On Friday, during floor debate, the Senate could not wrap up debate on a bill (S.150), sponsored by Senators Ron Wyden (D-Oregon) and George Allen (R-Virginia) that would make permanent a ban on taxing internet access. Senators of both parties expressed concern that the definition of internet access in the bill may preclude localities and states from collecting access fees on traditional telecommunities services. Senators Wyden and Allen are working on compromise language with senators that expressed concern about the loss of state and local tax revenue.

In the last temporary tax moratorium bill, which expired on November 1, there was language that specifically preserved a city or state’s ability to collect access or right-of-way fees on telecommunications services. The Senate bill preserves this same right by excluding telecommunication services from the internet access exemption, but there is a caveat, which is disconcerting to many cities. In the Senate bill and the recently passed House bill (H.R. 49), Internet access would not include telecommunications services, much like the last bill. However, the following language was inserted to both bills: Internet access does not include telecommunication services except to the extent that such service is used for Internet access. This new language was added at the behest of many phone companies, who felt that cable companies that provided Internet service by means of a cable modem (as opposed to high speed Digital Subscriber Line (DSL) service, which the phone companies have rolled out) had an unfair advantage because such a service was not subject to access or right-of-way fees. The distinction between DSL and cable modems service is currently being fought in the courts as well, with the Ninth Circuit Court overuling a FCC decision on October 6. According to the latest court ruling, both DSL and cable modem service can be classified as a "telecommunications" service.

Some Senators are concerned that telephone companies may interpret the new definition of Internet access too broadly and refuse to pay traditional telecommunications fees, citing a change in law. If there is not specific language in the bill that preserves a locality’s right to collect fees on traditional telephone services, some lawmakers feel that cities would lose an important source of revenue.

On Friday, Senator Wyden said he and Senator Allen were willing to accept a new tax moratorium, even thought they both are still seeking a permanent ban. Both Senators are still working with other senators on language that will keep consumers' Internet bills tax free, but still allow states and localities the ability to collect fees on traditional telecommunication services. Allen still wants to keep the definition of Internet access broad to keep new technologies like DSL, satellite and wireless tax free. Many localities are currently taxing DSL because the services runs on the same lines as telephones. Wyden feels that cable companies who provide Internet access currently have an unfair advantage over telecommunications companies that provide DSL service, because Internet access via a cable modem is not subject to taxation. (Prior to the latest court ruling, cable modems were not classified as telecommunications services.)

Debate on S.150 has not been overly partisan, as many Senate Democrats support the bill and many Senate Republicans oppose it. Senate Appropriations Chairman Ted Stevens (R-Arkansas) only supports a scaled down version of the bill and a two year extension of the moratorium. Senators Lamar Alexander (R-Tennessee) and Tom Carper (D-Delaware), both former governors, have expressed serious misgivings about the bill, most saliently, the likely loss of revenue for state and local governments. Senator Diane Feinstein (D-California) on Friday mentioned that 104 California cities wrote her opposing the bill because of the broad definition of Internet access.

Senate majority leader Bill Frist (R-Tennessee), a supporter of the bill, was doubtful as to whether the bill would make it back onto the floor this week.