USA: Major manufacturers oppose buy American provisions waived in broadband stimulus plans

[NY Times] Cisco Systems and Alcatel-Lucent said they wanted “Buy American” provisions waived in a $7.2 billion U.S. program to expand high-speed Internet access, saying the rules were difficult to meet and undermined the economic stimulus program.

Requiring parts made in the United States would be “grossly inefficient” and a “radical departure” from normal practice, said Cisco, the largest maker of networking equipment. The comments were filed with the National Telecommunications and Information Administration, the U.S. agency running the broadband initiative that is part of $787 billion in stimulus spending.

The rules might slow projects the stimulus was meant to spur because telecommunications networks contained parts from around the globe, the two equipment makers said. Congress, seeking to create jobs in the United States, said funds provided under the program generally could not be used for iron, steel and factory goods that were not produced in the United States.

“We’re talking about technologies that are no longer made in the United States,” said John Marinho, vice president of public affairs for Alcatel-Lucent, which is based in Paris. The company operates in 130 countries, and “you need a global scale,” he said.

At stake was access to about $2.8 billion of the broadband funding that would go for equipment, said Jeff Evenson, a senior analyst with Sanford C. Bernstein in New York.

Cisco, which is based in San Jose, California, and Alcatel are arguing their case in filings and conversations with officials at the National Telecommunications and Information Administration, part of the Commerce Department.

President Barack Obama and Congress gave the N.T.I.A. $4.7 billion to spend on broadband and provided $2.5 billion to the Rural Utilities Service, part of the Agriculture Department. The funds are part of the program to speed the recovery of the U.S. economy.

Complex procurement chains “cannot be easily re-engineered and supplanted in a matter of weeks or months,” Cisco said in its comments.

“The public interest in generating jobs cannot be served if network construction on public projects is delayed” by a search for suppliers based in the United States, Cisco said.

The N.T.I.A. and the Rural Utilities Service are working on the program’s rules, which are to be released “in early summer,” said Mark Tolbert, a spokesman for the N.T.I.A. He did not provide a date and declined to comment on the requests for waivers.

The Telecommunications Industry Association, the trade group representing Cisco, Alcatel-Lucent, Intel and ADC Telecommunications, said in a letter to the Commerce Department on June 1 that thousands of components and parts are made around the globe and that requiring documentation of their origins “will severely complicate” applications for funds.

Goals for the broadband spending include creating jobs, bringing high-speed Internet to more Americans, stimulating investment and connecting schools, libraries and other community centers, Mark Seifert, a senior adviser at the N.T.I.A., told Congress in testimony April 2.

There is no reason to exempt companies like Cisco and Alcatel-Lucent from the “Buy American” provision, said Debbie Goldman, telecommunications policy director for the Communications Workers of America, a union based in Washington.

“This is about creating American jobs — not Chinese jobs,” Ms. Goldman said.

Granting a blanket exemption “in effect awards companies that have created a global supply chain that excludes the United States,” Ms. Goldman said.

In a filing, she said applicants should request exemptions for each piece of equipment, subject to possible vetting by the N.T.I.A.

“Show us,” Goldman said. “If you’re claiming a router isn’t made in America, show us.”

Officials should approve the use of equipment from the 51 countries with U.S. trade agreements that might be considered as satisfying the “Buy American” requirements, Ms. Goldman said.

The list, put out by the Office of Management and Budget, which supervises spending by U.S. government agencies, does not include China.

“I would caution against anything that adversely affects the flow of trade between the United States and China,” said Mr. Marinho. “It just doesn’t make sense to exclude them from any part of the game when it comes to broadband.”

Makers of broadband equipment are not the only ones saying they are feeling the pinch of the requirements.

The stimulus spending includes $6 billion in municipal projects, and the wastewater industry is not sure what equipment it can use, said Dawn Kristof Champney, president of the Water and Wastewater Equipment Manufacturers Association in Washington, which represents companies like Flowserve, based in Texas, and Siemens, based in Munich.

“American manufacturers are finding it difficult to comply with these new ‘Buy American’ rules because it is often impossible to avoid sourcing at least a portion of their content from other countries,” Thomas Donohue, the president of the U.S. Chamber of Commerce, wrote in a letter to Mr. Obama on May 22.

The rules were impeding projects for wastewater and water plants and could eliminate jobs for some steel-pipe workers, Mr. Donohue wrote.

“We are a globally sourced industry,” Ms. Kristof Champney said. “It’s a very, very frustrating process, and it’s been stifling.”

Cisco and Alcatel Oppose 'Buy American' Broadband Requirements