President-Elect Barack Obama’s $40 billion Handout Bailout to Internet Providers

Monday, January 19, 2009

1934[1].jpg President-Elect Barack Obama is planning to send up to $40 billion in grants and loans bailout funds toward improving broadband availability and speeds as part of broader economic stimulus efforts, according to UBS analysts.

According to Telephony Online:

A draft of the proposed $825-billion economic stimulus bill circulating on Capitol Hill today lists $6 billion for expanding broadband “so businesses in rural and other underserved areas can link up to the global economy,” adding that this provision could well aid the job-creation goals of the larger economic stimulus effort.

PC World writes: The money will “strengthen the economy and provide business and job opportunities in every section of America with benefits to e-commerce, education and health-care,” a House Appropriations Committee document said. “For every dollar invested in broadband the economy sees a ten-fold return on that investment.”

10X the return? I’m not buying it. My BS meter just went off the scale. Just my opinion here, but I see this as $40 billion in wasted tax payer money. The private U.S. sector already offers high-speed Internet to nearly every part of the country. Where DSL or cable isn’t available, American can pay for high-speed satellite Internet access. If it isn’t profitable for ISPs to bring high-speed Internet to boondocks USA, then I am very skeptical about the government paying for it. We’ve been down this road before with the Community Reinvestment Act forcing banks to give mortgage loans to risky  individuals, which turned into a very unprofitable venture with disastrous results.

Let the free market decide where high-speed Internet is profitable. Seriously, why should I subsidize high-speed Internet for Backwaters, U.S.A.?

In this tight economy, I’d rather have this $40 billion divided by 300 million Americans = $133.33 back per person.

That’s $533 for my 4 person family.

Or if you only count just tax payers it’s $40b divides by 136 million tax payers = $294 back per tax payer.

$40 billion doesn’t seem like a lot in the grand scheme of things, but when the government spends $40b on this, $100b on that, $800b on bailouts, etc. soon enough your Federal income taxes starts shooting through the roof – or at least the deficit will until the bill comes due years from now. Average Americans no longer pay attention to how much the Federal government takes out of their paycheck each week/bi-week. It’s money they never see, so they don’t miss it.

I have a solution for this slow American economy – suspend all federal income taxes (except social security taxes of course) for 1 year. I guarantee that will give the economy a huge boost. It’ll never happen though, because my fellow Americans will be shocked how much more dispensable income they will have in the course of one year. Once their eyes are opened, Americans will never allow the federal government to reinstitute the same amount of taxes formerly taken. Congress knows this and will never give up that much money/power.

Now, you could argue that poor Americans could use an Internet access subsidy. However, last I checked, poor people in this country had plasma TVs, PS3s, subsidized housing, free emergency care, and more. We have perhaps the richest poor people in the world or close to it. If they want Internet access, they’ll pay for it. Americans work hard and will work to earn things they want. It’s the way it’s always been.

Unfortunately, we keep hearing these “great ideas” how to offer more services to Americans via the government, and we just think the government can do anything with their “limitless” funds. The U.S government can just print more money – it’s just Monopoly money after all. Who cares about the impacts on inflation, which will no doubt hit us in the next 18 months from all these bailouts and new government spending ideas/plans?

So the question is do you want really want your federal taxes to increase and go towards building high-speed Internet access for every American. If you agree to pay higher taxes for that, why not tax the taxpayers even more to give a free car or a free house to all Americans making under $40,000? Bad analogy? Agreed, it is a bit over the top, but you see my point.

I’m all for stimulating the economy, but this seems like yet another wasteful government project.

Let Verizon, AT&T, cable cos, etc. make their own investments in building out their Internet networks. Enough with the government grants, subsidies handouts already!

Tags: , , , , , ,

TrackBacks
| Comments | Tag with del.icio.us | VoIP & Gadgets Blog Home | Permalink: President-Elect Barack Obama’s $40 billion Handout Bailout to Internet Providers


Copyright VoIP & Gadgets Blog

Comments on this Entry:

(Rich Tehrani on
Jan 16, 2009 11:02 AM)

I say the ROI will be less than 10x as well but it should be greater than 1.5x. Moreover, remember if you didn’t get a tax rebate check last year under Bush (even if you did), you will not see a dime in rebates under Obama. Let’s just say, I don’t think he is a fan of ex-Viper drivers. :)

One other point – is it possible this massive amount of money-spending won’t cause the inflation we fear because it is merely replacing the wealth which was lost. Madoff alone reduced global wealth by far greater than $50 billion. Then there is the lost value of homes, stocks, office buildings and malls.

Finally, the financial markets coupled with the government and homebuyers who seem to have a less than stellar sense of responsibility got us into a mess and it is a big mess.

Layoffs will continue and if the government can do anything to increase spending which will lead to job creation, it should.

Remember the government will be paying people for being unemployed… I would rather have these people who could choose to watch TV and get a check, out there building better broadband infrastructure so we can be a more competitive nation. Then there is the sorry state of US roads, bridges and tunnels.

The alternative of course is to just let this all play out and it could take half a decade to do so or even more.

Sadly, there is a psychology problem at play here. These sorts of government spending programs have a chance to get positive psychology going in this country. It is much better to spend the money here instead of bailing out the incompetent managers of Bank of America, Merrill Lynch, Citigroup, etc.

I say it is worth a shot and has good chance of paying back more than 1.5x as I said earlier.

(Peter Radizeski on
Jan 16, 2009 11:52 AM)

If this money goes directly to the DUOPOLY, it will be a mistake. The telcos already get RUS and USF monies for rural broadband and tele-medicine. This money should go to smaller businesses – maybe as a grant program – who can actually see where the money will go.

Job creation happens with small business, not with the giving more money to Fortune 500.

And if we give the money to Charter, will it be used or help to stave off bankruptcy?

Large corporations are doing poorly because they have been riding the gravy train for too long. Give the money to the SBA and the RUS so that every business has a chance to put it to real use. (BTW, I consult for ISP’s and CLEC’s who are creating jobs, designing innovative solutions, and bridging the Digital Divide in rural America).

BTW, Verizon doesn’t even have DSL available in a Tech park in Chantilly VA. VZ’s eyes are only on its FiOS project where it cherry picks what neighborhoods will get it Fiber.

BTW, as you can read here, “The Bureau of Economic Advisors estimates that for each $1 invested in broadband, the economy benefits nearly $3.”

(Tom Keating on
Jan 16, 2009 12:08 PM)

Good thoughts. I agree it shouldn’t go to the major ILECs. I bet the CLECs you represent aren’t looking for a government handout either. They’re ‘lean and hungry’ & work hard to be profitable & acquire customers, unlike the “fat cats” that expect the government to give them a helping hand.

>>for each $1 invested in broadband, the economy benefits nearly $3

I buy that a heck of a lot more than the 10X benefit. Still, I’d rather the private sector make that investment. Assuming we do allow the gov’t to make the $1-$3 investment ratio, who gets to keep the $3 return? The ISPs will keep most of that profit – not the government and certainly not the tax payer. The gov’t will get ’some’ return via more jobs and more tax revenue from the increased broadband penetration, but I’m still not convinced it can’t be done already without the need for tax payer money. Where there is a profit to be made, companies will make the investment.

Verizon is indeed cherry-picking where to put FiOS. I for one wish my small neighborhood had it available, but I understand why Verizon is going for denser populated areas first to recoup their large investment in building out fiber to the home. Digging & installing FTTH isn’t cheap. While it would be nice if I had the U.S. gov’t subsidize fiber to my house so I can get 100+ HDTV channels and uber-fast Internet, my DSL broadband connection works just fine. So I don’t want my fellow tax payers to subsidize fiber to my house. It’s not their job to give me more ‘perks’ in my life. If I truly want fiber to my house, I’ll move to where FiOS is offered.

When did we become a nation of “what can you do for me?”. JFK would be rolling in his grave – “Ask not what your country can do for you–ask what you can do for your country”.

(Greg Galitzine on
Jan 16, 2009 12:18 PM)

It doesn’t appear the incoming Administration has much faith in small businesses and their ability to be the wealth and job creation engines that they have been throughout American history.

We can’t buy our way out of this mess with bailout checks to organizations that have shown an inability to make sound, responsible decisions.

Entrepreneurs create wealth. Wealth begets jobs and more wealth. More jobs = more tax revenue. And so on.

Government should stay out of the way.

I agree with Peter. Put the money into the hands of small businesses, and create an environment (low taxes, fewer regulations) in which they can thrive.

(Tom Keating on
Jan 16, 2009 12:22 PM)

>>Madoff alone reduced global wealth by far greater than $50 billion

Two wrongs don’t make a right. The argument that we spend $40 billion on this, $10 billion on that, so what’s the problem with another $40 or even $800 billion is no big deal… is a non-sequitur.

Roads are critical to the infrastructure of this country, national security, the economy, and much more. I have no problem with taxes to pay for that. I’d rather see us improve our physical infrastructure not our digital one. We, the American public “own” the physical infrastructure, but we have much less stake in the “digital” infrastructure owned by Verizon, AT&T, etc. I really don’t like the idea of funding private companies with American tax dollars – it screams of socialism.

You can always make the argument that the governments “needs” to spend money on XYZ. Congress does a great job of convincing the American people they ‘need’ to spend money on many things that are wasteful.

The real question is how critical is ubiquitous high-speed Internet. The U.S. economy survived for hundreds of years without the Internet. Dial-up is slow, but people can still access information on the Internet, buy stuff on Amazon, etc. So they can’t play a Youtube video on dial-up. They’ll live.

I don’t equate ubiquitous high-speed Internet access as critical to national security, the economy, etc. We already have 80-90% penetration any way. Spending $40B just to get the last 10-20% seems moronic with all the deficits and wasteful spending.

Sure, it will lead to more jobs, higher speed Internet for Americans, but at what cost? We fought the Revolutionary War because of unfair taxation without representation. I’d venture a guess that most Americans would rather keep $294 in their pockets than give nearly $300 to Verizon, AT&T, etc. Too bad our representatives in Congress often due the opposite of what the American public wants – including the recent multi-billion dollar bailouts.

(Rich Tehrani on
Jan 16, 2009 12:35 PM)

Greg good point on small business — the true backbone of the country’s economy. We should encourage job creation in small businesses for sure. We need to encourage new businesses to launch and help them in any/every way we can. After all it is the large businesses in part who are responsible for this mess.

(Richard Grigonis on
Jan 16, 2009 1:06 PM)

I’m curious as to how exactly this “pie” is going to be divided up and what exactly it will be used for and when. After all, look what has happened with the bank bailouts, with their lack of accounting. It appears that we’re all in uncharted territory, and things are changing “on the fly” (such as in the case of the sudden federal “investment” in Bank of America).

My town doesn’t have Verizon fiber not because Verizon doesn’t want to install it here, but because an intervening municipality wants to bring about a sort of “payola” situation, one at which Verizon rightfully balked. The greed factor got us into this mess, and it will continue to make things worse. I’m all for everyone having broadband access to the Internet, but I think the unemployed should get jobs and medical coverage first.

(Brendan Read on
Jan 16, 2009 1:51 PM)

Subsidizing universal broadband access is legitimate public policy. It is no different than the government financing of railroads (through land grants) in the 19th Century, highways (and rural electrification) in the 20th, and more recently urban transit and intercity rail.

All of these policies (including broadband), have been designed to meet the goals of improving individual and community access to opportunities, jobs, and services, nation-building, and security. All of them have been carried out in the presence of private firms.

It is no more illegitimate for say a New London, Connecticut resident to subsidize high-speed Internet access to a farmer in New London, New Hampshire as it is to pay through their gas taxes a portion of I-89 that runs by the latter town. By the same token, it is no more illegitimate for a resident of that rural New Hampshire community to help pay for transit bus and Amtrak service for their counterpart in that Connecticut city.

One can make the same arguments against paved roads and for the Interstate highway system, especially in rural areas as for broadband. People and the economy survived without them too. There were railroads and interurban lines, and, prior to the Interstates, federally-supported and state paved roads, modern-day turnpikes, and parkways.

Yet dial-up is the equivalent of dirt roads; satellite broadband the same as planked toll roads of the 19th century. The former became outmoded except for the most rural/remote areas while the latter went by the wayside. Ask rural residents about what they think of satellite broadband and the reaction will not be ones of loud cheers.

Yes, roads are vital, such for national security. Yes, it was poor roads that planted the seeds in the mind of a young U.S. Army officer by the name of Dwight Eisenhower of better highways to more quickly transport troops and materiel (the Interstates were originally known as the Interstate Defense Highway System that he signed into law). Yet the lack of them did not sufficiently impede the U.S. in moving vast amounts of personnel and equipment during World War II and to a lesser extent in the Korean ‘conflict’.

The Internet, and by extension, broadband has national security applications. While it was originally intended for scientific purposes, that it could tie in distributed computers that would enable the U.S. to retaliate after a first strike made it understandably appealing to the Pentagon.

And on 9-11-01 the Internet did just that. It enabled the U.S. to survive an enemy attack.

I saw this up front and personal. I had witnessed the bombings of the World Trade Center on my commute to Call Center Magazine’s midtown Manhattan editorial office. I along with my colleagues evacuated the building. I ended up at a friend’s house in New Jersey (I could not get to my-then home on Staten Island). While many of the phone lines and cell towers were down I was still able to log in over a broadband connection to receive—and send—‘Are You OK’ e-mails…

So the question then becomes: does a universal broadband network merit the same standing as a key infrastructure like roads, and transit? The arguments clearly points that way.

Broadband opens the doors to jobs and services via telework. Only broadband has the ability to reduce the demand on, and the tax costs of supporting, both roads and transit, which in turn cuts emissions and resulting healthcare costs while improving quality of life. A nationwide broadband system, by distributing the work, can, and has, enabled the country to withstand disasters.

Lastly, broadband is the road to the future: of making the Information Age into reality just as having railroads into every community made the Industrial Age possible, and having paved highways everywhere enabled the post-World War II boom. The direct and indirect opportunities and employment universal broadband will directly and indirectly create represents the best hope and the brightest future for current and upcoming generations.

(Joe Biden on
Jan 16, 2009 2:21 PM)

Don’t you know, paying taxes is patriotic? Like I (Joe Biden) said, “it’s time to be patriotic … time to jump in, time to be part of the deal, time to help get America out of the rut.”

Please give Obama and I your money so we can spend it. We’ll spend out way out of this recession, don’t you worry.

It is true that dial-up is like dirt roads. We can’t have 10% of Americans driving on dirt roads or digital dirt dial-up roads. Give us your money so we may pave the roads in gold. You will have sweet 5000Mbps bandwidth so you can download The Dark Knight in just 1.2s. iTunes downloads will be so fast you won’t know what to do with yourself. Trust me, your life is nothing without this kind of bandwidth speed! Help us help you. Give us your money. We know best how to use it. You would have lost it in the stock market anyway. Or probably spent the money on something stupid like I don’t know, a vacation, or your kids college education or something.

Give to us so we may give to others.

Sincerly,
Joe Biden
Vice President-Elect

(Rich Tehrani on
Jan 16, 2009 3:00 PM)

There you go again Joe. :)

(Slingshot on
Jan 17, 2009 8:03 PM)

I disagree with the commentary. Broadband is crucial for our economy to move forward. We invented the Internet and now are 15th in the world as far as being able to provide high-speed access to our businesses and citizens. We should be number 1! Google is one company that is SAVING the US right now. We need major technological innovation. Freedom and access of information will only help this.

For example, my Mother and Father in law cannot get access to anything aside from dial-up. Satallite access is too expensive for them and does not allow any better upload speed. Many businesses are out of reach for high-speed access here in Indiana and either don’t have access or are forced to pay $500/mo or more for T1 access. This is a major expense for small business.

(Rich Tehrani on
Jan 19, 2009 8:58 AM)

Slingshot — you are right. So it seems to me a broadband tax credit makes the most sense. This would allow cnsumers and businesses to choose the provider they want to work with. It should also help your in-laws by offsetting the cost of high-priced internet.

(Tom Keating on
Jan 19, 2009 10:18 AM)

>>Google is one company that is SAVING the US right now.

Google is saving the U.S.? I don’t think so. Google has 24,400 full-time employees. That’s 0.0181% of the entire workforce. Let’s not exaggerate. Coca-Cola employs over 90,000, so they’re doing more to help the American people earn a living. Even if you add in all the people who make money off Adsense, Google still represents a small fraction of the American economy.

>>Broadband is crucial for our economy to move forward.

I don’t think so. I’ve used both dial-up and broadband. I prefer broadband of course, but the American economy isn’t any better off for me having broadband at work and home. Maybe I might download & pay for a few more iTunes on broadband vs. dial-up, but the aggregate of adding 10% more broadband users to the mix isn’t going to add much to the American economy.

As for American being 15th in broadband, you forget that America is one of the largest nations in the world with large population scattered in rural areas. Europe is very concentrated, so it’s much easier to do DSL, cable, ISDN, and fiber drops.

>>Many businesses are out of reach for high-speed access here in Indiana and either don’t have access or are forced to pay $500/mo or more for T1 access. This is a major expense for small business.

What about wireless such as 3G/EVDO/4G/WiMAX? You’re going to see WiMAX take off the 2nd half of 2009 – all funded by the private sector.

I still stand by my opinion that $40 billion to get the last 10% on broadband is a waste of money. I can’t get Verizon FiOS with 100 HD channels in my neighborhood and I’m not happy about it. But I wouldn’t go knocking on the Federal government’s door demanding they fork over billions to Verizon to help them bring fiber to my house.

I can’t get a sewer line to my house so I have a septic. If my septic goes, I’m out $20,000 – $30,000. I think the local, state, or federal government should bring sewer lines to my neighborhood at tax payer expense. If my septic goes, can I get a bailout? We can go round-and-round what the government can do for “me”.

If you read the Declaration of Independence and the Constitution you would know our forefathers valued personal property and tried to limit the power of the federal government. Alas, the federal government today has gone far beyond the Constitution to take personal property via taxation and give it to other individuals and “social” programs. The federal government has the right to tax individuals to raise and maintain an army, protect Americans & America’s borders, ensure national security, and fund government institutions. That’s pretty much it.

It’s the states that are “supposed” to have the power to tax its citizens for social programs. Each state’s citizens has much more control over its representatives than what happens in Washington, D.C. If a state wants to invest in any particular social cause, they can do so. However, if the citizens disagree and see it as wasteful spending, they can vote out the state’s Democrat or Republican Party that supported this cause. Not so easy when dealing with Congress, when your state only controls 2 Senators and a few representatives.

We as citizens have much less control with our “voting power” over what the Federal government does, which is why our forefathers tried to restrict what the Federal government could do. We the people are the government not Congress. Or at least they are supposed to represent “we the people”. I’m reminded of Lincoln’s Gettysburg address where he said, “that this nation, under God, shall have a new birth of freedom—and that government of the people, by the people, for the people, shall not perish from the earth.”

I think we’ve forgotten that Congress isn’t any better than us, they’re not smarter than us, and they shouldn’t hold carte blanche power over us. We should always be skeptical about “new ideas” on how to spend tax payer money.

(Joe the Plumber on
Jan 19, 2009 12:25 PM)

Hear hear, Tom!

It’s SO easy for people to spend other people’s money.

You’re right that people don’t pay attention to the federal taxes taken out. People look at federal spending programs as money the government just magically already has. It’s not their money, it’s OUR money.

If only we could somehow switch to a pay-as-you go tax system where the federal government sent quarterly tax bills to U.S. citizens with a breakdown of where the federal taxes are going. U.S. citizens would then have to write a check to the government. None of this auto-deduct stuff which has made people blind to how much money the government takes from us.

I can dream this will one day happen, can’t I?

Sincerely,
Joe “the Plumber”

(Erik Linask on
Jan 19, 2009 4:05 PM)

Tom, Broadband IS crucial for our entire country to move forward. Look beyond the dollar figure and the 10% increase in broadband users. Consider, instead, that ubiquitous broadband will allow us to move forward as a technologically advanced nation — we are that, are we not?

If we don’t ensure our underserved areas have broadband access now, while it is still a reasonable opportunity, and while underserved are still within a step of today’s technology. Else, you’ll see the technology gap between the haves and the have-nots will only widen, and those that you suggest can make do with dial-up access will become further isolated from the rest of us.

Technology is a fundamental part of our lives – our President-elect proved that, and it’s certainly a funamental part of yours. Just as we’re about to witness a mandated transition to digital television, does it not make sense that we must dump dial-up to avoid stifling innovation? You can’t do with dial-up what you can with broadband — and we all know applications and services are not becoming less bandwidth-intensive.

(Tom Keating on
Jan 19, 2009 4:44 PM)

You make the analogy of haves vs. have nots. What about those that have plasma TVs? They’re able to access more content than those using analog TVs – even with the impending digital TV transition & the converter box rebate. Should we give everyone free plasma screens at tax payer expense? What about Blu-ray DVD players which allow users to access the web from their TV and remote control? Shouldn’t we enable all Americans to have Web access from their TVs? After all, many homes can only afford one PC, which means only one person can use it at a time.

Of course I’d like everyone to have broadband. I just disagree with tax payers funding the expenditure. It isn’t that critical to the economy. I can think of better ways to stimulate the economy.

Gotta run. I want to illegally download Clint Eastwood’s Gran Torino from The Pirate Bay on my fast broadband connection. Yeah, I know Clint will be peeved he won’t get revenue from my download. Not to mention the director of the movie, and the entire cast and crew. Illegal downloading of movies and music is fun. I love sticking it to Hollywood for their overpriced movie tickets and DVDs. It’ll help bankrupt artists sooner rather than later. I’ll take great joy that 100% broadband coverage in the U.S. helped bring about the demise of copyright holders. Screw em’! There goes 5 million copyright holder jobs, (artists, actors, musicians, screen writers) but who cares?

Yes, I’m being facetious. Point being, there are some negative drawbacks to the economy in bringing 100% broadband coverage. Advocates of tax payer funded “building out” of 100% broadband coverage paint this rosy picture, but there are consequences. That said, I hope we do get to 100% broadband coverage – preferably over wireless. But don’t take it out of my paycheck, thank you very much. Are you volunteering yours?

Related Topics: 2008, 3g, 4G, ADSL, application, AT&T, attack, Avaya, bandwidth, broadband, BT, business, call, cell tower, Channel, cheap, CLEC, coverage, credit, DSL, equipment, Europe, FCC, fiber, free, Google, government, home, illegal, India, Info, information, Internet, ISDN, ISP, laws, LEC, market, Microsoft, Mobile, municipal, Nortel, phone, PNG, provider, regulation, regulations, satellite, security, solution, stock market, stocks, T1, taxes, telecom, USA, USF, Verizon, voice, VoIP, VZ, WiMax, wireless

Related Articles

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

This entry was posted on Monday, January 19th, 2009 at 11:27 pm and is filed under VoIP and Gadgets Guide. You can follow any responses to this entry through the RSS 2.0 feed.

Comments are closed.

Pages