January 27, 2009 / 3:53 PM / 11 years ago

Lawmakers mull Internet, wireless tax credits

WASHINGTON (Reuters) - U.S. lawmakers will consider on Tuesday a plan to give tax credits to Internet and wireless companies, such as AT&T Inc and Sprint Nextel Corp, as part of a broad stimulus package to boost the ailing economy.

The proposal would provide a 10 percent tax credit to companies that build out high-speed Internet in rural and underserved areas, and 20 percent for those willing to exceed current speeds.

Sen. John Rockefeller, a senior Democrat on the Senate Finance Committee, will offer the amendment to the $825 billion economic package the panel debates later on Tuesday.

Internet service providers like AT&T, Verizon Communications and Comcast Corp could apply for the credits, as could wireless companies like Sprint and Deutsche Telekom’s T-Mobile.

Telecommunications companies have been pushing for tax credits, rather than grant money, the route the House of Representatives has taken thus far.

House committees approved $6 billion in grants to providers and others to fuel telecom and Internet investment. A Senate version would give about $9 billion in grants.

Analyst Jessica Zufolo of Medley Advisors said inclusion of language for wireless Internet was a victory for the mobile industry.

“The wireless industry has never before been the subject of such generous tax treatment from the Senate Finance Committee for the deployment of mobile data service,” she said in an investor note.

Still, an open question is whether the panel will include so-called open access provisions, which require that providers not discriminate based on applications or content.

The House version did include such a mandate, staunchly opposed by the industry.

GIVE AWAY?

The proposal, which is also sponsored by Republican Sen. Olympia Snowe, gives a 10 percent tax credit for investments at current Internet speeds in rural and underserved areas.

“Our concern about tax credits is that they may fund projects that would have been built anyway,” said Derek Turner, research director at the public interest group Free Press.

The 10 percent credit seems to fall into that category, even in a flailing economy, said Turner, who noted that he has not yet seen the full proposal yet.

The 20 percent tax credit for “next-generation” speeds is more likely to spur investment not already planned, because only Verizon and perhaps some cable operators offer the proposed speeds, he added.

Wireless broadband will be eligible for this credit if deployed in unserved areas, defined as a location with no current Internet provider.

Reporting by Kim Dixon; Editing by Lisa Von Ahn and Matthew Lewis

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