79–006

106TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 106–615

INTERNET ACCESS CHARGE PROHIBITION ACT OF 2000

MAY 12, 2000.—Committed to the Committee of the Whole House on the State of

the Union and ordered to be printed

Mr. BLILEY, from the Committee on Commerce,

submitted the following

R E P O R T

together with

ADDITIONAL VIEWS

[To accompany H.R. 1291]

[Including cost estimate of the Congressional Budget Office]

The Committee on Commerce, to whom was referred the bill

(H.R. 1291) to prohibit the imposition of access charges on Internet

service providers, and for other purposes, having considered the

same, report favorably thereon with an amendment and recommend that the bill as amended do pass.

CONTENTS

Page

Amendment .............................................................................................................. 2

Purpose and Summary ............................................................................................ 2

Background and Need for Legislation .................................................................... 2

Hearings ................................................................................................................... 3

Committee Consideration ........................................................................................ 4

Committee Votes ...................................................................................................... 4

Committee Oversight Findings ............................................................................... 6

Committee on Government Reform Oversight Findings ...................................... 6

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 6

Committee Cost Estimate ....................................................................................... 6

Congressional Budget Office Estimate ................................................................... 6

Federal Mandates Statement ................................................................................. 7

Advisory Committee Statement .............................................................................. 8

Constitutional Authority Statement ...................................................................... 8

Applicability to Legislative Branch ........................................................................ 8

Section-by-Section Analysis of the Legislation ...................................................... 8

Changes in Existing Law Made by the Bill, as Reported ..................................... 8

Additional Views ...................................................................................................... 10

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AMENDMENT

The amendment is as follows:

Strike out all after the enacting clause and insert in lieu thereof

the following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Internet Access Charge Prohibition Act of 2000’’.

SEC. 2. PROHIBITION OF CHARGES ON PROVIDERS OF INTERNET ACCESS SERVICE.

Section 254 of the Communications Act of 1934 (47 U.S.C. 254) is amended by

adding at the end the following new subsection:

‘‘(l) PROHIBITION OF CHARGES ON INTERNET SERVICE PROVIDERS.— ‘‘(1) IN GENERAL.—Notwithstanding subsection (b)(4) or (d) or any other provision of this title, the Commission shall not impose on any provider of Internet

access service (as such term is defined in section 231(e)) any contribution for

the support of universal service that is based on a measure of the time that

telecommunications services are used in the provision of such Internet access

service.

‘‘(2) RULE OF CONSTRUCTION.—Nothing in this subsection shall preclude the

Commission from imposing access charges on the providers of Internet telephone services, irrespective of the type of customer premises equipment used

in connection with such services.’’.

PURPOSE AND SUMMARY

H.R. 1291, the Internet Access Charge Prohibition Act of 2000,

will preclude the Federal Communications Commission (FCC) from

imposing on providers of Internet access service per-minute charges

that are intended to support universal service.

BACKGROUND AND NEED FOR LEGISLATION

The FCC’s interstate access charge regime was established in

1983 to require long distance carriers (e.g., AT&T, Worldcom) to

compensate local exchange carriers (e.g., Bell Atlantic, SBC, GTE)

for the cost of originating and terminating long distance telephone

calls, as well as to provide support for universal telephone service

in high-cost and rural areas. Thus, when a consumer makes a long

distance telephone call, a long distance carrier pays a per-minute

usage fee (in addition to other per-line fees) to the local exchange

carrier that originates and terminates the long distance call. These

per-minute and per-line fees are more commonly known as ‘‘access

charges.’’ Under current FCC rules governing per-minute access

charges, long distance carriers, and ultimately their consumers,

pay local exchange carriers roughly 2.4¢ for each minute of long

distance service.

At the same time it established its access charge regime in 1983,

the FCC specifically exempted information service providers from

having to pay interstate access charges. The term ‘‘information

service provider’’ (which the FCC historically referred to as ‘‘enhanced service providers’’) covers a broad range of non-telecommunications service providers, including Internet service providers (ISPs) like America Online and Mindspring. Accordingly,

when a consumer logs on to the Internet via a local call to an ISP,

the ISP and its subscribers do not pay the per-minute access

charges that a consumer of long distance services would have to

pay, irrespective of whether the consumer surfs Web sites in distant locations. The FCC based its decision on the fact that the information services industry was in its infancy as of 1983. Moreover,

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the FCC was concerned that, if required to pay per-minute access

charges, ISPs would inflict ‘‘rate shock’’ on their subscribers; consumers tend to stay on-line an average of 45 minutes, whereas the

average telephone call lasts roughly five minutes.

In recent years, however, the FCC’s exemption for information

service providers has been the subject of much debate and litigation. Some in the local exchange carrier (LEC) industry have argued that the rationale for the FCC’s exemption no longer makes

sense, given that many ISPs are larger in terms of market capitalization than many telecommunications service providers that still

must pay per-minute access charges. In addition, some LECs argue

that many information service providers (and ISPs, in particular)

place a substantial burden on the public telephone network, and as

such, these ISPs and their consumers should be required to contribute to the network’s maintenance.

The information services industry counters that it contributes to

the growth and modernization of the telephone network by virtue

of the growing residential and business demand for additional telephone lines that are dedicated for access to the Internet. Moreover,

the industry insists that its members directly contribute to the

maintenance of the network by paying the same charges as similarly situated end-users (e.g., the subscriber line charge (SLC), the

business line tariff, and where, applicable, a private-line interconnection charge). The industry notes that a portion of these payments flow through the local exchange carrier to the Universal

Service Fund. The industry also points out that the current exemption enables ISPs to continue charging consumers flat-rate monthly

fees for access to the Internet (compared to long distance service,

which is based on minutes of use).

The ongoing debate about the extent to which information service

providers should be required to support universal service, in addition to the extent to which they should pay for the cost of accessing

the public switched telephone network, raises a number of complex

issues that the Committee has yet to explore and develop a more

complete record. Therefore, at this point in time, the Committee

seeks to codify the FCC’s access charge exemption, to the extent

per-minute access charges are assessed for the purpose of supporting universal service. Moreover, the codified exemption applies

only to providers of Internet access service, as that term is defined

in section 231(e)(4) of the Communications Act of 1934 (47 U.S.C.

§ 231(e)(4)).

HEARINGS

The Subcommittee on Telecommunications, Trade, and Consumer

Protection held two hearings that relate to H.R. 1291. On April 6,

2000, the Subcommittee held an oversight hearing to receive a

summary of the report of the Advisory Commission on Electronic

Commerce. The Subcommittee received testimony from the Honorable James Gilmore, the Governor of the Commonwealth of Virginia, and Chairman of the Advisory Commission on Electronic

Commerce.

On Wednesday, May 3, 2000, the Subcommittee also held a legislative hearing on H.R. 1291, as well as H.R. 4202, the Internet

Services Promotion (ISP) Act of 2000. The Subcommittee heard tesVerDate 11-MAY-2000 05:58 May 13, 2000 Jkt 079006 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\HR615.XXX pfrm07 PsN: HR615
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timony from two panels of witnesses. Panel I consisted of only Congressman Fred Upton (R-MI), the sponsor of H.R. 1291. Panel II included: Mr. Peter Lowy, co-President, Westfield-America, Inc. (on

behalf of the e-Fairness Coalition); Mr. Harris N. Miller, President,

Information Technology Association of America (ITAA); Mr. Grover

Norquist, President, Americans for Tax Reform (ATR); and Mr.

Leroy Grey, RAVEN-Villages Internet.

COMMITTEE CONSIDERATION

On May 10, 2000, the Subcommittee on Telecommunications,

Trade, and Consumer Protection was discharged from the further

consideration of H.R. 1291 by unanimous consent. The Committee

ordered H.R. 1291 reported, with an amendment, by a voice vote.

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House requires the

Committee to list the record votes on the motion to report legislation and amendments thereto. A motion by Mr. Bliley to order H.R.

1291 reported to the House, with an amendment, was agreed to by

a voice vote. A motion to table the bill by Mr. Deutsch was not

agreed to by a voice vote.

The following amendment was agreed to by voice vote:

An amendment in the nature of a substitute by Mr.

Upton, #1, precluding the FCC from imposing on providers

of Internet access service any per-minute charges intended

for universal service support.

The following amendment was withdrawn by unanimous consent:

An amendment to the amendment in the nature of a

substitute by Mr. Stearns, #1a, establishing an Advisory

Commission to examine state and local taxation of telecommunications services.

The Committee took a record vote on the following amendment.

The names of Members voting for and against follow:

An amendment to the amendment in the nature of a

substitute by Mr. Markey, #1b, clarifying that the FCC is

precluded from imposing per-minute charges on Internet

telephony services.

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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House

of Representatives, the Committee held legislative and oversight

hearing and made findings that are reflected in this report.

COMMITTEE ON GOVERNMENT REFORM OVERSIGHT FINDINGS

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House

of Representatives, no oversight findings have been submitted to

the Committee by the Committee on Government Reform.

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the

House of Representatives, the Committee finds that H.R. 1291, The

Internet Access Charge Prohibition Act of 2000, would result in no

new or increased budget authority, entitlement authority, or tax

expenditures or revenues.

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by

the Director of the Congressional Budget Office pursuant to section

402 of the Congressional Budget Act of 1974.

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House

of Representatives, the following is the cost estimate provided by

the Congressional Budget Office pursuant to section 402 of the

Congressional Budget Act of 1974:

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, May 11, 2000.

Hon. TOM BLILEY, Chairman, Committee on Commerce,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1291, the Internet Access

Charge Prohibitions Act of 2000.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Mark Hadley.

Sincerely,

BARRY B. ANDERSON.

(For Dan L. Crippen, Director).

H.R. 1291—Internet Access Charge Prohibition Act of 2000

Summary: H.R. 1291 would prohibit the Federal Communications Commission (FCC) from collecting fees from Internet service

providers to finance the Universal Service Fund that are based on

the length of time that the Internet access service is provided. Currently, the FCC does not charge any such fees and has no plans

to do so. Internet service providers carry data transmissions of

their customers, and such data may be used to provide telephone

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services. H.R. 1291 would allow the FCC to charge Internet service

providers for the Universal Service Fund only when they provide

telephone services.

Certain charges imposed on telecommunications services either

by states or the federal government under the Telecommunications

Act of 1996 to support universal service are recorded in the federal

budget. (Universal service is a program intended to promote the

availability of telecommunications services at affordable rates.) Because H.R. 1291 could affect direct spending and receipts, pay-asyou-go procedures would apply, but CBO estimates that any such

effects would be negligible. H.R. 1291 contains no private-sector or

intergovernmental mandates as defined in the Unfunded Mandates

Reform Act (UMRA) and would impose no costs on state, local, or

tribal governments.

Estimated cost to the Federal Government: Under the Universal

Service Fund established by the Telecommunications Act of 1996,

the FCC seeks to provide universal access to telecommunications

services through various charges to some telephone companies and

payments to others. The 1996 act also permits states to establish

additional collections and payments to preserve and advance universal service, so long as these mechanisms are not inconsistent

with federal law.

The Universal Service Fund records these transactions in the

federal budget as governmental receipts and direct spending. To

the extent that the FCC or states would choose to support universal service through charges on Internet service providers based

on the time such services are used, H.R. 1291 could result in forgoing revenues and direct spending. The FCC does not charge any

such fees and has no plans to do so. H.R. 1291 would allow the

FCC to charge Internet service providers when customers’ data

transmissions are used to support telephone services; therefore,

CBO estimates that any change in revenues and direct spending as

a result of this legislation would be negligible.

The costs of this legislation fall within budget function 370 (commerce and housing credit).

Pay-as-you-go considerations: The Balanced Budget and Emergency Deficit Control Act sets up pay-as-you-go procedures for legislation affecting direct spending and receipts. As noted above, H.R.

1291 could affect direct spending and receipts, but CBO estimates

that any such effects would be negligible.

Intergovernmental and private-sector impact: H.R. 1291 contains

no private-sector or intergovernmental mandates as defined in

UMRA and would impose no costs on state, local, or tribal governments.

Estimate prepared by: Federal costs: Mark Hadley; revenues:

Hester Grippando; impact on State, local, and tribal governments:

Shelley Finlayson; impact on the private sector: Jean Wooster.

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis.

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office

pursuant to section 423 of the Unfunded Mandates Reform Act.

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ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the

Federal Advisory Committee Act were created by this legislation.

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House

of Representatives, the Committee finds that the Constitutional authority for this legislation is provided in Article I, section 8, clause

3, which grants Congress the power to regulate commerce with foreign nations, among the several States, and with the Indian tribes.

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the

terms and conditions of employment or access to public services or

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act.

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title.

Section 1 of H.R. 1291 provides the bill’s short title, the ‘‘Internet

Access Charge Prohibition Act of 2000.’’

Section 2. Prohibition of charges on providers of Internet access

service

Section 2 of the bill amends section 254 of the Communications

Act of 1934 (47 U.S.C. § 254) to preclude the FCC from imposing

on any provider of Internet access service (as such term is defined

in section 231(e)(4) of the Act) any contribution for the support of

universal service that is based on a measure of the time that telecommunications services are used in the provision of such Internet

access service. Section 2 also contains a savings clause that makes

clear that nothing in H.R. 1291 precludes the FCC from imposing

access charges on the providers of Internet telephone services, irrespective of the type of customer premises equipment used in connection with such services.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (new matter is printed in italic

and existing law in which no change is proposed is shown in

roman):

SECTION 254 OF THE COMMUNICATIONS ACT OF 1934

SEC. 254. UNIVERSAL SERVICE.

(a) * * *

* * * * * * *

(l) PROHIBITION OF CHARGES ON INTERNET SERVICE PROVIDERS.—

(1) IN GENERAL.—Notwithstanding subsection (b)(4) or (d) or

any other provision of this title, the Commission shall not imVerDate 11-MAY-2000 05:58 May 13, 2000 Jkt 079006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6603 E:\HR\OC\HR615.XXX pfrm07 PsN: HR615
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pose on any provider of Internet access service (as such term is

defined in section 231(e)) any contribution for the support of

universal service that is based on a measure of the time that

telecommunications services are used in the provision of such

Internet access service.

(2) RULE OF CONSTRUCTION.—Nothing in this subsection

shall preclude the Commission from imposing access charges on

the providers of Internet telephone services, irrespective of the

type of customer premises equipment used in connection with

such services.

(10)

ADDITIONAL VIEWS

This legislation, H.R. 1291, is intended to make sure that when

an individual logs on to the Internet, he or she will not be charged

by the minute for the privilege of doing so. That is a worthy goal,

and I support it.

I am sure that few Congressional offices have escaped an insidious e-mail campaign over the past year decrying fictitious legislation that would purport to accomplish precisely the opposite result

of the bill we report today. I only hope that passage of H.R. 1291

will finally extinguish this ‘‘cyber-myth’’ once and for all.

I am not convinced, however, that mounting a massive legislative

counter-attack on a fictitious bill, introduced by a make-believe

Congressman, is the best use of this Committee’s time, or that of

the House. Particularly when the substance of this bogus bill—if it

were actually introduced—is so contrary to the public interest that

it would have zero chance of success in this Committee.

My puzzlement extends further to the speed with which the Republican leadership wants this bill to go to the floor. They apparently believe this bill is so important that we were asked to dispense with regular order and bypass Subcommittee consideration.

I find it amazing that a phantom Congressman has more success

jump-starting the legislative process than those of us elected by the

people.

Certainly our constituents should know that Congress has no intent of installing a meter on their use of the Internet, and this legislation will alleviate their concern in that regard. However, I am

disappointed that the majority refuses to seize the opportunity presented here to address a greater and more genuine threat to consumer pocketbooks. That is, the real possibility that burgeoning

new Internet services, such as Internet telephony, paging, webbased wireless services, and countless others on the horizon may

evade the responsibility of contributing to support the Universal

Service Fund—a fund which ensures that all Americans have access to affordable telephone service.

These services will continue to migrate from traditional networks

to the Internet and, unless we act, the Universal Service Fund will

be left to wither on the vine. Traditional network service providers

will be forced to raise prices wherever they can, and that can only

spell trouble when it comes to local phone rates for all consumers,

but particularly those who live in rural areas and the working

poor. Of course, these are the same Americans who are stuck on

the wrong side of the ‘‘digital divide’’ and are least able to take advantage of high-tech alternatives.

This Committee’s approach to telecommunications policy has always been consistent and straightforward: like services should be

treated in a like manner. We had the opportunity to apply that phiVerDate 11-MAY-2000 05:58 May 13, 2000 Jkt 079006 PO 00000 Frm 00010 Fmt 6604 Sfmt 6604 E:\HR\OC\HR615.XXX pfrm07 PsN: HR615
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losophy here, and it would have been entirely proper that we do

so.

Unfortunately, in our haste to get legislation to the floor that

solves an imaginary problem, we squandered the opportunity to address one that is all too real: the prices Americans will pay for telecommunications services if today’s disparate regulatory treatment

is permitted to continue. Whether a service is offered via the Internet or through a traditional network, the obligations attendant to

it should be the same.

JOHN D. DINGELL.

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