[Congressional Record Volume 147, Number 7 (Monday, January 22, 2001)]
[Senate]
[Pages S345-S346]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROCKEFELLER (for himself, Ms. Snowe, Mr. Kerry, Mr. Hatch, 
        Mr. Baucus, Mr. Burns, Mr. Hollings, Mr. Bayh, Mrs. Boxer, Mr. 
        Brownback, Mr. Cleland, Mrs. Clinton, Mr. Craig, Mr. Daschle, 
        Mr. DeWine, Mr. Dodd, Mr. Edwards, Mr. Enzi, Mr. Johnson, Mr. 
        Kennedy, Ms. Landrieu, Mrs. Lincoln, Mr. Miller, Mrs. Murray, 
        Mr. Roberts, Mr. Schumer, Mr. Thomas, Mr. Wyden, Mr. Helms, Mr. 
        Leahy, Mr. Conrad, Mr. Reid, and Mr. Harkin):
  S. 88. 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 Tax Credit Legislation

  Mr. ROCKEFELLER. Mr. President, I rise today to introduce the 
Broadband Internet Access Act of 2001. The convergence of computing and 
communications has changed the way America interacts and does business. 
Individuals, businesses, schools, libraries, hospitals, and many 
others, reap the benefits of networked communications more and more 
each year. However, where in the past access to low bandwidth telephone 
facilities met our communications needs, today many people and 
organizations need the ability to transmit and receive large amounts of 
data quickly--as part of electronic commerce, distance learning, 
telemedicine, and even for mere access to many web sites.
  In some areas of the country companies are building networks that 
meet today's broadband need as fast as they can. Technology companies 
are fighting to roll out the current generation of broadband facilities 
as quickly as they can in urban and suburban areas. They are tearing up 
streets to install fiber optics, converting cable TV facilities to 
broadband telecom applications, developing incredible new DSL 
technologies that convert regular copper telephone wires into broadband 
powerhouses.
  Other areas are not as fortunate. In rural and inner city areas 
access to even the current generation of broadband communications is 
harder to come by. In fact, there are only a few broadband providers 
outside the prosperous areas of big cities and suburban areas 
nationwide. This is because in many cases rural areas are more 
expensive to serve. Terrain is difficult. Populations are widely 
dispersed. Importantly, many of our current broadband technologies 
cannot serve people who live more than eighteen thousand feet from a 
phone company's central office--which is the case for most rural 
Americans. In inner cities, companies may believe that lower household 
income levels will not support a market for their services, so they 
chose not to invest in these communities.
  The implications for the country if we allow this broadband disparity 
to continue are alarming. Organizations in traditional robust 
communications and computing regions, often located in prosperous urban 
and suburban communities, will be able to reap the rewards of a 
networked economy. Organizations in other areas, often in rural areas 
as in inner cities, including many areas in my State of West Virginia, 
will suffer the consequences of being unable to take advantage of the 
astounding power of broadband networked computing.
  Just as companies that employ technological advances are decimating 
their less technologically savvy competitors, businesses in 
infrastructure-rich areas may soon decimate competitors in 
infrastructure-poor areas. This is just as true as rural and inner city 
students, workers trying to gain new skills, and regular individuals 
who want to participate in the New Economy in other ways compete 
against their non-rural peers. The result could be disastrous for 
Americans who live in rural areas or in our inner cities: job loss, tax 
revenue loss, brain drain, and business failure concentrated in their 
communities.
  Denying Americans who live in rural areas and inner cities a chance 
to participate in the New Economy is also bad for the national economy. 
Businesses will be forced to locate their operations and hire their 
employees in urban locations that have adequate broadband 
infrastructure, rather than in rural or inner city locations that are 
otherwise more efficient due to the location of their customers or 
suppliers, a stable or better workforce, and cheaper production 
environments. Additionally, without adequate infrastructure, the 
businesses and individuals in these communications infrastructure poor 
areas are less likely to be integrated into the national electronic 
marketplace. Their absence would put a damper on the growth of the 
digital economy for everyone--not just for those in rural areas.
  Therefore, we must do everything we can to ensure that broadband 
communications are available to all areas of the country--rural and 
inner city as well as the prosperous urban and suburban communities. 
The Broadband Internet Access Act of 2001 addresses this problem.
  The Act would give companies the incentive to build current 
generation broadband facilities in rural areas by using a very focused 
tax credit. It would offer any company that invests in broadband 
facilities in rural or inner city areas a ten percent tax credit over 
the next five years. This tax credit will help fight the growing 
disparity in technology I just described.
  The credit is also restricted to investments needed for high-speed 
broadband telecommunications services. This means that only powerful 
broadband services are covered. Companies cannot claim that inferior 
services qualify for the credit. Only facilities that can download data 
at a rate of speed of 1.5 megabytes per second, and upload data at 200 
kilobytes per second qualify.
  In addition, the bill provides a 20 percent tax credit for companies 
that invest in next generation broadband services. These powerful new 
services, that can deliver data capacities of 22 megabytes per second 
download and 5 megabytes per second upload will be the infrastructure 
the new economy depends as the digital economy matures. We need to 
reward the companies who have the foresight to invest in these next 
generation broadband services--they will benefit the whole country.
  The Broadband Internet Access Act of 2000 is part of the solution to 
the critically important digital divide problem. Rural Americans and 
Americans living in inner cities deserve the chance to participate in 
the New Economy. Without access to broadband services they will not 
have this chance. I hope that the Members of this body will support 
this important bill.
  For those who want even more details, I ask unanimous consent that 
Attachment One to this statement, titled Broadband Internet Access Tax 
Credit, be made part of the Record. This attachment is a detailed 
explanation of the tax credit based on an analysis of the similar 
Broadband Internet Access Act of 2000, from the 106th Congress. We will 
hopefully have a more updated explanation that reflects changes to the 
bill for the 107th Congress very soon.
  There being no objection, the attachment ordered to be printed in the 
Record, as follows:

                  Broadband Internet Access Tax Credit

                       (New sec. 48A of the Code)


                              present law

       Present law does not provide a credit for investments in 
     telecommunications infrastructure.


                        explanation of provision

       The bill provides a credit to 10 percent of the qualified 
     expenditures incurred by the taxpayer with respect to 
     qualified equipment

[[Page S346]]

     with which ``current generation'' broadband services are 
     delivered to subscribers in rural and underserved areas. In 
     the addition, the bill provides a credit equal to 20 percent 
     of the qualified expenditures incurred by the taxpayer with 
     respect to qualified equipment with which ``next generation'' 
     broadband services are delivered to subscribers in rural 
     areas, underserved areas, and to residential subscribers.
       Current generation broadband services is defined as the 
     transmission of signals at a rat of at least 1.5 million bits 
     per second to the subscriber and at a rate of at least 
     200,000 bits per second from the subscriber. Next generation 
     broadband services is defined as the transmission of signals 
     at a rate of at least 22 million bits per second to the 
     subscriber and at a rate of at least 5 million bits per 
     second from the subscriber. Taxpayers will be permitted to 
     substantiate their satisfaction of the required transmission 
     rates through statistically significant test data 
     demonstrating satisfaction of the required transmission 
     rates, by providing evidence that all relevant subscribers 
     were provided with a written guarantee that the required 
     transmission rates would be satisfied, or through any other 
     reasonable method. For this purpose, the fact that certain 
     subscribers are not able to access such services at the 
     required transmission rates due to limitations in equipment 
     outside of the control of the provider, or in equipment other 
     than qualified equipment, shall not be taken into account.
       A rural area is any census tract which is not within 10 
     miles of any incorporated or census designated place with a 
     population of more than 25,000 and which is not within a 
     county with a population density of more than 500 people per 
     square mile. An underserved area is any census tract which is 
     located in an empowerment zone, enterprise community, renewal 
     zone or low-income community. A residential subscriber is any 
     individual who purchases broadband services to be delivered 
     to his or her dwelling.
     Qualified expenditures
       Qualified expenditures are those amounts otherwise 
     chargeable to the capital account with respect to the 
     purchase and installation of qualified equipment for which 
     depreciation is allowable under section 168. Qualified 
     expenditures are those that are incurred by the taxpayer 
     after December 31, 2001, and before January 1, 2006.
       The expenditures are taken into account for purposes of 
     claiming the credit in the first taxable year in which 
     broadband service is delivered to at least 10 percent of the 
     specified type of subscribers which the qualified equipment 
     is capable of serving in an area in which the provider has 
     legal or contractual area access rights or obligations. For 
     this purpose, it is intended that the subscribers which the 
     equipment is capable of serving will be determined by the 
     least capable link in the system. For example, if a system 
     has a packet switch capable of serving 10,000 subscribers, 
     followed by a digital subscriber line access multiplexer 
     (``DSLAM'') capable of serving only 2,000 subscribers, then 
     the area which the equipment is capable of serving is the 
     area served by the 2,000 DSLAM lines.
       Although the credit only applies with respect to qualified 
     expenditures incurred during specified periods, the fact that 
     the expenditures are not taken into account until a later 
     period will not affect the taxpayer's eligibility for the 
     credit. For example, if a taxpayer incurs qualified 
     expenditures with respect to equipment providing next 
     generation broadband services in 2004, but the taxpayer 
     does not satisfy the 10 percent subscription threshold 
     until 2005, the taxpayer will be eligible for the credit 
     in 2005 (assuming the other requirements of the bill are 
     satisfied). To substantiate their satisfaction of the 10 
     percent subscription threshold, taxpayers will be required 
     to provide such information as is required by the 
     Secretary, which may include relevant customer date or 
     evidence of independent certification.
       In the case of a taxpayer that incurs expenditures for 
     equipment capable of serving both subscribers in qualifying 
     areas and other areas, qualified expenditures are determined 
     by multiplying otherwise qualified expenditures by the ratio 
     of the number of potential qualifying subscribers to all 
     potential subscribers the qualified equipment would be 
     capable of serving, as determined by the least capable link 
     in the system. Taxpayers may use any reasonable method to 
     determine the relevant total potential subscriber population, 
     based on the most recently published census data. In 
     addition, for purposes of substantiating the total potential 
     subscriber population which equipment is capable of serving, 
     taxpayers will be required to provide such information as is 
     required by the Secretary, which may include manufacturer's 
     equipment ratings or evidence of independent certification.
     Qualified equipment
       Qualified equipment must be capable of providing broadband 
     services at any time to each subscriber who is utilizing such 
     services. It is intended that this standard would be 
     satisfied if a subscriber utilizing broadband services 
     through the equipment is able to receive the specified 
     transmission rates in at least 99 out of 100 attempts.
       In the case of a telecommunications carrier, qualified 
     equipment is equipment that extends from the last point of 
     switching to the outside of the building in which the 
     subscriber is located. In the case of a commercial mobile 
     service carrier, qualified equipment that extends from the 
     customer side of a mobile telephone switching office to a 
     transmission/reception antenna (including the antenna) of the 
     subscriber. In the case of a cable operator or open video 
     system operator, qualified equipment is equipment that 
     extends from the customer side of the headend to the outside 
     of the building in which the subscriber is located. In the 
     case of a satellite carrier or other wireless carrier (other 
     than a telecommunications carrier), qualified equipment is 
     equipment that extends from a transmission/reception antenna 
     (including the antenna) to a transmission/reception antenna 
     on the outside of the building used by the subscriber. In 
     addition, any packet switching equipment deployed in 
     connection with other qualified equipment is qualified 
     equipment, regardless of location, provided that it is the 
     last such equipment in a series as part of transmission of a 
     signal to a subscriber or the first in a series in the 
     transmission of a signal from a subscriber. Finally, 
     multiplexing and demultiplexing equipment and other equipment 
     making associated applications deployed in connection with 
     other qualified equipment is qualified equipment only if it 
     is located between qualified packet switching equipment and 
     the subscriber's premises.
       Although a taxpayer must incur the expenditures directly in 
     order to qualify for the credit, the taxpayer may provide the 
     requisite broadband services either directly or indirectly. 
     For example, if a partnership constructs qualified equipment 
     or otherwise incurs expenditures, but the requisite services 
     are provided by one or more of its partners, the partnership 
     will be eligible for the credit (assuming the other 
     requirements of the bill are satisfied). It is anticipated 
     that the Secretary will issue regulations or other published 
     guidance demonstrating how the requirements of the bill are 
     satisfied in such situations.


                             effective date

       The provision is effective for expenditures incurred after 
     December 31, 2001.

  Mr. BURNS. Mr. President, I rise today in support of a bill I 
supported last Congress along with over half of the members in this 
body. The bill, the Broadband Internet Access Act of 2001, creates tax 
incentives for the deployment of broadband (high-speed) Internet 
services to rural, low-income, and residential areas.
  This bill will ensure that all Americans gain timely and equitable 
access to the Internet over current and future generations of broadband 
capability.
  The legislation provides graduated tax credits to companies that 
bring qualified telecommunication capabilities to targeted areas. It 
grants a 10-percent credit for expenditures on equipment that provide 
current generation bandwidth of 1.5 million bits per second (mbps) 
downstream and .2 mbps upstream to subscribers in rural and low-income 
areas, and a 20-percent credit for delivery of next generation 22 mbps 
downstream and 5 mbps upstream to these customers and other residential 
subscribers.
  This bill has been endorsed by a number of organizations, including 
Bell Atlantic, MCI/Worldcom, Corning Incorporated, the National 
Telephone Cooperative Association, the Association for Local 
Telecommunications Services, the United States Distance Learning 
Association, and the Imaging Science and Information Systems Center at 
Georgetown University Medical Center.
  Mr. President, in a few short years, the Internet has grown 
exponentially to become a mass medium used daily by over 100 million 
people worldwide. The explosion of information technology has created 
opportunities undreamed of by previous generations. In my home state of 
Montana, companies such as Healthdirectory.com and Vanns.com are taking 
advantage of the global markets made possible by the stunning reach of 
the Internet.
  The pace of broadband deployment to rural America must be accelerated 
for electronic commerce to meet its full potential however. Broadband 
access is as important to our small businesses in Montana as water is 
to agribusiness.
  I am aware of all of the recent discussion regarding the ``digital 
divide'' and I am very concerned that the pace of broadband deployment 
is greater in urban than rural areas. However, there is some positive 
and exciting news on this front as well. The reality on the ground 
shows that some of the ``gloom and doom'' scenarios are far from the 
case. By pooling their limited resources, Montana's independent and 
cooperative telephone companies are doing great things. I encourage my 
colleagues to support this bill.
                                 ______