Congress, Taxes and Broadband

Reporter’s Notebook: Once again, the issue came down to the wire,
but once again, Congress got it done regarding extending the Internet Tax
moratorium.

As the Nov. 1 deadline for extending the federal ban on some forms of
Internet taxation inched closer, the House, perhaps sensing an opportunity
for a no-brainer of a bill, closed some potential tax loopholes in its
version and passed the Senate version. Off it went to the President, who
signed it into law.

And so, taxing some kinds of Internet services dodges the bullet again.
Long live the Internet, said supporters of all stripes who cheered the
legislation.

But there’s always more to the story. The bill, which was enacted nine
years ago and then extended in 2001 and 2004, bans taxes on Internet access.
But it doesn’t entirely prevent states and cities from passing or raising
their own use taxes. Still, it at least holds the line on taxes that could
be higher than what people in the physical world already pay on
transactions.

Maybe that helps to explain why the permanent ban remained elusive in
this bill: it helped garner bi-partisan support. After all, Congress has to
do something to placate state and local governments on this issue,
especially when broadband access bills are creating new struggles over
broadband access, and who collects a piece of the action.

As we’ve reported before, state and
local governments
support the moratorium on Internet connection taxes,
but only on a temporary basis. After all, why toss away a potential chit for
expanding state coffers down the road?

So everybody gets something. By extending the ban for seven years — the
longest extension since the ban was enacted in 1998, tech companies,
consumers and policy advocates get what they want too: a ban on taxes they
say would impede the growth of the Web use.

Just don’t expect a permanent ban, goes one theory, when the Senate also is
trying to roll back states’ efforts to get a cut on other forms of broadband
with the The
Community Broadband Act of 2007
.

As InternetNews.com reported this week, the bill approved by a
Senate panel would reverse laws on the books in Pennsylvania and 13 other
states that prevent local governments from providing free or low-cost
broadband access to citizens in competition with commercial broadband
services.

In addition to prohibiting states from preventing “a public provider”
from offering broadband services, the bill also prohibits local governments
from discriminating against competing private providers, as Sean Gallagher
wrote for InternetNews.com. There’s a lot more in the bill, including
provisions to help promote public-private partnerships to provide broadband
services.

A House version of the bill is bubbling in subcommittee as well.

Whether the commercial providers will succeed in holding back this bill
is seen as the next fight to watch regarding broadband access. Internet
companies such as Skype, Earthlink and Google are lined up in support of it;
access providers see it as a potential threat to their own bottom line on
paid services.

Left hanging in the balance is whether Congress is in a position to help
the U.S. address its stagnant
penetration rates as well as woeful speeds compared to other global markets.

A report this year by the Communications Workers of America (CWA), for
example, showed that, on average, U.S. customers average broadband speed is
1.9 megabits per second (mbps) for broadband. The report said Japan averaged
61 mbps (putting it at the top of the list. South Korea clocked in at 45
mbps. Canada came in at 7.6 mbps.

If six months is considered a lifetime in politics, then seven years on a
‘Net tax ban should be considered a century. Congress stepped up to that
support by passing the ban. The rest of the broadband question — especially
access and speeds — is as open as ever.

Erin Joyce is Executive Editor of InternetNews.com

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