WATPA: FW: Let's Underwrite Broadband

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From: Norm Jacknis (norm@jacknis.com)
Date: Wed Jan 22 2003 - 22:18:39 EST

Is this in the old category of "there ought to be a law?"




Let's Underwrite Broadband
Every American home should be connected to the information superhighway. The
problem? The toll is too high. Ten bucks a month from Uncle Sam will help.
By Ned Desmond, February 2003 Issue

It's time for the U.S. government to subsidize broadband connections to the
home. I never thought I'd say that, but I've gotten over my free-market
puritanism. The Bush administration should write a check to cover about a
quarter of the $40 per month that households pay for their cable or DSL
connections, and be ready to pick up even more if Americans don't get with
broadband fast enough.

The idea comes from Reed Hundt, former chairman of the Federal
Commission, who now consults on telecommunications and works as a venture
partner at Benchmark Capital. You probably remember Hundt for his elegant if
controversial efforts to use regulation as a way to create more competition
lower prices for broadband, among other services. The telecom implosion
interrupted that experiment, and today the surviving providers of cable and
service can't drop prices below the $40-to-$50 range and cover costs. That's
too steep for most families.

So forget about elegant regulations, Hundt argues. Let's follow the proven,
American approach of using taxpayers' money to underwrite a civic and
good. "Broadband is like paper or clay," Hundt says. "It will be written
by any number of value providers -- just like TV was." The United States
lose a critical part of its technological leadership if it can't find a way
increase the broadband penetration of American homes.

Just 16 percent of U.S. households now connect through a big pipe, compared
with 35 percent or more of those in South Korea, Taiwan, and Hong Kong. And
we're falling further behind every year. The rate of growth in countries as
diverse as France and India is far greater than in the United States, where
more than 33 percent of households will have broadband by 2006. In South
the government set up a three-way competition among phone, cable, and power
companies to outfit consumers with broadband. The result: Consumers pay $25
month, on average. More than half the homes in South Korea that can get
broadband do so, and the government recently lent broadband providers $120
million to reach the remaining 45 percent that lack connections for
Internet. Broadband will be a giant engine of commerce that creates
we can't even imagine today. TeleNomic Research in Virginia, for example,
estimates that if we got most of America's households online we would see
million new jobs -- 230,000 in the telecom sector alone. The Brookings
Institute projects $500 billion in economic growth.

Broadband will do for the economy what the railroad, electrification,
telephone, and interstate highway systems did in their own times. They
new industries, and so will broadband in arenas such as security, education,
health care, entertainment -- and others we can't fathom.

There are countless proposals to stimulate broadband adoption stacked up
Washington, but none share the simple directness of Hundt's proposed
Use tax dollars to knock subscription rates down to $30 per month and
subscriptions will increase. We've seen that price-subscription rate
with other technologies, such as telephone and cable TV.

How much will this cost taxpayers? About $6.6 billion per year, assuming 55
million households sign up. Hundt proposes that Washington start slowly and
provide an average of $10 per month (the amount could vary with household
income), and then increase it as necessary until broadband reaches 60
of households -- roughly the same percentage that have PCs. Whether it's $6
billion or $18 billion, the sum is modest by the standards of Washington's
favored projects. For example, FCC and state regulations subsidize local
service to the tune of $30 billion a year. Our interstate highway system,
President Eisenhower kicked off in 1956, cost $330 billion by 1996. Both
examples provide priceless social and economic dividends. So will broadband.

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