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.
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
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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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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.
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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,
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
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