BILL ANALYSIS 1 1 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 2 2 1 3 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