Failures

by Karl Bode


Filed Under:
broadband, investment, jobs, shovel ready, stimulus, telcos

Companies:
at&t, verizon



Throwing Tax Breaks At AT&T And Verizon Shockingly Not Creating Promised Jobs, Investment

from the we-don't-appear-to-be-learning-anything dept

Time and time again we're told by incumbent ISPs that if lawmakers give them "X," we'll soon be awash in all manner of miraculous network investment and job creation. Sometimes "X" is an acquisition, as when AT&T promised to magically increase competition if it was allowed to remove T-Mobile from the marketplace. Often "X" is broad deregulation. Other times it's significant regulation of they other guy. Sometimes it's just subsidies. Lately we've been told that if we only don't apply net neutrality rules, we'll be awash in amazing network investment and next-generation broadband in no time.

Of course, if you stop and actually pay attention, time and time again you'll shockingly find that these repeated telecom Utopias never arrive, and by giving your favorite lumbering telecom duopolist everything it wants, things generally only get worse. Deregulate AT&T broadly in California under promise that you'll see lower rates and greater competition, for example, and watch miraculously how things actually get worse (and nobody wants to talk about it). AT&T's currently telling state lawmakers that if they gut all regulations requiring it maintain DSL and POTS networks (so AT&T can hang up on users it doesn't want to upgrade) we'll soon be awash in the technology miracles of tomorrow. Downgrades are upgrades, you see.

"X" is also all-too-frequently tax breaks and incentives. You might recall that Verizon promised the States of New Jersey and Pennsylvania it would deliver fiber broadband to every home in exchange for billions in tax cuts. After getting the incentives Verizon simply threw money at the States, and a decade later both States were willing to forget Verizon's obligations entirely.

Similarly, the Wall Street Journal recently dug through the history books, and found that bonus depreciation -- imposed as part of the 2008 Stimulus Act and pushed for by the telcos to spur job creation and investment -- also never delivered the goods. Essentially an interest-free loan that lets companies defer tax obligations, the Journal notes that, once again, the promised job growth and investment spikes never actually happened:
"But that isn’t how it has worked, at least at AT&T and Verizon, whose vast networks of towers and cables make them two of the country’s biggest investors in infrastructure. AT&T estimated its federal tax bill last year at $3 billion, down from about $5.9 billion in 2007, before the tax relief was enacted. Verizon estimated that it would get $197 million back last year, compared with a 2007 bill of $2.6 billion. Meanwhile, the companies have kept their capital spending relatively flat since the stimulus was adopted, and their employee count has dropped by more than 100,000 people, a fifth of their combined work forces."
This was, the Journal notes, despite studies years earlier clearly illustrating that bonus depreciation didn't really work, though AT&T (as it does with everything) is threatening reduced investment if the policies aren't extended. While wireless spending remains strong, the Journal fails to note that AT&T's fixed-line investment has actually been dropping significantly -- even while the company pretends to be expanding gigabit fiber to get its DirecTV acquisition approved by regulators. It's a never-ending cycle of bluffing and bullshit, and at some point you'd think we'd stop and realize that maybe just giving lumbering, pampered duopolists absolutely everything they want may not be the quickest path to telecom nirvana.

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  • icon
    cypherspace (profile), 24 Dec 2014 @ 6:59am

    Once again we see the failure of throwing money at entrenched actors (we don't seem to learn from this do we?). It would be nice if we could either eliminate this tax loophole or modify it to include a clawback provision if broadband investment falls short of what's expected.

    reply to this | link to this | view in chronology ]

    • identicon
      Daniel, 24 Dec 2014 @ 9:47am

      Re:

      Exactly, how hard is it to provide the money on the conditions that X happens. If X doesn't happen they are fully responsible for the amount?

      Don't grants already work this way?

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 1 Jan 2015 @ 11:49pm

        Re: Re:

        These provisions often do have such clauses, but the states tend to release their beneficiaries from the requirements to comply (or simply decline to enforce compliance).

        reply to this | link to this | view in chronology ]

    • icon
      Robenger (profile), 24 Dec 2014 @ 10:41am

      Re:

      So our corrupt government keeps giving tax breaks(which shouldn't be needed as taxes should be dramatically lowered across the board), listens to said lobbyists and enforces regulations the ISP's want and the ones they don't want they don't follow, but the solution is more government?

      reply to this | link to this | view in chronology ]

      • icon
        nasch (profile), 25 Dec 2014 @ 8:18am

        Re: Re:

        but the solution is more government?

        How did you get "more government" out of "eliminate the tax breaks or make sure they have the desired effect"?

        reply to this | link to this | view in chronology ]

  • identicon
    Pragmatic, 24 Dec 2014 @ 7:36am

    Y-you mean trickle-down doesn't actually work? I'm shocked, I tell you! Shocked and dismayed. /s

    reply to this | link to this | view in chronology ]

    • icon
      Robenger (profile), 24 Dec 2014 @ 10:05am

      Re:

      Trickle down economics does not exist. No one other than a few on the left have coined such a phrase.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 24 Dec 2014 @ 11:16am

        Re: Re:

        But Reagan's own budget director referenced it and associated it with supply-side economic policies:

        "David Stockman, who as Reagan's budget director championed these cuts at first but then became skeptical of them, told journalist William Greider that the 'supply-side economics' is the trickle-down idea: 'It's kind of hard to sell 'trickle down,' so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory.'"

        http://en.wikipedia.org/wiki/Trickle-down_economics

        reply to this | link to this | view in chronology ]

        • icon
          Uriel-238 (profile), 24 Dec 2014 @ 11:52am

          Trickle-down economics didn't work...

          when Hoover was doing it.

          We won't refer to future economic depressions as depressions anymore because the Great Depression was so bad, and we still have to take drugs to keep the nightmares away.

          reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 24 Dec 2014 @ 7:55am

    we all know who needs to be chastised over these disgraceful procedures but no one has the balls to tell Congress members to stop 'being pampered' and do their damn jobs, properly!! if the amount of money that ends up being given to these incumbent companies because of the back handers paid to government members, the things that could be done with that money, by spending it on anything else, could make a hell of a difference!!

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 24 Dec 2014 @ 8:13am

    Of course it didn't create jobs. A business would be stupid to hire employees if it didn't actually need them, regardless of how much spare cash is lying around. You only hire more people if your current pool of labor is not able to meet the current demand for your product or service. Businesses are not charities, their purpose is to make money not decrease the unemployment rate. That's why trickle-down doesn't even pass the laugh test.

    reply to this | link to this | view in chronology ]

  • icon
    lostalaska (profile), 24 Dec 2014 @ 10:28am

    Bluffing & Bullshit: The Card Game

    Yes, if Cards Against Humanity could pull it off....

    reply to this | link to this | view in chronology ]

  • icon
    Uriel-238 (profile), 24 Dec 2014 @ 11:10am

    Par for the course.

    You lobby to pass a bill to give you money. Purposes and contingencies on that money are for the dog and pony show that is congress.

    What, did you expect actual results? The reps are owned by these companies. They're specifically in office to funnel money to these companies.

    This is called government failure, last I checked.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 24 Dec 2014 @ 2:06pm

    ATT DSL

    Here in Texas, I've been fighting off ATTs efforts to "upgrade" my DSL to Uverse for a while (yes I know it would be faster when/if it works, but DSL meets my needs, has been 99.99% reliable, and Google fiber is coming soon).

    Last month, they offered $400 "money back" if I upgrade to DSL. This month, it's $250, and they just changed the TOS to grant themselves the right to unilaterally "upgrade" me with 30 days notice, and I indicated my "acceptance" of the new TOS by continuing to use my business-critical Internet.

    Google Fiber can't get here fast enough, as far as I'm concerned.

    reply to this | link to this | view in chronology ]

  • icon
    Coyne Tibbets (profile), 24 Dec 2014 @ 2:25pm

    Great for the profits

    Those tax breaks, subsidies and such never, ever create jobs in any company or industry; or at least not at any rate less than $1 million per minimum wage job.

    The money is simply handed to the stockholders...if any of it gets past the executive bonuses.

    reply to this | link to this | view in chronology ]

  • icon
    Dave Cortright (profile), 24 Dec 2014 @ 2:49pm

    What does AT&T tell its investors?

    This is passive-aggressive codependent manipulation at its finest: if you don't do X then you will make me do Y. But here's the thing: if the subsidies don't come through and they do follow through on their threat to not invest, what the hell are they going to tell their stockholders? That it is choosing not to fully invest in the future and its future profits because it's mad at the government? Sounds like the flawed, emotional logic of a 3 year old.

    reply to this | link to this | view in chronology ]

    • icon
      John Fenderson (profile), 29 Dec 2014 @ 8:09am

      Re: What does AT&T tell its investors?

      I suspect that they tell the investors everything the investors want to know in the form of dividend checks.

      reply to this | link to this | view in chronology ]


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