BILL ANALYSIS Ó
AB 1409
Page 1
Date of Hearing: September 11, 2013
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 1409 (Bradford) - As Amended: September 6, 2013
SUBJECT : Voice communications: Moore Universal Telephone
Service Act
SUMMARY : Requires the California Public Utilities Commission
(PUC) to modernize the lifeline program to provide more
technology options for consumers and adjusts the fee for
Certificates of Public Convenience and Necessity (CPCN).
Specifically, this bill :
1)Requires the PUC to adopt rules by June 1, 2014, authorizing
an alternative provider of voice communications service to
voluntarily participate in the state lifeline program pursuant
to the Moore Universal Telephone Service Act.
2)Clarifies that a provider may not be denied the necessary
state and federal certifications to provide service simply
because they use VoIP or other unregulated technology.
3)States that the rules, among other things, provide
reimbursement to all participating lifeline providers on a
nondiscriminatory basis.
4)Eliminates the current PUC statutory application fee of $75
for a CPCN and would instead allow the PUC to adjust the fee
based on the Consumer Price Index (CPI).
EXISTING LAW :
1)Authorizes the PUC to issue Certificates of Public Convenience
and Necessity (CPCNs) to telephone corporations (Public
Utilities Code § 1001).
2)Allows the PUC to charge and collect a fee of $75 for filing
each application for a CPCN, or for the mortgage, lease,
transfer, or assignment of a certificate (Public Utilities
Code §1904).
3)Creates the Moore Universal Telephone Service Act, enacted in
1987, to offer high quality basic telephone service at
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affordable rates to the greatest number of California
residents, and has become an important means of achieving
universal service by making residential service affordable to
low income households through the creation of a lifeline class
of service (currently landline only) at a fixed monthly rate,
with subsidies to providers to offset the cost of the discount
(Public Utilities Code §871).
4)Encouraged the PUC to develop rules to expand technology
options for consumers receiving service under the More
Universal Service Lifeline Program (Public Utilities Code
§871.7).
5)Prohibits PUC regulation of voice over internet protocol
(VoIP) service or Internet Protocol (IP) - enabled service
except as required or expressly delegated by federal law or
expressly directed by state statute (Public Utilities Code §
710).
6)Provides, by federal law, for the PUC to designate as an
Eligible Telecommunications Carrier (ETC) a lifeline provider
serving California as eligible for federal lifeline subsidies,
if the requesting provider meets ETC requirements in federal
law (47 U.S. Code Section 214 (e)).
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, "AB 1409 directs the PUC to
develop rules governing the offering of lifeline service for all
providers of voice services using alternative technologies. In
addition, AB 1409 clarifies that the Commission may not deny a
request to be designated an ETC to receive federal lifeline
support on the basis of the technology used to provide lifeline
service nor may they deny or revoke a Certificate of Public
Convenience and Necessity (CPCN, or authorization to provide
telecommunications services) based on the fact that the
telecommunications provider also provides Voice over Internet
Protocol (VoIP) or IP-enabled services."
1)California LifeLine Program : The Legislature established the
Moore Universal Telephone
Service Act (Moore Act), in 1983, which makes basic telephone
service affordable to low-income households through the creation
of a lifeline class of service. The Moore Act established an
important state policy for making basic telephone service
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affordable to low-income households through the California
Lifeline Program. A Lifeline subscription provides benefits in
the form of lower bills. The program is funded by surcharges
assessed on end user's telephone bills, including wireline,
voice over internet protocol (VoIP) and wireless services.
Currently the Lifeline Program limits low-income customers to
landline telephone service only.
When the Moore Act was written over thirty years ago, landline
telephone service was the only means for providing basic
telephone service. Wireless and other alternative
communications services were neither widely accessible nor
affordable. Over the past decade, numerous requests by the
Legislature, customers, and providers asked the PUC to expand
the California lifeline program to include wireless service and
other alternative technologies. In 2010 the Legislature
mandated that every household in the state be given access to
Lifeline telephone service, rather than every individual and
authorized the CPUC to determine what is considered Lifeline
Service. The intent of this mandate would be to enable a
lifeline offering to wireless service. PUC implementation of
this measure has yet to occur.
In December 2012, the PUC redefined basic service to be
technology neutral but thus far only landline service can comply
with the basic service elements and requirements. Subsequently
the PUC opened a new rulemaking in April 2013 to consider
whether wireless and other alternative providers can provide
lifeline service consistent with the new basic service
definition. The scoping memo indicated that the initial phase
would consider wireless service within 18 months, with a
possible second phase to consider VoIP within an unspecified
timeframe.
2)Different timelines for lifeline providers : To date, the PUC
has yet to establish rules
for wireless providers to participate in the lifeline program.
According to PUC testimony on a different yet similar measure at
the July 8 Senate Utilities and Communications Committee
hearing, a proposed decision (PD) on wireless lifeline is on
track to be released in October 2013. This, however, does not
take into account the public comment period, a possible
alternative PD or delay in vote. Moreover, this PD will not
consider rules for VoIP or other alternative technologies which
impedes a competitive marketplace and denies low-income
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customers access to low-cost lifeline service options.
Essentially, wireless providers would have the advantage of
offering wireless products and services to eligible lifeline
consumers before VoIP products and services can reach the
market.
AB 1409 attempts to level the playing field by requiring the PUC
to develop the rules by June 1, 2014, authorizing an alternative
provider of voice communications service to voluntarily
participate in the state lifeline program. The bill also
provides that all lifeline providers, including those that are
non telephone corporations, may be reimbursed for lifeline
service from the Universal Lifeline Telephone Service Trust
Administrative Committee Fund. Moneys in the funds are the
proceeds of rates and are held in trust for the benefit of
ratepayers and to compensate telephone corporations for their
costs of providing universal service.
3)PUC delay in designating lifeline providers : This bill intends
to remove current PUC delay in
designating providers as Eligible Telecommunications Carriers
(ETCs). This designation is required for providers to obtain
lifeline subsidies to cover their cost of offering lifeline
customers a price discount. Moreover, delaying ETC designation
also prevents flow of federal lifeline dollars to California,
creating more demand on the state lifeline fund.
For example, the request of Cox Communications for ETC
designation has been stalled for nearly a year because of claims
that designation may be unauthorized by the prohibition on PUC
regulation of VoIP service in section 710 of the Public
Utilities Code, enacted by SB 1161 (Padilla, 2012). Cox
provides basic service to residential customers, in part with
VoIP service, and serves about 50,000 low-income customers under
the state lifeline program. If granted ETC status, it could
draw federal lifeline subsidies. An Assigned Commissioner's
ruling in late February expanded the Cox ETC application to
include many questions on CPUC authority over VoIP. Cox and
others responded that such a broad inquiry was not necessary
because section 710 restricts regulation of a service, not a
provider, and SB 1161 was specifically amended to be clear on
that distinction. Cox also cited to a prior PUC decision which
concluded that requiring wireless and VoIP service providers
that voluntarily participate in the California lifeline program
to comply with lifeline program rules does not constitute
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regulation of those carriers.
In order to resolve this matter and obtain their ETC, Cox
Communications has agreed to enter into a settlement agreement
and the Commission has issued a Proposed Decision adopting the
settlement agreement and granting Cox ETC status. The process
has taken more than a year and a final decision has not yet been
adopted. The Cox settlement agreement and the accompanying
Proposed Decision only resolve the ETC designation for Cox. Cox
is an incumbent lifeline provider that was seeking ETC
certification. For any other provider, whether existing or new,
that employs VoIP or IP enabled technology, the issue is
unresolved, and those providers will likely encounter the same
delay and review as experienced by Cox in seeking ETC
designation. In addition, the Commission in the Proposed
Decision has taken the position that because Cox has agreed to
treat its VoIP product like a regulated service, the VoIP
product therefore is a telecommunications service, despite the
fact that this is a designation that only the FCC can make and
it is not legally necessary in order to designate any provider
an ETC. The PD thus has the potential to impact participation in
other public purpose programs, and must be clarified.
4)Overcoming barriers for providers offering VoIP service : AB
1409 seeks to remove
the current business uncertainty for existing CLECs and new
entrants by expressly clarifying that the PUC must continue to
issue new CPCNs and not revoke existing CPCNs on the grounds
that the carrier also provides VoIP or other IP-enabled service.
Many competitive local exchange carriers, or CLECs, use both
circuit-switched and VoIP/IP-enabled technologies to provide
services to hundreds of thousands business and residential
customers. These CLECs hold and maintain CPCNs pursuant to PU
Code Section1001 in order to obtain access to wholesale inputs,
including unbundled network elements and network
interconnection. However, since the passage of SB 1161, the PUC
has questioned whether it now has the authority to issue and
maintain CPCNs under PU Code Section 710 to any carrier that
offers VoIP/IP-enabled services, even though a CPUC memo
recognizes that CPCNs have been routinely issued to telephone
corporations that offer unregulated services (e.g. enhanced
services such as voicemail and/or information services such as
broadband) as long as they also offer services that have been
classified as telecommunications services. According to CALTEL
"rather than opening a properly-noticed industry-wide rulemaking
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to address this issue, the PUC is using a piecemeal approach in
four application proceedings which has created business
uncertainty for the CLEC industry."
5)Removing statutory barrier to increasing CPCN fee : The $75
fee to file an application for a
CPCN for telephone corporations and other utilities except for
passenger stage corporations, and for the mortgage, lease,
transfer, or assignment of a CPCN has been in statute since
1969. This bill would increase the PUC statutory application
fee to $500 to reflect the reasonable cost to the PUC for the
filing of the application. Thereafter the PUC would be
authorized to adjust the fee based on the CPI. The cost of CPCN
application has not adjusted for inflation. According to PUC,
the CPI has increased 530.5% since 1969. If the application fee
had been adjusted for inflation, using CPI calculator, the fee
would be approximately $473. Currently, PUC does not have the
authority to raise the fee unless there is a change in statute
through legislative action, thus the creating the need for this
bill.
The current CPCN application fee does not reflect the current
cost of PUC resources required to process the application. The
application requires extensive review and evaluation by an
Administrative Law Judge, is assigned to the Communications
Division to review tariffs and other technical aspects of the
application. Hearings may be required due to protest filed by
other parties or by PUC's Consumer Protection and Safety
Division due to regulatory issues in another district, or a
California Environmental Quality Act review if the applicant is
proposing to build facilities. Depending on the initial review,
PUC staff may require the applicant to submit additional
information. After all the necessary information is provided, a
draft decision is prepared which may be sent out for a 30-day
comment period. PUC will subsequently vote on the matter after
comments are addressed.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Competitive Telecommunications
Companies (CALTEL)
California Cable & Telecommunications Association (CCTA)
AB 1409
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Opposition
None on file.
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083