BILL ANALYSIS �
AB 1050
Page 1
Date of Hearing: April 11, 2011
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 1050 (Ma) - As Amended: March 31, 2011
SUBJECT : Telecommunications.
SUMMARY : Requires the Board of Equalization (BOE) to convene a
working group to develop recommendations for an equitable and
uniform method of collecting state and locally authorized
communications taxes, fees, and surcharges from prepaid
communications end-use customers. Specifically, this bill :
1)Requires BOE to convene a working group to develop
recommendations for an equitable and uniform method of
collecting state and locally authorized communications taxes,
fees, and surcharges from prepaid communications end-use
customers.
2)Requires the working group to include stakeholder
representatives from the California Public Utilities
Commission (PUC), the California Technology Agency (CTA),
local government entities, law enforcement agencies, mobile
telephony service providers, retailers, and consumer groups.
3)Declares that maintaining effective and efficient
telecommunications services, 911 emergency systems,
telecommunications-related public policy programs to promote
universal service, and various local programs across the state
benefits all citizens.
4)Finds that consumers purchase prepaid communications services
at a wide variety of retail locations and other distribution
channels, as well as through service providers.
5)Declares prepaid communications services are an important and
growing segment of the communications industry.
6)States that to ensure equitable contributions from end-use
consumers of postpaid and prepaid communications services,
there should be standardization with respect to the method
used to collect communications taxes, fees, and surcharges
from end-use consumers of prepaid communications services.
AB 1050
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EXISTING LAW :
1)States the PUC has regulatory authority over public utilities,
including telephone corporations, and is authorized to fix
just and reasonable rates and charges for services provided by
those public utilities.
2)Requires several public purpose surcharges and user fees to be
collected from end-users and remitted to the PUC.
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 : According to the author, this bill is intended to
create a fair, uniform mechanism to ensure collection of state
and local communications taxes and fees from consumers of
prepaid wireless communication 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 calls without
restrictions. 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
AB 1050
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made.
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 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 discarded
once the minutes have been exhausted, while others can be
recharged. An individual who purchases a prepaid wireless phone
(also known as a pay-as-you-go) buys credit to use that phone on
a mobile phone network until they run out of credit. Like some
prepaid calling cards, these phones can be recharged after the
minutes have been exhausted.
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. Specifically, these taxes
and fees include:
a) Surcharges authorized pursuant to the Emergency
Telephone Users Surcharge Act
b) Public Utilities Commission surcharges including
i. California High Cost Fund - A program
ii. California High Cost Fund - B program
iii. Deaf and Disabled Telecommunications
Program
iv. California Teleconnect Fund
v. The California Advanced Services Fund
vi. Lifeline Program
vii. Public Utilities Commission reimbursement
fees
c) Local 911 or access line taxes, fees, or surcharges
d) Local utility user taxes
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3)Level the playing field : Since most prepaid customers do not
have a direct relationship with
a carrier, and do not enter into a contract with a monthly bill,
there is no statewide mechanism to collect the same
communications taxes and fees from prepaid wireless customers
that are presently collected from postpaid services. As a
result, the state and local governments have no reliable means
for ensuring collection of these revenues. In other words,
these entities lose revenues for important services and
programs. This bill seeks to alleviate the hurdles of assessing
surcharges on prepaid wireless communication services by
developing a uniform statewide collection mechanism.
4)Growing pains in California : According to CTIA - The Wireless
Association, the prepaid
wireless market is anticipated to grow at a rate of 10 percent
per year. Out of 300 million nationwide wireless consumers, it
is estimated that 20 percent use prepaid services. California's
share of the national wireless market is 20 percent.
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. Because of the
lack of billing relationship between the prepaid wireless user
and the sellers of the prepaid wireless service, the prepaid
wireless industry approached the states with model legislation
to create a uniform collection methodology that would collect
prepaid wireless Enhanced 911 (E911) fees on end users at the
retail point of sale. In response, on July 20, 2009, The
National Conference of State Legislatures (NCSL) adopted a
resolution entitled "The Collection of E911 Fees on Wireless
Prepaid Service at the Point-of-Sale Act." The adoption of a
uniform methodology for collecting the 911 surcharges would
provide the funding for 911 systems while minimizing
administrative costs for states and providers of prepaid
wireless service.
However, California is rather unique in comparison to other
states, as it not only has the 911 surcharge to collect, but
also a number of other state and local government surcharges,
which make the collections methodology used by other states more
challenging for it to adopt. This bill would require the BOE to
convene a working group that would include key stakeholder
representatives to develop recommendations for an equitable and
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uniform method of collecting state and locally authorized fees
from prepaid end-use consumers.
5)Accountability : To ensure that the BOE complies with the
provisions in this bill in a timely
manner, the author and this committee may wish to amend the bill
to require BOE to convene the first meeting of the working group
no later than March 1, 2012 and report back to the Legislature
with its findings and recommendations no later than April 30,
2013 .
REGISTERED SUPPORT / OPPOSITION :
Support
AT&T
CTIA - The Wireless Association (sponsor)
Opposition
None on file.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083