BILL ANALYSIS                                                                                                                                                                                                              1
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                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                 ALEX PADILLA, CHAIR
          

          AB 2213 -  Fuentes       Hearing Date: June 15, 2010         A
          As Amended:              April 27, 2010           FISCAL       B

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                                      DESCRIPTION
           
           Current law  requires telephone corporations to provide a  
          discount rate for residential basic telephone service to  
          low-income customers and requires that each customer eligible  
          for this lifeline service be provided with one single party line  
          at his or her principal place of residence.

           Current law  authorizes provision of wireless telephone service  
          and does not classify wireless service as a residential basic  
          telephone service.

           Current decisions  of the California Public Utilities Commission  
          (CPUC) define "basic" telephone service as having 17 service  
          elements generally associated with traditional landline service,  
          including single-party local exchange service, equal access to  
          toll carriers, free unlimited incoming local calls, unlimited  
          access to 911 emergency services, a free directory listing and  
          directory, and access to other services.  

           This bill  deletes references to lifeline service being a  
          residential basic telephone service and requires that an  
          eligible low-income subscriber be provided with one lifeline  
          subscription, as defined by the CPUC, to the household of that  
          lifeline subscriber.

           This bill  makes a finding that technologies beyond traditional  
          landline telephones could be used to offer low-income citizens  
          access to affordable, reliable, and high quality basic telephone  
          service.













           This bill declares that if alternative technologies are used to  
          provide lifeline telephone service, they should provide  
          comparable access to emergency and community services as  
          traditional landline telephone service, and the CPUC shall  
          ensure that low-income consumers using alternative technologies  
          continue to have access to reliable, high quality and affordable  
          voice telecommunications service.


                                      BACKGROUND
           
          The Moore Universal Telephone Service Act sets the goal of  
          providing high quality telephone service at affordable rates to  
          the greatest number of citizens.  The act requires the CPUC to  
          annually designate a class of lifeline service necessary to meet  
          minimum residential communications needs, develop eligibility  
          criteria for lifeline service (currently 150% of the federal  
          poverty level), and set the rates for lifeline service, which  
          are required to be not more than 50% of the rate for basic  
          telephone service.  The CPUC sets lifeline rates based on AT&T's  
          basic service rate, resulting in current lifeline rates between  
          $5.47 and $6.03.  Telephone companies are reimbursed for the  
          cost of offering the discount through a surcharge assessed on  
          all non-lifeline telephone customers.  Because lifeline rates  
          are tied to AT&T's rates, consumer advocates are concerned that  
          the lifeline rate could increase after January 1, 2011, when  
          AT&T and other carriers under the Uniform Regulatory Framework  
          will be free to increase basic service rates without regulatory  
          approval.

          The CPUC has an open proceeding to address lifeline rates and  
          other reforms to the lifeline program (R.06-05-028).  A 2009  
          proposed decision in this proceeding that would have allowed  
          customers the option of alternative technologies such as  
          wireless for lifeline service was deemed to be in conflict with  
          current law that refers to lifeline service as basic residential  
          telephone service.   In a related proceeding, the CPUC is  
          seeking to reform the California High Cost B-Fund, which  
          provides subsidies to carriers of last resort for providing  
          basic telephone service to residential customers in high-cost  
          areas (R.09-06-019).  In these proceedings, the CPUC is  
          addressing how the elements of "basic" telephone service should  
          be updated to promote competitive and technological neutrality  











          in lifeline service while upholding the universal service goals  
          of ensuring that basic service is affordable for all low-income  
          households and available to all customers residing in high-cost  
          regions.  


                                       COMMENTS

             1)   Author's Purpose  .  According to the author, the purpose  
               of this bill is to remove statutory barriers that prevent  
               the CPUC from allowing lifeline service to be offered to  
               low-income customers with new technologies such as wireless  
               service rather than only with landline service.  The author  
               cites the "ubiquity of cell phones and studies showing a  
               preference among low-income persons for cell phones" as  
               reasons why wireless service should be an option for  
               lifeline service. 

              2)   Basic Service  .  This bill removes one, but not all,  
               reference to lifeline service as a "basic" service.   
               Keeping the word "basic" in these provisions may  
               automatically preclude wireless service as an option for  
               lifeline service because wireless does meet all of the  
               specified elements of basic service.  However, the CPUC in  
               its pending proceedings has determined that the first step  
               in making the lifeline program technology neutral is to  
               update the definition of basic service.  Because many of  
               the current elements of basic service ensure provision of  
               reliable, high quality service, it may be preferable to  
               keep the word "basic" in lifeline statutory provisions  
               while the CPUC, with stakeholder input, addresses whether  
               and how each of these elements should be modified to  
               accommodate new technologies.  Thus, the author may wish to  
               consider amending the bill to retain all references in  
               current law to lifeline service as a "basic" telephone  
               service.

              3)   The Broadband Question  .  A May 10 scoping plan in the  
               pending CPUC proceedings concludes that updating the  
               definition of basic telephone service is a threshold issue  
               to achieving competitive and technological neutrality in  
               lifeline service and in reforming the California High Cost  
               B-Fund, universal service programs that aim to make basic  











               telephone service affordable for all low-income households  
               and available to all customers residing in high-cost  
               regions.  Thus, the ruling states that the revisions to the  
               definition of basic service for all purposes should be  
               addressed "comprehensively and consistently in a single  
               proceeding."

               The CPUC scoping plan, however, does not direct that the  
               proceeding review the definition of basic service in light  
               of the Federal Communications Commission's (FCC) pending  
               proposal that federal universal service and high-cost  
               support programs be modified to ensure universal access to  
               broadband and voice services.  The FCC issued a rulemaking  
               on April 21 seeking comments on a proposal to modify legacy  
               high-cost support for voice service in order to redirect  
               funding to support universal broadband.  This follows the  
               FCC's February release of the National Broadband Plan,  
               which concluded that high-speed access to the Internet has  
               become a necessity in modern life.  If the FCC adopts these  
               proposals over the coming years, state universal service  
               programs will be impacted and the CPUC may need to alter  
               its definition of basic service.  The Telecommunications  
               Act of 1996 authorizes state universal service programs not  
               inconsistent with FCC rules on universal service.  The  
               CPUC's pending proceedings may be an opportunity to begin  
               review of whether broadband should be part of basic service  
               that should be universally available to all Californians.   
               Accordingly, the author may wish to consider amending this  
               bill to direct the CPUC to do the following in the pending  
               proceedings: (1) identify issues and seek input on how to  
               update the definition of basic service in a manner that  
               preserves the option of including broadband at a later  
               date, and (2) establish a schedule, as dictated by ongoing  
               FCC action in its universal service proceeding, for when  
               the CPUC will address whether to include broadband in the  
               definition of basic service.

              4)   Ratepayer Impact  .  By authorizing the CPUC to establish  
               a lifeline service with technologies other than landline  
               service, this bill opens the door to lifeline services that  
               will almost certainly be more costly than landline service.  
                The lifeline program is funded by a surcharge levied on  
               all non-lifeline telephone and wireless subscribers.  To be  











               affordable to lifeline-eligible customers, a wireless  
               option will require a larger subsidy than landline service,  
               which will result in a higher surcharge for ratepayers.   
               Even with a higher subsidy, wireless providers may not be  
               able to offer lifeline service at a rate as low as the  
               current landline lifeline service.  If that is the case,  
               current law establishing the lifeline rate at 50% of basic  
               service rates will need to be amended, along with its  
               provisions that refer to lifeline as a residential service  
               (Public Utilities Code Section 874). 

              5)   Comparable Terms of Service  .  This bill declares that if  
               alternative technologies are used to provide lifeline  
               telephone service, they should provide comparable access to  
               emergency and community services as traditional landline  
               telephone service, and the CPUC shall ensure that  
               low-income consumers using alternative technologies  
               continue to have access to reliable, high quality and  
               affordable voice telecommunications service.  Some  
               stakeholders claim that this bill should include more  
               policy direction to ensure that any CPUC decision to make  
               lifeline technology neutral does not result in degradation  
               of lifeline service or imposition of inequitable  
               requirements on different providers of lifeline service.
              
             6)   Technical Amendment  .  This bill removes some, but not  
               all, of the references to lifeline service as a residential  
               service that preclude wireless from being a lifeline  
               option.  In order to remove all statutory barriers to  
               expanding lifeline service for new technologies, the author  
               may wish to consider amending the bill to remove other  
               references to "residential" from provisions governing the  
               lifeline program.  

           
                                   ASSEMBLY VOTES  

          Assembly Utilities & Commerce      (12-0)
          Assembly Appropriations            (16-0)
          Assembly Floor                     (72-0)


                                       POSITIONS











           
           Sponsor:
           
          Author.

           Support:
           
          AT&T
          California Public Utilities Commission
          Division of Ratepayer Advocates
          Sprint (Support if Amended)
          TURN (Support if Amended)

           Oppose:
           
          California Independent Telephone Companies (Oppose unless  
          Amended)
          SureWest (Oppose unless Amended)


          Jackie Kinney 
          AB 2213 Analysis
          Hearing Date:  June 15, 2010