The Verizon stimulous

NY Times:

UPDATE: Verizon has posted its thoughts on the broadband stimulus on its policy blog.

Four words buried in a provision to help subsidize high-speed Internet service contained in the latest Senate version of the economic stimulus legislation could mean hundreds of millions of dollars a year in tax credits for Verizon Communications, according to telecommunications analysts.

Indeed, John Hodulik, an analyst with UBS Securities, said the provision might give Verizon $1.6 billion in credits in the next two years, even if it does not hire one more person than it currently plans to do.

At issue is the part of the stimulus package meant to bring fast Internet connections to rural and low-income areas. The House bill that passed Wednesday provided $6 billion in grants to broadband projects. The latest Senate bill increases those grants to $9 billion.

Most significantly, the bill before the Senate also includes tax credits for investment in broadband services to low-income neighborhoods, rural areas and places that don’t have any providers of high-speed Internet service.

Companies would get a 20 percent tax credit on investments made on “current-generation” broadband — with speeds of at least 5 megabits per second — in “unserved areas” and 10 percent for investment in low-income and rural areas.

“Next-generation broadband” service — at least 100 megabits per second — also gets a 20 percent credit for unserved, low-income and rural areas. But further down in the bill sits a significantly expanded definition of what sort of customers can be served by a company that qualifies for the tax credit:

A qualified subscriber, with respect to next generation broadband services, means any nonresidential subscriber maintaining a permanent place of business in a rural, underserved, or unserved area, or any residential subscriber.

Jessica Zufolo, an analyst with Medley Global Advisors, said that last phrase–”or any residential subscriber” — means that a company could receive the tax credit for service to any home, whether or not it is in a rural, low-income, or unserved area.

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I live in one of those rural areas that is not wired for broadband. I have the Sprint broadband card which is better than dial up but is still not that fast. It is also not cheap. If this is aimed at low income users, they will find they have to pay three to four times more than the cost of hard wired broadband available in the urban areas.

Sprint had their card out before Verizon in my area, and I chose it over a satellite dish because I can use it when I travel. In places like San Antonio it works as well as the wired broadband. If you find yourself in an area with a weak signal it is as slow as dial up.

I suspect that adding towers in rural areas will provide some jobs. I assume that Sprint would be eligible for the tax credit too.