Morning Consult

Supreme Court Declines to Review Colorado’s Internet Sales Tax Law

The US Supreme Court denied review of a case that leaves intact a Colorado law forcing retailers without a physical presence in the state to turn over customer purchase data to state tax officials. The court’s denial of Direct Marketing Association v. Brohl gives the green light for other states to impose laws mandating the collection of consumer purchase data from online retailers, making it more difficult for customers who buy products online to avoid state sales taxes. It may also presage an examination of a 1992 Supreme Court ruling in Quill v. North Dakota that prohibits states from ordering out-of-state retailers to directly collect sales tax from their customers.

A reconsideration of that decision has already been suggested thanks to a separate 2015 high court ruling in the same case, where the justices unanimously agreed that the Direct Market Association had the standing to sue. In that ruling, Justice Anthony Kennedy also wrote a concurring statement emphasizing that the court should take another look at its 1992 decision. Kennedy noted that the amount of forgone taxes resulting from the decision is now many orders of magnitude greater than in 1992, when Internet commerce was not yet viable. He urged the the court to reconsider the decision at the earliest opportunity.

Chairman Thune Throws in Towel on Commissioner Rosenworcel Vote Despite Wheeler’s Pledge to Resign

Senate Commerce Committee Chairman John Thune (R-SD) has essentially given up on a floor vote for Federal Communications Commissioner Jessica Rosenworcel’s confirmation for a second term.

He said that a vote before her term ends on Dec. 31 is extremely unlikely despite FCC Chairman Tom Wheeler’s conditional pledge to Senate Minority Leader Harry Reid (D-NV) to step down immediately if it would expedite her reconfirmation. Chairman Wheeler is required by law to step down as chairman of the commission when President-elect Donald Trump takes office on Jan. 20, but his term as a commissioner doesn’t end until June 2018. Before this week, he hadn’t been specific about his plans under the next administration. But his promise to stop down is being viewed as too little, too late. “If in fact he has made those representations, we’re just finding out about them now,” Chairman Thune said, adding that it seems Chairman Wheeler “wasn’t in any hurry to get out of there.” “My sense is that we’re kind of up against the clock now,” Chairman Thune said. “And it’s going to be very hard, even if Wheeler was agreeable to stepping down, to be able to get all this done between now and the time we go out.” “Even if they clear this, this is going to take a cloture vote,” Chairman Thune said, referring to a procedural maneuver that would bypass the objection of a senator or senators and takes several days. “A lot of our members are probably going to object to this.”

Without Senate confirmation for a second term, Rosenworcel’s tenure at the agency will conclude at the end of December. Chairman Thune said it’s still possible Commissioner Rosenworcel could be nominated again in January 2017, perhaps as a part of a deal to reconfirm Republican FCC Commissioner Ajit Pai.

Rep Blackburn Outlines Path to Network Neutrality Reversal, Communications Act Rewrite

Rolling back network neutrality rules and replacing them with legislation that establishes the “rules of the road” for internet service providers will be a priority for House Republicans in 2017, Rep. Marsha Blackburn (R-TN) said.

Rep. Blackburn, a member of President-elect Donald Trump’s transition team and a candidate to lead the House Commerce Committee’s Communications and Technology Subcommittee, said Republicans are intent on reversing Obama-era net neutrality rules that reclassified broadband companies as common carriers under the 1934 Communications Act. That move allowed the Federal Communications Commission to regulate internet service providers the same way as traditional phone companies. “I think you will see us address a net neutrality fix early in the next Congress,” Rep Blackburn told an audience at a Free State Foundation event. “I also believe you are going to see a legislative solution as opposed to a regulatory solution for this issue.” Rep Blackburn added, “A legislative fix is going to give you in the industry the certainty that you need so that you know what the rules of the road are for standards for internet conduct.”

Trump FCC Adviser Says Net Neutrality Is a Target for Next Administration

The Federal Communications Commission’s network neutrality rule is “the worst kind of crony capitalism” and is likely to be weakened or dismantled in the next administration, according to Jeffrey Eisenach, one of President-elect Donald Trump’s top telecommunications advisers. Eisenach also said that one of the two Republicans currently on the commission “will be designated chairman, because that’s the way the world works.”

President-elect Trump will have the opportunity to name a Republican chairman of the FCC in 2017, and Eisenach, who’s head of Trump’s transition team for the agency, is expected to play a key role in determining who the White House places on the commission. Eisenach noted that the net neutrality rule is tangled up in federal court and seems likely to end up on the Supreme Court’s docket. Eisenach also suggested that a new Republican-led FCC would curb its own power, saying 1980s-style deregulation “absolutely” can happen.

Chairman Wheeler Floats FCC Cybersecurity Certification for IoT Devices

Federal Communications Commission Chairman Tom Wheeler has laid out an unexpected roadmap through which the FCC could directly regulate the security of Internet-connected devices. In a letter to Sen Mark Warner (D-VA) dated Dec 2 and released by Sen Warner on Dec 5, Chairman Wheeler proposed an FCC-mandated cybersecurity certification process for “Internet of Things” devices. The proposal would also require consumer cybersecurity labels for IoT devices and associated services.

Chairman Wheeler is set to step down on Jan 20, but the new framework could be used to support legislation enhancing the FCC’s ability to regulate IoT devices. Chairman Wheeler’s letter responded to a set of questions that Sen Warner sent to the FCC four days after an Oct 21 cyberattack directed through IoT devices knocked popular websites offline for several hours. Chairman Wheeler that he shares Sen Warner’s concern “that we cannot rely solely on the market incentives of ISPs to fully address the risk of malevolent cyber activities.”

Trump Team Talks Up Sen Heitkamp as Agriculture Secretary Speculation Grows

The president-elect is scheduled to huddle with Sen Heidi Heitkamp (D-ND), a member of the Senate Broadband Caucus and a "clean coal" technology advocate, as part of Dec 2's round of transition meetings. There is speculation that Sen Heitkamp could lead the Agriculture Department.

While in Congress, Sen Heitkamp has been a proponent for rural broadband, promoting infrastructure to support high-speed Internet connections on North Dakota's Indian reservations and small towns across the state. In October, she was one of five senators who urged the Federal Communications Commission to consider how its business data services rules could deter investment from emerging providers, especially in rural areas. It's unclear whether the Heitkamp meeting pertains to a potential position in the administration, though news of the expected sit-down fueled rumors that she could be under consideration for a role at either the Energy or Interior departments or at the USDA.

Confirmation Prospects for FCC’s Rosenworcel Remain Cloudy

Confirmation prospects for Democratic Commissioner Jessica Rosenworcel of the Federal Communications Commission, who’s awaiting a Senate vote for a second term, aren’t dead yet, apparently. “I’ve felt for some time we were gonna get that resolved, I still hope that we will,” Senate Commerce Committee Chairman John Thune (R-SD) said. Earlier, he told reporters who were asking about Commissioner Rosenworcel,”It’s a leader decision about when that would come to the floor. …But you know we’re in a whole new world now. We’re going to have a new FCC starting next year.”

The prospect of a Trump Administration complicates pending confirmations, but not necessarily in a bad way for Commissioner Rosenworcel. “Now that we’ve got a new administration, we’ll have a new FCC. They’ll be looking at how and when to proceed with her nomination,” Chairman Thune said. Democratic lawmakers say Commissioner Rosenworcel is owed a confirmation vote based on a promise from Senate Majority Leader Mitch McConnell (R-KY). In December 2014, he promised Senate Democrats that if they voted to confirm Republican FCC Commissioner Michael O’Rielly, the GOP would in turn move quickly to confirm Commissioner Rosenworcel at the beginning of the 114th Congress in 2015. That hasn’t happened.

CTIA Wants Small ISPs Permanently Exempt From Net Neutrality Transparency Rules

CTIA - The Wireless Association called on the Federal Communications Commission to permanently exempt small businesses from transparency rules included in the agency’s 2015 network neutrality rules, with the current exemption scheduled to expire on Dec. 15.

“The enhanced transparency rules are unnecessary and unduly burdensome for all broadband providers, and particularly burdensome for smaller providers, many of which lack the monetary and/or staff resources to comply with complex disclosure requirements that will not provide any benefit to smaller providers’ customers,” wrote Krista L. Witanowski, assistant vice president of regulatory affairs at CTIA, in a filing with the FCC. “CTIA urges the Commission to permanently exempt small businesses from the enhanced transparency requirements and adopt a more realistic definition of the small business entities to which the exemption would apply.” The Washington-based organization represents companies such as AT&T and Verizon.

FCC Commissioner O’Rielly Is in It for the Long Haul

Washington (DC) may be white-knuckling its way through the last days of a traumatic 2016 election. But up on the eighth floor of the Federal Communications Commission, Michael O’Rielly is taking it all in stride. The Republican commissioner’s job is safe no matter what happens on Nov 8. Commissioner O’Rielly’s term doesn’t end until June 30, 2019, and a law allowing him to remain until a successor is appointed means he could stick around into 2020.

Perhaps it’s that sense of stability that gives Commissioner O’Rielly — whose frequent pleas for a light regulatory touch have fallen on deaf ears at a commission dominated by Democratic FCC Chairman Tom Wheeler — such an unflappable outlook. At nearly every FCC open meeting, Commissioner O’Rielly can be found dutifully dissenting against what he characterizes as the commission’s latest usurpation of congressional authority. “It’s OK. I make my points,” he said. “Sometimes I win. Sometimes I lose. And we go from there.” “Most times I lose,” he added, with a grin and a shrug. But Commissioner O’Rielly knows he will outlast the current chairman, who has indicated that he will step down in 2017 to allow a new president to appoint a chairman of his or her choice. When it comes to Commissioner O’Rielly’s plans for reining in the FCC, he is playing the long game. “You don’t have to be the chairman to get good outcomes,” he said. “Right now, the commission is viewed as a pyramid. And it doesn’t have to be.”

FCC Holds Off on Security Mandates for Internet of Things

Don’t expect the Federal Communications Commission to rush into issuing network security rules anytime soon, even in the face of a congressional inquiry seeking the agency’s response to the massive Oct 21 distributed-denial-of-service attack. At issue is whether the FCC’s Open Internet rules restrict internet service providers’ ability to block insecure Internet of Things (IoT) devices from their networks and whether the commission should mandate greater safeguards. But the commissioners generally believe the Open Internet order already gives ISPs sufficient leeway to protect their networks from vulnerable internet-connected devices without additional regulations or standards. And, according to FCC officials, there isn’t much of an appetite to issue any new mandates now.

There are also questions as to whether cybersecurity is even in the commission’s purview. Sen Mark Warner (D-VA) sent a letter to FCC Chairman Tom Wheeler on Oct. 25, several days after a hijacked network of IoT devices took large swaths of the United States internet offline. Sen Warner asked detailed questions about the commission’s role in empowering both ISPs and consumers with the means to prevent similar attacks in the future. The senator suggested that the Open Internet rule — adopted in 2015 during the debate on net neutrality — might actually limit the ability of ISPs to block insecure IoT devices from their networks. That could make it difficult to prevent future attacks stemming from those devices. Chairman Wheeler called Sen Warner’s letter “thoughtful” and promised a response. He also disputed the notion that the rules limit security practices of ISPs. “The Open Internet order allows for reasonable network management, which clearly gives leeway to be able to deal with issues like this,” Wheeler said at the FCC’s open meeting on Oct. 27. There is clear language in the rules for ISPs to deny access to networks or devices that could put their security at risk, according to one FCC official, who added that they were “designed for flexibility, particularly when it comes to network security.” The rules allow broadband providers to implement network management practices for the purpose of “ensuring network security and integrity, including by addressing traffic that is harmful to the network,” according to the Open Internet order.