March 21, 2000 4:20 PM PST

Tax credit for rural broadband proposed

A pair of U.S. senators will introduce a bill later this week aimed at giving tax credits for companies that bring high-speed Internet services to rural areas.

Speaking at a conference hosted by the U.S. Telephone Association today, Sen. Jay Rockefeller (D-West Virg.) said he is sponsoring a bill that will give companies a 10 percent tax credit for investing in rural broadband services.

The bill is needed to bridge the "digital divide" that is widening as urban areas gain access to high-speed Net services, and rural areas are stuck on the dial-up Net, Rockefeller said.

High speed pipe dreams?

"If this disparity is allowed to continue and grow, I fear that businesses in urban areas may soon decimate competitors in rural areas that don't have broadband," the senator said in his speech. "The result of the broadband disparity could be disastrous for rural Americans: job loss, tax revenue loss, brain drain and business failure concentrated in rural areas."

The issue of high-speed Internet service for outlying areas has grown in profile over the last year, as battles between AT&T and America Online in urban areas have brought the broadband Net to the front pages of newspapers around the country. The new measure, which will enter the difficult climate of Washington in an election year, is one of several proposals aimed at giving unserved areas access to the most modern Internet technology.

Most of the other proposals have been focused on deregulating the big local telephone companies, which complain that the restrictions imposed on their data business are in large part responsible for the slow and geographically inequitable pace of high-speed Internet deployments.

But another group of legislators has suggested bringing Internet access, or even high-speed Internet access into the "Universal Service" program that now subsidizes telephone connections for low income and rural callers.

Last month, a group of Democrat lawmakers wrote to the Federal Communications asking that the body uphold the legal requirement for "comparable rates and comparable services for rural and urban consumers." This warning was meant to include high-speed service, said a spokeswoman for Sen. Ron Wyden (D-Ore.), one of the authors of the letter.

The Rockefeller bill will apply to any company that adds service in rural areas, defined as anywhere at least 15 miles from towns of 25,000 people or more. This could include some high-income areas, such as ski resorts, where the investments might have been made anyway, the senators' staff said. But the large majority of areas are genuinely rural areas, they added.

If passed, the bill could provide a substantial initial windfall for companies like US West, which have strong high-speed Internet programs and serve large rural areas. The bill does not provide a long-term subsidy for operating in these areas, which are more expensive to serve, however.

Rockefeller will introduce the bill along with co-author Sen. Olympia Snowe (R-Maine), he said.

 

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