Revised Stimulus Bill Bolsters Broadband, Telecom Competition Reinhardt Krause Thursday February 12, 2009, 5:52 pm EST
Related:Clearwire Corporation, Comcast Corporation, Google Inc. The latest version of the economic stimulus legislation being finalized by Congress may be aimed at creating more broadband competition than the big phone companies expected, analysts say.
The package would make $6.5 billion to $6.7 billion available for high-speed Internet initiatives in rural and "underserved" urban areas and may bolster smaller telecom providers.
In early versions of the stimulus bill proposed in the House and Senate, most grant money targeted rural areas, which often lack speedy Internet service entirely.
The revised bill, forged by a Democratic-controlled Congress, would make grant money available to local governments building wireless and fiber broadband networks.
At the same time, the stimulus bill doesn't appear to provide tax credits for Internet investments, a blow to phone company Verizon Communications (NYSE:VZ - News).
Verizon stood to garner $1 billion to $ 2 billion in tax savings from the buildout of its superfast, fiber-based FiOS network, analysts say.
While the stimulus bill holds little sizzle for Verizon and fellow telecom giant AT&T (NYSE:T - News), their rivals stand to gain, say analysts and industry observers.
"Big telcos get more competition," said George Reed Dellinger, an analyst at research firm Washington Analysis. "Municipal broadband networks are competitors for the telcos, and CLECs (competitive local exchange carriers) will partner with them."
Dellinger says wireless broadband startup Clearwire (NasdaqGS:CLWR - News) -- backed by Intel (NasdaqGS:INTC - News), Google (NasdaqGS:GOOG - News) and cable companies -- may benefit.
Clearwire has struggled to obtain financing amid the financial downturn.
"A close reading of the $6 billion-plus of grants and loans will be used not by the primary broadband suppliers, such as AT&T and Comcast (NasdaqGS:CMCSA - News), but by secondary and tertiary competitors," Dellinger added.
The stimulus bill marks a change in broadband policy from the Bush administration, says Robert Atkinson, president of the Information Technology & Innovation Foundation.
He says making at least half of grant funds available to nonrural markets will spur competition.
"It is significant," he said. "There is a conscious effort in the bill to introduce more competitors, new entrants to the market, to challenge the incumbent telco or cable providers."
"A close reading of the $6 billion-plus of grants and loans will be used not by the primary broadband suppliers, such as AT&T and Comcast (NasdaqGS:CMCSA - News), but by secondary and tertiary competitors," Dellinger added."
If CLWR qualifies for funds in the above definition while being a 51% controlled subsidiary of Sprint, what's to stop Verizon or AT&T creating similar 51% controlled subidiaries to qualify for stimulus money?
Dellinger's "if's" and "maybe's" are stretched pretty thin.