Some steps toward this goal have already been taken, including a $2 billion low-interest loan program for rural broadband access programs, passed as part of the Farm Security and Rural Investment Act of 2002. For the most part, however, two fundamental goals remain unmet: bringing broadband to outlying areas that might otherwise be left behind, and stimulating investment in next-generation technologies that are much faster than the status quo.

In crafting these incentives, though, policy makers must guard against pork-barrel politics and prejudice toward specific technologies. Decisions made by politicians and bureaucrats unfamiliar with technology are among the many reasons that the industry has long opposed government regulation.

"I think that those kinds of incentives are helpful, but removing the regulatory barriers to investment are actually more important to stimulating investment," said David Young, director of technology policy at Verizon Communications, a regional phone company.

The federal government has ample precedent for acting as a catalyst in the construction of national infrastructure.

In the 1860s, proponents of transcontinental railroad projects found it difficult to raise cash from banks skeptical of their future. To help build what was seen as a critical national infrastructure, Congress gave four of the five transcontinental projects land grants amounting to millions of acres, some for laying tracks and some to sell in order to defray construction costs.

Hundreds of other municipalities, mostly in rural areas avoided or underserved by the communications giants, have started or are planning similar broadband projects. The cable and telecommunications companies are so threatened by these grass-roots networks that they have redoubled their lobbying efforts against them in recent months.

Specifically, the large companies have seized on a March decision by the U.S. Supreme Court, which ruled that states have the legal right to block local governments from building their own telecommunications utility projects. Although only about a dozen states have laws that block or limit local government broadband projects, cable and phone companies are citing the ruling in efforts against local networks in the Pennsylvania capital of Harrisburg and in other jurisdictions.

"It is being used in a political sense to cause concern among city council members and utility members," said Richard Geltman, general counsel for the American Public Power Association, a municipal utility trade group that also monitors public broadband projects. "It has been used by incumbent providers with state legislators to seek state legislation for municipal prohibitions, saying that the Supreme Court has endorsed that position, which it did not."

Geltman and others believe that Congress should step in to protect local broadband projects even if state legislators--who often prove receptive to the big-money lobbying campaigns of large corporations--are opposed.

The idea of such overriding federal action has found support even among some who are typically wary of allowing government at any level to take over functions normally performed by private companies.

"If there are state laws that prohibit municipal projects, we should probably look at that again," said Rick White, a former Republican congressman who is now chief executive of TechNet, a lobbying group that represents the technology industry.

Frank Caruso, Kutztown's director of information technology, says he doesn't lose sleep worrying about opposition to local projects like his, because those projects simply make too much sense.

"Elected officials are going to have a tough time telling voters that they don't have a right to save money in their own communities," he said.

Bringing laws up to hyperspeed

Four years ago, communications analyst Kevin Werbach, a former FCC lawyer, penned a manifesto advocating a new kind of regulation for the Information Age, writing that "communications will be a subset of Internet policy, rather than the reverse." That statement, considered hyperbolic at the time, has proved prescient.

Existing legal structures force regulators to make absolute category distinctions that don't work for Internet-based applications. --Kevin Werbach former FCC lawyer

The FCC has tried its best to apply pre-Internet laws to today's landscape, but those measures are proving a poor fit. Regulations aimed at fostering competition have been repeatedly blocked by courts. A generation of upstart telecommunications companies has collapsed. Meanwhile, giant cable and phone companies now offer almost indistinguishable service packages, despite still being regulated in very different ways.

"I don't think anyone would disagree that there has been a tremendous amount of confusion and bitter opposition in trying to implement the 1996 Telecommunications Act," Werbach said in a recent interview. "The clear problem we have today is that the existing legal structures force regulators and other policy makers to make absolute category distinctions that don't work when you're talking about Internet-based applications."

One solution, according to Werbach and a rising number of academics, is a "layered" regulatory system based on the Internet's architecture, rather than on a 70-year history of networks and technologies that are now obsolete. Elements of the concept are contained in legislation proposed by MCI.

A layered system would treat corresponding elements of different networks similarly. It would recognize that cable TV and telephone wires are increasingly carrying the same bits of data and apply the same appropriate rules to them, instead of regarding them as entirely different creatures.

This would, for instance, make voice services subject to the same laws whether they are provided over a cable network, a telephone line or an Internet Protocol connection. Advocates note that this approach requires only consistency, not more regulation.

Phone and cable companies remain skeptical, fearing that the practical result would be to leave their networks subject to more government intrusion. Instead, they say, the FCC should selectively remove government controls until all industries face as little regulation as possible.

"There is already a version of the layered approach in place," said Dave Pacholczyk, a spokesman for telephone carrier SBC Communications. "They can forbear from applying certain rules to certain industries."

Others say they are concerned that the congressional action necessary to modernize broadband regulations could lead to an expensive political battle that likely would once again favor deep-pocketed industries that can afford extensive lobbying.

"It's an interesting approach, and is a good intellectual point for discussion," said Jeff Campbell, director of technology and communication policy for networking gear maker Cisco Systems. "But at this point in time, it is not very realistic."

Nonetheless, it is clear that the telecommunications rules made for yesterday's networks are increasingly inappropriate and therefore ineffective in governing the 21st-century infrastructure--meaning major changes are inevitable.

"The whole concept of the Communications Act is breaking down in so many ways," said Rick Whitt, senior director of global policy and planning at MCI. "A lot of folks are looking for a way out."