April 19, 2001 – Spectrum auctions may have helped feed government coffers, but the high prices paid by carriers for those airwaves could be stymieing the economy.

That's the word from analysts at Gartner Dataquest, who take specific aim at the U.S. – and appeal directly to President Bush – suggesting that changes to telecommunications regulations are a needed first step to helping pull the country out of its economic doldrums.

"While the huge revenue streams received by governments have helped balance federal budgets and funded new programs and expanded programs, the unintended outcome of the hidden tax forced carriers everywhere to curtail infrastructure investments. Because the telecommunications sector is so large, the investment slowdown has actually slowed the U.S. economy," said Ron Cowles, principal analyst for Gartner Dataquest's worldwide Telecommunications and Networking group.

In the market alert, titled "Mr. President: A Change in Telecom Policy will Promote Your Economic Agenda," Gartner Dataquest suggests that the government find ways to stimulate broadband innovation through, for example, investment tax credits, streamlining any rules or laws that inhibit infrastructure placement and modifying rules or laws that may inhibit competition.

Without a federal broadband vision, Gartner Dataquest says the current "bottleneck" in gross domestic product (GDP) growth will continue.

"The government should consider using a portion of the auction revenue to apply financial incentives for infrastructure development to build advanced networks," Cowles said. "While others would argue that new rules are required to break a monopolist's hold on the local exchange marketplace, we would argue that economic incentives are a better solution."

The Bush administration is urged to begin taking steps now "to stimulate growth in the large and vibrant telecom marketplace. All the mechanisms are in place to do so," Cowles said. "We recommend starting with an information inquiry to define the proper course of action in a time-specific manner.

"The U.S. society is being transformed into a services economy requiring new definitions and policies," Cowles continued. "The government can use the next 18 months to lay the proper foundation for the United States' next surge of economic prosperity."

More information on the market alert can be found at Gartner's Telecom Marketplace Resource Center, www.gartner.com.