SENATE COMMERCE COMMITTEE CLEARS INTERNET TAX MORATORIUM
The Senate Commerce Committee approved a permanent Internet tax moratorium Thurs., although a few senators expressed concern that the definition of Internet access needed to be more precise. The Committee passed on voice vote a substitute bill (S-150) that was supported by Sens. Allen (R-Va.), Wyden (D-Ore.), Stevens (R-Alaska), Sununu (R- N.H.), Brownback (R-Kan.) and Dorgan (D-N.D.). But Dorgan also emphasized that language in the bill needed to be tweaked so it couldn’t be interpreted to apply to telecom services as well as Internet access. And the bill included provisions supported by rural telecoms that would protect the universal service fund (USF.)
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Allen said the bill needed modification so the Internet would be defined to include wireless and satellite delivery, along with cable, DSL and dial-up broadband delivery. “I am concerned that if this Congress were to allow discriminatory taxes on Internet access it would allow state governments to exacerbate the economic digital divide,” Allen said. “For every dollar added to the cost of Internet access, we can expect to see lost utilization of the Internet by thousands of lower income families nationwide.”
Allen said the moratorium would have no effect on the FCC’s ability to assess universal service fund (USF) fee collection. Wyden said the bill would “lock in” the technology-neutral philosophy behind the bill. “If the line is used to provide Internet access, then that Internet access is not to be taxed,” he said. The revised bill would include a 3-year sunset provision for the 10 states now allowed to charge Internet access fees through a grandfather clause in the original 1998 Internet Tax Freedom Act.
The House Judiciary Committee approved a similar Internet tax moratorium (HR-49) earlier last month (July 17 WID p1). That bill also included an amendment that would prevent the Internet definition from applying to purely telecom services.
Rural telecom interests said they were happy with the USF provision in the bill. The provision would prevent the moratorium from affecting the FCC’s ability to assess USF contribution. Don Erickson, legislative dir., OPASTCO, said there was concern that companies could avoid paying USF fees by using voice-over-Internet protocol (VoIP) to transport telephone calls. “This will help prevent further erosion of the USF contribution base,” he said. Tom Wacker, National Telecom Coop Assn. (NTCA) dir.-govt. affairs, said Dorgan and Stevens, both staunch advocates of USF, were instrumental in having the provision added. Wacker said HR-49 lacked the USF protections. Erickson said that while the spirit of the bill wasn’t to assess USF fees on Internet access, it still technically would allow the FCC to assess USF requirements on Internet access. OPASTCO has advocated applying USF requirements on cable modem service.
Dorgan worried about the definition of Internet service and asked how service providers would separate Internet services when they were bundled with others such as telephone or cable. He said state regulators were worried they would lose part of their telecom tax revenue if the provision were applied more broadly to telecom services. It could allow for a loss of state revenue, he said. Dorgan said the language should be adjusted in the floor debate on the bill. Sen. Lautenberg (D-N.J.) agreed, saying the N.J. Div. of Taxation had expressed concern about the provision. “It’s ambiguous,” he said of the definition of Internet: “It could allow for different interpretations.”
Praise poured in for the Senate Committee’s action. Calling it a “win for innovation,” Treasury Secy. John Snow and Commerce Secy. Donald Evans said the moratorium would encourage the rollout of new Internet services. “A permanent moratorium means permanent innovation,” they said in a joint news release. Information Technology Industry Council (ITI) Pres. Rhett Dawson said: “This legislation is key to closing the digital divide and ensuring that all Americans have unencumbered access to the vast potential of the Internet.” The Cellular Telecom & Internet Assn. (CTIA) also praised the bill.