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Tuesday, July 15, 2014, Alert No. 2,674.
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House Passes Permanent Internet Tax Freedom Act

7/15. The House passed HR 3086 [LOC | WW], the "Permanent Internet Tax Freedom Act", by voice vote.

The House considered this bill under suspension of the rules, which meant that no amendments were considered, and a two thirds majority was required for passage.

The Internet Tax Freedom Act (ITFA), enacted in 1998, is set to expire on November 1, 2014. It contains a ban on taxes on internet access and multiple or discriminatory taxes on electronic commerce, subject to exemptions and grandfathered taxes.

This short bill would permanently extend the ban by deleting the expiration date. However, three times in the past the Congress has enacted temporary extensions.

Rep. Bob Goodlatte (R-VA), Chairman of the House Judiciary Committee (HJC), introduced this bill on September 12, 2013. See, story titled "House Members Introduce Internet Tax Freedom Act Extension Bill" in TLJ Daily E-Mail Alert No. 2,600, September 12, 2013. The HJC approved this bill on June 18, 2014, by a vote of 30-4.

The Senate has not yet passed this bill, or a related bill.

Summary of the ITFA. The Congress enacted the original Internet Tax Freedom Act (ITFA) in late 1998. The original ban was for three years. The Congress enacted three temporary extensions, in 2001, 2004 and 2007. The Congress has also added to the definitions, and exemptions.

The most recent extension of the ITFA is scheduled to expire on November 1, 2014. That bill was HR 3678 [LOC | WW], the "Internet Tax Freedom Act Amendments Act of 2007", in the 110th Congress. See also, stories titled "Summary of HR 3678" and "House to Consider Extension of Act Limiting Internet Taxes" in TLJ Daily E-Mail Alert No. 1,655, October 16, 2007, "Senate Approves 7 Year Extension of Internet Tax Ban" in TLJ Daily E-Mail Alert No. 1,663, October 26, 2007, and "House Passes Senate Version of Internet Tax Ban Bill" in TLJ Daily E-Mail Alert No. 1,666, October 31, 2007.

The current ban provides that "No State or political subdivision thereof may impose ... Taxes on Internet access" or "Multiple or discriminatory taxes on electronic commerce". There are, however, grandfathered taxes, and numerous exceptions.

The statute currently provides that "No State or political subdivision thereof may impose any of the following taxes during the period beginning November 1, 2003, and ending November 1, 2014: (1) Taxes on Internet access. (2) Multiple or discriminatory taxes on electronic commerce." The statute then sets forth at length the grandfathered taxes, and exemptions.

However, the ITFA does nothing to limit federal taxation of internet access or electronic commerce.

The ITFA is codified in the notes to 47 U.S.C. § 151.

Rep. Bob GoodlatteDebate in the House. Rep. Goodlatte (at right) stated during House debate that "If the moratorium is not renewed, the potential tax burden on consumers will be substantial. The average tax rate on communications services in 2007 was 13.5 percent, more than twice the average rate on all other goods and services. To make matters worse, this tax is regressive. Low-income households pay 10 times as much in communications taxes as high-income households as a share of income."

Rep. Goodlatte also addressed grandfathering. He said in response to a question from Rep. Joe Barton (R-TX) that "I and others have been clear that we think these grandfather clauses should expire. When they first were adopted 16 years ago, it was with the intention that they be phased out. Of course, they have had 16 years, and we would like to have them do that."

Rep. Goodlatte added that "Our goal is to have a clean, permanent moratorium signed into law as promptly as possible. If the gentleman from Texas can engineer a phaseout consistent with that goal, I am certainly willing to work with him in that objective."

Rep. Zoe Lofgren (D-CA) stated that "The moratorium is one of the reasons for the huge growth in the digital economy. The Internet wouldn't be what it is today without affordable Internet access. And, by the way, this tax relief is not to companies. It is to individuals who access the Internet."

In contrast, Rep. John Conyers (D_MI) stated that "Unfortunately" this bill "responds to the impending expiration of the moratorium by making it permanent and ending the act's grandfather protections for States that impose such taxes prior to the act's enactment date."

He continued that "The approach taken in H.R. 3086 is problematic for a number of reasons. First, Congress, instead of supporting this seriously flawed legislation, should really be focusing on meaningful ways to help State and local governments, taxpayers, and local retailers. The House can do that by addressing the remote sales tax issue."

He also argued that "the bill ignores the fundamental nature of the Internet. The original moratorium was intentionally made temporary to ensure that Congress, industry, and State and local governments would be able to monitor the issue and make adjustments where necessary to accommodate new technologies and market realities. The act was intended as a temporary measure to assist and nurture the fledgling Internet that back in 1998 was still in its commercial infancy. Yet this bill is oblivious to the significantly changed environment of today's Internet."

Reaction. Michael Powell, head of the National Cable and Telecommunications Association (NCTA), praised House passage of this bill. He stated in a release that "With the current ITFA tax moratorium expiring November 1, a failure to extend before Congress recesses in September will risk driving up the cost of Internet connectivity for tens of millions of American consumers and businesses."

He also stated that "Keeping Internet access free from state and local taxes has been a fundamental principle since the Internet was introduced to American consumers. Reversing this course which has sparked such tremendous economic growth and numerous other benefits would be a tragic mistake. We urge the Senate to quickly take up and pass in July this important, bipartisan legislation so that American consumers and businesses will continue to be protected from any additional taxes and fees that could raise the price of Internet access and slow the rapid adoption of broadband services."

Jot Carpenter of the CTIA Wireless Association stated in a release that "We appreciate Chairman Goodlatte’s leadership in the effort to pass PITFA, which will help keep the Internet affordable and Americans connected. We hope the Senate moves expeditiously to follow suit and alleviate provider and consumer uncertainty driven by the moratorium’s looming expiration."

House Judiciary Committee Approves Satellite Television Access Reauthorization Act

7/10. The House Judiciary Committee (HJC) passed HR 5036 [LOC | WW], the "Satellite Television Access Reauthorization Act", by voice vote.

Rep. Howard Coble (R-NC), the Chairman of the HJC's Subcommittee on Court, Intellectual Property and the Internet, introduced this bill on July 9, 2014.

This short bill would amend the Copyright Act to extend expiring provisions of the Satellite Television Extension and Localism Act of 2010 (STELA) for five years. The STELA was S 3333 [LOC | WW] in the 111th Congress. See, story titled "Obama Signs Satellite TV Bill" in TLJ Daily E-Mail Alert No. 2,089, May 28, 2010.

Rep. Bob Goodlatte (R-VA), Rep. John Conyers (D-MI), Rep. Coble, and Rep. Jerrold Nadler (D-NY) wrote in a joint statement that passage of this bill "ensures that our constituents have full access to network programming no matter where they live for another five years. Our constituents depend upon this license for entertainment, news, and sports. We look forward to working with our colleagues on the Energy and Commerce Committee and in the Senate to ensure that legislation to protect satellite consumers is in place before the December 31, 2014 expiration of STELA."

The House Commerce Committee (HCC) approved another bill, HR 4572 [LOC | WW | PDF], the "STELA Reauthorization Act of 2014", on May 7, 2014.

That HCC bill addresses STELA reauthorization, and several other issues, including retransmission consent, the FCC's joint sales agreement attribution rule, deletion or repositioning of stations during certain periods, and repeal of the FCC's integration ban. See also, story titled "HCC/SCT to Mark Up STELA Reauthorization Bill" in TLJ Daily E-Mail Alert No. 2,635, March 24, 2014, and story titled "HCC/SCT Marks Up STELA Reauthorization Bill" in TLJ Daily E-Mail Alert No. 2,636, March 25, 2014.

Gordon Smith, head of the National Association of Broadcasters (NAB), stated in a release that HR 5036 is "a sensible, non-controversial STELA reauthorization bill ensuring that satellite TV subscribers without access to local TV signals can continue receiving popular programming from broadcast TV networks. NAB strongly supports this practical approach to STELA."

Antitrust Division Compels Divestiture in Sinclair's Acquisition of Broadcast TV Stations

7/15. The Department of Justice (DOJ) and the state of Pennsylvania filed a civil complaint in the U.S. District Court (DC) against Sinclair Broadcast Group and Perpetual alleging that Sinclair's proposed acquisition of Perpetual's broadcast properties would substantially lessen competition in violation of Section 7 of the Clayton Act.

Sinclair and Perpetual both own broadcast television stations. At issue is Perpetual's one broadcast television station located in a market in which Sinclair owns two stations, and how Sinclair's acquisition would affect competition in the sale of advertising.

The complaint requests that the District Court block the transaction. However, the DOJ, Pennsylvania, Sinclair and Perpetual simultaneously announced a settlement of the action. They filed with the District Court a proposed final judgment and related pleadings. Under this settlement, ownership of the one station will be transferred to a third company, Media General, and the transaction will otherwise proceed. The agreement is subject to District Court approval. (The transaction also requires FCC approval.)

William BaerBill Baer, head of the DOJ's Antitrust Division, stated in a release that "The rivalry between the stations has helped to constrain advertising rates, and without the divestiture, advertisers on stations in this area would likely have paid higher prices."

Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18, provides in part that "No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly."

Sinclair announced this transaction in a release on July 29, 2013. Sinclair stated then that it anticipated divesting the station at issue.

The complaint states that Perpetual owns a broadcast television station in Nielson's Harrisburg Lancaster Lebanon York, Pennsylvania Designated Market Area (DMA), that Sinclair operates two television stations in that DMA with similar audiences, and that the proposed acquisition would result in Sinclair owning three of six stations in the DMA.

The complaint also alleges that "Together, these stations account for approximately a 38% share of the gross revenues for broadcast television advertising" in the DMA. Also, "Unless blocked, the transaction is likely to lead to higher prices for broadcast television spot advertising".

Pursuant to the Tunney Act, the proposed settlement must be disclosed in a notice in the Federal Register, opened to public comment, and then approved or rejected by the District Court.

Perpetual is the parent corporation of Allbritton Communications, which owns the broadcast television stations to be transferred. Allbritton also owns Politico, which is not a part of this transaction.

This case is U.S.A. and Commonwealth of Pennsylvania v. Sinclair Broadcast Group, Inc. and Perpetual Corporation, U.S. District Court for the District of Columbia, D.C. No. 1:14-cv-01186.

FCC Proceeding. There is also a proceeding pending at the Federal Communications Commission (FCC).

The DOJ's action is based upon the Clayton Act, and competition in the sale of advertising. Others have raised issues involving the impact of this transaction upon retransmission consent negotiations. See, September 13, 2013 petition to deny filed by the American Cable Association (ACA) and February 12, 2014 letter submitted by the ACA, Charter Communications, Time Warner Cable, Directv, and Dish Network. See also, the ACA's latest criticism of Sinclair's retransmission consent practices.

In the District Court proceeding, neither the complaint, proposed final judgment, nor competitive impact statement address retransmission consent.

Also, the Free Press, a constant advocate of heavy handed FCC regulation of media ownership, filed a petition to deny in which it addressed consolidation, competition, shared service agreements and joint sales agreements. It also alleged "loss of diversity of viewpoints", "decrease in competition in coverage of local news", and loss of "journalistic independence".

See also, the FCC's January 15, 2014 letter to Sinclair.

The FCC's proceeding is MB Docket No. 13-203.

In This Issue
This issue contains the following items:
 • House Passes Permanent Internet Tax Freedom Act
 • House Judiciary Committee Approves Satellite Television Access Reauthorization Act
 • Antitrust Division Compels Divestiture in Sinclair's Acquisition of Broadcast TV Stations
Washington Tech Calendar
New items are highlighted in red.
Wednesday, July 16

The House will meet at 10:00 AM for morning hour, and at 12:00 NOON for legislative business. The House continue consideration of HR 5016 [LOC | WW], the Financial Services and General Government (FSGG) appropriations bill, subject to rule. This bill includes appropriations for many agencies relevant to information and communications technology, including the Federal Communications Commission (FCC), Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), and Financial Crimes Enforcement Network. See, Rep. Cantor's schedule.

The Senate will meet at 9:30 AM.

9:30 AM - 3:00 PM. The Department of Health and Human Services' (DHHS) Office of the National Coordinator for Health Information Technology's (ONC/HIT) HIT Standards Committee will meet. See, notice in the Federal Register, Vol. 78, No. 243, December 18, 2013, at Page 76627-76628.

10:00 AM. The House Ways and Means Committee (HWMC) will hold a hearing on trade policy and the World Trade Organization (WTO). See, notice. Location: Room 1100, Longworth Building.

10:00 AM. The Senate Finance Committee (SFC) will hold a hearing on the nomination of Robert Holleyman to be a Deputy U.S. Trade Representative. See, notice. Location: Room 215, Dirksen Building.

10:15 AM. The House Judiciary Committee (HJC) will meet to mark up HRes 646, a resolution of inquiry directing the Attorney General to turn over emails related to Lois Lerner, and HR 744 [LOC | WW], the "STOP Identity Theft Act of 2013". See, notice. Location: Room 2141, Rayburn Building.

2:30 PM. The Senate Commerce Committee (SCC) will hold a hearing titled "At a Tipping Point: Consumer Choice, Consolidation and the Future Video Marketplace". The witnesses will be David Cohen (Comcast), John Stankey (AT&T), Gene Kimmelman (Public Knowledge), Shawn Ryan (Writers Guild of America, West), Jeffrey Blum (Dish Network), and Justin Hurwitz (University of Nebraska College of Law). Webcast. Location: Room 253, Russell Building.

Deadline to submit comments to the U.S. Patent and Trademark Office (USPTO) to assist it in preparing its report to the Congress, as required by Section 16 of the America Invents Act, regarding virtual marketing of patented articles. See, notice in the Federal Register, Vol. 79, No. 115, June 16, 2014, at Page 34291. See also, story titled "USPTO Seeks Comments on Virtual Marking" in TLJ Daily E-Mail Alert No. 2,670, June 24, 2014.

Thursday, July 17

The House will meet at 9:00 AM for legislative business. See, Rep. Cantor's schedule.

9:00 AM. The House Intelligence Committee (HCC) will hold a closed hearing titled "Ongoing Intelligence Activities". See, notice. Location: Room HVC-304, Capitol Building.

9:30 AM. The House Judiciary Committee's (HJC) Subcommittee on Regulatory Reform, Commercial and Antitrust Law will hold a hearing titled "Guilty until Proven Innocent? A Study of the Propriety & Legal Authority for the Justice Department’s Operation Choke Point". Webcast. See, notice. Location: Room 2141, Rayburn Building.

9:30 AM. The House Commerce Committee's (HCC) Subcommittee on Communications and Technology and Subcommittee on Health will hold a hearing titled "21st Century Technology for 21st Century Cures". The witnesses will be __. Webcast. See, notice. Location: Room 2123, Rayburn Building.

9:30 AM. The Senate Judiciary Committee (SJC) will hold an executive business meeting. The agenda again includes consideration of the nominations of Pamela Harris (USCA/4thCir), Pamela Pepper (USDC/EDWisc), Brenda Sannes (USDC/NDNY), Patricia McCarthy (U.S. Court of Federal Claims), and Jeri Kaylene Somers (U.S. Court of Federal Claims). See, notice. Location: Room 226, Dirksen Building.

10:00 AM. The Senate Finance Committee (SFC) will hold a hearing titled "The Role of Trade and Technology in 21st Century Manufacturing". The witnesses will be __. See, notice. Location: Room 215, Dirksen Building.

1:00 - 2:00 PM. The American Bar Association (ABA) will host a webcast panel discussion titled "Talking SMAC: Contracting for Social, Mobile, Analytics and Cloud Computing". The speakers will be Lei Shen, Mark Oram, Mark Irving, and Joseph Pennell. Prices vary. CLE credits. See, notice.

2:30 PM. The Senate Intelligence Committee (SIC) will hold a closed hearing on undisclosed matters. See, notice. Location: Room 219, Hart Building.

Friday, July 18

Rep. Cantor's schedule states that "no votes are expected in the House".

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its draft SP 800-82 Rev. 2 [255 pages in PDF] titled "Guide to Industrial Control Systems (ICS) Security".

12:30 - 5:30 PM. The National Science Foundation's (NSF) Advisory Committee for Mathematical and Physical Sciences will meet. See, notice in the Federal Register, Vol. 79, No. 118, June 19, 2014, at Pages 35191-35192. Location: NSF, 4201 Wilson Boulevard, Suite 1235, Arlington, VA.

EXTENDED FROM JULY 15. Extended deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) that proposes rules for the regulation of the network management practices of broadband internet access service (BIAS) providers. The FCC adopted and released this item on May 15, 2014. It is FCC 14-61 in GN Docket No. 14-28. See also, stories titled "FCC Adopts Net Neutrality NPRM", "Summary of the FCC's Proposed Net Neutrality Rules", and "Net Neutrality NPRM and Pay for Priority Agreements" in TLJ Daily E-Mail Alert No. 2,659, May 19, 2014. See also, Public Notice (DA 14-1002) extending this deadline.

Monday, July 21

1:00 - 2:30 PM. The American Bar Association (ABA) will host a webcast panel discussion titled "The Mobile Transformation: The Extraordinary Legal Implications of Billions of Mobile Devices". The speakers will be Lori Chang, Damier Xandrine, Stephen Wu, Lucy Thomson, and Ruth Bro. Prices vary. CLE credits. See, notice.

Tuesday, July 22

8:50 AM - 12:00 NOON. The American Enterprise Institute (AEI) will host an event titled "Who Governs the Internet? A Conversation on Securing the Multistakeholder Process". The speakers will be Jeffrey Eisenach (AEI), Danny Sepulveda (Department of State), Steve DelBianco, (NetChoice), Laura DeNardis (American University), David Gross (Wiley Rein), Shane Tews (AEI), and Larry Strickling (National Telecommunications and Information Administration). Free. Open to the public. No CLE credits. Webcast. See, notice. Location: AEI, 12th Floor, 1150 17th St., NW.

6:00 PM. The National Press Club (NPC) will host a discussion of the book titled "Innovative State: How New Technologies Can Transform Government". The main speaker will be Aneesh Chopra, the author. The price to attend is $10. No webcast. See, notice. Location: NPC, 13th floor, 529 14th St., NW.

Wednesday, July 23

12:00 NOON - 1:30 PM. The Information Technology and Innovation Foundation (ITIF) will host a panel discussion titled "The Social Impact of Open Data". The speakers will be Maureen Ohlhausen (FTC Commissioner), Sandra Moscoso (World Bank), Laurie Actman (Penn Center for Innovation), Daniel Castro (ITIF), Brian Rayburn (Symcat), and Emily Shaw (Sunlight Foundation). See, notice. Location: ITIF/ITIC, Suite 610, 1101 K St., NW.

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