City of Portland Sends Letters
to Senators Smith and Wyden
with increased concerns about HR 49/S 150
October 14, 2003
Senator Gordon Smith
404 Russell Office Building
Washington DC 20510
Senator Ron Wyden
516 Hart Senate Office Building
Washington, D.C. 20510
Dear Senators Smith and Wyden:
Recently I wrote you to express the concern of the city of Portland
about the serious adverse effects that will result from passage
of S. 150, the Internet Tax Freedom Act, in its current form. I
am following up on the letter because new developments have increased
the levels of our concern.
In the case of Brand X Internet Services v. FCC, --F.3rd—2003
WL 22283874 (90th Cir. Oct. 6, 2003) the Ninth Circuit ruled just
last week that cable modem service is a mixture of information
services and telecommunications services. Although this ruling
will possibly be subject to further review and interpretation, at
this point it seems clear that such service is, in part, subject
to regulation as a telecommunications service under Title II of
the Communications Act of 1934, as amended. In turn, this suggests
that local governments are entitled to impose franchise fees for
the use of public rights of way for the provision of those services.
As currently proposed, S. 150 would negate that effect of the Brand
X decision. It is not appropriate to inject a legislative reversal
of that portion of the decision while the matter is still potentially
subject to further review by the judiciary. The FCC’s chair
has already announced that he has instructed the Commission’s
general counsel to seek review of the decision.
Additionally, as you undoubtedly know, the Federal Communications
Commission has solicited comment on a petition filed by Vonage Holding
Corporation, seeking preemption of state regulation of voice over
Internet protocol (VoIP). Should that petition be granted, the very
real prospect exists that all telephony would rapidly move to VoIP.
If this occurs, approving S. 150 in its current form would have
the unintended consequence of granting any user of the public rights-of-way
offering VoIP carte blanche to use public assets without compensation.
This raises questions with significant constitutional implications.
We believe the Congress should await the outcome of this petition,
and any subsequent judicial review, before enacting legislation
that could have disastrous, and we presume, unintended consequences
for local government.
These consequences can be avoided by simply eliminating the “clarification”
provision in Section 2(c)
of the current version of the bill. We urge you to support such
an amendment. In the alternative, it is critical that the prohibition
against taxation of the services used to provide internet access,
as distinguished from taxation of transactions using internet access
(the original intent of the moratorium) be delayed until the Congress
can fully explore the consequences of such a change.
As always, my staff and I are ready and willing to work with you
and your staff in crafting a solution which advances the purpose
of avoiding interference with internet economic activity without
impairing the ability of local governments to recover compensation
for private uses of public resources.
With warm regards,
Vera Katz
Mayor, City of Portland, Oregon
Cc: Penny Schiller
Marge Kafoury
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