The “Omnibus” Appropriations Bill -- What It Means for Telecommunications & Media Policy

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Robbie's Round-Up (December 21-25, 2015)

On Friday, December 18, Congress gave final approval to a year-end, 2,000-page fiscal package that includes a $1.15 trillion spending measure as well as $620 billion in tax breaks for businesses and low-income workers. President Barack Obama signed the bill later that afternoon, which means the government is funded through October 2016. The House vote was 316 to 113, with 150 of 246 Republican members (61%) and 166 of 188 Democratic members (88%) supporting the bill. The vote was 65 to 33 in the Senate, with 27 of 54 Republican Senators (50%) and 38 of 46 Democratic Senators (83%) supporting the bill. The bill marks the end of recently-elected Speaker Paul Ryan’s (R-WI) first trip through the omnibus appropriations process.

As the bill marched towards its final passing, numerous “riders” (additional legislative provisions) were attached concerning media and telecommunications policy. While the bill was being debated, some were adopted and others were dropped. Here is a rundown of the significant communications policy elements that have now been adopted:

Cybersecurity Information Sharing Act (CISA)
The Cybersecurity Information Sharing Act (CISA) gives U.S. corporations legal immunity when sharing consumer's' private data about hacks and digital breaches with the Department of Homeland Security (DHS). DHS can then funnel that information to other agencies, including the National Security Agency and Federal Bureau of Investigation, which can use that information for surveillance purposes.

Electronic Communications Privacy Act (ECPA) Reform
The legislation amends the Electronic Communications Privacy Act (ECPA) requiring that agencies not violate the Fourth Amendment when collecting electronic communications for investigations. That includes the Securities and Exchange Commission (SEC), which has lobbied against changes to ECPA that would require a warrant to access stored e-mails.

A requirement to follow the Fourth Amendment is nothing new, legally speaking. "This is just a circular restatement," said Paul Rosenzweig, founder of security firm Red Branch Consulting. He added that "atmospherically, it is a pretty solid slam at the SEC." Center for Democracy & Technology’s Chris Calabrese called the language "an important statement that Congress wants ECPA reform, but it's not a replacement for the Email Privacy Act." (The E-Mail Privacy Act is the House's main ECPA reform bill).

ICANN Transition
The nonprofit Internet Corporation for Assigned Names and Numbers (ICANN) manages the IP and Domain Name System (DNS) systems (the “address book” of the Internet), and is still under oversight of the US government. ICANN released a proposed plan to break up with the U.S. government this August. The proposal seemed to address Republican concerns of an international takeover of the Internet by prohibiting any governmental organizations from exercising oversight. But despite the proposal, the 2016 omnibus bill prohibits the US National Telecommunications and Information Administration (NTIA) from spending any money "to relinquish the responsibility of the [NTIA]... with respect to internet domain name system functions," through next year. It's the same language Congress passed in its last omnibus spending bill, which blocked the NTIA from taking action until September 30th, 2015.

Internet Access Tax Ban
The legislation includes a nine-month extension of the Internet Tax Freedom Act, which bars state and local governments from taxing customers’ monthly Internet service bills. The tax ban has required a handful of extensions since it was first put in place more than 15 years ago.

Joint Sales Agreements
The legislation includes a rider, backed by the broadcast industry, that will prevent the Federal Communications Commission rules meant to prevent a single company from owning more than one major broadcast station in a market from applying retroactively. This leaves in place the deals that were made before the FCC approved the rules. The provision lasts until 2025.

Targeting Private Federal E-Mail Accounts
The bill seeks to block some federal employees from using a personal e-mail account similar to the one used by former-Secretary of State Hillary Clinton. The bill prohibits funding streams for the State Department and US Agency for International Development (USAID) from being used “to support the use or establishment of e-mail accounts or e-mail servers created outside the .gov domain or not fitted for automated records management." Additionally, the legislation requires the State Department and USAID to update their policies for recordkeeping and try to ensure that all employees hand over relevant files when they leave office.

Halting Political Disclosure
The bill temporarily blocks efforts to force more disclosure of political contributors, a blow to advocates who have sought to curb the use of secret money in campaigns. The omnibus legislation would prohibit the Internal Revenue Service from using any federal funds in the coming fiscal year to revise or issue new rules governing the political spending of tax-exempt advocacy groups. The measure would effectively halt a two-year-long attempt by the IRS to set a clear limit on how much money such nonprofit groups, set up under Section 501(c)(4) of the tax code, can spend on politics. House Speaker Paul Ryan (R-WI) heralded the measure as a win, telling reporters that with the budget deal, Congress is “stopping the IRS from suppressing civic participation in 501(c)(4) organizations.” But advocates for greater transparency of political donations said the ban would make it harder for voters to know who is behind politically active groups.

Tax Breaks for Media Companies
The bill extends tax breaks that cable operators say have helped them invest in broadband buildouts, as well as a break for TV and film producers and a tax credit for research and development.

CenturyLink, for one, had pressed House Speaker Ryan and others in leadership not to let the accelerated and bonus depreciation provisions in the tax law expire Dec. 31. They were adopted to goose the economy during the Great Recession, but were extended for two more years in 2013, when they were initially to have sunset. CenturyLink said the provisions have helped the company invest billions of dollars to launch a gigabit network and that it continues to invest hundreds of millions in residential speed upgrades, fiber-to-tower, investments that would have slowed if the tax break were not extended. According to the budget bill, that bonus depreciation will be extended through 2019, though the bonus ramps down from 50% to a 40% bonus in 2018 and 30% in 2019.

Also in the bill is a permanent extension for a research and development tax credit, which helps keep that R&D onshore. Ron Dickel, VP of finance and director of global tax and trade for Intel said, "As one of the largest private investors in R&D in the U.S., Intel understands the value of investing in American innovation and the direct benefits on U.S. job growth...With a permanent R&D tax credit, Congress takes a significant step in securing long-term American economic growth and technological leadership.”

FCC Cleans Up Old Phone Rules
We also want to highlight some news from the Federal Communications Commission. On December 17, the commission acted on a petition, filed by industry trade association US Telecom, that sought relief from certain rules governing the provision of telephone service. The FCC decided to no longer enforce multiple rules governing legacy local phone companies, known as incumbent local exchange carriers, or ILECs. A number of these rules were pre-conditions to the ability of the former “Baby Bell” telephone companies to offer long distance telephone service, a process that was completed over a decade ago. However, the FCC maintained rules still needed to ensure that consumers in rural areas and low-income consumers have access to affordable phone service. And it preserved rules that the agency says continue to protect competition in the market for telecommunications services to businesses and other enterprises.

The FCC decision eliminates (grants forbearance from):

  • 1990s-era rules that governed the entry of the Baby Bell local phone companies into the long-distance marketplace – rules that largely are irrelevant and duplicative in today’s changed marketplace
  • 1980s “equal access” rules protecting stand-alone residential long-distance, a product that is disappearing[1]
  • Requirements from the 1980s and 1990s that required ILECs to provide access to their networks for competitive providers of “enhanced services” such as voice mail and fax – subject to a discontinuance process to ensure a smooth transition.
  • A rule requiring ILECs to provide a voice-grade channel (64 Kbps) on fiber networks for use by other providers

The FCC decision partially eliminates: (grants partial forbearance from):

  • Required sharing of newly-deployed ILEC entrance conduits
    • No sharing required for new entrance conduits in new developments (greenfields), where competitors have equal opportunity to build
    • Sharing of newly deployed entrance conduit in existing developments (brownfields) still required, given the advantages the incumbent LECs enjoy in these situations.

The FCC decision does not eliminate (denies forbearance from):

  • Obligation to provide voice service to consumers living in rural areas at affordable rates
  • Prohibition of using “contract tariffs” for business data services in areas not previously deemed to be competitive
  • Safeguards for enterprise stand-alone long-distance, protecting competition in this market, which has different characteristics than the consumer market

Looming for the FCC is a three-year old petition, also filed by USTelecom, asking the commission to issue a declaratory ruling that ILECs are no longer subject to dominant-carrier regulation under the Commission’s rules. The dominant carrier designation originated in the 1980s when the FCC exempted emerging competitive carriers from requirements which dated back to the monopoly days.

Quick Bits

Weekend Reads (Resist tl;dr)

Events Calendar for the Week of Dec 28-Jan 1, 2015
Please, take a break from telecom events. We are.

We will return in 2016 -- Happy New Year!

  1. The FCC decided to “grandfather” equal access rules for remaining subscribers to stand-alone long-distance, although ILECs may seek permission to eliminate equal access for these customers if they can demonstrate how the consumers will be protected.

By Robbie McBeath.