BILL ANALYSIS                                                                                                                                                                                                    Ó          1






                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                 ALEX PADILLA, CHAIR


          Bill No: AB 1717 - Author: Perea             Hearing Date:  June  
          17, 2014                                  A
          As Amended:         May 28, 2014                        
          FISCAL/Urgency                  B

                                                                        1
                                                                        7
                                                                        1
                                                                        7

                                     DESCRIPTION

          Current law establishes the State Board of Equalization (BOE)  
          with duties that include administering tax and fee programs that  
          provide revenue for state and local government.

          Current law, the Fee Collection Procedures Law, specifies  
          procedures for BOE collection of fees and taxes that fund  
          programs administered by other state agencies, including taxes  
          and fees that retailers collect from customers and remit to the  
          BOE for transfer to another agency.

          Current law establishes the California Public Utilities  
          Commission (CPUC) to regulate utilities, including telephone  
          corporations, and establishes the CPUC Reimbursement Fee to be  
          collected from utility customers and remitted to the CPUC to  
          fund its operations.

          Current law requires the CPUC to administer several universal  
          service programs, to ensure that all customers have  
          communications service, funded by surcharges on intrastate  
          communications service.

          Current law requires the Public Safety Communications Office  
          (PSCO) within the Office of Emergency Services to administer the  
          state's 911 emergency telephone system with funds derived from a  
          surcharge on intrastate communication service that providers  
          remit to the BOE, which transfers the funds to the PSCO.

          Current law authorizes cities and counties to collect User  











          Utility Taxes (UUTs) on utility and communications service,  
          which typically are revenues used for public safety and other  
          general purposes.

          This bill establishes, effective January 1, 2016, a method for  
          collecting all of these state and local fees on prepaid wireless  
          communications service through a point-of-sale collection by  
          retailers of a Mobile Telephony Services (MTS) surcharge, who  
          are required to remit the fees to the BOE, which is required to  
          transfer the revenue to the CPUC, the PSCO and local agencies.

          This bill requires the CPUC to annually compute and notify BOE  
          of a CPUC Reimbursement Fee and cumulative universal service  
          portion of the MTS surcharge, requires OES to notify BOE of the  
          911 portion of the MTS surcharge, and requires BOE to calculate  
          and post on its web site no later than December 1 a combined  
          surcharge that includes the local charges for each local  
          jurisdiction, which shall be effective April 1 of the following  
          year.

          This bill allows retailers to retain 2% of fees collected on  
          prepaid service and allows the BOE to retain an uncapped amount  
          of fees remitted for prepaid service as payment for their  
          expenses incurred in administration and collection of the  
          charges, with expenses allocated by BOE on a pro rata basis  
          according to revenues collected for the CPUC, PSCO, and local  
          agencies.

          This bill requires providers of prepaid service to guarantee not  
          less than $9.9 million per year in prepaid surcharge revenue to  
          the PSCO for the state 911 system, with BOE to bill each  
          provider a pro rata share of any deficiency.

          This bill provides that payment of these prepaid fees is the  
          liability of the consumer and not the seller or provider of  
          service.

          This bill exempts the purchase of prepaid service from the  
          prepaid surcharge if the consumer is certified as eligible for  
          the state or federal lifeline program and the seller is an  
          authorized lifeline provider.

          This bill is an urgency measure, stating that it is necessary to  










          take effect immediately to provide a standardized collection  
          mechanism for prepaid mobile service in order to permit needed  
          financial support for programs necessary to serve the public or  
          telecommunications users.

                                     BACKGROUND

          Prepaid Wireless Service Growing - Telephone service  
          traditionally has been provided on a postpaid basis where  
          customers get a monthly bill for calls made and services  
          received in the prior month. With prepaid service, customers pay  
          in advance for a predetermined amount of calling minutes, or for  
          a fixed time period of use of unlimited minutes or data,  
          typically loaded onto a calling card or directly onto a mobile  
          phone, with options to reload once the calling minutes are used.  
          According to CTIA the Wireless Association, prepaid wireless is  
          an expanding multi-billion dollar business nationally, with  
          nearly a quarter of the nation's 300 million wireless consumers  
          currently using prepaid service. Prepaid service is popular for  
          "backup" phones kept in the car for emergencies and "starter"  
          phones for children so it is easy to control usage, and is  
          increasingly an attractive option for all wireless consumers who  
          do not want a fixed-term contract.

          About 30 to 40 percent of prepaid service is sold directly by a  
          provider to a customer, either online, over the phone, or  
          otherwise.  The other 60 to 70 percent is sold through retailers  
          such as grocery stores and big-box stores, to which providers  
          sell prepaid cards on a wholesale national basis, typically not  
          knowing in which state the cards will be sold or the service  
          used. 

          Statewide Fees and Surcharges - Current law imposes on  
          intrastate communications service a fee to support the state 911  
          system administered by PSCO, a fee to pay for the CPUC's  
          operations, and six separate surcharges to pay for the following  
          state universal service programs administered by the CPUC: 

                     California High Cost Fund A;
                     California High Cost Fund B;
                     Deaf and Disabled Telecommunications Program;
                     California Teleconnect Fund;
                     California Advanced Services Fund; and










                     Lifeline Telephone Service.

          All of these fees are assessed as a percentage of a customer's  
          intrastate communications service.  These state and local  
          surcharges are easily determined and collected for post-paid  
          service and included on customer bills after service is used.   
          In a 1996 decision, the CPUC adopted an all-end-user-surcharge  
          mechanism in which surcharges are itemized on the customer's  
          bill in order to promote transparency so customers know what  
          they are paying to support universal service programs  
          (D.96-10-066).

          With prepaid service, neither providers nor retailers selling  
          prepaid service know ahead how many minutes will be intrastate  
          calls or whether they will be made within the city or county  
          where the transaction occurs. For prepaid service sold by a  
          retailer that is not the provider, there is no direct billing  
          relationship between the seller and the user. 

          Local Fees and Charges - Local 911 fees and UUTs are assessed on  
          service provided within the jurisdiction of the city or county  
          imposing the tax. About 100 cities and three counties have  
          utility tax ordinances imposing charges on communications  
          service at about 35 different rates, some up to 11%. The total  
          UUT revenue currently remitted to local agencies on all wireless  
          service is estimated to be about $400 million.  Service  
          providers, local agencies, and the BOE generally concur that  
          UUTs are largely unpaid for prepaid service.

          National Strategy for Point-of-Sale Legislation - Given growing  
          customer demand for prepaid service, and lack of a convenient  
          way to determine intrastate use and bill prepaid customers, the  
          wireless industry has advocated nationwide a point-of-sale  
          collection methodology with model legislation endorsed in 2009  
          by the National Conference of State Legislatures.  According to  
          CTIA, 32 states and the District of Columbia have adopted  
          point-of-sale legislation based on the model statute.  However,  
          most of these other states have only a statewide 911 fee,  
          although Minnesota, Maine, and Nebraska have multiple statewide  
          surcharges like California, and several states also have local  
          911 fees.  Point-of-sale legislation has been introduced in  
          California since 2009 but failed passage.











          All Carriers Now Pay State Surcharges - TracFone is the  
          nation's, and California's, largest provider of prepaid wireless  
          service and provides only prepaid service, unlike other carriers  
          that offer both postpaid and prepaid wireless service.  In 2003,  
          TracFone sought clarification through CPUC staff about whether  
          CPUC fees and surcharges apply to its service.  TracFone claims  
          to have relied on staff indicating that it was exempt.  The CPUC  
          opened a formal investigation against TracFone in 2009, and in  
          November 2011 issued a decision concluding that TracFone is a  
          telephone corporation subject to its jurisdiction and is  
          required to pay CPUC fees and surcharges (D.12-02-032). In March  
          2013, a state appellate court denied TracFone's petition for  
          review of that decision.  In a second phase of the proceeding,  
          the CPUC ordered TracFone to pay about $24.4 million in past-due  
          surcharges and interest to the public purpose programs.   
          TracFone has appealed that penalty decision.

          As a result of this proceeding, according to the CPUC, TracFone  
          and all other prepaid providers are now collecting and remitting  
          all necessary state surcharges and fees from their postpaid and  
          prepaid customers. The CPUC denied requests of carriers during  
          the TracFone proceeding to review the obligations of all prepaid  
          service providers to pay CPUC fees and surcharges and establish  
          a collection mechanism. The CPUC maintains that it  
          "intentionally does not prescribe any collection method for any  
          kind of wireless service, leaving carriers complete discretion  
          to implement the method that best meets their business needs,"  
          which may include embedding the surcharges and fees into the  
          rates for service.

          Estimating Intrastate Minutes - Because California has authority  
          to impose surcharges only on communications within its state  
          borders, a customer's intrastate minutes of use must be  
          estimated in connection with certain services.  The Federal  
          Communication Commission (FCC) allows for three different  
          methods to make this allocation, including books and records  
          (actual data), traffic studies, or a "safe harbor" estimates  
          that about 63 percent of service revenues are for intrastate  
          calling and 37% interstate. AB 841 (Buchanan, 2011), which  
          required VoIP providers to pay state universal service program  
          surcharges, endorsed these same three methods for determining  
          intrastate VoIP service subject to the surcharge. 











          Although prepaid service can be used for voice or data, only the  
          voice service is subject to the surcharges because data is  
          considered an unregulated "information service."  Thus, the  
          providers use an estimate to separate out the data (and texting)  
          usage of prepaid service and remit only on the estimated voice  
          service.   For all wireless service, data usage is increasing  
          while voice usage is decreasing.

                                      COMMENTS

             1.   Author's Purpose.  According to the author, this bill  
               would establish a statewide system for point-of-sale  
               collection of state and local fees imposed on  
               communications service that are currently paid by end users  
               of postpaid customers, thereby ensuring that the prepaid  
               wireless sector of the communications market equitably  
               shares in the responsibility to fund the state 911 system,  
               state universal service programs, and CPUC operations paid  
               with the CPUC Reimbursement Fee, and also contribute to the  
               revenue of cities and counties generated by local fees and  
               UUTs.    

             2.   Last Year's Bill Vetoed.  This bill is the fourth  
               measure sponsored by the wireless industry attempting to  
               establish a point-of-sale collection of surcharges for  
               prepaid service in California.  It is substantially similar  
               to AB 300 (Perea, 2013), which the Governor vetoed with the  
               following message:

                    I am returning Assembly Bill 300 without my signature.

                    This bill would establish an additional system for  
                    collecting and remitting fees, surcharges and taxes  
                    applicable to prepaid mobile services. These charges  
                    would be collected from prepaid customers and remitted  
                    to the Board of Equalization, while fees collected  
                    from postpaid customers would continue to be remitted  
                    directly to the CPUC, State 911 Fund and local  
                    governments.

                    There is no question that the state needs an effective  
                    system for capturing local taxes related to the sale  
                    of prepaid phones. The solution, however, proposed by  










                    this bill is duplicative, complex and will result in  
                    significant and unnecessary costs to the state.

                    I encourage the author to partner with the local  
                    governments and State Agencies affected by these  
                    revenues and craft a bill with a more cost effective  
                    solution.
           
             3.   BOE Now Estimates Significant Local Revenue Collections.  
               Although much of the debate over this bill is the same as  
               last year, a major new development is that BOE's estimate  
               of costs and revenues for the first time includes an  
               estimate that the bill will generate about $72 million in  
               revenue for local agencies that today is largely  
               uncollected. Thus, even though BOE's annual costs in  
               implementing the bill remain at about $11.4 million, the  
               bill requires that these costs will be deducted on a pro  
               rata basis from each category of charges - CPUC, state 911,  
               and local UUTs.  The result is that the bill appears to  
               generate a net revenue increase for each category. 

             4.   New Funding Guarantee for 911 Emergency Service.   
               Another new provision in this year's legislation is a  
               guarantee that the point-of-sale collection mechanism will  
               generate no less than $9.9 million for the state 911 fund.   
               This number is based on BOE's estimate that the bill will  
               generate $9.9 million for the 911 fund in 2014-15.  The  
               bill requires BOE to annually determine whether $9.9  
               million is generated for the 911 fund and, if not, requires  
               BOE to bill each prepaid service provider its pro rata  
               share of the deficiency. 

               This funding guarantee was added to the bill in amendments  
               on the Assembly floor.  Since then, BOE and the author have  
               agreed on amendments necessary to ensure that the guarantee  
               is an aggregate amount minus retailer and BOE expenses, and  
               that BOE can obtain data from the CPUC to bill the  
               appropriate service providers their pro rata portion of any  
               deficiency. In addition, the bill is blank as to the  
               expiration of the 911 funding guarantee, which the author  
               intends be through the end of 2019.  Thus, the author and  
               committee may wish to consider amending the bill to ensure  
               the effectiveness of the 911 funding guarantee through  










               2019, as set forth in Appendix A. 

             5.   Ensuring Long-Term Support for the State's 911 System.   
               All revenues from the 911 fee are deposited into the State  
               Emergency Telephone Number Account (SETNA), which funds the  
               state 911 system including about 458 local Public Safety  
               Answering Points (PSAPs) that receive 911 calls and  
               dispatch first responders.  The SETNA has been in a  
               structural deficit for years, with annual surcharge revenue  
               declining from about $133 million in 2005-06 to about $80  
               million in 2012-13.  The 911 fee was increased effective  
               2014 to the statutory maximum of 0.75 percent.   
               Nonetheless, the state faces an enormous challenge to fund  
               PSAP upgrades to enable text to 911 (already available from  
               the carriers) and Next Generation 911 services.

               While the 911 funding guarantee helps mitigate this  
               challenge, the BOE analysis of this bill recommends a  
               thorough review of the 911 fee to determine a more  
               up-to-date surcharge mechanism to provide a sufficient  
               revenue stream for the statewide 911 system.  In addition  
               to impact from the decline of landline telephone service  
               and increased prepaid wireless usage, certain security,  
               medical, and telemetry devices directly access the 911  
               system with no intrastate service subject to the 911 fee.   
               ECaTS, the PSCO vendor that manages data and analytics on  
               all 911 uses, reports that it can identify all of these 911  
               uses that are not paying the fee.  In addition, SB 1211  
               (Padilla), now pending in the Assembly, amends provisions  
               also in this bill in order to help establish transparency  
               and accountability for the 911 fee, laying the foundation  
               for necessary funding increases for texting and Next Gen  
               upgrades and long-term sustainability of the system.  Thus,  
               the author and committee may wish to consider supplementing  
               the 911 funding guarantee by amending this bill to also  
               incorporate those provisions of SB 1211, as set forth in  
               Appendix B.

             6.   Why Not Just a Local Collection Mechanism? Since the  
               CPUC's success in its legal action against TracFone, all  
               providers of prepaid service currently remit surcharges to  
               the CPUC.  Similarly, providers of prepaid service  
               currently remit the 911 fee to the BOE.  Local agencies,  










               however, report that they receive very little UUT revenue  
               on prepaid service.  Both service providers and BOE report  
               that the exact amount of uncollected UUT revenue is  
               unknown.  BOE states that some unknown small amount of its  
               estimated $72 million per year that would be collected if  
               this bill is enacted is currently remitted by providers to  
               local agencies. Muni Services states that in many cities  
               the UUT is the second highest source of general fund  
               revenue after the sales tax and their revenue loss is  
               growing as prepaid service expands:  "California agencies  
               with existing UUT are losing revenues from prepaid wireless  
               and in some cases the loss is as high as 25% in last 3  
               years. Extrapolating the increased use of prepaid wireless  
               over time, over $100 million a year of local taxes is at  
               risk without corrective legislation." 

               Reasons cited for why local agencies have not found an  
               effective way to enforce collection of their UUTs include  
               lack of resources and risk of litigation with ordinances  
               based on post-paid billing. In addition, TracFone's   
               pending legal action against the City of Los Angeles  
               seeking a refund of UUTs remitted for prepaid service  
               before TracFone ceased remitting "places a dark cloud over  
               the enforceability of our UUT ordinance," according to  
               MuniServices. 

             7.   Who Benefits From This Bill? After several years of  
               prepaid legislation that has failed passage, this bill  
               still faces opposition because it provides financial  
               benefits or compensation to some stakeholders but appears  
               likely to cause financial harm to others.  Here's the  
               breakdown:

                     Customers of all postpaid and prepaid landline,  
                 wireless and VoIP communications service who pay all the  
                 surcharges will benefit if the net revenue estimates hold  
                 true for the long-term. If they do not, all customers  
                 will need to pay increased surcharges or receive reduced  
                 benefits from the programs these surcharges support;

                     Service providers benefit because they will no  
                 longer be required to pay surcharges out of profits, and  
                 prepaid customers will instead pay the surcharges on top  










                 of the price for service; 

                     Local governments benefit because they will have a  
                 new revenue stream from UUTs and local fees that have  
                 been largely unpaid by prepaid service providers to date,  
                 thereby providing increased funding for local services  
                 and programs. BOE estimates local revenue at about $72  
                 million in 2014-15;

                     Retailers benefit by keeping two percent of all  
                 surcharges collected as reimbursement for their expenses.  
                  Although retailers currently have no legal obligation to  
                 collect state and local taxes and fees on communications  
                 service, some retailer groups have agreed to collect them  
                 at point-of-sale for prepaid service provided they  
                 collect a single aggregated charge statewide, remit all  
                 funds to BOE (with which they are familiar for remitting  
                 sales tax) rather than to different agencies, and get  
                 reimbursed for their administrative costs;

                     The BOE benefits somewhat by being reimbursed for  
                 actual costs for their administrative costs in collecting  
                 the MTS surcharge from retailers and distributing it to  
                 the CPUC, PSCO, and local agencies, plus other duties;  
                 BOE currently is compensated for its actual costs in  
                 collecting the 911 fee; and

               Ï      The PSCO may benefit because the newly estimated  
                 local revenues will offset its costs, likely producing  
                 net revenue, and because of the 911 funding guarantee.

             1.   Will Low-Income Customers Bear the Burden?  The group  
               that definitely will not benefit from this bill are  
               customers of prepaid service because they will be required  
               to pay an additional amount on top of the price of service,  
               which they do not currently pay.  As pointed out by The  
               Utility Reform Network (TURN), The Greenlining Institute,  
               and the Office of Ratepayer Advocates (ORA), this will  
               especially affect low-income people who are a significant  
               portion of the prepaid market.  TURN states: "AB 1717  
               creates a mandated mechanism of surcharges and a convenient  
               excuse for all carriers to shift the burden directly to the  
               consumer."  According to Greenlining, the lowest cost  










               prepaid plans will have the highest per-minute surcharge,  
               creating a disproportionate burden on consumers who can  
               only afford to buy additional minutes in smaller bundles.   
               On the other hand, low-income customers eligible for  
                                                                               lifeline service will not be required to pay the new  
               surcharge for prepaid service from an authorized lifeline  
               provider, although that would not include prepaid service  
               from a retailer that is not a provider.

             2.   Will Surcharge Revenues Increase or Decrease in the Long  
               Term? Although the BOE's estimate of local revenue  
               collections appears to indicate that this bill will produce  
               net revenue for the CPUC, 911, and local agencies,  
               stakeholders still engage in somewhat of a numbers battle  
               over whether this bill will result in more or less  
               surcharge revenue than currently collected for prepaid  
               service.  The uncertainty inherent in any projection of  
               future revenue is exacerbated by the fact that prepaid  
               service is a rapidly growing market segment and the need to  
               estimate what portion of service will be for calls within  
               California versus interstate.  Industry claims that revenue  
               will increase because carriers now calculate surcharges  
               based on wholesale cost of prepaid service, which is at  
               least ten percent less than the retail price of service  
               that the surcharge required by this bill will be based on.   
               Industry also points to the bill requiring the surcharge to  
               apply to an entire prepaid sale amount even if usage is for  
               data or minutes are never used.  This could create more  
               revenue as customers' data use increases because the  
               current system substracts an estimated data usage.

               The CPUC counters that the industry's prediction of  
               increased revenue is misleading because carriers currently  
               are required to remit based on retail sales revenue and  
               because revenue needed for public purpose programs and user  
               fees is a fixed sum, independent of the means of  
               collection.  The CPUC also points to the bill creating  
               expenses to "split the rolls" between prepaid and post-paid  
               revenues, which currently are remitted in a combined  
               amount.

             3.   Local Government and Taxation Issues.  This bill  
               establishes a tiered approach for collecting UUTs and local  










               fees similar to the provisions adopted last year in AB 300  
               in the Committee on Governance and Finance.  Related issues  
               are in the jurisdiction of that committee.

             4.   Related Legislation.  

               AB 2545 (de La Torre, 2010) required a public process to  
               recommend a prepaid wireless service collection mechanism  
               and was essentially a study bill.  Status: Failed passage  
               on the Senate floor.

               AB 1050 (Ma, 2012) required a point-of-sale collection of  
               state and local surcharges on prepaid service somewhat  
               similar to this bill. Status: Died in the Senate Committee  
               on Governance and Finance.

               AB 300 (Perea, 2013) established a prepaid surcharge  
               collection mechanism substantially similar to this bill.  
               Status: Vetoed by the Governor.

             5.   Double Referral.  Should this bill be approved by the  
               committee, it will be re-referred to the Senate Committee  
               on Governance and Finance for its consideration.

                                   ASSEMBLY VOTES

          Assembly Floor                     (71-2)
          Assembly Appropriations Committee                               
          (15-0)
          Assembly Revenue & Taxation Committee                           
          (9-0)
          Assembly Utilities and Commerce Committee                       
          (9-0)

                                      POSITIONS

          Sponsor:

          CTIA - The Wireless Association














          Support:

          AT&T
          Blackhawk Network, Inc.
          Boost
          California Communications Association
          California Professional Firefighters
          California State Association of Counties
          California's Independent Telecommunications Companies
          City of Bellflower
          City of Burbank
          City of Cathedral City
          City of Culver City
          City of El Segundo
          City of Gardena
          City of Gilroy
          City of Glendale
          City of Hawthorne
          City of La Verne
          City of Lakewood
          City of Rancho Cordova
          City of Redwood City
          City of Sacramento
          City of San Gabriel
          City of San Luis Obispo
          City of Santa Barbara
          City of Santa Fe Springs
          City of Seal Beach
          Consolidated Communications Inc.
          George Runner, Member, State Board of Equalization, Second  
          District
          Jerome E. Horton, Chairman, State Board of Equalization, Fourth  
          District
          MuniServices
          Sprint
          T-Mobile
          TracFone Wireless, Inc.
          Virgin Mobile

          Oppose:

          California Police Chiefs Association
          California Public Safety 9-1-1 Coalition










          California Public Utilities Commission
          The Greenlining Institute
          The Utility Reform Network

          Jacqueline Kinney 
          AB 1717 Analysis
          Hearing Date:  June 17, 2014














































                                      Appendix A



           SEC. 2. Section 319 is added to the Public Utilities Code, to  
           read:


           319.


           (d)  The commission shall have enforcement authority to ensure  
           the proper remittances over retail transactions of a prepaid  
           MTS provider, pursuant to the Prepaid Mobile Telephony Services  
           Surcharge Collection Act (Part 21 (commencing with Section  
           42001) of Division 2 of the Revenue and Taxation Code), where  
           the prepaid mobile telephony services (prepaid MTS) provider is  
           also the seller. The commission shall collaborate with the  
           State Board of Equalization in exercising its enforcement  
           authority pursuant to this subdivision.


           (e)  (1)  Carriers providing prepaid mobile telephony  
           servicePrepaid MTS providers shall remit to the commission the  
           fee established for telephone corporations pursuant to  
           subdivision (a) of Section 431 on the intrastate portion of  
           the revenues received for prepaid mobile telephony service  
           through December
           31, 2015.


           (2)  Carriers providing prepaid mobile telephony  
           servicePrepaid MTS providers shall remit to the commission  
           the telecommunications universal service surcharges  
           established for telephone corporations on the intrastate  
           portion of the revenues received for prepaid mobile  
           telephony service through December 31, 2015.


           (f)  (1)  This section does not relieve  carriers providing  
           prepaid mobile telephony service  prepaid MTS providers of  
           their continuing obligation to report prepaid mobile  










           telephony service revenues to the commission in a manner  
           prescribed by the commission.


           (2)  When reporting prepaid mobile telephony service revenues  
           to the commission,  carriers providing prepaid mobile  
           telephony service  prepaid MTS providers  shall report the  
           intrastate revenue portion subject to the reimbursement fee  
           and the telecommunications universal service surcharges, as  
           well as total state wireless revenue.


           (3)  Reports made pursuant to this subdivision are subject to  
           Section 583 and any related orders of the commission.






           SEC. 6. Section 41033 is added to the Revenue and Taxation  
           Code, to read:


           41033.
           (a)  For purposes of this section, the following terms have the  
           following meanings:


           (1)  "Prepaid mobile telephony services" has the same meaning  
           as defined in Section 42004.


           (2)  "Prepaid MTS provider" has the same meaning as defined in  
           Section 42004.


           (3)  "Prepaid MTS 911 Account" means the Prepaid MTS 911  
           Account created in the Prepaid Mobile
           Telephony Services Surcharge Fund pursuant to Section 42023.


           (4)  "Retail transaction" has the same meaning as defined in  










           Section 42004.


           (5)  "Seller" has the same meaning as defined in Section 42004.



           (b)  Beginning with the calendar year beginning January 1,  
           2016, and ending with the calendar year ending December 31,_ ,  
           not less than nine million nine-hundred thousand dollars  
           ($9,900,000) shall be paid to the Prepaid MTS 911 Account for  
           each calendar year for prepaid mobile telephony services. Any  
           deficiency in payment to the Prepaid MTS 911 Account, below  
           this amount, resulting from retail transactions by sellers  
           during each calendar year, shall be the responsibility of  
           prepaid MTS providers. , (b) For each fiscal year, beginning  
           with the fiscal year commencing July 1, 2016, and ending with  
           the fiscal year commencing July 1, 2019, the board shall  
           calculate the following on or before the November 1 following  
           the end of such fiscal year:

           (1) The total collections for the fiscal year of that portion  
           of the prepaid MTS surcharge  that is for  the emergency  
           telephone users surcharge, net of any amounts that a seller  
           was permitted to deduct and retain pursuant to subdivision (e)  
           of section 42010;

           (2 ) Less the  expenses incurred and reimbursed to the board  
           for the fiscal year from that portion of the prepaid MTS  
           surcharge that is for the emergency telephone users surcharge  
           pursuant to subdivision (e) of section 42020.



           The board shall provide notification of whether the amount  
           calculated in this section exceeds or is less than nine  
           million nine-hundred thousand dollars ($9,900,000) on its  
           Internet website by the December 15 following such  
           calculation, along with the underlying calculations,  
           assumptions, and methodology.













           (c)   On November 15, 2017, and by November 15 of each year  
           thereafter, the board shall determine whether nine million  
           nine-hundred thousand dollars ($9,900,000) was paid to the  
           Prepaid MTS 911

           Account pursuant to Section 42023, for retail transactions  
           occurring during the previous calendar year. If in any calendar  
           year  for any fiscal year the resulting calculation in (b) is  
           less than nine million nine-hundred thousand dollars  
           ($9,900,000) was paid to the Prepaid MTS 911 Account, the board  
           shall  , the deficiency shall be the responsibility, on a pro  
           rata basis as provided in this paragraph, of each prepaid MTS  
           provider.  The board shall  calculate the deficiency and  bill  
           each prepaid MTS provider its pro rata share of that deficiency  
           A based on each prepaid MTS provider's pro rata share shall be  
           calculated based upon each  provider's percentage share of  
           total California intrastate prepaid mobile telephony services  
           revenues, as reported to the California Public Utility  
           Commission pursuant to section 319(f) of the Public Utility  
           Code.



           (d)  A prepaid MTS provider shall remit  the amount billed to  
           it pursuant to subdivision (c) to the board, and the board  
           shall deposit all amounts remitted to the Prepaid MTS 911
           Account.



          (d) The California Public Utility Commission shall provide the  
          board, within 45 days of request, the name and address of each  
          prepaid MTS provider and each prepaid MTS provider's California  
          intrastate prepaid mobile telephone services revenue, along with  
          the provider's percentage share of total California intrastate  
          prepaid mobile telephony services revenue, and any other  
          information the board deems necessary.


          (e) The obligation of each prepaid MTS provider shall be  
          enforced by serving a notice in the manner prescribed for  
          service of a notice of a deficiency determination, not later  
          than three years after the date the board determines that the  










          calculation specified in subdivision (b) results in a deficiency  
          for the previous fiscal year.  Notwithstanding any provisions to  
          the contrary in this part, a petition for a redetermination of a  
          notice issued pursuant to this subdivision may be filed within  
          60 days after service upon the person of notice thereof.  Solely  
          for purposes of a notice issued pursuant to this subdivision,  
          interest shall begin to accrue at the expiration of the 60-day  
          period.  If a petition for redetermination is not filed within  
          the 60-day period, the determination becomes final at the  
          expiration of that period.  All determinations made by the board  
          under this section are due and payable at the time they become  
          final.  If they are not paid when due and payable, a penalty of  
          10 percent of the amount of the determination, exclusive of  
          interest and penalties shall be added thereto.  Interest shall  
          apply in accordance with Article 6 (commencing with Section  
          41095).  The liability imposed by this section shall be  
          collected by the board in accordance with the provisions of this  
          part.


           (eg)  This section shall remain in effect only until January  
 
           1, 2019, and as of that date is repealed, unless a later  
 
           enacted statute, that is enacted before January 1,  _, deletes  
 
           or extends that date.










           SEC. 7.  42004.


           For purposes of this part, the following terms have the  
           following meanings:












           (f)  "Mobile data service" has the same meaning as defined in  
           Section 224.4 of the Public Utilities Code.


           (g)  "Mobile telephony service" or "MTS" has the same meaning  
           as defined in Section 224.4 of the Public
           Utilities Code.



           (h)  "Person" includes any individual, firm, partnership,  
           joint venture, limited liability company, association, social  
           club, fraternal organization, corporation, estate, trust,  
           business trust, receiver, assignee for the benefit of  
           creditors, trustee, trustee in bankruptcy, syndicate, the  
           United States, this state, any city, county, city and county,  
           municipality, district, or other political subdivision of the  
           state, or any other group or combination acting as a unit.


           (i)  "Prepaid consumer" or "consumer" means a person who  
           purchases prepaid mobile telephony
           services in a retail transaction.


           (j)  "Prepaid mobile telephony services" means the right to  
           utilize a mobile device  authorized by the Federal  
           Communications Commission  for mobile telecommunications  
           services or information services, including the download of  
           digital products delivered electronically, content, and  
           ancillary services, or both telecommunications services and  
           information services, that must be purchased in advance of  
           usage in predetermined units or dollars. For these purposes,  
           "telecommunications service" and "information service" have the  
           same meanings as defined in Section 153 of Title 47 of the  
           United States Code.


           (k)  "Prepaid MTS provider" means a person telephone  
           corporation pursuant to California Public Utilities Code  
           Section 234 that provides prepaid mobile telephony services  
           pursuant to a license issued by the Federal Communications  










           Commission.



           (l)  "Prepaid MTS surcharge" means the surcharge that  
           consists of the emergency telephone users surcharge and the  
           Public Utilities Commission surcharges, as calculated  
           pursuant to subdivision (b) of Section 42010, that is  
           required to be collected by a seller from a prepaid  
           consumer.


           (n)  "Retail transaction" means the purchase of prepaid  
           mobile telephony services, either alone or in combination  
           with mobile data or other services, from a seller for any  
           purpose other than resale in the regular course of business.  
           For these purposes, a "purchase" means any transfer of title  
           or possession, exchange, or barter, conditional or otherwise.


           (o)  "Seller" means a person that sells prepaid mobile  
           telephony service to a person in a retail transaction.



           42010.



            (e)  A seller who is not a prepaid MTS provider shall be  
           permitted to deduct and retain an amount equal to 2 percent of  
           the amounts that are collected by the seller from prepaid  
           consumers  in a retail transaction for the prepaid MTS  
           surcharge and local charges, except in a retail transaction  
           that involves both of the following:, on a pro rata basis  
           according to the amount of revenues collected by the retailer  
           for: 



           (1) that portion of the prepaid MTS surcharge that is for the  
           emergency telephone users surcharge, 













           (2) that portion of the prepaid MTS surcharge that is for the  
           Public Utilities Commission surcharges, and 



           (3) local charges.


           (1)  The seller is the provider of prepaid mobile telephony  
           services pursuant to Section 224.4 of the
           Public Utilities Code, or a telephone corporation pursuant to  
 
           Section 234 of the Public Utilities Code.







           (2)  The seller sells the prepaid mobile telephony services  
 
           directly to the prepaid consumer.




























                                     Appendix B





          SB 1211 -- SEC. 2.

           Section 41030 of the Revenue and Taxation Code is amended to  
          read:

           (a)  The Office of Emergency Services shall determine annually,  
          on or before October 1, a surcharge rate that it estimates will  
          produce sufficient revenue to fund the current fiscal year's 911  
          costs. The surcharge rate shall be determined by dividing the  
          costs (including incremental costs) the Office of Emergency  
          Services estimates for the current fiscal year of 911 plans  
          costs  approved pursuant to Section 53115 of  Article 6  
          (commencing with Section 53100) of Chapter 1 of Part 1 of  
          Division 2 of Title 5 of  the Government Code, less the  
          available balance in the State Emergency Telephone Number  
          Account in the General Fund, by its estimate of the charges for  
          intrastate telephone communications services and VoIP service to  
          which the surcharge will apply for the period of January 1 to  
          December 31, inclusive, of the next succeeding calendar year,  
          but in no event shall such surcharge rate in any year be greater  
          than three-quarters of 1 percent nor less than one-half of 1  
          percent.
          (b) When determining the surcharge rate, the office shall  
          include the costs it expects to incur to plan, test, implement,  
          and operate Next Generation 911 technology and services,  
          including text to 911 service, consistent with the plan and  
          timeline required by Section 53121 of the Government Code.
          (c) At least one month before determining the surcharge rate  
          pursuant to subdivision (a), the office shall prepare a summary  
          of the calculation of the proposed surcharge and make it  
          available to the Legislature and the 911 Advisory Board, and on  
          the office's Internet Web site.