< NetAction Notes 66

NetAction Notes

Published by NetAction Issue No. 66 February 2, 2001
Repost where appropriate. See copyright information at end of message.


Five Years and Counting
The IRS and the Internet
About NetAction Notes

Five Years and Counting

Like most Californians, I'm coping with the daily possibility of rolling blackouts and the looming threat of massive energy rate hikes. I start my day now by turning on the radio -- briefly -- for an energy crisis status report.

California's energy crisis is getting all the attention right now, but consumers and regulators should also be worried about the local phone company.

Although February 8 marks the fifth anniversary of the Telecommunications Act of 1996, a truly competitive local phone market is still a long way off. If anything, the regional phone markets are more monopolistic now than they were when the Act was approved. There were eight regional phone companies in 1996; today there are only four. Together, these monopolies still control up to 98 percent of the $110 billion local phone market.

In contrast, there is ample evidence that the 1996 Act is promoting competition in other telecommunications markets. Long distance rates continue to decline, dial-up Internet services are well established and cable broadband is increasingly available.

But a key goal of the Act -- competitive local phone service -- has not been achieved.

Despite this failure, the four regional monopolies have been intensifying their demands that regulators declare their markets competitive and let them into the lucrative long distance market. This would be a mistake; one that can only lead to higher prices for both local phone service and broadband Internet access.

NetAction is particularly concerned about the impact on deployment of digital subscriber line (DSL) service. In the next few years, the demand for DSL is expected to skyrocket. But will consumers have a choice of providers, or will the local monopoly control the market?

In many states, competitive re-sellers of digital subscriber line (DSL) service have complained that the monopolies are making it difficult for them to service consumers. In December alone, six DSL re-sellers filed for bankruptcy, leaving many consumers with no choice of broadband providers. Where customers do have a choice, they are often forced to wait months for the service to be installed because the local monopoly is slow to fulfill the service requests of their competitors.

The customer service problems that DSL users have experienced are similar to the problems that local phone customers have been experiencing. In both cases, a lack of competition is to blame.

Here in California, customer dissatisfaction increased 50 percent since Pacific Bell was acquired by SBC. Now that PacBell is seeking permission to enter the long distance market, the company is portraying its operational support systems as "robust and reliable." But a recent independent report to state regulators identified more than 40 deficiencies, 10 of which were considered critical.

If these deficiencies aren't corrected before PacBell is allowed into the long distance market, California consumers could face the same problems that plagued New Yorkers when regulators allowed Bell Atlantic into the long distance market. After some 272,000 New York consumers experienced problems in switching their local service to competitive carriers, the New York Public Service Commission slapped a $13 million fine against the company.

The Telecommunications Act of 1996 was intended to promote competition in phone and Internet services, but so far the results have been disappointing. Competitive markets can only develop if consumers demand choices. Otherwise, we could end up with a re-monopolized, unregulated telecommunications industry. And our phone and Internet service could wind up being just as unreliable and expensive as energy is becoming in California.

The IRS and the Internet

The nonprofit Alliance for Justice has taken the lead in responding to an Internal Revenue Service Request for Comments on the use of the Internet by nonprofit organizations for lobbying and electoral activities. Other organizations are invited to sign on to the comments before they are filed with the IRS on February 13, 2001. NetAction will be co-signing the comments and we urge other organizations to do so also.

The draft comments and an online form for groups that want to co-sign the comments is on the web at: http://www.afj.org/fai/irs/index.cfm. Suggestions for changes to the draft are also welcome.

Nonprofit organizations that use the Internet for advocacy would be wise to co-sign the Alliance's comments, even if the organization's advocacy stops short of lobbying and/or electoral activities. A strong showing by the nonprofit sector is important to ensure that all organizations can continue making effective use of the Internet to support our programs and policy goals.

According to the Alliance, the comments reflect the legal analysis contained in the Alliance's excellent publication, "E-Advocacy for Nonprofits: The Law of Lobbying and Election-Related Activity on the Net." (An electronic version of this guide is available on the web at: http://www.afj.org/eadvocacy/index.htm.)

The comments rely on three basic principles, as noted below:

  1. When use of the Internet is similar to more traditional types of communication, the IRS should not create special rules for the Internet.

  2. In the few areas where the Internet is fundamentally different from other forms of communication in ways that support and encourage advocacy by nonprofits, any regulation should be careful to protect this potential to expand advocacy.

  3. Any attempt to regulate the Internet should take into account that the Internet is still evolving, suggesting generalized guidance and a go-slow approach in some areas.

About NetAction Notes

NetAction Notes is a free electronic newsletter, published by NetAction. NetAction is a California-based non-profit organization dedicated to promoting use of the Internet for grassroots citizen action, and to educating the public, policy makers, and the media about technology policy issues.

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