UPDATE 1-Internet tax credit boost proposed by US Senator

The amendment also clarifies language that only spending in rural and unserved areas will be eligible for the incentives. Earlier drafts also included under-served areas.

Public interest groups fear tax incentives not backed up by accountability will fund investment likely to occur anyway.

Backers of Rockefeller's approach said the new emphasis on areas will with no Internet options whatsoever will help alleviate that risk.

Internet service companies "have pretty much covered every place they're going to cover," where they can make money, said Robert Atkinson, president of the Information Technology and Innovation Foundation, a nonpartisan think tank that gets some telecommunications funding. "I don't see how putting broadband into rural America is a waste."

Wireless-only companies like Sprint Nextel Corp (S.N), satellite companies like DIRECTV Group (DTV.O) and rural telephone companies like CenturyTel Inc (CTL.N) may also be eligible for the grants and credits.

SPEED, JOBS

Current Internet speeds are defined as 5 megabits per second, while the "next-generation" speeds eligible for the larger tax credits are defined as 100 megabits per second, in the proposal.

Some have complained the 100 megabits per second bar is too high. Verizon Communications (VZ.N) is the most obvious recipient of that credit, since its fiber-based FIOS system can handle that speed.

The spending must take place between 2009 and 2010.