Here Comes Broadband John
John Kerry doesn't claim he invented the Internet -- but he has long recognized its value. Back in the mid-'90s, he was agitating to bring high-speed data lines to rural Massachusetts and promoting tech-friendly policies in the Senate. So while he's not a full-blown geek like Al Gore, Kerry is comfortable in libertarian Silicon Valley, which he's visited 16 times in the past three years, as well as on Boston's Route 128. His message to the shrunken industry: I feel your pain.
Now, the likely Democratic Presidential nominee plans to take his pro-tech message to the national stage. In a speech scheduled for mid-April, he will unveil his plan to bolster the industry. Among the ideas he's likely to propose: a national broadband strategy to promote superfast Web connections, tax breaks for investments in startups, and more federal dollars for research that can foster lucrative commercial spin-offs. His goal: Woo techies -- and draw a sharp contrast with President George W. Bush, who many in techdom say hasn't lifted a finger to help them.
THE UPSCALE SWING VOTE. Retooling Gore's approach for the post-bubble era, Kerry claims his tech policies will leverage small federal investments into a big economic impact. He's counting on tech for 1 million of the 10 million new jobs he claims his economic policies will create. Kerry's tech brain trust -- which includes veterans of Gore's White House staff -- says cutting-edge innovation will create jobs that are immune to outsourcing to low-wage countries.
Politically, Kerry's strategy could offer several payoffs. Although tech executives have dialed back political giving since the glory days, they still have deep pockets, and many of the most vocal support Democrats. As of Feb. 29, Bush had raised $3.5 million from the tech industry, vs. Kerry's $1.1 million. But a Mar. 29 fund-raiser in San Francisco raked in $3 million for Kerry, according to his California finance chief, Mark Gorenberg, a partner at Hummer Winblad Venture Partners in San Francisco.
More broadly, Kerry hopes a high-tech sheen will appeal to upscale swing voters -- both within the industry and among active users of its products. And tech plays into Kerry's overall theme: He's tackling specific economic problems, while Bush just offers broad tax cuts.
Kerry backers in the tech industry complain that Bush stood on the sidelines as the sector went bust, losing 1 million jobs nationwide. "The only problem Bush solved was the traffic in Silicon Valley," says Wade Randlett, CEO of San Francisco-based Web consulting firm Dashboard Technology. Bush's tax cuts didn't distinguish between potato chips and silicon chips -- and tech execs argue that the 2003 dividend rate cut steered investors away from growth stocks like theirs.
What's more, Bush's budget proposes to ax the Advanced Technology Program, which provides early-stage funding, and continues to flat-line federal research spending on the physical sciences. Bush's nod to the Religious Right has stymied stem-cell research. And Democrats charge Bush is short-changing education for the workforce of the future.
Bush supporters say those attacks are off target. "The success or failure of technology is not decided by activism in Washington," says former Bush Administration official Bruce P. Mehlman, now executive director of the Computer Systems Policy Project, which lobbies for boosting R&D. Faced with a slump, the President focused on spurring business investment that will fill tech's order books, he says. And Bush has pursued deregulation -- from freeing up air- waves for more commercial use to unshackling the Bells' broadband business to trying to rein in product-liability lawsuits.
The GOP is also counting on Kerry rhetoric that ticks off some techies. The Democrat has demonized "Benedict Arnold CEOs" who send jobs offshore and has backed expensing of the industry's prized employee stock options. "When you tee off on Benedict Arnolds, you probably have to play a few rounds before you interest the business community," says John Endean, president of the American Business Conference, which represents midsize growth companies.
But Kerry's newfound populism obscures his tech-friendly record in the Senate. He was one of the first lawmakers to back the industry on issues such as Internet taxation. And with strong ties to Route 128, Kerry has long championed a permanent R&D tax credit, more federal funding for research, and a zero capital-gains tax when investors hold stock in startups for four years or longer -- all policies designed to boost innovation.
A NEED FOR SPEED. Kerry will advance similar proposals as a Presidential candidate. But his new idea is his vow to make the U.S. the world's leader in access to superfast broadband. Zippier, universal connections could revolutionize education, health care, and commerce, Kerry aides say. According to sources close to the campaign, Kerry will likely propose a series of federal levers to get truly fast broadband into more households. They include tax credits for companies that deploy next-generation speeds -- boosting today's 1 to 3 megabit-per-second data transfers to as much as 20 megs. He will also encourage the feds to free up more airwaves for new wireless technologies to compete with cable and phone companies and drive down prices.
Projects under consideration include Health Net, a high-speed network to connect health-care organizations, and a broadband version of the Clinton-Gore program to bring Web access to schools and libraries. And Kerry may push tax breaks and the creation of rural cooperatives to deliver affordable broadband to the hinterlands.
Bush stole some of Kerry's thunder on Mar. 26 with a hasty announcement that he will back "universal, affordable broadband by 2007." Still, Kerry will play up the Administration's lack of a clear national policy for high-speed broadband. But he must tread carefully. While some lobbying groups, such as TechNet, have long prodded the feds to promote broadband, many techies prefer Bush's hands-off approach.
The tech industry has long had an uneasy relationship with Washington -- prospering on the products of Uncle Sam's research yet at the same time insisting that innovation thrives when government doesn't butt in. Kerry vs. Bush gives them a chance to decide what they really believe.
By Catherine Yang, with John Carey, in Washington and with Rob Hof in Silicon Valley