Fast Company

Which Senators Are Fighting Broadband Funding?

As the President's stimulus package approaches $1 trillion, the Senate is looking to cut the fat. In the senators' sights: about $6 billion in funding for expanded broadband access, much of it for wireless access in rural areas, among $90 billion of total cuts (as of Thursday night).

Depending on your political allegiances, here are the people to whom you can direct your letters of fury, or your calls of thanks, for trying to cut out Internet access as a priority in the American Recovery and Reinvestment Act.

Sen. Mitch McConnell (R-KY) hasn't decried broadband funding specifically, but he said yesterday he and his Republican contingent would fight against “an aimless spending spree that masks as a stimulus.” The Kentucky senator supported an amendment to the bill that was heard earlier this week, which replaced a substantial block of spending programs with expanded tax cuts.

Convinced that only consumer spending--not federal--can serve as a workable economic stimulus, the Senate minority leader has set the tone of resistance adopted by many of his party-mates.

Sen. Ben Nelson (D-NE) is the Democratic leader of the bi-partisan committee that has undertaken paring down the stimulus package. Long considered an "ambassador to the Right" by other Democrats, Nelson is working with an undisclosed number of other senators who have volunteered their time for the bi-partisan committee (Time puts the figure at 18 senators).

Nelson has indicated that his primary disagreement with the stimulus package, as it is written now, is the speed of spending. About only 10% of the spending would occur in the first 18 months after passage, which would make for an awfully sluggish solution. It has been under his direction that the bi-partisan committee has singled out broadband funding along with monies for state aid, education, and science programs. The group has also added in about $30 billion of infrastructural spending that it sees as more stimulative.

Sen. Susan Collins (R-ME) is the other half of the bi-partisan committee leadership attempting to slim down the bill. For procedural reasons, the bill will require 60 yea votes out of the 100 senators, and there are only 57 Democrats voting (Ted Kennedy is out sick). That leaves at least two Republicans that will have to cross the aisle, and Democrats are hoping Senator Collins will be one of them. She's a moderate, but she's been staunch in her principles: “My goal is to be able to support a bill,” she said of the revisions her committee is making, with a hint of obstinacy.

“We’re trying to focus it on spending that truly helps stimulate the economy,” she said on Thursday evening, after her group had outlined specific suggestions for cuts. Those cuts included hard numbers. According to The New York Times: $40 billion in state aid, $14 billion for education programs, $4.1 billion to weatherize federal buildings for efficient and $1.5 billion for rural broadband Internet. According to the AP, the total rural broadband program will cost closer to $6 to $9 billion, as it stands in the current bill.

Sen. John McCain (R-AZ) is employing his classically reductive reasoning to undercut broadband spending. “The American people are figuring it out. This is not a stimulus bill, it is a spending bill," he said Thursday. Of course, the terms "stimulus" and "spending" are essentially synonymous, but the semantic distinction he's making is two-fold: Between government and consumer spending, and between short-term and long-term spending. Republicans want short-term capital infused into the economy by way of consumer spending.

So it follows that McCain's bill, introduced Monday, proposed to drastically revise the stimulus to include massive tax breaks. As late as Thursday morning, his bill included windfall tax cuts for corporations and massive tax relief from personal income taxes. His bills were defeated.

Sen. Richard Durbin
Sen. Richard Durbin (D-IL) holds up a section
of the stimulus bill that Senate Republicans find
objectionable.

What does the bill actually propose we do about broadband?

As currently stated, the bill calls for the National Telecommunications and Information Administration, or NTIA, a part of the Commerce Department, to grant monies to cover startup costs for "advanced broadband" deployment in "unserved" or "underserved" areas of the country. Contrary to what most discussions have implied, that funding would be available for all kinds of areas: Rural, suburban, and urban alike. It bears noting that the FCC currently has no definition for what constitutes "unserved" or "underserved."

Here's how the money would get doled out: States would apply for grants in which they list areas that don't have adequate voice and broadband service. The states would also indicate which of the areas would best be served by hard-wired service, and which would be more practical for wireless service (perhaps under the FCC's mandatory nationwide Wi-Fi initiative, if it is enacted.) The NTIA then delivers states appropriations, which they will use to hire private contractors to do installation.

The bill defines "advanced broadband" as having speeds of 45 megabits per second downstream, and 15Mbps upstream. "Advanced wireless" is 3Mbps downstream and 1Mbps upstream. In other words, these government-funded services aren't going to crowd out any private high-speed ISPs, whose speeds greatly exceed the aforementioned.

Right now, about 57% of Americans subscribe to broadband, and 9% use dial-up. Many others use the Internet at work or at public libraries, but about a quarter of the country doesn't use the Internet at all, according to surveys by the Pew Internet & American Life Project. Many of these Internet-less folks, often elderly, have shown little interest in getting online if given the opportunity, according to surveys. So the major question behind government-funded broadband is whether anyone will actually use it.

Some estimates say that every $2 billion spent for broadband access creates about 100,000 jobs, among them skilled-labor positions in network administration, system maintenance, fiber optic installation, and wireless tower construction. That's a cost of about $200,000 per job. Sen. McCain has put the job-cost estimate for the total bill at around $900,000 for each of the three to four million jobs President Obama plans to create; by comparison, broadband should be a relatively cheap job-creation mechanism.

Not only that, more broadband access would create a so-called "network effect" stimulus: Consumers can spend more by buying online, businesses can save money by digitizing their dealings, and the overall speed and cost of communications can be improved. The Internet could bring a whole new host of entertainment, service, utility and products to underserved citizens, both saving them money and encouraging new spending.

All of this talk raises a valid question: what can we classify as a "stimulus?" As I said earlier, Republicans have defined "spending" as any long-term commitment that won't necessarily pump money into the economy in the next few months. This includes funding for programs like Head Start, and for projects like beautifying the National Mall in Washington, and apparently, broadband. They are against these projects.

As Michael Grunwald points out in his column in Time, we can evaluate a given stimulus project (like broadband) using three criteria: It must be something that injects quick money into the economy, it must be something that creates a long-term fiscal obligation, and it must be something that we should be doing anyway.

Broadband access fits all three of those criteria, unlike some of the portions of the bill being advocated by Republicans (many of which, in fairness, were written in by Democrats). One example: A tax credit for first-time home buyers. Seriously? This stay-drunk solution would come in addition to the current $7500 tax rebate that first-time buyers are already getting under the Bush tax plan, and represents a dangerous incentive with interest rates hovering at an ultra-low national average of 5.1%.

With so much spending already on the docket, a new deluge of home loans will create an excess in the money supply that will drive inflation through the roof in the next decade. That's because every time a commercial bank issues a new loan, and every time the federal government spends a dollar, they're creating new money in the monetary system. Sure, right now we're at a 50-year low in inflation. But excess liquidity left over from the 90s boom is what got us into this whole housing mess to begin with. Let's not repeat our mistakes, shall we?

My point is, the Senate should be squabbling over the titanically-important economic theory behind their broad strokes--not the symbolic meaning behind tiny, efficient job-creation programs like broadband. The Senate is set to vote on a revised bill by 7pm tonight.

If there are any reader arguments against government-funded broadband infrastructure, let's hear them.

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4 Comments

  • Patrick Sullivan

    Something needs to be done. The Republicans seem to be more worried that someone other then a Republican may come up with the solution. We really can't expect a guy who once said that "economics aren't my strong point" and "I don't use a computer" to be able to grasp what the problems really are and come up with a new way of fixing those problems (as in anything tech related). Instead he'll push for the things that cost him the presidency.

  • Chris Dannen

    Hey John -- handing money over to consumers to spend is a tempting proposition. There are two ways to do it: with tax cuts, and with cash vouchers (the debit cards you mention).

    The problem with the former is that a lot of individuals and businesses aren't making any money to begin with, so tax breaks are useless. The problem with the latter is that you engage in what economists call a "moral hazard." As it stands now, the US government bears the risk of the action it takes to resolve the recession. But by giving consumers money to spend, it transfers some of the risk onto everyday Americans. That means if the stimulus doesn't work, the government is not 100% accountable for the failure. If the government isn't 100% accountable, the theory goes, it will act less carefully. And no one wants a careless government.

    Let's leave the government to take responsibility for its own course of action, and let consumers be the beneficiaries.

  • John Palmay

    Now I have to agree with McCain as I don't see where this will spur a lot of growth. Don't get me wrong I am all for this Mircowave shots and towers that would have to be placed but in the long run this is not something that is going to stimulate the economy. What we need is to put this cash into the hands of every American via a Debit card of sometype if indeed they want to kick the spending into gear. I won't mind 10K to each tax payer and let them do what they want with it, think about it, most would just go and blow it on something. Although I would like a Check myself so I then can in turn just payoff some debt with it I don't think that will help the economy directly, but will help the Banks. So much "Fat" in all of these packages.