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: 8/19/16 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 requires the California Public Utilities Commission (CPUC) to adopt a portability freeze rule for the LifeLine program by January 15, 2017, that limits the ability of subscribers to change services, and would require the CPUC to consider including certain features as part of the rule. Senate Floor Amendments of 8/19/16 direct the CPUC to institute a port freeze rule for the LifeLine program that would limit how often and when a subscriber could change telephone providers. AB 2570 Page 2 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) 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 AB 2570 Page 3 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)Requires the CPUC to adopt a portability freeze rule for the LifeLine program by January 15, 2017. 2)Requires the CPUC to consider including all the following in the portability freeze rule: a) A 60-day duration of the portability freeze; b) A period of time when a subscriber would be able to terminate LifeLine service without penalty, similar to provisions in CPUC Decision 14-01-036; and c) A requirement that the administrator of the LifeLine program provide participating telephone corporation with real-time information concerning whether a subscriber has enrolled with another provider during the period of the portability freeze. 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 AB 2570 Page 4 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 plans are offered at no cost to the customer. AB 2570 Page 5 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. Verifying subscribers. 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 eligibility verifications may require up to seven days, though often only a couple days, to further verify an applicant's eligibility. Consumer choice vs. port freeze. This bill requires the CPUC adopt a rule to limit the ability of an eligible enrollee to transfer service and receive a subsidy if they have previously enrolled in the program, known as a portability freeze or "port freeze" rule. Considering the implications of a port freeze rule on consumer choice, it is preferable that the CPUC is provided the discretion to adopt a rule that balances the needs of consumers and providers. This bill appropriately requires the CPUC to consider including specific elements as part of the port freeze rule which this bill previously proposed to include in statute: a 60 day port freeze, termination period without penalty and requiring an administrator to provide real-time information to verify subscriber eligibility. As such, the CPUC can incorporate the concerns and perspectives of interested stakeholders prior to adopting a final rule and balance the needs of consumers, providers and ensuring the program's efficiency and effectiveness. This bill is consistent with recent Federal Communications Commission (FCC) decision adopted on March 31 of this year regarding federal LifeLine program. In its decision, the FCC noted the need to further incentivize investments by providers for high-quality LifeLine service AB 2570 Page 6 offerings by requiring a 60-day port freeze for voice services with exceptions to protect consumers, such as circumstances when a provider is found to be in violation of the FCC's rules that impact the subscriber. 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 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: (Verified8/19/16) AB 2570 Page 7 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: (Verified8/19/16) None received 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, 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." 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, AB 2570 Page 8 Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon NO VOTE RECORDED: Beth Gaines Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107 8/22/16 23:05:47 **** END ****