trap that has already been set for other industries.

However, the Senate version of broadband stimulus does not make grantees abide by the FCC’s net neutrality policy statement.  Should a stimulus bill pass, it should be the bill that best benefits consumers and maintains a free market in the long run.  Even though the Senate version funnels more federal money at broadband subsidies, it at least makes an attempt to avoid the “strings-attached” problem by prohibiting this ill-conceived FCC policy from being enforced as if it were actual law or a proper rule, which it isn’t.

Again, the contrast between this bill and the House version is significant.  The House bill gives grantees little money, asks them to bear most of the burden of build-out, and then regulates and taxes these new networks as a reward for the companies’ efforts.  This strategy is doomed to fail .

The Senate version would encourage rural expansion of broadband and reward companies for taking risks.  If such a stimulus must pass, at the very least it should contain this sort of policy approach.