Broadband for the Masses

Here’s an idea I got from a correspondent. It’s long, but I think you’ll find it a worthwhile read and a good starting point for a longer conversation:

The most important infrastructure investment in the 1950s, the interstate highway system, was funded by the Highway Trust Fund, which continues to extract 25 cents or more from every gallon of gasoline sold in America for interstate highway maintenance.

The most important infrastructure investment in the 21st century is ubiquitous broadband connectivity. Right now only 36 percent of Internet connectivity in the United States is high speed. Moreover, our country needs a way to fund tech research and development not earmarked for “science” (NSF), defense (DARPA) or biotech (NIH).

I propose forming a Broadband Trust Fund (BTF), funded by levying a one-half of one percent surcharge on the purchase of every tech product or service over $1,000 in America. It’s not an onerous tax. A family buying a $2,500 PC would pay an additional $12.50. Businesses would, of course, pay more. But every dollar paid into the BTF over $100,000 would be treated by as a tax “credit.”

BTF funds would be dispersed to the states just like the Highway Trust Fund and used to 1) build out and upgrade high-speed connectivity and 2) offer $1,000 low interest loans to the 62 percent of American homes using dial-up to upgrade to high speed. The $1,000 would approximately pay for one year’s worth of high-speed connectivity and since high speed is an “addictive” technology, few homes would downgrade to dial-up.

BTF funds could also be used to create a National Institute for Information Technology Research (NIITR). The dilemma facing IT entrepreneurs seeking funds is twofold: First, the very big venture firms (who typically invest $20 million or more) have gone very conservative and are unwilling to invest, and second, the smaller venture funds (willing to invest $5 million or less) extract onerous ownership terms from the entrepreneurs. The NIITR would cater to very early stage venture funding.

You have heard of Metcalfe’s Law, which states the “network” becomes more valuable with each additional node added to it. Well the entire BTF is an application of Metcalfe’s Law to our nation’s high-speed infrastructure. As each additional American household becomes connected via broadband it creates or enhances learning, medical, commerce and entertainment opportunities in America.

The obvious hurdle here is that this would be a new tax and the current administration is not going to introduce a new tax. From a practical standpoint the only way this system would develop is if business leaders (the people who would pay the most) advocated for it. Taking it a step further, the only way business leaders would advocate for it is if the tax had a demonstrable ROI. The main reason that broadband isn’t ubiquitous now is that the cable and telecom companies have decided that there isn’t an ROI for them. But is there one for the wider business community (and more specifically for the large corporations who spend the most on IT)? Would businesses benefit if every American had a high-speed hook-up? Would your business benefit?