BILL ANALYSIS �
SB 1161
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Date of Hearing: June 18, 2012
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 1161 (Padilla) - As Amended: June 12, 2012
SENATE VOTE : 30-6
SUBJECT : Communications: Voice over Internet Protocol and
Internet Protocol enabled communications service.
SUMMARY : Requires authorization by statute or express
delegation by federal law expressly authorized by statute for
the California Public Utilities Commission (PUC) or any other
state department, agency, commission or political subdivision of
the state to regulate Voice over Internet Protocol (VoIP) or
Internet Protocol-enabled (IP) service providers. Specifically,
this bill :
1)Specifies certain areas of law that are expressly applicable
to VoIP and IP enabled service providers.
2)Provides that this bill does not affect existing PUC authority
over non-VoIP and other non-IP enabled wireline or wireless
service and does not affect the enforcement of any state or
federal criminal law or local ordinances of general
applicability that apply to the conduct of business, the
California Environmental Quality Act, or a local utility user
tax.
3)Specifies that it does not affect existing regulations or
existing PUC authority over non-VoIP and other non-IP enabled
wireline or wireless service including regulations regarding
universal service, the offering of basic service, and lifeline
service, and will remain in effect until January 1, 2020.
EXISTING LAW :
1)Federal law grants the Federal Communications Commission (FCC)
authority over all interstate and international communication
and reserves for each state authority over services that are
provided between points within that state's borders.
2)Federal law provides that it is the "policy of the United
States to preserve the vibrant and competitive free market
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that presently exists for the Internet and other interactive
computer services, unfettered by Federal or State regulation."
3)The California Constitution grants subject to control of the
Legislature, the PUC authority, to regulate utilities
including "telephone corporations," defined as every entity
"owning, controlling, operating, or managing any telephone
line for compensation within this state."
4)Federal law and FCC decisions provide that a
"telecommunications service", but not an "information
service," is subject to utility-type common carrier
regulation, including regulation of market entry, rates, and
terms and conditions of service, among other requirements, and
preempts state regulation of any "information service."
5)FCC decisions have imposed public safety and consumer
protection requirements on VoIP service, which include
requiring VoIP to offer 911 service, provide law enforcement
access to facilities, make facilities accessible to disabled
users, protect customers' private information, allow customers
to keep their telephone number when switching providers, and
report network outages.
6)FCC decisions have preempted state regulation of IP-enabled
services including VoIP but have authorized states to take
specified actions with respect to VoIP, which include
requiring VoIP providers to pay fees to support state 911
systems and state universal service programs.
7)Authorizes the PUC to require VoIP providers to pay fees to
support the state's 911 system and state universal service
programs and to obtain specified data from VoIP providers in
connection with certain federal proceedings.
8)Federal law authorizes the PUC to implement and enforce
federal requirements relating to service provider
interconnection, access to unbundled network elements, and to
affect the resolution of disputes regarding intercarrier
compensation, including for the exchange of traffic that
originated, terminated, or was translated at any point into IP
format.
9)Authorizes the PUC to grant statewide franchises to providers
of video service and enforce conditions of service pursuant to
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the Digital Infrastructure and Video Competition Act of 2006.
10)Includes numerous provisions of criminal or civil laws of
general applicability, including unfair or deceptive trade
practice laws that apply to the conduct of business.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, SB 1161 reaffirms
California's current policy of fostering investment and
innovation in the Internet and new "app" economy and widespread
availability of Internet-based services that benefit consumers
and stimulate economic growth.
1)Background : California is a global leader in the Internet
economy. While other sectors
continue to struggle in this down economy, innovators developing
new "apps" and Internet-based services are leading the state's
economic recovery with new investment and job creation.
Innovation and competition are increasing to meet consumer
demand for voice, video and data services using the Internet and
Internet Protocol (IP) technology. For example, Skype is an
IP-enabled service that allows inexpensive "face-to-face"
connection between family members, friends, students and
teachers, doctors and patients and businesses and their
customers around the world. Consumer benefits and economic
growth have been fostered by state and federal policies that
promote an open and competitive Internet.
Over the past decade and in parallel with the development of IP
technology, the telecommunications industry has experienced
advances in technology, shifts in the competitive markets, and
major changes in service and price structures. Of increasing
importance among these recent changes in technology is the
migration of voice service away from the circuit-switched
platform to routed or soft-switched "packetized" telephone
transmission relying on IP. With IP, calls are routed over
different network pathways maintained by the carrier or carriers
carrying the voice service, not over one sustained circuit. IP
increases the efficiency of voice services at a lower cost. All
voice services, along with other network services are
transitioning to this increasingly common means of delivering
voice, data, and video seamlessly from the point of view of the
consumer.
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Evidence of the consumer acceptance of IP-enabled services can
be seen nationwide: the number of subscribers to interconnected
VoIP service increased 46 percent from 2008 to 2010, while the
number of subscribers to traditional wired telephone services
decreased by 17 percent during that two-year period. As of
December 2010, 31 percent of the 87 million residential
telephone subscriptions in the United States were provided by
interconnected VoIP providers. AT&T and Verizon had a combined
29 percent increase in the number of VoIP customers in the six
months from June to December 2011.
Federal law governs the Internet because it crosses state and
international borders, which means the FCC has primary
authority, rather than state commissions.
2)What is VoIP? : Federal Communications Commission's (FCC)
rules define "interconnected
VoIP service" as a service that: 1) enables real-time, two-way
voice communications; 2) requires a broadband connection from
the user's location; 3) requires Internet protocol-compatible
customer premises equipment, and 4) permits users generally to
receive calls that originate on the public switched telephone
network (PSTN) and to terminate calls to the PSTN.
Interconnected VoIP services may be fixed or nomadic. A fixed
interconnected VoIP service can be used at only one location,
whereas a nomadic interconnected service may be used at multiple
locations.
3)Does the FCC regulate VoIP? : The Communications Act of 1934,
as amended established a
dual regulatory regime for communications services, granting the
FCC authority over all interstate and international
communication, and reserving for each state authority over
services that are provided between points within that state's
borders. The law specifies that only a "telecommunications
service" is subject to utility-type common carrier regulation,
which includes regulation of market entry, rates, and terms and
conditions of service, among other requirements. Traditional
landline voice service has always been recognized as a
"telecommunications service".
Historically, the FCC has not regulated the Internet or the
services provided over it. The Vonage Preemption Order handed
down by the FCC in 2004 preempted the Minnesota Public Utilities
Commission from applying its traditional telephone company
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regulations to a VoIP service that allowed calling through a
broadband connection. The FCC found that this preemption was
needed because it was impractical to decipher the intrastate
component of the service and because state regulation would
directly conflict with the long-standing policy of promoting a
free and competitive Internet market. This policy would also
avoid patchwork regulation so that these new IP-enabled services
would not have to comply with regulations of multiple
jurisdictions with multiple varying sets of regulatory
obligations.
In the Vonage Preemption Order, the FCC declined from deciding
whether VoIP is a "telecommunications service" or an
"information service" but stated that it was "making clear that
the Commission, not the state commissions, has the
responsibility and obligation to decide whether certain
regulations apply" to IP-enabled services. Rather than
regulating IP-enabled services, the FCC has imposed specific
requirements on VoIP services such as to:
offer 911 service, including customer location
information, and collect 911 fees;
provide law enforcement access to facilities;
make facilities accessible to disabled users;
protect customers' proprietary information;
apply number portability requirements so customers can
keep their telephone number when changing providers;
contribute to universal service programs;
not transmit fraudulent Caller ID information;
provide customers notice of discontinuance of service,
and
report network outages
1)Are states regulating VoIP services? : Presently, no state
commission regulates VoIP as a
telephone utility. Twenty four states and the District of
Columbia have enacted legislation clarifying that VoIP services
are not the subject of state-level regulation (District of
Columbia. Alabama, Arkansas, Delaware, Florida, Georgia,
Illinois, Indiana, Kentucky, Massachusetts, Maryland, Maine,
Minnesota, Missouri, North Carolina, New Jersey, Nevada, Ohio,
Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee,
Texas, Virginia and Wisconsin).
There are several similar VoIP related bills pending in other
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states.
2)Does the PUC regulate VoIP? : The California Constitution
establishes that "Private
corporations and persons that own, operate, control, or manage a
line, plant, or system for the transportation of people or
property, the transmission of telephone and telegraph
messages,?are public utilities subject to control by the
Legislature." The Constitution also confers authority to the PUC
to fix rates, establish rules, examine records, issue subpoenas,
administer oaths, take testimony, punish for contempt, and
prescribe a uniform system of accounts for all public utilities
subject to its jurisdiction. "Telephone corporation" is defined
in statute as every corporation or person owning, controlling,
operating, or managing any telephone line for compensation
within this state. A "telephone line" includes "all conduits,
ducts, poles, wires, cables, instruments, and appliances, and
all other real estate, fixtures, and personal property owned,
controlled, operated, or managed in connection with or to
facilitate communication by telephone, whether such
communication is had with or without transmission wires." The
PUC has authority to regulate the intrastate component of
service that equates to a "telecommunications service" under
federal law, subject to any preemption.
According to the PUC's website under Consumer Frequently Asked
Questions - "Does the Commission Regulate VoIP? It states "the
Federal Communications Commission has determined that it, not
the states, will prescribe what regulations apply to IP-enabled
services."
Similar to the FCC, the PUC has evaluated and found that it did
not need to establish a regulatory framework for VoIP. The PUC
repeated this conclusion in several other decisions over the
years (including a service quality decision in July 2009 and its
backup power decision in January 2010), each time declining to
regulate VoIP and IP-enabled services.
In January 2011, in a proceeding to require interconnected VoIP
service providers to contribute to state universal service
programs, the PUC tentatively concluded that VoIP providers are
"telephone corporations" subject to its jurisdiction.
Subsequently, the Legislature stepped in and passed a law
explicitly authorizing the PUC to require VoIP contribution to
state universal service programs only.
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3)Does this bill undo existing PUC authority over
telecommunication services?:
Consumer advocacy groups express concern that SB 1161 impacts
the PUC's existing authority over certain telecommunication
services such as basic service, universal service, lifeline and
carriers of last resort (COLR) rules. Proponents of this bill
argue that it has "no impact on the authority of the PUC to
ensure the continued availability of basic telephone service,
including all of the traditional PUC consumer protections
pursuant to universal service and COLR laws and regulations."
In PUC Decision No. 96-10-066, it designated all 22 incumbent
local exchange carriers (ILECs) as "carriers of last resort"
(COLRs) in their respective service territories". The
designated ILECs remain bound by these requirements.
Accordingly, ILECs must continue to provide basic service (as
defined by the PUC) to all customers who request such service
within their traditional service areas. The fact that an ILEC
chooses to provide VoIP and IP-enabled service does not relieve
it of the duty to offer basic service . SB 1161 does not affect
the PUC's existing authority over entities that provide basic
services that may also offer VoIP and/or IP services.
Moreover proponents assert "SB 1161 does not affect other state
laws empowering the PUC on issues of basic service." For
example, Public Utilities Code Section 489(b) provides that the
PUC "shall, by rule or order, require every telephone
corporation operating within a service area, on first contact by
a prospective subscriber and in subsequent contacts by the
subscriber for the purpose of changing service, to fully inform
the subscriber of the basic services available to the class of
subscribers to which the subscriber belongs. For eligible
residential subscribers, these services shall include universal
lifeline telephone service."
The PUC is also guided by the State's policy of promoting
universal service "by assuring the continued affordability and
widespread availability of high-quality telecommunications
services to all Californians" as noted in Public Utilities Code
Section 709(a).
To make it explicit that SB 1161 does not diminish the PUC's
authority over non-VoIP and other non-IP enabled wireline or
wireless service, the author and this committee may wish to
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amend Section 710 (e) as follows: (e) This section does not
affect any existing regulation of, or proceedings governing, or
existing commission authority over, non-VoIP and other non-IP
enabled wireline or wireless service, including regulations
governing universal service, and the offering of basic service
and lifeline service , and any obligations to offer basic
service.
Some opponents argue that the amendment, "or proceedings
governing," will allow the commission to impose requirements it
is considering in current proceedings, such as service quality,
upon VoIP service. This is incorrect. The language is clear:
the phrase "or proceedings governing" is expressly limited
proceedings that address "non-VoIP and non-IP enabled services."
Therefore, any attempt by any agency to impose a regulation
upon VoIP or any other IP-enabled service clearly is prohibited.
4)Who's looking out for the consumers who utilize VoIP and
IP-enabled services? : It
is unclear if the PUC has a current process for resolving
complaints from consumers who utilize VoIP and IP-enabled
services. The FCC has adopted a number of consumer protections
for these services which includes a process for addressing VoIP
complaints. A consumer can either file a complaint through the
FCC's Internet Website or call a toll-free number to raise a
complaint. Opponents of the bill argue that the PUC should have
the authority to adopt regulations to protect customers of VoIP
and IP-enabled services, especially as an increasing number of
customers migrate to VoIP for voice service.
Opponents to the bill argue that consumer protections would be
lost immediately for customers with phone service provided by
cable companies when the migration to digital phone service is
completed. They believe that new service connections or outage
restoration services will be adversely impacted. They also
suggest that without PUC regulation, customers will not be
protected against unauthorized charges, unauthorized release of
phone records, or have the ability to file a complaint and have
it resolved. Further, they believe that the service providers
will not offer contracts in the same language as their marketing
materials.
Supporters of the bill state that customer protection is
unaffected by this bill. For example, 1) consumers can change
providers if they are dissatisfied with their service, 2) the
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FCC has adopted consumer protections, 3) a patchwork of
differing state regulations will impede availability of service
option, 4) all consumer protections available under generally
applicable laws will continue to apply to customers of VoIP and
IP-enabled services, and 5) any customers can choose to
subscribe to basic landline telephone service, which comes with
all the traditional PUC consumer protections, pursuant to
universal service and COLR laws and regulations, are not
impacted by this bill. Additional consumer protection via the
PUC is not necessary or appropriate given the many ways
consumers are currently protected.
To the extent the Legislature can ensure consumers of VoIP and
IP-enabled services have a venue other than the FCC to raise
complaints, the author and this committee may wish to amend
Section 710 (f) as follows: This section does not limit the
commission's ability to continue to monitor and discuss VoIP
services, to track and report to the FCC and the Legislature,
within its Annual Report to the Legislature, the number and type
of complaints received by the commission from customers, respond
informally to customer complaints, including providing VoIP
customers who contact the commission information regarding
available options under state and federal law for addressing
complaints.
REGISTERED SUPPORT / OPPOSITION :
Support
Advancement of Colored People
African-American Male Achievers Network (AMAN)
American G.I. Forum of California
Appallicious, LLC
Applied Materials
Asian Business Association (ABA)
Asian Pacific Islander American Public Affairs Association
(APAPA)
AT&T
Avetta, Inc.
Bay Area Council
BayBio
BeePolitical.com
BIOCOM
Black Business Association (BBA)
Brotherhood Crusade
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CA Regional Headquarters
California Asian Pacific Chamber of Commerce (CAPCC)
California Black Chamber of Commerce Foundation
California Cable & Telecommunications Association (CCTA)
California Chamber of Commerce (CalChamber)
California Hawaii State Conference of the National Association
for the Advancement of Colored People (NAACP)
California Health Institute (CHI)
California Hispanic Chambers of Commerce (CAHCC)
California Manufacturers & Technology Association (CMTA)
California Retailers Association (CRA)
California State Association of Electrical Workers (CSAEW)
CALinnovates
Cambodian Association of America
Chambers of Commerce Alliance of Ventura & Santa Barbara
Counties
Charter Communications, Inc.
Cisco Systems, Inc.
Coachella Valley Economic Partnership
Coalition of California Utility Employees (CCUE)
Comcast Cable Corporation
Comcast Communications
Concerned Citizens Community Involvement (CCCI)
Congress of California Seniors (CCS)
CONNECT
Consejo de Federaciones Mexicanas en Norteamerica (COFEM)
Corporation for Education Network Initiatives in California
(CENIC)
Cox Communications (Cox)
Drumbi, Inc.
Frontier Communications
Great Valley Center (CVC)
Inland Empire Economic Partnership
Jobblehead
Juniper Networks
La Maestra Community Health Centers
Latin Business Association (LBA)
Lex Machina, Inc.
Los Angeles Area Chamber of Commerce
Los Angeles Opportunities Industrialization Center (LAOIC)
Los Angeles Urban League
Marvell
Microsoft Corporation
Mobile Future
Orange County Business Council
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Pelco
Portal A
QUALCOMM
San Diego East County Chamber of Commerce
San Gabriel Valley Economic Partnership
Self-Help for the Elderly
Silicon Valley Leadership Group (Sponsor)
South Bay Association of Chambers of Commerce (SBACC)
Southwest California Legislative Council
TechAmerica (Sponsor)
TechNet (Sponsor)
Telecom Council of Silicon Valley
The Village Project, Inc.
Time Warner Cable
United Cambodian Community (UCC)
United States Hispanic Chamber of Commerce (USHCC)
Valley Industry and Commerce Association (VICA)
Verizon
Voice on the Net Coalition (VON)
World Institute on Disability
Opposition
AARP California
Access Humboldt (AH)
American Civil Liberties Union (ACLU)
Citizens (2 letters)
Communications Workers of America, Local 9412
Communications Workers of America, Local 9421
Communications Workers of America, Local 9505
Communications Workers of America, Local 9510
Communications Workers of America, Local 9575
Consumer Federation of California
Consumers Union
Mendocino County Board of Supervisors
National Association of Telecommunications Officers and Advisors
(NATOA)
The Utility Reform Network (TURN)
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083
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