An Alabama state senator who is pushing bills to give tax breaks to private businesses for broadband development says his plan is the best way to engage experts in the quest to develop high-speed Internet across the state.
“I think we really need to lean on the expertise of the private sector to get the job done,” Sen. Clay Scofield, R-Guntersville, told Watchdog.org. “I think this is the appropriate way to get broadband to our rural areas.”
Scofield is sponsoring SB 212, SB 213 and SB 214. The first would exempt broadband telecommunications network facilities built beginning this year from taxation for 10 years, while the second bill would exempt materials or equipment used by those facilities from the state’s sales and use tax. The third bill would offer an income tax credit equal to 10 percent of the investment in broadband network facilities.
Gov. Robert Bentley has made broadband expansion a major priority this year, and said recently the state hopes to get $200 million to $300 million in federal dollars through the E-Rate program to run fiber-optic cable in rural areas. A few dozen schools would hook up first under the plan, with private providers building and operating the networks and the state maintaining ownership.
Scofield said state leaders shouldn’t compare Internet to other utilities like power and water when talking about taxpayer investment. He’s concerned those fiber-optic cables could quickly become obsolete in an increasingly wireless world.
“When you’re talking about broadband, it is a very steep technological curve,” Scofield said. “[The fiber] may be obsolete halfway through the bond issuance.”
He points to the financial failure of a municipal broadband system in Provo, Utah, which Google Fiber later bought for $1. Local ratepayers were left with higher bills to pay off the tens of millions of dollars in debt.
“Provo, Utah, is a prime example of why we should be very cautious about this,” Scofield said.
Sen. Tom Whatley, R-Auburn, backs a different approach to spur broadband development in rural Alabama. His SB 56, which would allow municipal utilities to expand their service zones, is pending in the state Senate’s Transportation and Energy Committee.
In a recent op-ed on the Alabama Senate Republicans website, Whatley noted Google Fiber is partnering with Huntsville to help develop super-fast Internet to the Rocket City, but such an agreement is less likely in rural Alabama.
“I am not willing to penalize a smaller city or a rural area if a private company makes a business decision not to invest there,” he wrote. “If private Internet providers choose not to build broadband networks in smaller locales, then municipal utilities should have the option to develop those underserved areas. To my mind, it is question of economic fairness for the consumer and economic development for the state.”
Whatley said allowing government-owned networks to expand their reach will increase competition and hopefully lower prices for consumers. But David Williams, president of the Taxpayers Protection Alliance, said the move could have the opposite effect.
In written testimony he submitted for an initial hearing on Whatley’s bill last week, Williams said owners of small Internet service providers in Chattanooga, where the city built a $300 million broadband system, say they stay out of the city because they can’t compete with that level of subsidization (Chattanooga got $111 million from the 2009 economic stimulus law.)
A movement is afoot in Tennessee, much like Alabama, to let municipal providers expand their service areas. Williams said those ISPs worry the move could put them out of business.
“City government should not be putting small businesses out of work,” he wrote.
“Supporters of Sen. Whatley will try to make this a fight between mayors and city councils and ‘big’ nameless, faceless ISPs, but it’s not. Remember, there are 117 broadband providers in this state — many of them small and community-owned. Opposition to this bill is about protecting taxpayers and protecting competition.”
Scofield said since he drafted his bills, he’s heard plenty of interest from both wired and wireless Internet providers, as well as electric cooperatives, who want to help sell lawmakers on the tax abatements. He plans to substitute amended bills in the state Senate this week in advance of hearings on the issue.
“I want to have as much competition in there as possible,” Scofield said.