Tax Boost for Broadband

So far, providers have shied away from broadband in rural areas because of the high costs involved. But with a new incentive, more providers might be able to bring the technology that enables high-speed Internet access to rural areas.

Sen. Jay Rockefeller (D-WV) and Sen. Olympia Snowe (R-ME) introduced a bill in March to entice providers to expand broadband services in rural areas and help close the digital divide. The Rural Telecommunications Modernization Act would offer a 10% tax credit per year for three years to any provider that invests in rural broadband facilities that provide high-speed service.

"While efforts are being made to ensure broadband services are available in all regions, the fact is that these services are being deployed more rapidly and ubiquitously in urban areas," Snowe said.

The legislation will target that disparity with a focused tax credit that will give providers an incentive to build rural broadband facilities. Other details include:

• Investments must be for "broadband local-access facilities," including fiber optics, DSL, wireless enhancements and cable-TV upgrades.

• The credit is restricted to investments in "high-speed broadband telecommunications services." Narrowband doesn't qualify.

• Services must be in areas located more than 15 miles from any town with more than 25,000 people. They also can't be within a county with a population density of more than 500 people per square mile.

"The act supports two levels of broadband service: 10% for broadband, which we define as facilities capable of delivering 1.5Mb/s downstream and 0.5Mb/s upstream," said Paul Margie, Rockefeller's counsel and legislative assistant. "An enhanced credit of 15% would be available for people who invest in technologies capable of delivering 10Mb/s bi-directional."

Margie said he hopes the incentive will encourage companies that currently provide broadband service in rural areas to extend service to other rural areas.

Several mobile- and fixed-broadband providers are pursuing eligible-telecom-carrier (ETC) status to provide rural service because the accompanying Universal Service subsidies allow them to offer service in such high-cost areas. Together, the Rockefeller-Snowe credit and Universal Service subsidies finally might make rural broadband economically viable.

"There's no reason that I can see why the same carrier couldn't receive ETC status and Universal Service funds for regular narrowband service, and have a broadband offering that is not currently supported by Universal Service that would be supported by the tax credit," Margie said.