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Tech Companies Lobby Capitol Hill for Broadband Assist

7 Feb, 2002 By: Holly J. Wagner

As the country struggles under the weight of economic recession and the shock of last September's terrorism, telecommunications and technology companies are skirmishing on Capitol Hill to lobby for tax breaks to subsidize broadband buildout — and meeting with considerable bipartisan support.

But critics say the broadband incentive proponents, often among the largest political donors in the nation, are just looking for a handout to restore their own sagging sales and subscriptions. More than 20 bills that would benefit broadband providers are pending in Congress.

Among those lobbying for incentives are TechNet, a political action committee of 300 senior executives from technology and telecommunications powerhouses including Microsoft, Dell, Intel, 3Com, Hewlett-Packard and others. TechNet's slogan and stated goal is “100 megabytes to 100 million homes and small businesses by 2010.”

According to online analyst eMarketer, there were 6.2 million broadband U.S. households at the end of 2000 (5.8 percent of all households) and 11.4 million at the end of 2001 (10.6 percent). The company estimates the number will increase to 17.6 million in 2002, 25.6 million in 2003 and 34.7 million in 2004 (31.3 percent).

Those forecasts, said eMarketer senior analyst Ben Macklin, are based on demand, not supply, and assume a monthly fee of “about $50 per month now and gradually falling to about $40 in the next five years.” Lower fees, he noted, could change the equation.

Computer makers would not benefit directly from the $413 million in tax relief and another $80 million in low-cost loans that are included the leading bill, the Broadband Internet Access Act of 2001 (pending in Congress as HR 267 and S 88). But it follows that demand for their products — the on ramps to the Internet — would increase along with broadband penetration. The demand for Internet-delivered services like video-on-demand (VOD) and video game communities is also likely to increase as high-speed connections become more available, especially in rural areas where fat pipe connections are sparse.

Although the companion bills were introduced more than a year ago, TechNet lobbyists who support the act say it's essential to short-term economic recovery as well as the future of the nation's economy and education systems.

“Broadband should be a national imperative for this country in the 21st century, just like putting a man on the moon was an imperative in the last century,” said TechNet co-founder John Chambers (also president and CEO of Cisco Systems) last month in a written call for a national broadband policy. “To stay competitive, educate the work force and increase productivity, the United States must have ubiquitous broadband.”

Also backing incentives are many of the “Baby Bells,” local exchange telephone companies whose executives contend that telecommunications industry deregulation has forced them into the shadow of their behemoth competitors like Verizon and Sprint.

But not everyone agrees that the nation's future hinges on broadband access or that the government should offer breaks to providers.

“The telecom sector was suffering before Sept 11. Certainly the recession and the telecoms downturn was affected by Sept. 11,” Macklin said. “Many people are, however, using the word ‘security' whenever they espouse the benefits of broadband, as if the future security of the nation depends on widespread broadband. This is taking advantage of the situation somewhat.”

In the world's most wired country, Macklin continued, the primary use for broadband access is entertainment.

“The leading broadband country in the world is South Korea, with nearly 50 percent of households connecting to broadband,” he said “It is still unclear what economic benefits South Korea has gained from massive government subsidies and tax incentives to broadband providers. Most [subscribers] just love to play games.”

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