BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 2570 Hearing Date: 6/27/2016
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|Author: |Quirk |
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|Version: |6/14/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Nidia Bautista |
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SUBJECT: Telecommunications: universal service: wireless
communications
DIGEST: This bill makes changes to the state's LifeLine
universal telephone service program specific to procedures for
reimbursements related to wireless telephone service provided to
eligible low-income households.
ANALYSIS:
Existing law:
1)Establishes the Moore Universal Telephone Service Act to
achieve universal service by making basic telephone service
affordable to low-income households through the creation of a
lifeline class of service. Requires the CPUC and telephone
corporations to employ every means to ensure that every
qualified household is informed and afforded the opportunity
to subscribe to the service. (Public Utilities Code §871)
2)States it is the intent of the Legislature that the CPUC
initiate a proceeding investigating the feasibility of
redefining universal telephone service by incorporating
two-way voice, and data service as components of basic
service. (Public Utilities Code §871.7)
3)Defines "household" as a residential dwelling that is the
principal place of residence of the lifeline telephone service
subscriber, and excludes any industrial, commercial, or other
nonresidential building. (Public Utilities Code §872)
AB 2570 (Quirk) Page 2 of ?
4)Requires the CPUC to annually designate a class of lifeline
service necessary to meet minimum communication needs, set the
rates and charges for that service, develop eligibility
criteria for that service, assess the degree of achieving
universal service, including telephone penetration rates by
income, ethnicity, and geography. (Public Utilities Code
§873)
5)Requires a lifeline telephone service subscriber to be
provided with one lifeline subscription, as defined by the
CPUC, at his or her principal place of residence, and no
member of that subscriber's family or household who maintains
residence at that place is eligible for lifeline telephone
service. (Public Utilities Code §878)
6)Requires the CPUC to, at least annually, initiate a proceeding
to set rates for lifeline telephone service and requires
telephone corporations providing lifeline telephone service to
apply the funding requirement in the form of a surcharge to
service rates which may be separately identified on the bills
of customers. (Public Utilities Code §879)
This bill:
1)Prohibits the CPUC from reimbursing a telephone corporation
for providing wireless lifeline service to a new subscriber if
the subscriber has enrolled in wireless lifeline service with
another telephone corporation within the previous 60 days.
2)Provides that a subscriber may terminate wireless LifeLine
service within 14 days of service activation without incurring
any charges, including an early termination, as authorized
pursuant to Rulemaking 11-03-113.
3)Requires the CPUC to reimburse a telephone corporation
providing wireless lifeline service within 60 days of the date
the telephone corporation submits a reimbursement claim.
4)Requires the CPUC to pay all of the costs of the telephone
corporation resulting from a late reimbursement if the CPUC
does not reimburse a telephone corporation for a reimbursement
claim for wireless lifeline service within 60 days, including
financing fees, interest payments, and staff time.
Background
AB 2570 (Quirk) Page 3 of ?
About the LifeLine program. The Moore Universal Service
Telephone Act of 1987 establishes the goal of offering basic
telephone service at affordable rates to the greatest number of
California residents. To help achieve this goal, state law
directs CPUC to develop the California LifeLine Program to
provide basic telephone service at a discounted cost to
low-income households. The Act requires the CPUC to annually
designate a class of LifeLine service necessary to meet minimum
residential communications needs, develop eligibility criteria,
currently 150 percent of the federal poverty level (about
$36,000 annually for a family of four), and set rates for the
LifeLine services, which are required to be not more than 50
percent of the rate for basic telephone service. The maximum
state subsidy in the current year is about $12.65 per month. The
federal government also administers the federal LifeLine program
that provides a monthly discount of about $9.25 per month. As a
result, an eligible participant has a combined nearly $22 per
month subsidy to cover the costs of telephone service.
Additionally, the CPUC provides (1) a per enrollee monthly
payment to cover carriers' administrative costs, (2) a one-time
connection subsidy for new enrollees or enrollees that switch
plans, and (3) a subsidy to cover other telephone taxes and
surcharges for LifeLine enrollees. The revenues to fund the
program are collected from a surcharge on telephone bills for
non-LifeLine customers. The CPUC adjusts the level of the
surcharge based on its projections of the amount of revenue
needed to cover the costs of the program.
Wireless telephone LifeLine. Historically, the LifeLine program
in California has only included traditional landline service.
AB 2213 (Fuentes, Chapter 381, Statutes of 2010) made changes to
state law that gave CPUC the authority to allow LifeLine
customers to choose between wireline, wireless service or other
technologies. In January 2014, the CPUC officially expanded the
program to allow wireless carriers to offer LifeLine service.
Participating wireless plans are eligible for the same monthly
subsidy amount available for traditional landline plans.
However, in the case of wireless telephone service the amount of
the subsidy varies based on the number of voice and data minutes
included in the telephone service plan. Wireless telephone
carriers participating in the LifeLine program must offer plans
that meet specified criteria and conditions established by the
CPUC related to quality of service, voice and text minutes,
consumer protection requirements and others. There are roughly
34 LifeLine wireless plans available and 21 of the available
AB 2570 (Quirk) Page 4 of ?
plans are offered at no cost.
Increased popularity. The expansion of the LifeLine program into
wireless telephone service has increased the demand for the
program. Program enrollment had been steadily declining prior to
adding wireless service in 2014. However, program enrollment
doubled between the years of 2013-14 to 2014-15 as a result of
the new wireless telephone service offering. With growth in
enrollees, program costs also have increased substantially over
the same time period. The surcharge on telephone service to fund
the program has increased from to 5.5 percent from 1.15 percent.
Recent legislative budget action. Per the Senate Budget
Committee analysis: As part of the May Revision, at the
Legislature's request, CPUC prepared a caseload and cost
estimate package that provides revised projections of the
current and budget year local assistance costs for the Universal
LifeLine program. For 2015-16, CPUC estimates LifeLine
expenditures will total $483.5 million, which is an increase of
$137.8 or 40 percent, compared to the 2016-17 Governor's Budget.
This projected increase in expenditures is due to increased
carrier claims from wireless service providers. In addition,
$53.2 million of the 2015-16 appropriation was used to pay
2014-15 carrier claims. In 2016-17, the May Revision estimates
total state operations and local assistance costs of $483.1
million, which is a decrease of $142.4 million from the January
proposal.
Why only wireless? This bill attempts to address various issues
of the LifeLine program from the perspective of a wireless
provider. However, many of the proposed changes could be
applicable to wireless, landline or other technologies should
they be included in the program. The author and committee may
wish to amend the bill to require technology neutral language
where applicable.
Why 60 days? At the initial rollout of the wireless LifeLine
program, the CPUC was paying reimbursements CPUC General Order
153 sections 9.5.2 and 9.9 specify a deadline of 60 to 120 days
(depending on the when the claim is submitted) by which the
California LifeLine Program may pay a claim to a qualified
telephone service provider for reimbursements without incurring
interest. According to the CPUC, as of this date, the LifeLine
program has never had to pay any interests for late
AB 2570 (Quirk) Page 5 of ?
reimbursements. It's understandable that telephone providers
would desire quick reimbursements for services provided,
particularly for smaller company providers whose main business
is hinged on the Lifeline program. Delayed reimbursements can
affect the company's cash-flow and debt-burden. However, the
desire to pay out reimbursements must be balanced against the
practical limitation s of processing payments for what is
quickly become a popular program. The author and committee may
wish to amend the bill to require the CPUC to reimburse
providers within 90 days, instead of 60 days as proposed in this
bill.
Ratepayers on the hook. The bill includes sanctions on the CPUC
if it fails to make a reimbursement to a provider under the
specified schedule. The proposed consequences could be costly
and beyond what would be reasonable, particularly requiring the
CPUC to pay all of the costs of the telephone corporation
resulting from the late reimbursement, including, but not
limited to financing fees, interest payments, and staff time.
Currently, the CPUC's general orders require the CPUC to pay
interest on late reimbursements - of which they claim to have
none. The author and committee may wish to amend the bill to
narrow and limit the sanctions proposed on the CPUC should they
reimburse a provider within the specified time.
Consumer choice. The bill proposes to limit the ability of an
eligible enrollee to transfer service and receive a subsidy if
they have previously enrolled in a program within the past 60
days. The CPUC's third party administrator of the LifeLine
program provides a real-time verification system based on
matching a person's name and address. However, if there is no
match based on name or address, then the process to verify
eligibility becomes more difficult. Ultimately, an improved
verification system can help reduce fraud or mistakes in
enrolling someone who is not eligible. In those situations, the
wireless provider is left holding the bag which includes the
hardware - telephone and accessories. It may be that 60 days is
too long a period to institute a "port freeze" on someone who
may urgently need a phone and 14 days is too short to provide a
subscriber the opportunity to terminate their service without a
termination fee. This portion of the bill merits further
attention to ensure consumers are appropriately protected.
Prior/Related Legislation
AB 2570 (Quirk) Page 6 of ?
AB 2213 (Fuentes, Chapter 381, Statutes of 2010) deleted
references to LifeLine service being a residential basic
telephone service, required that an eligible low-income
subscriber be provided with one lifeline subscription per
household, and made findings that technologies beyond
traditional landline telephones could be used to offer
low-income citizens access to affordable, reliable, and high
quality basic telephone service.
AB 1407 (Bradford, 2014) would have phased out the existing
lifeline program for basic landline service and created a new
lifeline discount of $11.85 per month for voice communication
services from a telephone corporation or eligible wireless and
Voice over Internet Protocol (VoIP) providers. The bill would
have prohibit the CPUC from requiring state LifeLine providers
to offer more than is required under the federal LifeLine
Program. Died in the Senate Committee on Appropriations.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
enTouch Wireless
Pacoima Beautiful
State Board of Equalization
TruConnect Communications, Inc.
OPPOSITION (unless amended):
California Association of Competitive Telecommunications
Companies
California Cable and Telecommunications Association
Consolidated Communications, Inc.
The Utility Reform Network
ARGUMENTS IN SUPPORT: According to the author, "The CPUC
initially refunded wireless lifeline providers every 45 days for
the upfront costs to companies in providing a phone and the
communication services. However, in early 2015, the CPUC
changed its reimbursement period to 120 days which has resulted
in service providers leaving the marketplace, going into debt to
cover capital and operations costs, and ultimately hurting
low-income consumers by reducing service options. Additionally,
AB 2570 (Quirk) Page 7 of ?
the enrollment process has experienced problems with customers
enrolling in multiple service plans within a short period of
time. This is problematic for service providers because the
reimbursement subsidies from the state and federal government
are eligible one time to a consumer. Providers are finding that
after waiting nearly three months for the CPUC's reimbursement,
a portion of their subscribers were in fact ineligible for the
service all along."
ARGUMENTS IN OPPOSITION: The opponents to this bill, CCTA and
CalTEL argue that this bill's provisions should apply to all
technologies, not only wireless telephone service. They raise
concerns that the reimbursement rates proposed by this bill
would result in the CPUC prioritizing reimbursements for
wireless providers' ahead of reimbursements for other lifeline
service providers.
In opposing this bill, the Utility Reform Network (TURN) argues
that these issues raised in this bill are better left to
decision-making by the CPUC within its proceedings. TURN
asserts that "AB 2570 attempts to short circuit the CPUC's
process by creating a prescriptive legislative mandate on two
critical issues affecting the administration of the program -
carrier reimbursement payment schedules from the LifeLine Fund
and restrictions on customer choice of LifeLine providers."
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