Rancho Palos Verdes City Council
   

TO: HONORABLE MAYOR AND COUNCILMEMBERS

FROM: CITY MANAGER

DATE: OCTOBER 7, 2003

SUBJECT: FEDERAL TELECOMMUNICATIONS LEGISLATION

H.R. 49 (COX) AND S. 150 (ALLEN)

RECOMMENDATION:

Consider sending a letter to Congressman Rohrbacher and Senators Feinstein and Boxer, asking them to remove the detrimental expansion of the definition of " Internet Access" from the "Internet Tax Non-Discrimination Act of 2003" (H.R.49/S.52).

BACKGROUND:

Two identical bills currently moving through Congress, H.R. 49 (Cox) and

S. 150 (Allen) threaten to fundamentally undermine the telecommunications tax revenue base for local governments throughout California.

The Internet Tax Freedom Act of 1998 prevented state and local governments from imposing a tax on Internet access services. Under current law, Internet access is defined as "a service that enables users to access content, information, electronic mail, or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers. Such term does not include "telecommunications services." H.R. 49 and S. 150 would amend the last sentence to read, " Such term does not include telecommunications services, except to the extent that such services are used to provide Internet access. "

DISCUSSION:

Preventing local governments from imposing taxes on telecommunications services "to the extent that such services are used to provide Internet access" could infringe on local ability to collect taxes on a number of different services offered by various telecommunications and cable companies, such as DSL lines, cable modem services, and wireless internet access provided over cellular phones. Moreover, the future consequences of this expanded definition of Internet access for state and local governments is staggering. As more local telecommunications and cable services, whether they be voice, data, cable television or video, begin moving over broadband networks rather than traditional transmission lines, local governments are likely to find that a revenue source they rely heavily upon is no longer available.

FISCAL INPACT:

Rancho Palos Verdes generates over $690,000 annually in UUT from General Telephone, Pacific Bell, AT&T, Sprint, MCI, GTE, Airtouch, Cox, and other telecommunications providers.

Respectfully submitted,

Les Evans

City Manager

Attachments: Letter from the U.S. Conference of Mayors

Proposed Letter to Legislators