BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2570|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 2570
Author: Quirk (D)
Amended: 8/15/16 in Senate
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 9-0, 6/27/16
AYES: Hueso, Morrell, Cannella, Gaines, Hertzberg, Hill, Lara,
Leyva, McGuire
NO VOTE RECORDED: Pavley, Wolk
SENATE APPROPRIATIONS COMMITTEE: 6-0, 8/11/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza
NO VOTE RECORDED: Nielsen
ASSEMBLY FLOOR: 79-0, 5/5/16 (Consent) - See last page for
vote
SUBJECT: Telecommunications: universal service:
reimbursement claims
SOURCE: Author
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:
AB 2570
Page 2
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 California Public
Utilities Commission (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)
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
AB 2570
Page 3
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 LifeLine service to a new subscriber if the
subscriber has enrolled in 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.
Background
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
AB 2570
Page 4
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 plans are offered at no cost to the customer.
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, LifeLine 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
AB 2570
Page 5
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.
Consumer choice. This bill proposes to limit the ability of an
eligible enrollee to transfer service and receive a subsidy if
they have previously enrolled in the program within the previous
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. These more difficult checks
may require up to seven days, though often only a couple days,
to further verify an applicant's eligibility. Ultimately, an
improved verification system can help reduce fraud or mistakes
in enrolling someone who is not eligible. 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 this bill merits further
attention to ensure consumers are appropriately protected.
Prior Legislation
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 2570
Page 6
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 prohibited the CPUC from requiring state LifeLine providers
to offer more than is required under the federal LifeLine
Program. The bill died in the Senate Committee on
Appropriations.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, there are
unknown, minor costs (Utilities Reimbursement Account) to the
CPUC.
SUPPORT: (Verified8/11/16)
Brightline Defense Project
Budget PrePay Inc.
enTouch Wireless
Pacoima Beautiful
Salvadoran American Leadership and Educational Fund
State Board of Equalization
Total Call Mobile
TruConnect Communications, Inc.
OPPOSITION: (Verified8/11/16)
The Utility Reform Network
ARGUMENTS IN SUPPORT: According to the author, "The CPUC
initially refunded wireless lifeline providers every 45 days for
AB 2570
Page 7
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,
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:In opposing this bill, the Utility
Reform Network (TURN) argues that the 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 critical issue affecting the
administration of the program - restrictions on customer choice
of LifeLine providers.
ASSEMBLY FLOOR: 79-0, 5/5/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,
Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,
Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes,
McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,
O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Beth Gaines
Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107
8/15/16 20:22:23
**** END ****
AB 2570
Page 8