BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 1315 - Fuentes Hearing Date: June
29, 2010 A
As Amended: June 16, 2010 FISCAL B
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DESCRIPTION
Current federal law requires local exchange carriers (LECs) to
provide access to unbundled network elements necessary for
competitive carriers to offer local telephone service to end
users and allows the Federal Communications Commission (FCC) to
forbear from enforcing these unbundling requirements if it
determines that they are not needed to ensure just and
reasonable rates or protect consumers and if forbearance is in
the public interest.
Current federal law authorizes a LEC to petition the FCC to
forbear from enforcing unbundling requirements in individual
Metropolitan Statistical Areas (MSAs), allows interested parties
to comment on a petition, requires the FCC to act on a petition
within 12 months, and provides that a petition is deemed granted
if the FCC fails to act within that time.
A current FCC decision approving AT&T's merger with Bell South
prohibits AT&T from petitioning the FCC for forbearance from
unbundling requirements until after June 29, 2010.
This bill requires the California Public Utilities Commission
(CPUC) to respond to any forbearance petition filed in
connection with a California MSA by reviewing the petition's
compliance with applicable standards, consulting with the
Division of Ratepayer Advocates (DRA) to independently determine
the truth of the facts in the petition, and filing with the FCC
a motion for summary denial or comments that identify how the
petition potentially impacts the state's policies promoting
local competition.
This bill requires the CPUC to require telephone corporations to
report comprehensive and detailed data sufficient to analyze the
level of retail competitive options available to residential and
business customers in each MSA and the level of wholesale
competitive options available to carriers for last-mile loops
and transport circuits in each MSA at the wire center level.
BACKGROUND
The Telecommunications Act of 1996 (1996 Act) establishes a
pro-competitive, deregulatory national policy for
telecommunications and allows competition in the local exchange
market. The market for local service had historically been a
monopoly because it is prohibitively expensive for more than one
provider to replicate last-mile connections - the copper wire
loops and transport facilities to each customer's residence or
business. The 1996 Act requires LECs to share their networks
and allow competitive local exchange carriers (CLECs) to lease
unbundled last-mile loops and transport elements that they can
combine with their own facilities to offer service to end users.
The Act recognizes that these unbundling requirements were
essential to development of local competition.
The Act authorizes the FCC to forbear from enforcing these
unbundling requirements if it finds that (1) enforcement is not
necessary to ensure that rates are just, reasonable and
nondiscriminatory, (2) enforcement is not necessary to protect
consumers, and (3) forbearance is in the public interest, which
requires an analysis of whether forbearance will promote
competitive market conditions. A LEC can seek forbearance from
unbundling requirements in distinct markets by filing a
forbearance petition for individual MSAs.
As a condition of FCC approval of its merger with Bell South,
AT&T voluntarily agreed in 2006 to not seek forbearance from
loop and transport unbundling requirements until after June 29,
2010. After that date, AT&T is eligible to file a forbearance
petition for one or more of the 26 California MSAs. So far, 11
Forbearance Petitions have been filed nationwide, including
petitions by Qwest for Phoenix, Seattle, Denver, and
Minneapolis-St. Paul, and by Verizon for Boston, New York,
Philadelphia, Pittsburgh, Virginia Beach, and Providence. State
public utilities commissions participated in those proceedings
and provided data on the level of local competition. No
petitions have been filed for any California MSA. AT&T
indicates that it currently has no plans to file a forbearance
petition in California in the near future.
On June 22, 2010, the FCC issued a decision denying Qwest's
forbearance petition for Phoenix and establishing a new
analytical framework and data-driven standard for what a
petitioner must establish to show that local competition is
sufficient to justify forbearance (Phoenix Decision). The
Phoenix Decision requires a petitioning LEC to show that it does
not have "market power," which includes the ability to raise
rates without losing customers to competitors. The new
framework requires a separate evaluation of the level of
competition for distinct retail services for residential and
small, medium, and large business customers and for wholesale
services such as loops and transport that CLECs can lease to
provide service. The petitioner's burden can be met with data
showing the market share for each product that is served by
competitors such as cable telephone service, Voice over Internet
Protocol, and possibly wireless services. Many view the new
standard established in the Phoenix Decision as setting a very
high bar for forbearance petitioners to meet.
CALTEL, the sponsor of the bill, claims that CLECs rely on
either unbundled network elements to serve the vast majority of
their customers, especially to small business customers. CALTEL
claims that, if a forbearance petition is granted for a
California MSA, CLECs will be forced to exit the market because
the cost of alternative facilities is prohibitive. For example,
a CLEC that now leases for $9.48 a month one or more unbundled
loops to provide high-speed Internet service to a small business
customer would instead have to pay the regular tariffed special
access rate of at least $260 a month to provide that customer
comparable Internet speed. The result would be less local
exchange competition in California and fewer service options for
customers.
COMMENTS
1) Author's Purpose . According to the author, this bill
will ensure that the CPUC fully participates in the FCC's
proceeding when a forbearance petition is filed for a
California MSA and provides the FCC with thorough and
impartial data on the level of competition in that MSA.
2) Pro-competition Policy . Consistent with the 1996 Act,
California has adopted policies to promote competition in
the local exchange and other telecommunications markets.
The FCC's disposition of a forbearance petition will have a
direct impact on the availability of network elements
deemed essential to local exchange competition and
providing choice, especially for business customers. Thus,
this bill, by requiring the CPUC to collect and provide the
FCC with the best data possible on the level of
competition, will further the state's pro-competition
policies for the benefit of all customers.
3) CPUC Duties . This bill appropriately recognizes the
CPUC's critical role in connection with a forbearance
petition filed with the FCC for a California MSA, but it is
overly prescriptive. The bill requires the CPUC to
determine whether the petition meets all applicable federal
regulations and, if it fails to meet any, to file a motion
for summary denial of the petition "identifying and
supporting each deficiency identified." It also requires
the CPUC to determine whether the petition meets the
three-part forbearance test, "determine the truth and
completeness of the facts" in the petition, consult with
the DRA, and file comments and reply comments discussing
specified matters. This level of prescription may reduce
the CPUC's ability to tailor its response to the facts and
circumstances of individual petitions and to respond to any
future changes in standards governing these petitions. In
order to preserve the CPUC's flexibility to respond to
forbearance petitions on a case-by-case basis, the author
and committee may wish to consider amending the bill to
delete the prescriptive language and instead require the
CPUC to review any forbearance petition filed for a
California MSA and actively engage in the FCC's proceeding
on that petition in a manner that advances California's
pro-competition policies.
4) Data collection . This bill appropriately recognizes
that the CPUC is in the best position to impartially
collect and analyze data on local competition in California
and provide it to the FCC in a forbearance proceeding.
Although a petitioning LEC has the burden of presenting
data that demonstrates sufficient competition to justify
forbearance, additional data and analysis from the CPUC
will help the FCC make the most informed decision possible.
Indeed, the FCC has relied on data from other state public
utilities commissions in determining the outcome of
forbearance petitions. However, this bill requires more
than this task demands. It requires the CPUC to require
each telephone corporation providing service in any of
California's 26 MSAs to report comprehensive and detailed
information on competitive options for residential and
business customers and wholesale competitive options for
last-mile loops and transport circuits at the wire center
level. It requires this data collection at an unspecified
date prior to any forbearance petition ever being filed.
Thus, the CPUC and telephone corporations will incur the
expense of this effort but likely end up with data about
MSAs for which no forbearance petition is ever filed and
that is too stale by the time a petition is filed, if ever.
Moreover, the specified data does not match entirely what
the Phoenix Decision requires, including, most
significantly, data from cable companies that offer voice
service in competition with LECs. In order to achieve the
goal of this bill in a less costly and more efficient
manner, the author and committee may wish to consider
amending the bill to require the CPUC to develop a process
and sample data request to collect the data required under
the Phoenix Decision in a timely manner if a petition is
filed, authorize the CPUC to collect data from any provider
of local telephone service, including cable companies,
require that data be collected only for a MSA for which a
LEC seeks forbearance, and require the CPUC to submit it to
the FCC in that forbearance proceeding.
ASSEMBLY VOTES
Assembly Utilities and Commerce Committee
10-4
Assembly Appropriations Committee 11-4
Assembly Floor 43-27
POSITIONS
Sponsor:
California Association of Competitive Telecommunications
Companies (CALTEL)
Support:
CALTEL
Small Business California
The Utility Reform Network (TURN)
Oppose:
None on file.
Jackie Kinney
AB 1315 Analysis
Hearing Date: June 29, 2010