LAME-DUCK CONGRESS PASSES NET TAX BAN BEFORE HOLIDAY

Congress, during a chaotic week focused on approving a 2005 budget, passed a bill to ensure that DSL providers are not subject to new taxes. But other significant telecom legislation will not be resolved until lawmakers reconvene their lame-duck session in earnest during December.

Three telecom items — E-911 funding, the spectrum relocation trust fund and a legislative remedy to a universal-service fund (USF) accounting problem that has caused E-rate support to be stopped — are included in a package that passed the House but stalled in the Senate before a recess was called on Nov. 21.

There appears to be plenty of support for all of the telecom measures in the legislative package, but a proposal from Sen. John McCain (R-Ariz.) seeking the creation of a national boxing commission has created uncertainty for the telecom portions of the bill.

“It's not unusual for lawmakers to add all kinds of pet projects to popular legislation, like hanging ornaments on a Christmas tree,” said one Beltway source, who spoke on the condition of anonymity. “The danger is that, if you load the Christmas tree too heavily, it collapses.”

Probably the highest priority in the package is the spectrum relocation trust fund legislation, which would reimburse government agencies for the cost of clearing airwaves by giving those agencies a portion of the proceeds from FCC auctions of the vacated spectrum. If approved quickly, most analysts believe the Department of Defense will clear the airwaves from 1710 MHz to 1755 MHz so that the 3G spectrum can be auctioned within a year.

Congress may reconsider the telecom package when it returns to complete the lame-duck session beginning Dec. 7, when lawmakers are expected to focus on intelligence reform before adjourning for the year.

Lawmakers did succeed in extending the expired moratorium on Internet-access taxes through 2008. Telecom carriers had feared more states would tax DSL if the moratorium was not extended. An attempt to remove all existing DSL taxes failed, although the state of Wisconsin will have to cease taxing DSL in 2005, according to Mark Mullet, Verizon Communications' vice president of government affairs.

In approving the FCC's $388 billion budget for 2005, lawmakers included at least two policy statements, according to Jessica Zufolo, telecom analyst at Medley Global Advisors. While prohibiting the FCC from limiting universal-service support to primary lines had been expected, lawmakers also stipulated the agency could not take any action that would cause the cost of military personnel's prepaid calling cards to increase.

“This language is directly related to a petition filed by AT&T seeking an exemption from having to pay inter- and intra-state access and USF contributions for prepaid calling card services,” Zufolo wrote in a report. “This language was included mostly to create an obstacle for the FCC as it prepares to reject the AT&T petition before the end of the year.”

One other telecom item accomplished during the busy weeklong session was the confirmation of FCC Commissioner Jonathan Adelstein to a full term. Without the confirmation, Adelstein would have been forced to leave the FCC when Congress adjourned the lame-duck session. Now Adelstein's term ends in 2008, and he is eligible to serve on the commission until Congress adjourns in 2009.

Many Beltway sources deemed Adelstein's tenure at the FCC doomed when his sponsor and former employer, Senate Minority Leader Tom Daschle (D-S.D.), lost his re-election bid. However, Adelstein previously worked as a liaison for incoming Senate Minority Leader Harry Reid (D-Nev.). President George Bush renominated the Democratic commissioner to be part of a package of 170 nominees — featuring numerous Republican judicial appointments — confirmed by the Senate on Nov. 19.

“Once it was clear that Adelstein was also a Reid guy, it became clear it would get done,” Precursor CEO Scott Cleland said. “Adelstein had the good fortune of working for both the current and future minority leaders, and the Bush administration had a ton of judges it wanted to get through.”