BILL ANALYSIS
AB 2545
Page 1
Date of Hearing: April 19, 2010
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 2545 (De La Torre) - As Introduced: February 19, 2010
SUBJECT : Emergency Telephone Users Surcharge Act: prepaid
communications service.
SUMMARY : Requires the California Public Utilities Commission
(CPUC) to open or expand the scope of a proceeding to determine
an equitable manner for mobile phone service providers to
collect a 911 surcharge from users of prepaid communications
services. Specifically, this bill :
1)Requires the CPUC to open proceedings or expand the scope of
existing proceedings to determine an equitable manner for
mobile telephony service providers to collect the 911
surcharge from users of prepaid communications services.
2)Requires the CPUC to advise the State Board of Equalization of
its determination per (1).
3)Makes legislative findings and declarations regarding
equitable contributions to the funding of 911 systems by
consumers of prepaid communications services.
4)Defines "prepaid communications service" to include prepaid
calling card telephone service and prepaid wireless service.
5)Defines "prepaid calling card service" as the right to access
exclusively telecommunications services, which must be paid
for in advance and which enables the origination of calls
using an access number or authorization code, whether manually
or electronically dialed, and that is sold in predetermined
units or dollars of which the number declines with use in a
known amount.
6)Defines "prepaid wireless calling service" as a
telecommunications service that provides the right to utilize
mobile wireless service as well as other
non-telecommunications services, including the downloading of
digital products delivered electronically, content, and
ancillary services, which must be paid for in advance that is
sold in predetermined units or dollars of which the number
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declines with use in a known amount.
EXISTING LAW
1)Vests the CPUC with authority to approve rates for public
utilities, including telecommunications services.
2)Requires several public purpose surcharges and user fees to be
collected from end users and remitted to the CPUC.
3)Establishes the Warren-911-Emergency Assistance Act and the
Emergency Telephone Users Surcharge Act to create and pay for
the 911 emergency response system.
4)Imposes a surcharge on all intrastate telephone calls,
including calls made using voice over internet protocol (VoIP)
technologies and wireless technologies, to fund 911 services.
5)Requires the Department of General Services to determine
annually a surcharge rate that it estimates will produce
sufficient revenue to fund the fiscal year's 911 costs, not to
exceed 0.75% on intrastate telephone calls.
FISCAL EFFECT : Unknown.
COMMENTS : The purpose of this bill is to create parity in the
funding of the 911 emergency response system for users of
prepaid telecommunications services.
1) Postpaid vs. prepaid telephone service: Postpaid service is a
plan in which phone service is provided under a long-term
contract and paid for on a monthly basis. At the end of each
month, the carrier calculates charges for all of the services
the customer has used and sends the user a bill. Prepaid
service refers to phone service plans where an individual pays
for the service in advance. Prepaid plans typically require a
customer to buy a predetermined amount of calling minutes.
Postpaid plans provide customers with the advantage of unlimited
phone usage credit, allowing subscribers to make as many calls
as they choose. Prepaid plans allow customers to use a
carrier's services only if there is enough credit to pay for the
service. Once the credit has been depleted, no additional calls
can be made.
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Prepaid services are generally offered via two products: prepaid
calling cards and prepaid wireless telephones. Both of these
products are sold at a variety of retail outlets including
stores, markets, post offices, pharmacies, gas stations, and
vending machines, as well as through the mail and the internet.
An individual who purchases a calling card must use a phone that
is already connected to a local provider to call a toll-free or
carrier-specific number and then activate a Personal
Identification Number (PIN) printed on the back of the card. As
calls are made, the usable minutes are automatically deducted
from the card balance. Some prepaid calling cards are meant to
be discarded once the minutes have been exhausted, while others
can be recharged. An individual who purchases a prepaid
wireless phone (also known as pay-as you-go) buys credit to use
that phone on a mobile phone network until they run out of
credit.
2) Surcharges : Current law imposes the state 911 surcharge, as
well as a variety of public purpose surcharges for low-income,
and rural assistance programs and programs for the disabled.
The surcharges are calculated based on the amount paid for all
phone calls that originate and end within the state. These
intrastate calls are the only calls over which any state has the
authority to impose a surcharge. Current law also specifies
that the surcharge is to be imposed at the time of billing.
3) Is it feasible to assess the 911 surcharge on prepaid
customers : Calculating and collecting the 911 surcharges on
prepaid calling plans can be difficult. When the usage is
calculated at the end of the billing cycle, the carrier can
easily determine how much that customer spent on intrastate
calls, apply the 911 surcharge and then remit the surcharge
revenue to the appropriate jurisdiction.
The collection of the 911 surcharge and other fees is more
difficult for prepaid calling plans. When a user buys a prepaid
card for a specified number of minutes, there is no way to
predict how many of those minutes will be spent on intrastate
calls. For example, an individual might buy a prepaid phone in
California and only use it while on vacation outside of the
state. In such a case, the individual would have no intrastate
calls and thus have no obligation to pay into the 911 account.
Due to this difficulty in determining the appropriate surcharge,
some carriers pay the fees based on estimates of the proportion
of calls that will be intrastate. Other carriers appear not to
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be paying the surcharge at all.
4) 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% in
North America last year, nearly three times faster than
traditional cell phone plans. Prepaid wireless customers make
up about 17% of all wireless customers, and the segment is
growing at a rate of 10-15% annually.
The growth in the use of prepaid services over postpaid services
has sparked a national discussion on how to ensure essential
services like 911 will continue to be funded. In a number of
jurisdictions, public safety officials are concerned that users
of both postpaid and prepaid services are given access to 911
but that postpaid users pay a disproportionately large share of
the cost, which varies depending on state policies. Regardless
of variations in state policies, as more consumers switch to
prepaid service, the burden of paying for 911 increasingly
shifts to a declining number of postpaid users.
5) Are prepaid carriers paying these charges now: In order to
avoid the repercussions of non-payment, some prepaid service
carriers have developed their own formulas that provide
estimates of fees that should be remitted to various
jurisdictions. It is unclear whether these estimates actually
reflect the amount that these users should be contributing to
the various funds. The CPUC is currently auditing the funds over
which they have jurisdiction to get a better understanding of
how much prepaid carriers have been paying.
6) New Definitions: This bill defines the terms "prepaid
calling card service" and "prepaid wireless calling service" and
places them in the Revenue and Taxation Code. The Business and
Professions code contains existing definitions of "prepaid
calling services" and "Prepaid calling card" in sections that
are referenced in the Public Utilities code. These definitions
have some overlap and may cause confusion for interested
parties. The author may wish to consider amending the
definitions in this bill to ensure they are consistent with
existing definitions.
REGISTERED SUPPORT / OPPOSITION :
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Support
California State Sheriffs' Association (CSSA)
Opposition
None on file.
Analysis Prepared by : Angela Mapp / U. & C. / (916) 319-2083