The technology and telecommunications industries are vital and innovative sectors of the U.S. economy.  Advances in these fields have a positive impact on other industries such as health care, education, transportation, and services.

However, some of the federal laws governing technology and telecommunications were written more than 20 years ago.  In addition, the growth of the industries has made them prime targets for new taxes and excessive regulations at all levels of government.

As the 113th Congress is sworn in on January 3, 2013, Citizens Against Government Waste’s (CAGW) top technology and telecommunications priorities include the following:

1. Internet Tax Moratorium

Since the general public first gained access to the World Wide Web in 1992, the Internet has been mostly free from government regulation and taxation.  This lack of intervention has contributed to the Internet’s remarkable expansion and availability.  In 1998, the Internet Tax Freedom Act placed a moratorium on discriminatory taxes on the Internet.  Since then, the Internet has reached 2.3 billion users; almost two billion more users than when the law was first enacted.  The latest extension of the moratorium expires on November 1, 2014.

Rather than continuing the moratorium, the ban should be made permanent.  Internet business and commerce have become an important part of the economy, and the tax ban has been a contributing factor.  As the world becomes more digitally-focused, the certainty that would come from a permanent ban would provide even greater innovation in technology and telecommunications.

2.  The Spectrum Crunch

Even though the Federal Communications Commission (FCC) is working on the development of the upcoming voluntary spectrum auctions, the federal government still needs to do more to address the looming spectrum crunch.  A December 5, 2012 report by Bret Swanson of Entropy Economics stated that in 2011, worldwide Smartphone sales reached 488 million units, and worldwide sales of tablets is expected to reach 202.7 million units in 2013, nearly doubling the number sold in 2012.  With this exponential growth in mobile computing, Swanson projects that mobile data traffic has a five-year compounded annual growth rate of 75 percent, with data traffic expected to reach nearly 2 exabytes per month by 2016. 

Without additional spectrum available for mobile communication and data, wireless networks will be unable to handle the increased traffic.  While the voluntary spectrum reverse auction is a first step toward providing more spectrum for mobile devices, the vast majority of spectrum is currently held by the federal government.  Federal agencies must review their own spectrum management and then release unneeded and unused spectrum to the private sector.

3. Federal Cloud Computing

Further implementation of the Obama administration’s cloud-first initiative will require continued monitoring to ensure that federal agencies are taking the appropriate steps in procuring cloud services, as well as providing adequate security and privacy within the cloud environment.  Federal information technology (IT) systems will continue to transform, as agency chief information officers find new ways to use cloud computing and integrate emerging technologies.  

Agency procurement officers will need to follow best practices to ensure that the product that best meets the needs of the agency is purchased, particularly with so many new cloud offerings being brought to the market.  In addition, Congress will need to address the changing landscape of how data is collected, used and stored in the new cloud environment.  Federal agencies are also considering permitting employees to use their own mobile devices in the workplace.  All of this must be done in a secure manner that protects data and networked systems. 

4. The Electronic Consumer Privacy Act (ECPA)

Just as one would expect a government entity to be required to obtain a warrant prior to opening up someone’s mailbox, the government should also be required to obtain a warrant in order to access personal email and other documents from a third-party provider.  In 1986, when the Electronic Consumer Privacy Act (ECPA) was first enacted, legislators had no crystal ball telling them that one day hundreds of millions of private citizens would be carrying around small computers in the palms of their hands and storing their information, including mail, documents, videos and photos, in the cloud.  

ECPA must be updated to address today’s computing environment.  In the 112th Congress, the Senate Judiciary Committee approved legislation that would require government officials to obtain a warrant if they ask service providers to disclose the contents of stored emails, which is the correct policy to address this matter.  It is expected that this legislation will be reintroduced in the 113th Congress. 

5. Taxing Wireless Services and Digital Goods

As reported in CAGW’s December WasteWatcher, the telecommunications industry, while providing innovation and economic growth to the country, is one of the most heavily taxed businesses in the nation with most of those taxes and fees being passed along to consumers.  Compared to the 17.18 percent average tax burden on wireless consumers, the U.S. average state and local sales tax for other goods and services is currently 7.33 percent.  During the 112th Congress, the Wireless Tax Fairness Act (H.R. 1002/S. 543) was introduced to address the rising tax burden on wireless consumers.  The bill would place a five-year freeze on attempts by state and local governments to raise taxes on wireless services, including mobile services, mobile service providers, and mobile service property.  

Currently, there are no federal or state guidelines to define the source of digital products sold in interstate commerce, which could lead to consumers being taxed twice for the same transaction should they purchase a digital good, such as a song or e-book in another state.   Several state legislatures are making efforts to increase taxes on consumers of digital goods by subjecting digital products such as movies, books, ringtones, audio and video works and similar downloadable products to sales and use tax.  

Legislation in the 112th Congress sought to address this issue by prohibiting a state or local jurisdiction from imposing multiple or discriminatory taxes on sales or use of digital goods or services.  The Digital Goods and Services Tax Fairness Act (S. 971/H.R. 1860) would have eliminated tax-related burdens on interstate commerce that could stifle the vital online market.  Because neither the Digital Goods and Services Tax Fairness Act nor the Wireless Tax Fairness Act was enacted, these issues will need to be addressed in the 113th Congress.

6. STEM Education and Immigration Reform

According to a January 20, 2012 Government Accountability Office (GAO) study there are 13 federal agencies that spent $3 billion in FY 2010 on 209 separate Science, Technology, Engineering, and Math (STEM) education programs designed to increase knowledge of STEM fields and attainment of STEM degrees.  According to the report, 83 percent of the programs were identified as overlapping with at least one other program, yet less than half of the programs surveyed by GAO coordinated with other agencies that offered similar STEM education programs.  On February 13, 2012, the White House issued a plan to coordinate STEM education efforts to address these issues.

Steve Case, co-founder of America Online, offered another solution to deal with the shortage of STEM-skilled workers in the U.S. in his December 7, 2012 op-ed in U.S. News.  Case proposes including high-skilled visa reform in the immigration reform debate in order to increase the number of STEM workers in the U.S. by permitting foreign students studying STEM curriculums in the U.S. to remain in the country to work after attaining their degrees.  According to Case, for every 100 additional foreign-born workers hired into STEM fields, an additional 262 jobs are created for native U.S. workers.  This issue will receive heightened scrutiny in the coming year.

7. Internet Radio Fairness

The growth of the Internet has provided a platform for expansion in digital radio services through satellite, cable and mobile applications.  Although several updates to the law regulating copyrights for music, video and other artistic works have occurred over the years due to complaints about the pricing determined by the Copyright Royalty Board (CRB), digital radio services are currently regulated under a compulsory licensing system established in the 1970s.  

In 2008, the copyright law was updated to permit parties to set industry-wide rates as an alternative to those issued by the CRB, allowing the free market to provide the pricing for copyright material.  However, satellite radio services were “grandfathered” to function under the then-existing below-market fixed price agreements, and still are subject to compulsory licensing agreements with rates set by the CRB.

Legislation was introduced during the 112th Congress to “fix” this “problem” for Internet radio.  The Internet Radio Fairness Act (H.R. 6480/S. 3609) would place all Internet-based radio services under same below-market rates standard currently paid by the three remaining "grandfathered" services (Music Choice, XMSirius, and Musak), and would force nearly 1,800 entities offering Internet radio into the old price-fixing compulsory licensing model.

The government should not be in the business of price fixing for Internet radio; instead the 113th Congress should lower the regulatory and compulsory burdens on industry, and allow the free market to determine fair market value of the copyrighted material.  Additionally, barriers to negotiations between the creators of copyrighted content and their distributors should be removed.

8. Other Issues

While the foregoing issues are CAGW’s top priorities, there are many other technology and telecommunications issues that CAGW will be monitoring in the new Congress.  They include municipalities developing their own broadband services where the private sector already offers these services; the FCC’s efforts to transform the Universal Service Fund into the Connect America Fund; the ongoing development and privacy of electronic health records; and budgetary issues relating to federal IT spending.  Federal agencies will also be under CAGW’s watch, particularly any rules and regulations that would stymie innovation or investment in these vital sectors of the economy.