BILL ANALYSIS �
SB 1161
Page 1
SENATE THIRD READING
SB 1161 (Padilla)
As Amended June 21, 2012
Majority vote
SENATE VOTE :30-6
UTILITIES & COMMERCE 13-1 APPROPRIATIONS
16-1
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|Ayes:|Bradford, Fletcher, |Ayes:|Fuentes, Harkey, |
| |Buchanan, Fong, Fuentes, | |Blumenfield, Bradford, |
| |Furutani, Gorell, | |Charles Calderon, Campos, |
| |Roger Hern�ndez, Knight, | |Davis, Donnelly, Hall, |
| |Ma, Nestande, Swanson, | |Hill, Lara, Mitchell, |
| |Valadao | |Nielsen, Norby, Solorio, |
| | | |Wagner |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Huffman |Nays:|Gatto |
| | | | |
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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
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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.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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, 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]. 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 of 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 PUC from engaging in regulatory
activity results in an increase in disputes and a redirection of
staff resources at PUC.
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.
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 IP
technology. For example, Skype is an IP-enabled service that
allows inexpensive "face-to-face" connection between family
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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.
Evidence of the consumer acceptance of IP-enabled services can be
seen nationwide: the number of subscribers to interconnected VoIP
service increased 46% from 2008 to 2010, while the number of
subscribers to traditional wired telephone services decreased by
17% during that two-year period. As of December 2010, 31% 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% 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 Federal Communications
Commission (FCC) has primary authority, rather than state
commissions.
What is VoIP ?: FCC's 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 PSTN. Interconnected VoIP
services may be fixed or nomadic. A fixed interconnected VoIP
service can be used at only one location, whereas a nomadic
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interconnected service may be used at multiple locations.
Does the FCC regulate VoIP ?: The Communications Act of 1934, as
amended established a
dual regulatory regime for communications services, granting 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, FCC has not regulated the Internet or the services
provided over it. The Vonage Preemption Order handed down by FCC
in 2004 preempted the Minnesota Public Utilities Commission from
applying its traditional telephone company regulations to a VoIP
service that allowed calling through a broadband connection. 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, 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, FCC has imposed specific
requirements on VoIP services such as to:
1)Offer 911 service, including customer location information, and
collect 911 fees.
2)Provide law enforcement access to facilities.
3)Make facilities accessible to disabled users.
4)Protect customers' proprietary information.
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5)Apply number portability requirements so customers can keep
their telephone number when changing providers.
6)Contribute to universal service programs.
7)Not transmit fraudulent Caller ID information.
8)Provide customers notice of discontinuance of service.
9)Report network outages.
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 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." 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 PUC's Web site 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 FCC, PUC has evaluated and found that it did not need
to establish a regulatory framework for VoIP. PUC repeated this
conclusion in several other decisions over the years (including a
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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, PUC tentatively concluded that VoIP providers are
"telephone corporations" subject to its jurisdiction.
Subsequently, the Legislature stepped in and passed a law
explicitly authorizing PUC to require VoIP contribution to state
universal service programs only.
Does this bill undo existing PUC authority over telecommunication
services ?:
Consumer advocacy groups express concern that this bill impacts
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 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 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 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. This bill does not
affect 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 PUC on issues of basic service." For example,
Public Utilities Code Section 489(b) provides that 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."
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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).
Who's looking out for the consumers who utilize VoIP and
IP-enabled services ?: It
is unclear if PUC has a current process for resolving complaints
from consumers who utilize VoIP and IP-enabled services. 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 FCC's Internet Web site or call a
toll-free number to raise a complaint. Opponents of the bill
argue that 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) 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 PUC is not necessary or appropriate given
the many ways consumers are currently protected.
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Furthermore, this bill does not limit PUC's ability to continue to
monitor, track and report to FCC and the Legislature, within its
annual report to the Legislature, the number and type of
complaints received by PUC from customers, and to respond
informally to customer complaints, including providing VoIP
customers who contact PUC for information regarding available
options under state and federal law for addressing complaints.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083
FN: 0004850