A Modest Proposal

Subsidizing phone and cable companies to deploy high-speed Internet access to markets that are incapable of producing profit is a bad business decision. Perhaps Congress should enact a law protecting taxpayers from this type of misappropriation?

by Patricia Fusco ISP-Planet Managing Editor [February 1, 2001]

Online smut, opt-in spam, individual privacy and intellectual property—just a few Web-related issues that Congress has already attempted to retool. The only problem is that U.S. lawmakers keep applying the same old futile fixes to repair new technology problems.

It is an imposing proposition for legislators to craft laws capable of regulating different aspects of the Internet while embracing fundamental rights like free speech, justice and equality. But that doesn't seem to stop Congress from trying to get their arms around the World Wide Web.

Case in point
Of the 300-plus high-tech rules and regulations presented for review by the 106th Congress, only four bills that directly impacted the Internet industry became law:

1. The Small Business Year 2000 Readiness Act, which provided a guaranteed loan program to address Y2K computer problems for small businesses.
2. The Children's Online Protection Act (COPA) and
3. The Child Online Privacy Protection Act (COPPA) prohibits using the Internet to deliver harmful material to kids and requires that Web operators obtain parental consent before collecting information from children under the age of thirteen, respectively.
4. The Electronic Signatures in Global and National Commerce Act (E-SIGN) grants valid e-mail signatures the same binding authority as paper contracts.

You would think that the 107th Congress currently in session should have no problem improving upon its predecessor's lackluster lawmaking performance. Apparently, that's not the case. Based on Capitol Hill happenings in January, the information super highway is in for a bumpy regulatory ride for the next two years.

Life, liberty and broadband?
One of the first Internet-related bills reintroduced to the Senate last month is an appropriation scheme designed to entice businesses into delivering high-speed Internet access to underserved markets. Apparently legislators believe high-speed Internet access is an inalienable right, rather than a privilege.

Lawmakers are hopeful that President Bush will include the High-Speed Internet Tax Credit in his budget this year.

The Senate revived the broadband initiative after reports indicated that broadband access is readily available for commercial use in major cities and in affluent residential areas, but that high-speed services have not been deployed to inner city, rural or remote parts of the country.

Duh, duh, duh
By attaching the appropriation to current budget plans, legislators failed to notice existing market conditions in which broadband providers subsist. Extending high-speed Internet programs to markets that are incapable of producing profit is a bad business decision. There is no chance that a high-speed access provider could sell such an absurd idea to investors.

Should the provision be included in this year's budget, carriers like America Online, AT&T, Verizon, SBC, and Qwest could secure a 10 percent tax credit for five years by providing advanced services to rural or underserved urban areas of the U.S.

Additionally, communications companies building "next generation'' networks capable of delivering download speeds of up to 22 megabits per second, would receive a 20 percent tax credit for the same five year term.

The bipartisan bill was introduced by Republican senators Olympia Snowe of Maine and Orrin Hatch of Utah, and Democrats Jay Rockefeller of West Virginia and John Kerry of Massachusetts. It was co-sponsored by 32 other senators.

The 36 senators sent a letter to President Bush urging him to include the appropriation in his initial budget proposal. The letter claimed that the subsidy had the support of 59 senators and 115 House members last year.

This means that 174 lawmakers think it's good idea to subsidize the advanced communications industry with taxpayer dollars. Apparently 32 percent of the nation's lawmakers believe it's in the nation's best interest to help high-speed access providers commit fiscal hara-kiri.

What regulators really want
Let's face it; the Senate's proposed short-term 20 percent subsidy has no bearing on the long-term profitability of a broadband venture that is incapable of producing profit. In other words, nothing from nothing is still, nothing.

Perhaps the 107th Congress should enact a law safeguarding taxpayers against this type of misappropriation?

Lawmakers' ambition to fill the gap between the nation's high-speed have's and have-not's shouldn't be disallowed in entirety. After all, spanning the "Digital Divide" is an imposing proposition. But there must be a better way to satisfy lawmakers' longing to provide citizens with ubiquitous broadband access than to throw money at big business.

Fresh look
Congress should adjust its focus and fund high-speed Internet access programs for the public sector, not subsidize the private sector.

Thus, computer or TV ownership would not be a prerequisite for Internet access and low-income families would have an equal opportunity to receive all the benefits of the Web piped into their local library.

It's this type of outside the box thinking the 107th Congress should endeavor to embrace. Just for fun, let's step way outside the box and propose that Congress appropriate funds to acquire the bankrupt digital subscriber line provider NorthPoint Communications.

Congress could authorize the U.S. Postal Service to deliver high-speed Internet access to the nation's inner cities—along with delivering regular, priority, and junk mail, postal carriers could also deliver Web content, e-mail, and spam.

Think about it—Congress could succinctly bridge the nation's broadband service gap to metropolitan markets by executing a single transaction—purchase NorthPoint for $38 million. Now, all legislators have to do is accomplish the same service extension for citizens in rural or remote parts of the country.

Legislators could fix this piece of the broadband puzzle with a second appropriation to fund fixed wireless broadband build-outs. The Small Business Administration could be tasked with delivering low-interest loans to small enterprises that establish fixed wireless broadband services in rural localities.

This pair of appropriations would resolve the real issue that Congress intended to address—providing low-cost broadband access to America's underserved populace. At least it would be more effective than subsidizing telecom and cable companies' network build-outs for the next five years.

Do nothing
Of course, Congress could simply leave the "Digital Divide" alone and give private industry an opportunity to build a profit-based business plan that would serve-up ubiquitous broadband access nationwide.

Consider what could happen if communications companies fused public phone systems with high-speed Internet access?

Let's see, it costs about a nickel for you make a local phone call from your home. But if you place the same local call from a pay phone, it costs you .25 to .35 cents—or as much as half a buck if you don't have exact change.

Phone firms can charge payphone users inflated fees ranging from five to 10 times greater than residential market prices because incumbent carriers are adept at robbing the poor and the phoneless.

Such a payphone/payPC strategy would take no stretch of the imagination to deploy—nor would it require tax subsidies or appropriations to implement—and carriers could eventually profit from building the program.

Remember, 59 senators and 115 House members approve of the High-Speed Internet Tax Credit. We're only 32 days into the New Year and 32 percent of the country's lawmakers have rubber-stamped a bad broadband bill.

Bet you can't wait to see what lawmakers have in store for us over the next two years when it comes to guaranteeing online privacy or developing anti-spam policy.

— End