Sunday, December 09, 2007

Will state broadband build out incentives be enough?

As states gear up public-private partnerships to provide incentives to broadband telecommunications providers to build out their incomplete infrastructures, the question of whether these programs will be sufficient arises.

In allocating $5 million in seed funding for competitive grants to research, design and implement accessible Internet for unserved and underserved areas of rural and urban New York, Gov. Eliot Spitzer made clear the funds would not be used to build needed digital infrastructure. "Instead, state money will be used to leverage matching funds from the private and not-for-profit sectors," Spitzer noted. "In the end, it is New York's vibrant telecommunications sector—together with their tireless and invaluable workers—who will implement this vision in partnership with government."

But will telecom providers respond to the state incentives and will relatively paltry sums such as New York's $5 million begin to make a dent in the billions that are needed to bring a metal wire-based telecom infrastructure built decades ago for an analog, pre-Internet era technologically up to date? Especially considering that America's existing telecom infrastructure is already at least a decade behind where it should be to meet current needs and becomes increasingly obsolete as demand for high speed Internet access at greater bandwidth grows.

As this reality is confronted, a number of public policy options emerge. Should the states float multi-billion dollar bond issues – perhaps combined with tax breaks -- to provide low interest loans to telecommunications providers in order to provide more patient capital that the providers themselves cannot access given their short-term earnings horizons?

Or might these state-level efforts prove inadequate, providing too little money over too long a period to fund the massive investment that should have been made a decade or more ago in order to bring America's telecommunications system to the point where it should be today? It certainly seems likely, which would lead to calls for the federal government to step into the gap.

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