Big Telecoms Reluctant to Accept Federal Funds

Published July 1, 2009

Verizon and AT&T are indicating reluctance to join the federal government’s offer of $7.2 billion to help build high-speed Internet projects.

In addition, the companies are urging the government not to help other companies compete with them through broadband grants or set new conditions on how Internet access should be provided.

“We do not have our hand out seeking government funds,” AT&T Senior Executive Vice President James Cicconi told reporters shortly after the law providing billions for broadband buildout was approved in March. Although the company is “open to considering things that might help the economy and might help our customers at the same time,” he said AT&T’s primary focus for broadband is its own investment program.

Verizon Executive Vice President Thomas Tauke stated, “We don’t have any plans to apply. We also have not made a decision not to apply.”

Majors Oppose Subsidies

While so far spurning the stimulus funds, Verizon is nonetheless making suggestions on how they should be spent.

In recommendations filed in mid-April with the National Telecommunications and Information Administration and the Rural Utilities Service, the carrier recommended the government be open to a wide range of projects to help finish the broadband buildouts already underway, rely on state and local expertise in identifying unserved areas, and maintain transparency and accountability.

Rene Cruz, chief finance officer of Mushroom Networks, Inc. and a professor of electrical and computer engineering at University of California-San Diego, says the major carriers see broadband buildout as something in which the government has insufficient expertise and should not be involved.

“Market forces and competition should determine what’s out there,” Cruz said. “The government could endanger the development of broadband by endorsing an approach that is less than optimal for the delivery of the service.”

Companies Scared Off

Steve Titch, a telecom policy analyst for the Reason Foundation in Los Angeles, says many firms were initially interested in the stimulus funds but then saw the actions the government took with American International Group and General Motors. They’re now much more hesitant to want the funds.

“Whoever thought you would see the day when the government would go in and fire the head of a private company?” Titch asked, referring to the forced ouster of former General Motors CEO Rick Wagoner. “And who thought they would try to invalidate legal contracts, as in the case of the AIG bonuses?”

Verizon and AT&T don’t want such government oversight and restrictions, Titch said.

Such potential restrictions also have limited participation in public-private partnerships.

Another restriction Titch fully expects the government to impose on telecom companies that accept stimulus funds is net neutrality, defining and regulating how Internet service providers can manage their user traffic.

Phil Britt ([email protected]) writes from South Holland, Illinois.