Broadand - economic stimulus

Defining 'broadband' key in stimulus plans

As information begins to emerge regarding President-Elect Barack Obama’s plans to include broadband in his sweeping economic stimulus proposals, a key question remains: At what speed will the new administration define “broadband” for the purpose of its goals?

According to Business Week magazine, Obama’s team is considering a $20-billion to $30-billion plan centered around tax breaks for companies that extend broadband availability or even boost its speed in areas where it is already available. The government may agree to subsidize 60% of the cost of the former and 40% of the cost of the latter. In the article, a Cisco executive echoed other analysts in suggesting Obama’s team could even set the tax breaks relative to the speed of the offerings, with higher subsidies for higher speeds.

Bell carriers and cable operators would likely be the primary beneficiaries of those tax breaks, Stifel Nicolaus analysts said in a research note today, since as a group, those companies have lower broadband penetration than most publicly traded rural telcos. However, much depends on how – i.e., at what speeds -- broadband is defined, they said, as Bell companies have focused on higher speeds while others focused on broader penetration.

This week Qwest Communications urged the Obama transition team to give states federal money to contract with private companies for rural broadband deployment. But by “broadband,” the company specified speeds of 7 Mb/s and above, which Qwest is currently deploying.

The question of how to define broadband has long been a challenging one for many proponents of universal broadband. When asked last summer at what speed Obama’s administration might define broadband, Blair Levin, an analyst with Stifel Nicolaus who is now a key member of Obama’s transition team focused on broadband, told Telephony, “Part of it depends on what feature sets happen in the future. I don’t think we’ll define universal service as that necessary to carry Cisco’s telepresence, for example. But we may get to a level of video; who knows. I think there’s a growing consensus that universal service, as it is today, ought to [allow one to] be capable of doing Web-surfing, VoIP, information gathering – those kinds of things. And we want that to be available in roughly 100% of the country. And we’d like to achieve penetration rates similar to what we’ve achieved in voice.”

“Here’s the way I think service providers will think about it,” he added last August, speaking only for himself. “What is the speed which qualifies you that I can achieve but disqualifies some of my potential competitors? In other words, if you can achieve 3m, but your wireless guys are never going to get there, you want that to be, in order to qualify, you want that to be the level.”

The Obama team’s planning evolves as Verizon Communications ponders what to do next year after it accomplishes its goal of passing 18 million homes with fiber. This week Verizon Chief Executive Officer Ivan Seidenberg said the company would wait until next year to make a decision on further deployment (at least one analyst believes the company could spill into adjacent areas in other Bells’ territories rather than push hard into rural places), but due to the dropping cost of fiber deployment, he added, “Anything we do beyond 18 million homes would be on a completely different economic model.”