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Stop Congress from Undermining the Open, Nondiscriminatory Internet!

In Competition, Do-Not-Deliver, FCC, FTC & DOJ, Network Neutrality, Rules&Regs, Uncategorized on March 18, 2011 at 6:27 pm

Take Action to Oppose H.J. Res. 37!

Some Members of the House and Senate want to override the modest safeguards finally put in place by the Federal Communications Commission. If successful, their action would say to the handful of major Broadband Internet Service Providers that actually handle the flow of traffic: “The Web is YOURS — Carve it up as you please!” Measures that would amount to a “Congressional Veto” of the FCC, small business and the general public have been introduced on both sides of Capitol Hill. The knee-jerk legislation, H.J. Res. 37 and companion S.J. Res. 6, aim to shred several years worth of diligent policy process at the expert agency and replace it with…nothing. A gaping black hole of uncertainty for every other line of business that is not a monopoly or duopoly ISP.

Members pushing for “Congressional Veto” willfully ignore the exhaustive record in the inclusive, open proceedings at the FCC. But what is worse, from an economic and job creation standpoint anyway, is the blind eye to the current market realities. We noted the lack of broadband competition in nearly all markets in our last post on topic. Here’s another way to look at the sheer market force of the handful of incumbent providers — those who would now be told that our collective internet is really their proprietary internet. While all the rest of us who are dependent on the network are scolded to just click our heels and say competition three times fast, and all evils will just cure themselves.

Even a quick peek through the lens of Moore’s law shows us how the idea of competition gives way to alternate reality in anticompetitive markets. Moore’s law anticipated the technological breakthroughs behind the wonders of computer chip-making. The innovations predicted by Moore, and the numerous corollaries beyond transistors including pixels per dollar, have brought us faster and cheaper computers, cameras, smart phones, tablets and the like. All smaller and more powerful — and cheaper — by the day. Consider the descending arc of the consumer’s cost of a Gigabyte of storage: 1981 = $300,000; ’87 = $50K; ’90 = $10K; ’94 = $1,000; ’97 = $100; ’00 = $10; ’04 = $1…and by 2010 we’re down to tens cents. All thanks to the driving forces of innovation and robust competition.

Now look at your latest Broadband Bill. Compare it to last year and the year before that. The price tag might suggest that the costs of digital data transmission are somehow immune to the otherwise ubiquitous phenomenon predicted by Moore and his innovative peers. But they absolutely are not. Accurate parallels apply to network capacity including Butter’s Law of Photonics — and today the actual bandwidth cost has fallen to an industry average of between 2 and 5 pennies per gigabite. Innovation combined with widespread adoption, has driven down the average cost of digital data transmission to the major incumbent ISPs to a mere $1 per month per customer. That fact that we’re still charged an average between $20 and 50.00 per month for broadband service is proof positive of an anticompetitive market.

But Congress wants to do more than simply ignore the reality that our nation’s wireline broadband markets are so concentrated that they can defy Moore’s law and keep all the savings away from consumers. In pushing this “Congressional Veto” of the FCC — and the rest of America exposed to monopoly or duopoly broadband provider conditions — they are actually signaling to the major ISPs with outsized market power and national footprints to go ahead with plans to set up new traffic-tampering toll booths if the markets will allow. And obviously, a broken market that allows charging up to $50 for something that costs as low as $1 to provide will also “allow” a new profit center built on gatekeeping.

Take Action to Oppose H.J. Res. 37!

The Free Community Paper Industry strongly oppose this “Congressional Veto” of the Federal Communications Commission’s modest safeguards to preserve an Open, Nondiscriminatory Internet. Contrary to some misleading talking points, the FCC’s well-reasoned framework simply establishes Transparency and prohibits Blocking and Unreasonable Discrimination against lawful network traffic. The FCC would have Broadband Internet Access Service Providers clearly disclose to consumers what exactly they are paying for and getting, while guarding against involuntary censorship of their customers’ digital communications. Instead, H.J. Res. 37 would obliterate these most basic rules of the road, scrapping the very conditions which have finally enshrined the longstanding policy and practice that allowed the internet to flourish. This “Congressional Veto” would give the green light to ISPs to launch into the gatekeeping business, and create new profit centers built on censorship and traffic toll booths. In essence, this bill says that after collecting payment for hosting as well as for wholesale and retail connectivity, the limited group of monopoly and duopoly providers can now create a new piggy bank to fill by dictating consumer experience and extorting new access taxes from all content creators including our hometown publishers, or otherwise block content in favor of their own.

The public is clearly on the side of the FCC, and overwhelmingly opposed to this Congressional effort to undermine sound communications policy. For those just entering this important policy debate, please read the latest opinion survey released by CFA and CU, the publishers of unbiased Consumer Reports. Perhaps even more instructive than the data detailing broad public support for Open Internet are the survey questions themselves. Answer them for yourself, as these are the actual network management practices at issue. Doing so, you might note the radical disconnect between real policy substance and distractive talking points on topic. With this understanding of the underlying principles of Open, Nondiscriminatory Internet, you will likely appreciate why this debate has historically been nonpartisan. A broad consensus of consumer and social policy interest groups across the political divide agree on the need to prohibit traffic tampering and corporate censorship. One particularly passionate essay on point was Christian Coalition of America’s “Net Neutrality is Not Some Marxist Plot,” debunking propaganda parroted by pundits on this action issue for them rooted in protecting free speech. Similarly, there is simply no credible reading of the actual FCC safeguards that could confuse network transparency and nondiscriminatory treatment of traffic with a “fairness doctrine of the internet” by any reasonable stretch of the imagination.

Our Industry joins with the broad consensus of job creators that support the FCC policy to preserve our vibrant, interconnected networks. The solid economic case against this “Congressional Veto” has been made universally by innovators, investors and a broad range of job creators operating on the so-called edge of the network. Our collective economic output is orders of magnitude above the solo enterprise of data transmission, and our capacity for innovation is as vast as our lines of business are diverse. Our continued growth and the emergence of new business models are critically dependent on the fair competition fueled by open, nondiscriminatory networks. The “Repeal” offered in H.J. Res. 37 implicitly contemplates a new anticompetitive vision of digital-era commerce, where the game is suddenly changed at halftime. It decides who gets to be the home team, and allows them to make their own new rules while telling the referees to leave the stadium. It’s worth noting that even competitive rivals to the national ISP giants support the FCC’s safeguards for fair competition.

This “Congressional Veto” comes as longstanding policy and practice have been recently undermined by the Courts and demonstrably threatened by implementation of powerful new traffic tampering technologies including Deep Packet Inspection (DPI). It proposes to remove enforceable Open Internet protections in the face of explicit internet carve-up schemes such as the public proposal floated jointly by Google and Verizon, and those buried in the comments of monopoly and duopoly broadband providers filed with the FCC in their exhaustive review. H.J. Res. 37 ignores the record established by the expert agency, and with negligible diligence of its own, torpedos a years-long open and transparent process of consultation, meetings, hearings and countless reams of substantive comments from all stakeholders including our Industry. If Congress moves forward with this ill-conceived and reactionary measure, the participatory internet as we’ve collectively grown it could devolve from a robust information superhighway into a potholed patchwork of fast and slow lanes and new toll booths. Free speech, fair competition, commerce, investment and job creation are all placed in jeopardy by this and similar Congressional proposals to demolish the FCC’s light-touch approach to preserving an Open Internet.


Community Paper Case to Repeal the 1099 Paperwork Tsunami

In Competition, Healthcare Reform, Rules&Regs, Testimony, Uncategorized on March 18, 2011 at 12:11 pm

For countless months, we have joined with our peers across the small business community in calling for full repeal of the new 1099 reporting provisions. We have made our case to the House and Senate, and gradually they began to listen.

Sort of.

Currently all sides say they want to repeal this job-killing paperwork nightmare. Several bipartisan votes have demonstrated that. Competing legislation has now moved from the Senate to the House and the House to the Senate…and even more repeal language has been attached and will soon be offered to larger pieces of unrelated legislation. Great, freestanding and pin-the-tail-on-the-donkey are both ways to get the job done.

But the Lingering Problem: Repeal is still not legally complete! Please Click Here on Our Industry Action Page to let your House and Senate Members know that you appreciate their efforts so far — BUT it’s now time to Finally Repeal the 1099 Paperwork once and for all!

The Free Community Paper Case for Repeal the 1099 Paperwork Tsunami has been made to Congress from the unique perspective of our industry — as well as part of a much broader coalition of small business groups. For the most comprehensive analysis of the impact to Our Industry, read excerpts of our formal Comments to IRS and Treasury as follow:



RE:  Notice 2010–51

Information Reporting Under the Amendments to Section 6041 for Payments to Corporations and Payments of Gross Proceeds and With Respect to Property

The Association of Free Community Papers (AFCP) and Mid-Atlantic Community Papers Association (MACPA) submit these comments to the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) on behalf of the united Free Community Paper Industry (Community Papers)1 in response to Notice 2010-51, regarding guidance concerning new requirements with respect to the reporting of payments made in the course of the payor’s trade or business.  Specifically, the Treasury and the IRS have asked for comments regarding the implementation of the expanded information reporting requirements included in the Patient Protection and Affordable Care Act of 2010, Pub.L.No. 111-148, 124 Stat. 119 (PPACA).

Community Papers are concerned about the increased complexity and cost this new requirement will place on small business generally, and on our hometown publishers and their community advertisers specifically.  The potential reach of the new reporting requirement is vast, requiring small businesses to report almost every business-to-business transaction including commerce-driving advertising services.

It is our understanding that the goal of this exponential expansion of reporting requirements is to increase the aggregate amount of income believed to be currently underreported by some in the business community, and thereby bolster collection of the sum total tax revenue believed to be owed.  Even in theory, it is generally understood that these new burdens will fall on already compliant small business taxpayers.  As a matter of practice, there are concerns even within Treasury and IRS that a tsunami of new 1099s will not provide any practicable new information, or whether this tidal wave of data can even be purposefully integrated into current data analysis systems.

Community Papers appreciate the fact that Treasury and the IRS have requested ways to minimize the expanded burdens on our small business communities. We note that attention has been given to, and comment sought on, specific concerns including duplicative reporting, disproportionate burdens among types of taxpayers and businesses associated with implementation and compliance, as well as the privacy concerns arising from the new, widespread wave of soliciting taxpayer identification numbers (TINs).

It is our strong and considered belief that these new reporting requirements will wreak havoc beyond even that currently contemplated, with a net return to Treasury and IRS far less than hopefully projected. Plainly stated, this costly scheme will do far more harm than good, and we will continue working with small business peers across industries united for full repeal measures before Congress. Here, however, we plead for the specific remedy of exempting advertising expenses from 1099 reporting at the new $600 threshold.

Community Papers offer five (5) concrete reasons why advertising — a commerce-driving, routine business operating expense — should be exempt from the duplicative 1099 reporting and the requisite and potentially hazardous TIN swapping triggered by $600 of services rendered over the course of the year:

• First, in practical terms with tax revenue objectives in focus, 1099 reporting on advertising will not provide any bottom-line information about any unreported revenues from client advertisers. The avalanche of requests for TINs, and subsequent cross-filings of 1099s will not reveal whether or not our advertisers are underreporting the income generated by their own, respective businesses. The overriding goal of making sure — or finding out whether — the plumber, the pizzeria or the seasonal lawn mowing and snow plowing service is reporting all of their income and paying their taxes will not be advanced one penny by this futile enterprise.

• Second, advertising expenses are not even remotely likely to involve any real compliance difficulties. These are tracked by front-end systems, generating a trail of payment and receipts, and presumably our clients already claiming advertising as a deduction.

• Third, a $600 threshold, or any other nominal and arbitrary baseline, could lead to the consolidation of advertising with fewer, larger firms — or even a reduction in advertising by small business altogether. Advertising generates a proven multiplier effect on economies, and since each ad dollar lost compounds to a net economic loss of 4 to 10 times or more, this would be a disaster for small business generally, our hometown publishers particularly — and quite possibly a net loss to Treasury and IRS.

• Fourth, given that TINs are unique, very real and powerful identities — the object of illicit demand and subject of theft and abuse — the forced, widespread unprotected sharing among all businesses based solely on a small dollar amount of aggregate yearly expenditures, would in other applicable contexts be scorned as dangerously promiscuous.  The magnitude of compulsory risk for our industry, and all of small business, is chilling.

• Fifth and finally, disproportionate burden:  Estimates of compliance across industries puts new 1099 reporting at multiples of ten (10) upwards past fifty (50) times current levels — Community Papers, anticipating formal requests for TINs from even our smallest and occasional advertisers, will see increases one thousand-fold (1,000x) and even higher at larger publications.  We are in the business of helping businesses generate business, and over the course of a single year even the smallest hometown publishers provide advertising services totaling $600 to several hundred and more micro and small businesses, in addition to others. For larger community paper publishers, that could run into the tens of thousands over the short span of fifty-two weeks.

The presumption behind these exponentially expanded reporting measures is the hopeful expectation that disclosure of this tsunami of new information will translate into significantly reduced illegal tax avoidance.  At the same time, there is a considerable concern bridging industry and government regarding the resulting paperwork burden and security risks, especially for small businesses.  Treasury and the IRS seek comment and have authority to issue rules exempting certain expenses unlikely to involve compliance difficulties, such as advertising, and in particular print advertising.

For the reasons detailed above, Community Papers urge the exemption of advertising from the duplicative 1099 reporting and the requisite and potentially hazardous TIN swapping triggered by $600 of services rendered over the course of the year.



1 The Association of Free Community Papers (AFCP) and Mid-Atlantic Community Papers Association (MACPA) are joined by the following state and regional trade associations of Free Community Paper Publishers:  Midwest Free Community Papers (MFCP), Southeastern Advertising  Publishers’ Association (SAPA), Community Papers of Florida (CPF), Community Papers of Michigan (CPM), Wisconsin Community Papers (WCP), Texas Community Newspaper Association (TCNA), Community Papers of Ohio and West Virginia (CPOWV), Free Community Papers of New York (FCPNY). Collectively, the Industry includes 2,673 hometown publications with a combined, audited circulation 65,187,292, and a small business client base, investing at least $600 a year, well into the millions — all to grow our inter-dependent economies.