Stumping For Telecom Reform at CES

Lawmakers who will be shaping the technology agenda for the 109th Congress
will be in Las Vegas this weekend for their annual roundtable appearance at
the Consumer Electronics Show (CES). At least one of the panelists says the
message will be simple: don’t tax broadband.

In a telephone interview from the CES, George Allen (R-Va.) told proposed Congressional efforts to reform the 1996
Telecommunications Act are all about “making sure broadband is there” for
consumers to take advantage of the innovation currently on display at the

“The only things taxed higher than telecommunications in this country are
alcohol and tobacco,” Allen said. “That’s what revising or upgrading the
Telecom Act is all about — making sure we don’t put more taxes on broadband

Although there are early rumors that telecom reform may not actually
materialize in the wake of what is expected to be a time-consuming, highly
controversial debate over Social Security reform and the war in Iraq, Allen
said incoming Senate Commerce Committee Chairman Ted Stevens (R.-Ala.)
“… has told me he will hold hearings on telecom reform.”

While Allen’s big picture is simple, he readily admits there will be some
“tough and close fights” on a number of technology policy issues this year, including
stock options expensing, spyware and Web sales taxes.

In mid-December, the Financial Accounting Standards Board (FASB) set a June
1 deadline for corporations to deduct the cost of all employee stock options
from their profits. Currently, employee stock options are included as
footnotes in financial statements and do not count against a corporation’s
bottom line profit and loss statement.

In the 108th Congress, the House passed legislation mandating the expensing
of stock options granted to the CEO and the next four most highly
compensated officers of a company, but exempted the expensing of stock
options for all other employees. The Senate took no action to stop the FASB
rule and now the deadline for changing the accounting standard looms.

“It is so important to so many [technology] companies. There is no accurate
way to account for stock options,” Allen said.

Another issue that split the House and the Senate in the last session is
spyware. The House passed two separate pieces of legislation aimed at
curbing spyware, but the Senate, as it did with stock option expensing, took
no action.

The House Energy and Commerce Committee pushed through an anti-spyware
measure that prohibited unfair or deceptive practices related to spyware.
Rep. Mary Bono (R-Calif.)
the bill this week for the new Congress to

The House Judiciary Committee successfully passed another measure last year
increasing the criminal penalties for spyware purveyors, an approach Allen
said he supports.

“Spyware is going to come up again. It [spyware] is like spam and all the
rest of these types of things. It takes up so much time and threatens
consumer privacy,” Allen said. “We need to address it in a way that you
don’t hit those who are not culpable.”

Allen is also opposed to the implementation of a sales tax on Internet
purchases, a proposal that is gaining momentum as a way for cash-strapped
states to replace project income losses to IP-based services, such as
Internet telephony. The Federal Communications Commission
recently ruled
Voice over IP is an interstate service and not subject to state and local
regulations and taxes.

The Streamlined Sales and Use Tax Act, which failed to pass either the House
or the Senate in the last session of Congress, would permit states that
become voluntary members of a national compact to require remote sellers to
collect and remit sales and use taxes. The states would only have the
authority to collect, however, if they simplify their sales and use tax
system for all sales, including remote sales.

According to National Governors Association (NGA), 21 states have already
done exactly that and another 24 are in the process of simplifying their
sales and use taxes. David Quam, the NGA’s director of federal relations,
said his group hopes that by Oct. 1 the first 21 states will be certified
to begin charging sales taxes on Internet and catalogue sales. Without
Congressional action, Internet merchants are not obligated to participate in
the program.

Currently, sales and use taxes are owed on all online transactions, but
states are prohibited from requiring remote sellers to collect and remit
those levies. A 1992 U.S. Supreme Court decision said states could only
require sellers that have a physical presence or “nexus” in the same state
as the consumer to collect so-called use taxes.

The court ruled that the current patchwork of taxing jurisdictions across
the country is too complex and burdensome for online retailers to charge and
collect sales taxes. In order to collect the taxes, the court ruled, states
would need to first simplify the existing system.

“States may want to do this, but it should be voluntary,” Allen said.

News Around the Web