II

106TH CONGRESS

2D SESSION S. 2698

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 SENATE OF THE UNITED STATES

JUNE 8, 2000

Mr. MOYNIHAN (for himself, Mr. KERRY, Mr. ROCKEFELLER, Ms. SNOWE,

Mr. ALLARD, Mr. BAUCUS, Mr. BREAUX, Mr. BROWNBACK, Mr. BRYAN,

Mr. BUNNING, Mr. BURNS, Mr. DASCHLE, Mr. DURBIN, Mr. HOLLINGS,

Mr. HUTCHINSON, Mr. JOHNSON, Mr. KENNEDY, Mr. KERREY, Ms.

LANDRIEU, Mrs. LINCOLN, Ms. MIKULSKI, Mr. REID, Mr. ROBB, Mr.

ROBERTS, Mr. SCHUMER, Mr. THURMOND, Mr. ENZI, Mrs. BOXER, and

Mr. DEWINE) introduced the following bill; which was read twice and referred to the Committee on Finance

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’’.
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1 SEC. 2. FINDINGS AND PURPOSE.

2 (a) FINDINGS.—The Congress finds the following:

3 (1) The Internet has been the single greatest

4 contributor to the unprecedented economic expansion

5 experienced by the United States over the last 8

6 years.

7 (2) Increasing the speed that Americans can ac8 cess the Internet is necessary to ensure the contin9 ued expansion.

10 (3) Today, most residential Internet users, es11 pecially those located in low income and rural areas,

12 are extremely limited in the type of information they

13 can send and receive over the Internet because their

14 means of access is limited to ‘‘narrowband’’ commu15 nications media, typically conventional phone lines at

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

17 (4) Similarly, small businesses in low income

18 and rural areas are also deprived of full information

19 access because of their dependence on narrowband

20 facilities.

21 (5) By contrast, many residential users located

22 in higher income urban and suburban areas and

23 urban business users can access the Internet from a

24 variety of carriers at current generation broadband

25 speeds in excess of 1,500,000 bits per second, giving
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1 them a choice among carriers and high-speed access

2 to a wide array of audio and data applications.

3 (6) The result is a growing disparity in the

4 speed of access to the Internet and the opportunities

5 it creates between subscribers located in low income

6 and rural areas and subscribers located in higher in7 come urban and suburban areas.

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

9 under current financial and regulatory conditions,

10 the facilities needed to transmit next generation

11 broadband services over the Internet to residential

12 users at speeds in excess of 10,000,000 bits per sec13 ond will not be as ubiquitously available as is tele14 phone service until sometime between the years 2030

15 and 2040.

16 (8) Experts also believe that, under current fi17 nancial and regulatory conditions, the disparity in

18 access will be exacerbated with the deployment of

19 next generation broadband capability.

20 (9) The disparity in current broadband access

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

22 generation broadband capability, and the projected

23 disparity in access to such capability will likely prove

24 detrimental to the on-going economic expansion.
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1 (10) It is, therefore, appropriate for Congress

2 to take action to narrow the current and future dis3 parity in the level of broadband access to the Inter4 net, and to accelerate deployment of next generation

5 broadband capability.

6 (b) PURPOSE.—The purpose of this Act is to accel7 erate deployment of current generation broadband access

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

9 rural areas and to accelerate deployment of next genera10 tion broadband access for all Americans.

11 SEC. 3. BROADBAND CREDIT.

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

13 1 of the Internal Revenue Code of 1986 (relating to rules

14 for computing investment credit) is amended by inserting

15 after section 48 the following new section:

16 ‘‘SEC. 48A. BROADBAND CREDIT.

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

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

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

20 plus

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

22 ‘‘(b) CURRENT GENERATION BROADBAND CREDIT;

23 NEXT GENERATION BROADBAND CREDIT.—For purposes

24 of this section—
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1 ‘‘(1) CURRENT GENERATION BROADBAND

2 CREDIT.—The current generation broadband credit

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

4 qualified expenditures incurred with respect to quali5 fied equipment offering current generation

6 broadband services to rural subscribers or under7 served subscribers and taken into account with re8 spect to such taxable year.

9 ‘‘(2) NEXT GENERATION BROADBAND CRED10 IT.—The next generation broadband credit for any

11 taxable year is equal to 20 percent of the qualified

12 expenditures incurred with respect to qualified

13 equipment offering next generation broadband serv14 ices to all rural subscribers, all underserved sub15 scribers, or any other residential subscribers and

16 taken into account with respect to such taxable year.

17 ‘‘(c) WHEN EXPENDITURES TAKEN INTO AC18 COUNT.—For purposes of this section—

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

20 respect to qualified equipment shall be taken into ac21 count with respect to the first taxable year in which

22 current generation broadband services or next gen23 eration broadband services are offered by the tax24 payer through such equipment to subscribers.
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1 ‘‘(2) OFFER OF SERVICES.—For purposes of

2 paragraph (1), the offer of current generation

3 broadband services or next generation broadband

4 services through qualified equipment occurs when

5 such class of service is purchased by and provided

6 to at least 10 percent of the subscribers described

7 in subsection (b) which such equipment is capable

8 of serving through the legal or contractual area ac9 cess rights or obligations of the taxpayer.

10 ‘‘(d) SPECIAL ALLOCATION RULES.—

11 ‘‘(1) CURRENT GENERATION BROADBAND SERV12 ICES.—For purposes of determining the current gen13 eration broadband credit under subsection (a)(1), if

14 the qualified equipment is capable of serving both

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

16 and other subscribers, the qualified expenditures

17 shall be multiplied by a fraction—

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

19 the total potential subscriber populations within

20 the rural areas and the underserved areas

21 which the equipment is capable of serving, and

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

23 potential subscriber population of the area

24 which the equipment is capable of serving.
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1 ‘‘(2) NEXT GENERATION BROADBAND SERV2 ICES.—For purposes of determining the next genera3 tion broadband credit under subsection (a)(2), if the

4 qualified equipment is capable of serving both the

5 subscribers described under subsection (b)(2) and

6 other subscribers, the qualified expenditures shall be

7 multiplied by a fraction—

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

9 of—

10 ‘‘(i) the total potential subscriber pop11 ulations within the rural areas and under12 served areas, plus

13 ‘‘(ii) the total potential subscriber

14 population of the area consisting only of

15 residential subscribers not described in

16 clause (i),

17 which the equipment is capable of serving, and

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

19 potential subscriber population of the area

20 which the equipment is capable of serving.

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

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

23 any device used to transmit or receive signals

24 through the electromagnetic spectrum, including sat25 ellite equipment.
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1 ‘‘(2) CABLE OPERATOR.—The term ‘cable oper2 ator’ has the meaning given such term by section

3 602(5) of the Communications Act of 1934 (47

4 U.S.C. 522(5)).

5 ‘‘(3) COMMERCIAL MOBILE SERVICE CAR6 RIER.—The term ‘commercial mobile service carrier’

7 means any person authorized to provide commercial

8 mobile radio service as defined in section 20.3 of

9 title 47, Code of Federal Regulations.

10 ‘‘(4) CURRENT GENERATION BROADBAND SERV11 ICE.—The term ‘current generation broadband serv12 ice’ means the transmission of signals at a rate of

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

14 and at least 200,000 bits per second from the sub15 scriber.

16 ‘‘(5) NEXT GENERATION BROADBAND SERV17 ICE.—The term ‘next generation broadband service’

18 means the transmission of signals at a rate of at

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

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

21 subscriber.

22 ‘‘(6) NONRESIDENTIAL SUBSCRIBER.—The

23 term ‘nonresidential subscriber’ means a person or

24 entity who purchases broadband services which are
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1 delivered to the permanent place of business of such

2 person or entity.

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

4 term ‘open video system operator’ means any person

5 authorized to provide service under section 653 of

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

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

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

9 a telecommunications carrier, commercial mobile

10 service carrier, cable operator, open video system op11 erator, or satellite carrier) providing current genera12 tion broadband services or next generation

13 broadband service to subscribers through the radio

14 transmission of energy.

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

16 switching’ means controlling or routing the path of

17 a digitized transmission signal which is assembled

18 into packets or cells.

19 ‘‘(10) QUALIFIED EQUIPMENT.—

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

21 equipment’ means equipment capable of pro22 viding current generation broadband services or

23 next generation broadband services at any time

24 to each subscriber who is utilizing such services.
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1 ‘‘(B) ONLY CERTAIN INVESTMENT TAKEN

2 INTO ACCOUNT.—Except as provided in sub3 paragraph (C), equipment shall be taken into

4 account under subparagraph (A) only to the ex5 tent it—

6 ‘‘(i) extends from the last point of

7 switching to the outside of the unit, build8 ing, dwelling, or office owned or leased by

9 a subscriber in the case of a telecommuni10 cations carrier,

11 ‘‘(ii) extends from the customer side

12 of the mobile telephone switching office to

13 a transmission/receive antenna (including

14 such antenna) on the outside of the unit,

15 building, dwelling, or office owned or

16 leased by a subscriber in the case of a

17 commercial mobile service carrier,

18 ‘‘(iii) extends from the customer side

19 of the headend to the outside of the unit,

20 building, dwelling, or office owned or

21 leased by a subscriber in the case of a

22 cable operator or open video system oper23 ator, or

24 ‘‘(iv) extends from a transmission/re25 ceive antenna (including such antenna)
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1 which transmits and receives signals to or

2 from multiple subscribers to a trans3 mission/receive antenna (including such

4 antenna) on the outside of the unit, build5 ing, dwelling, or office owned or leased by

6 a subscriber in the case of a satellite car7 rier or other wireless carrier, unless such

8 other wireless carrier is also a tele9 communications carrier.

10 ‘‘(C) PACKET SWITCHING EQUIPMENT.—

11 Packet switching equipment, regardless of loca12 tion, shall be taken into account under subpara13 graph (A) only if it is deployed in connection

14 with equipment described in subparagraph (B)

15 and it is uniquely designed to perform the func16 tion of packet switching for current generation

17 broadband services or next generation

18 broadband services, but only if such packet

19 switching is the last in a series of such func20 tions performed in the transmission of a signal

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

22 functions performed in the transmission of a

23 signal from a subscriber.

24 ‘‘(11) QUALIFIED EXPENDITURE.—
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1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 expenditure’ means any amount chargeable to

3 capital account with respect to the purchase

4 and installation of qualified equipment (includ5 ing any upgrades thereto) for which deprecia6 tion is allowable under section 168.

7 ‘‘(B) CERTAIN SATELLITE EXPENDITURES

8 EXCLUDED.—Such term shall not include any

9 expenditure with respect to the launching of

10 any satellite equipment.

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

12 ‘residential subscriber’ means an individual who pur13 chases broadband services which are delivered to

14 such individual’s dwelling.

15 ‘‘(13) RURAL SUBSCRIBER.—

16 ‘‘(A) IN GENERAL.—The term ‘rural sub17 scriber’ means a residential subscriber residing

18 in a dwelling located in a rural area or nonresi19 dential subscriber maintaining a permanent

20 place of business located in a rural area.

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

22 means any census tract which—

23 ‘‘(i) is not within 10 miles of any in24 corporated or census designated place con25 taining more than 25,000 people, and
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1 ‘‘(ii) is not within a county or county

2 equivalent which has an overall population

3 density of more than 500 people per

4 square mile of land.

5 ‘‘(14) SATELLITE CARRIER.—The term ‘sat6 ellite carrier’ means any person using the facilities

7 of a satellite or satellite service licensed by the Fed8 eral Communications Commission and operating in

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

10 of the Code of Federal Regulations or the Direct

11 Broadcast Satellite Service under part 100 of title

12 47 of such Code to establish and operate a channel

13 of communications for point-to-multipoint distribu14 tion of signals, and owning or leasing a capacity or

15 service on a satellite in order to provide such point16 to-multipoint distribution.

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

18 means a person who purchases current generation

19 broadband services or next generation broadband

20 services.

21 ‘‘(16) TELECOMMUNICATIONS CARRIER.—The

22 term ‘telecommunications carrier’ has the meaning

23 given such term by section 3(44) of the Communica24 tions Act of 1934 (47 U.S.C. 153 (44)), but—
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1 ‘‘(A) includes all members of an affiliated

2 group of which a telecommunications carrier is

3 a member, and

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

5 service carrier.

6 ‘‘(17) TOTAL POTENTIAL SUBSCRIBER POPU7 LATION.—The term ‘total potential subscriber popu8 lation’ means, with respect to any area and based on

9 the most recent census data, the total number of po10 tential residential subscribers residing in dwellings

11 located in such area and potential nonresidential

12 subscribers maintaining permanent places of busi13 ness located in such area.

14 ‘‘(18) UNDERSERVED SUBSCRIBER.—

15 ‘‘(A) IN GENERAL.—The term ‘under16 served subscriber’ means a residential sub17 scriber residing in a dwelling located in an un18 derserved area or nonresidential subscriber

19 maintaining a permanent place of business lo20 cated in an underserved area.

21 ‘‘(B) UNDERSERVED AREA.—The term

22 ‘underserved area’ means any census tract—

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

24 least 30 percent (based on the most recent

25 census data),
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1 ‘‘(ii) the median family income of

2 which does not exceed—

3 ‘‘(I) in the case of a census tract

4 located in a metropolitan statistical

5 area, 70 percent of the greater of the

6 metropolitan area median family in7 come or the statewide median family

8 income, and

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

10 located in a nonmetropolitan statis11 tical area, 70 percent of the non12 metropolitan statewide median family

13 income, or

14 ‘‘(iii) which is located in an empower15 ment zone or enterprise community des16 ignated under section 1391.

17 ‘‘(f) DESIGNATION OF CENSUS TRACTS.—The Sec18 retary shall, not later than 90 days after the date of the

19 enactment of this section, designate and publish those cen20 sus tracts meeting the criteria described in paragraphs

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

22 shall remain so designated for the period ending with the

23 termination date described in subsection (g).

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

25 expenditures incurred after December 31, 2005.’’
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1 (b) CREDIT TO BE PART OF INVESTMENT CREDIT.—

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

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

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

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

6 by adding at the end the following new paragraph:

7 ‘‘(4) the broadband credit.’’

8 (c) SPECIAL RULE FOR MUTUAL OR COOPERATIVE

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

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

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

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

13 and inserting ‘‘, or’’, and by adding at the end the fol14 lowing new clause:

15 ‘‘(v) from sources not described in

16 subparagraph (A), but only to the extent

17 such income does not in any year exceed

18 an amount equal to the credit for qualified

19 expenditures which would be determined

20 under section 48A for such year if the mu21 tual or cooperative telephone company was

22 not exempt from taxation.’’

23 (d) CONFORMING AMENDMENT.—The table of sec24 tions for subpart E of part IV of subchapter A of chapter

25 1 of the Internal Revenue Code of 1986 is amended by
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1 inserting after the item relating to section 48 the following

2 new item:

‘‘Sec. 48A. Broadband credit.’’

3 (e) EFFECTIVE DATES.—

4 (1) IN GENERAL.—Except as provided in para5 graph (2), the amendments made by this section

6 shall apply to expenditures incurred after December

7 31, 2000.

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

9 subsection (c) shall apply to amounts received after

10 December 31, 2000.

11 SEC. 4. REGULATORY MATTERS.

12 No Federal or State agency or instrumentality shall

13 adopt regulations or ratemaking procedures that would

14 have the effect of confiscating any credit or portion thereof

15 allowed under section 48A of the Internal Revenue Code

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

17 the purpose of this Act.

18 SEC. 5. STUDY AND REPORT.

19 (a) SENSE OF CONGRESS.—It is the sense of Con20 gress that in order to maintain competitive neutrality, the

21 credit allowed under section 48A of the Internal Revenue

22 Code of 1986 (as added by section 3) should be adminis23 tered in such a manner so as to ensure that each class

24 of carrier receives the same level of financial incentive to
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1 deploy current generation broadband services and next

2 generation broadband services.

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

4 Treasury shall, within 180 days after the effective date

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

6 section 48A of the Internal Revenue Code of 1986 (as

7 added by section 3) on the relative competitiveness of po8 tential classes of carriers of current generation broadband

9 services and next generation broadband services, and shall

10 report to Congress the findings of such study, together

11 with any legislative or regulatory proposals determined to

12 be necessary to ensure that the purposes of such credit

13 can be furthered without impacting competitive neutrality

14 among such classes of carriers.

Æ