Debate over tax credits for US ISPs

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US senators have been debating whether to give tax credits to internet and telecom companies such as AT&T and Sprint in a move designed to stimulate the economy.

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

Senator John Rockefeller, a senior Democrat on the Senate Finance Committee, will offer the amendment to the $825 billion (£578 billion) economic package the panel debates later on Tuesday.

Internet service providers like AT&T, Verizon and Comcast 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.

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.

"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 per cent 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 per cent 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.

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