Build American And They Will Come

President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA) on February 17th.  Of the $787 billion appropriated by the ARRA, $7.2 billion will put in motion a plan and a program to extend broadband to reach all American communities, beginning with those that are deemed to be "un-served" and "under-served".

Since the ARRA was signed into law, the telecommunications industry's "field of dreams" has sprouted with webinars, seminars, whitepapers, commentary and suggestions about who should get the money, how to get it and how it should be spent.

There's been a lot of talk about the "Buy American" provision in the ARRA, and how it should be applied to the $7.2 billion appropriated for broadband.  "Since U.S. taxpayers' dollars will be used to stimulate broadband, then they darn sure should be spent on American-made products, right?"  (Actually, the U.S. Treasury is just going to print some brand new dollars to fund the ARRA, but we'll leave discussion of that for a future column.)  One equipment supplier has launched a publicity campaign asserting that, since its headquarters is in California and its factory is in Florida, arguably parts of America, then "Buy American" means that its products, rather than those made in "foreign" countries, should be bought with the broadband stimulus money.

Hokum!

Let's look at what the ARRA actually says about "Buy American."

Section 1605 (a) of the ARRA says:  "None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States."

Nothing at all about telecommunications equipment!

But, $2.5 billion of the broadband stimulus funds are going through the Rural Utilities Service (RUS), part of the Dept of Agriculture that makes low-cost loans to rural telephone companies.  So, the RUS' "Buy American" rules will apply to that money, right?

Wrong!  The Rural Electrification Act of 1938, as amended by the North American Free Trade Agreement of 1993, says:  "In making loans pursuant to this title and pursuant to the Rural Electrification Act of 1936, the Administrator of the Rural Electrification Administration shall require that, to the extent practicable and the cost of which is not unreasonable, the borrower agree to use in connection with the Expenditure of such funds only such unmanufactured articles, materials, and supplies, as have been mined or produced in the Unites States, Mexico, or Canada substantially all from articles, materials or supplies mined, produced, or manufactured, as the case may be, in the United States, Mexico, or Canada"  (Israel was added to the list of "eligible" countries in 1998.)

This statute applies to the existing RUS programs, but not to the new ones established by the ARRA!

So, there's no law that requires that we "Buy American" products for use in our broadband stimulus projects.  It's a good idea to buy American products when we can, if only to save shipping costs, but it's not the law.

What the ARRA does require is that we "Build American."  We are required to build the best broadband network on Earth, and to make sure that it reaches even the most remote parts of the country, and is accessible to and affordable by even the most disadvantaged people. 

Building a broadband infrastructure to reach every corner of our country will employ thousands of people to design and construct it, many more than work in the automated factories where telecommunications equipment is manufactured.  And, a first-rate broadband infrastructure will enable millions more people to learn and earn to their fullest potential, and thousands more businesses to participate in the global economy. 

Even more important, if we build a world-class broadband infrastructure, we will restore our U.S. telecom industry to the forefront, where we once lead the world.  Then, the whole world will want to "Buy American."

Kermit  L. Ross is founder and Principal of Millennium Marketing, a consultancy providing market research, strategy and planning services to telecommunications equipment suppliers.