BILL ANALYSIS Ó
AB 300
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Date of Hearing: May 24, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 300 (Perea) - As Amended: May 21, 2013
Policy Committee: Utilities and
Commerce Vote: 14-0
Revenue and Taxation 8-0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes a new point-of-sale system for collecting
and remitting specified fees, surcharges, and taxes applicable
to prepaid mobile telephony services (MTS).
FISCAL EFFECT
1)The state should realize revenue from 911 and public purpose
fees in the range of $30.5 to $39.4 million (excluding user
utility taxes (UUT) resulting in an increase or decrease of up
to several million dollars from 2011-12 revenues. In
addition, there will be increased special fund administrative
costs, likely in $1 to $2 million range to the BOE and PUC and
point of sale retailers.
This estimate is based on the following assumptions:
a) Approximately six million prepaid wireless customers in
California.
b) BOE estimated 911 and public purpose revenues from
prepaid wireless in 2011-12 were in the range of $39
million.
c) The estimated monthly average revenue per unit (ARPU)
ranges between $20 to $25 per prepaid customer which equals
approximately $120 to $150 million per month or $1.4 to
$1.8 billion per year.
d) The FCC attributes approximately 63% of total wireless
traffic to intrastate usage for a total of approximately
$882 million to $1.14 billion.
e) Total 911 and public purpose rates are approximately
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3.46%
1)Board of Equalization (BOE) estimates differ from the
committee estimate. BOE projects this bill will cost over $1
million to implement and will result in net annual revenue
losses of $10 million to the various 911 and public purpose
funds.
2)Likewise, according to the PUC, this bill will cost $550,000
per year in administrative costs and net annual revenue losses
in the range of $2 million to $10 million per year.
COMMENTS
1)Purpose. Everyone who uses phone service pays a small
monthly fee as part of their bill to help fund 911 and support
other important state and local programs. However, for the
fastest growing segment of wireless users, prepaid wireless
services, there is no collection mechanism for customers to
pay these fees. Nearly 25% of all wireless customers are now
prepaid customers.
The current system leaves state and local governments without
a reliable, predictable means for ensuring collection of these
revenues. AB 300 would ensure state and local governments
receive the necessary resources for 911 programs by developing
a statewide mechanism to include prepaid services in the
already-established collection of fees applied to wireless
communication services.
2)Background . The state's current system for collecting taxes
and fees is based on monthly bills. Customers pay 911 fees
and state and local fees to fund telephone service for
low-income households, broadband for underserved areas, and
local government services.
According to the Wireless Association, the prepaid wireless
market is anticipated to grow at a rate of 10% per year.
3)Collection of fees and surcharges for prepaid wireless
services . Current law imposes a state 911 user surcharge on
intrastate communications service, administered by the
California Technology Agency; a PUC Reimbursement Fee to pay
for PUC operations, and several surcharges to pay for state
universal service programs administered by the PUC as follows:
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a) California High Cost Fund A and B
b) Deaf and Disabled Telecommunications program
c) California Teleconnect Fund
d) California Advanced Services Fund
e) Lifeline Telephone Service
The BOE estimates state fees total 3.46 percent of intrastate
service. There are about 150 different Local 911 fees and User
Utility Taxes (UUTs) assessed on service provided within the
jurisdiction of the city or county imposing the tax. UUTs vary
by jurisdiction but not all cities and counties impose them.
Post-paid fees and surcharges are assessed as they are reflected
on customer bills after service is used. With prepaid service,
there is no specific billing process.
1)PUC concerns. According to the PUC, it is their
responsibility to ensure safe and reliable service at
reasonable rates. The PUC contends AB 300 unreasonably
replaces the current system for collecting and remitting
taxes, surcharges, and fees from prepaid wireless customers
with a new system that would cost several million dollars
annually to administer, decrease revenue by up to $16 million
annually, and increase rates on all telephone service
customers.
The PUC also argues this bill inappropriately requires that
the PUC assess higher surcharges and fees on prepaid wireless
customers than on postpaid wireless customers in order to
compensate retailers and the BOE for processing prepaid
remittances that are currently delivered directly to the CPUC
by the carriers at no cost.
2)Supporters. Wireless providers counter the PUC's claim that
the bill will reduce the surcharge base by over 20%.
According to the sponsors of the bill, PUC calculations are
based on an incorrect extension of the ratios used by a single
company to the entire industry, significantly overstating the
fiscal impact. Prepaid customers represent approximately 23%
of the total number of wireless users, but the average revenue
per prepaid user is less than half the average revenue on
postpaid customers. Supporters disagree with the PUC
assumption that prepaid services are 22% of the total revenues
and assert they are less than half of that figure.
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Proponents argue there will be an increase in revenue
resulting from the surcharges being accurately levied on the
total retail amount of all the prepaid services.
3)Opposition. This bill is also opposed by The Utility Reform
Network (TURN), the Consumer Federation of California and the
Greenlining Institute for the difficulty in implementation and
reasons similar to those stated by the PUC.
4)BOE Staff Concerns. BOE staff indicates numerous
implementation challenges that still need to be addressed,
particularly with the local component.
Analysis Prepared by : Jennifer Galehouse / APPR. / (916)
319-2081