BUSH'S BROADBAND STRATEGY GREETED WITH SKEPTICISM

President George Bush's recent declaration that “universal, affordable” broadband access should be available to all U.S. consumers by 2007 was applauded publicly, but many industry observers dismissed it as little more than a sweeping statement designed to help the president's re-election.

Bush made the pronouncement during a March 26 speech on home ownership in Albuquerque, N.M. In addition to calling for universally affordable broadband, the president said, “We ought to make sure … consumers have got plenty of choices when it comes to purchasing the broadband carrier” and that “Congress must not tax access to broadband technology, if we want to spread it around.”

The proclamations were not supported with any details about how to achieve the goal. Many have proposed incentives such as deregulation and tax credits to assure ubiquitous broadband deployment. And it was not clear whether Bush's reference to competition was based on the current telephony-based competitive carrier model or intermodal competition between various platforms, including cable and wireless.

Meanwhile, Bush's use of the word “universal” in his speech caused many to wonder whether broadband in high-cost areas should be subsidized through the universal service fund — a tough sell in the current environment, according to Patrick Brogan, assistant director of research for The Precursor Group.

“It potentially has some implication for universal services,” Brogan said. “But they're having enough trouble funding the basic universal service; it would take a substantial increase in the fund to pay for broadband.”

Others have argued that making broadband a universal service may be the best way to save the fund because it could expand the number of potential contributors to the support mechanism. Indeed, some industry officials believe the FCC or Congress should determine whether broadband should be deemed a universal service before proposals to resolve related issues such as intercarrier compensation and the fund's solvency are considered.

Like many observers, Brogan characterized Bush's speech as vague and said it would not be particularly relevant until after the election, if the president remains in office. Indeed, some noted that a broadband policy declaration from Bush would have been much more effective two years ago, when there was considerable speculation that he would include such a statement in his 2002 State of the Union address.

Instead, broadband was not mentioned in that speech, and the meltdown of the telecom industry largely has been ignored by the administration in terms of public statements.

“Let's face it, the Bush administration is old economy; they're oil people,” said one former government official who requested anonymity. “Telecom's not their thing.”

But telecom may become a priority for the administration during the 2004 campaign, based on recent actions. In addition to Bush's broadband statement, the administration last week played a key role in the FCC calling for industry players to negotiate commercial agreements on unbundled network elements (see story, page 8). And White House pressure reportedly caused consumer group Voices for Choices to drop an ad campaign that implied decisions on telephone regulations could cause a rise in phone rates, which would hurt the president's re-election effort.

Most agree that the wording on Bush's initial statement was a masterful political stroke, because it included nuggets of encouragement for all industry groups.

“It's interesting to me how everyone is spinning what he said to serve their own purposes,” said Rick Brecher, a CLEC attorney and a shareholder in the law firm of Greenberg Traurig.

Indeed, in prepared statements, FCC Chairman Michael Powell called Bush's proposal a “bold vision,” while U.S. Telecom Association President and CEO Walter McCormick said he looked forward to working with the administration to “promote investment.” Meanwhile, apparently noting Bush's reference to competition, CompTel/ASCENT CEO Russell Frisby expressed support for a “pro-consumer, pro-competition broadband marketplace.”

While making broadband a universal service item would have the greatest impact in the long term, Bush's declaration that broadband access should not be taxed may be tested soon. Two competing Senate bills regarding Internet taxation currently are under consideration, with one co-sponsored by Sen. Lamar Alexander (R-Tenn.) and Sen. Thomas Carper (D-Del.) allowing states to continue taxing DSL.

Whether Bush's broadband statement means he would veto the Alexander-Carper bill is unclear — as are many aspects of his declaration. “It has everyone asking, ‘What does he mean?’” said the former government official.

But telecom analyst Andy Regitsky, president of Regitsky & Associates, said he doesn't think there's a lot of mystery involved, noting that the timing of Bush's broadband statement makes the motivation apparent.

“The broadband thing sounds like one of those feel-good things you say during an election,” he said.