Rural Telecom Tax Incentives Still in the Works

By eweek  |  Posted 2001-09-03

Despite the high volume of the battle between lawmakers and lobbyists about the degree to which the regional Bell companies should be regulated, theres a strong chance that, in the end, the skirmish on Capitol Hill will be called a draw.

Yet, there are bits and pieces of telecommunications policy that are still working their way through Congress. They revolve around bringing broadband connections to rural America and, in a year marked by severe economic braking, they could conveniently help lawmakers announce to their anxious constituents that when it comes to the economy, yes, they are doing something.

Ironically, however, the same argument for aggressive broadband policy — the shrinking economy — works against it as well. The most prominent measure, which would provide tax credits for the deployment of broadband networks, would sap dollars from the federal treasury — which, thanks to the foundering economy, no longer luxuriates in surplus but skirts around deficit.

In addition, many experts agree that many of the rural broadband bills ultimately wouldnt have much impact on the spread of broadband into rural areas anyway.

"Tax incentives might help, but they wont compensate for the fact that [rural broadband] is not an economic winner — at least not now," said Scott Reiter, a senior telecommunications specialist of the National Telephone Cooperative Association, a trade association representing small rural phone companies. "People want [broadband], but not bad enough to have a significant number of them take to it. In other words, the market doesnt seem entirely ripe for it yet."

According to a study conducted by the NTCA last summer, 21 percent of rural companies offering residential DSL service do not have any customers. Neither do 29 percent of those offering business DSL. About half of the surveyed companies offered DSL, but only about 1 percent of their customers have signed up for it.

The Broadband Internet Access Act of 2001, introduced earlier this year, had wide congressional support: 60 cosponsors in the Senate, before lawmakers left for the August recess, and 170 cosponsors in the House. But with the budget surplus shrinking, so might momentum.

"I think everything is being framed by the dwindling surplus," said Ken Johnson, a senior telecommunications consultant of law firm Bennet & Bennet. "It costs $2.1 billion over the next couple of years. Its up in the air, along with any other spending program."

Although the tax credit bill might stall, a new government program aimed at providing low-interest loans to companies deploying broadband in rural areas will likely be inserted into this years reauthorization of the 1996 Farm Bill, according to Don Erickson, legislative director of the Organization for the Promotion and Advancement of Small Telecommunications Companies.

Erickson said another bill is in the works to exempt rural telecommunications carriers from having to share data networks with competitors.

The rural broadband initiatives disturb some conservatives, who fear they set the stage for too much government involvement.

"Policymakers feel the need to do something. If they cant deal with the legal problems, theyll do promotional activities. Whether it helps or not is another story," said Adam Thierer, director of telecommunications studies of the Cato Institute, a conservative think tank.

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