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As Tennessee lawmakers wrapped up their 2022 legislative session, passing bills related to school funding and critical race theory, one bill slipped quietly through the cracks. The Tennessee Broadband Investment Maximization Act, which grants a sales tax exemption to broadband companies, primarily benefits AT&T, Tennessee’s largest political spender.

The act grants a three-year sales tax exemption for the purchase of equipment to improve or expand high-speed internet networks. The estimated annual tax savings of million could fund the hiring of 142 new highway patrol officers and 25 new forensic scientists, as well as the construction of a new park each year. While the bill appears benign on the surface, critics argue it was a strategic maneuver to pass legislation with minimal scrutiny.

AT&T has a significant influence over telecommunications and broadband policy in Tennessee. The company successfully lobbied for the removal of a provision that would have benefited nonprofit electric cooperatives, which have proven to be effective in bringing high-speed internet to rural areas. As a result, AT&T is likely to receive the majority of the tax benefits, while cooperatives, which are not subject to sales tax, miss out.

The fight over broadband expansion in Tennessee has a complex history, with debates over whether it should be treated as a public utility or a private good. The COVID-19 pandemic highlighted the need for high-speed internet access in education, healthcare, and business, leading to a shift in favor of treating it as a utility. The broadband investment act was presented as a way to avoid taxing companies that receive federal grants for expanding broadband in rural communities.

While lawmakers claim that AT&T had no undue influence on the legislation, critics argue that the bill does little to promote competition and transparency in the broadband industry. With limited competition, prices remain high, and quality of service suffers. Despite the controversy, the tax exemption is unlikely to be undone, leaving AT&T as the primary beneficiary.

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