Tax Credits Will Help Low-Income, Rural Areas Gain Internet Access

Posted February 21, 2003 at 9:41am

Providing our rural and underserved communities with Internet access is critical to creating jobs and growing the economy. As with the railroads in the early 20th century, communities that are not connected to the information superhighway will get passed by.

While many people throughout the United States have successfully merged onto this information superhighway, far too many are stuck in traffic at the on-ramp. A great disparity exists in the availability of high-speed Internet access, also known as broadband services, in the United States. While urban businesses and affluent residential areas have broadband access, many communities do not, creating a “digital divide.”

Families and businesses in rural and low-income areas need access to the latest technologies available from broadband, from telemedicine and distance learning to tracking shipping orders and maintaining large, continually updated databases.

Today we have an opportunity to connect those areas to the information superhighway while encouraging capital investment and spurring economic growth. The Broadband Internet Access Act would bridge the “digital divide” by enabling previously unconnected Americans to get technology that much of the country already enjoys.

The Broadband Internet Access Act of 2003 (H.R. 768) addresses that problem by offering a two-tiered tax credit. The bill, which I have sponsored with Rep. Robert Matsui (D-Calif.) in the House, enjoys a wide range of bipartisan support. While we’ve just reintroduced our bill, a similar bill we introduced last session gained 227 co-sponsors.

Our bill would provide a 10 percent tax credit to companies expanding their broadband services to rural and low-income areas. It would provide a 20 percent tax credit to companies deploying “next generation” broadband to rural and underserved areas. Any provider installing broadband service in the targeted areas, whether by standard telephone wire, cable, fiber optics, terrestrial wireless, satellite or any other medium, would be eligible. And to encourage providers to act quickly, the credit would be limited to broadband services deployed in the next five years.

In northwestern Pennsylvania, my district serves as a hub to the East and the Midwest. When companies scout our area, they see highly skilled workers, accessible highway systems and sites ready for development. But they don’t see Internet connection speeds that would allow them to connect with the rest of the global market quickly and download large quantities of information in seconds.

The digital divide compromises the enormous gains that could be achieved by the Internet economy. Economists including Alan Greenspan have credited the Internet for the improved productivity and job creation of the past five years.

This year, we introduce this legislation in the context of a weak economy. Expanding high-speed Internet service to all segments of our population will bring the disenfranchised into the domestic and global marketplace. This legislation will give a much-needed boost to investment in the technology sector, something seriously lacking since the tech bubble burst in 1999.

Expanding broadband will help small businesses gain access to the global marketplace. Furthermore, according to the Brookings Institute and Gartner Dataquest, expanding broadband deployment is expected to generate $500 billion in economic growth annually. [IMGCAP(1)]

However, if we do not act, economists estimate that next-generation broadband capability will not be available to every telephone user until at least 2030. Slow deployment will only widen the digital divide until we have the equivalent of a digital Grand Canyon. Just as the federal government stepped in to provide national availability of electrification and transportation in the late 19th and early 20th centuries, we must do so now to ensure a national system of electronic information.

While we have been debating the value of providing incentives for American companies to expand broadband services and deploy next-generation broadband, our economic competitors in the rest of the world are surpassing us in developing a high-tech communications infrastructure. If the United States is left behind, we risk losing our strong position in world trade.

The United States is currently ranked sixth in broadband deployment behind Korea, Canada, Sweden, Denmark and Belgium. Many U.S. trade partners are aggressively subsidizing broadband deployment to homes and businesses.

The recovery of the U.S. economy can be sustained only if the infrastructure, regulations and institutions encourage and support further economic development. Providing a real incentive for companies to invest in the rural and underserved urban areas will bring those areas into the information age, create jobs and spur growth. And, with a cost of $2.2 billion over the next five years, the benefits clearly outweigh its cost to the Treasury.

Rep. Phil English (R-Pa.) is a member of the Ways and Means and Joint Economic committees.