Scientists endorse tax credits for developing high-speed Internet networks

Thursday, November 29th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ A federal research panel on Thursday recommended tax credits and grants to spur deployment of high-speed Internet services for Americans, particularly in rural areas.

The report, by the National Research Council, says the value of ``broadband'' Internet access for educational and economic uses is worth federal help, even when telecommunications companies have difficulty justifying the expense.

``Tax credits ... may provide incentives for what is ultimately uneconomic activity,'' the report states. The council said rural areas should be targeted.

A bill moving through Congress calls for a tax credit of 10 percent to 20 percent to companies that provide broadband access to rural areas. The bill, sponsored by Sen. Jay Rockefeller, D-W.Va., has 32 co-sponsors.

Adam Thierer, of the libertarian Cato Institute, said the tax credits are corporate welfare for large communications companies and may also bring unwanted regulation of the Internet.

``There is a very serious risk that we could be politicizing a very dynamic and thus far unregulated sector,'' Thierer said. ``It would be best to just leave the Internet alone and be patient.''

It is unclear whether the proposed tax credit would be enough to encourage companies to expand their networks to areas with fewer potential customers. Mark Mullet, a lobbyist for Verizon Communications, said the credit wouldn't make a difference to Verizon.

``Purely from Verizon's standpoint, it does not have a significant impact,'' Mullet said. Verizon still supports the bill for the industry's sake, Mullet said, and it may help smaller telephone companies.

The council declined to specify how much the tax credit could be, or endorse a particular bill. They said that if the tax credit isn't enough to spark more development, it should be abandoned.

``If a substantial but not extreme tax credit is not (enough), then you're probably trying to push a rock up a hill and you should quit doing that,'' said David Clark, a scientist at the Massachusetts Institute of Technology and a member of the council.

The council is part of the National Academy of Sciences, which advises Congress on scientific issues.

The recommendations _ which include ways to stimulate competition among Internet providers _ were fueled by the dismal rate of broadband use by Americans. Nikil Jayant, chairman of the council, said only 8 percent of American households are high-speed Internet subscribers.

Most customers are connected through cable television lines, while others access the Internet through a Digital Subscriber Line _ which runs over telephone lines _ or a satellite dish. The connection is ideal for downloading large files like audio and video clips.

``Despite its enormous utility, broadband continues to be the exception rather than the rule,'' Jayant said.

Thierer said direct vouchers to customers to offset the monthly cost of broadband access would be a better idea.

``We're talking about an indirect way to spread funds to companies with the hope that they in turn spread the goodies to the masses,'' Thierer said. ``If you're going to do any kind of subsidization, it should be direct and visible.''