BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 1717
Author: Perea (D)
Amended: 7/2/14 in Senate
Vote: 27 - Urgency
SENATE ENERGY, UTILITIES & COMMUNICATIONS COMM. : 9-0, 6/17/14
AYES: Padilla, Fuller, Block, Cannella, De León, DeSaulnier,
Hill, Pavley, Wolk
NO VOTE RECORDED: Corbett, Knight
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De León, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 71-2, 5/29/14 - See last page for vote
SUBJECT : Telecommunications: prepaid mobile telephony
services: state
surcharge fees
SOURCE : CTIA The Wireless Association
DIGEST : This bill creates a point of sale mechanism to
collect surcharges for the states universal service programs,
911 emergency response system, the Public Utilities Commission's
(PUC's) user fee, and local utility users taxes (UUTs) on
prepaid mobile telephony services (MTS).
ANALYSIS : Under existing law, customers in California pay the
following surcharges based on their intrastate telephone use:
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1.The 911 Surcharge : this charge funds the state's 911
emergency response system. The charge is statutorily
restricted to be between 0.5 and 0.75% on revenues from
intrastate voice service and is determined by the Office of
Emergency Services (OES). OES recently raised the surcharge
to 0.75% this past fall. The Board of Equalization (BOE)
administers the surcharge, and remits revenue to the State
Emergency Telephone Number Account (SETNA), which is
administered by OES. The SETNA currently has a structural
imbalance, largely due to steep decreases in revenues over the
past eight years as texting and other communication
technologies have been replacing intrastate voice service. OES
anticipates the SETNA to have a negative fund balance in FY
2015-16.
2.PUC universal program surcharges: PUC can change the rates to
ensure stable fund balances based on forecast demand. Fees
include:
A. Universal Lifeline Account: 1.15% of the amount paid
for monthly service, which subsidizes landline services
for low-income households,
B. Deaf and Disabled Telecommunications Program: 0.2% to
aid deaf, hearing impaired, and disabled persons to use
telephones,
C. High Cost Fund A: 0.4% to subsidize rural
telecommunications carriers,
D. High Cost Fund B: currently 0 (because of a large
reserve) to subsidize carriers of last resort providing
residential telecommunications in high cost areas,
E. Teleconnect Fund: 0.59% to fund a 50% discount on
selected telecommunication services to qualifying schools,
libraries, government-owned and operated hospitals and
health clinics, and community-based organizations.
F. Advance Services Fund: 0.44% to fund broadband
deployment unserved and underserved areas.
1.PUC a user fee of 0.18% on telecommunications carriers based
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on their intrastate revenues. This fee funds PUC operations
and is also referred to as the reimbursement fee.
2.Utility users taxes (UUTs) are excise taxes imposed on
consumers of utilities by cities and counties on the
consumption of utility services, including electricity, gas,
water, sewer, telephone, sanitation, and cable television. In
jurisdictions that impose a UUT, a utility company collects
the tax through the bills it sends to utility customers, and
remits the revenues to the local government that imposed the
tax. Although a city or county can impose a UUT as a special
tax, generating revenues that must be used for a specific
purpose, nearly all UUTs are imposed as general taxes, which
allow revenues to be used for any purpose. Additionally, some
local agencies also impose charges to fund local 911 systems.
Assessing surcharges : All these fees are assessed as a
percentage of a customer's intrastate telephone service. The
collection of these surcharges are relatively straightforward
when telephone service is paid for after the calls were made
(postpaid), whether the telephone service is landline or
wireless, as a telephone carrier can identify actual intrastate
calls and there is a billing relationship with the customer.
This bill establishes the Prepaid Mobile Telephony Services
Surcharge Collection Act, which requires purchasers of prepaid
wireless to pay a surcharge on retail sales for state and local
charges on and after January 1, 2016. Current surcharge
collection will continue until December 31, 2015.
MTS Fee : The MTS Fee is a percentage of the sales price, and is
in-lieu of all other state charges, fees, and taxes that
currently apply. BOE administers the MTS Fee according to the
Fee Procedures Collections Law, and calculates the rate
according to the bill each year no later than November 1,
commencing on November 1, 2015 by adding the 911 surcharge rate
and the rates for the PUC reimbursement and universal service
fees, as calculated by the PUC for prepaid mobile telephony
services.
The MTS fee is combined with any UUTs or other local charges
applicable to wireless services (e.g. local 911 fees). The BOE
is required to post the combined rate for each jurisdiction on
its website by December 1 of each year. Seller of wireless
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services would be required to collect this combined rate on
prepaid wireless services at the point of sale and disclose
separately the MTS fee, UUT, and other local charges on the
customer's receipt.
This bill establishes numerous provisions regarding the
obligations and liabilities for the seller as well as customers
to require collection. This bill also establishes provisions
specifying the collection of the MTS fee and local charges when
the purchase is not a retail transaction (i.e. online purchase).
The MTS Fee applies to the entire price where prepaid mobile
telephony services are sold in combination with mobile data
services or any other services or products for a single price.
The retailer can elect to apply the MTS fee only to the amount
charged for the prepaid service, and not to the whole amount of
the transaction when the retailer sells the prepaid service with
a cellular telephone, and the purchase price for the prepaid
service is separately disclosed to the consumer.
Local charges : Local agencies will be required to contract with
BOE annually to collect its UUT and local charges along with the
MTS fee. This bill specifies the provisions of the contract
including a requirement that the local agency certify that its
UUT and local charge ordinance applies to prepaid wireless
services. The bill provides provisions for the posting and
enactment of new rates should local rates change.
This bill suspends the authority of any local agency to impose a
UUT or local 911 charge at the rate specified in the ordinance;
instead the bill sets rates that approximate UUT and local
charge rates.
Surcharge administration - direct sales : For collections
collected by direct sellers, the portion of the combined rate
that is attributable to the 911 surcharge will be remitted to
the BOE, the portion that is attributable to the PUC surcharges
will be remitted directly to the PUC, and the portion that is
attributable to the local charges would be remitted directly to
the appropriate jurisdiction. Direct sellers are defined in
this bill as a prepaid MTS provider or service supplier. For
example, this includes an AT&T or Verizon store.
Surcharge administration - indirect sales : Indirect sellers
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will be required to remit funds collected from the combined rate
to the BOE, less up to 2% of the total collected to compensate
for the costs of collections.
The BOE will deposit collections from the MTS rate into the
Prepaid Mobile Telephony Services Fund, which will be created in
the State Treasury by this bill, less BOE's expenses incurred in
the administration and collection of the MTS surcharge. BOE
will allocate its costs for collection on a pro rata basis
according to revenues collected for the 911 Fee, PUC Fees, and
local charges. A proportional amount of the funds from the 911
component of the MTS fee will be deposited into the Prepaid 911
MTS account, created by the bill, and a proportional amount
funds for the PUC fee component into the Prepaid MTS PUC
account, also created by the bill.
Collections of local charges by the BOE will be deposited in the
Local Charges for Prepaid Mobile Telephony Services Fund, which
will be created in the State Treasury by this bill, less BOE's
expenses. Monies in this fund would be required to be
transmitted to local agencies as specified. Local agencies must
pay all of BOE's costs of administering this part of the bill
and collecting local charges. The Director of Finance has final
decision-making authority to resolve disputes between BOE and
local agencies over costs. BOE must annually report on both its
reimbursed and unreimbursed costs for collecting local charges.
BOE can prescribe and adopt tax administration and enforcement
regulations, as well as any necessary emergency regulations as
necessary to implement the bill.
911 Guarantee : The bill requires the BOE to calculate for each
fiscal year the total collections that is attributable to the
911 surcharge less the amount retained by sellers and less the
proportionate share of BOE's administrative costs. If MTS
revenues fall below $9.9 million, BOE must bill each prepaid
wireless service provider according to its pro rata share of
California intrastate revenue. PUC fees have no such guarantee.
Lifeline exemption : Consumers eligible for the state or federal
lifeline program are exempt from the MTS fee if the seller is
authorized to provide lifeline service (e.g. a direct seller).
The exemption applies only to the amount paid for prepaid
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service that the lifeline program specified is exempt from the
components of the MTS fee.
Calculation of PUC MTS fees : This bill requires the PUC to
compute its reimbursement fee as a percentage of the sales price
of prepaid MTS by October 1st for the following calendar year,
commencing October 1, 2015. The PUC will also be required to
calculate the cumulative amount of telecommunications universal
service charges, which include all the fees above, using
identical dates. This bill contains provisions regarding any
past overcollection and undercollection from the previous year
as well as requirements to disclose this calculation to OES and
the BOE and on its website.
Calculation of the 911 fee: This bill requires OES to determine
the 911 fee for prepaid wireless according to the intrastate
portion of prepaid wireless based on the information carriers
send to the PUC, commencing with the calculation made on October
1, 2015, effective January 1, 2016. OES must inform BOE of the
total amount collected, including the amount from prepaid
wireless. OES must prepare a summary regarding its calculation
and post it on its website.
This bill also requires OES, when determining the 911 fee, to
include the costs it expects to incur to develop, implement, and
operate Next Generation 911 technology and services.
This bill sunsets on January 1, 2020, except for the 911
guarantee provisions, as specified, which has a separate,
unspecified sunset date.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
$8.3 million for FY 2015-16, $13.6 million for FY 2016-17,
$12.3 million for FY 2017-18, and $12.1 million thereafter
from fee revenues (special) for BOE to administer and collect
the new collection mechanism beginning in 2016, not including
additional costs associated with the potential sunset of the
new collection mechanism.
$630,000 for the first two years of implementation and
$350,000 thereafter from the Public Utilities Commission
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Utilities Reimbursement Account (special) to set the MTS and
track MTS revenues
Unknown changes in state revenues, but potentially an increase
in $4.99 million, to various special funds by collecting
surcharges on more services and on retail prices. Staff
estimates that after the subtraction of the state's portion of
the BOE and PUC's increased administrative costs, net revenues
may be in the hundreds of thousands of dollars.
Cost pressures on the General Fund for a loan for start-up
costs.
SUPPORT : (Verified 8/18/14)
CTIA - The Wireless Association (source)
AT&T
Blackhawk Network, Inc.
Boost
California Communications Association
California Professional Firefighters
California State Association of Counties
California's Independent Telecommunications Companies
Cities of: Bellflower, Cathedral City, Culver City, El Segundo,
Gardena, Gilroy,
Glendale, Hawthorne, La Verne, Lakewood, Rancho Cordova, Redwood
City,
Sacramento, San Gabriel, San Luis Obispo, Santa Barbara, Santa
Fe Springs, and
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
OPPOSITION : (Verified 8/18/14)
California Public Utilities Commission
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The Greenlining Institute
The Utility Reform Network
ASSEMBLY FLOOR : 71-2, 5/29/14
AYES: Achadjian, Alejo, Allen, Bigelow, Bloom, Bocanegra,
Bonilla, Bonta, Bradford, Buchanan, Ian Calderon, Campos,
Chau, Chávez, Conway, Cooley, Dababneh, Dahle, Daly,
Dickinson, Eggman, Fong, Frazier, Beth Gaines, Garcia, Gatto,
Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Hall,
Harkey, Holden, Jones, Jones-Sawyer, Levine, Linder, Logue,
Lowenthal, Maienschein, Medina, Melendez, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Patterson, Perea, John A.
Pérez, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,
Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,
Waldron, Weber, Wieckowski, Wilk, Williams, Atkins
NOES: Donnelly, Fox
NO VOTE RECORDED: Ammiano, Brown, Chesbro, Roger Hernández,
Mansoor, Yamada, Vacancy
JG:nl 8/18/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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