Small-town Broadband Allure

Could Congress lure ISPs into deploying rural broadband access? Will newly e-lected tech-savvy freshmen influence, e-ducate or aggravate seniors?

by Heather Mark
ARS, Inc. Networking Group Research Analyst
[December 4, 2000]

It's going to be a hot one on Capitol Hill this winter. One of the acts facing Congress after the holiday break is the Comprehensive Rural Telecommunications Act [HR 5069].

Have and have-nots
The policy initiative has been compared to the Rural Electrification Act, in which Congress recognized that electricity and phone services were vital to the economic development of the country. Rather than allowing some areas to lapse into an economically depressed state, the U.S. Government took steps to ensure that the entire country would be able to take advantage of the technology that was emerging.

Similarly, the rapid deployment of broadband technology has left some areas of the country behind. This is creating a scenario in which the rich get richer and the poor get poorer. The areas that are served by broadband providers are given a competitive edge over those areas that are not served.

Congress is seeking to ensure that underserved areas—by their definition cities with populations under 20,000 and Indian Reservations—are not prevented from enjoying the economic boom that the rest of the country has enjoyed over the past several years. The specific aim of the bill is to allow economically depressed areas to be more competitive in a time of ever increasing e-commerce opportunities.

Work goes to workers
Should the bill pass, the government would set aside $11 million per fiscal year to carry out the establishment of National Distance Working Centers and award grants to eligible employers who provide telecommuting jobs to citizens of rural communities.

The National Distance Working Centers would provide a place for those in very rural areas to work, without them having to drive into an office and without an employer having to build another branch office. In addition, those centers would train qualified IT professionals to give more employment opportunity to those who would not ordinarily have such an opportunity.

Subsidies go to providers
The bill also provides for tax credits to those ISPs that will provide broadband service to the National Distance Working Centers. The bill differentiates between broadband providers and enhanced providers. Broadband providers are defined as those carriers capable of transmitting voice and data at a rate of up to 1.5 Mbps. Enhanced providers can transmit voice and data at up to 10Mbps.

The tax credits are laid out as follows:

• Broadband providers are eligible for 10% of the facilities expenditures are deductible
• Enhanced broadband providers are eligible for 15% tax credit

Bucolic market space
As major metropolitan markets are becoming saturated—for example Los Angeles has more than 60 broadband service providers—ISPs are beginning to move into smaller cities.

But the broadband market is constricting a little bit everyday. NorthPoint just revised its earning statements to reflect the fact that not all of its customers could pay for their services this week, duly terminating their acquisition by Verizon. DSL.net announced last week that they will layoff 28 percent of their workforce. Clearly, competitors in this market are looking for places to expand their services and gain a foothold. The bill before congress offers ISPs a new marketing opportunity by expanding into rural areas. Additionally, those new markets are supported by government loans and tax incentives. Not only is the government opening up new markets, but they are also reducing entry costs to those markets.

Another issue to keep an eye on is the FCC Indian Initiative. The FCC plans to bring comprehensive telecommunications access to tribal lands. Those ISPs that can service a niche market could benefit from receiving additional tax incentives to deploy broadband access on tribal territories.

Techies Elected to Congress
The election of 2000 has been remarkable in a number of ways, while the presidential election has yet to determine a winner, E2K should be remembered for at least one other unprecedented incident.

Lofty dot-com pedigrees
This election marks the first time that so-called "techies" will be serving as elected officials in the US Congress. Maria Cantwell, a former RealNetworks executive, was able to claim victory in her Senate race today after a tight race in Washington. Darrell Issa, the chairman of the Consumer Electronics Association, also registered a victory in his Congressional race when he was elected to the House of Representatives. Jon Corzine, former CEO of Goldman Sachs, was elected to the Senate, as was Jim Langevin, Rhode Island's former Secretary of State who oversaw the modernization of the state's IT operations.

E-politechs anyone?
While the freshmen crop of senators and representatives will occupy different sides of the aisle, they do have one interesting trait in common—the new crop of techies in Congress are people that understand the value of innovation. That is an illusive quality absent from a Congressional population historically comprised of lawyers and "old money."

In an economy that relies increasingly on technology as its foundation, it is important to have individuals in government that are comfortable with, and fluent in, both entrepreneurship and technology.

An e-minority
While shiny news faces in Capitol Hill may not have the clout to influence their peers, at least they are capable of educating senior members of Congress on the value of the Internet services and the companies that provide them.

— End    

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