Senate stimulus trimming cuts back broadband tax breaks

Efforts in the Senate to reduce the ever-growing economic stimulus package have trimmed back a proposed $9 billion for broadband by $1.5 billion. However, the Senate bill still has to be reconciled with a House bill that has allocated $6 billion vs. the Senate's $7.5 billion number.

Last night, the Senate fine-tuned language to tighten up tax credits for broadband buildouts. Under the original vague language, Verizon might have gotten a $1.6 billion tax break from a 20 percent tax credit for any investment in 100 Mbps broadband service to any home - Verizon expected to roll FiOS to 6 million homes over the next two years, so the carrier was looking at a serious windfall.

Sen. Jay Rockefeller (D-W.Va.), the original proponent of the $9 billion broadband investment, proposed an amendment to significantly tighten the rules and increase the amount of tax credit. The new plan would only offer credits for broadband services to rural and unserved areas, with a 40 percent credit for 100 Mbps or better service and 30 percent for slower service of at least 5 Mbps. Wireless data services allowing downloads of 6 Mbps or better also get the 40 percent credit and 30 percent if they manage at least 3 Mbps.

Tax credits for Internet service to low-income areas have been nicked too. Verizon is already bringing FiOS into low-income neighborhoods in New York, Philly, and Washington D.C., so senators felt no need to provide a tax break for investments the company had already planned to make.

Details on net neutrality and which federal agencies will distribute the money are being worked out. There are also demands from the cable industry to lower the definition of advanced service to 50 Mbps and Hollywood and the record companies to modify net neutrality provisions so ISPs can police the exchange of pirated copyrighted music and video.

For more:
- Saul Hansen over at the NY Times blogs on the late night maneuvers.

Related articles
It started small: Economic stimulus package: $6 billion for broadband - FierceTelecom
And then got bigger: Rockefeller pushes $9B broadband stimulus plan - FierceTelecom

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