BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  AB 1315|
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                                 THIRD READING


          Bill No:  AB 1315
          Author:   Fuentes (D)
          Amended:  8/16/10 in Senate
          Vote:     21

           
           SENATE ENERGY, U.&C. COMMITTEE  :  10-0, 6/29/10
          AYES:  Padilla, Dutton, Corbett, Florez, Kehoe, Lowenthal,  
            DeSaulnier, Simitian, Strickland, Wright
          NO VOTE RECORDED:  Cox
           
          SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  Not relevant


           SUBJECT  :    Telecommunications:  Public Utilities  
          Commission

           SOURCE  :     California Association of Competitive  
          Telecommunications 
                      Companies


           DIGEST  :    This bill provides that if an incumbent local  
          exchange carrier files a forbearance petition with the  
          Federal Communications Commission (FCC) requesting that the  
          FCC forbear from enforcing that carrier's duty to provide  
          to any requesting telecommunications carrier  
          nondiscriminatory access to network elements on an  
          unbundled basis at any technically feasible point on rates,  
          terms, and conditions that are just, reasonable, and  
          nondiscriminatory, within any metropolitan statistical area  
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          located in the state, the Public Utilities Commission (PUC)  
          would be required to
          participate in that forbearance proceeding by filing  
          comments on the petition, providing data on competition in  
          the metropolitan statistical area that is the subject of  
          the petition, and taking any other action that advances the  
          state's policies promoting competition in  
          telecommunications markets.  This bill requires the PUC to  
          develop a sample data request for collecting data on  
          competition in any California metropolitan statistical  
          area, and requires all providers of voice communications  
          services, as specified, to provide all data and other  
          information relevant to the forbearance petition  requested  
          by the PUC.

           Senate Floor Amendments  of 8/16/10 make technical  
          refinements to the language specifying the activities  
          required of the PUC if a petition is filed with the FCC  
          requesting forbearance from local competition requirements.

           ANALYSIS  :    Current federal law requires local exchange  
          carriers (LECs) to provide access to unbundled network  
          elements necessary for competitive carriers to offer local  
          telephone service to end users and allows the FCC to  
          forbear from enforcing these unbundling requirements if it  
          determines that they are not needed to ensure just and  
          reasonable rates or protect consumers and if forbearance is  
          in the public interest.  Current federal law authorizes an  
          LEC to petition the FCC to forbear from enforcing  
          unbundling requirements in individual Metropolitan  
          Statistical Areas (MSAs), allows interested parties to  
          comment on a petition, requires the FCC to act on a  
          petition within 12 months, and provides that a petition is  
          deemed granted if the FCC fails to act within that time.

          A current FCC decision approving AT&T's merger with Bell  
          South prohibits AT&T from petitioning the FCC for  
          forbearance from unbundling requirements until after June  
          29, 2010.

           Background  

          The Telecommunications Act of 1996 (1996 Act) establishes a  
          pro-competitive, deregulatory national policy for  

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          telecommunications and allows competition in the local  
          exchange market.  The market for local service had  
          historically been a monopoly because it is prohibitively  
          expensive for more than one provider to replicate last-mile  
          connections - the copper wire loops and transport  
          facilities to each customer's residence or business.  The  
          1996 Act requires LECs to share their networks and allow  
          competitive local exchange carriers (CLECs) to lease  
          unbundled last-mile loops and transport elements that they  
          can combine with their own facilities to offer service to  
          end users.  The Act recognizes that these unbundling  
          requirements were essential to development of local  
          competition.  

          The Act authorizes the FCC to forbear from enforcing these  
          unbundling requirements if it finds that (1) enforcement is  
          not necessary to ensure that rates are just, reasonable and  
          nondiscriminatory, (2) enforcement is not necessary to  
          protect consumers, and (3) forbearance is in the public  
          interest, which requires an analysis of whether forbearance  
          will promote competitive market conditions.  An LEC can  
          seek forbearance from unbundling requirements in distinct  
          markets by filing a forbearance petition for individual  
          MSAs.  

          As a condition of FCC approval of its merger with Bell  
          South, AT&T voluntarily agreed in 2006 to not seek  
          forbearance from loop and transport unbundling requirements  
          until after June 29, 2010.  After that date, AT&T is  
          eligible to file a forbearance petition for one or more of  
          the 26 California MSAs.  So far, 11 Forbearance Petitions  
          have been filed nationwide, including petitions by Qwest  
          for Phoenix, Seattle, Denver, and Minneapolis-St. Paul, and  
          by Verizon for Boston, New York, Philadelphia, Pittsburgh,  
          Virginia Beach, and Providence.  State public utilities  
          commissions participated in those proceedings and provided  
          data on the level of local competition.  No petitions have  
          been filed for any California MSA.  AT&T indicates that it  
          currently has no plans to file a forbearance petition in  
          California in the near future.

          On June 22, 2010, the FCC issued a decision denying Qwest's  
          forbearance petition for Phoenix and establishing a new  
          analytical framework and data-driven standard for what a  

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          petitioner must establish to show that local competition is  
          sufficient to justify forbearance (Phoenix Decision).  The  
          Phoenix Decision requires a petitioning LEC to show that it  
          does not have "market power," which includes the ability to  
          raise rates without losing customers to competitors.  The  
          new framework requires a separate evaluation of the level  
          of competition for distinct retail services for residential  
          and small, medium, and large business customers and for  
          wholesale services such as loops and transport that CLECs  
          can lease to provide service.  The petitioner's burden can  
          be met with data showing the market share for each product  
          that is served by competitors such as cable telephone  
          service, Voice over Internet Protocol, and possibly  
          wireless services.  Many view the new standard established  
          in the Phoenix Decision as setting a very high bar for  
          forbearance petitioners to meet.

          The California Association of Competitive  
          Telecommunications Companies (CALTEL), the bill's sponsor,  
          claims that CLECs rely on either unbundled network elements  
          to serve the vast majority of their customers, especially  
          to small business customers.  CALTEL claims that, if a  
          forbearance petition is granted for a California MSA, CLECs  
          will be forced to exit the market because the cost of  
          alternative facilities is prohibitive.  For example, a CLEC  
          that now leases for $9.48 a month one or more unbundled  
          loops to provide high-speed Internet service to a small  
          business customer would instead have to pay the regular  
          tariffed special access rate of at least $260 a month to  
          provide that customer comparable Internet speed.  The  
          result would be less local exchange competition in  
          California and fewer service options for customers.  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

           SUPPORT  :   (Verified  8/17/10)

          California Association of Competitive Telecommunications  
            Companies (source)
          Small Business California
          The Utility Reform Network 

           OPPOSITION  :    (Verified  8/17/10)

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          Public Utilities Commission

           ARGUMENTS IN SUPPORT  :    According to the author's office,  
          this bill will ensure that the PUC fully participates in  
          the FCC's proceeding when a forbearance petition is filed  
          for a California MSA and provides the FCC with thorough and  
          impartial data on the level of competition in that MSA.  

           ARGUMENTS IN OPPOSITION  :    According to the author's  
          office, "the intent of this bill is to ensure that the CPUC  
          fully participates in the FCC proceeding when a forbearance  
          petition is filed for a California MSA and provides the FCC  
          with thorough and impartial data on the level of  
          competition in that MSA.  The author is concerned that one  
          of the former Bell Operating Companies operating in  
          California (AT&T and Verizon) could file a forbearance  
          petition, that if approved could allow the company to deny  
          competitive access to some of the Bell Operating Company's  
          own infrastructure.  The CPUC is opposed to the bill as it  
          was amended on August 16, 2010, because the bill may have  
          the opposite impact from the stated intent of the author.   
          This bill provides a high level of specificity on how the  
          CPUC must respond to a forbearance petition.  The  
          micro-management of CPUC actions in this bill would allow  
          some telephone service providers to withhold information  
          from CPUC about the competitive state of the telephone  
          market in California that the CPUC would need to file an  
          effective response to a forbearance petition.  Thus, this  
          bill could make it less likely that the CPUC will  
          effectively participate at the FCC.  The CPUC is actively  
          engaged in FCC proceedings and has filed in the past on  
          several forbearance proceedings."  
           

          DLW:mw  8/17/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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