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Sprint Corporation Message Board

  • sanddollars586 sanddollars586 Jan 20, 2009 10:45 AM Flag

    Stimulus Tax Credits Little Benefit To CLWR

    Broadband carriers have been lobbying behind the scenes for weeks to influence the administration's plans for allocating taxpayer dollars for broadband and reaching the unserved and underserved.

    Among the options for spending that money are grants but knowledgable insiders know that grant money given to specific companies can damage a well functioning industry by distorting the competitive landscape with company specific wind-fall gifts. Those not receiving grants then become relatively disadvantaged.

    Tax credits are another option that gives incentive for increased R&D and even deployment and is generally considered a more fair and productive incentive for accelerating commercial activity without the downside of having the government pick winners and losers.

    Tax credits however are more beneficial to companies that are profitable enough to pay taxes. In some sense tax credits self-select the healthiest of the companies that can actually implement the desired action because they are already profitable and self-sustaining prior to the incentive. The financial benefit received by any company is in proportion to the incremental investment made. In this respect the tax credit can be considered a "fair" distribution of allocated funds.

    AT&T, Verizon, Comcast and many other wired, wireless and satellite operators can benefit from this approach.

    Startups like CLWR are years away from producing enough free cash flow to have earnings or even have a tax obligation. So receiving new tax credits on top of monumental operating losses deliver little total benefit, or incentive for additional investment in CLWR.

    The takeway is that like everything else in life, the benefits of a broadband stimulus plan is in the details.

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