BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 1717
Author: Perea (D)
Amended: 8/22/14 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).
Senate Floor Amendments of 8/22/14 guarantee consumer payment
options; add additional reporting requirements; add
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double-jointing language with SB 1211 (Padilla); clarify
definitions; and add technical and conforming changes.
ANALYSIS : Under existing law, customers in California pay the
following surcharges based on their intrastate telephone use:
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.
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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
on their intrastate revenues. This fee funds PUC operations
and is also referred to as the reimbursement fee.
2.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:
1. Enacts the Prepaid Mobile Telephony Service Surcharge
Collection Act which establishes a prepaid MTS surcharge, as
defined, based upon a percentage of the sales price of each
retail transaction that occurs in this state for prepaid MTS,
as defined.
2. Provides that the prepaid MTS surcharge will include the
emergency telephone users surcharge, as defined, and PUC
surcharges, as defined.
3. Requires a seller, as defined, to collect the prepaid MTS
surcharge, as provided, from a prepaid consumer, as defined,
and remit the amounts collected to the BOE pursuant to the
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Fee Collection Procedures Law, unless the seller is a direct
seller, as defined.
4. Requires the BOE, after deducting its administrative
expenses, to deposit the amounts collected for the emergency
telephone users surcharge into the Prepaid MTS 911 Account
and to deposit the amounts collected for PUC surcharges into
the Prepaid MTS PUC Account in the Prepaid Mobile Telephony
Services Surcharge Fund, established in the State Treasury.
5. Requires a direct seller to remit the PUC surcharges to the
PUC, the emergency telephone users surcharge to the BOE, and
the local charges to the local jurisdiction or agency.
6. Requires the PUC to annually compute for prepaid mobile
telephony services the PUC's reimbursement fee and six
universal service program surcharges, to post notice of those
fees and surcharges on its Internet Web site, and to notify
the BOE and the OES of the amounts and the computation method
used to determine the amounts, which will be adjusted, as
specified, and together will be the PUC surcharges.
7. Requires, beginning with the 2016-17 fiscal year and ending
with the 2018-19 fiscal year, the BOE to calculate the net
amounts collected pursuant to the MTS surcharge for the
emergency telephone users surcharge during each fiscal year
and to provide notification on its Internet Web site by
December 15 following each fiscal year, whether the amount
exceeds or is less than $9,900,000.
8. Provides that if for any fiscal year the amount collected is
less than $9,900,000, the deficiency is the responsibility,
on a pro rata basis, of each prepaid MTS provider based on
each provider's share of total California intrastate prepaid
mobile telephony service revenues as reported to the
commission.
9. Requires the PUC to provide the BOE with information
relative to each prepaid MTS provider's revenue and
percentage sales upon request and authorize the BOE to
enforce the obligation of each prepaid MTS provider by
serving a notice in a prescribed manner.
10.Requires the PUC, 30 days prior to adopting any adjustment
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to a reimbursement fee or universal service surcharge on both
postpaid and prepaid intrastate service to prepare a
prescribed resolution or other public document proposing the
fee or surcharge adjustment and explaining the calculation of
the new fee or surcharge, as specified, and requires the PUC
to make it available to the public and on the PUC's Internet
Web site.
11.Exempts the purchase in a retail transaction in this state
of prepaid MTS, either alone or in combination with mobile
data or other services, by a consumer from the prepaid MTS
surcharge and specified local charges if certain conditions
are met, including that the prepaid consumer is certified as
eligible for the state lifeline program or federal lifeline
program.
12.Requires the OES to annually compute, as specified, the
intrastate portion of the 911 surcharge to be collected on
prepaid mobile telephony services, to post notice of those
charges, and to notify the BOE of the amount, which will be
the emergency telephone users surcharge.
13.Requires the OES to prepare a prescribed summary of the
calculation of the proposed 911 surcharge and make the
summary available to the public and on its Internet Web site,
as specified. Local charges will be computed pursuant to the
Local Prepaid Mobile Telephony Services Collection Act, as
specified.
14.Provides that the provisions will, on and after January 1,
2016, suspend the authority of a city, county, or city and
county, including any charter city, county, or city and
county, to impose a utility user tax on the consumption of
prepaid communications service at the rate specified in an
ordinance adopted, and instead require the utility user tax
rate to be applied during that period under any ordinance to
be at specified tiered rates, to be collected and
administered as prescribed in the Prepaid Mobile Telephony
Services Surcharge Collection Act.
15.Provides that in addition, the provisions will, on or after
January 1, 2016, suspend the authority of a city, county, or
city and county, including any charter city, county, or city
and county, to impose a charge, that applies to prepaid
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mobile telephony service, on access to communication services
or access to local "911" emergency telephone systems, in the
city, county, or city and county at the rate as specified in
an ordinance adopted, and will instead require the charge
rate to be applied during that period under any ordinance to
be at specified rates, to be collected and administered as
prescribed in the Prepaid Mobile Telephony Services Surcharge
Collection Act.
16.Specifies that a change in a utility user tax rate or access
charge rate resulting from either the rate limitations or the
end of the suspension period is not subject to voter
approval.
17.Requires these local charges imposed by a city, county, or a
city and county be administered and collected by the BOE,
deposited in the Local Charges for Prepaid Mobile Telephony
Services Fund and transmitted to the city, county, or a city
and county, as provided.
18.Allows a consumer to rebut the presumed location of a retail
transaction for purposes of the collection of the local
charges by filing a claim and declaration under penalty of
perjury.
19.Contains double-jointing language with SB 1211 (Padilla).
20.Sunsets these provisions on January 1, 2020.
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
Utilities Reimbursement Account (special) to set the MTS and
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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 8/22/14)
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 8/22/14)
California Public Utilities Commission
The Greenlining Institute
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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 8/25/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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