BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                       AB 2570|
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                                   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. 








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          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  







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            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  







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          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. 








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          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  







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          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)









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          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,  







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            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


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