A tech industry lobbying group on Wednesday called on President-elect Barack Obama to reserve $30 billion of his proposed $700 billion economic stimulus package for broadband, a smart electric grid, and a health network.

According to the Information Technology and Innovation Foundation, rebuilding the nation’s digital infrastructure will have a bigger impact on the economy than rebuilding roads and bridges--the centerpiece of the stimulus plan.

The ITIF issued a 22-page report detailing how a $30 billion investment in digital will create 949,000 jobs in the United States, with more than half of those jobs, 524,225, generated through small businesses.

Money spent on improving the digital infrastructure will spur investment, productivity, and innovation as opposed to the planned physical stimulus expenditure which will spur consumption for the most part, the report said.

While improved roads and bridges will create many direct jobs, they will not create new applications, businesses, and industries. Improved digital communications will create far more downstream jobs than a better physical infrastructure.

But the report is sure to chafe free market advocates, many of whom believe spending taxpayer dollars upgrading digital communications in the United States is a waste of public money.

The big broadband problem in the country is coverage rather than cost to consumers. In urban areas there are multiple wireline and wireless broadband services from which to choose, but the commercial incentive to extend broadband to less-populated rural areas is not as compelling.

“There are ways to improve broadband coverage in the U.S. without spending $30 billion,” said Tim Farrar, president of Telecom Media and Finance Associates. “It can be done through regulation and perhaps extending Universal Service Fund responsibility to wireless broadband operators.”

Wireline operators contribute money to the Universal Service Fund, which is used to extend telecommunications coverage to under-served areas.

The emergence of wireless broadband is creating a good deal of competition among broadband service providers. And some analysts believe that eventually raw, low-end broadband connectivity will be free.

The U.S. Federal Communications Commission is examining a proposal to auction off a swath of spectrum for just that reason. (M2Z Moves Closer to Free Mobile Service)

The Bush administration protested the commission’s plan, but with a new and perhaps more agreeable administration less than two weeks away, chances are good that the auction will happen. (M2Z Slams White House Broadband Protest)

But for now not everyone agrees that the country needs a $30 billion broadband stimulus when a combination of regulation and market forces could possibly achieve the same ends for a lot less taxpayer money.