State and local governments would be barred from taxing internet connections until at least 2007, under legislation passed by Congress earlier this month.

The move could cut two ways for educators: Though schools would miss out on the additional revenue these taxes might provide, the measure is designed, in part, to encourage the adoption of broadband technologies by consumers–meaning more students potentially could enjoy home internet access as a result.

The bill, which had been stalled for months, was approved by a unanimous vote in the Senate Nov. 17. It passed in the House by a voice vote Nov. 19, and at press time awaited President Bush’s signature.

The measure reinstates a temporary ban that lapsed more than a year ago while lawmakers argued over its extension. It applies to all types of internet-access services–from traditional dial-up services, such as America Online, to high-speed broadband lines from telecommunications carriers and cable providers.

“Today, we have made sure that the avaricious tax commissars from every county, city, and state in America cannot continue conniving new ways to tax the internet and the people who use it,” said Sen. George Allen, R-Va.

Lawmakers sought to make sure that new and evolving internet connections, such as satellite and broadband, got the same treatment as traditional dial-up connections. The plan would not affect sales taxes imposed on merchandise purchased online.

“Renewing this law will protect consumers from a host of new internet taxes on everything from web access to eMail and has saved those online businesses from becoming tax collectors for thousands of jurisdictions,” said Sen. Ron Wyden, D-Ore.

The House voted last year to permanently ban taxes on internet access, but it could not find enough support to pass the Senate despite a strong push from the telecommunications industry.

Some senators worried about the proposal’s drain on state and local budgets. Others saw provisions that communications companies might try to exploit.

Sen. Lamar Alexander, R-Tenn., said the new measure imposes the ban “while doing minimal harm to state and local governments.”

The agreement clarifies that the ban does not affect the taxation of a new technology–Voice over Internet Protocol, or VoIP–that allows consumers to make telephone calls using the internet’s backbone.

It also allows states that started taxing internet access before the initial 1998 ban to continue collecting them. House Judiciary Committee Chairman James Sensenbrenner, R-Wis., won a change that ends his state’s internet access taxes in 2006, a year before the temporary ban must be reconsidered.

The measure calls on the handful of states that tax high-speed DSL connections to phase out the levies in two years.

“The nation’s governors are pleased that Congress agreed on this reasonable extension of the previous ban on state and local taxation of internet access,” said Raymond C. Scheppach, executive director of the National Governor’s Association, in a statement. “The temporary moratorium is fiscally fair and preserves existing state and local government revenues.”

The House passed the bill on the same day the Commerce Department released a report indicating the number of Americans using fast internet connections doubled from 2001 through late 2003–still below some expectations, and especially low among minority groups and people in rural areas.

During his re-election campaign, President Bush advocated affordable access to high-speed internet services for all Americans by 2007.

The Commerce Department report, prepared in September but undisclosed until after the election, said use of fast internet connections grew dramatically through October 2003, to 20 percent of U.S. households. The report praised such services for fueling online banking, entertainment, and commerce.

Some experts said the growth was disappointing, far behind countries that include South Korea, Taiwan, and Canada. The report also identified troubling figures for use or availability of high-speed internet services among blacks, Hispanics, and people in rural areas.

“It shows we continue to have a significant divide between urban and rural America in the infrastructure for the economy of the 21st century,” said Gregory L. Rohde, who was top telecommunications adviser under President Clinton.

Only one in seven blacks–and fewer than one in eight Hispanics–lives in a household with fast internet service, said the report, titled “A Nation Online: Entering the Broadband Age.”

One in four white Americans uses high-speed connections at home. In urban areas, 40.4 percent of households use fast connections. In rural areas, only 24.7 percent do.

Significant numbers of rural Americans said they couldn’t subscribe to high-speed services because none was available. Most Americans who did not use fast connections said service was either too expensive or they did not need it.

“This [broadband gap] is lousy,” said Harris Miller, head of the Information Technology Association of America, an industry trade group in Washington, D.C. “We’re just not keeping up with our competitors. We’re not even keeping up with countries we don’t consider competitors. It’s not acceptable.”


Information on S. 150, Internet Tax Non-discrimination Act of 2003

National Governor’s Association

U.S. Department of Commerce

“A Nation Online: Entering the Broadband Age”

Information Technology Association of America