Year In Review: Tech Issues Find Success in 2000

Despite its now entrenched legacy as the year of the punishing market correction, the year 2000 is also likely to be remembered fondly by many technology companies as the year of the well-spent congressional lobbying fund.

Technology companies scored a number of important victories in the second session of the 106th Congress. Lawmakers and the White House teamed up to pass several bills dear to the high-tech industry, including the extension of permanent normal trade relations (PNTR) to China, and an increase in the number of high-tech work visas allotted each year.

The tech industry had lobbied hard for the PNTR legislation, which cleared the way for China to enter the World Trade Organization, and allowed the United States to consummate a Chinese trade agreement that greatly increases the access of U.S.-based technology companies to the Chinese market.

In September, the Senate removed the final roadblock to the legislation when it passed the House version of the bill by a vote of 83-15. President Clinton signed the measure into law in mid-October.

The 106th Congress also approved legislation upping the number of high-tech-oriented H-1B visas doled out each year to skilled foreign workers. In October, Congress passed and President Clinton signed legislation increasing the annual number of H-1B visas to 195,000. A separate measure increasing the fee that employers must pay to apply for one of the coveted visas also was approved.

Among the many riders attached to the massive year-end congressional spending package was language that requires schools and libraries receiving federal "E-rate" funding to install approved filtering software on their computers. The changes to the ubiquitous E-rate program, which provides funds to help connect poor and rural public schools and libraries to the Internet, has drawn fire from the American Civil Liberties Union, which last week vowed to fight the new requirements in court.

The 106th Congress also voted to reduce from 180 to 60 days the time Congress has to review changes to computer export control regulations, a move sought by the computer industry for the past three years. The export provisions roll back restrictions put in place in 1997, following a scandal in which two US companies were found to have exported high-performance computers and sensitive satellite equipment to China and Russia.

All high-performance computer exports are regulated according to their operating speed and destination county. In the past, exports of computers that exceed a certain operating speed-measured in MTOPS (millions of theoretical operations per second) and destined for certain "Tier III" countries such as Russia and China had to endure a high-level review and obtain a special license.

As a result of the 1997 restrictions, each time the administration sought to increase the threshold of computer operating speed that would trigger such controls, those changes had to be approved by Congress over the course of a 180-day period. High-tech companies claimed this rendered many new products obsolete by the time the review period had elapsed.

In August, the White House increased the MTOPs threshold for exports of high-performance computers to all destinations, raising the Tier III threshold from 12,500 to 28,000 MTOPs, and upping the bar for exports to Tier II countries from 35,000 MTOPS to 45,000 MTOPS.

The White House also announced it would no longer draw distinctions between military and civilian end users in countries on all tiers, which covers roughly 50 nations, including Russia, China, India, Pakistan, the Middle East, Vietnam and Central Europe.

But for all the tech-friendly legislation enacted this year, the 106th Congress might just as well be remembered for inaction on a number of high-tech bills that by and large scared the living daylights out of many in the tech community.

Despite a number of high-profile Internet credit card fraud cases and countless public opinion polls identifying privacy concerns as the number one reason more consumers don't shop online, Congress failed to pass any meaningful privacy legislation this year.

Most congressional observers predict that the 107th Congress will quickly take up the issue of electronic privacy when it convenes in 2001. However, while privacy and civil liberties groups are pushing for the creation of strong legislative framework, many business leaders, including the powerful US Chamber of Commerce, said the privacy issue is not ripe for legislation. They have urged Congress to give industry self-regulation more time to work before imposing any electronic privacy laws.

A congressionally appointed panel failed earlier this year to come to a consensus on how and whether Internet purchases should be taxed. Now, there remains little consensus on Capitol Hill over how to balance the needs of the still-nascent e-commerce industry with those of state and local government leaders, who fear an erosion of their tax revenues as e-commerce grows.

Last week, representatives from 27 states approved draft legislation that - if enacted at the individual state level - could help states collect sales tax revenue for products sold online and through catalogs. The model language sets uniform definitions so that states can choose which items are taxable and which should be exempt. The legislation also places more restrictions on tax rates at the state level to whittle down the more than 7,500 different tax jurisdictions currently in use.

But in order to approve the legislation, the states will have to battle entrenched opposition from anti-tax organizations, high-tech industry lobbyists and literally thousands of local tax officials who may fear losing sovereignty over their fiefdoms.

Any state-approved taxation regime also would have to be reconciled with a federal moratorium on "new and discriminatory" e-commerce taxes. While that moratorium lapses in October, Hill sources say that supporters of the moratorium are poised to introduce a bill extending the ban early in the next legislative session.

In their ongoing negotiations with congressional Democrats and the Clinton administration over a $1.8 trillion budget compromise, the Republican leadership abandoned an effort to repeal a 102-year-old tax on telecommunications services. The $6 billion yearly tax -- derided as an outdated tariff introduced during the Spanish-American War in 1898 to fund the military effort - was offered up in exchange for cuts of roughly $5 billion from the health, labor and education spending bills.

House GOP leaders also let up on a pair of broadband deployment bills that appeared to be gathering steam toward the middle of the session. H.R. 2420, offered by Reps. W.J. "Billy" Tauzin, R-La., and John Dingell, D-Mich., and a separate measure introduced by Reps. Robert Goodlatte, R-Va., and Rick Boucher, D-Va., would allow traditional local telecommunications companies to offer long distance broadband service outside of their historical monopolies.

H.R. 2420 enjoyed the support of more than 220 House members earlier this year, but was strongly opposed by outgoing House Commerce Committee Chairman Thomas Bliley, R-Va. The legislation will almost assuredly be reintroduced at the start of the 107th Congress, particularly if Tauzin - widely considered one of the top candidates to replace Bliley - takes over as Commerce Committee chair.

Newsbytes reporters Robert MacMillan and David McGuire contributed to this report.