An NCSL newsletter from the Communications, Technology and
Interstate Commerce Committee

Contents

At the NCSL Spring Forum held April 4-6, 2006 in Washington, D.C., members of the Communications, Technology & Interstate Commerce Committee (CTIC) adopted five new policies:

• Video franchising 
• Streamlined sales tax 
• Universal service 
• Municipal WiFi 
• Economic growth tax policy 

The CTIC Committee policies are available through the NCSL web site, http://www.ncsl.org/statefed/COMMERCE.htm

The CTIC Committee will begin its meetings in Nashville on Monday, August 14^th.  The streamlined sales tax task force will meet Monday morning, and in the afternoon, legislators and legislative staff are invited to attend a tour and briefing at the Dell Inc. state-of-the-art computer manufacturing facility.    Broadband, Telecommunications Tax Reform, Consumers and Wireless Services, Video-Franchising, and Nexus in the New Economy are on the agenda for Tuesday.  At the business meeting Tuesday afternoon, Committee members will consider policy on nexus, tax reform, municipal broadband and potentially video-franchising.    Topics for Wednesday include Copyright and Theft in a Digital Age, Streamlined Sales Tax, Identity Theft and Nanotechnology.  On Thursday, the Committee sponsors concurrent sessions on E-Legislatures and Telecommunications Competition.   For information about the NCSL Annual Meeting in Nashville, see the Nashville web page, and for updates on the Committee agenda, go to the CTIC Committee web page. 

For more information about the CTIC Committee, contact Committee Directors, Neal Osten in Washington, DC or Jo Anne Bourquard in Denver.

Telephone owners may not be aware that a number of unscrupulous companies are selling their confidential information to third parties. 

TELECOMMUNICATIONS

Telephone owners may not be aware that a number of unscrupulous companies are selling their confidential information to third parties. These telephone calling records, gathered by local, long-distance and wireless telephone companies, provide information not just on the calls you make and when you make them but also on other telephone services that you use.

Colorado (S.B. 91), Connecticut (H.B. 5669,  H.B. 5783) Virginia (H.B. 1518) and Wisconsin (A.B. 1014) passed laws this session to stop the practice. Georgia and Washington have laws on the books.  The new Virginia law creates a Class 1 misdemeanor for the fraudulent procurement, sale, or receipt of telephone records.  Virginia lawmakers defined the misdemeanor as one that involves: 

• knowingly procuring, attempting to procure, soliciting, or conspiring with another to procure a telephone record without authorization by fraudulent means; 
• knowingly selling, or attempting to sell, a telephone record without authorization; or 
• receiving a telephone record knowing that the record has been obtained without authorization by fraudulent means

All of these state laws prohibit trading in telephone records, including the unauthorized buying or selling of a person’s telephone information or records. Depending upon the state, violations are defined as a crime, an unfair trade practice, or a civil violation that may result in a civil lawsuit to recover monetary damages.

- Submitted by Bob Boerner

Several states have created authorities or funding mechanisms to develop and promote access to broadband Internet services throughout underrepresented areas of the state.

A gulf exists between access to broadband Internet services by urban dwellers and access by citizens in rural areas.  According to a recent General Accounting Office report, only seventeen percent of rural households subscribe, while 28 percent of suburban and 29 percent of urban households subscribe to broadband Internet services. 

As a result of this disparity, several states have created authorities or funding mechanisms to develop and promote access to broadband Internet services throughout underrepresented areas of the state.  For example, Kentucky lawmakers created the Broadband Deployment Account in 2006 to establish an incentive program to assist in broadband deployment.  Virginia legislators in 2006 authorized grants and loans for the purpose of installing, extending or increasing the capacity of broadband access to rural or underserved areas of the Commonwealth.  And, Wisconsin lawmakers passed a measure in 2006 known as the Broadband Deployment Act.  The new law provides $7.5 million in a combination of tax credits and exemptions for companies that expand in areas of the state where there are one or fewer broadband service providers.

Illinois and Michigan had broadband deployment laws on the books prior to 2006.  Illinois citizens may participate in funding the Program to Foster Elimination of the Digital Divide by making monthly contributions with payment of their telephone bill.  And, Michigan lawmakers created the Broadband Development Authority in 2002 to help Michigan attract more private sector investment and to increase the demand for broadband Internet services. 

As an alternative to state-funded mechanisms for broadband deployment, several cities recently have provided wireless or wire-delivered broadband Internet services to their residents.  However, Arkansas, Colorado, Florida, Louisiana, Minnesota, Missouri, Nebraska, Nevada, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington and Wisconsin have passed laws that restrict or prohibit the ability of municipalities to create or fund municipal broadband networks.

On Capitol Hill, the House and Senate Commerce Committees have each introduced legislation, H.R. 5252 and S. 2686, that would preempt the state authority to regulate municipal broadband networks.  If passed and signed into law, H.R. 5252 and S. 2686 may challenge the historical precedents that the states have the authority to govern their own localities, without interference by the federal government, and that such authority is absolute (see Hunter v. City of Pittsburgh, Williams v. Baltimore and Nixon v. Missouri Municipal League). 

- Submitted by Bob Boerner and  Garner Girthoffer

In 2006, statewide video franchise bills passed in at least four states.

Prior to 2005, all cable companies, and other companies interested in offering cable services to consumers, were required to negotiate separate agreements with each city before they could lay cable in the ground or place cable along utility poles.  In some states these agreements were valid for up to 15 years.  In order to establish these agreements, the company needed to enter into negotiations with as many as 2,500 or more cities per state.

In order to streamline the video franchise process, the Texas Legislature in 2005 approved a cable and video franchise law that permits state issued agreements.  This year, statewide video franchise bills have passed in at least four states, including Indiana, Kansas,  New Jersey, and South Carolina.  The Indiana law stipulates that the state public service commission is the sole franchising authority for video services in Indiana.  Under the law, cable providers are not required to obtain any other separate franchise agreements.  The Kansas law requires any company providing cable service or video service after July 1, 2006, to file an application with the State Corporation Commission.  The law also requires the State Corporation Commission to promulgate regulations governing the state-issued video service authorization application process. 

A 2006 Virginia law mandates a shorter time period for municipalities to review video franchise applications.  Designed to discourage a protracted approval process, the law mandates that local governments in the Commonwealth approve video franchise applications within a specified time.

In Congress, the House and Senate Commerce Committees each have introduced legislation that would reform the video franchise process.  The House version of video franchise reform, H.R. 5252, allows a video provider to choose between a national franchise or a state/local franchise.  The Senate bill, S. 2686, streamlines the video franchise process by preempting state and local laws concerning time deadlines for reviewing video franchise applications.  It is uncertain whether Congress will enact significant reform legislation in 2006 given the number of legislative days remaining prior to the November election. 

 
- Submitted by Bob Boerner and Garner Girthoffer

The Project Safe Childhood initiative will help law enforcement and community leaders develop a coordinated strategy to prevent, investigate, and prosecute sexual predators, abusers, and pornographers who target children.

INTERNET & INFORMATION TECHNOLOGY

On May 17, 2006, U.S. Attorney General Alberto R. Gonzalez announced the launch of a nationwide initiative to protect American children from online sexual exploitation. The initiative, involving efforts by federal, state, and local law enforcement officials, formally began on May 17, 2006. The Project Safe Childhood initiative will help law enforcement and community leaders develop a coordinated strategy to prevent, investigate, and prosecute sexual predators, abusers, and pornographers who target children. The project has also published a Project Safe Childhood Guide.  The U.S. Department of Justice has funded state and regional Internet Crimes Against Children Task Forces (ICACs). This year, as part of the Project Safe Childhood initiative, the Justice Department will be awarding more than $14 million dollars to fund the ICACs. 

NCSL's Children & the Internet Web page has a number of resources concerning state legislative efforts to protect children online, including links to related state laws.

-Submitted by Pam Greenberg

Wisconsin is the first state to enact privacy legislation related to radio frequency identification technology. 

Several state legislatures have introduced legislation in the past two years relating to the use of radio frequency identification (RFID) tags in consumer products.  However, more recently there's been an increased focus on RFID implantation in humans and the use of RFID in ID documents. 

Wisconsin is the first state to enact privacy legislation related to radio frequency identification technology.  Wisconsin A.B. 290 prohibits anyone from requiring individuals to have a microchip (e.g., an RFID chip) implanted in them.  Violators could face up to $10,000 in fines (each day of continued violation constitutes a separate offense).  New Hampshire lawmakers considered a similar bill earlier this year, but amended it substantially, and in May, enacted legislation (H.B. 203) establishing a commission to study the use of RFID.    New Jersey also proposed legislation this year to prohibit human implantation, and South Dakota and Rhode Island introduced legislation in 2005 (the bill in Rhode Island passed the legislature but was vetoed by the governor). Several other states have proposed bills to limit or prohibit the use of RFID in identification cards or documents. 

The Department of Homeland Security (DHS) Emerging Applications and Technology Subcommittee of the DHS Data Privacy and Integrity Advisory Committee recently released a draft report, The Use of RFID for Human Identification. The report examines the use of RFID to identify and track individuals and concludes:

RFID technology may have a small benefit in terms of speeding identification processes, but it is no more resistant to forgery or tampering than any other digital technology. The use of RFID would predispose identification systems to surveillance uses. Use of RFID in identification would tend to deprive individuals of the ability to control when they are identified and what information identification processes transfer. Finally, RFID exposes identification processes to security weaknesses that non-radio-frequency-based processes do not share.

The Department of Homeland Security should consider carefully whether to use RFID to identify and track individuals, given the variety of technologies that may serve the same goals with less risk to privacy and related interests.

The DHS Committee sought comments on this draft report, which will be considered by the full committee at a June 7, 2006 meeting.  A response to the report from the Smart Card Alliance, appearing in a press release in Government Technology magazine, disagrees with the report's position regarding the use of RFID technologies in identification applications.  The alliance argues that the report defines RFID too broadly and that the recommendation will "unduly restrict appropriate and secure applications of smart cards with RF technology that can meet the strictest privacy and security requirements."

-Submitted by Pam Greenberg

Using the private sector to help manage and deliver public services has become a popular approach to cost savings and improving efficiency in state government.

In recent years, using the private sector to help manage and deliver public services has become a popular approach to cost savings and improving efficiency in state government. Proponents of this form of outsourcing point out that private companies frequently possess capabilities that governments cannot readily match and can react more rapidly and with greater flexibility than the public sector. Indeed, surveys show that state governments are relocating a greater number and a greater range of service jobs related to information technology (IT). While many of these jobs are outsourced to domestic companies in the private sector, some states have entered into offshore contracts with companies that provide call centers and other low-level processing work, most notably in India and other countries that have lower labor costs. 

A growing number of state legislatures have taken up the issue of outsourcing in response to political pressure and public anxiety. For better or worse, IT outsourcing has become part of the broader debate over unemployment and the loss of U.S. jobs. Many lawmakers argue that government dollars should be funding jobs at home and cite complaints from their constituents about reaching a call center in India when calling a government agency for help. In response, at least two states (Minnesota and Missouri) have created requirements for contractors to disclose where they plan to perform the work, and in the past several years many states have considered bills that would block companies from using foreign workers on state contracts. In 2005, Maine enacted a law prohibiting state departments, agencies and bureaus from conducting business with any entity that employs outsourcing of services outside of the United States.

Proponents and opponents point to competing studies regarding unemployment and economic growth resulting from IT outsourcing. For example, IT industry statistics reveal that nationally, between March 2001 and April 2004, the industry lost 403,300 jobs. In addition, a recent report released by Input claims that state and local government outsourcing expenditures on information technology (IT) are expected to grow from $10 billion in fiscal year 2005 to nearly $18 billion by fiscal year 2010. Regardless of the claims from either side, many observers caution states to evaluate opportunities and risks associated with offshore outsourcing based on business goals, budget pressures, labor situations and technology challenges.

NCSL's Web site provides summaries of 2006, 2005, and 2004 outsourcing legislation in the 50 states.

- Submitted by Andrew Barwig

NCSL has identified 55 legislators in 26 states who have established blogs ("Web logs" or online journals).  Legislative blogs document experiences at the statehouse and report on issues of concern to constituents and others following state legislative issues.  These legislator-bloggers have been known to report on happenings directly from the floor of the legislature or to highlight local meetings in their districts.  Some legislators are prolific bloggers who make daily entries, others may blog only occasionally during legislative sessions or interims. 

At least one legislative office has a blog (the Hawaii LRB Library blog), and several state legislative caucuses have blogs, including caucuses in Alaska, Oregon, Pennsylvania, Utah and Washington. 

NCSL has joined the legislative "blogosphere" with The Thicket, a blog about the state legislative institution and federalism "written by and for legislative junkies."  For legislative technology junkies (and if you've read this far, you likely qualify), there are technology-related blog postings about the teleconferencing technology in Alaska, uses of the web to influence policymakers, and Webcasts in state legislatures. 

- Submitted by Pam Greenberg

TAX & COMMERCE

DaimlerChrysler v. Cuno

In an attempt to encourage DaimlerChrylser Corporation to expand its Toledo operations, the City of Toledo and the State of Ohio offered the company local property tax exemptions and a state franchise tax credit.  A group of individuals including Toledo residents, who were also taxpayers, sued in state court alleging that the two tax breaks violated the Commerce Clause.

The district court found that neither tax benefit violated the Commerce Clause.  However, on appeal, the 6^th Circuit Court of Appeals upheld the municipal tax exemption, but found that the state franchise tax credit violated the Commerce Clause.  On May 15, 2006, the United States Supreme Court held that the plaintiffs lacked standing to challenge the state franchise tax credit. DaimlerChrysler v. Cuno  The Supreme Court declined to review the decision of the 6^th Circuit Court of Appeals that upheld the constitutionality of the municipal tax exemption granted by the city of Toledo, Ohio. 

- Submitted by Garner Girthoffer

U.S. Senator Mike  Enzi from Wyoming has introduced the Sales Tax Fairness and Simplification Act, S. 2152, which would give the states the authority to require sellers to collect sales taxes on interstate sales (once a state has complied with the Streamlined Sales and Use Tax Interstate Agreement) and overturn the Bellas Hess and Quill decisions. The Sales Tax Fairness and Simplification Act also creates a small business exception whereby a seller with annual gross-remote taxable sales below $5 million is not required to collect under the Agreement.