Broadband tax credit cut from stimulus bill

The bill will still award more than $6 billion in grants to help build high-speed Internet service, mainly in rural areas, Hansell writes.

Senate leaders have boasted that they have reached a compromise with the House over the stimulus bill, but no text has been published yet. Hansell writes that details of the bill's earmark-trading have been leaking on Capitol Hill, and four different people have told him that the tax credit, originally proposed by Senator John D. Rockefeller IV (D-Wv.) has been eliminated.

Dow Jones News Service also reported the news.

The initial draft of the tax credit raised eyebrows because it appeared to favor Verizon, and Rockefeller later proposed a new version of the credit that restricted the benefits to companies installing new service in rural or unserved areas. But the change didn't make it into the final Senate version, and the entire concept is said to have been dropped in the negotiations between the House and Senate, Hansell writes.

The original House bill set aside $6 billion for the grant program, and the Senate initially proposed $9 billion, but that was later cut to $7 billion. The compromise is rumored to be between $6.65 and $6.8 billion.

Another difference between the two proposals is what government agency will be responsible for making the grants: the Senate wanted the National Telecommunications and Information Administration, which is in the Commerce Department, to administer the money, while the House split the funds between that agency and Rural Utility Service, which is part of the Department of Agriculture.

Finally: the latest plan is also said to eliminate rules meant to encourage the deployment of very fast service, Hansell writes. The House bill allocated three-quarters of the grant money to broadband systems that offered download speeds of at least 45 megabits per second. (As readers of ZDNet know, pretty much only Verizon's FiOS service offers service at that speed.)