[House Report 106-615]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     106-615

======================================================================



 
             INTERNET ACCESS CHARGE PROHIBITION ACT OF 2000

                                _______
                                

  May 12, 2000.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 1291]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Commerce, to whom was referred the bill 
(H.R. 1291) to prohibit the imposition of access charges on 
Internet service providers, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Committee Consideration..........................................     4
Committee Votes..................................................     4
Committee Oversight Findings.....................................     6
Committee on Government Reform Oversight Findings................     6
New Budget Authority, Entitlement Authority, and Tax Expenditures     6
Committee Cost Estimate..........................................     6
Congressional Budget Office Estimate.............................     6
Federal Mandates Statement.......................................     7
Advisory Committee Statement.....................................     8
Constitutional Authority Statement...............................     8
Applicability to Legislative Branch..............................     8
Section-by-Section Analysis of the Legislation...................     8
Changes in Existing Law Made by the Bill, as Reported............     8
Additional Views.................................................    10

                               Amendment

    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Internet Access Charge Prohibition Act 
of 2000''.

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

  Section 254 of the Communications Act of 1934 (47 U.S.C. 254) is 
amended by adding at the end the following new subsection:
  ``(l) Prohibition of Charges on Internet Service Providers.--
          ``(1) In general.--Notwithstanding subsection (b)(4) or (d) 
        or any other provision of this title, the Commission shall not 
        impose on any provider of Internet access service (as such term 
        is defined in section 231(e)) any contribution for the support 
        of universal service that is based on a measure of the time 
        that telecommunications services are used in the provision of 
        such Internet access service.
          ``(2) Rule of construction.--Nothing in this subsection shall 
        preclude the Commission from imposing access charges on the 
        providers of Internet telephone services, irrespective of the 
        type of customer premises equipment used in connection with 
        such services.''.

                          Purpose and Summary

    H.R. 1291, the Internet Access Charge Prohibition Act of 
2000, will preclude the Federal Communications Commission (FCC) 
from imposing on providers of Internet access service per-
minute charges that are intended to support universal service.

                  Background and Need for Legislation

    The FCC's interstate access charge regime was established 
in 1983 to require long distance carriers (e.g., AT&T, 
Worldcom) to compensate local exchange carriers (e.g., Bell 
Atlantic, SBC, GTE) for the cost of originating and terminating 
long distance telephone calls, as well as to provide support 
for universal telephone service in high-cost and rural areas. 
Thus, when a consumer makes a long distance telephone call, a 
long distance carrier pays a per-minute usage fee (in addition 
to other per-line fees) to the local exchange carrier that 
originates and terminates the long distance call. These per-
minute and per-line fees are more commonly known as ``access 
charges.'' Under current FCC rules governing per-minute access 
charges, long distance carriers, and ultimately their 
consumers, pay local exchange carriers roughly 2.4 cents for 
each minute of long distance service.
    At the same time it established its access charge regime in 
1983, the FCC specifically exempted information service 
providers from having to pay interstate access charges. The 
term ``information service provider'' (which the FCC 
historically referred to as ``enhanced service providers'') 
covers a broad range of non-telecommunications service 
providers, including Internet service providers (ISPs) like 
America Online and Mindspring. Accordingly, when a consumer 
logs on to the Internet via a local call to an ISP, the ISP and 
its subscribers do not pay the per-minute access charges that a 
consumer of long distance services would have to pay, 
irrespective of whether the consumer surfs Web sites in distant 
locations. The FCC based its decision on the fact that the 
information services industry was in its infancy as of 1983. 
Moreover, the FCC was concerned that, if required to pay per-
minute access charges, ISPs would inflict ``rate shock'' on 
their subscribers; consumers tend to stay on-line an average of 
45 minutes, whereas the average telephone call lasts roughly 
five minutes.
    In recent years, however, the FCC's exemption for 
information service providers has been the subject of much 
debate and litigation. Some in the local exchange carrier (LEC) 
industry have argued that the rationale for the FCC's exemption 
no longer makes sense, given that many ISPs are larger in terms 
of market capitalization than many telecommunications service 
providers that still must pay per-minute access charges. In 
addition, some LECs argue that many information service 
providers (and ISPs, in particular) place a substantial burden 
on the public telephone network, and as such, these ISPs and 
their consumers should be required to contribute to the 
network's maintenance.
    The information services industry counters that it 
contributes to the growth and modernization of the telephone 
network by virtue of the growing residential and business 
demand for additional telephone lines that are dedicated for 
access to the Internet. Moreover, the industry insists that its 
members directly contribute to the maintenance of the network 
by paying the same charges as similarly situated end-users 
(e.g., the subscriber line charge (SLC), the business line 
tariff, andwhere, applicable, a private-line interconnection 
charge). The industry notes that a portion of these payments flow 
through the local exchange carrier to the Universal Service Fund. The 
industry also points out that the current exemption enables ISPs to 
continue charging consumers flat-rate monthly fees for access to the 
Internet (compared to long distance service, which is based on minutes 
of use).
    The ongoing debate about the extent to which information 
service providers should be required to support universal 
service, in addition to the extent to which they should pay for 
the cost of accessing the public switched telephone network, 
raises a number of complex issues that the Committee has yet to 
explore and develop a more complete record. Therefore, at this 
point in time, the Committee seeks to codify the FCC's access 
charge exemption, to the extent per-minute access charges are 
assessed for the purpose of supporting universal service. 
Moreover, the codified exemption applies only to providers of 
Internet access service, as that term is defined in section 
231(e)(4) of the Communications Act of 1934 (47 U.S.C. 
Sec. 231(e)(4)).

                                Hearings

    The Subcommittee on Telecommunications, Trade, and Consumer 
Protection held two hearings that relate to H.R. 1291. On April 
6, 2000, the Subcommittee held an oversight hearing to receive 
a summary of the report of the Advisory Commission on 
Electronic Commerce. The Subcommittee received testimony from 
the Honorable James Gilmore, the Governor of the Commonwealth 
of Virginia, and Chairman of the Advisory Commission on 
Electronic Commerce.
    On Wednesday, May 3, 2000, the Subcommittee also held a 
legislative hearing on H.R. 1291, as well as H.R. 4202, the 
Internet Services Promotion (ISP) Act of 2000. The Subcommittee 
heard testimony from two panels of witnesses. Panel I consisted 
of only Congressman Fred Upton (R-MI), the sponsor of H.R. 
1291. Panel II included: Mr. Peter Lowy, co-President, 
Westfield-America, Inc. (on behalf of the e-Fairness 
Coalition); Mr. Harris N. Miller, President, Information 
Technology Association of America (ITAA); Mr. Grover Norquist, 
President, Americans for Tax Reform (ATR); and Mr. Leroy Grey, 
RAVEN-Villages Internet.

                        Committee Consideration

    On May 10, 2000, the Subcommittee on Telecommunications, 
Trade, and Consumer Protection was discharged from the further 
consideration of H.R. 1291 by unanimous consent. The Committee 
ordered H.R. 1291 reported, with an amendment, by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House requires 
the Committee to list the record votes on the motion to report 
legislation and amendments thereto. A motion by Mr. Bliley to 
order H.R. 1291 reported to the House, with an amendment, was 
agreed to by a voice vote. A motion to table the bill by Mr. 
Deutsch was not agreed to by a voice vote.
    The following amendment was agreed to by voice vote:

          An amendment in the nature of a substitute by Mr. 
        Upton, #1, precluding the FCC from imposing on 
        providers of Internet access service any per-minute 
        charges intended for universal service support.

    The following amendment was withdrawn by unanimous consent:

          An amendment to the amendment in the nature of a 
        substitute by Mr. Stearns, #1a, establishing an 
        Advisory Commission to examine state and local taxation 
        of telecommunications services.

    The Committee took a record vote on the following 
amendment. The names of Members voting for and against follow:

          An amendment to the amendment in the nature of a 
        substitute by Mr. Markey, #1b, clarifying that the FCC 
        is precluded from imposing per-minute charges on 
        Internet telephony services.
        
        
                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held legislative and 
oversight hearing and made findings that are reflected in this 
report.

           Committee on Government Reform Oversight Findings

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
1291, The Internet Access Charge Prohibition Act of 2000, would 
result in no new or increased budget authority, entitlement 
authority, or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 11, 2000.
Hon. Tom Bliley,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1291, the Internet 
Access Charge Prohibitions Act of 2000.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark Hadley.
            Sincerely,
                                         Barry B. Anderson.
                                    (For Dan L. Crippen, Director).

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

    Summary: H.R. 1291 would prohibit the Federal 
Communications Commission (FCC) from collecting fees from 
Internet service providers to finance the Universal Service 
Fund that are based on the length of time that the Internet 
access service is provided. Currently, the FCC does not charge 
any such fees and has no plans to do so. Internet service 
providers carry data transmissions of their customers, and such 
data may be used to provide telephone services. H.R. 1291 would 
allow the FCC to charge Internet service providers for the 
Universal Service Fund only when they provide telephone 
services.
    Certain charges imposed on telecommunications services 
either by states or the federal government under the 
Telecommunications Act of 1996 to support universal service are 
recorded in the federal budget. (Universal service is a program 
intended to promote the availability of telecommunications 
services at affordable rates.) Because H.R. 1291 could affect 
direct spending and receipts, pay-as-you-go procedures would 
apply, but CBO estimates that any such effects would be 
negligible. H.R. 1291 contains no private-sector or 
intergovernmental mandates as defined in the Unfunded Mandates 
Reform Act (UMRA) and would impose no costs on state, local, or 
tribal governments.
    Estimated cost to the Federal Government: Under the 
Universal Service Fund established by the Telecommunications 
Act of 1996, the FCC seeks to provide universal access to 
telecommunications services through various charges to some 
telephone companies and payments to others. The 1996 act also 
permits states to establish additional collections and payments 
to preserve and advance universal service, so long as these 
mechanisms are not inconsistent with federal law.
    The Universal Service Fund records these transactions in 
the federal budget as governmental receipts and direct 
spending. To the extent that the FCC or states would choose to 
support universal service through charges on Internet service 
providers based on the time such services are used, H.R. 1291 
could result in forgoing revenues and direct spending. The FCC 
does not charge any such fees and has no plans to do so. H.R. 
1291 would allow the FCC to charge Internet service providers 
when customers' data transmissions are used to support 
telephone services; therefore, CBO estimates that any change in 
revenues and direct spending as a result of this legislation 
would be negligible.
    The costs of this legislation fall within budget function 
370 (commerce and housing credit).
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending and receipts. As 
noted above, H.R. 1291 could affect direct spending and 
receipts, but CBO estimates that any such effects would be 
negligible.
    Intergovernmental and private-sector impact: H.R. 1291 
contains no private-sector or intergovernmental mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal costs: Mark Hadley; revenues: 
Hester Grippando; impact on State, local, and tribal 
governments: Shelley Finlayson; impact on the private sector: 
Jean Wooster.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title.

    Section 1 of H.R. 1291 provides the bill's short title, the 
``Internet Access Charge Prohibition Act of 2000.''

Section 2. Prohibition of charges on providers of Internet access 
        service

    Section 2 of the bill amends section 254 of the 
Communications Act of 1934 (47 U.S.C. Sec. 254) to preclude the 
FCC from imposing on any provider of Internet access service 
(as such term is defined in section 231(e)(4) of the Act) any 
contribution for the support of universal service that is based 
on a measure of the time that telecommunications services are 
used in the provision of such Internet access service. Section 
2 also contains a savings clause that makes clear that nothing 
in H.R. 1291 precludes the FCC from imposing access charges on 
the providers of Internet telephone services, irrespective of 
the type of customer premises equipment used in connection with 
such services.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

             SECTION 254 OF THE COMMUNICATIONS ACT OF 1934


SEC. 254. UNIVERSAL SERVICE.

    (a) * * *

           *       *       *       *       *       *       *

    (l) Prohibition of Charges on Internet Service Providers.--
          (1) In general.--Notwithstanding subsection (b)(4) or 
        (d) or any other provision of this title, the 
        Commission shall not impose on any provider of Internet 
        access service (as such term is defined in section 
        231(e)) any contribution for the support of universal 
        service that is based on a measure of the time that 
        telecommunications services are used in the provision 
        of such Internet access service.
          (2) Rule of construction.--Nothing in this subsection 
        shall preclude the Commission from imposing access 
        charges on the providers of Internet telephone 
        services, irrespective of the type of customer premises 
        equipment used in connection with such services.

                            ADDITIONAL VIEWS

    This legislation, H.R. 1291, is intended to make sure that 
when an individual logs on to the Internet, he or she will not 
be charged by the minute for the privilege of doing so. That is 
a worthy goal, and I support it.
    I am sure that few Congressional offices have escaped an 
insidious e-mail campaign over the past year decrying 
fictitious legislation that would purport to accomplish 
precisely the opposite result of the bill we report today. I 
only hope that passage of H.R. 1291 will finally extinguish 
this ``cyber-myth'' once and for all.
    I am not convinced, however, that mounting a massive 
legislative counter-attack on a fictitious bill, introduced by 
a make-believe Congressman, is the best use of this Committee's 
time, or that of the House. Particularly when the substance of 
this bogus bill--if it were actually introduced--is so contrary 
to the public interest that it would have zero chance of 
success in this Committee.
    My puzzlement extends further to the speed with which the 
Republican leadership wants this bill to go to the floor. They 
apparently believe this bill is so important that we were asked 
to dispense with regular order and bypass Subcommittee 
consideration. I find it amazing that a phantom Congressman has 
more success jump-starting the legislative process than those 
of us elected by the people.
    Certainly our constituents should know that Congress has no 
intent of installing a meter on their use of the Internet, and 
this legislation will alleviate their concern in that regard. 
However, I am disappointed that the majority refuses to seize 
the opportunity presented here to address a greater and more 
genuine threat to consumer pocketbooks. That is, the real 
possibility that burgeoning new Internet services, such as 
Internet telephony, paging, web-based wireless services, and 
countless others on the horizon may evade the responsibility of 
contributing to support the Universal Service Fund--a fund 
which ensures that all Americans have access to affordable 
telephone service.
    These services will continue to migrate from traditional 
networks to the Internet and, unless we act, the Universal 
Service Fund will be left to wither on the vine. Traditional 
network service providers will be forced to raise prices 
wherever they can, and that can only spell trouble when it 
comes to local phone rates for all consumers, but particularly 
those who live in rural areas and the working poor. Of course, 
these are the same Americans who are stuck on the wrong side of 
the ``digital divide'' and are least able to take advantage of 
high-tech alternatives.
    This Committee's approach to telecommunications policy has 
always been consistent and straightforward: like services 
should be treated in a like manner. We had the opportunity to 
apply that philosophy here, and it would have been entirely 
proper that we do so.
    Unfortunately, in our haste to get legislation to the floor 
that solves an imaginary problem, we squandered the opportunity 
to address one that is all too real: the prices Americans will 
pay for telecommunications services if today's disparate 
regulatory treatment is permitted to continue. Whether a 
service is offered via the Internet or through a traditional 
network, the obligations attendant to it should be the same.
                                                   John D. Dingell.

                                  
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