Senate Broadband Tax Breaks

Aside from the fact that the Senate lacks the necessary votes to pass their 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. This is of course as opposed to the House version which was written by someone who went to clown college that went something like:

Step 1: Take $6 billion dollars from the public.

Step 2: ???

Step 3: Rural area broadband expansion!

The Senate version of the stimulus actually raises the amount of money spent on broadband up to $9 billion. I still don’t condone public funding for broadband expansion, but nontheless at least this is a more reasonable number than $2.825 billion if one was giving expansion a serious look.

The most interesting tidbit of broadband stimulus though is that it would give tax credits to the companies that receive grants to build these networks in rural areas. Essentially it boils down to what the bill has termed current generation broadband and next generation broadband. 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.

The bill will provide a tax credit for the sum of a percentage of what the grantee has spent on current generation broadband and next generation broadband. More specifically 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.

This is actually a very interesting proposal. Especially being that the Senate version of broadband stimulus does not make grantees enforce the FCC’s net neutrality policy statement. If a stimulus bill were to pass, then what would be best for consumers and free-market capitalism in the long run must be considered. And of the two versions of the stimulus, this is definitely more on the right track. Tax breaks as incentives to extend broadband networks in underserved or unserved areas is going to be a better option than what was proposed in the House version of the bill. The House version basically said, “We are going to give the grantee a little money. They will have to deal with the majority of the expense of build-out and maitenance. Then we are going to tell you how you can run it, and tax the crap out of you for expanding.” This is a doomed to fail strategy.

The Senate version would encourage rural expansion of broadband. And additionally would reward companies for their risk. Which there is a great deal. These companies do not know for sure they would even have enough customers to maintain the cost of running their business in that area. I believe these companies would ventures into these underserved or unserved areas when they saw a need and additionally it became beneficial to push forward into those areas. Because many companies would be moving forward before that and taking some risk, these tax incentives along with the grant would be a positive marker to that risk.

-nick