Rim Semiconductor Company (fka RSMI)

[dilt1]

Interesting news piece from today:
http://www.msnbc.com/news/690095.asp?0dm=N11NT#BODY

Seeking spoils from broadband push
Tech lobbyists pursue windfall from White House strategy

WASHINGTON, Jan. 18 —- For months, the high-tech industry has been working behind the scenes here to push its remedy for the nation’s economic ills: a national policy to promote high-speed Internet access.

NOW THE LOBBYING is paying off. Both President Bush and Senate Majority Leader Tom Daschle are preparing ambitious programs to give more Americans fast Web connections — raising the prospect of a government-supported gusher of sales for computer and telecom companies. But the programs also raise questions about how the spoils will be divided, and whether the government can revive a sector that has already failed key tests in the market.

Earlier this month, Daschle declared that one of his top economic priorities will be making “broadband service as universal tomorrow as telephone access is today.” Daschle wants a mix of government grants, loans and tax credits devoted to spreading the technology. And President Bush, who agrees with Daschle on little else these days, will outline his own plans to boost broadband in coming weeks, in what aides are touting as the most significant high-tech policy announcement of his administration.

CULTIVATING RELATIONS

White House officials are still debating details of the broadband strategy. But the fact that the administration is developing one at all reflects the enormous lobbying push by high-tech companies and trade groups. They have taken great pains to cultivate relations with the Bush administration, which early on seemed to show little interest in high-tech issues.

Some conservatives wish the White House would keep the lobbyists at arm’s length. “There’s no question that there’s some risk,” says Thomas Hazlett, a senior fellow at the Manhattan Institute and former chief economist of the Federal Communications Commission. “If your policy moves end up leaving one technology — like wireless — out of the mix, you can end up shooting yourself in the foot and doing a lot more harm than good.”

It’s hard to imagine the broadband sector getting much worse. Investors have lost billions of dollars since the mid-1990s on companies promising ultrafast access to the Internet. Plagued by technical problems and consumer indifference, many of the largest providers have gone out of business, including Excite At Home Corp., which filed for bankruptcy last September and is set to shut down next month.

Broadband is now largely controlled by two oligopolies: the cable industry, which delivers service through cable modems; and the Baby Bells, which use digital subscriber lines, otherwise known as DSL. With their smaller competitors failing, both boosted their prices sharply last summer to around $50 a month from around $40, further slowing the pace of new subscriptions. Today, fewer than 10 million American households and businesses have high-speed Internet access.

‘DARK’ CABLE

The slow rollout, in turn, has rippled throughout the technology business, curbing sales growth for everyone from Cisco Systems Inc., a maker of networking equipment, to Dell Computer Corp., the personal-computer manufacturer. Millions of miles of fiber-optic cable lay “dark” and unused across the U.S., hurting the prospects of fiber concerns such as Corning Inc. Also suffering from pokey Internet connections are a slew of content providers, including purveyors of online movies, music and video games.

Last February, TechNet, a Silicon Valley trade group of high-tech chief executives such as Intel Corp.’s Craig Barrett and 3Com Corp.’s Eric Benhamou, voted to make broadband its top priority. The Telecommunications Industry Association, a Virginia-based group representing the manufacturers of communications and information-technology equipment, followed five months later. By the fall, both groups were drafting policy papers and dispatching lobbyists and executives to Capitol Hill and the White House. On Tuesday, TechNet called for the administration to set the ambitious goal of bringing ultrafast Internet access to 100 million American homes and businesses by the end of 2010.

But high-tech and telecommunications firms have differed sharply on how to bring about an increase in broadband deployment. For the Bells, the broadband strategy has become entangled in an extremely controversial effort to roll back provisions of the landmark 1996 Telecommunications Act. That law allows the Bells to sell long-distance phone and data service, but only after they’ve opened their local markets — the so-called “last mile” of phone service — to competition. The FCC has used the act to try to force the Bells to allow competitors to rent access to their facilities and equipment at heavily discounted rates.

A new proposal, known as the Tauzin-Dingell bill, would allow the Bells to carry the voice and data traffic without having to prove that their local markets are open to competition. The bill is ardently opposed by the cable industry, long-distance companies such as AT&T Corp., and the Bells’ few remaining local competitors. These local players believe that bill would allow the Bells to cement their dominance over the DSL market while quashing any chance of competition in the local phone market.

Ads for and against the legislation have blanketed Washington’s airwaves and dominated discussions on Capitol Hill for months, and many tech groups have tried to avoid being drawn into the battle.

For the White House, the pressure has been intense. High-tech and telecommunications firms have devoted enormous amounts of time and money to winning Bush’s attention. Bush’s campaign received nearly $1.2 million from high-tech companies and their executives, including Microsoft Corp., Dell Computer and Cisco, according to the Center for Responsive Politics, a watchdog group. All told, high-tech companies contributed some $40 million to congressional and presidential candidates in the 2000 election, with most of the money going to Republicans, according to the center.

Republican political operatives see a new broadband push as an effective fund-raising tool. National Republican Congressional Committee Chairman Tom Davis of Virginia argues his party could benefit if Bush took the lead on broadband, the industry’s biggest remaining priority. In meetings with tech lobbyists, Karl Rove, the president’s top political adviser, has begun stressing Bush’s commitment to the issue.

AVOIDING ‘FOOD FIGHTS’

Within the administration, a high-level “tech team” has held more than 100 meetings on broadband with industry executives and lobbyists, as it tries to figure out a way to endorse specific policy initiatives without being dragged into the Tauzin-Dingell debate. “We’re trying to stay out of the food fights,” says one administration official.

Many of Bush’s senior advisers on the issue come from the technology industry. At the Commerce Department, Bruce Mehlman, assistant secretary of Commerce for technology policy and an advocate of the broadband push, worked as a top lobbyist for Cisco before joining the administration. Phil Bond, the undersecretary of Commerce for technology, had been a lobbyist for Hewlett-Packard Co. Lezlee Westine, the president’s liaison to the high-tech community, was lured away from her post as the co-CEO of TechNet.

In October, Grant Seiffert, the vice president of external affairs and global policy at the TIA, met with Bush’s main economic adviser, Lawrence Lindsey, and the director of the White House’s Office of Management and Budget, Mitchell Daniels, to push TIA’s suggestions for speeding broadband deployment.

Seiffert urged the administration to modify existing FCC rules so that Bells wouldn’t have to give competitors access to their new high-speed lines. He also tried to persuade the officials to sign off on tax credits for companies willing to bring broadband connections to poor and rural areas. The issue had been a priority for the TIA since the summer of 2000, when then-Senator Daniel Patrick Moynihan, a New York Democrat, began crafting tax-credit legislation. The bill is now sponsored by Sen. Jay Rockefeller, a West Virginia Democrat. But Seiffert says he didn’t get any promises.

Lindsey declined to comment on the TIA meeting, or about the debate over broadband tax credits. “There are a number of regulatory and public-policy questions that need to be addressed,” he says.

In part, such reticence reflected a deep policy split among Bush’s advisers. In closed-door meetings at the White House, one group of tech-savvy administration staffers argued in favor of the tax credits, which they said would help bridge the so-called digital divide while also giving the entire industry a boost. But Lindsey and other key economic advisers opposed the idea of subsidizing a rapidly growing and young industry.

For now, Lindsey’s arguments appear to have carried the day. A top Bush adviser says the president favors changing the tax laws to allow companies to depreciate 30 percent of the cost of a capital expenditure in the first year it was purchased. The change would allow companies to depreciate more of their investments sooner. This would disproportionately help the tech and telecom industries because the equipment they buy tends to last fewer years than a new factory, and also because the bulk of most companies’ capital spending is on computers and other high-tech equipment.

A $20 BILLION TAX BREAK?

Telecommunications companies led the corporate push for the new tax break, which could be worth as much as $20 billion to the high-tech industry, analysts say. “Spurring our increased investment in telecommunications equipment would be a tremendous boost to one of our hardest-hit manufacturing sectors,” Verizon Communications Corp. Chairman Chuck Lee wrote to Treasury Secretary Paul O’Neill in early October.

Exactly what President Bush will propose remains uncertain. The first drafts of the policy principles being considered by the administration include: modest new funds to help spread the technology to rural areas; a statement urging cities and states to adopt more uniform regulations on broadband taxation and rights-of-way access for companies trying to dig up streets to lay new fiber-optic cables; and a call for adopting a national spectrum policy to free up more airwaves for existing and so-called third generation wireless broadband service.

The administration may also urge the FCC to deregulate future Bell investments in new high-speed lines, officials say. The move would mark one of the first times in recent memory that an administration has explicitly urged the agency to adopt a specific policy, in this case one that would be a huge boost for the Bells.