Kiplinger predicts U.S. tax to bolster telecom infrastructure

The Kiplinger Letter is predicting the U.S. Federal Communications Commission will propose a tax next year to subsidize private telcos and cable companies' cost to build out broadband to serve all Americans. The American Recovery and Reinvestment Act of 2009 tasked the FCC with providing Congress a plan for universal broadband access by Feb. 17, 2010. Kiplinger Senior Associate Editor Richard Sammon forecasts the tax will be part of the plan.

But at the same time, Sammon says enacting such a tax will prove politically difficult. The take away is the FCC should be considering alternative entities that can roll out advanced telecommunications infrastructure for less money than the big telcos and cable companies that must produce hefty profits and pay fat dividends to satisfy shareholders.

That means turning to the nonprofit sector and specifically local governments and consumer-owned telecom cooperatives. There, taxpayer dollars can go farther and these smaller, more nimble entities can move more rapidly to deploy broadband infrastructure to fill in the areas where the business models of the large telcos and cable companies don't pencil out. Instead of new taxes, policymakers should enact tax breaks to encourage homeowners and small businesses to buy their own last mile fiber connections through cooperative ventures and public/private partnerships.

The need for alternative business models is underscored in a report prepared for the FCC by the Columbia Institute for Tele-Information and released last month.

A key conclusion: a significant number of homes -- 5 to 10 million representing 4.5 to 9 percent of U.S. households -- will continue to have "significantly inferior choices in broadband" between now and 2015. "Most of these homes will have wireless or wired service broadband available only at speeds substantially lower than the speeds available to the rest of the country," the report notes, adding that some homes "will have no choice except satellite broadband, which has some performance attributes that make it less satisfactory for many applications than a terrestrial broadband service."