BILL ANALYSIS �
SB 1161
Page 1
Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1161 (Padilla) - As Amended: June 21, 2012
Policy Committee:
UtilitiesVote:13-1
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill, until January 1, 2020, prohibits the Public Utilities
Commission (PUC) from exercising regulatory jurisdiction or
control over Voice over Internet Protocol (VoIP) and Internet
Protocol (IP) enabled services, as defined, unless expressly
delegated by federal law or expressly directed by state statute.
Specifically, this bill:
1)Prohibits the PUC, with specified exceptions, from regulating
VoIP and IP enabled service, except as required or delegated
by federal law or expressly provided in statute.
2)Prohibits any state or local government entity from enacting
or enforcing any law, rule, regulation, or other provision
having the force or effect of law, which regulates VoIP or
other IP enabled service.
3)Provides that the limitations per (1) on the PUC regulation of
VoIP and IP enabled service do not affect:
a) Any existing regulation or existing commission authority
over non-VoIP and other non-IP enabled wireline or wireless
service, including regulations governing universal service
and obligations to offer basic service.
b) Enforcement of any state or federal criminal or civil
law, or any local ordinances of general applicability that
apply to the conduct of business, enforcement of the
California Environmental Quality Act, and the imposition of
local utility user taxes.
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c) The PUC's ability to monitor and discuss VoIP services,
including responding informally to customer complaints and
to inform VoIP customers who contact the PUC about options
under state or federal law for addressing complaints.
FISCAL EFFECT
The PUC estimates one-time special fund costs of about $730,000.
These costs include a one-year proceeding (four positions
totaling $500,000) to examine the applicability of a Certificate
of Public Convenience and Necessity (CPCN) to the services and
facilities of VoIP providers, and other voice service providers.
Potential issues include clarifying the scope of PUC
jurisdiction over facilities providers use to offer basic
telephone service utilizing VoIP.
Additionally, the PUC anticipates a review, likely through a
rulemaking, to assess the impact on its public purpose programs.
This review would require three positions at a cost of about
$230,000 �Public Utilities Reimbursement Account]. The PUC
would likely address whether existing PUC rules and guidelines
would still apply to a service provider that does not hold a
CPCN but wishes to participate in one or more the state's public
purpose programs.
While it is unclear whether the PUC will need two proceedings to
implement this bill, cost pressure could exceed $150,000 to the
extent that a statute prohibiting the PUC from engaging in
regulatory activity results in an increase in disputes and a
redirection of staff resources at the PUC.
COMMENTS
1)Purpose . According to the author, this bill "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 growth. This bill would
continue California's current policy of not regulating these
services unless required or expressly delegated by federal law
or expressly directed by the Legislature. The bill would not
affect current law authorizing the California Public Utilities
Commission to regulate wireless or traditional landline voice
services that are not internet-based, including consumer
protections and Carrier of Last resort law that guarantees
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every California resident the option of traditional voice-only
basic service."
SB 1161 is co-sponsored by TechAmerica and Technet and
supported by numerous telecommunications companies and
business associations. TechNet states, "VoIP has delivered a
wide array of choices and benefits for consumers, including
lower prices or free services like video calls, enabling
consumers to connect affordability with family and friends in
other states or countries." TechAmerica states, "SB 1161
provides regulatory certainty-established by the
legislature-to California's Technology industry that
encourages continued innovation, investment and job creation
for an industry that is vital to California's economic
future."
2)Background . 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. Many, if not all voice services, along
with other network services, are transitioning to this
increasingly common means of delivering voice, data, and
video.
Federal law and FCC decisions give the FCC, rather than the
states, primary authority over Internet governance. In its
Vonage Preemption Order (2004), the FCC preempted the
Minnesota Public Utilities Commission from applying its
traditional telephone company regulations to a VoIP service
that allowed calling through a broadband connection. The FCC
refrained from deciding whether VoIP is a "telecommunications
service" or an "information service" but stated that it was
"making clear that this Commission, not the state commissions,
has the responsibility and obligation to decide whether
certain regulations apply" to IP-enabled services. Lastly, it
concluded that preemption was warranted because it was
impossible or impractical to separate out the purely
intrastate component of the service and that state regulation
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would directly conflict with the pro-competitive policy
disfavoring utility-type regulations that hinder development
of innovative new services.
The California Constitution grants the PUC authority, subject
to control of the Legislature, to regulate utilities including
telephone corporations, as defined. The CPUC has refrained
from applying utility-type regulation to VoIP and has never
decided whether or not a VoIP provider is a telephone
corporation.
Presently, no state commission regulates VoIP as a telephone
utility. The following 24 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 VoIP related bills pending in other states.
3)Opposition . Opponents, which include The Utility Reform
Network (TURN), the Communication Workers of America (CWA),
the AARP, and consumer advocates, argue that as telephone
service, including service currently provided over copper and
fiber cable networks and circuit switched technology, becomes
IP-enabled, the PUC will be unable to exercise regulatory
jurisdiction. Lack of regulatory jurisdiction, opponents
contend, will result in less consumer protection.
TURN states, "there have been no developments at the federal
level, including the FCC, that require the California
Legislature to divest jurisdiction over services using IP
technology."
Analysis Prepared by : Israel Salas / Chuck Nicol / APPR. /
(916) 319-2081