I

106TH CONGRESS

2D SESSION H. R. 4728

To amend the Internal Revenue Code of 1986 to provide an incentive to

ensure that all Americans gain timely and equitable access to the Internet

over current and future generations of broadband capability.

IN THE HOUSE OF REPRESENTATIVES

JUNE 22, 2000

Mr. ENGLISH (for himself Mr. MATSUI, Mr. HAYES, Mr. NEAL of Massachusetts, Mr. BALLENGER, Mr. BURR of North Carolina, Mrs. EMERSON,

Mr. FLETCHER, Mr. MCINTYRE, Mr. NUSSLE, Mr. POMEROY, Mr. SHERWOOD, Mr. THUNE, and Mrs. JONES of Ohio) introduced the following

bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

an incentive to ensure that all Americans gain timely

and equitable access to the Internet over current and

future generations of broadband capability.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Broadband Internet

5 Access Act of 2000’’.

6 SEC. 2. FINDINGS AND PURPOSE.

7 (a) FINDINGS.—The Congress finds the following:
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1 (1) The Internet has been the single greatest

2 contributor to the unprecedented economic expansion

3 experienced by the United States over the last 8

4 years.

5 (2) Increasing the speed that Americans can ac6 cess the Internet is necessary to ensure the contin7 ued expansion.

8 (3) Today, most residential Internet users, es9 pecially those located in low income and rural areas,

10 are extremely limited in the type of information they

11 can send and receive over the Internet because their

12 means of access is limited to ‘‘narrowband’’ commu13 nications media, typically conventional phone lines at

14 a maximum speed of 56,000 bits per second.

15 (4) Similarly, small businesses in low income

16 and rural areas are also deprived of full information

17 access because of their dependence on narrowband

18 facilities.

19 (5) By contrast, many residential users located

20 in higher income urban and suburban areas and

21 urban business users can access the Internet from a

22 variety of carriers at current generation broadband

23 speeds in excess of 1,500,000 bits per second, giving

24 them a choice among carriers and high-speed access

25 to a wide array of audio and data applications.
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1 (6) The result is a growing disparity in the

2 speed of access to the Internet and the opportunities

3 it creates between subscribers located in low income

4 and rural areas and subscribers located in higher in5 come urban and suburban areas.

6 (7) At the same time, experts project that,

7 under current financial and regulatory conditions,

8 the facilities needed to transmit next generation

9 broadband services over the Internet to residential

10 users at speeds in excess of 10,000,000 bits per sec11 ond will not be as ubiquitously available as is tele12 phone service until sometime between the years 2030

13 and 2040.

14 (8) Experts also believe that, under current fi15 nancial and regulatory conditions, the disparity in

16 access will be exacerbated with the deployment of

17 next generation broadband capability.

18 (9) The disparity in current broadband access

19 to the Internet, the slow pace of deployment of next

20 generation broadband capability, and the projected

21 disparity in access to such capability will likely prove

22 detrimental to the on-going economic expansion.

23 (10) It is, therefore, appropriate for Congress

24 to take action to narrow the current and future dis25 parity in the level of broadband access to the Inter-
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1 net, and to accelerate deployment of next generation

2 broadband capability.

3 (b) PURPOSE.—The purpose of this Act is to accel4 erate deployment of current generation broadband access

5 to the Internet for users located in certain low income and

6 rural areas and to accelerate deployment of next genera7 tion broadband access for all Americans.

8 SEC. 3. BROADBAND CREDIT.

9 (a) IN GENERAL.—Subpart E of part IV of chapter

10 1 of the Internal Revenue Code of 1986 (relating to rules

11 for computing investment credit) is amended by inserting

12 after section 48 the following new section:

13 ‘‘SEC. 48A. BROADBAND CREDIT.

14 ‘‘(a) GENERAL RULE.—For purposes of section 46,

15 the broadband credit for any taxable year is the sum of—

16 ‘‘(1) the current generation broadband credit,

17 plus

18 ‘‘(2) the next generation broadband credit.

19 ‘‘(b) CURRENT GENERATION BROADBAND CREDIT;

20 NEXT GENERATION BROADBAND CREDIT.—For purposes

21 of this section—

22 ‘‘(1) CURRENT GENERATION BROADBAND

23 CREDIT.—The current generation broadband credit

24 for any taxable year is equal to 10 percent of the

25 qualified expenditures incurred with respect to quali-
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1 fied equipment offering current generation

2 broadband services to rural subscribers or under3 served subscribers and taken into account with re4 spect to such taxable year.

5 ‘‘(2) NEXT GENERATION BROADBAND CRED6 IT.—The next generation broadband credit for any

7 taxable year is equal to 20 percent of the qualified

8 expenditures incurred with respect to qualified

9 equipment offering next generation broadband serv10 ices to all rural subscribers, all underserved sub11 scribers, or any other residential subscribers and

12 taken into account with respect to such taxable year.

13 ‘‘(c) WHEN EXPENDITURES TAKEN INTO AC14 COUNT.—For purposes of this section—

15 ‘‘(1) IN GENERAL.—Qualified expenditures with

16 respect to qualified equipment shall be taken into ac17 count with respect to the first taxable year in which

18 current generation broadband services or next gen19 eration broadband services are offered by the tax20 payer through such equipment to subscribers.

21 ‘‘(2) OFFER OF SERVICES.—For purposes of

22 paragraph (1), the offer of current generation

23 broadband services or next generation broadband

24 services through qualified equipment occurs when

25 such class of service is purchased by and provided
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1 to at least 10 percent of the subscribers described in

2 subsection (b) which such equipment is capable of

3 serving through the legal or contractual area access

4 rights or obligations of the taxpayer.

5 ‘‘(d) SPECIAL ALLOCATION RULES.—

6 ‘‘(1) CURRENT GENERATION BROADBAND SERV7 ICES.—For purposes of determining the current gen8 eration broadband credit under subsection (a)(1), if

9 the qualified equipment is capable of serving both

10 the subscribers described under subsection (b)(1)

11 and other subscribers, the qualified expenditures

12 shall be multiplied by a fraction—

13 ‘‘(A) the numerator of which is the sum of

14 the total potential subscriber populations within

15 the rural areas and the underserved areas

16 which the equipment is capable of serving, and

17 ‘‘(B) the denominator of which is the total

18 potential subscriber population of the area

19 which the equipment is capable of serving.

20 ‘‘(2) NEXT GENERATION BROADBAND SERV21 ICES.—For purposes of determining the next genera22 tion broadband credit under subsection (a)(2), if the

23 qualified equipment is capable of serving both the

24 subscribers described under subsection (b)(2) and
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1 other subscribers, the qualified expenditures shall be

2 multiplied by a fraction—

3 ‘‘(A) the numerator of which is the sum

4 of—

5 ‘‘(i) the total potential subscriber pop6 ulations within the rural areas and under7 served areas, plus

8 ‘‘(ii) the total potential subscriber

9 population of the area consisting only of

10 residential subscribers not described in

11 clause (i),

12 which the equipment is capable of serving, and

13 ‘‘(B) the denominator of which is the total

14 potential subscriber population of the area

15 which the equipment is capable of serving.

16 ‘‘(e) DEFINITIONS.—For purposes of this section—

17 ‘‘(1) ANTENNA.—The term ‘antenna’ means

18 any device used to transmit or receive signals

19 through the electromagnetic spectrum, including sat20 ellite equipment.

21 ‘‘(2) CABLE OPERATOR.—The term ‘cable oper22 ator’ has the meaning given such term by section

23 602(5) of the Communications Act of 1934 (47

24 U.S.C. 522(5)).
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1 ‘‘(3) COMMERCIAL MOBILE SERVICE CAR2 RIER.—The term ‘commercial mobile service carrier’

3 means any person authorized to provide commercial

4 mobile radio service as defined in section 20.3 of

5 title 47, Code of Federal Regulations.

6 ‘‘(4) CURRENT GENERATION BROADBAND SERV7 ICE.—The term ‘current generation broadband serv8 ice’ means the transmission of signals at a rate of

9 at least 1,500,000 bits per second to the subscriber

10 and at least 200,000 bits per second from the sub11 scriber.

12 ‘‘(5) NEXT GENERATION BROADBAND SERV13 ICE.—The term ‘next generation broadband service’

14 means the transmission of signals at a rate of at

15 least 22,000,000 bits per second to the subscriber

16 and at least 10,000,000 bits per second from the

17 subscriber.

18 ‘‘(6) NONRESIDENTIAL SUBSCRIBER.—The

19 term ‘nonresidential subscriber’ means a person or

20 entity who purchases broadband services which are

21 delivered to the permanent place of business of such

22 person or entity.

23 ‘‘(7) OPEN VIDEO SYSTEM OPERATOR.—The

24 term ‘open video system operator’ means any person
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1 authorized to provide service under section 653 of

2 the Communications Act of 1934 (47 U.S.C. 573).

3 ‘‘(8) OTHER WIRELESS CARRIER.—The term

4 ‘other wireless carrier’ means any person (other than

5 a telecommunications carrier, commercial mobile

6 service carrier, cable operator, open video system op7 erator, or satellite carrier) providing current genera8 tion broadband services or next generation

9 broadband service to subscribers through the radio

10 transmission of energy.

11 ‘‘(9) PACKET SWITCHING.—The term ‘packet

12 switching’ means controlling or routing the path of

13 a digitized transmission signal which is assembled

14 into packets or cells.

15 ‘‘(10) QUALIFIED EQUIPMENT.—

16 ‘‘(A) IN GENERAL.—The term ‘qualified

17 equipment’ means equipment capable of pro18 viding current generation broadband services or

19 next generation broadband services at any time

20 to each subscriber who is utilizing such services.

21 ‘‘(B) ONLY CERTAIN INVESTMENT TAKEN

22 INTO ACCOUNT.—Except as provided in sub23 paragraph (C), equipment shall be taken into

24 account under subparagraph (A) only to the ex25 tent it—
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1 ‘‘(i) extends from the last point of

2 switching to the outside of the unit, build3 ing, dwelling, or office owned or leased by

4 a subscriber in the case of a telecommuni5 cations carrier,

6 ‘‘(ii) extends from the customer side

7 of the mobile telephone switching office to

8 a transmission/receive antenna (including

9 such antenna) on the outside of the unit,

10 building, dwelling, or office owned or

11 leased by a subscriber in the case of a

12 commercial mobile service carrier,

13 ‘‘(iii) extends from the customer side

14 of the headend to the outside of the unit,

15 building, dwelling, or office owned or

16 leased by a subscriber in the case of a

17 cable operator or open video system oper18 ator, or

19 ‘‘(iv) extends from a transmission/re20 ceive antenna (including such antenna)

21 which transmits and receives signals to or

22 from multiple subscribers to a trans23 mission/receive antenna (including such

24 antenna) on the outside of the unit, build25 ing, dwelling, or office owned or leased by
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1 a subscriber in the case of a satellite car2 rier or other wireless carrier, unless such

3 other wireless carrier is also a tele4 communications carrier.

5 ‘‘(C) PACKET SWITCHING EQUIPMENT.—

6 Packet switching equipment, regardless of loca7 tion, shall be taken into account under subpara8 graph (A) only if it is deployed in connection

9 with equipment described in subparagraph (B)

10 and it is uniquely designed to perform the func11 tion of packet switching for current generation

12 broadband services or next generation

13 broadband services, but only if such packet

14 switching is the last in a series of such func15 tions performed in the transmission of a signal

16 to a subscriber or the first in a series of such

17 functions performed in the transmission of a

18 signal from a subscriber.

19 ‘‘(11) QUALIFIED EXPENDITURE.—

20 ‘‘(A) IN GENERAL.—The term ‘qualified

21 expenditure’ means any amount chargeable to

22 capital account with respect to the purchase

23 and installation of qualified equipment (includ24 ing any upgrades thereto) for which deprecia25 tion is allowable under section 168.
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1 ‘‘(B) CERTAIN SATELLITE EXPENDITURES

2 EXCLUDED.—Such term shall not include any

3 expenditure with respect to the launching of

4 any satellite equipment.

5 ‘‘(12) RESIDENTIAL SUBSCRIBER.—The term

6 ‘residential subscriber’ means an individual who pur7 chases broadband services which are delivered to

8 such individual’s dwelling.

9 ‘‘(13) RURAL SUBSCRIBER.—

10 ‘‘(A) IN GENERAL.—The term ‘rural sub11 scriber’ means a residential subscriber residing

12 in a dwelling located in a rural area or nonresi13 dential subscriber maintaining a permanent

14 place of business located in a rural area.

15 ‘‘(B) RURAL AREA.—The term ‘rural area’

16 means any census tract which—

17 ‘‘(i) is not within 10 miles of any in18 corporated or census designated place con19 taining more than 25,000 people, and

20 ‘‘(ii) is not within a county or county

21 equivalent which has an overall population

22 density of more than 500 people per

23 square mile of land.

24 ‘‘(14) SATELLITE CARRIER.—The term ‘sat25 ellite carrier’ means any person using the facilities
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1 of a satellite or satellite service licensed by the Fed2 eral Communications Commission and operating in

3 the Fixed-Satellite Service under part 25 of title 47

4 of the Code of Federal Regulations or the Direct

5 Broadcast Satellite Service under part 100 of title

6 47 of such Code to establish and operate a channel

7 of communications for point-to-multipoint distribu8 tion of signals, and owning or leasing a capacity or

9 service on a satellite in order to provide such point10 to-multipoint distribution.

11 ‘‘(15) SUBSCRIBER.—The term ‘subscriber’

12 means a person who purchases current generation

13 broadband services or next generation broadband

14 services.

15 ‘‘(16) TELECOMMUNICATIONS CARRIER.—The

16 term ‘telecommunications carrier’ has the meaning

17 given such term by section 3(44) of the Communica18 tions Act of 1934 (47 U.S.C. 153 (44)), but—

19 ‘‘(A) includes all members of an affiliated

20 group of which a telecommunications carrier is

21 a member, and

22 ‘‘(B) does not include a commercial mobile

23 service carrier.

24 ‘‘(17) TOTAL POTENTIAL SUBSCRIBER POPU25 LATION.—The term ‘total potential subscriber popu-
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1 lation’ means, with respect to any area and based on

2 the most recent census data, the total number of po3 tential residential subscribers residing in dwellings

4 located in such area and potential nonresidential

5 subscribers maintaining permanent places of busi6 ness located in such area.

7 ‘‘(18) UNDERSERVED SUBSCRIBER.—

8 ‘‘(A) IN GENERAL.—The term ‘under9 served subscriber’ means a residential sub10 scriber residing in a dwelling located in an un11 derserved area or nonresidential subscriber

12 maintaining a permanent place of business lo13 cated in an underserved area.

14 ‘‘(B) UNDERSERVED AREA.—The term

15 ‘underserved area’ means any census tract—

16 ‘‘(i) the poverty level of which is at

17 least 30 percent (based on the most recent

18 census data),

19 ‘‘(ii) the median family income of

20 which does not exceed—

21 ‘‘(I) in the case of a census tract

22 located in a metropolitan statistical

23 area, 70 percent of the greater of the

24 metropolitan area median family in-
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1 come or the statewide median family

2 income, and

3 ‘‘(II) in the case of a census tract

4 located in a nonmetropolitan statis5 tical area, 70 percent of the non6 metropolitan statewide median family

7 income, or

8 ‘‘(iii) which is located in an empower9 ment zone or enterprise community des10 ignated under section 1391.

11 ‘‘(f) DESIGNATION OF CENSUS TRACTS.—The Sec12 retary shall, not later than 90 days after the date of the

13 enactment of this section, designate and publish those cen14 sus tracts meeting the criteria described in paragraphs

15 (13)(B) and (18)(B) of subsection (e), and such tracts

16 shall remain so designated for the period ending with the

17 termination date described in subsection (g).

18 ‘‘(g) TERMINATION.—This section shall not apply to

19 expenditures incurred after December 31, 2005.’’

20 (b) CREDIT TO BE PART OF INVESTMENT CREDIT.—

21 Section 46 of the Internal Revenue Code of 1986 (relating

22 to the amount of investment credit) is amended by striking

23 ‘‘and’’ at the end of paragraph (2), by striking the period

24 at the end of paragraph (3) and inserting ‘‘, and’’, and

25 by adding at the end the following new paragraph:
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1 ‘‘(4) the broadband credit.’’

2 (c) SPECIAL RULE FOR MUTUAL OR COOPERATIVE

3 TELEPHONE COMPANIES.—Section 501(c)(12)(B) of the

4 Internal Revenue Code of 1986 (relating to list of exempt

5 organizations) is amended by striking ‘‘or’’ at the end of

6 clause (iii), by striking the period at the end of clause (iv)

7 and inserting ‘‘, or’’, and by adding at the end the fol8 lowing new clause:

9 ‘‘(v) from sources not described in

10 subparagraph (A), but only to the extent

11 such income does not in any year exceed

12 an amount equal to the credit for qualified

13 expenditures which would be determined

14 under section 48A for such year if the mu15 tual or cooperative telephone company was

16 not exempt from taxation.’’

17 (d) CONFORMING AMENDMENT.—The table of sec18 tions for subpart E of part IV of subchapter A of chapter

19 1 of the Internal Revenue Code of 1986 is amended by

20 inserting after the item relating to section 48 the following

21 new item:

‘‘Sec. 48A. Broadband credit.’’

22 (e) EFFECTIVE DATES.—

23 (1) IN GENERAL.—Except as provided in para24 graph (2), the amendments made by this section
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1 shall apply to expenditures incurred after December

2 31, 2000.

3 (2) SPECIAL RULE.—The amendments made by

4 subsection (c) shall apply to amounts received after

5 December 31, 2000.

6 SEC. 4. REGULATORY MATTERS.

7 No Federal or State agency or instrumentality shall

8 adopt regulations or ratemaking procedures that would

9 have the effect of confiscating any credit or portion thereof

10 allowed under section 48A of the Internal Revenue Code

11 of 1986 (as added by section 3) or otherwise subverting

12 the purpose of this Act.

13 SEC. 5. STUDY AND REPORT.

14 (a) SENSE OF CONGRESS.—It is the sense of Con15 gress that in order to maintain competitive neutrality, the

16 credit allowed under section 48A of the Internal Revenue

17 Code of 1986 (as added by section 3) should be adminis18 tered in such a manner so as to ensure that each class

19 of carrier receives the same level of financial incentive to

20 deploy current generation broadband services and next

21 generation broadband services.

22 (b) STUDY AND REPORT.—The Secretary of the

23 Treasury shall, within 180 days after the effective date

24 of section 3, study the impact of the credit allowed under

25 section 48A of the Internal Revenue Code of 1986 (as
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1 added by section 3) on the relative competitiveness of po2 tential classes of carriers of current generation broadband

3 services and next generation broadband services, and shall

4 report to Congress the findings of such study, together

5 with any legislative or regulatory proposals determined to

6 be necessary to ensure that the purposes of such credit

7 can be furthered without impacting competitive neutrality

8 among such classes of carriers.

Æ