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The Internet and Electronic Commerce

The Internet defies a detailed one-size-fits-all approach to public policy and regulation. America's federal and state lawmakers, as well as policy makers from other countries should be guided by principles that foster the Internet's development while protecting the security and privacy of individual users.

Our nation's state legislatures are well-aware of the impact that access to the Internet and electronic commerce have on the economic vitality of our states and communities. State legislatures also recognize that the marketplace for electronic commerce is global, not just in the United States. State legislatures share the concern of many in Congress that ill-conceived over-regulation and taxation of the Internet and electronic commerce services could harm our nation's ability to compete globally. However, state legislatures also recognize that they have an obligation to act, when and if necessary, to protect the general welfare of their constituents. As the use of the Internet continues to expand, any future or existing regulations must be balanced against market forces in a competitive and technologically neutral manner, as government must not choose the winners or losers of the digital age.

Nothing in this policy statement is to be construed as limiting or affecting the right of any state to regulate alcohol according to its local norms and standards pursuant to the 21st Amendment.

NCSL opposes unnecessary or unwarranted federal legislation or regulation that would impede efforts by states to promote access to the Internet, enhance competition or increased consumer choice, or ensure the security of personal information of consumers conducting electronic commerce transactions.

The National Conference of State Legislatures (NCSL) supports the following principles in formulating laws and regulations that impact the Internet and electronic commerce:

Data Privacy and Security

With the proliferation of data online, including the internet of things and mobile devices, the regulation of the collection, sales, and transmission of consumer data is increasingly a priority for state and federal lawmakers. NCSL recognizes the importance of consumer data privacy and security protections, as well as the role of the states as leaders in establishing those protections for their constituents.

In response to many high-profile security breaches and violations of consumer privacy, data privacy and security have become the subject of increasing regulation, most notably the General Data Protection Regulation (GDPR) in Europe. States and the federal government are working to protect against data breaches, mishandling of data, and non-transparent sale of consumer data in a way that balances myriad competing interests and allows for innovation while safeguarding the rights of consumers. Congress has yet to enact any significant or comprehensive legislation that addresses consumer data privacy and security protection. Meanwhile, state activity in the areas of data privacy and security has significantly increased in the past few years and states will not hesitate to act in the absence of federal legislation.

NCSL opposes blanket state preemption in federal data privacy and security legislation.   However, because of the interstate nature of the internet and data transmission, NCSL recognizes the need for uniformity in the regulatory environment. Although data privacy and security legislation has traditionally followed a sector-by-sector approach, NCSL further urges Congress to consider comprehensive legislation in setting any national standard.

NCSL strongly urges Congress to engage in regular and meaningful consultation of state lawmakers when considering federal privacy and security legislation. State lawmakers should be included in hearings, review of draft language, principle setting, and other Congressional activity intended to impact state regulatory regimes.

If Congress develops a national standard, NCSL strongly encourages consultation with states and recognition of state expertise in addressing the varied interests of each state’s unique constituency. In any federal legislation, NCSL urges Congress to prioritize transparency and informed privacy decisions, and to carefully consider the best method for consumer notice, disclosure, and consent. NCSL further encourages Congress to consider issues of third-party access and sales, disposal of data, consumer rights to control data, and the burden of protecting consumer data. States have also engaged in significant deliberation over the applicability of consumer protections to various data types, including how to define personal data and how categories of data collectors or sellers should be regulated. NCSL supports recognition by Congress of states’ expertise on these issues and opposes any legislation that preempts state law without meaningful consideration of state priorities or established consumer protections.

NCSL also recognizes the rapidly evolving nature of data collection and urges Congress to consider biometric data, location data, and technologies like facial recognition and artificial intelligence when considering federal legislation.

States should retain the right to establish their own legal rights of action, enforcement regimes, and oversight authority. NCSL urges Congress to protect the right of the states to enforce data privacy provisions in any federal legislation.

Telemarketing

NCSL recognizes the increase in telemarketing activity and robocalls across the nation and the work of the Consumer Financial Protection Bureau and Federal Communications Commission on expanding consumer rights in this area. NCSL encourages Congress to pass legislation to protect consumers from harassment and predatory telemarketing activity, including requiring telephone service providers to, at no cost to the customer:

  1. Make robocall mitigation technology available to any customer;
  2. Implement call authentication technology to identify likely spoofed calls; and
  3. Offer call blocking technology.

Free Speech

The Internet allows people to communicate and share ideas with others with an ease never before possible. Federal government policy should rigorously protect freedom of speech and expression on the Internet, but not restrict states or local governments from oversight protecting freedom of speech. New technologies should adequately enable individuals, families and schools to protect themselves and students from communications and materials they deem offensive or inappropriate. State law enforcement, with federal assistance and resources, must be able to enforce criminal statutes against predators that use the Internet to harm or abuse children.

Self-Governance

NCSL requests that Congress to maintain the current self-governance approach that allows the competitive marketplace to drive broadband and broadband-related applications development and deployment. Congress should avoid adopting new mandates and provide the Federal Communications Commission (FCC) with defined and limited authority to oversee, but not proactively intervene in, the broadband Internet marketplace consistent with principles that focus on assessing whether the market continues to ensure that consumers can:

  1. Receive meaningful information regarding their broadband service plans;
  2. Have access to their choice of legal Internet content, recognizing the limits on bandwidth and quality of service of their service plan;
  3. Run applications of their choice, subject to the needs of law enforcement and the limits on bandwidth limits and quality of service of their service plans, as long as they do not harm the provider’s network or interfere with other consumers’ use of the broadband service; and
  4. Be permitted to attach any devices they choose to their broadband connection at the consumer’s premise, so long as they operate within the limits on bandwidth and quality of service of their service plans and do not harm the provider’s network, interfere with other consumers’ use of the broadband service, or enable theft of services.

Growth

Public policies must be designed to foster continuing expansion of useful and affordable bandwidth, encourage development of innovative technologies and promote broad universal access. Federal and state governments must work together to ensure that all Americans, regardless of where they live, have competitive access to high-speed broadband technologies. Government must work to guarantee open and competitive markets for broadband services.

Information Technology

Information technology (IT) is a global industry. A strong American IT industry enhances and strengthens the economic well-being of our states and nation. States and the federal government must work together to ensure a climate that allows America’s IT companies to continue to perform research and technology development, to generate innovative new products and services and to solve customer problems. States must have the unfettered ability to continue to seek ways to use IT to better the lives of their residents. Therefore, NCSL opposes any attempt by the federal government to restrict or penalize states’ efforts to utilize information technology services and products that allow states to provide more efficient government services to residents at lower costs to taxpayers.

Internet Gambling

Congress must respect the sovereignty of states to allow or to prohibit Internet gambling by their residents.

The Wire Act of 1961 prohibits using an interstate wire communication to transmit bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest. The law also made it illegal to use interstate wire communications transmissions to provide remuneration for winning bets or wagers or for information assisting in the placing of bets or wagers.

In 2018, the Supreme Court’s ruling in Murphy vs. National Collegiate Athletic Assn. allowed states to legalize and regulate sports betting for the first time, and many states have passed or are considering legislation that allows online gaming. Additionally, states currently engage in online gaming markets, interstate online poker pools, online lottery sales, and interstate lottery pools, among other online gaming activities. States and bettors also use the internet for marketing and payment processing. Some states currently utilize technology that restricts sportsbooks and users to operate within state lines.

The Department of Justice has issued several memos on the application of the Wire Act that may impact the ability of states to operate and regulate a variety of online betting and gaming activities. In 2019, the Office of Legal Counsel in the Department of Justice issued a revision of their 2011 opinion. The revision stated that the restrictions in the Wire Act apply to any form of gambling that crosses state lines, and may impact many currently legal state gambling activities, including the passing of data through intermediaries. The revision creates uncertainty in the regulatory environment and may cause disruption in state markets as litigation follows.

NCSL recognizes the importance of state sovereignty in the operation and regulation of online gaming and the importance of a predictable and stable regulatory environment. NCSL encourages Congress and the Department of Justice to engage in regular and meaningful consultation of state lawmakers and regulators when considering bills, opinions, or other actions that may disrupt current state markets or affect the ability of states to regulate online gaming. NCSL recognizes that states are best suited to regulate online gambling and encourages the Department of Justice to revise its current interpretation of the Wire Act to recognize state sovereignty in regulating these activities and provide market stability.

NCSL also urges Congress to clarify the Wire Act to protect the ability of states to operate and regulate online gambling activities as they see fit, including currently legal activities threatened by the revision of the OLC opinion. NCSL further recognizes that the Wire Act contains language that is out of date and does not reflect the reality that states, markets, consumers, and regulators operate in the age of the internet and digital commerce. NCSL supports a revision of the Wire Act that updates the Act to more accurately represents current technology and communications capabilities.

Electronic Commerce and Taxation

Government policies should create a workable infrastructure in which electronic commerce can flourish. Policy makers must resist any temptation to apply tax policy to the Internet in a discriminatory or multiple manner that hinders growth. Government tax systems should treat transactions, including telecommunications and electronic commerce, in a competitively neutral and non-discriminatory manner. The federal government and America’s industries should work with state legislatures in ensuring equal tax treatment of all forms of commerce and should encourage state efforts to achieve simplification and uniformity through the streamlining of state and local sales and telecommunications tax systems.

NCSL supports the reform of the discriminatory taxation of communications services and believes that if state and local governments were to take such action, the need for the federal moratorium on Internet access would cease to exist.

Video Franchise Reform

Innovation and convergence of existing technologies are radically expanding communications and information services, blurring distinctions between telephone, Internet services, cable, wireless and satellite. These rapid changes often outpace abilities of federal, state and local regulatory regimes to adapt. It is important that video regulatory policy assure that like services are treated alike, investment is encouraged, and services are in a non-discriminatory manner.

State Administration Will Preserve State Authority

Local jurisdictions are the creation of either state constitutions or law. The powers that these political subdivisions of the state exercise were granted to them over time by state legislatures. Those local jurisdictions that have franchise authority have it as a result of state legislation or the state constitution. Therefore, any attempt by Congress to preempt current local franchise authority is a preemption of state sovereignty.

While NCSL rarely advocates the consideration of legislation in state legislatures, NCSL has at times, when states are facing a crisis or a serious threat of federal preemption, urged state legislatures to take action. NCSL endorses efforts that remove barriers to entry for or inequity of regulation among video competitors and foster additional consumer choices in the video marketplace ultimately ensuring competitive neutrality.

Government should encourage competition and consumer choices for broadband and video services and promote the deployment of broadband services and technologies, as well as including options for public-private partnerships where applicable.

Fees and Taxation of Video Providers

Franchise fees today are levied, imposed or collected as a percentage of gross revenues, used for general revenue purposes and not based on the actual direct and identifiable costs of any benefit to the entity that pays the fee. To the extent such fees are intended as payment for use of public rights-of-way, that fee should be limited to the actual, direct and identifiable cost of such use, and that portion of the fee should be applied only to those who use the rights-of-way. Franchise fees should be collected and administered by one central agency per state.

Online Child Privacy Protection

WHEREAS, the internet presents certain risks for children under the age of 13 years who may not be able to recognize dangerous situations online.; and

WHEREAS, Congress passed the Children’s Online Privacy Protection Act of 1998 (COPPA) to limit personally identifiable information from children without their parents’ consent. In 2000, the Federal Trade Commission (FTC) issued a rule implementing COPPA that requires websites to post a complete privacy policy, notify parents directly about their information collection practices, and obtain verifiable parental consent before collecting personal information from their children or sharing it with others; and

WHEREAS, since COPPA’s enactment, research on children’s mental health and their online interactions has become available, showing a disturbing increase in youth mental health issues commensurate with social media presence. Studies have found that youth who spend over three hours per day on social media have double the risk of experiencing poor mental health outcomes such as depression and anxiety; and

WHEREAS, full compliance with COPPA has yet to occur and it has become a concern of the states to protect children online as their presence on social media platforms and other online websites has increased significantly since COPPA’s enactment and the FTC promulgated its rule; and

WHEREAS, states have begun to introduce and enact legislation to provide enhanced protections for children on the internet; and

NOW THEREFORE BE IT RESOLVED that, given that Congress has already established a baseline structure for regulating content shown to children, and that there is a federal agency in place to establish a regulatory framework, NCSL supports updating COPPA to reflect current concerns, encouraging compliance within the private sector, and creating reasonable federal standards to better protect children’s data that recognize important state interests and do not preempt state laws or create unimplementable, burdensome, or costly mandates for states.

Remote Commerce

The 1967 Bellas Hess and the 1992 Quill Supreme Court decisions denied states the authority to collect sales and use taxes by out-of-state sellers that have no physical presence or nexus in the taxing states, and urged Congress to address the issue of remote sales tax collection. It is estimated in various studies that state and local governments are losing between $8 billion to $35 billion a year in uncollected sales taxes from remote transactions and that annual losses will continue to grow as more commerce is conducted online. Congress’ failure over the last 26 years to address the issues raised by the Supreme Court in 1992, resulted in an effort by states to require remote sales tax collection based on economic presence. The first case ready for review by the Supreme Court, South Dakota v. Wayfair, resulted in the Court overturning its previous decisions in Bellas Hess and Quill, which allowed states to require remote sellers to collect sales taxes for purchases made by their residents. The Wayfair decision by the Supreme Court has made the need for congressional action unnecessary.

Having state tax sovereignty returned to the states for sales tax collection, states now have the obligation to act with fairness and transparency in administering the remote sales tax collection system. The responsibility will be on states to ensure that the burden to collect sales taxes by remote sellers is no greater than the burden on in state sellers if states are to avoid a preemptive federal framework imposed by Congress. States must work together as partners in the collection of sales taxes or face a call from sellers for federal intervention. Action by state tax departments regarding remote sales tax collection without the consent of the elected policymakers in the state legislature and executive branch should be avoided.

NCSL recognizes that 24 states have enacted legislation to join the Streamlined Sales and Use Tax Agreement (SSUTA), which was recognized by the Supreme Court in the majority opinion as a viable way for states to collect remote sales taxes. While it is an option for the remaining 21 states that have a sales tax, it is not mandatory. However, those 21 states should consider joining SSUTA or consider enacting legislation to work with SSUTA for: a central registration system for remote sellers, a central system for the certification of Certified Software Providers (CSPs), ensure that remote sellers are provided the same compensation as in-state sellers, provide a publicly available taxability and exemption table, and, provide a rates and boundary database in an easily downloadable format.

States won a victory in the U.S. Supreme Court and now they have a responsibility to ensure that sellers are treated with fairness and as good corporate citizens. States should follow the Golden Rule of state tax policy: “Do unto taxpayers in other states as you would have them do unto your taxpayers.” Any state that implements remote sales tax collection irresponsibly will only jeopardize the ability of other states to require remote sales tax collection.

Moreover, NCSL will oppose unnecessary federal legislation that preempts the states’ authority, as granted by the Supreme Court, to collect sales taxes from remote sellers.

Supporting the Affordable Connectivity Program (ACP) Through Permanent Congressional Funding

WHEREAS, internet connectivity is essential to the success of families, businesses, and government services; and 

WHEREAS, Congress created the Affordable Connectivity Program (ACP) in 2021 to make broadband service and connected devices available to lower-income households at discounted prices from providers that opt to participate in the program; and

WHEREAS, ACP has enabled low-income individuals and families to access online educational resources, gain employment opportunities, access vital services such as telehealth and government assistance, and participate in our civic life; and

WHEREAS, as of July 2023, more than 19 million low-income American households rely on support from ACP for access to the internet, and growing, many of whom receive broadband access effectively free after the ACP discount; and

WHEREAS, after state and federal broadband expansion investments, the ACP will help more Americans, including persons of color and residents in rural communities, stay connected; and

WHEREAS, many states are requiring recipients of the Department of Treasury’s Capital Projects Funds to participate in ACP; and 

WHEREAS, states and territories may require recipients of Broadband Equity, Access, and Deployment (BEAD) funding to participate in ACP or any successor program; and 

WHEREAS, current ACP funding could be exhausted in early 2024; and

WHEREAS, allowing funding for the ACP program to lapse will impose a hardship on the millions of families that rely on such support to secure broadband services that are necessary for jobs, for homework, and for staying connected with loved ones; and

WHEREAS, in addition to impacts on broadband adoption, the end of ACP would also impede the success of ongoing federal and state efforts to close the digital divide through the construction of new infrastructure to help reach those in unserved and underserved parts of the country; and

WHEREAS, it is crucial for Congress to prioritize the continuity and sustainability of ACP to ensure that low-income American families can continue to afford broadband internet access service; and

NOW, THEREFORE BE IT RESOLVED that the National Conference of State Legislatures urges Congress to fund the ACP program to ensure the continuation of the program ensuring that all Americans can have access to broadband service; and

BE IT FINALLY RESOLVED that a copy of this Resolution be sent to the President of the United States and all members of Congress.

 

Telecommunications

Deployment and Adoption

Internet connectivity is essential to the success of families, businesses, and government services. NCSL urges Congress and the administration to invest in universal internet connectivity, provide flexibility to states in federal programs and funding, and initiate proactive, meaningful engagement and consultation with states during the process of program development and implementation. NCSL also encourages prioritization of anchor institutions in federal funding and programs, as these schools, libraries, and hospitals are often cornerstones of community access. NCSL further recognizes the special challenges of middle and last mile deployment and encourages Congress and the administration to provide support to communities working towards universal service.

Federal funding and deployment programs should also address affordability and access among rural, unserved, and minority communities. NCSL urges Congress and the administration to provide targeted resources for reducing the digital divide, such as digital inclusion funding, training, and digital literacy. NCSL further encourages funding for tribal connectivity.

NCSL urges investment in wireless connectivity and facilities deployment, especially in unserved and underserved communities. NCSL further encourages investment in telecommunications workforce and advanced communications technology education and training.

Mapping and Data Collection

Fair, efficient deployment of internet services is dependent on accurate mapping of speeds, adoption rates, and coverage. NCSL encourages the federal government to ensure readily available data and technical support for accurate mapping. We also urge Congress and the administration to provide sufficient funding for mapping and to continue to provide easy-to-use, free online maps available to states and consumers. NCSL recognizes the importance of protecting states’ ability to do their own data collection and ensure accuracy of deployment maps.

Technology and Smart Communities

Telecommunications technologies are constantly evolving, and states are finding increasingly innovative ways to deploy connected devices. NCSL encourages additional federal investment in the development of smart communities. We further urge federal support for emerging telecommunications technologies, including those with applications in telehealth, agriculture, smart infrastructure, and transportation. NCSL also recognizes the need for investment in devices and connectivity equipment for anchor institutions.

Federal Funding and Cooperation

The federal government, including Congress, the Federal Communications Commission, National Telecommunications and Information Administration, and the U.S. Department of Agriculture, must work in close partnership with states to reach universal adoption. NCSL recognizes the essential leadership role of state policymakers and regulators as many states have created broadband offices, task forces, commissions, agencies, or frameworks. It is essential that federal regulatory agencies participate in meaningful engagement and consultation with states in the development and implementation of federal programs. NCSL encourages state legislature representation on federal advisory committees and boards that oversee broadband and consumer protection issues.

NCSL urges Congress and the administration to provide predictable, stable, and sufficient funding for internet connectivity programs. If Congress enacts financing opportunities, NCSL supports state flexibility in financing options in addition to sufficient program funding. We further emphasize the importance of partnership and communication in funding decisions.

NCSL encourages responsible, nimble, and fair federal spectrum management as well as meaningful engagement and consultation with states when determining the best use for spectrum.

Taxation

NCSL recognizes that communications tax policies should encourage a level playing field between communications service providers, enhance economic development, and avoid discrimination between new and existing providers. Other than the prohibition of taxes on internet access, NCSL opposes federal action that preempts the ability of states to determine their own tax policies in all areas, including communications services, unless where specifically supported by other NCSL policies.

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