blind_html [Fwd: Verizon Could Get $1.6 Billion in Senate Stimulus Plan]



-------- Original Message --------
Subject:        Verizon Could Get $1.6 Billion in Senate Stimulus Plan
Date:   Sat, 31 Jan 2009 16:25:02 -0500
From:   Ray T. Mahorney <coffee-craver@xxxxxxxxxxxxxx>
Reply-To:       Blind-chit-chat@xxxxxxxxxxxxxxx
To:     <Undisclosed-Recipient:;>



January 30, 2009, 2:04 am

Verizon Could Get $1.6 Billion in Senate Stimulus Plan
By Saul Hansell
NY Times

http://bits.blogs.nytimes.com/2009/01/30/senate-looks-to-stimulate-verizon/?pagemode=print <http://bits.blogs.nytimes.com/2009/01/30/senate-looks-to-stimulate-verizon/?pagemode=print>

UPDATE: Verizon has posted its thoughts on the broadband stimulus on its
policy blog.

Four words buried in a provision to help subsidize high-speed Internet
service contained in the latest Senate version of the economic stimulus
legislation could mean hundreds of millions of dollars a year in tax
credits for Verizon Communications, according to telecommunications
analysts.

Indeed, John Hodulik, an analyst with UBS Securities, said the provision
might give Verizon $1.6 billion in credits in the next two years, even
if it does not hire one more person than it currently plans to do.

At issue is the part of the stimulus package meant to bring fast
Internet connections to rural and low-income areas. The House bill that
passed Wednesday provided $6 billion in grants to broadband projects.
The latest Senate bill increases those grants to $9 billion.

Most significantly, the bill before the Senate also includes tax credits
for investment in broadband services to low-income neighborhoods, rural
areas and places that don't have any providers of high-speed Internet
service.

Companies would get a 20 percent tax credit on investments made on
"current-generation" broadband - with speeds of at least 5 megabits per
second - in "unserved areas" and 10 percent for investment in low-income
and rural areas.

"Next-generation broadband" service - at least 100 megabits per second -
also gets a 20 percent credit for unserved, low-income and rural areas.
But further down in the bill sits a significantly expanded definition of
what sort of customers can be served by a company that qualifies for the
tax credit:

A qualified subscriber, with respect to next generation broadband
services, means any nonresidential subscriber maintaining a permanent
place of business in a rural, underserved, or unserved area, or any
residential subscriber.

Jessica Zufolo, an analyst with Medley Global Advisors, said that last
phrase-"or any residential subscriber" - means that a company could
receive the tax credit for service to any home, whether or not it is in
a rural, low-income, or unserved area.

Moreover, right now Verizon's FiOS service, which runs fiber optic
cables to customers' homes, is by far the largest provider of Internet
service that meets the 100 megabits-per-second hurdle.

"On first blush it appears that this will be very beneficial to
Verizon," Ms. Zufolo said.

AT&T and the smaller phone companies generally don't have technology
that meets the 100 megabit-per-second threshold, she said. New
technology known as Docsis 3.0 will allow Comcast and some other cable
operators to qualify for the credit.

"This is an incentive to get cable companies to deploy Docsis faster,"
she said.

Verizon has said it hopes to expand FiOS to three million more customers
this year, and another three million in 2010. Mr. Hodulik, the UBS
analyst, said he estimates that Verizon will spend $4 billion a year on
capital expenses to build out FiOS. And thus it might well qualify for
as much as $800 million a year in tax credits, even if it doesn't change
its plans. Mr. Hodulik, however, said that the tax credits might well
encourage the company to accelerate its plans and run FiOS past more
homes over the next two years.

Even if the tax credits are not given for service to all residential
homes, Verizon still stands to be a big winner, according to an analysis
by David Burstein, the editor of DSL Prime, an industry newsletter. Many
of the homes that Verizon is set to wire for FiOS over the next few
years are in neighborhoods in New York, Washington and other cities that
qualify as low-income areas. Moreover, he estimated that Verizon might
benefit from some of the grants meant to subsidize the expansion of
wireless data services.

A Verizon spokesman declined to comment on the potential tax credit. On
a conference call with investors on Tuesday, Dennis F. Strigl, Verizon's
president, said the company preferred to see the stimulus in the form of
tax credits than grants, particularly if the grants include additional
requirements. (He didn't mention the network neutrality rules by name.)
Mr. Strigl:

What we like are things like depreciation and tax policy. What we
probably don't like are grants that have a lot of government conditions
on them. So given those two benchmarks so far the dialogue has been
pretty good and we will continue to comment on that. I think as you look
at our company we have made a lot of investments in broadband and what
we don't want to see is additional government regulation on any new
broadband that would have any sort of backward looking impact on the
company.

The changes to the broadband part of the Senate stimulus bill were
spearheaded by Senator John D. Rockefeller IV, the West Virginia
Democrat who is the chairman of the Senate Commerce Committee. Mr.
Rockefeller has long advocated for expanded broadband service to rural
areas. Verizon is the dominant phone company in his state.

The Senate proposal also would not ban Verizon, or any other company
benefiting from the credit, from discriminating against certain uses of
their Internet service, a principle often called network neutrality.
Recipients of those grants would be required to follow network
neutrality principles outlined by the Federal Communications Commission.

Barack Obama campaigned for president on a pledge to enforce network
neutrality, but telecommunications companies object to the idea as an
unneeded restriction on their business and would impose a potentially
less stringent test that the recipients meet "nondiscrimination" rules
created by the commission. Those tax credits don't impose any
requirements for network neutrality or nondiscrimination.

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