Massachusetts Official Calls for Federal Broadband Stimulus

Published March 1, 2009

In one of his final acts before leaving office at the end of January, Massachusetts’s former Secretary of Housing and Economic Development, Daniel O’Connell, called on the new Obama administration and Congress to use the federal economic stimulus package to expand broadband use and capacity in his state.

O’Connell also said he wants the stimulus package to fund studies compiling data about broadband access across the nation. His successor, Greg Bialecki, is not expected to retract the request. But many telecom industry experts are cautioning against the federal government spending tax dollars on broadband infrastructure.

Private Investments

The building of a national broadband network is better left in private hands, experts say, because the market is better at making the countless decisions necessary to provide such services efficiently.

“To spur investment in and deploy broadband in these areas, something has to happen to change the business case from negative to positive,” said Curt Stamp, president of the Independent Telephone and Telecommunications Alliance in Washington, DC.

“One way to do this is by providing grants or—even better—tax incentives to supplement a [telecom] company’s capital expenditure budget for the initial [broadband] deployment,” Stamp continued.

Even then, though, industry insiders are perplexed about how to sustain broadband service to rural parts of Massachusetts and other states. Besides the initial deployment costs of building a system, telecom companies run into substantial costs in maintaining the services. If government is involved, those costs transfer to taxpayers and the systems are not subject to market incentives that spur improvements.

Influence of Lobbyists

Experts also warn of the influence of lobbyists if government gets too intimately involved in the broadband market. Telecom companies would have an incentive to get the federal and state governments to pick winners based on political influence instead of letting the market work.

Stamp says broadband policies should accommodate that concern.

“If the focus is on under-served areas and any program is technology-neutral, it greatly reduces the [concern about] government picking winners and losers,” Stamp said.

Tax Incentives Needed

The consensus emerging among telecom experts is that it will be nearly impossible to get broadband access to America’s rural areas and other uneconomic locations unless the federal government provides tax incentives that greatly reduce the cost of deployment.

“There are ways to make broadband go faster without massive government investment in those parts of the country where the market and investment climate is willing,” Stamp said. “However, in rural and economically depressed areas, you will not see the same levels of speed and investment as you do in competitive markets absent government incentives or policies that take currently uneconomic business cases and make them viable.”

Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.