[Congressional Record Volume 146, Number 70 (Thursday, June 8, 2000)]
[Senate]
[Pages S4820-S4834]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. MURKOWSKI (for himself and Mr. Stevens):
S. 2693. A bill to amend title XIX of the Social Security Act to
provide a more equitable Federal medical assistance percentage for
Alaska; to the Committee on Finance.
the alaska medicaid equity act of 2000
Mr. MURKOWSKI. Mr. President, for more than 30 years, the
State of Alaska was subjected to an economic inequity in the
administration of the national Medicaid program.
With a poverty level 25 percent above the national average, and over
one-sixth of the state's population Medicaid-eligible, Alaska delivers
health care to many needy children, pregnant women, disabled and
elderly poor Americans. These people deserve quality medical care, and
Alaska delivers.
But three years ago, Congress recognized that the federal government
was not paying its fair share of Alaska's Medicaid program. The one-
size-fits-all formula that is used to calculate the federal Medicaid
match is based upon the per capita income of individual states as it
relates to the national per capita income. Simply put, states with
higher per capita income pay a higher percentage of Medicaid costs.
This formula works well for states that are near national norms for
most economic indicators. But it certainly doesn't work in the State of
Alaska, where most economic measurements are atypical compared with
national averages.
The reason is fairly simple. It just costs more to live and do
business in Alaska. Per capita income isn't a fair indicator unless it
takes into account the cost of delivering care in that area. Somehow,
however, the Medicaid formula forgot this.
In 1997, when Congress recognized this issue, it adopted legislation
that reflected the state's higher costs and increased the federal
Medicaid match. Instead of receiving a 50-50 match rate, as the formula
would dictate, a 59.8-40.2 percent match rate was established.
Unfortunately, this legislation was a short term fix. It only allowed
the formula change to remain in effect for
[[Page S4821]]
three years. As a result, unless we change the law, the formula will
revert to the same inequitable standard that was used previously. And
unless we extend the formula change, vital health care services to
Alaska's neediest patients will be compromised.
For this reason, I am introducing legislation that will extend the
federal government's commitment to the health and well-being of
Alaska's Medicaid beneficiaries. The ``Alaska Medicaid Equity Act of
2000,'' which is co-sponsored by Senator Stevens, simply continues the
spirit and intent of Congress by adjusting federal medical assistance
percentage calculations to account for Alaska's unusually high delivery
costs.
Three years after we first passed this legislation, the reasons and
justifications for the adjustment still exist. The formula is still
fundamentally unfair to Alaska.
Let me explain why. Alaska's per capita income is $28,523, the 17th
highest in the country. In fact, it's right near the national average,
which is $28,518. Although Alaska's per capita income suggests it is
one of the richer states, it fails to take into account the high cost
of living and the high cost of delivering health care.
Some studies show that it costs 71 percent more to deliver health
care in Alaska. But let's look at some real numbers. From coast to
coast, the U.S. dollar buys more goods and services than it does in
Alaska.
In Portland, Oregon, it costs $66.00 to feed a family of four for one
week. In Anchorage it costs $84.15. In Kodiak, that number jumps to
$105.88. And out in Dillingham, that number rises to $144.57! We're
comparing apples and oranges when we compare Alaska's per capita income
to another state's average.
And how about electricity? In Portland, 1000 kilowatt hours costs
$60.88. Anchorage residents are paying $92.83. Out in Bethel, Alaska,
residents are paying $202.68.
When focusing solely on the delivery of health care services, the
differences stand out even more. In Florida, a hospital room for one
day costs, on average, $361. This is in line with lower 48 costs, which
run between $350 and $450. In Alaska, that same room costs $748--more
than twice as much! A physician office visit is $53 in Florida. That
visit costs $80 in Alaska--an increase of 66%!
You can look at virtually any good or service and see a comparable
difference. A dollar simply doesn't buy the same thing in Alaska that
it does in the lower 48. The numbers prove this. The federal government
has admitted this. Federal government employees receive a salary
adjustment in Alaska--a 25% cost of living adjustment. Military
personnel receive a similar increase. Medicare pays higher as well.
Even the Federal Poverty Level is adjusted to reflect the unique costs
in Alaska. So why doesn't Medicaid?
Our bill merely continues the commitment Congress made to Alaska's
Medicaid population three years ago. It's fair, and it makes sense. I
ask my colleagues to assist me in rectifying this clear inequity for
the state of Alaska; I ask my colleagues to support this bill.
I ask unanimous consent that the text of the bill be included in the
Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 2693
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Alaska Medicaid Equity Act
of 2000''.
SEC. 2. AMENDMENT TO THE SOCIAL SECURITY ACT.
(a) In General.--The first sentence of section 1905(b) of
the Social Security Act (42 U.S.C. 1396d(b)) is amended--
(1) by striking ``and (3)'' and inserting ``(3)''; and
(2) by striking the period and inserting ``, and (4) for
purposes of this title and title XXI, with respect to Alaska,
the State percentage used to determine the Federal medical
assistance percentage shall be that percentage which bears
the same ratio to 45 percent as the square of the adjusted
per capita income of Alaska (determined by dividing the
State's 3-year average per capita income by 1.25) bears to
the square of the per capita income of the 50 States.''.
(b) Effective Date.--The amendments made by subsection (a)
take effect October 1, 2000.
______
By Mr. CONRAD (for himself, Ms. Collins, and Mr. Robb):
S. 2696. A bill to prevent evasion of United States excise taxes on
cigarettes, and for other purposes; to the Committee on Finance.
gray market cigarette compliance act of 2000
Mr. CONRAD. Mr. President, I am pleased today to join my good friends
from Maine and Virginia, Ms. Collins and Mr. Robb, in introducing the
Gray Market Cigarette Compliance Act of 2000. The growth in this gray
market in cigarettes represents not only an economic threat, but a
significant public health menace as well. This legislation will provide
law enforcement with better and more effective tools to fight this
dangerous intrusion into our marketplace.
This bill concerns itself with cigarettes manufactured for overseas
markets that nevertheless find their way into our domestic stream of
commerce. Even if they have been manufactured in the United States,
they are not required to comply with U.S. content disclosure and health
labeling requirements. Thus, when they are brought back into the U.S.
by gray market profiteers, they represent a serious public health
concern. And because they are often sold at prices below those of
products manufactured to comply with our tough cigarette marketing
laws, they become more attractive and available to children.
The gray market is unfair competition, plain and simple. Consumers
often purchase gray market products thinking they are the same as the
legitimate products manufactured for sale in the U.S. When gray
marketers bring in cigarettes that are not manufactured in full
compliance with U.S. law, they mislead unwitting consumers.
Consumers are not the only ones affected. Gray marketers also harm
the legitimate wholesalers and retailers who work hard and play by the
rules by exploiting gray areas in the law in order to gain this unfair
competitive advantage.
It is important to stress as well the implications of the gray market
in cigarettes for states under the tobacco Master Settlement Agreement
(MSA). One of the major components of the MSA provides that payments to
states are based on a formula that takes into account the annual volume
of tobacco sold in each state. Gray market cigarettes are not counted
under that volume adjustment formula. Therefore, to the extent that
gray market sales displace sales of cigarettes that are counted in the
volume adjustment, states could lose a portion of the amounts they
would otherwise receive under the MSA.
The Gray Market Cigarette Compliance Act will help consumers,
retailers, wholesalers, and federal and state governments. It will
strengthen the hand of law enforcement to combat the sale of gray
market cigarettes and close loopholes that gray markets have been able
to exploit. But most importantly, it will help keep cheap cigarettes
out of the hands of children.
I ask unanimous consent that the text of the bill be printed in the
Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 2696
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Gray Market Cigarette
Compliance Act of 2000''.
SEC. 2. FINDINGS.
Congress finds that additional legislation is necessary to
prevent evasion of United States taxes on cigarettes, to
ensure that the packages of all cigarettes sold or
distributed in the United States bear the health warnings
required by Federal law, to ensure compliance with applicable
Federal ingredient reporting requirements, and to improve the
enforcement of existing United States trademark laws so as to
prevent consumer confusion and deception. In support of this
finding, Congress has determined that:
(1) Prevention of federal tax evasion.--
(A) Cigarettes manufactured in the United States that are
labeled and shipped for export are not subject to the excise
taxes that otherwise would be payable with respect to such
products when removed from the premises of the manufacturer.
(B) Enforcement difficulties are created for the
authorities charged with ensuring that proper taxes are paid
whenever export-labeled cigarettes are sold or distributed in
the United States.
[[Page S4822]]
(C) The Balanced Budget Act of 1997 imposed restrictions on
the domestic sale or distribution of export-labeled
cigarettes, but such provisions have not been adequate to
prevent continued evasion of United States taxes on
cigarettes.
(D) Enforcement of Federal cigarette tax laws will be
enhanced substantially if cigarettes manufactured in the
United States and labeled for export are not sold or
distributed in the United States.
(2) Ensuring compliance with federal health warnings and
ingredient reporting requirements.--
(A) Congress has required that specified warnings appear on
the packages of all cigarettes manufactured, packaged, or
imported for sale or distribution in the United States.
(B) Congress has required that each person who
manufactures, packages, or imports cigarettes for sale or
distribution in the United States annually provide the
Secretary of Health and Human Services with a list of the
ingredients added to tobacco in the manufacture of such
cigarettes.
(C) The public health objectives of the foregoing
requirements will be advanced by adopting additional
mechanisms for ensuring that these requirements are met with
respect to all cigarettes for sale or distribution in the
United States.
(3) Enforcement of federal trademark laws.--
(A) Cigarettes manufactured for sale abroad have
characteristics that differentiate them in material respects
from cigarettes that bear the same trademarks but that are
manufactured for sale in the United States.
(B) Such material differences may include tar and nicotine
yields, incentive programs, and quality assurances with
respect to distribution and storage.
(C) When cigarettes bearing trademarks registered in the
United States are manufactured for sale or distribution
outside the United States but are diverted or reimported for
sale or distribution in the United States, there is a
substantial risk of consumer confusion and deception.
Stickers and other similar devices are inadequate to prevent
such confusion and deception.
(D) In order to effectuate the purposes of the United
States trademark laws, including the prevention of consumer
confusion and deception, additional legislation is necessary
to allow United States trademark holders to enforce fully
their rights against infringing cigarettes whether such
cigarettes were manufactured in the United States or abroad.
SEC. 3. RESTRICTIONS ON TOBACCO PRODUCTS INTENDED FOR EXPORT.
(a) Restrictions on Tobacco Products Intended for Export.--
Section 5754 of the Internal Revenue Code of 1986 is amended
to read as follows:
``SEC. 5754. RESTRICTIONS ON TOBACCO PRODUCTS INTENDED FOR
EXPORT.
``(a) Export-Labeled Tobacco Products.--Tobacco products
and cigarette papers and tubes manufactured in the United
States and labeled or shipped for exportation under this
chapter--
``(1) may be transferred to or removed from the premises of
a manufacturer or an export warehouse proprietor only if such
articles are being transferred or removed without tax in
accordance with section 5704;
``(2) except as provided in subsection (b), may be imported
or brought into the United States, after their exportation,
only if--
``(A) the requirements of section 4 of the Gray Market
Cigarette Compliance Act of 2000 are satisfied; and
``(B) such articles either are eligible to be released from
customs custody with the partial duty exemption provided in
section 5704(d) or are returned to the original manufacturer
of such article as provided in section 5704(c); and
``(3) may be sold or held for sale for domestic consumption
in the United States only if such articles are removed from
their export packaging and repackaged by the original
manufacturer or its authorized agent into new packaging that
does not contain the mark, label, or notice required by
section 5704(b) and complies with all other domestic law
applicable to such article.
This section shall apply to articles labeled for export by
the original manufacturer even if the packaging or the
appearance of such packaging to the consumer of such articles
has been modified or altered by a person other than the
original manufacturer or its authorized agent so as to remove
or conceal or attempt to remove or conceal (including by the
placement of a sticker over) any mark, label, or notice
required by section 5704(b). For purposes of this section,
sections 5704(d) and 5761, and such other provisions as the
Secretary may specify by regulations, references to
exportation shall be treated as including a reference to
shipment to the Commonwealth of Puerto Rico.
``(b) Exceptions for Export-Labeled Tobacco Products for
Personal Use.--The restrictions of subsection (a)(2) and the
penalty and forfeiture provisions in section 5761(c) shall
not apply to personal use quantities of tobacco products and
cigarette papers and tubes, as defined in section
555(b)(8)(G) of the Tariff Act of 1930 (19 U.S.C
1555(b)(8)(G)).
``(c) Cross Reference.--Section 5761(c) contains civil
penalties related to violations of this section. Section
5762(b) contains a criminal penalty applicable to any
violation of this section. Section 5763(a)(3) contains
forfeiture provisions related to violations of this
section.''.
(b) Clarification of Reimportation Rules.--Section 5704(d)
of the Internal Revenue Code of 1986 (relating to tobacco
products and cigarette papers and tubes exported and
returned) is amended by--
(1) striking ``a manufacturer of'' and inserting ``the
original manufacturer, or its authorized agent, of such'';
and
(2) inserting ``authorized by such manufacturer to receive
such articles'' after ``proprietor of an export warehouse''.
(c) Conforming Amendments.--
(1) Section 5761(e) is amended by adding at the end the
following: ``For an exception to the application of the
penalty under subsection (c), see section 5754(b).''.
(2) Section 5763(a) of the Internal Revenue Code of 1986 is
amended by adding at the end the following new paragraph:
``(3) Export-labeled tobacco products or cigarette papers
or tubes.--Any tobacco product, cigarette paper, or tube that
was imported or brought into the United States, or is sought
to be imported or brought into the United States in violation
of section 5754(a)(2), or that is sold or being held for sale
in violation of section 5754(a)(3), shall be forfeited to the
United States. Notwithstanding any other provision of law,
any product forfeited to the United States pursuant to this
section shall be destroyed.''.
(d) Clerical Amendment.--The item relating to section 5754
in the table of sections for subchapter F of chapter 52 of
the Internal Revenue Code of 1986 is amended to read as
follows:
Sec. 5754. Restrictions on tobacco products intended for export.
SEC. 4. REQUIREMENTS APPLICABLE TO CIGARETTE IMPORTS.
(a) Definitions.--As used in this section:
(1) Secretary.--Except as otherwise indicated, the term
``Secretary'' means the Secretary of the Treasury.
(2) Primary packaging.--The term ``primary packaging''
refers to the permanent packaging inside of the innermost
cellophane or other transparent wrapping and labels, if any.
Warnings or other statements shall be deemed ``permanently
imprinted'' only if printed directly on such primary
packaging and not by way of stickers or other similar
devices.
(b) Requirements for Entry of Cigarettes.--
(1) General rule.--Except as provided in paragraph (2),
cigarettes (whether originally manufactured in the United
States or in a foreign country) may be imported or brought
into the United States only if--
(A) the manufacturer of those cigarettes has timely
submitted, or has certified that it will timely submit to the
Secretary of Health and Human Services the lists of the
ingredients added to the tobacco in the manufacture of such
cigarettes as described in section 7 of the Federal Cigarette
Labeling and Advertising Act (15 U.S.C. 1335a);
(B) the precise warning statements in the precise format
specified in section 4 of such Act (15 U.S.C. 1333) are
permanently imprinted on both--
(i) the primary packaging of all those cigarettes; and
(ii) any other pack, box, carton, or container of any kind
in which those cigarettes are to be offered for sale or
otherwise distributed to consumers;
(C) the manufacturer or importer of those cigarettes is in
compliance as to those cigarettes being imported or brought
into the United States with a rotation plan approved by the
Federal Trade Commission pursuant to section 4(c) of such Act
(15 U.S.C. 1333(c));
(D) those cigarettes do not bear a trademark registered in
the United States for cigarettes, or if those cigarettes do
bear a trademark registered in the United States for
cigarettes, the owner of such United States trademark
registration for cigarettes (or a person authorized to act on
behalf of such owner) has consented to the importation of
such cigarettes into the United States; and
(E) the importer has submitted at the time of entry all of
the certificates described in paragraph (3).
(2) Exemptions.--Cigarettes satisfying the conditions of
any of the following subparagraphs shall not be subject to
the requirements of paragraph (1):
(A) Personal-use cigarettes.--Cigarettes that are imported
or brought into the United States in personal use quantities
as defined in section 555(b)(8)(G) of the Tariff Act of 1930
(19 U.S.C 1555(b)(8)(G)).
(B) Cigarettes brought into the united states for
analysis.--Cigarettes that are imported or brought into the
United States solely for the purpose of analysis in
quantities suitable for such purpose, but only if the
importer submits at the time of entry a certificate signed,
under penalties of perjury, by the consignee (or a person
authorized by such consignee) providing such facts as may be
required by the Secretary to establish that such consignee is
a manufacturer of cigarettes, a Federal or State government
agency, a university, or is otherwise engaged in bona fide
research and stating that such cigarettes will be used solely
for analysis and will not be sold in domestic commerce in the
United States.
(C) Cigarettes intended for noncommercial use, reexport, or
repackaging.--Cigarettes--
(i) that are being imported or brought into the United
States for delivery to the original
[[Page S4823]]
manufacturer of such cigarettes, or to a cigarette
manufacturer or an export warehouse authorized by such
original manufacturer;
(ii) that do not bear a trademark registered in the United
States for cigarettes, or if those cigarettes do bear a
trademark registered in the United States for cigarettes,
cigarettes for which the owner of such United States
trademark registration for cigarettes (or a person authorized
to act on behalf of such owner) has consented to the
importation of such cigarettes into the United States; and
(iii) for which the importer submits a certificate signed
by the manufacturer or export warehouse (or a person
authorized by such manufacturer or export warehouse) to which
such cigarettes are to be delivered (as provided in clause
(i)) stating, under penalties of perjury, with respect to
those cigarettes, that it will not distribute those
cigarettes into domestic commerce unless prior to such
distribution all steps have been taken to comply with
subparagraphs (A), (B), and (C) of paragraph (1), and, to the
extent applicable, section 5754(a)(3) of the Internal Revenue
Code of 1986.
For purposes of this subsection, a trademark is registered in
the United States if it is registered in the Patent and
Trademark Office under the provisions of title I of the Act
of July 5, 1946 (popularly known as the Trademark Act of
1946), and a copy of the certificate of registration of such
mark has been filed with the Secretary. The Secretary shall
make available to interested parties a current list of the
marks so filed.
(3) Customs certifications required for cigarette
imports.--The certificates that must be submitted by the
importer of cigarettes at the time of entry in order to
comply with paragraph (1)(E) are--
(A) a certificate signed by the manufacturer of such
cigarettes or an authorized official of such manufacturer
stating under penalties of perjury with respect to those
cigarettes, that such manufacturer has timely submitted, and
will continue to submit timely, to the Secretary of Health
and Human Services the ingredient reporting information
required by section 7 of the Federal Cigarette Labeling and
Advertising Act (15 U.S.C. 1335a);
(B) a certificate signed by such importer or an authorized
official of such importer stating under penalties of perjury
that--
(i) the precise warning statements in the precise format
required by section 4 of the such Act (15 U.S.C. 1333) are
permanently imprinted on both--
(I) the primary packaging of all those cigarettes; and
(II) any other pack, box, carton, or container of any kind
in which those cigarettes are to be offered for sale or
otherwise distributed to consumers; and
(ii) with respect to those cigarettes being imported or
brought into the United States, such importer has complied,
and will continue to comply, with a rotation plan approved by
the Federal Trade Commission pursuant to section 4(c) of such
Act (15 U.S.C. 1333(c)); and
(C) either--
(i) a certificate signed by such importer or an authorized
official of such importer stating under penalties of perjury
that those cigarettes and the packages containing those
cigarettes do not bear a trademark registered in the United
States for cigarettes; or
(ii) if those cigarettes do bear a trademark registered in
the United States for cigarettes--
(I) a certificate signed by the owner of such United States
trademark registration for cigarettes (or a person authorized
to act on behalf of such owner) stating under penalties of
perjury that such owner (or authorized person) consents to
the importation of such cigarettes into the United States;
and
(II) a certificate signed by such importer or an authorized
official of such importer stating under penalties of perjury
that the consent referred to in clause (i) is accurate,
remains in effect, and has not been withdrawn.
The Secretary may provide by regulation for the submission of
certifications under this subsection in electronic form if
prior to the entry of any cigarettes into the United States,
the person required to provide such certifications submits to
the Secretary a written statement, signed under penalties of
perjury, verifying the accuracy and completeness of all
information contained in such electronic submissions.
(c) Enforcement.--
(1) Civil penalty.--Any person who violates a provision of
subsection (b) shall, in addition to the tax and any other
penalty provided by law, be liable for a civil penalty for
each violation equal to the greater of $1,000 or 5 times the
amount of the tax imposed by chapter 52 of the Internal
Revenue Code of 1986 on all cigarettes that are the subject
of such violation.
(2) Forfeitures.--Any tobacco product, cigarette papers, or
tube that was imported or brought into the United States or
is sought to be imported or brought into the United States in
violation of, or without meeting the requirements of,
subsection (b) shall be forfeited to the United States.
Notwithstanding any other provision of law, any product
forfeited to the United States pursuant to this section shall
be destroyed.
(3) Cross reference.--Section 1621 of title 18, United
States Code, contains criminal penalties applicable to the
commission of perjury under this section.
SEC. 5. PENALTIES APPLICABLE TO THE SALE OF CIGARETTES NOT IN
COMPLIANCE WITH LABELING REQUIREMENTS.
(a) Civil Penalty.--Any person who sells or holds for sale
for domestic consumption any cigarettes for which the precise
warning statements in the precise format required by section
4 of the Cigarette Labeling and Advertising Act (15 U.S.C.
1333) are not permanently imprinted on both--
(1) the primary packaging of all those cigarettes; and
(2) any other pack, box, carton, or container of any kind
in which those cigarettes are offered for sale, sold, or
otherwise distributed to consumers,
shall, in addition to the tax and any other penalty provided
in this title, be liable for a penalty for each violation
equal to the greater of $1,000 or 5 times the amount of the
tax imposed by chapter 52 of the Internal Revenue Code of
1986 on all cigarettes that are the subject of such
violation.
(b) Forfeitures.--Cigarettes that are sold, or are being
held for domestic sale, in the United States (and not for
export or duty-free sale) shall be forfeited to the United
States if the precise warning statements in the precise
format required by section 4 of the Federal Cigarette
Labeling and Advertising Act (15 U.S.C. 1333) are not
permanently imprinted on both--
(1) the primary packaging of all those cigarettes; and
(2) any other pack, box, carton, or container of any kind
in which those cigarettes are offered for sale, sold, or
otherwise distributed to consumers.
(c) Enforcement.--The provisions of this section shall be
enforced by the Secretary of the Treasury through the Bureau
of Alcohol, Tobacco, and Firearms and such other agencies
within the Department of the Treasury as the Secretary may
determine.
(d) Treatment of transfers.--Transfers of cigarettes that
meet the requirements for transfer or removal free of tax
under section 5704 of the Internal Revenue Code of 1986 and
transfers of cigarettes pursuant to section 4(b) of this Act
shall not be treated as sales for domestic consumption under
this section.
(e) Destruction of Forfeited Articles.--Notwithstanding any
other provision of law, any article forfeited to the United
States pursuant to this section shall be destroyed.
(f) Definitions.--For purposes of this section, the term
``primary packaging'' shall refer to the permanent packaging
inside of the innermost cellophane or other transparent
wrapping and labels, if any. Warnings or other statements
shall be deemed ``permanently imprinted'' only if printed
directly on such primary packaging and not by way of stickers
or other similar devices.
SEC. 6. EFFECTIVE DATES.
(a) In General.--Except as provided in subsection (b), this
Act, and the amendments made by this Act, shall take effect
upon the date of enactment of this Act. Nothing in this
subsection shall be construed to affect the effective date of
the provisions of section 9302 of the Balanced Budget Act of
1997 (Public Law 105-33).
(b) Exceptions.--The amendments to sections 5754(a)(3) and
5763(a)(3) of the Internal Revenue Code of 1986, and the
provisions of sections 4 and 5 of this Act shall take effect
after the date which is 60 days after the date of enactment
of this Act.
SEC. 7. STUDY.
The Director of the Bureau of Alcohol, Tobacco, and
Firearms shall study whether the penalties imposed under
sections 5761, 5762, and 5763 of the Internal Revenue Code of
1986 are adequate to enforce the provisions of sections
5704(d) and 5754 of such Code and report the results of such
study to the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate
within 1 year of the date of enactment of this Act.
SEC. 8. SEVERABILITY.
If any provision of this section is held to be invalid as
it relates to any particular circumstance, such provision
shall remain valid under all other circumstances, and all
other provisions of this section shall remain in full force
and effect. If any provision of this section is held to be
invalid in its entirety, all other provisions of this section
shall remain in full force and effect.
SEC. 9. SAVINGS.
The civil or criminal penalties and remedies provided by
this Act and any other civil or criminal penalty and remedy
provided by chapter 52 of the Internal Revenue Code of 1986
and section 4 of this Act that are applicable to any
violation shall not be exclusive, but shall be in addition to
any other remedy provided by law.
______
By Mr. LUGAR (for himself, Mr. Gramm, and Mr. Fitzgerald):
S. 2697. A bill to reauthorize and amend the Commodity Exchange Act
to promote legal certainty, enhance competition, and reduce systemic
risk in markets for futures and over-the-counter derivatives, and for
other purposes; to the Committee on Agriculture, Nutrition, and
Forestry.
the commodity futures modernization act of 2000
Mr. LUGAR. Mr. President, I rise today with Senator Gramm,
distinguished Chairman of the Senate Banking Committee, and Senator
Fitzgerald, distinguished Chairman of the Subcommittee on Research,
Nutrition and General Legislation of the Senate Agriculture Committee,
to introduce
[[Page S4824]]
legislation to reauthorize the Commodity Exchange Act (CEA), which
lapses on September 30th of this year. The Commodity Futures
Modernization Act of 2000 would reauthorize the Commodity Exchange Act
(CEA) for five additional years and would reform the Commodity Exchange
Act in three primary ways. First, it would incorporate the unanimous
recommendations of the President's Working Group (PWG) on the proper
legal and regulatory treatment of over-the-counter (OTC) derivatives.
Second, it would codify the regulatory relief proposal of the Commodity
Futures Trading Commission (CFTC) to ensure that futures exchanges are
appropriately regulated and remain competitive. Lastly, this
legislation would reform the Shad-Johnson jurisdictional accord, which
banned single stock futures 18 years ago.
Derivative instruments, both exchange-traded and over-the-counter
(OTC), have played a significant role in our economy's current
expansion due to their innovative nature and their risk-transferring
attributes. According to the International Swaps and Derivatives
Association, the global derivatives market has a notional value that
exceeds $58 trillion and it has grown at a rate exceeding 20 percent
since 1990. Identified by Alan Greenspan as the ``most significant
event in finance of the past decade,'' the development of the
derivatives market has substantially added to the productivity and
wealth of our nation.
Derivatives enable companies to unbundle and transfer risk to those
entities who are willing and able to accept it. By doing so, efficiency
is enhanced as firms are able to concentrate on their core business
objective. A farmer can purchase a futures contract, one type of
derivative, in order to lock in a price for his crop at harvest.
Automobile manufacturers, whose profits earned overseas can fluctuate
with changes in currency values, can minimize this uncertainty through
derivatives, allowing them to focus on the business of building cars.
Banks significantly lessen their exposure to interest rate movements by
entering into derivatives contracts known as swaps, which enable these
institutions to hedge their risk by exchanging variable and fixed rates
of interests.
Signed into law in 1974, the Commodity Exchange Act requires that
futures contracts be traded on a regulated exchange. As a result, a
futures contract that is traded off an exchange is illegal and
unenforceable. When Congress enacted the CEA and the Commodity Futures
Trading Commission (CFTC) to enforce it, this was not a concern. The
meanings of `futures' and `exchange' were relatively apparent.
Furthermore, the over-the-counter derivatives business was in its
infancy. However, in the 26 years since the statute's creation, the OTC
swaps and derivatives market, sparked by innovation and technology, has
significantly outpaced the exchange-traded futures markets. And along
with this expansion, the definitions of a swap and a future began to
blur.
In 1998, the CFTC released a concept release on OTC derivatives,
which was perceived by many as a precursor to regulating these
instruments as futures. Just the threat of reaching this conclusion
could have had considerable ramifications, given the size and
importance of the OTC market. The legal uncertainty interjected by this
dispute jeopardized the entirety of the OTC market and threatened to
move significant portions of the business overseas. If we were to
lose this market, most likely to London, it would take years to bring
it back to U.S. soil. The resulting loss of business and jobs would be
immeasurable.
This threat led the Treasury Department, the Federal Reserve, and the
SEC to oppose the concept release and request that Congress enact a
moratorium on the CFTC's ability to regulate these instruments until
after the President's Working Group (PWG) could complete a study on the
issue. As a result, Congress passed a six-month moratorium on the
CFTC's ability to regulate over-the-counter derivatives. Despite
reservations, I supported this moratorium because it brought legal
assurance to this skittish market and it allowed the President's
Working Group time to develop recommendations on the most appropriate
legal treatment of OTC derivatives. In November 1999, the President's
Working Group completed its unanimous recommendations on OTC
derivatives and presented Congress with these findings.
This legislation adopts much of the recommendations of the PWG
report. Our bill contains three mechanisms for ensuring that legal
certainty is attained and that certain transactions remain outside the
Commodity Exchange Act. The first, the electronic trading facility
exclusion, would exclude transactions in financial and energy
commodities from the Act if conducted: (1) on a principal to principal
basis; (2) between institutions or sophisticated persons with high net
worth; and (3) on an electronic trading facility. The second would
exclude these transactions if (1) they are conducted between
institutions or sophisticated persons with high net worth; and (2) they
are not on a trading facility. The third exclusion clarifies the
Treasury Amendment language already contained in the CEA. It would
exclude all transactions in foreign currency and government securities
from the Act unless those transactions are futures contracts and traded
on an organized exchange. As recommended by the PWG, the bill would
give the CFTC jurisdiction over non-regulated off-exchange retail
futures transactions in foreign currency. Another important
recommendation of the PWG was to authorize futures clearing facilities
to clear OTC derivatives in an effort to lessen systemic risk and this
bill incorporates this finding.
As part of this legal certainty section, our legislation also
addresses the concern that excluding OTC derivatives from the futures
laws will invite the SEC to regulate these products as securities. With
Senator Gramm's leadership, this legislation would adopt language that
would ensure that these products maintain their current regulatory
status and remain healthy and competitive.
The second major section of this legislation addresses regulatory
relief. In February of this year, the CFTC issued a regulatory relief
proposal that would provide relief to futures exchanges and their
customers. Instead of listing specific requirements for complying with
the CEA, the proposal would require exchanges to meet internationally
agreed-upon core principals. The CFTC proposal creates tiers of
regulation for exchanges based on whether the underlying commodities
being traded are susceptible to manipulation or whether the users of
the exchange are limited to institutional customers.
The legislation incorporates this framework. A board of trade that is
designated as a contract market would receive the highest level of
regulation due to the fact that these products are susceptible to
manipulation or are offered to retail customers. Futures on
agricultural commodities would fall into this category. This bill also
sets out that in lieu of contract market designation, a board of trade
may register as a Derivatives Transaction Execution Facility (DTEF) if
the products being offered are not susceptible to manipulation and are
traded among institutional customers or retail customers who use large
Futures Commission Merchants (FCMs) who are members of a clearing
facility. Lastly, a board of trade may choose to be an Exempt Board of
Trade (XBOT) and not be subject to the Act (except for the CFTC's anti-
manipulation authority) if the products being offered are traded among
institutional customers only (absolutely no retail) and the instruments
are not susceptible to manipulation. Our bill would allow a board of
trade that is a DTEF or an XBOT to opt to trade derivatives that are
otherwise excluded from the Act on these facilities and to the extent
that these products are traded on these facilities, the CFTC would have
exclusive jurisdiction over them. With this provision, the intent is to
provide these facilities that trade derivatives with a choice--if
regulation is beneficial, the facility may choose to be regulated. If
not, the facility may choose to be excluded or exempted from the Act.
The bill's last section addresses the Shad-Johnson jurisdictional
accord. In 1982, SEC Chairman John Shad and CFTC Chairman Phil Johnson
reached an agreement on dividing jurisdiction between the agencies for
those products that had characteristics of both securities and futures.
Known as the Shad-Johnson Accord, this agreement prohibited single
stock futures and delineated jurisdiction between the SEC
[[Page S4825]]
and the CFTC on stock index futures and other options.
Meant as a temporary agreement, many have suggested that the Shad-
Johnson accord should be repealed. The President's Working Group
unanimously agreed that the Accord can be repealed if regulatory
disparities are resolved between the regulation of futures and
securities. Recently, the General Accounting Office (GAO) released a
report that found that there is no legitimate policy reasons for
maintaining the ban on single stock futures since they are being traded
in foreign markets, in the OTC market, and synthetically in the options
markets. Senator Gramm, chairman of the Senate Banking Committee, and I
sent a letter in December requesting the CFTC and the SEC to make
recommendations on reforming the Shad-Johnson. On March 2, the SEC and
CFTC responded that, although progress had been made, the agencies
could not resolve these issues before October. Disappointment with this
answer led Senator Gramm and I to once again ask SEC Chairman Arthur
Levitt and CFTC Chairman Bill Rainer to attempt to resolve the problems
surrounding lifting the ban. Unfortunately, the agencies were not able
to reach an agreement within our time-frame.
This legislation would repeal the prohibition on single stock futures
and narrow-based stock index futures. It would allow these products,
termed designated futures on securities, to trade on either a CFTC-
regulated contract market or a SEC-regulated national securities
exchange or association. The SEC would maintain its insider trading and
antifraud enforcement authority over these products traded on a
contract market and the CFTC would maintain its anti-manipulation
authority, including large trader reporting, over these products traded
on a national securities exchange or association. Margin levels on
these products would be harmonized with the options markets. The bill
would provide the regulators with one year after enactment to resolve
any remaining issues.
The goal of this legislation is to ensure that the United States
remains a global leader in the derivatives marketplace and that these
markets are appropriately and effectively regulated. Due to the
shortened legislative calendar in this election year, it will be
difficult to pass this bill without momentum and a strong base of
support. If Congress fails to enact a bill, we will begin the debate
again next year. However, in this technology-driven economy, a one year
delay is an eternity. Legal uncertainty for OTC derivatives will remain
and our futures markets will continue to lose market share due in part
to an outdated regulatory structure. For this reason, it is imperative
that Congress enact thoughtful legislation this year when it has a
golden opportunity to do so.
I ask unanimous consent that a section by section analysis of this
bill be included in the Record immediately after my statement.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Section-by-Section Analysis--Commodity Futures Modernization Act of
2000
Sec. 1. Short Title and Table of Contents. The Act is
entitled the Commodity Futures Modernization Act of 2000
Sec. 2. Purposes. The section lists 8 purposes for the bill
including reauthorizing and streamlining the Commodity
Exchange Act (CEA); eliminating unnecessary regulation for
the futures exchanges; clarifying the jurisdiction of the
CFTC over certain retail foreign currency transactions;
transforming the role of the Commodities Futures Trading
Commission (CFTC); providing a legislative and regulatory
framework for the trading of futures on securities; promoting
innovation and reducing systemic risk for futures and over-
the-counter (OTC) derivatives; allowing clearing of OTC
derivatives and enhancing the competitive position of the
U.S. financial institutions and markets.
Sec. 3. Definitions. Adds definitions to section 1(a) of
the CEA for the following terms: derivatives clearing
organizations; designated future on a security; electronic
trading facility; eligible contract participant; energy
commodity; exclusion-eligible commodity; exempted security;
financial commodity; financial institution, hybrid
instrument; national securities exchange; option organized
exchange; registered entity; security and trading facility.
Sec. 4. Agreements, Contracts, and Transactions in Foreign
Currency, Government Securities and Certain Other
Commodities. Strikes 2(a)(1)(A)(ii) (the current law Treasury
Amendment) and replaces it with a new subsection 2(c), which
states that nothing in the CEA applies to transactions in
foreign currency, government securities and other similar
instruments unless these instruments are futures traded on an
organized exchange. The bill defines ``organized exchange''
as a trading facility that either allows retail customers,
permits agency trades, or has a self regulatory role.
Subparagraph (2)(B) provides the CFTC with jurisdiction over
retail foreign currency transactions that are not traded on
an organized exchange and that are not regulated by another
federal regulator.
Sec. 5. Legal Certainty for Over-the-Counter Transactions.
Amends section 2 of the CEA to create a new subsection 2(d),
which provides two exclusions from the CEA for over-the-
counter derivatives. Section 2(d)(1) provides that nothing in
the CEA applies to transactions in an exclusive-eligible
commodity if the transaction: (1) is between eligible
contract participants (large, institutional entities) and (2)
is not executed on a trading facility. The second exclusion
in paragraph (d)(2) provides that nothing in the CEA shall
apply to a transaction in exclusion-eligible commodity if the
transaction: (1) is entered into on a principal to principal
basis between parties trading for their own accounts; (2) is
between eligible contract participants (large, institutional
entities) and (3) is executed on an electronic trading
facility. Paragraph (d)(3) provides that derivatives on
energy commodities (i.e., energy swaps) that have been
excluded from the CEA would be subject to anti-manipulation
provisions of the CEA.
Sec. 6. Excluded Electronic Trading Facilities. Amends
section 2 of the CEA to create a new subsection 2(e) that
provides that trading instruments that are otherwise excluded
from the CEA on an electronic trading facility does not
subject the transactions to the CEA. Paragraph (c)(2)
states that nothing in the DEA shall prohibit a contract
market or derivatives transaction execution facility from
establishing and operating an excluded electronic trading
facility.
Sec. 7. Hybrid Instruments. Amends section 2 of the CEA to
create a new subsection 2(f) that provides that nothing in
the CEA applies to a hybrid instrument that is predominantly
a security to mean any hybrid instrument in which (1) the
issuer of the instrument receives payment in full of the
purchase price at the time the instrument is delivered; (2)
the purchaser is not required to make additional payments;
(3) the issuer of the instrument is not subject to mark-to-
market margining requirements; and (4) the instrument is not
marketed as a futures contract. Paragraph (f)(3) clarifies
that mark-to-market requirements do not include the
obligation of an issuer of a secured debt instrument to
increase the amount of collateral for the instrument.
Sec. 8. Futures on Securities. Amends section 2 of the CEA
by adding a new subsection 2(g) that repeals the Shad Johnson
jurisdictional accord. The new section 2(g)(1) is a savings
clause to ensure that excluded OTC equity derivatives remain
outside the CEA and the jurisdiction of the CFTC. This
paragraph also prohibits the CFTC from designating a board of
trade as a contract market in options on securities (as in
current law).
Paragraph (2) allows the trading of futures on security
indexes on contract markets. Gives the CETC exclusive
jurisdiction in regulating these futures. In order for these
products to be designated as a contract market, the contracts
must be cash settled and must not be susceptible to
manipulation (applies to both the price of the contract or
the underlying securities (or an option on such securities)).
Paragraph (3) allows the trading of designated futures on
securities (defined in the bill as a contract for future
delivery on a single non-exempted security, an index based on
fewer than 5 non-exempted securities or an index in which a
single stock predominates by its value accounting for more
than 30 percent of the index's total value). The Act
authorizes these products to be traded on designated contract
markets and national securities exchanges or associations.
Paragraph (4) provides criteria for contract market
designation of these products including: cash settlement;
real-time audit trails; insusceptibility to price
manipulation (both of the contract and the underlying stock
or an option on that stock); eligibility for listing on a
national securities exchange; margin requirements; conflict
of interest rules; and making information available to the
regulators.
Paragraph (5) authorizes the SEC to enforce the securities
laws related to insider trading and fraud with respect to
designated futures on securities listed on a contract market.
This paragraph also requires the SEC and the CFTC, beginning
three years from the date of enactment, to jointly compile a
report on the implementation of this new authority and,
four years after the date of enactment, to submit the
report to Congress.
Paragraph (6) authorizes the CFTC to enforce its large
trader reporting and other antifraud and antimanipulation
authorities for designated futures on securities listed on a
national securities exchange. It requires national securities
exchanges to provide the CFTC information to enforce these
provisions.
Paragraph (7) provides the process for listing a designated
future on security on either a futures exchange or national
securities exchange.
As in current law, paragraph (8) provides the Federal
Reserve with the authority to
[[Page S4826]]
set margin and delegate this authority. The paragraph would
allow the Federal Reserve to create a three member board
consisting of members of the CFTC, SEC and the Federal
Reserve to set and maintain margin levels on designated
futures on securities.
Sec. 9. Protection of the Public Interest. Replaces section
3 of the CEA with a new section listing the responsibilities
of the CFTC in protecting the public interest. These include:
ensuring the financial integrity of all transactions subject
to the Act; protecting market participants from fraud and
manipulation; preventing market manipulation and minimizing
the risk of systemic failure; and promoting financial
innovation and fair competition.
Sec. 10. Prohibited Transactions. Re-writes the current
section 4c for clarity and adds a new provision (sec.
4c(a)(3)(B)) to allow futures commission merchants to trade
futures off the floor of a futures exchange as long as the
board of trade allows such transactions and the FCMs report,
record and clear the transactions in accordance with the
rules of the contract market or derivatives trading execution
facility.
Sec. 11. Designation of Boards of Trade as Contract
Markets. Strikes current law sections 5 and 5a and adds a new
section 5 providing for the designation of boards of trade as
contract markets. Subsection (b) contains criteria that
boards of trade must meet in order to be designated as a
contract market. These include establishing and enforcing
rules preventing market manipulation; ensuring fair and
equitable trading; specifying how the trade execution
facility operates--including any electronic matching systems;
ensuring the financial integrity of transactions;
disciplining members or market participants who violate the
rules; allowing for public access to the board of trade rules
and enabling the board of trade to obtain information in
order to enforce its rules. Existing contract markets are
grand fathered in.
The 17 core principles that must be met to maintain
designation as a contract market are contained in (d) and
provide that the board of trade must: monitor and enforce
compliance with the contract market rules; list only
contracts that are not susceptible to manipulation; monitor
trading to prevent manipulation, price distortion and
delivery or settlement disruptions; adopt position limits for
speculators; adopt rules to provide for the exercise of
emergency authority, including the authority to liquidate
or transfer open positions, suspend trading and make
margin calls; make available the terms and conditions of
the contracts and the mechanisms for executing
transactions; publish daily information on prices, bids,
offers, volume, open interest, and opening and closing
ranges; provide a competitive, open and efficient market
and mechanism for executing transactions; provide for the
safe storage of all trade information in a readily usable
manner to assist in fraud prevention; provide for the
financial integrity of the contracts, the futures
commission merchants and customer funds; protect market
participants from abusive practices; provide for
alternative dispute resolutions for market participants
and intermediaries; establish and enforce rules regarding
fitness standards for those involved in market governance;
ensure that the governing board reflects the composition
of the market participants (in the case of mutually owned
exchanges); maintain records and make them available at
any time for inspection by the Attorney General; and avoid
taking any action that restrains trade or imposes
anticompetitive burdens on the markets.
Sec. 12. Derivatives Transaction Execution Facilities.
Amends the CEA by adding a new section 5a authorizing a new
trading designation, derivatives transaction execution
facility (DTEF). Under (b), a board of trade may elect to
operate as a DTEF rather than a contract market if they meet
the DTEF designation requirements. A registered DTEF may
trade any non-designated futures contract if the commodity
underlying the contract has a nearly inexhaustible supply, is
not susceptible to manipulation and does not have a cash
market in commercial practice. Eligible DTEF traders include
authorized contract market participants and persons trading
through registered futures commission merchants with capital
of at least $20,000,000 that are members of a futures self-
regulatory organization (SRO) and a clearing organization.
Boards of trade that have been designated as contract markets
may operate as DTEFs if they provide a separate location for
DTEF trading or, in the case of an electronic system,
identify whether the trading is on a DTEF or contract market.
Subsection (c) provides requirements for boards of trade
that wish to register as DTEFs, including: establishing and
enforcing trading rules that will deter abuses and provide
market participants impartial access to the markets and
capture information that may be used in rule enforcement;
define trading procedures to be used; and provide for the
financial integrity of DTEF transactions.
To maintain registration as a DTEF, the board of trade must
comply with 8 core principles listed in (d): maintain and
enforce rules; ensure orderly trading and provide trading
information to the CFTC; publicly disclose information
regarding contract terms, trading practices, and financial
integrity protections; provide information on prices, bids
and offers to market participants as well as daily
information in volume and open interest for the actively
traded contracts; establish and enforce rules regarding
fitness standards for those involved in DTEF governance;
maintain records and make them available at any time for
inspection by the Attorney General; and avoid taking any
action that restrains trade or imposes anticompetitive
burdens on the markets.
Subsection (e) allows a broker-dealer or a bank in good
standing to act as an intermediary on behalf of its customers
and to receive customer funds serving as margin or security
for the customer's transactions. If the broker-dealer holds
the DTEF customer funds or accounts for more than 1 business
day, the broker-dealer must be a registered FCM and a member
of a registered futures association. The CFTC and SEC are to
coordinate in adopting rules to implement this subsection.
Under (f), the CFTC may adopt regulations to allow FCMs to
give their customers the right to not segregate customer
funds for purposes of trading on the DTEF.
Subsection (g) clarifies that a DTEF may trade derivatives
that otherwise would be excluded from the CEA and the CFTC
has exclusive jurisdiction only when these instruments are
traded on a DTEF.
Sec. 13. Derivatives Clearing Organizations. Amends the CEA
to create a new section 5b regarding derivatives clearing
organizations. Under subsection (a), these clearing entities,
which are allowed to clear derivatives (that are not a
security), must register with the CFTC and meet a set of 14
core principals set out in subsection (d), including
principals on financial resources of the clearing facility,
participant eligibility, risk management systems, settlement
procedures, treatment of client funds, default rules, rule
enforcement, system safeguards, reporting, record keeping,
public information disclosure, information sharing, and
minimizing competitive restraints.
Under subsection (b), a derivatives clearing organization
will not have to register with the CFTC if it is registered
with another federal financial regulator and it does not
clear futures. Under subsection (c), a derivatives clearing
organization that is exempt from registration may opt to
register with the CFTC. Subsection (e) provides that existing
clearing entities that clear futures contracts on a
designated contract market will be grand fathered in as a
derivatives clearing organization.
Sec. 14. Common Provisions Applicable to Registered
Entities. Amends the CEA to create a new section 5c that
contains provisions affecting all registered entities
(contract markets, derivatives transaction execution
facilities and derivatives clearing organizations).
Subsection (a) would allow the CFTC to issue or approve
interpretations to describe what would constitute an
acceptable business practice under the core principals for
registered entities.
Subsection (b) would allow a registered entity to delegate
its self regulatory functions to a registered futures
association, while specifying that responsibility for
carrying out these functions remain with the registered
entity.
Subsection (c) would enable the registered entity to trade
new products or adopt or amend rules by providing the CFTC a
written certification that the new contract or new rule or
amendment complies with the CEA. This subsection would allow
a registered entity to request that the CFTC grant prior
approval of a new contract, new rule or rule amendment. This
subsection would require the CFTC to pre-approve rule changes
to open agricultural contracts.
Subsection (d) grants the CFTC the authority to informally
resolve potential violations of the core principals for
registered entities.
Sec. 15. Exempt Boards of Trade. Amends the CEA to create a
new section 5d regarding exempt boards of trade. Under
subsections (a) and (b), futures contracts traded on an
exempt board of trade would be exempt from the CEA (except
section 2(g) regarding equity futures) if (1) participants
are eligible contract participants (large institutional
investors) and (2) the commodity underlying the futures
contract has an inexhaustible deliverable supply, is not
subject to manipulation, or has no cash market. Subsection
(c) subjects futures contracts traded on an exempt board of
trade to the anti-fraud and anti-manipulation provisions of
the CEA. Under subsection (d), if the CFTC finds that an
exempt board of trade is a significant source of price
discovery for the underlying commodity, the board of trade
shall disseminate publicly on a daily basis trading volume,
opening and closing price ranges, open interest, and other
trading data as appropriate to the market.
Sec. 16. Suspension or Revocation of Designation as
Contract Market. Designates current section 5b as 5d and
amends it to authorize the CFTC to suspend the registration
of a registered entity for 180 days for any violation of the
CEA.
Sec. 17. Authorization of Appropriations. Amends section
12(d) of the CEA by striking 2000 and reauthorizing
appropriations through fiscal year 2005.
Sec. 18. Preemption. Rewrites paragraph 12(e)(2) of the CEA
for clarity and to conform with changes made in the bill. Re-
states the current provisions that the CEA supercedes and
preempts other laws in the case of transactions conducted on
a registered entity or subject to regulation by the CFTC
(even if outside the United States), and adds that in the
case of excluded electronic trading facilities, and any
agreements, contracts or transactions that are excluded or
covered by a 4(c)
[[Page S4827]]
exemption, the CEA supercedes and preempts state gaming and
bucket shop laws (except for the anti-fraud provisions of
those laws that are generally applicable).
Sec. 19. Predispute Resolution Agreements for Institutional
Customers. Amends section 14 of the CEA to clarify that
futures commission merchants, as a condition of doing
business, may require customers, that are eligible contract
participants, to waive their right to file a reparations
claim with the CFTC.
Sec. 20. Consideration of Costs and Benefits and Antitrust
Laws. Amends section 15 of the CEA to add a new subsection
(a) requiring the CFTC, before promulgating regulations and
issuing orders, to consider the costs and benefits of their
action. This does not apply to orders associated with an
adjudicatory or investigative process, emergency actions or
findings of fact regarding compliance with CFTC rules.
Sec. 21. Contract Enforcement Between Eligible
Counterparties. Amends section 22 of the CEA to provide a
safe harbor so that transactions will not be voidable based
solely on the failure of the transaction to comply with the
terms or conditions of an exclusion or exemption from the Act
or CFTC regulations.
Sec. 22. Legal Certainty for Swaps. Provides that the SEC
does not have jurisdiction over swap agreements. Places a one
year moratorium on banks being able to market swaps to the
retail public. Requests the President's Working Group to
conduct a study on the regulatory treatment of swaps offered
to retail customers.
Sec. 23. Technical and Conforming Amendments. Makes
technical and conforming amendments throughout the CEA to
reflect changes made by the bill.
Sec. 24. Effective Date. The Act takes effect on the date
of enactment, except section 8 (dealing with futures on
securities), which takes effect one year after
enactment.
Mr. GRAMM. Mr. President, today I join with Senator Lugar, chairman
of the Senate Agriculture Committee, to introduce the Commodity Futures
Modernization Act of 2000. The formal purpose of this legislation is to
reauthorize the Commodity Exchange Act, the legal authority for the
Commodity Futures Trading Commission. As important as that is, this
legislation does far more.
This is a landmark bill, that addresses four chief goals that Senator
Lugar and I set out to achieve when we first began discussing this
legislation. First of all, this bill would repeal the so-called Shad-
Johnson Accord, the 18-year-old temporary prohibition on the trading of
futures based on individual stocks. Second, the bill eliminates the
legal uncertainly that today hangs as an ominous cloud over the $7
trillion financial swaps markets. Third, the bill addresses the need to
harmonize the treatment of margins among the futures, stock, and
options markets. Fourth, the bill provides important and necessary
regulatory relief to the futures and securities markets.
One of the most notable aspects of this bill is that it brings
together the chairmen of the two committees with jurisdiction over
these issues, the Agriculture Committee and the Banking Committee. To
start out with such cooperation speaks well, I believe, for the
prospects for this legislation. While the Commodity Exchange Act is
clearly within the jurisdiction of the Agriculture Committee, stocks,
options, and swaps are within the jurisdiction of the Banking
Committee.
The next step for this bill will be joint hearings of our two
committees to consider it. Few bills are in a perfected form when first
introduced, and I fully expect that additional changes will be made to
this one before it becomes law. For example, I hope to see additional
measures of regulatory relief for the securities markets included.
But this bill is a fine beginning, introduced in the best way. We
bring together two committees that could choose to argue over turf but
instead are choosing to cooperate to make changes in law that are
needed to ensure that our financial market places continue to lead the
world. At the same time, we will be providing the widest choice of
investment opportunities for American businesses and families.
______
By 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. 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):
S. 2698. 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; to the Committee on Finance.
broadband internet access act of 2000
Mr. MOYNIHAN. Mr. President, today, joined by my colleagues Senators
Kerry, Rockefeller, Snowe, Allard, Baucus, Breaux, Brownback, Bryan,
Bunning, Burns, Daschle, Durbin, Enzi, Hollings, Hutchinson, Johnson,
Kennedy, Kerrey, Landrieu, Lincoln, Mikulski, Reid, Robb, Roberts,
Schumer, and Thurmond, I am introducing the Broadband Internet Access
Act of 2000. This legislation provides a tax incentive to stimulate
rapid deployment of high-speed communication services to residential,
rural, and low-income areas.
A term of art often used for high-speed communication service is
``broadband.'' The term is a remnant from the era of analog systems. It
refers to the size of spectral bandwidth over which signals can be
transmitted. Even though it is not essential to have wide spectra in
the digital world to transmit vast amounts of data, ``broadband''
remains in our digital society's lexicon for high-speed communication
or throughput.
In common use, broadband connotes fast Internet access, and that is
certainly part of the goal of this legislation. The grander goal,
however, extends beyond simply expediting traditional Internet use. It
is to deliver, in the near future, a wide array of voice, video, and
data communication services, at extremely fast speeds, to all
Americans.
The Broadband Internet Access Act of 2000 provides graduated tax
credits for deployment of high-speed communications to residential and
rural communities. It gives a 10-percent credit for the deployment of
at least 1.5 million bits per second downstream and 200,000 bits per
second upstream to all subscribers--residential, business, and
institutions--in rural and low income areas. This is essentially
``current generation'' broadband. The bill gives a 20-percent credit
for the deployment of at least 22 million bits per second downstream
and 10 million bits per second upstream to all subscribers in rural and
low income areas, and to all residential customers in other areas. This
is what we are calling ``next generation'' broadband.
The bill does not dictate the technological means by which these
broadband services are to be delivered. Today, the possibilities
include telephone lines, cable modems, fiber optics, terrestrial
wireless, and satellite wireless. In the future there may be others.
Whether high-speed communications are delivered by electrons or by
photons, with wires or without wires, by copper or by glass, by
terrestrial or by extraterrestrial means, is immaterial. With a
temporary tax credit, it is economically feasible to push national
communication capabilities forward by ten or perhaps twenty years. The
bill permits a variety of technological approaches to make under-served
areas more economically attractive to broadband providers. Yesterday we
had electronics. Today we have photonics. Tomorrow we will have some
``future-onics.''
Mr. President, as I stand before you today, the streets of
Washington, D.C. and of many other major cities in this country are
being torn-up to lay cables for high-speed communication. Line-of-sight
communication ``dishes'' are being installed on office buildings
permitting business-to-business voice, video, and data transmissions.
The problem is, market forces are driving deployment of high-speed
communication capabilities almost exclusively to urban businesses and
wealthy households. Low-income families, exurban communities, rural
businesses, and rural families are relegated to the back of the queue.
The bill gives private industry economic incentives to accelerate high-
speed communication capabilities to Americans who are at the end-of-
the-line.
Why is this important? Let me offer examples of this technology's
power and importance. I start with two historical cases.
During the 1950's the National Institute of Mental Health funded a
1,278-
[[Page S4828]]
mile closed-circuit telephone system between seven state hospitals in
Nebraska, Iowa, North Dakota, and South Dakota. Health care providers
at the hospitals held weekly teleconferencing lectures via this system.
By 1961, the system included both audio and video, and psychiatrists
successfully used it to care for patients under a program called
``telepsychiatry.''
At about the same time, radiologists in Montreal had a coaxial cable
laid between two hospitals three miles apart, thus connecting them for
audio and video communications. Doctors were regularly transmitting
radiographic images to each other to consult on difficult cases and to
conduct educational conferences.
As a result of these two projects, patients were treated by
physicians who were, in some cases, hundreds of miles away. The medical
profession was able to share information and ideas, which improved
healthcare in this country and Canada.
Unfortunately, such ``telemedicine'' links are very few, even though
our ability to transmit data has increased. Why? Because there is no
nationwide high-speed data-transfer infrastructure. Instead, the
standard business Internet speed in rural areas is 56,000 bits per
second. What can be done at that speed? Printed matter can be sent and
received reasonably quickly. But photographs or graphics, require long
waits, and then often with poor image quality. More advanced uses, such
as video conferencing, are out of the question. At faster Internet
speeds of, say, 200,000 to 300,000 bits per second, information can be
sent much faster. Photographs and graphics leap to the screen, instead
of crawling. Video conferencing also is possible, although jittery
images and low image resolution make it impractical. Music and movies
can be downloaded slowly to a compact disk.
At higher data transfer speeds--about 1.5 million bits per second--
the amount and quality of information that can be transmitted becomes
quite good. Very good video conferencing is possible. Two or more
people in different places can see and talk to each other as if in the
same room, at a crisp image resolution and without image jitter.
And at even higher speeds, extraordinarily rich images of movement,
color, and detail can be transmitted as if one were looking at them in
person. Complex medical images can be sent and received. At twenty
million bits per second, a digitized mammography image can be
transmitted in about fifteen seconds, and a standard chest x-ray in
about four seconds.
Twenty million bits per second is about 360 times faster than the
fastest speeds available on a conventional modem attached to a Plain
Old Telephone Service, or, as I am told, POTS. Is it really possible to
do this? Indeed, it is. The technology exists now. Over ordinary copper
wire, some of our communication companies are now offering data speeds
of 26 million bits per second.
Imagine the tremendous personal and economic benefits our nation will
reap with universal high-speed communication access, including
telemedicine; telecommuting; distance learning at all education levels;
electronic commerce in low-income and rural communities; digital
photography; and entertainment video. As a result, we will enjoy
greater educational opportunities, greater geographic freedom,
increased wealth in low-income areas, and even decreased urban
congestion.
So if the benefits are so great and the capability exists, why are
these technologies not widely available? Simple economics. It is much
more lucrative to provide services to business customers. Although a
few affluent individuals in urban areas have high speed Internet
access, the great majority of Americans are limited to extremely slow
communication or to none at all.
That is why it is appropriate for government to step in at this time
and provide an incentive to stimulate deployment of high-speed
communication service to residential areas and small businesses,
especially in rural and low-income areas of the country. Our country
has a proud history of supporting critical services in rural and under-
served communities.
Three major examples are utilities, interstate highways, and the
airline industries.
The Rural Utilities Service is a federal credit agency within the
Department of Agriculture that helps rural areas finance electric,
telecommunications, water, and waste water projects. Its lending
creates public-private partnerships to finance the construction of
infrastructure in rural areas. Working in partnership with rural
telephone cooperatives and companies, the Department of Agriculture
helped boost the number of rural Americans with telephone service from
38 percent in 1950 to more than 95 percent in 1999.
The federal government funded 90 to 100 percent of the cost of
building the interstate highway system. The Federal Aid Highway Act of
1956 initiated a nationwide program that aimed to be completed within
20 years. The bulk of the program was completed within this time
period, although full implementation was not achieved until the early
1990s.
In the 1930s, the airline industry--much like today's Internet start-
ups--was operating at a loss. Believing airline service to be both
unique and necessary, the federal government stepped-in with an airmail
subsidy in 1938, and this federal funding made the industry instantly
profitable. The airline industry then flourished, and the subsidy was
removed in the mid 1950s.
In a 1979 speech titled, ``Technology and Human Freedom,'' I stated,
``I believe that government can and should seek to advance technology--
as a condition of social progress.'' I still believe that. In 1979, I
went on to say, ``In my view, only a person of what St. Augustine would
have termed `indomitable ignorance' could deny that technology has
greatly enhanced human freedom. . . . Freedom is choice, and technology
vastly enhances choice. . . . The relation between technology and
democracy is intimate. . . . Experimentation, variety, optimism: these
are the ingredients of both technology and democracy.''
In 1978, the late Mancur Olson, an esteemed economist, cautioned that
the very liberty of societies such as ours may be the source of
developments that make innovation considerably more difficult. We
should guard against the prospect of our government retarding
technology as Professor Olson hypothesized. The bill I introduce today
encourages technology, and extends its range to those residential and
business areas it otherwise would not reach until much later.
We need this legislation now to maintain our technological
leadership. As the press has recently reported, Sweden, Japan,
Singapore, and Canada are deploying broadband at levels higher than
those called for in this bill. We cannot afford to fall behind in this
critical area. History indicates that, if we do not act aggressively,
it will take a very long time to deploy broadband services on a
widespread basis. The first regular, sustained commercial telephone
services were offered in 1876, but it took more than 90 years to make
the service available to 90 percent of residences in the United States.
It would be deplorable if it takes even half as long to bring existing
broadband technology to the same number of Americans.
If the Internet is the information superhighway, broadband
communication is the information super sonic transport. I want to
encourage the communications industry to accelerate deployment of the
this super sonic transport to every community in the country.
I want to thank my colleagues for their support and collaboration on
this bill. Senator John Kerry and his staff have been involved in every
aspect of this legislation, and we could not have formulated the bill
without their detailed knowledge of the communications industry. And
Senators Rockefeller and Snowe recently introduced a similar bill
focusing on the deployment of broadband in rural areas, and the
legislation we introduce today incorporates and expands upon their
work.
This bill is meant to be a proposal. As we consider this measure,
Congress may decide to modify it. Moreover, we have not yet received a
revenue estimate on the bill, and if it proves to be too expensive, we
will have to scale it back. It is time, however, to focus on this
issue. Let us begin the discussion of how we can provide the stimulus
necessary to ensure the availability of high-speed communication to
every
[[Page S4829]]
American. I urge the Senate to support this important legislation.
Mr. President, I ask unanimous consent that a copy of the bill and
letters of support from a number of organizations appear in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 2698
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Broadband Internet Access
Act of 2000''.
SEC. 2. FINDINGS AND PURPOSE.
(a) Findings.--The Congress finds the following:
(1) The Internet has been the single greatest contributor
to the unprecedented economic expansion experienced by the
United States over the last 8 years.
(2) Increasing the speed that Americans can access the
Internet is necessary to ensure the continued expansion.
(3) Today, most residential Internet users, especially
those located in low income and rural areas, are extremely
limited in the type of information they can send and receive
over the Internet because their means of access is limited to
``narrowband'' communications media, typically conventional
phone lines at a maximum speed of 56,000 bits per second.
(4) Similarly, small businesses in low income and rural
areas are also deprived of full information access because of
their dependence on narrowband facilities.
(5) By contrast, many residential users located in higher
income urban and suburban areas and urban business users can
access the Internet from a variety of carriers at current
generation broadband speeds in excess of 1,500,000 bits per
second, giving them a choice among carriers and high-speed
access to a wide array of audio and data applications.
(6) The result is a growing disparity in the speed of
access to the Internet and the opportunities it creates
between subscribers located in low income and rural areas and
subscribers located in higher income urban and suburban
areas.
(7) At the same time, experts project that, under current
financial and regulatory conditions, the facilities needed to
transmit next generation broadband services over the Internet
to residential users at speeds in excess of 10,000,000 bits
per second will not be as ubiquitously available as is
telephone service until sometime between the years 2030 and
2040.
(8) Experts also believe that, under current financial and
regulatory conditions, the disparity in access will be
exacerbated with the deployment of next generation broadband
capability.
(9) The disparity in current broadband access to the
Internet, the slow pace of deployment of next generation
broadband capability, and the projected disparity in access
to such capability will likely prove detrimental to the on-
going economic expansion.
(10) It is, therefore, appropriate for Congress to take
action to narrow the current and future disparity in the
level of broadband access to the Internet, and to accelerate
deployment of next generation broadband capability.
(b) Purpose.--The purpose of this Act is to accelerate
deployment of current generation broadband access to the
Internet for users located in certain low income and rural
areas and to accelerate deployment of next generation
broadband access for all Americans.
SEC. 3. BROADBAND CREDIT.
(a) In General.--Subpart E of part IV of chapter 1 of the
Internal Revenue Code of 1986 (relating to rules for
computing investment credit) is amended by inserting after
section 48 the following new section:
``SEC. 48A. BROADBAND CREDIT.
``(a) General Rule.--For purposes of section 46, the
broadband credit for any taxable year is the sum of--
``(1) the current generation broadband credit, plus
``(2) the next generation broadband credit.
``(b) Current Generation Broadband Credit; Next Generation
Broadband Credit.--For purposes of this section--
``(1) Current generation broadband credit.--The current
generation broadband credit for any taxable year is equal to
10 percent of the qualified expenditures incurred with
respect to qualified equipment offering current generation
broadband services to rural subscribers or underserved
subscribers and taken into account with respect to such
taxable year.
``(2) Next generation broadband credit.--The next
generation broadband credit for any taxable year is equal to
20 percent of the qualified expenditures incurred with
respect to qualified equipment offering next generation
broadband services to all rural subscribers, all underserved
subscribers, or any other residential subscribers and taken
into account with respect to such taxable year.
``(c) When Expenditures Taken Into Account.--For purposes
of this section--
``(1) In general.--Qualified expenditures with respect to
qualified equipment shall be taken into account with respect
to the first taxable year in which current generation
broadband services or next generation broadband services are
offered by the taxpayer through such equipment to
subscribers.
``(2) Offer of services.--For purposes of paragraph (1),
the offer of current generation broadband services or next
generation broadband services through qualified equipment
occurs when such class of service is purchased by and
provided to at least 10 percent of the subscribers described
in subsection (b) which such equipment is capable of serving
through the legal or contractual area access rights or
obligations of the taxpayer.
``(d) Special Allocation Rules.--
``(1) Current generation broadband services.--For purposes
of determining the current generation broadband credit under
subsection (a)(1), if the qualified equipment is capable of
serving both the subscribers described under subsection
(b)(1) and other subscribers, the qualified expenditures
shall be multiplied by a fraction--
``(A) the numerator of which is the sum of the total
potential subscriber populations within the rural areas and
the underserved areas which the equipment is capable of
serving, and
``(B) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving.
``(2) Next generation broadband services.--For purposes of
determining the next generation broadband credit under
subsection (a)(2), if the qualified equipment is capable of
serving both the subscribers described under subsection
(b)(2) and other subscribers, the qualified expenditures
shall be multiplied by a fraction--
``(A) the numerator of which is the sum of--
``(i) the total potential subscriber populations within the
rural areas and underserved areas, plus
``(ii) the total potential subscriber population of the
area consisting only of residential subscribers not described
in clause (i),
which the equipment is capable of serving, and
``(B) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving.
``(e) Definitions.--For purposes of this section--
``(1) Antenna.--The term `antenna' means any device used to
transmit or receive signals through the electromagnetic
spectrum, including satellite equipment.
``(2) Cable operator.--The term `cable operator' has the
meaning given such term by section 602(5) of the
Communications Act of 1934 (47 U.S.C. 522(5)).
``(3) Commercial mobile service carrier.--The term
`commercial mobile service carrier' means any person
authorized to provide commercial mobile radio service as
defined in section 20.3 of title 47, Code of Federal
Regulations.
``(4) Current generation broadband service.--The term
`current generation broadband service' means the transmission
of signals at a rate of at least 1,500,000 bits per second to
the subscriber and at least 200,000 bits per second from the
subscriber.
``(5) Next generation broadband service.--The term `next
generation broadband service' means the transmission of
signals at a rate of at least 22,000,000 bits per second to
the subscriber and at least 10,000,000 bits per second from
the subscriber.
``(6) Nonresidential subscriber.--The term `nonresidential
subscriber' means a person or entity who purchases broadband
services which are delivered to the permanent place of
business of such person or entity.
``(7) Open video system operator.--The term `open video
system operator' means any person authorized to provide
service under section 653 of the Communications Act of 1934
(47 U.S.C. 573).
``(8) Other wireless carrier.--The term `other wireless
carrier' means any person (other than a telecommunications
carrier, commercial mobile service carrier, cable operator,
open video system operator, or satellite carrier) providing
current generation broadband services or next generation
broadband service to subscribers through the radio
transmission of energy.
``(9) Packet switching.--The term `packet switching' means
controlling or routing the path of a digitized transmission
signal which is assembled into packets or cells.
``(10) Qualified equipment.--
``(A) In general.--The term `qualified equipment' means
equipment capable of providing current generation broadband
services or next generation broadband services at any time to
each subscriber who is utilizing such services.
``(B) Only certain investment taken into account.--Except
as provided in subparagraph (C), equipment shall be taken
into account under subparagraph (A) only to the extent it--
``(i) extends from the last point of switching to the
outside of the unit, building, dwelling, or office owned or
leased by a subscriber in the case of a telecommunications
carrier,
``(ii) extends from the customer side of the mobile
telephone switching office to a transmission/receive antenna
(including such antenna) on the outside of the unit,
building, dwelling, or office owned or leased by a subscriber
in the case of a commercial mobile service carrier,
``(iii) extends from the customer side of the headend to
the outside of the unit, building, dwelling, or office owned
or leased by a subscriber in the case of a cable operator or
open video system operator, or
``(iv) extends from a transmission/receive antenna
(including such antenna) which transmits and receives signals
to or from
[[Page S4830]]
multiple subscribers to a transmission/receive antenna
(including such antenna) on the outside of the unit,
building, dwelling, or office owned or leased by a subscriber
in the case of a satellite carrier or other wireless carrier,
unless such other wireless carrier is also a
telecommunications carrier.
``(C) Packet switching equipment.--Packet switching
equipment, regardless of location, shall be taken into
account under subparagraph (A) only if it is deployed in
connection with equipment described in subparagraph (B) and
it is uniquely designed to perform the function of packet
switching for current generation broadband services or next
generation broadband services, but only if such packet
switching is the last in a series of such functions performed
in the transmission of a signal to a subscriber or the first
in a series of such functions performed in the transmission
of a signal from a subscriber.
``(11) Qualified expenditure.--
``(A) In general.--The term `qualified expenditure' means
any amount chargeable to capital account with respect to the
purchase and installation of qualified equipment (including
any upgrades thereto) for which depreciation is allowable
under section 168.
``(B) Certain satellite expenditures excluded.--Such term
shall not include any expenditure with respect to the
launching of any satellite equipment.
``(12) Residential subscriber.--The term `residential
subscriber' means an individual who purchases broadband
services which are delivered to such individual's dwelling.
``(13) Rural subscriber.--
``(A) In general.--The term `rural subscriber' means a
residential subscriber residing in a dwelling located in a
rural area or nonresidential subscriber maintaining a
permanent place of business located in a rural area.
``(B) Rural area.--The term `rural area' means any census
tract which--
``(i) is not within 10 miles of any incorporated or census
designated place containing more than 25,000 people, and
``(ii) is not within a county or county equivalent which
has an overall population density of more than 500 people per
square mile of land.
``(14) Satellite carrier.--The term `satellite carrier'
means any person using the facilities of a satellite or
satellite service licensed by the Federal Communications
Commission and operating in the Fixed-Satellite Service under
part 25 of title 47 of the Code of Federal Regulations or the
Direct Broadcast Satellite Service under part 100 of title 47
of such Code to establish and operate a channel of
communications for point-to-multipoint distribution of
signals, and owning or leasing a capacity or service on a
satellite in order to provide such point-to-multipoint
distribution.
``(15) Subscriber.--The term `subscriber' means a person
who purchases current generation broadband services or next
generation broadband services.
``(16) Telecommunications carrier.--The term
`telecommunications carrier' has the meaning given such term
by section 3(44) of the Communications Act of 1934 (47 U.S.C.
153 (44)), but--
``(A) includes all members of an affiliated group of which
a telecommunications carrier is a member, and
``(B) does not include a commercial mobile service carrier.
``(17) Total potential subscriber population.--The term
`total potential subscriber population' means, with respect
to any area and based on the most recent census data, the
total number of potential residential subscribers residing in
dwellings located in such area and potential nonresidential
subscribers maintaining permanent places of business located
in such area.
``(18) Underserved subscriber.--
``(A) In general.--The term `underserved subscriber' means
a residential subscriber residing in a dwelling located in an
underserved area or nonresidential subscriber maintaining a
permanent place of business located in an underserved area.
``(B) Underserved area.--The term `underserved area' means
any census tract--
``(i) the poverty level of which is at least 30 percent
(based on the most recent census data),
``(ii) the median family income of which does not exceed--
``(I) in the case of a census tract located in a
metropolitan statistical area, 70 percent of the greater of
the metropolitan area median family income or the statewide
median family income, and
``(II) in the case of a census tract located in a
nonmetropolitan statistical area, 70 percent of the
nonmetropolitan statewide median family income, or
``(iii) which is located in an empowerment zone or
enterprise community designated under section 1391.
``(f) Designation of Census Tracts.--The Secretary shall,
not later than 90 days after the date of the enactment of
this section, designate and publish those census tracts
meeting the criteria described in paragraphs (13)(B) and
(18)(B) of subsection (e), and such tracts shall remain so
designated for the period ending with the termination date
described in subsection (g).
``(g) Termination.--This section shall not apply to
expenditures incurred after December 31, 2005.''
(b) Credit To Be Part of Investment Credit.--Section 46 of
the Internal Revenue Code of 1986 (relating to the amount of
investment credit) is amended by striking ``and'' at the end
of paragraph (2), by striking the period at the end of
paragraph (3) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(4) the broadband credit.''
(c) Special Rule for Mutual or Cooperative Telephone
Companies.--Section 501(c)(12)(B) of the Internal Revenue
Code of 1986 (relating to list of exempt organizations) is
amended by striking ``or'' at the end of clause (iii), by
striking the period at the end of clause (iv) and inserting
``, or'', and by adding at the end the following new clause:
``(v) from sources not described in subparagraph (A), but
only to the extent such income does not in any year exceed an
amount equal to the credit for qualified expenditures which
would be determined under section 48A for such year if the
mutual or cooperative telephone company was not exempt from
taxation.''
(d) Conforming Amendment.--The table of sections for
subpart E of part IV of subchapter A of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after
the item relating to section 48 the following new item:
``Sec. 48A. Broadband credit.''
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to expenditures
incurred after December 31, 2000.
(2) Special rule.--The amendments made by subsection (c)
shall apply to amounts received after December 31, 2000.
SEC. 4. REGULATORY MATTERS.
No Federal or State agency or instrumentality shall adopt
regulations or ratemaking procedures that would have the
effect of confiscating any credit or portion thereof allowed
under section 48A of the Internal Revenue Code of 1986 (as
added by section 3) or otherwise subverting the purpose of
this Act.
SEC. 5. STUDY AND REPORT.
(a) Sense of Congress.--It is the sense of Congress that in
order to maintain competitive neutrality, the credit allowed
under section 48A of the Internal Revenue Code of 1986 (as
added by section 3) should be administered in such a manner
so as to ensure that each class of carrier receives the same
level of financial incentive to deploy current generation
broadband services and next generation broadband services.
(b) Study and Report.--The Secretary of the Treasury shall,
within 180 days after the effective date of section 3, study
the impact of the credit allowed under section 48A of the
Internal Revenue Code of 1986 (as added by section 3) on the
relative competitiveness of potential classes of carriers of
current generation broadband services and next generation
broadband services, and shall report to Congress the findings
of such study, together with any legislative or regulatory
proposals determined to be necessary to ensure that the
purposes of such credit can be furthered without impacting
competitive neutrality among such classes of carriers.
____
MCI WorldCom,
Washington, DC, June 8, 2000.
Hon. Daniel Patrick Moynihan,
Senate Finance Committee,
Washington, DC.
Dear Senator Moynihan: Thank you for your leadership in
advancing the deployment of broadband technology to rural and
underserved areas of the country. WorldCom, a leading
Internet backbone provider, believes broadband technology
will improve the quality of life for millions of Americans
and assist in maintaining this country's leadership in the
worldwide information technology marketplace. Your support of
our efforts to modernize communications infrastructure dates
at least to the Tax Reform Act of 1986, when you supported
legislation designed to enhance advanced telecommunications
investment.
Electronic commerce and its Internet medium is a thriving
environment. More jobs, more gross domestic product, and more
wealth have been created by the Internet than any other
single innovation in recent memory. Electronic commerce
continues to grow apace, creating increased need for
continuing development and deployment of communications
technology.
Your proposal, Senator Moynihan, is designed to support
that deployment and development at an advanced level. It is
designed not only to accelerate deployment of existing
technology, but also to encourage development and deployment
of next generation broadband technologies as well.
Acceleration is important. Persons needing distance education
cannot wait while job opportunities pass them by; businesses
facing competitive pressure cannot wait to engage in the
latest Internet based inventory planning; rural residents
with a great idea for a new dot.com need high speed
connectivity now; and persons suffering from serious disease
far from the right medical experts cannot wait for a
telemedicine connection.
WorldCom appreciates your effort to support this critical
technology and supports your efforts through the Broadband
Internet Access Act of 2000. While we would like to see a
proposal broader than the ``last mile'', your bill initiates
this all-important process.
Sincerely,
Catherine R. Sloan,
Chief Legislative Counsel.
[[Page S4831]]
____
Bell Atlantic,
Washington, DC, June 5, 2000.
Re: Broadband Internet Access Act of 2000
Hon. Daniel Patrick Moynihan,
Russell Senate Office Building,
Washington, DC.
Dear Senator Moynihan: Congratulations on your leadership
in developing and introducing the ``Broadband Internet Access
Act of 2000.'' I am writing to provide you with Bell
Atlantic's support and views regarding this important tax
legislation.
As you know, Bell Atlantic is a leader in the deployment of
broadband capability, particularly in the state of New York.
As such, we are extremely familiar with the regulatory and
financial hurdles associated with deploying broadband to all
our business and residential customers. We believe that rapid
deployment of this capability will provide the basis for
sustained long-run economic growth in the economy. Our
experience with the Internet has taught us that the
convergence of communications and computing yields tremendous
benefits for the economy in terms of productivity growth.
Unfortunately, other carriers and we face tremendous
government hurdles as we roll out this capability. These
hurdles arise from the unintended adverse effects of
regulation on investment that, in turn, increase the degree
of financial uncertainty associated with such investments. In
other words, we face a regulatory problem and a financial
problem in deploying broadband capability to our customers.
The Broadband Internet Access Act helps to overcome these
problems by encouraging Bell Atlantic and other carriers
through financial incentives to proceed with these
investments. More importantly, the targeted nature of the
incentives will help us reach customers in rural areas and
low-income areas that are otherwise difficult to serve
because of the high cost of deployment and other factors.
The bill does not address the overwhelming regulatory
issues, which Bell Atlantic continues to face. We encourage
you to support legislation to address these problems as well
as the financial issues that are addressed in the Broadband
Act.
We encourage you to enact the Broadband Internet Access Act
this year. We appreciate your leadership on this important
issue.
Sincerely,
Thomas J. Tauke,
Senior Vice President--
Government Relations.
____
NTCA,
Arlington, VA, June 5, 2000.
Re Broadband Internet Access Act of 2000.
Hon. Daniel Patrick Moynihan,
Ranking Minority Member, Senate Committee on Finance,
Washington, DC.
Dear Senator Moynihan: During the course of the past year,
the term ``digital divide'' has quickly become the buzzword
of choice among policymakers. Coined ostensibly to describe
the absence of communications availability to certain
segments of the nation's population, the term has been
twisted to imply the issue of communications ``haves'' and
``have-nots'' is merely a rural vs. urban matter.
NTCA has vigorously moved to redirect the discussion to
fully recognize the achievements of small rural incumbent
local exchange carriers (ILECs) in deploying advanced
communications infrastructure and services. The facts bear
witness to the success of small rural ILECs in stepping up to
what we feel is better described as the ``Digital
Challenge.'' Recent surveys show that in many cases, markets
served by such entities are more technologically advanced
than their larger, urban counterparts. Likewise, they are
significantly more advanced than the rural markets served by
the nation's large ILECs. Other reports show that urban areas
in general are not the ``digital Mecca'' many would have us
believe. The reality is that the markets of the nation's
small rural ILECs are anything but communications technology
wastelands as many are portraying them to be.
Nevertheless, there remains a substantial amount of costly
work to be done for all markets to be fully advanced service-
capable. For this reason, we commend your effort, vis-a-vis
the Broadband Internet Access Act of 2000, to further
stimulate deployment of broadband services by granting tax
credits to telecommunications providers deploying advanced
technologies. Furthermore, we sincerely appreciate your
effort to recognize the special circumstances, with regard to
tax credits, of the nation's rural telecommunications
cooperatives by the inclusion of the Special Rule for Mutual
or Cooperative Telephone Companies.
In addition, there are several existing tools such as the
universal service support program that, if allowed to
function appropriately, could help offset the tremendous
costs associated with the deployment of advanced services. We
continue to work with several of your colleagues to advance
legislation that will ensure the universal service program is
allowed to function as the Congress envisioned in helping
lead the deployment of new communications technologies and
services.
It must be reiterated that small rural ILECs have long led
the way in meeting the Digitial Challenge by deploying new
technologies--not just to their most profitable customers,
but to every individual within their market that wishes to
receive service. With your assistance, the rural ILEC
industry will continue to maintain its unparalleled record of
service.
Sincerely,
Shirley Bloomfield,
Vice President, Government
Affairs & Association Services.
____
Bristol Bay Area
Health Corporation,
Dillingham, AK, May 31, 2000.
Re Broadband Internet Access Act of 2000.
Hon. Patrick Daniel Moynihan,
Ranking Minority Member, Committee on Finance, U.S. Senate,
Washington, DC.
Dear Senator Moynihan: We are writing to indicate our
support for your continued effort to pass the Broadband
Internet Access Act of 2000. If passed, this legislation
could significantly improve access of millions of Americans
to the Internet and its valuable resources, including
residents of rural Alaska communities.
We provide health care services to 34 remote Alaska
communities, most of which can only be reached by small
airplane. The availability of affordable advanced
telecommunications including telemedicine and improved
Internet access would be beneficial in providing health
education to villagers; would help reduce feelings of
isolation of health care providers, teachers and other
professionals; and provide access to health care resources
for everyone. It would also provide faster and less expensive
access to all communication mediums.
We believe that remote, rural areas such as those that make
up a large part of Alaska need and deserve the availability
of affordable high-speed Internet services like urban
communities currently enjoy. Without this availability, rural
communities will continue to be left behind and
technologically outdated as the rest of the U.S. moves
forward.
Thank you for the opportunity to comment on this important
legislation. Please contact me at (907) 842-5201 if I can be
of further assistance.
Sincerely,
Robert J. Clark,
President/CEO.
____
Georgetown University
Medical Center,
May 25, 2000.
Re Broadband Internet Access Act of 2000.
Hon. Patrick Daniel Moynihan,
Ranking Minority Member, Committee on Finance, U.S. Senate,
Washington, DC.
Dear Senator Moynihan: We are writing to encourage you in
your effort to pass the Broadband Internet Access Act of
2000. If passed, this important legislation could
significantly improve the way millions of Americans gain
access to health information and receive health care.
For many years the Imaging Sciences and Information Systems
(ISIS) Center at Georgetown University has been a successful
innovator of technologies that are used to improve the
quality and lower the cost of health care. This contribution,
however, accounts for only two-thirds of the receipt for
successful health care reform in America. The third element,
improved access to health services, has been one of the most
challenging, especially to health care providers and
consumers in rural America.
Access to quality health care cannot be improved through
development of more efficient technologies, alone. We, and
with us many of our colleagues throughout America, believe
financial incentives are necessary to correct current
regulatory and market insufficiencies that inhibit assess to
emerging health services that increasingly rely on
telecommunications and Internet connectivity to reach
consumers. The creation of these incentives is outside the
purview of the health sector and that is why we look to you
and your Senate colleagues. You can help remedy the economic
conditions that contribute to the growing ``digital divide'',
that made second class citizens out of underserved people
throughout the country.
Specifically, we look to you for a remedy that will improve
access and availability of telephone, cable, fiber optic,
terrestrial, wireless, and satellite telecommunications
services at bandwidth capacities sufficient to carry high
resolution images, video and voice over the Internet,
increasingly the preferred mode of delivery. We believe your
proposed legislation addressed these problems through its 10%
tax credit for deployment of ``last-mile'' current generation
broadband capability to rural and underserved areas, and its
20% credit for ``next generation'' service.
Therefore we applaud your sponsorship of the Broadband
Internet Access Act of 2000. We appreciate your vision and
look to you and your colleagues in the Senate to rapidly pass
this important legislation so that we can move on to a next
generation of health care with improved quality, cost and
access.
Thank you for an opportunity to express our support for
your initiative. If you need any additional information,
please call us at 202-687-7955 or at
M[email protected].
Sincerely,
Dukwoo Ro, PhD,
Associate Professor.
Seong K. Mun, PhD,
Professor, Director of ISIS Center.
[[Page S4832]]
____
United States Distance
Learning Association,
Watertown, MA, May 19, 2000.
Re Broadband Internet Access Act of 2000.
Hon. Daniel Patrick Moynihan,
U.S. Senate,
Washington, DC.
Dear Senator Moynihan:
The United States Distance Learning Association supports
the Broadband Internet Access Act of 2000 to be introduced by
you.
As Executive Director of the association I want to assure
you that our association applauds the initiative. The
Congress of the United States has the opportunity to help
deliver long needed Telecommunication Services to all
Americans. This act will serve two purposes--increasing
bandwidth availability and decreasing the well-documented
Digital Divide.
Sincerely,
Dr. John G. Flores,
Executive Director.
Corning Incorporated,
Corning, NY, May 19, 2000.
Hon. Daniel Patrick Moynihan,
Ranking Minority Member, Committee on Finance, U.S. Senate,
Washington, DC.
Dear Senator Moynihan: I am writing to endorse with
enthusiasm the Broadband Internet Access Act of 2000 and to
congratulate you for your leadership for introducing this
important legislation.
As you may know, Corning is a leader in optical
communications systems. As such, we have great confidence in
the benefits that deployment of broadband to all Americans
can confer on the economy and society as a whole. As Alan
Greenspan has said many times, the Internet has contributed
significantly to the on-going economic expansion. The rapid
deployment of broadband access can extend the benefits of the
Internet well into the future.
Unfortunately, broadband is being deployed very slowly in
this country. Two specific problems have arisen. First,
subscribers in rural and underserved low-income areas are
unlikely to gain access to the current generation broadband
capability any time soon, giving rise to a ``digital divide''
between information haves and have-nots. Secondly, the
deployment of next generation broadband capability will take
30 to 40 years in the current regulatory and financial
environment. We think America can do better for its citizens
by immediate enactment of the Broadband Internet Access Act
of 2000.
We believe your legislation addresses these problems
through its 10% tax credit for deployment of last-mile
current generation broadband capability to rural and
underserved areas, and its 20% credit of next generation
technology more generally. These incentives will correct
current regulatory and market failures that are inhibiting
the investment. Moreover, the credits are temporary, lasting
only five years, a sufficient time to kick-start the
deployment of the technology and to reduce costs in this very
dynamic sector.
It is important to note that broadband infrastructure is a
common good. As such, we believe that a well-designed
initiative such as the Broadband Internet Access Act can cost
effectively enhance the national welfare.
Again, I congratulate you for taking the leadership and for
developing a creative initiative that will benefit the
country for decades to come.
All the best,
Roger Ackerman.
____
Association for Local
Telecommunications Services,
Washington, DC, June 7, 2000.
Senator Daniel Patrick Moynihan,
U.S. Senate,
Washington, DC.
Dear Senator Moynihan: The Association for Local
Telecommunications Services (ALTS) thanks you for your
leadership in drafting legislation to create financial
incentives for telecommunications companies to offer high-
speed Internet broadband services. The legislation that you
introduce today will help companies expand their businesses
into rural and urban communities and will also provide them
with incentives to offer broadband service at even higher
speeds.
We are especially grateful of your continuing efforts to
support competitive telecommunications companies in local
markets. While competitors have made enormous progress in
rolling out advanced telecommunications services to consumers
across the country, many markets remain uneconomic to serve.
Your legislation will help to accelerate the deployment of
these broadband services in rural, inner city and other
underserved areas. We have seen that the best way to
encourage deployment of advanced broadband technologies is to
encourage competition for local telecommunications services.
ALTS believes your legislation will provide significant
financial incentives to competitive companies to roll out
high speed broadband services for every consumer who wants to
receive the service.
Your legislation is a realistic effort to close the
``digital divide'' between rural and urban communities and to
ensure that all Americans have the fastest and best
telecommunications service in the world. We look forward to
continuing to work with you on this legislation in the coming
weeks.
Thank you again for your support of competition and the
rapid deployment of advanced, broadband services to all
Americans.
Sincerely yours,
John Windhausen, Jr.,
President.
____
Queens College,
Department of Economics,
New York, NY, June 1, 2000.
Re The Broadband Internet Access Act of 2000.
Hon. Daniel Patrick Moynihan,
Ranking Minority Leader, Committee on Finance, U.S. Senate,
Washington, DC.
Dear Senator Moynihan: I am aware that you and other
Senators are co-sponsors of ``The Broadband Internet Access
Act of 2000,'' a bill that is intended to alleviate the
disparity in high-speed access to the Internet. Preliminary
research undertaken by Florence Kwan and myself shows that
discrepancies in high-speed access do exist at this time.
Further, the study demonstrates the need for policy-makers to
examine the degree to which all members of society have high-
speed access to the Internet.
The study was based upon a sampling of residential lines in
the United States. The results suggest that income and
population density are significant predictors of access to
cable-modem or DSL service. High-speed access is less likely
to be available to Americans in rural and low-income
neighborhoods. As preliminary research, the study underscores
the need for further research that is comprehensive in scope
and that can serve as the basis for regulatory policy.
I commend your efforts to address an issue that is critical
to the ability of all Americans to be part of the Information
Society and to participate in our system of democracy.
Very truly yours,
David Gabel,
Professor.
Mr. KERRY. Mr. President, I am very pleased to join Senator Moynihan
in introducing the Broadband Internet Access Act of 2000. I commend the
Senator from New York for his leadership on this issue, and I look
forward to working with Senator Moynihan, Senator Rockefeller and
others in this critical effort to ensure the rapid deployment of high-
speed telecommunications services to all Americans.
Mr. President, throughout the course of history, prosperity has
flowed to those economies that had ready access to avenues of commerce.
Throughout the middle ages and up until the mid-19th century, that
meant ready proximity to a waterway. The great cities of Italy, England
and France all lay on oceans or rivers. In North America, the early
trading points on or near the Atlantic thrived and became New York,
Boston, Philadelphia and Baltimore. Throughout this time, the primary
way to ship goods was over water, and economies prospered along oceans
or major inland waterways because of the paramount importance of access
to commerce. With the industrial revolution came the advent of the
railroad and this new way of getting goods to market. If your town was
fortunate to be along one of many rail lines, then good economic times
often lay ahead. If your town was not along the railroad, then you were
at a serious economic disadvantage. We read today about the ``ghost
towns'' of the old West--these were the towns left behind because the
railroad passed them by. And even then, one hundred seventy years ago,
we know that Americans did all they could to connect themselves to the
networks--waterways, railroads--that delivered goods to market: along
the Panhandle, the entire town of Ivanhoe, Oklahoma literally uprooted
itself--picked up the church, the school, the buildings--and moved
across the Texas border to be closer to the railroad lines.
In many ways, that is precisely the challenge facing thousands of
communities across the nation today: communities are rushing and
hurrying--and too many are struggling and finding it enormously
difficult--to get connected to the networks on which we conduct
business in the New Economy. And, Mr. President, unless we are willing
to countenance thousands of ghost towns across the landscape of the
21st century--ghost towns of inner city and rural America--we must work
together to empower every community to meet that challenge.
Mr. President, today, the major product in the United States is
information. The ability to send and receive vast amounts of
information, quickly and efficiently, often determines the success or
failure of a company in our new information age. For this reason,
companies are locating where they have high-speed access to this new
avenue of commerce, and they are shying away from areas where such
excess is either prohibitively expensive or unavailable. High-speed
access is also
[[Page S4833]]
providing new opportunities in terms of educating our children and
caring for the sick. However, those opportunities are available only to
those communities with efficient and affordable access to high-speed
lines.
Herein lies the problem. As would be expected, telecommunications
companies are deploying advanced networks initially in areas where
there are lots of attractive consumers, but are often taking their time
to build-out elsewhere, such as in low-income urban and rural areas.
That's why a downtown business consumer has a myriad of choices for
high-speed access. And most residential consumers living in reasonable
well-off urban and suburban areas also have a choice. However, many,
many regions of our country still have little or no ability to obtain
high-speed access to the Internet.
According to the Massachusetts Technology Collaborative, of the 351
towns in Massachusetts, only 164 are wired to receive high-speed DSL
Internet service, and only 145 are wired to receive high-speed cable
modem service. Significantly, 151 towns have no DSL or cable modem
option, only 56 kilobit dial-up Internet service. Moreover, this
situation is not expected to change anytime soon. The Legg Mason
Precursor groups estimates that even three or fours years down the
road, half of America will have either one or zero broadband providers
to choose from.
We need to address this problem in order to ensure that no area is
left behind--to ensure that all Americans are able to benefit from our
new high-tech economy. Many telecommunications companies legitimately
argue that deploying in certain areas makes little sense because the
opportunity to recoup the investment is so small. It's time we listened
and offered an economic incentive to change the equation. To this end,
our bill establishes a generous 10 percent tax credit to all companies
willing to deploy and offer 1.5 megabit high-speed Internet service in
rural and low-income urban areas. We are advocating such an approach
because we have heard from industry that this will provide a needed
incentive to deploy in areas that are presently neglected.
Significantly, this credit is open to all companies be they telephone
or cable, wireline or wireless, MMDS or satellite. The bill is
concerned only with encouraging widespread deployment, and is
absolutely technology neutral.
Mr. President, our legislation addresses not only the digital divide
that exists today, but also looks to the future and to the next
generation of high-speed services. The next generation of advanced
services will require substantially higher transmission speeds like 4
megabits for one channel of standard television, 20 megabits for one
channel of HDTV, and 10 to 100 megabits for Ethernet data. These
transmission speeds can only be achieved with more advanced technology
such as fiber optics, very high speed digital subscriber line, 50-home-
node cable modems, and next-generation wireless.
The services available at such speeds will truly revolutionize and
improve our daily lives. However, according to economists from the
American Enterprise Institute, at the current rate of deployment, such
advanced technology will not achieve universal penetration until
somewhere between 2030 and 2040. Furthermore, such delay may seriously
undermine our global leadership in technology. Indeed, according to a
recent report in the Wall Street Journal, the Japanese company NTT will
start bringing optical fiber lines directly to homes in Tokyo and Osaka
by the end of this year. Such networks will have capabilities of up to
10 megabits downstream--several times faster than most of the high-
speed services offered today in America.
Such Internet capability will transform American life in ways we can
only imagine today. Children can download educational video in real
time on nearly any subject. Adults can train for new jobs from their
homes. Complex medical images such as MRIs and x-rays that today take
several minutes to download can be transmitted in a matter of seconds.
Telecommuting, business teleconferencing and personal communication
will all rise to new levels.
To accelerate the roll-out of such next-generation systems in the US,
we propose to establish a 20 percent tax credit for companies that
deploy systems capable of providing 22 megabit downstream/10 megabit
upstream service to residential consumers everywhere and business
consumers in low-income urban and rural areas. Such bits speeds will
allow for different users in a home to simultaneously watch 3 different
channels of digital television and utilize high-speed Ethernet-
comparable Internet access.
Mr. President, this measure is intended to begin the debate in the
Senate on how best to address the growing digital divide and to
accelerate the deployment of next-generation technologies across our
nation. I want to thank Senator Moynihan for his extraordinary
leadership on this issue and his staff for their continued hard work in
crafting this bill. I also wish to commend Senators Rockefeller and
Snowe for their work on tax credit legislation which we incorporate and
expand on in this bill. Finally, I wish to extend my gratitude to all
the members of industry who worked with us over these past few months
in crafting this bill. Clearly, this is a very complex topic and we are
continuing to work to find the right solution. I look forward to
continuing our partnership and to passing meaningful legislation this
year.
The challenge today is extraordinary--its implications absolutely
unmistakable for our country. Too often we talk about a digital divide
in the United States as if it were unchangeable, as if it were a simple
fact of life in this nation that some communities will be empowered by
technology while others will be left behind. But this is a false
choice--and we ought to be doing everything in our power as policy
makers, working harmoniously with industry, to offer a new choice:
every community connected to the new technology, every citizen provided
with the tools to make the most of their own talents in the New
Economy.
Mr. President, The Broadband Internet Access Act of 2000 is not a
panacea for every challenge before us in the New Economy; significant
questions of education reform workforce development, and technology
training must be resolved and reinvented before mere access to
technology will allow full participation for every citizen in the
Information Age. But Mr. President, I ask that--as we work in a
bipartisan way to address those other vital areas of public policy-- we
remember the lessons of our nation's economic history and take this
absolutely critical first step towards meeting the most basic needs of
any community--a connection to the New Economy.
Mr. BAUCUS. Mr. President, I am very pleased today to join with
Senator Moynihan in introducing the Broadband Internet Access Act of
2000. This legislation provides a tax incentive to stimulate rapid
deployment of high-speed communication services to residential, rural,
and low-income areas.
Although our nation continues to experience a period of unprecedented
economic growth, it is important to remember that this growth is not
shared evenly throughout the country. My State, Montana, is
unfortunately an example of areas in which the economy continues to lag
behind the rest of the nation. Montana is ranked last in per-capita
earned income and first in the number of people holding multiple jobs.
Our children and grandchildren are constantly faced with a difficult
dilemma--will they be able to find jobs in Montana, where they can
continue to enjoy living in ``the last great place'', or will they be
forced to move elsewhere just to be able to earn a decent wage. More
and more of them are choosing to leave, costing Montana some of her
best and brightest young people, and along with them much of our hope
for the future.
One of the keys to turning our State's economy around is to make sure
the appropriate infrastructure is in place so that we can attract the
kinds of businesses that will provide jobs for ourselves and our
children. I have worked for years as ranking Member of the Environment
and Public Works Committee to ensure that Montana and other rural
states receive our fair share of highway construction funds, so that
the transportation infrastructure of our great State can support
economic growth.
But today's economy is not just about bricks and mortar. Technology
is
[[Page S4834]]
transforming traditional ways of doing business, as it is creating
entirely new forms of business that never existed before. And high-
speed Internet access is the key to advancing technological growth.
The Broadband Internet Access Act of 2000 provides graduated tax
credits for deployment of high-speed communications to residential and
rural communities. It gives a 10 percent credit for the deployment of
at least 1.5 million bits per second downstream and 200,000 bits per
second upstream to all subscribers--residential, business, and
institutions--in rural and low income areas. This is what we call the
``current generation'' broadband. The bill also gives a 20 percent
credit for the deployment of at least 22 million bits per second
downstream and 10 million bits per second upstream to all subscribers
in rural and low income areas, and to all residential customers in
other areas. This is what we are calling ``next generation'' broadband.
Mr. President, as we look around us today and see the many streets
that are being torn-up to lay cables for high-speed communication, and
the communication dishes that are constantly ``sprouting'' from our
buildings, we may wonder why we need a tax credit to advance an
industry that is already growing by leaps and bounds. The reason,
again, is that this growth is most extensive in selected areas. Market
forces are driving deployment of high-speed communication capabilities
almost exclusively to urban businesses and wealthy households. Rural
businesses and rural families like those in Montana again find
themselves at the back of the line. And by the time our turn comes for
this technology, the rest of the country will already be well into the
next technological generation. The Digital Divide, which is already a
wedge between our citizens, will be perpetuated and grow into a chasm.
This bill is designed to even the playing field. By giving private
industry economic incentives to accelerate high-speed communication
capabilities to Americans who are at the end of the line, we will help
people like my constituents in Montana share in our nation's economic
growth.
As a member of the Senate Broadband Caucus, which was established to
develop solutions to the problem of bringing high-speed Internet access
to rural and underserved areas, I have worked hard on initiatives which
would help rural areas bridge the Digital Divide. These initiatives
include: the Rural Broadband Enhancement Act, which provides $5 billion
in low interest loans for broadband development; the Rural Telework Act
of 2000, to provide grants to develop National Centers for Distance
Working which would provide access to technology and training for rural
residents; the Universal Service Support Act, which lifts the cap on
the universal service support fund for rural telecommunications
providers; and the amendment I offered to the Rural Television Bill, to
give consideration to projects which offer high speed Internet access
in addition to television programming.
I believe these initiatives, along with the Broadband Internet Access
Act we are introducing today, will go a long way toward finally
bridging the growing Digital Divide and help rural areas grow and
flourish. With this legislation, I hope to create an economic
environment that will make sure Montana's children and grandchildren
will no longer have to sacrifice enjoying the beauty of the ``last
great place'' in order to earn a living wage.
______
By Mrs. FEINSTEIN:
S. 2699. A bill to strengthen the authority of the Federal Government
to protect individuals from certain acts and practices in the sale and
purchase of social security numbers and social security account
numbers, and for other purposes; to the Committee on Finance.
____________________