THE BLOG

Broadband Bullies Shouldn't Benefit From Stimulus

02/09/2009 05:12 am ET | Updated May 25, 2011

It's all well and good that President-Elect Obama wants high-speed Internet connectivity to be part of the economic stimulus package. The goal, he said in a speech today (Jan. 8), is, "expanding broadband lines across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world."

This isn't an abstract notion, or one to be simply glossed over by numbers. Here's Will Gilmer, a farmer in Lamar County, Alabama, speaking at a news conference with Gov. Bob Riley: "When farmers need up-to-the-minute weather and commodity information, that usually involves going to a Web site, going to make a cup of coffee, drinking the coffee and then coming back to see the page only half loaded."

Noting that DSL lines end less than a mile from his house, Gilmer said broadband can also help farmers tell their story: "Many people these days simply don't understand where their food comes from. As farmers, many of us want to educate the public about how production and environmental stewardship go hand in hand and how we care for our animals." Gilmer said, adding he his Internet connection is too slow to post the videos he would like to post.

In Bar Harbor, Maine, residents said they need higher speed access, either because they have home-based businesses or, as in the case of some city department heads, work from home. Dana Reed, the Bar Harbor town manager, said Time Warner wouldn't extend its broadband service more than 293 feet from its existing cable line.

What's to be done with these telephone and cable companies who refuse to bring their customers into the digital age and contribute to the local economies? Why, what else? Shower them with millions of tax dollars in grants, or tax credits, government bond-funded support or even loan guarantees so that they extend higher speed services to areas in which they haven't seen fit to expand it before, despite the demand. Those are the kinds of suggestions on the table for a stimulus package.

What else have they done to justify such public largesse? In Bar Harbor, Time Warner is protesting state grants to companies that want to fill in service areas where the cable giant has declined to go. In North Carolina, AT&T is leading the state carriers in a bid to undermine E-NC, the fine, homegrown agency that supports broadband expansion and mapping. Their tool of choice, of course, is the "Connected" franchise, which telephone companies control, and which reports only the deployment data the carriers want reported and under what conditions. (And shame on the Gates Foundation for further legitimizing these guys by including them in a plan to bring service to libraries.)

It's pretty clear that if new areas are to be served, and if underserved areas are to be upgraded, then either the incumbent telecom companies have to clean up their acts, or they have to make way for others. It's also clear that consumers should get some benefits out of the deal. As of now, consumers could be stuck on one hand with paying the telecom provider high monthly fees for the new service while at the same time having their tax dollars go to pay these big companies that won't upgrade their service (but have sufficient coin to spend millions of dollars to buy back their stock).

The good news is that there is a relatively cheap way to stimulate the telecommunications sector. The bad news is that the Federal Communications Commission or Congress have to do it. One or the other have to create new competition by allowing for other companies to have access to the lines of telecom and cable companies through wholesale or line sharing. This policy worked wonders back when there was simple old copper in the ground with much less capacity than today's advanced networks, and works wonders in other parts of the world. We should bring it back here. Second, support for consumers and companies should be reconfigured to encourage broadband. Low-income consumers benefit from programs to help them get regular telephone service; high-speed Internet (but not TV service) should also be included. Telephone companies get support for serving rural areas with regular telephone service. That money could be redirected to providing advanced Internet services as well.

If Congress and the new administration are looking for more traditional stimuli, by all means bring on the grants and tax credits - with a twist. First, allow any company to apply for a grant to provide broadband service in an unserved or underserved area - regardless whether it's the local telephone company or local cable company. Service territories and franchise areas shouldn't count for much here. If a small, entrepreneurial company, or consortium of companies, or even another telephone company, wants to try it out, by all means let them try to build a small network that will connect to the phone or cable network. The whole network doesn't have to be duplicated.

Cities and towns should also be encouraged through grants and subsidies to remedy market failures through construction of their own networks, or partial networks to make up for the lack of services their residents are getting from the existing companies. Even though the telecom companies have fought around the country to prohibit "competition" from municipal governments, they had better not take on that fight here.

If there are no other takers, than let the (generally anti-government) phone and cable companies step up to the trough for the money, albeit with conditions that could range from line sharing and wholesaling to build-out and data speed requirements with obligations to report publicly on deployment progress and location. The companies might complain but, heck, it's free money to pay for the network while they still buy back their stock.

Finally, let consumers - individuals, businesses and government - get some of the tax credits for upgrading to faster service or starting to take a broadband service. Maybe the vision of that much increased demand, even if fueled by a subsidy, might be enough to make the companies get going. Will all that cost money?

The goal of the stimulus package is to have not only an immediate effect on the economy, but also to provide a platform for long-term growth. Perhaps these are some elements that could do that.