World and Nation

Internet Money in Fiscal Plan: Wise or Waste?

Perhaps no line item in the nearly $900 billion stimulus program offers a better window into the tricky balancing act of how best to jolt the economy than the billions pegged to expand broadband Internet service to rural and underserved areas.

Proponents say it will create jobs, build crucial infrastructure and begin to fulfill one of President Barack Obama’s major campaign promises: to expand the information superhighway to every corner of the land, helping local businesses and offering people a dazzling array of services like online health care and virtual college courses.

But experts warn that the rural broadband effort could just as easily become a $9 billion cyber-bridge to nowhere, representing the worst kind of mistake lawmakers could make by ordering so much money to be spent so quickly.

“The first rule of technology investment is you spend time understanding the end user, what they need and the conditions under which they will use the technology,” said Craig Settles, an industry analyst and consultant who has studied broadband applications in rural and urban areas. “If you don’t do this well, you end up throwing millions or, in this case, potentially billions down a rat hole. You will spend money for things that people don’t need or can’t use.”

The Congressional Budget Office said Monday that, overall, the Senate version of the stimulus package would have a swifter impact on the economy, with a combined $694 billion in spending and tax breaks by October 2010, compared with $526 billion for the bill that the House approved.

The total cost of the Senate bill is $884 billion, about $64 billion more than the House bill. The new cost analysis came as the Senate opened debate on the recovery package, and Democrats congressional leaders met with Obama at the White House to discuss the looming floor fight.

Senate Republicans, meanwhile, said they would aggressively push for changes to the bill, like a provision that would help all creditworthy homeowners to refinance their mortgages at rates of 4.5 percent or lower.

Dozens of programs included in the stimulus measure could entail a similarly complicated cost-benefit analysis. But with Congress and the White House intent on adopting the economic recovery package by the end of next week, taxpayers are unlikely to find out whether these programs are great investments or a total waste — or something in between — until long after the money is out the door.

The proposals for expanding broadband service offer a particularly useful case study because, unlike other proposed programs, the potential benefits of wider network access are indisputable. And yet, supporters cannot simply wave away the potential pitfalls, including the fact that it will take at least until 2015 to spend all the money on infrastructure to deliver the service — vastly limiting the stimulating punch.

Already there has been sharp criticism of tax provisions in the Senate version of the bill that seem intended to benefit large Internet service providers, particularly Verizon, which could potentially claim hundreds of millions of dollars in tax credits.