Internet Access Definition Still Divides Senate

U.S. Sen. John McCain said Monday he hopes the Senate can pass some version
of an Internet access tax ban within the next two weeks. The five-year
moratorium on taxing consumers’ connections to the Internet expired on Nov.

McCain predicted Monday the issue would be resolved before the Senate
leaves for its Christmas break, which is currently scheduled to begin before
the Thanksgiving holidays. However, a highly partisan dispute over judicial
nominations is roiling the Senate and may extend the current session into

Senators Ron Wyden (D.-OR) and George Allen (R.-VA) last week tried to
win passage of a permanent moratorium but ran into opposition over the
legislation’s expanded definition of Internet access. Opponents, led by a
coalition of Republican and Democratic senators who formerly served as
governors of their states, claim the new definitions are too broad and could
cost the states as much as $9 billion annually in taxes.

A number of states contend the new definitions would exempt not only
certain telecommunications services used for Internet access, but would also
expand the pre-emption to include bundled telecom services that offer
high-speed connections and local and long distance telephone service in one

The cash-strapped states’ concerns prompted Sen. Lamar Alexander (R.-TN) to
introduce an amendment to extend the language of the just expired access tax
moratorium for another two years.

“What we are proposing is a two-year extension of the current law with
one exception: level the playing field between the phone companies and the
cable companies,” Alexander said. “This short term solution allows us to
craft careful changes in a rapidly changing technological world.”

Wyden said the Alexander amendment would make it easier for states to tax
wireless connections and other types of Internet access never contemplated
by the original 1998 ban on access taxes. Wyden said he and Allen offered to
compromise by extending the ban for only five years but with the new
language included. The compromise failed.

Senators Wyden and Allen have said they were willing to compromise on the
length of the moratorium but were holding fast on the definitions, which,
they claim, are designed to keep states from taxing DSL connections. Some
taxes have interpreted DSL connections as a telecommunications service and
subject to taxation.

The U.S. House of Representatives has already passed legislation, which
includes the expanded definitions of Internet access, to make the access tax
ban permanent. Any differences between the Senate and House versions would
have to be resolved by a joint conference committee.

“We’re down now to one basic difference: the definition of Internet
access,” said McCain, chairman of the Senate Commerce Committee, where the
Wyden-Allen legislation originated. “I would hope absolutely before we leave
for the Christmas break that we would have this issue resolved and voted on
by the Senate,” McCain said.

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