BILL ANALYSIS
AB 910
Page 1
Date of Hearing: May 11, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 910 (De La Torre) - As Amended: December 25, 2009
SUBJECT : Emergency Telephone Users Surcharge Act:
SUMMARY : States legislative intent to require users of prepaid
wireless service and prepaid calling cards to pay state and
local 911 surcharges through a single charge collected at the
time of purchase.
EXISTING LAW :
1)Imposes a surcharge to fund 911 services on amounts paid by
every person in the state for intrastate communication service
in this state commencing on July 1, 1977.
2)Imposes a surcharge to fund 911 services on amounts paid by
every person in the state for Voice over Internet Protocol
(VoIP) service that provides access to the "911" emergency
system commencing on January 1, 2009.
3)Provides that the Department of General Services shall
determine annually a surcharge rate that it estimates will
produce sufficient revenue to fund the fiscal year's 911
costs. Provides that in no event shall such surcharge rate be
greater than three-quarters of 1% or less than one-half of 1%.
4)States the intent of the Legislature to ensure that all forms
of telephonic quality communication that connect to the "911"
emergency system contribute to the State Emergency Telephone
Number Account.
THIS BILL:
1)Makes legislative findings and declarations regarding
equitable contributions to the funding of 911 systems by
consumers of prepaid communications services.
2)Defines "prepaid communications service" to include prepaid
calling card telephone service and prepaid wireless calling
service as specified.
AB 910
Page 2
3)States legislative intent to impose the collection and payment
obligation of charges to support the 911 service on the
consumer's retail purchase of the prepaid communications
service.
4)States legislative intent for the payment for the 911 service
to be collected at the time of purchase directly from the
consumer, remitted to the state or local jurisdiction and
distributed to the 911 emergency services fund.
FISCAL EFFECT : Unknown.
COMMENTS : The purpose of this bill is to bring users of
prepaid communications services (prepaid) into conformity with
users of more traditional postpaid wireless and wireline
services (postpaid) by requiring that prepaid users be subject
to the same state and local charges. The bill will also create a
mechanism that is intended to make the process by which these
fees are assessed more efficient and transparent. According to
the author's office this bill "this is a solution that is clear,
uniform and fair in determining which jurisdictions are entitled
to revenues from prepaid services.
Intent Bill :
How do we assess prepaid : Current law imposes a 911 surcharge on
the amount paid for communications made within the state. The
practicality of collecting this surcharge on a postpaid user is
high. When the usage is calculated at the end of the billing
cycle, the provider can determine how much that customer spent
on calls made within the state, apply the 911 surcharge (which
is calculated as a percentage of that amount), receive payment,
and then remit the surcharge amount to the state.
The practicality of collecting this surcharge on prepaid users
is low. When a user buys a prepaid card for a specified number
of minutes or dollars, there is no way to tell how much that
consumer will end up spending on calls made within the state. It
is therefore impossible to charge for 911 services in the exact
same way that is done for postpaid services. In order to deal
with this issue, the FCC determines the average level of
interstate calls called the "safe harbor" percentage. The safe
harbor percentage may be calculated inversely in order to
determine the level of intrastate calls and thus calculate the
AB 910
Page 3
amount that needs to be remitted for the 911 surcharge.
AB 910
Page 4
Fees paid by postpaid users (a.k.a. fees not paid by prepaid
users) : This bill makes users of prepaid communications services
subject to a number of state and local industry charges
currently assessed on postpaid users.
The state charges are:
a) State 911 Surcharge
b) Universal Lifeline Telephone Service (ULTS)
c) California Advanced Services Fund (CASF)
d) California Teleconnect Fund (CTF)
e) California High Cost Fund-A (CHCF-A)
f) California High Cost Fund-B (CHCF-B)
g) Deaf and Disabled Telecommunications Program (DDTP)
h) Public Utilities Commission Reimbursement Account
(PUCRA)
The local charges are:
a) Local 911 Surcharges
b) Utility Users Tax (UUT)
Fees not paid by prepaid users? :
Growing pains : It has been estimated that the prepaid wireless
industry will reach $31.3 billion by the end of the decade.
Although prepaid phones remain a fraction of the overall mobile
phone market, sales of the category grew 13 percent in North
America last year, nearly three times faster than traditional
cell phone plans. Prepaid customers accounted for 57% of new
subscribers at T-Mobile USA, up from 23% a year earlier. There
is general consensus in the industry that a large part of the
spike in prepaid sales can be attributed to consumers responding
to the current economic downturn. Switching to a prepaid plan is
a way to cut costs and avoid the lengthy contracts and
occasional billing surprises that come with traditional cell
phone plans. One specific prepaid wireless plan released in
January offers unlimited talking, texting and internet at a
price well below most traditional postpaid prices for limited
and unlimited services. A comparison of currently advertised
rates for traditional postpaid plans reveals that it would not
AB 910
Page 5
make economic sense to choose any postpaid plan over this
prepaid plan.
The growth in, and potential dominance of, the use of prepaid
services over postpaid services has sparked a national debate
that largely centers around the 911 surcharge. Public safety
officials note that while users of both postpaid and prepaid
services are given access to 911, only the postpaid users are
paying for the program. As more consumers switch to prepaid
service the burden of paying for 911 increasingly shifts onto
the declining number of postpaid users. A number of states have
implemented policies that require users of prepaid services to
pay the 911 surcharge.
necessitates a discussion of whether or not users of those
services should be assessed the same fees and taxes as users of
traditional services. T Public safety officials claim that
Unequal Treatment: Current law does not treat prepaid and
postpaid wireless
Point of Service: According to the author's office, this bill
requires that retailers of prepaid communications services
collect sales tax in lieu of all other industry fees and taxes.
The sales tax would also
Don't mess with Texas:
REGISTERED SUPPORT / OPPOSITION :
Support
>
Opposition
>
Analysis Prepared by : Nina Kapoor / U. & C. / (916) 319-2083