INTERNET TAX MORATORIUM VOTE POSTPONED FOR FURTHER TALKS

At issue is one addition to S-150 by Sen. Allen (R-Va.) that would seek to block states from taxing DSL when bundled with taxable telecom services. Allen, Wyden and other supporters believe the language is narrow and ensures that the moratorium is technologically neutral (CD Nov 4 p1), but 4 former governors now in the Senate -- Alexander (R-Tenn.), Carper (D-Del.), Graham (D-Fla.) and Voinovich (R-O.) -- agree with many state and local regulators that the language could lead to many existing telecom taxes being off-limits (CD Nov 7 p2).

“Verizon and some of these corporate have said, ‘Whoo! Look what we've got,'” Senate Commerce Committee ranking Democrat Hollings (S.C.) Hollings said on the floor Fri. Voinovich told reporters Thurs. that the language was an example of “the telecom companies’ doing a land grab.” Alexander last week said “we have begun to see the halls filled with lobbyists from the telecommunications industry,” and on the floor Fri. said the Internet didn’t necessarily need to be protected by a sweeping moratorium: “The Internet’s not a baby in the crib anymore. It can afford to hire the most expensive lobbyists. We know that.” Telecom associations such as CTIA and USTA have backed passage of S- 150 but have focused on the need to continue to protect the Internet from discriminatory taxation and taxes not technology-neutral, such as taxes on DSL. USTA Pres. Walter McCormick said S-150 “would permanently remove a major barrier to real broadband competition, the discriminatory taxation of telecom-provided broadband and would help speed the deployment of high-speed Internet services to consumers across the nation.”

Just weeks ago it seemed the only roadblock to S-150’s passage was holds by those 4 senators, but as they have lobbied their colleagues on both the language of S-150 and the implication that it could be an unfunded mandate for states, the 4 have made headway with senators traditionally supportive of the moratorium.

Sen. Feinstein (D-Cal.) is a longtime moratorium supporter, given the role of the Internet in her state, and is a co-sponsor of Wyden’s moratorium bill, S-51, provisions of which were folded into S-150 in the Senate Commerce Committee. But she said she had received letters from 104 cities in Cal. fearing tax revenue losses from the bill, and “today I would have to vote no” on the underlying bill. She called the Alexander amendment -- which would contain language banning DSL taxes and would extend the existing moratorium 2 years -- “the most appropriate approach.” Senate Commerce Committee Chmn. McCain (R-Ariz.), a longtime moratorium supporter and past sponsor of legislation for a moratorium, sponsored a manager’s amendment for S-150 and managed the bill on the floor. But he acknowledged that the debate over language wasn’t trivial. “Definitions certainly are critical in addressing this issue,” he said.

Hollings supported S-150 in committee, but now backs Alexander and took to the floor Fri. to discuss “the mistake we made in the Commerce Committee.” He said the promise of S-150’s backers was that concerns with language would be addressed before a floor vote -- a point also made by Sen. Dorgan (D-N.D.) -- and Hollings said he hoped a referral of the bill to the Senate Finance Committee would help clarify things. But the only change made was the adopted manager’s amendment that said the bill wasn’t meant to affect revenue such as universal service or E-911 fees, and the Finance Committee didn’t act on the bill, so Hollings said the “knotty problem” still hadn’t been addressed.

Senate Internet Caucus Co-Chmn. Burns (R-Mont.), chmn. of the Senate Communications Subcommittee, said Hollings “has a point… We have not worked on the definitions” sufficiently. “Maybe the status quo is not exactly right,” he said. Those who have come out in favor of the Alexander amendment include Senate Appropriations Committee Chmn. Stevens (R-Alaska), Sens. Enzi (R-Wyo.), Landrieu (D-La.), Lautenberg (D-N.J.) and Rockefeller (D-W.Va.).

Wyden was willing to negotiate further, after weeks of negotiations leading up to the Fri. bill consideration, but said Thurs. that he still was trying to make clear that its language was not being interpreted properly. “I want to make it clear that Senator Allen and I have done everything but hire a sky writer to fly over the Capitol,” he said, “to make it clear that telecommunications services, which can be taxed today, would and should be taxed in the future.” Wyden said that after 2 months of negotiations he and Allen had “agreed to 5 requests from state and local officials” only to have those groups still fight the bill.

McCain said Thurs. he supported the amended S-150 “only because I was satisfied that the amendment’s co-sponsors had compromised as much as they could with the states and localities,” but Fri. he was involved in further negotiations. Wyden said Fri. that the latest negotiations were “very painful for me” because he was considering the possibility of a moratorium extension that wasn’t permanent. He authored the 1998 and 2001 moratoriums, both of which he intended to be permanent, and he repeatedly has said that 5 years have shown that it should be permanent.

McCain made clear Thurs. that “permanent” didn’t have to be permanent. “I will be very candid on this point,” he said: “If a permanent moratorium passes and 3, 4, 5 years down the road we find that the effects of this moratorium were other than what we intend today, I will join my colleagues in reviewing this issue and work to amend the legislation to correct any unforeseen problems with it.”

When the language in question was first added to HR-49, the moratorium bill by Rep. Cox (R-Cal.), in the House Judiciary Committee, House Judiciary Commercial & Administrative Law Subcommittee ranking Democrat Watt (D- N.C.) was quite forthright about the fact that the push for the language came from telecom lobbyists, in particular an RBOC, and Subcommittee Chmn. Cannon (R-Utah) after the full committee markup thanked a telecom lobbyist for providing the legislative language. While not an unusual circumstance in Washington, the telecom industry’s potential stake in the language if it did prove to be broad was on many senators’ minds Fri., particularly if some services such as local and long distance voice, traveling by packets on the Internet and exempt from taxation, could then be considered free of regulation.

Alexander defended his position that S-150 was an unfunded federal mandate because it would deprive states of tax revenue. McCain said in fact that an unfunded mandate was a new rule that imposes costs, so S-150 didn’t apply, but Alexander said any bill that forced states to either cut the budget or raise new taxes was an unfunded mandate. McCain also argued that the moratorium was appropriate because the Internet was inherently interstate, thus falling under the federal Commerce Clause, while Alexander said states taxed telephones, TVs, buses, planes and other things involved in interstate commerce.

Alexander said Fri. that “I think we've made some progress” in negotiations and hoped that staff working over the weekend would be able to bridge the gap between the 2 sides. He said he was glad his efforts had slowed down the process to allow further consideration: “I think it is part of the tradition of the Senate that it is the saucer which the coffee cools.” Senate Minority Whip Reid (D-Nev.), noting the tight schedule of the Senate as it tried to wrap up in the next 2 weeks and faced a 30-hour debate this week on judicial nominees, said of the dispute over the bill’s language: “I say to everyone within the sound of my voice -- someone needs to interpret this law.”