Congress Quits As R&D Tax Credit, Anti-Pretexting Bills Pass

Telecom Policy Report, Dec 11, 2006

The 109th session of the U.S. Congress adjourned during the early hours of Dec. 9 without progress on any sweeping telecom reform or national video- franchising legislation. Nevertheless, it passed important bills dealing with the research-and-development tax credit, anti-pretexting, spyware and public- safety interoperability.

With the House of Representatives and the Senate reportedly gaveling the lame-duck, Republican-controlled Capitol Hill agenda to an end at about 3:15 a.m. and 4:40 a.m., respectively, the top business concern of the telecom industry was the successful two-year extension of the R&D tax credit measure worth about $38 billion and retroactive to its Dec. 31, 2005 expiration (TelecomWeb news break, Dec. 7).

The R&D tax credit - now in place through Dec. 31, 2007 and avoiding for a short time the annoying, annual watch-and-wait ritual for lobby groups - was part of a larger act on taxes and trade. It's passage came in a 367-45 House vote followed by a 79-9 Senate approval during the wee hours amid a House- first/Senate second progression of last-minute actions on a wide variety of lawmaking items all now headed for President George W. Bush's desk for his signature.

A R&D tax credit extension was a key element in an ongoing lobbying campaign by high-tech enterprises, including telecom manufacturers and many other business organizations and their associations. Several groups and sources singled out for praise Sens. Bill Frist (R-Tenn.), Charles Grassley (R-Iowa), Max Baucus (D-Mont.); and Reps. Bill Thomas (R-Calif.), Charles Rangel (D-N.Y.) and John Boehner (R-Ohio) for making an extra push for bipartisan support behind the much-sought measure.

Pretexting Penalties

At the same time and by unanimous consent, the Senate also approved legislation making it a criminal offense to obtain any wireline or wireless telephone calling records and other personal ID information without permission via so-called "pretexting" fraud methods. Similar to a bill passed earlier this year in the House, the anti-pretexting act imposes a fine on individuals of as much as $250,000 and imprisonment of as long as 10 years for deceiving telcos and their employees into divulging the data. Companies convicted under the Senate legislation face fines of as much as $500,000.

Debate and rushed writing of legislative proposals on pretexting followed a year's worth of disclosures on the extent of the nefarious activity - sometimes with criminal purpose - as well as the internal employee/board member snooping scandal at Hewlett Packard that included using pretexting techniques.

The identical House (H.R. 4709) and Senate (S.2178) versions of the Telephone Records and Privacy Protection Act of 2006 primarily were sponsored by Rep. Lamar Smith (R-Texas) and Sen. Chuck Schumer (D-N.Y.) and pushed heavily of majority leaders in both chambers. "Stealing someone's private phone records is a criminal act that can now be prosecuted," said Schumer. "Phone information and call logs should be protected with the same safeguards as financial data or medical records. With pretexting companies popping-up across the country, law enforcement will get the tools needed to track down these criminals down and put this industry out of business."

The pretexting bill carries an exemption for law-enforcement agencies but it's apparently vague on pre-empting third-party sharing of customer proprietary network information (CPNI) used by U.S. telcos under Federal Communications Commission (FCC) rules and regulations. The Electronic Privacy Information Center, which has pressed the FCC on CPNI enforcement, said it would have liked to see Congress force companies to protect customers' personal information, and the American Civil Liberties Union said the bill would pre-empt its legal challenges in at least 10 states to the government's use of private telephone records in its anti-terrorism investigations.

But Jon Leibowitz, a commissioner at the Federal Trade Commission that already is battling unfair and deceptive business practices (including pretexting), welcomed the measure. "The fraudulent acquisition of phone records is now clearly and unequivocally illegal," he said. "Just having the statute on the books will help reduce the number of bad actors out there."

Spyware And Public Safety

Besides the Telephone Records and Privacy Protection Act, Sen. Ted Stevens (R-Alaska), outgoing chairman of the Senate Commerce, Science and Transportation Committee, also pointed to this session's successful passage of the Undertaking Spam, Spyware, And Fraud Enforcement With Enforcers Beyond Borders (US SAFE WEB) Act of 2006 (S.1608) and the Call Home Act of 2006 (S.2653). With multiple sponsors and co-sponsors, the US SAFE WEB Act ostensibly will improve the ability of the FTC and the U.S. Department of Justice to handle international-level consumer protections and to combat spam, spyware, Internet fraud and deception.

The Call Home Act of 2006 primarily directs the FCC, the DoD and the U.S. Department of State to seek reduced phone rates - including via Voice over Internet Protocol (VoIP) calling - for U.S. armed forces personnel deployed overseas. The bill, originally introduced by Stevens and committee co- chairman/heir apparent Daniel Inouye (D-Hawaii), also includes language designed to help public-safety activities via the distribution of $1 billion to fund interoperability communications made available in the Deficit Reduction Act of 2005.