CONFERENCE CALL MEETING

Arlington, Virginia

Friday, August 20, 1999

P R O C E E D I N G S

(11:00 a.m.)

GOVERNOR GILMORE: We have previously had a meeting of the Work Force Subcommittee chaired by Dave Pottruck. I think we made a lot of progress up until that time. We're beginning to move ahead now towards the idea of an agenda for New York, which will be comprehensive of the issues that we had addressed in the last conference call.

Now I'd like to turn the matter over to David Pottruck for further chairing of this Work Force Subcommittee. David, take it away.

MR. POTTRUCK: Thank you, Governor, and good morning everyone. I really appreciate the fact that we had so much wonderful input during our last conference call and subsequent to the last conference call, and I think the work on these conference calls and the work in between off line is allowing us to move the ball forward, and I think that we've really made some wonderful progress here and we'll make some more good progress this morning.

You've all gotten a copy of the so-called draft work plan, which Heather sent out, which includes comments by the various members of the Work Plan Subcommittee. I think we are moving toward a good agenda that will hopefully move us toward a set of recommendations that we will have coming out of our meeting in Dallas. And, obviously, given the fact that we only have three more physical meetings as opposed to cyberspace meetings, we have to get a lot done in each of those physical meetings so that we can absolutely have something for Congress which represents a solid product we can all be proud of.

I think if you look at the work plan and the discussion we want to have, a couple of things have, I think, come to mind as we've considered the discussion and looked at the minutes of our last meeting. First of all, there seems to be a strong interest on the part of a lot of Commissioners regarding having some presenters in our meetings, particularly in New York, and maybe in others.

And, obviously, there's also a strong consensus on the notion that we have a wonderful cross-representation of interested parties and the Commissioners themselves, and there's a lot of value in the discussion of the Commissioners, each of us, representing our points of view and our constituencies and our perspectives and some of the knowledge that we have.

So there's a little tension here between the idea of time set aside for presentations and time set aside for dialogue. So I think the consensus I would propose would be that we would have some number of presenters, and I would hope today that we can gain some consensus on this phone call about the aggregate amount of time we would want to set aside.

I think the clear consensus is that presentations would be in the realm of about five minutes. They would include a written piece including a 2-page executive summary. There would be highlights presented in that 5-minute presentation, and then some good time for Q&A. Q&A could go on forever obviously, with some of these presentations, and so some self-discipline over the process and the amount of time is going to be crucial.

And, Governor Gilmore, I would really look to you for some help on this. Given the amount of time we have, do you think we could hold the presentations, including all the Q&A, to maybe an hour or an hour and a half of our agenda? Would that be possible?

GOVERNOR GILMORE: I certainly think so, David. I agree with you that one thing we definitely want is to make sure that there's a great deal of interaction, argument, discussion, comment among the Commission members; I think we all agree with that. The first meeting in Williamsburg was designed to present some foundation of fact, but I sense that the Commissioners are anxious to get in there and have some debate over the issues.

At the same time, I think that there is also a strong sense that on the actual policy issues that are under discussion, that many of the Commission members still feel that a solid advocacy position on those policy issues has not yet had the opportunity to come forward. So I think that trying to resolve this tension is a good one. I think that the presenters are a good idea. I think giving them five minutes is correct, with written background.

But I agree with you that reserving the bulk of the agenda portion for interaction between the Commissioners is the right thing to do.

MR. NORQUIST: If we're having an hour for the presenters and questions, how much time is blocked out for Commissioners to talk to each other?

MR. POTTRUCK: Well, if you look at the agenda, which I'm turning to right now, and I guess my staff and the Governor's staff put this together with a very Washington start time of 9:30. I would actually hope we could start a little earlier in the morning. But right now we've got three hours in the morning, from 9:30 to 12:30, and we have from 2:00 to 5:30, three and a half hours in the afternoon, plus we have about an hour and a half the night before. So that totals up to about eight hours of time together in meetings. So we'd have a good six and a half hours, six hours of dialogue.

GOVERNOR GILMORE: Let me point out that the last time we met and talked, one of the five topics was the international aspects, tariff and electronic commissions and international competitiveness. I think some Commissioners are concerned that there's going to be some action taken with the World Trade Organization pretty soon, and there was a request that some of that time be set aside on Tuesday to thrash some of that out.

But the good news is that that makes Wednesday able to discuss some of the other issues without necessarily having to take a lot more time up on the international aspects. That gives the other topics some time to be aired out through its entirety on Wednesday.

I would only point out that at five minutes apiece, which I think is correct for a presenter, say four more issues to be thrashed out and, say, three people who wanted to make a comment. I'm just trying to do the math, and I think I'd just like to make sure that we do have enough time for the presenters to say something constructive, not taking away from the debate and argument time among the Commissioners.

MR. POTTRUCK: Well, Governor, I would say realistically speaking you're talking about probably at least 15 minutes per presenter. Does that sound about right? With ten minutes of Q&A or maybe even 15, and five minutes of presentation, that's 15 or 20 minutes for each presenter, don't you think?

GOVERNOR GILMORE: It could very well be 15 or 20 minutes for each presenter, if you restrict their actual oral presentation to five minutes and then do some Q&A. I would also point out naturally that a lot of the presenters' information will provide the foundation and fodder for the later discussions among the commissioners as well.

MR. POTTRUCK: Yeah. So I think we're talking about probably having like six presenters max, which is going to be, I know, a challenge because there's a lot of different people who would like to offer and recommend different presenters. But I would say if we've got a big clock there and we're pretty rigorous around the time and basically end the discussion when the time is up so we can move promptly through it, we could keep it to an hour and a half, two hours on the outside. You know, if we shoot for an hour and a half, we'll be pretty good at keeping it under two.

GOVERNOR GILMORE: I would aspire certainly to keeping it under two so we could have the bulk of the day for the debate back and forth, but I would say that if we have four topics that we need to take up, if we have four topics that we need to fully air out, and we've actually distilled those down into three, I don't think you can limit it to two people per topic, but I think you can add a little more time for people to make sure they get their points in and still retain the bulk of the time for the interaction back and forth.

MR. NORQUIST: What if we were to be more disciplined in limiting the Q&A time? Because I'd be more interested in hearing from, say, ten people. But say you talk for five minutes and we'll do five minutes Q&A, and then the members of the Commission can go back and forth and cite back to what was said earlier. We don't have to address all those issues then; we'll have four hours to do that later.

MR. WEINBERGER: Could I add a suggestion? Maybe what you can do, to kind of come in between the boths, is to have five minutes of presentations and then have the presenters available throughout the discussion of the Commission members, and if there's a topic where someone needs confirmation of a fact or a specific issue answered, they would be available throughout the meeting to answer questions of the commissioner at that time.

MR. NORQUIST: That's a great idea. It means we don't have to do lots of Q&A immediately after.

MR. VRADENBURG: T hen we can also put them on a panel so that you don't need even some physical moving around time.

GOVERNOR GILMORE: I think that's a good idea also. We could have the presenters seated at a table and available throughout the entire day for the Commissioners to make reference to throughout their discussions back and forth, might give either a little more time for the presenter or, maybe even better, time for a few more presenters to get in a point of view.

MR. VRADENBURG: I'd just like to ask the question of whether we're intending to impose some degree of subject matter discipline on ourselves as we go through six hours of back and forth among the Commissioners. Are we going to divide that time in any way amongst the different issues, or is that intended to be a free-for-all for six hours?

MR. POTTRUCK: Well, I actually thought, George, we'd put a wrestling mat in the middle of the room and just have a tag team kind of battle.

GOVERNOR GILMORE: That would be a good one. Listen, as chairman, I think you all are seeing that I think I can run a meeting, but my objective here would be to try to keep the discussion within the Work Plan Subcommittee areas that we're talking about, generally, but, you know, make sure there's plenty of opportunity for a full discussion of this.

But as far as going way outside the discussion of our previous phone conference, I don't think we probably want to do that. But it seems to me that within the five topics that we have just set upon ourselves, we ought to have some freewheeling ability to do that.

MR. POTTRUCK: I would suggest the following. I think that if you take the five topics, those five topics actually can be further kind of compressed within three broad overview areas: The first one would be international; that sort of has its own set of issues, and the Governor has proposed, and I've proposed that we would try to deal with that on Tuesday afternoon and that in fact we would have some recommendation, some point of view from our Commission, but that in reality that would not be the focal point of most of our dialogue. So we would sort of try to get that discussed and behind us on Tuesday afternoon.

Then on Wednesday, our time really would be focused on two broad areas: The first would be the state and local tax issues associated with eCommerce, and then the second really would be again largely state and local tax issues, specific issues associated with telecommunications and Internet access.

And, if you look at the five broad areas we talked about on our last conference call, the ones that would fold neatly into these would be the issues of E-retailing, Main Street tax issues, low tax and tax minimization issues would all, I think, fall under this.

And what we would try to do is have questions and topics prepared in advance. The Commissioners, all of us, would recommend various issues that would be honed down and focused by the staff, and then I would recommend that we have a process by which we would have the staff send out that agenda, and we would try to give some sense of prioritization to the staff.

Now, the way we usually do that at Schwab, when we have these kinds of issues, is, for example, if under a topic there's 12 items, you basically get six votes, and you pick the six you like the best. The staff can get the sense of the Commissioners regarding where the greatest degree of focus seems to be, and we can prioritize along those lines, and then we can nail that down in our conference call in September.

All of this would happen through e-mail between this call and our next call, and we could have the results of today with some work that's been done in the intermediate time all teed up and fairly honed for a conference call that would happen in September that would nail the agenda and the work plan for the rest of our time.

I think that we have a very, very broad set of issues, and we've got to have some sense of prioritization or we're likely, as George said, to have kind of a free-for-all and never get to the important stuff. So if we have some prioritization, then it will really be up to the Governor to have some sense of the amount of time we're going to spend as we try to get a sense from each area.

Now, in between New York, where we would discuss a lot of these issues, and our next meeting in San Francisco, there would be a lot of work by our staff, by the Commission staff, to try to take the points of view that have been communicated and try to outline a set of observations and options that would be then discussed in our meeting in San Francisco.

I think the key is for a robust amount of e-mail dialogue around these issues. So, for example, a draft would come out, people can offer their comments, it can go back and forth. There can be a lot of dialogue in that way, and the process can be of one kind of getting everyone's sense and seeing where the greatest degree of consensus is.

And, as a result of that, I would imagine we would have a clearer set of recommendations to be discussed in San Francisco, and if we've done a good job with this, then the work that's presented in San Francisco should in fact be largely reflective of where the greatest degree of consensus seems to be.

I think we have to recognize and accept the notion that we're not going to have unanimity on most of these issues, and therefore the process of consensus building and understanding where the consensus is, is going to be key to our getting anything done. If we try to strive toward unanimity, I think we'll clearly get nothing accomplished.

Now, one thing we haven't talked about, and I'd like to hear some point of view on this, is the formation of subcommittees that would actually try to have separate -- either among the Commissioners -- I guess among the Commissioners or their staff, having subcommittees that would do work on different topics as opposed to all of us working on all the broad issues.

What are some of your points of view on that?

MAYOR KIRK: David, I couldn't agree with you more about limiting our discussion of international affairs to that Tuesday and getting that out of the way, because I just think that's not something we have a terrible amount of internal expertise on, and we can just get bogged down and never get that resolved.

And I would concur with the comments, at least of some I've read of certainly Governor Locke and Ted Waitt and others that, you know, the reason this Commission was formed was principally to figure out what to do with both the equity and application and ease of applying local sales taxes over the Internet, and I think that ought to consume the majority of our time and then get to those other issues.

But I like what I've heard thus far in terms of trying to narrow our focus. We can make this as complex as we want and end up with no report and have it paid no attention, or we can try to give Congress some direction on the one issue that brought forth our existence.

And the only thing I would urge is the more we can narrow our focus on that issue of applicability of sales and use taxes to remote sales, I think the better off we're going to be, and if we cannot get carried out with communications and excise and others, which I know are difficult issues but are not the scope of this Commission, I think we'll have more likelihood of not only reaching a consensus but, hopefully, achieve our objective of giving Congress some directive on formulating a national policy.

MR. NORQUIST: As the person who was put on to represent consumers and taxpayers, it's not my understanding that our goal is to figure out how to raise taxes on the Internet, but to look at existing taxes as well, and I think we need to spend as much time looking at the present tax and regulatory burdens. And I'm very concerned about the privacy issues. I want to know where those are put in if we're going to three topics.

The Administration has just come out with a new proposal to allow the government to go in and wiretap people's personal computers. This is, I think, a real question for consumers and for, I would hope, people in the industry who are concerned about privacy and the security of people's computers. And this is not a Commission on how to raise taxes, but to look at both the tax and regulatory burdens that government puts on now, hopefully before we think about any additional ones.

MR. LEBRUN: I beg to differ with Grover on the second part of that. I think our charge is limited to the taxation issue, and the issues of privacy and all that, they may be interesting; they may need study, but I think they're outside the scope of our direction.

MR. NORQUIST: If you're going to tax the Internet, you have to put little policemen all around, which gets into privacy. It's one of the costs of taxes.

MR. WEINBERGER: But isn't that the answer then, Grover, that basically that issue, if you want to bring that up, would be brought up under the broad definition of state and local tax issues associated with eCommerce?

MR. NORQUIST: Well, any tax applied to either access to the Internet or to the Internet itself or to commerce on the Internet has implications and costs imposed on the American people, not just in dollars and cents, but in terms of privacy. So I would certainly hope that that would be explicitly put in as one of the costs of looking at imposing regulatory or tax burdens, and, yes, that is part of it. I just would like it to be explicit.

MR. POTTRUCK: You know, Grover, I'll tell you, I have benefitted greatly from your discussion of those issues. Because, as one member of this Commission, I got to tell you that as I came on, it wasn't immediately apparent to me, that connection, but you've made it clear, and I think that's the way I would like to see this dialogue evolve.

I would not imagine, for example, that privacy would be a topic, because I think we could go very far afield on the issue of privacy. However, when you have the issue of state and local taxes and the collateral impact of any decision in that area, I think we would see that discussion come about of privacy. I'm sure you would bring it up, and I'm sure everyone would find it enlightening and helpful. And that's exactly the kind of broad-scale education that our Congress people need so that they can consider these issues.

I would not recommend we have privacy on the Internet as a topic, because I think that will take us all over the map on privacy, which is much, much bigger than we have here.

MR. VRADENBURG: I agree with the comment about privacy on the Internet. But there is an unfortunate potential side effect, if in fact the tax system that emerges from here is intended to track the residence of all the individuals and their purchases so that in fact there is a detailed matrix of who is buying what on the Internet so that we can in fact pay, you know, down to some micromanaged level, precisely what it is and where people live and the like.

So I think, incidental to the construction that we create for application of sales and use taxes to Internet purchases, there will, of necessity, be ancillary to that an issue about the extent to which we track people's residences and what they purchase. And I do think, therefore, there is going to be, at least inside the issue of state and local taxation architecture, an issue about how much information is being collected. And thus insofar as it relates to state and sales use taxes, there are going to be some privacy issues. So to that extent, I would agree with Grover.

MR. POTTRUCK: It's a fascinating topic. There's no question about it. I don't want to get into it today. But I could imagine any number of systems that could be created by private enterprise to create aliases and other things that would protect people's privacy and still allow us to do the job on taxation that needs to be done.

MR. VRADENBURG: I agree with that, but I think that presents the very point that Grover's raising, and that is we have to deal with that issue as we deal with the architecture of the future --

MR. POTTRUCK: I'm just saying, George, it's got to be kept within the context of taxes and not just privacy in and of itself.

MR. VRADENBURG: I agree with that.

MR. POTTRUCK: Other comments please.

MR. LEBRUN: I'd like to go back just for a minute to the topic of the presenters in New York. I think it's really important, in view of the limited time, that we be very selective on who we have give live presentations. I think we should take the issues and make sure we have a balanced presentation.

I personally would rather have a little lengthier time for them and fewer people. I don't think we need a lot of repetition of the same position by four or five people. They should get together and identify who the spokesman is for the respective positions and then limit the number of presenters but get into more depth with them.

GOVERNOR GILMORE: Gene, I agree with you that we don't want to have presenters just repeating themselves and burning up time by trying to repeat and repeat so they can make their point strictly on the basis of repetition. I would be cautious, though, about trying to oversimplify the array of issues that need to be addressed by separate presenters. We're not going to hear from 50 or anything like that, but I think that the issues that are on the table today from the work plan group are probably greater than just a handful.

MR. LEBRUN: I agree. I'm just saying we should be very selective on who we permit to give live presentations.

GOVERNOR GILMORE: I agree with that.

MR. POTTRUCK: Governor, how about the idea -- I really like the idea that we have some limited Q&A and then have these people available -- basically, the layout of the room would be such that the presenters would be a resource and within eye contact of the Commissioners throughout the day?

Could we also have perhaps a small group that you would select, along with any Commissioner input necessary, of potential experts who would participate on an as-needed basis? They perhaps would not make a presentation, but they would there in case some value came up, and I would guarantee that by being there and observing the dialogue, they would be a terrific resource to the staff in helping construct some of the materials that need to be constructed following our meeting in New York.

Could that also be accommodated, do you think?

GOVERNOR GILMORE: Yes. And let me see if I can summarize where I think we are. First of all, we're talking about two groups available: One is the body of presenters who would be sitting en bloc, I think, during the day for continued Q&A as the Commissioners go back and forth; a second group of experts, wise men, we will take you all's recommendations on who they might be, and we'll put them at a different table within the same room as available.

We're discussing here trying to stay within the array of topics that we have and give the maximum opportunity, I guess, for presenters without eating up our time, give some limited time for Q&A just to sharpen up any questions the presenters may have left unclear, but leaving the bulk of the time for the Commissioners to go back and forth with access to these human resources. Right?

MAYOR KIRK: Governor, that sounds great to me. My only concern is given all of our talk last time about the inequities of women -- just be careful -- we make that our presenters be wise men and women.

GOVERNOR GILMORE: Oh, my, yes. Yes, sir.

MAYOR KIRK: We just got the budget. And, Heather, I don't want it now, but if I could get some understanding of our staff further because I just got to see it today, $1.4 million for 18 months. I just want to know how much and where that's going and also the diversity issue I raised last time. Because it seems we're not making much headway on that.

And, Heather, I'll be able to talk to you about that later if you want assistance on how we could reach out to some other groups to get some difference of thought and opinion on the staff as well.

MR. ANDAL: I want to address this to David Pottruck before we get off of the subject of how we're going to make presentations. I really want to get to the rub, and it appears to me that there's an enormous number of people, for all kinds of various reasons, who want to philosophize and demagogue on these issues, but they're not really offering specific proposals. And what I think I like about your draft agenda is that presenters are going to be making presentations/proposals.

In other words, you know, almost anybody in America can get up and say, gee, there's some confusion about nexus standards. Mayor Kirk and I would disagree on what the solution is, and that's why we're here, and we got to get to that rub, but you can't do that if people are just reciting the problem over and over again.

And one thing I'd like to see happen here, I'm for a broad net, you know, and I'd like to get all kinds of competing views exposed. But I'd like it to be done with people that have a position, and so maybe when we select these panelists, one of the charges of the panelists and the presenters is that they have to step out and offer a solution. And there are people that will do it. You know, I want to do that on one of the issues.

But, you know, if we have, you know, people getting up and telling us what the world's problems are over and over again and not taking a position, then that doesn't allow us to get to the rub and doesn't allow to work towards consensus at the end. And I'm wondering, is that what you have in mind here?

MR. POTTRUCK: Well, my own personal point of view, I agree with you, Dean. I find that there's lots of people who come into my office and make my problems bigger, and that's always nice, but I really appreciate the people who come in with a proposed solution.

So I think in terms of Governor Gilmore and the Commission staff sorting through to who presents, I would recommend, indeed along your lines, that we try to focus on people who can explore an issue and offer some suggested solution that takes into account the complexity of what we're dealing with here.

The one thing I've learned in one meeting and two conference calls and some reading is that this is a lot more complicated than I thought when I found out I was named as a Commissioner. This is a lot more complicated. And that's why we have something to really add, because it is so complicated, and any solution becomes one of balancing the myriad issues and finding, you know, what we call the brilliance of the end as opposed to the ƒƒƒƒ. We've got to find that kind of a solution here.

So I would agree with you. I think that we've opened the gate to allow virtually anyone who wants to send a report or a recommendation or something to the Commission, as long as it's accompanied by a 2-page executive summary, we will receive that. I think Heather and the staff will make sure that it's appropriate and valuable and send that stuff out to us. That will give us all the opportunity to go through an awful lot of stuff because we can choose what we want to get into depth on and what we don't want to get into depth on.

And from all of that, we'll have the opportunity, I think, to select a small number of speakers. Does that make sense you to, Governor Gilmore?

GOVERNOR GILMORE: It does make sense to me. Let me also say that, as I hope everybody's observed, I have been at pains to try to make sure that the process that we are doing is fair and open and that everybody has an opportunity to discuss the salient points.

I think what this subcommittee is reaching for, and I agree with it, is to make sure that we in fact do hone it down, don't have just a lot of posturing, and that we're actually discussing substantive areas, and I agree with that.

Mayor Kirk, you are a strong advocate for a position, and I understand that, and you may be assured that the topic of a tax system is going to have a full and complete opportunity to be aired out here. But it cannot be the only and sole issue and I think many of us would agree that the charge to the Commission is broader than that, but you may be assured that that is what's on everybody's mind and it's going to have a fair opportunity.

On the international side, I want to say that I would not be surprised if we don't end up making some limited reference back to the previous day. Frankly, I have been trying to work out in my mind how you put together an enforceable plan when in fact the Internet is global, not national, and I have not heard an answer to that yet. I hope that it will be resolved to some extent the previous day, but I wouldn't be surprised if it isn't part of our discussions, even though it does not become a topic for Wednesday.

But be assured that I recognize the necessity to make sure this is an open topic, but also understand the whole discussion today is to make sure that it's valid, focused, and material, and I think that's what we're trying to work towards.

MR. VRADENBURG: Coming back to David's earlier question about working committees, I think it's essential, as we think through both the agenda for the New York meeting and then the continuing effort that goes to San Francisco and Dallas, that we have a through line to how we get from here to a final report that deals comprehensively and fairly with all the issues that are put before us.

I do think the earlier conversation about the elaboration of the New York meeting, in terms of getting the key questions out and having an opportunity for all Commissioners to get the key questions out for discussion in New York, is an excellent one and that the through line then is the issues and options, a piece of work product that David and the Governor have laid out between New York and San Francisco.

But I do think it's essential that this Work Plan Committee stay deeply involved, very quickly after New York, to make sure that the issues and options get laid out and get circulated so that all the Commissioners have an opportunity to make sure that the issues that they would like to see addressed and the options underneath those issues are well identified between New York and San Francisco and that we have, not only the discipline of where we're going to try and get to at the end of the pike, but also the full involvement of all of the Commissioners in making sure their issues and options and approaches are thoroughly out there and discussed.

Finally, I'd also make the point, David, that I do think it's important that we, almost immediately after New York, begin to think through the drafting process so that we have in front of us, in San Francisco at least, some ideas on what the final report looks like in terms of outline, subject matters, and length and scope and depth and complexity so that we get the Commissioners' input in San Francisco on what they think that the final report might look like.

MR. POTTRUCK: Yeah, I agree with that, George. I would offer one other observation, and it's a question really. Recognizing that we will not have unanimity around almost any issue, the question then becomes, how does the report represent the point of view of the minority or the points that are not inclusive, and how do we do that? Does each Commissioner, who doesn't agree, submit something, or do we have some other process?

I don't know, Governor Gilmore, if you've given that some thought, but I think our report has got to have some opportunity, the final written report, to also recognize the fact that there was not unanimity and that there were some other points of view which deserve to be represented in some fashion.

How would you imagine that being treated?

MR. ANDAL: David, Governor, this is Dean Andal. Could I offer a suggestion there? There seems to be many options. But I've been thinking about this because we have obviously some strongly felt views from some very bright people on this Commission, and it requires a two-thirds vote to resolve it, and really our job is to help Congress, not to decide the issues, because our recommendations don't become law, and a two-thirds vote on some of these issues is going to be very difficult.

Two other options, other than just simply offering, you know, a suggestion to Congress on what they might do, one would be a majority/minority report formula that is often done by congressional committees. So you just have a dissenting report and others can sign on to that.

Another though, which I'm looking at very seriously, is a broad recommendation on a subject area. For instance, it comes as no surprise to anybody on the Commission that there are strong differing views on the Quill case and on nexus standards for remote sellers, and, no matter what we do here, obviously, that's going to be of interest to a lot of us on both sides of that issue.

If we can't achieve a two-thirds vote, we could make a recommendation to Congress, for instance. I'm not suggesting this or putting it up for debate but just using it as an example. We could make a recommendation that Congress set a nexus standard and then offer two or three different options on what that standard might be, and I think that is, you know, a likely formula for success.

That way Congress is presented with real options. We clarify the issues and give them that menu to work off of, and then we've performed a real service to Congress. That is also likely to achieve a two-thirds vote, and it might even achieve a unanimous vote, depending upon how it's written. We also would have done our job, which is to advance the ball and put the issues directly before Congress.

So I'm not proposing that at this point, but I just wanted everybody to think that there are more options than just having a showdown.

MR. NORQUIST: I think one option would be, on some of these issues, to say, here are three or four different options and here are the pros and the cons and here's who thought why on each of them. If the Congressmen have that to work from, what are the different options and what are the costs. And that's where I want to make sure we're focused on some of the costs of privacy and taxpayers in each of the different proposals.

But we can put forward two or three or four proposals and just list the advantages and disadvantages of each. We can say X number of people liked one or the other, but there wasn't unanimity, and here are four different approaches.

MR. KIGA: David, Governor Gilmore, Fred Kiga on behalf of Governor Locke. You talk about the complexity of the issue and as well just how do we achieve consensus with respect to a final report? The National Tax Association project on electronic commerce is basically reliving the trials and tribulations that organization is going through.

Perhaps, as a presenter, you may want to have the two co-chairs, Kendall Houghton and Gary Kornea present the troubles the NTA project is currently going through in trying to achieve consensus, as well as the array of issues addressing taxation of eCommerce.

GOVERNOR GILMORE: Is that the one that basically sort of collapsed, failed to achieve a consensus?

MR. KIGA: Governor, they're still trying to achieve consensus, but right now it doesn't look promising, but the two co-chairs I believe are perceived by both business and government as being well-balanced.

GOVERNOR GILMORE: I think that there's wisdom in this Commission not defining itself as having to achieve unanimity or even a two-thirds' majority or otherwise it's defined as a failure. I think that what this discussion is reaching for is a way of communicating to the Congress without placing such a high bar on ourselves that we are characterized as not doing well. And I think that all this discussion that we're having with Gary Locke's people and Grover and Andal and everybody else is constructive.

MR. LEBRUN: In addition to aiming the report at Congress, although that's where we do send it, I think it's important also that we keep in mind the recommendations we may make to the various states as well.

MR. GUTTENTAG: I'm just picking up on what Fred said on behalf of Governor Locke. I don't think people should get the impression that the NTA project is a failure. It may fail to find a complete solution to the issue. The work, however, that has been done by the experts involved is extremely valuable and can greatly inform our discussions. Just on the definitions of the issues that they see being raised, they even had trouble defining the issues and reaching agreement on it, but they could move our project, I think, well along just by providing a lot of this information.

And I would support Fred's position but I would expand it. I'd like to have them tell us what they have achieved as well as describing the difficulties that they had in reaching conclusions or in reaching agreement. And I think, however, that we might need more than five minutes for those presentations. And how it should be done, at what meeting it should be done, what we think is the best way to do it, I would think we should coordinate with the leaders of that group and see what the most efficient way to do that is.

I think it can really save us a lot of time so we are not reinventing the wheel or going down a possible course of action which the NTA has found not the best way to do it.

MR. ANDAL: The NTA project was, you know, the latest of many projects like that that have not reached consensus, but I agree that they probably have some valuable information. But rumor has it all the Commissioners read, and maybe the NTA report, when it's complete, can be widely distributed.

GOVERNOR GILMORE: Do you know the timetable?

MR. ANDAL: I'm not sure we gain anything from oral presentations of anything we could otherwise read in advance, and the purpose of the oral presentations, I think, is to get to the rub.

GOVERNOR GILMORE: Do we know when the NTA thing will be done?

MR. KIGA: It's not clear at this point. I believe that the presentation by the people representing the NTA could get to the rub. I mean, they'll tell you specifically the pros and cons on the various issues relating to eCommerce and potential taxation.

MR. McCLELLAN: This is Donald McClellan on behalf of Ted Waitt. We'd just like to weigh in, in support of the idea that Fred and Joe have put forward. It makes absolute eminent sense for us to learn from a group such as NTA that's already been through many of the steps that we're talking about taking here. And so I think that recommendation is an excellent one.

MS. FISHBEIN: This Is Ellen Fishbein from AOL. I'm on the operating committee of the NTA project, and we had the operating committee call this morning. We're trying to arrive at a process that's acceptable to everybody to deliver something by September 14.

MR. ANDAL: How long has this current NTA project been going on?

MS. FISHBEIN: About two years.

MR. ANDAL: So you're two years into it and there's no report, and I think that's why we exist here, but we don't want to have that same ending to what we do here. And I would be very interested in the NTA's presentation, but I'd like to see them achieve a report after two years. You know, California's also participated in that. A lot of time and effort by the business community and by local and state governments alike have been invested in it. But it's very difficult to comment or listen to a report that doesn't exist.

MR. McCLELLAN: But, Dean, as David Pottruck mentioned earlier, this issue is so complex, and I think just a dialogue by the NTA presenters will indicate just, you know, the degree of complexity associated with this issue.

MR. POTTRUCK: I for one would certainly want to learn from them because it sounds like that has not been necessarily the most successful effort. Although, it would be unfair of us to give a final judgment since still work continues, but I would think that we could learn a lot about where the quagmires are and try to see if we can avoid getting ourselves also bogged down in those same tar pits, and we don't want that to happen.

So I would encourage Governor Gilmore and the staff to contact those folks and see what would be the best process to learn from them, since they seem to have gone down a similar path here.

Let's see if we can get this back on track since we're running out of time and I do want to give everyone a chance to move on. I think we've got consensus on an approach. If I'm hearing you all, I don't hear big debate or people objecting to the notion of what we've put forth. I think we have an open issue that we can discuss further, either on the next conference call or in New York, regarding how we get from New York to San Francisco in terms of committee work and staff work.

I for one expect my staff and myself to be very involved with the drafting of the document, and I would imagine that there's several people here who like to also be very involved and have a chance to participate, and that's of course the beauty of e-mail and the opportunities we have to circulate and comment and put that stuff together.

So it seems to me we have a pretty good consensus about what we need to do between now and our New York meeting, and I just would open it up to any last comments anybody has.

MR. SOKUL: I have just one quick question for Ellen, getting back to the NTA project, or maybe two. First, is there an earlier draft that could be circulated prior to September 14, with the understanding that it's a draft, so we can have something before the meeting?

And, second, if we put out a request somehow, a formal request to you that, in essence, created a deadline, would that be helpful to you?

MS. FISHBEIN: Well, with respect to the first question, we are in the drafting process. There are drafts out there that are not acceptable to both sides, and so as a group we have agreed to embargo that draft from release.

On your second question, I think it would be extremely helpful if there were a formal call from the Commissioners for a report. That would help drive the process.

MR. SOKUL: By September 7?

MS. FISHBEIN: Sure.

MR. SOKUL: I'm thinking we want to get something before the meeting -- that would be most helpful -- so we have a chance to review it before we get to New York.

GOVERNOR GILMORE: I want to weigh in on this a minute because I'm getting kind of concerned about it. I think that it is productive to learn from the experience of the NTA project and the back and forth that has gone on and some of the discussions that are being had. And, in fact, it seems to me like it may be very appropriate for them to circulate anything they want to circulate and then maybe make them part of the expert panel there to be available for reference in any of the back and forth that's going to be going on.

I'm not sure that a hash of what they are doing within the limited array of presenters on the specific topics we have outlined is a good idea, but I'd be very cautious about plunging us into the controversy of a project we've had nothing to do with.

MR. SOKUL: You know, our statute says that we're not supposed to interfere with that project, so we're sort of intertwined with it already.

But moving away from that, I just had one other point. On the international panel on Tuesday, I would hope that the people who speak at that panel would carry forward what Dean suggested and some others suggested, that they talk about the international issues as they relate to what we're reporting to Congress, not necessarily exactly what OECD is doing or WTO is doing. But what can we say to Congress or what issues should we be thinking about internationally as we report to Congress. I think that panel should relate back to our ultimate mission as well.

MR. VRADENBURG: David, just one last comment. I do think it would be useful, as we move from here to the conference call, with the full Commission September 7 or 8 in New York, that we set aside or at least make explicit some discussion about the process of getting to a final report. I think that is useful for the Commissioners to start thinking about, and I do think we ought to provide some focus, even though it would be limited in time, on either the conference call agenda or on the agenda in New York.

MR. POTTRUCK: I agree, George. I appreciate that input. You know, you've been very resolute on the issue that we have to be focused on the production of an output here. And since the Congress has charged us with giving them something, we can't just have, you know, what we've done, a lot of dialogue. We have to produce something, and that's going to be tricky.

So I would imagine that coming out of our New York meeting we would begin the process of drafting materials that would go back and forth. We would have a good discussion in San Francisco around what we've produced in writing. That would give further definition to our document, a lot more off-line work, and hopefully coalescing around a final document in Dallas.

Is that not the way you see it, Governor Gilmore?

GOVERNOR GILMORE: It is the way I see it. I think the process that George has discussed and we have all talked about in this report, going beyond our topics and on to a process for achieving a final report, is along those lines, and I concur.

MR. POTTRUCK: Okay. So I think we have a consensus here. And I guess the next step is, Heather, do you want to talk about our next conference call that we're going to have with the entire Commission?

MS. ROSENKER: I'd be glad to, David, but may I ask a question, if it might be appropriate. Do you believe it might be necessary for the Work Plan Subcommittee to have another conference call prior to that?

MR. POTTRUCK: I don't think so. I think we can do some work off line. I think e-mail is awfully efficient. I don't think we need to do that. I personally believe we can get what we need to get done via e-mail.

Would anyone like to make a case for another conference call?

GOVERNOR GILMORE: I don't think so, but I think we're talking about another conference call after New York; is that correct?

MR. POTTRUCK: Oh, yeah. Well, after New York this committee will be gone. We'll have a work plan. This committee basically disappears between now and New York, and then we'll have other committees that will work on specific issues, perhaps. I think that's one of the things we want to talk about in New York.

MR. VRADENBURG: I would urge that we keep at least an open mind, or perhaps I'd even dissent from the proposition that this Work Plan Subcommittee ought to go out of existence. I do think there's going to be a need for a smaller than full Commission group to enforce the discipline between meetings, and I do think that this, under your leadership, David, and that of the Governor, has been a useful subcommittee that does that kind of work.

And I think we ought to continue this subcommittee, whether it be under this name or under the name, you know, of a final report subcommittee or whatever, something which maintains the discipline between meetings of getting us from here to the end.

MR. KIGA: David, although we know you're quite busy, your leadership has provided us with the discipline to continue on.

MR. POTTRUCK: You know, I certainly wouldn't want to take a pay cut and give up this job. So if it makes sense for this committee to continue to exist in some form, I'm willing to contribute in any way that I can.

So, Governor Gilmore, I will leave that to you and Heather to try to see if there's some reason for this committee to rename itself or to continue, and if I can be of assistance to you, I'm happy to do so.

GOVERNOR GILMORE: I think the subcommittee has been of tremendous assistance in moving us forward, and I think that we ought to get to New York, proceed on, and should there be a need -- which I suspect that George is right, there will be -- then the group can go on, either under this name or any other. I think we're making great progress.

MAYOR KIRK: I think I understand where we're going, but the one issue I'm unclear on is, if we have suggestions for presenters, do we give those to you?

GOVERNOR GILMORE: Absolutely. Send them to me right away, every member of the Commission that's on the phone and every member of the Commission that is not on the phone.

And, Heather if you'd communicate with everyone regarding this, we will try to distill this down in accord with what this Commission has been discussing.

MAYOR KIRK: And I'll just tell you, in Virginia I was pleased at least we had a diversity of thought on the issue of taxation of how or not to tax. But I would hope we will hear from someone and I don't know that we need a lot of time, but I read in a number of the position papers people concerned about this digital divide, the issue that if you decide not to tax, the equity of having a system where some people get a tax break by virtue of the fact they can afford to shop online versus, you know, a lot of people that can't afford to.

And I don't know if there are constituent groups out there that have that interest, but I would hope we would give some of them a chance to come and present.

GOVERNOR GILMORE: Mayor Kirk, I've got to be honest. I am very concerned about the issue of the digital divide, and I think it is a good topic to take up, but we may do it in the discussions. I wouldn't rule it out in any way because I am concerned about it.

MAYOR KIRK: I don't know, Governor, that there are groups, but I'm pleased to hear you're concerned about that, and we can handle it.

MR. NORQUIST: Mayor, this is a very big concern, the present level of taxation on telecommunications prices some people out and creates much of the digital divide. So it's one of our major concerns that present tax policy is having that discriminatory effect, and we want to work to reduce that.

MR. POTTRUCK: I'd like to jump in and just say one thing here, and that is, I don't think anyone should perceive the importance of any issue as a function of whether we invite someone to present on it. So, for example, on this very specific issue, Mayor Kirk, I think we have some terrific resources on our Commission.

MAYOR KIRK: That's fine. I just wanted to make sure I understood the process, and if we handle it during that six hours of our debate, that will be fine.

MR. VRADENBURG: It does seem to me that, as I understood the process going between here and the conference call with the full Commission September 7 and 8, we will explicate issues within the agenda so that in fact this would be presumably one of the issues put forward by Mayor Kirk that at least would be on the table.

MR. POTTRUCK: Here's exactly what I see happening. We've sent you all a proposal. The staff will take all the input we've gotten so far and anything we hear in the next couple of days and the early part of next week, we will send out an e-mail with some questions and issues under the broad headings, and there will be a process for you all to, in a sense, vote for your highest priority items of that list so that we can narrow in and get some sense of where the consensus view of the priority items are.

Based upon all of that, we will come to the full committee with a recommendation of this committee as to what the issues are and where the majority concerns seem to be. We will have, I'm sure, a very robust discussion. Everyone will have seen that document in advance of the conference call, so they'll be hopefully well-prepared and have given it some thought.

We'll have a chance to modify that approach a bit as a result of the full Commission, and then we will come to New York with a pretty tight agenda and a sense of where our focus should be, and I'm sure, under Governor Gilmore's leadership, that meeting will go very well.

MS. ROSENKER: May I just add a couple of administrative issues, if I may. For suggestions of speakers, yes, they can come to the Governor, but would you all please send them through the Commission office? That's information that needs to be part of the public record, and it's easier for us to forward that down to the chairman.

GOVERNOR GILMORE: I think that's right, Heather. I didn't want anybody to send it up here to the capitol in Richmond. We should be working through the Commission staff, and I will, naturally as chairman, be in touch with you about that. So I agree with that.

MS. ROSENKER: Thank you. And then just to follow up on Mr. Pottruck's request about the conference call, we are trying to establish a full Commission teleconference call either September 7 or September 8. And if in fact there are Commissioners on the phone from whom we have not heard what times on those days -- I sent out an e-mail yesterday about it -- that you're available, would you just please get back to me as soon as possible?

We'd like to be able to firm that up within the next 25, 30 minutes and get an e-mail out to you so you can have it on your schedules.

MR. POTTRUCK: Okay. Sounds good.

GOVERNOR GILMORE: David, thank you very much.

MR. POTTRUCK: Thank you, Governor. I appreciate the opportunity.

GOVERNOR GILMORE: This concludes this conference call, and we will move on from here. Thank you very much, ladies and gentlemen.

(Whereupon, the PROCEEDINGS were adjourned.)

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