BILL ANALYSIS                                                                                                                                                                                                    �




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  AB 1717                     HEARING:  6/25/14
          AUTHOR:  Perea                        FISCAL:  Yes
          VERSION:  5/28/14                     TAX LEVY:  No
          CONSULTANT:  Grinnell                 

           PREPAID MOBILE TELEPHONY SERVICES SURCHARGE ACT (URGENCY)
          

             Enacts the Prepaid Mobile Telephony Services Surcharge  
                                Collections Act.


                           Background and Existing Law  

          In recent years, few industries have undergone as much  
          change as telephony; wireless phones were the most quickly  
          adopted consumer technology in history, surpassing landline  
          use worldwide in 2002.  Today, nearly 40% of American homes  
          rely solely on wireless telephones, and nearly one in six  
          received all or almost all phone calls on wireless  
          telephones.  The traditional model for wireless phones is  
          for a customer to pay on a monthly billing cycle under a  
          one or two year contract; but a significant amount of  
          industry growth is coming from "pre-paid wireless," where  
          customers purchase credits for their accounts, and usage is  
          limited to the amount of purchased credits.  Pre-paid  
          doesn't require a credit history of contract. While  
          post-paid is still the majority of the market in the United  
          States, pre-paid may overtake it soon, as it is already  
          more popular in the rest of the world.  All major wireless  
          carriers now offer pre-paid plans, and revenue from  
          pre-paid plans are increasing as a share of their total.   
          Estimates show major carriers sell 30 to 40% of prepaid  
          plans, while non-carrier retailers from big box stores to  
          convenience marts sell the rest, usually in the form of  
          prepaid cards.
           
          In California several taxes and fees apply to end-users of  
          telephones, which the consumer pays to the carrier as part  
          of their bill, who in turn remits them to the agency  
          imposing the fee or tax.  The state can only impose fees  
          and taxes on calls that originate and terminate within the  
          state because federal law limits states from taxing  
          interstate commerce.  The Federal Communications Commission  




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          allows carriers to estimate the share of intrastate calls  
          as a percentage of the total in three ways:
                 Books and records (actual call data),
                 Traffic studies,
                 A safe harbor of 63% for intrastate.

          Current state fees and taxes on telecommunications include:
                 The 911 Surcharge, which funds the state's 911  
               emergency response system. The surcharge cannot be  
               greater than three-quarters of 1 percent nor less than  
               one-half of 1 percent of the amount charged for  
               monthly service.  The State Board of Equalization  
               (BOE) administers the surcharge, and remits revenue to  
               the Office of Emergency Services.
                 California Public Utilities Commission (PUC) fees  
               and charges.  CPUC can change the rates to ensure  
               stable fund balances based on forecast demand.  Fees  
               include:
                  o         Universal Lifeline Account: 1.15% of the  
                    amount paid for monthly service, which subsidizes  
                     landline services for low-income households,
                  o         Deaf and Disabled Telecommunications  
                    Program:  0.2% to aid deaf, hearing impaired, and  
                    disabled persons to use telephones,
                  o         High Cost Fund A: .4% to subsidize rural  
                    telecommunications carriers, 
                  o         High Cost Fund B: currently 0, when in  
                    effect it subsidizes carriers of last resort  
                    providing residential telecommunications in high  
                    cost areas, 
                  o         Teleconnect Fund:  .59% to fund a 50%  
                    discount on selected telecommunication services  
                    to qualifying schools, libraries,  
                    government-owned and operated hospitals and  
                    health clinics, and community-based  
                    organizations.
                  o         Advance Services Fund:  .44% to fund  
                    broadband deployment unserved and underserved  
                    areas.

          Additionally, the CPUC imposes a user fee of .18% on  
          telecommunications carriers based on their intrastate  
          revenues.  This fee funds CPUC operations.

          Utility users taxes (UUTs) are excise taxes imposed on  
          consumers of utilities by cities and counties on the  





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          consumption of utility services, including electricity,  
          gas, water, sewer, telephone, sanitation, and cable  
          television.  In jurisdictions that impose a UUT, a utility  
          company collects the tax through the bills it sends to  
          utility customers, and remits the revenues to the local  
          government that imposed the tax.  Although a city or county  
          can impose a UUT as a special tax, generating revenues that  
          must be used for a specific purpose, nearly all UUTs are  
          imposed as general taxes, which allow revenues to be used  
          for any purpose.  Additionally, some local agencies also  
          impose charges to fund local 911 systems, but accounts vary  
          regarding the current compliance for sales of prepaid  
          wireless.  

          Currently, wireless carriers remit revenues for the 911  
          surcharge on behalf of consumers to BOE, and CPUC fees to  
          CPUC.  Wireless carriers instead want to shift the  
          collection responsibility for these end-user fees to  
          retailers, who would itemize the charges when collecting  
          them from consumers at the point-of-sale remit funds to  
          BOE, who deposits proceeds into the MTS surcharge fund, and  
          local proceeds into the Local Charges for Prepaid Mobile  
          Telephony Services Fund, after deducting its collections  
          costs. 



                                   Proposed Law  

          Assembly Bill 1717 enacts the Prepaid Mobile Telephony  
          Services Surcharge Collections Act, which requires  
          purchasers of prepaid wireless to pay a surcharge for each  
          retail sale (MTS Fee) on and after January 1, 2016.  The  
          MTS Fee is a percentage of the sales price, and is in-lieu  
          of all other state and local charges, fees, and taxes that  
          currently apply.  BOE administers the MTS Fee according to  
          the Fee Procedures Collections Law, and must calculate the  
          rate according to the bill each year no later than November  
          1, commencing on November 1, 2015 by adding:
                 The 911 Surcharge rate,
                 The CPUC reimbursement and cumulative universal  
               service fees,

          The measure also requires the seller to also collect at the  
          point of sale from consumers of prepaid wireless an amount  
          equal to adding the following according to rate  





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          approximations in the bill:
                 Local UUTs, and
                 Charges for access to communications services or  
               local 911 emergency telephone systems.

          I.  MTS Fee.  BOE must post the combined total of the MTS  
          fee, plus any UUTs or other local charges, on its website  
          by December 1st of each year.  BOE must post a recalculated  
          rate if a local agency notifies BOE that the rate is  
          inaccurate or if the local agency no longer levies the UUT  
          or local charge, and the revised rate shall become  
          operative on the first day of the calendar quarter more  
          than 60 days from the notification.  

          Sellers of prepaid must remit the MTS fee, UUTs, and local  
          charges to BOE, less any federal or state universal  
          lifeline exemption or discount, and separately state the  
          MTS fee, UUT, and local 911 charges on the invoice or  
          receipt provided the purchaser.  Sellers may retain 2% of  
          the total collected to compensate for the costs of  
          collection.  Sellers must register with BOE, and the bill  
          provides that the MTS fee due and payable by sellers to BOE  
          quarterly on or before the last day of the next month  
          following each calendar quarter, and that the seller must  
          file returns with BOE electronically.  Sellers are relieved  
          from liability when the MTS fee is imposed on accounts that  
          have been found worthless, and may claim a deduction on its  
          return in the future.  The seller must repay any  
          subsequently collected amounts from worthless accounts. 

          Any taxes collected, but not remitted are considered a debt  
          to the state.  The bill provides that a seller that  
          collects an amount that exceeds the MTS Fee, UUTs, and  
          local 911 charges may refund those amounts to the prepaid  
          consumer.  AB 1717 provides that once a customer pays the  
          MTS fee, he or she is relieved of future liability.  

          The bill requires sellers to collect the fee at the  
          point-of-sale, but if it's not a retail transaction, they  
          can use the consumer's address to collect the MTS Fee and  
          local charges that corresponds to the prepaid consumer's  
          five digit postal ZIP Code.  This measure discharges a  
          seller from any additional MTS Fee or local charges and  
          also relieves the seller from refunding amounts collected  
          and remitted to BOE if:
                 A seller relies in good faith on BOE-provided  





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               retail location information to match either a  
               point-of-sale transaction location, or the five digit  
               postal ZIP Code of the prepaid consumer's  
               known-address,
                 A seller collects that amount from the prepaid  
               consumers, and 
                 A seller remits the amount to BOE in compliance  
               with the Act.

          The bill discharges the seller from any additional local  
          charges, and relieves the seller from refunding amounts  
          collected and remitted if the seller with due diligence and  
          in good faith relies on credible information to match the  
          prepaid consumer's five digit postal ZIP code to the  
          correct local charge, even if the ZIP code corresponds to  
          more than one local charge in a known-address transaction.

          The MTS Fee applies to the entire price where prepaid  
          mobile telephony services are sold in combination with  
          mobile data services or any other services or products for  
          a single price.  The retailer can elect to apply the MTS  
          fee only to the amount charged for the prepaid service, and  
          not to the whole amount of the transaction when the  
          retailer sells the prepaid service with a cellular  
          telephone, and the purchase price for the prepaid service  
          is separately disclosed to the consumer on a receipt,  
          invoice, or other written electronic documentation.  When  
          the retailer sells a prepaid service of less than ten  
          minutes, or costs less than $5 sold in a single,  
          non-itemized bundled price with a cellular telephone, the  
          seller may elect not to apply the MTS fee or local charge.   
          The bill allows an apportioned credit for when the customer  
          paid charges incorporated into the MTS fee to another  
          state, one of its political subdivisions, or the District  
          of Columbia.

          BOE allocates its costs for collection on a pro rata basis  
          according to revenues collected for the 911 Fee, CPUC Fees,  
          and local charges.  BOE can prescribe and adopt tax  
          administration and enforcement regulations, as well as any  
          necessary emergency regulations as necessary to implement  
          the bill.  BOE must establish procedures for a seller to  
          document when a sale is not a retail transaction, and for  
          sharing specified MTS fee collection information upon the  
          request of the CPUC or OES.






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          The bill creates the Prepaid Mobile Telephony Services  
          Fund, into which BOE must deposit revenues from the MTS  
          fee.  The funds from the 911 component of the MTS fee are  
          deposited into the Prepaid 911 MTS account, created by the  
          bill, and funds for the CPUC fee component into the Prepaid  
          MTS PUC account, also created by the bill.  However, the  
          bill requires that not less than $9.9 million annually be  
          paid to the Prepaid MTS 911 account, beginning in 2016.  If  
          MTS revenues fall below $9.9 million, BOE must bill each  
          prepaid wireless service provider according to its pro rata  
          share of California intrastate revenue.  CPUC fees have no  
          such guarantee.
           
          II.  Local Charges.  Local agencies must contract with BOE  
          to collect its UUTs and local charges.  In the contract,  
          the local agency must:
                 Certify to BOE that its UUT or local charge  
               ordinance applies to prepaid wireless services,
                 Agree to indemnify and hold harmless BOE's  
               collections under the contract,
                 Certify the amount of the local 911 charge, or the  
               UUT tiered rate.

          The local agency must enter into a contract with BOE that  
          complies with the terms above for any new local charge that  
          applies to prepaid wireless by December 1 of each year, to  
          take effect by April 1.  Local agencies must notify BOE of  
          any increase in its UUTs or local charges under the same  
          schedule, but can notify BOE of any reduction or  
          elimination by written notice, and the revised rate shall  
          become operative on the first day of the calendar quarter  
          more than 60 days from the notification.  

          The bill enacts the exclusive method for collecting UUTs,  
          local 911 charges, or any other charge on prepaid wireless,  
          as well as defining the scope of any tax or charge.  The  
          measure suspends the authority of any local agency to  
          impose a UUT or local 911 charge at the rate specified in  
          the ordinance; instead the bill sets rates that approximate  
          UUT and local charge rates.  Sellers of prepaid wireless  
          may elect to pay amounts based on the rates set by bill,  
          and are deemed in full compliance if they do so.  The bill  
          states that its rate approximation is self-executing, and a  
          change in the rate resulting from a suspension or  
          termination of a UUT is not subject to voter approval.   
          Local agencies can increase UUT rates on prepaid wireless,  





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          but the bill's rate approximation sets the final rate.  

          The bill shifts collection responsibility for UUTs and  
          local charges from the local agency to BOE, which must  
          collect the fee according to the Fee Procedures Collections  
          Law.  The bill creates Local Charges for Prepaid Mobile  
          Telephony Services Fund, into which BOE must deposit  
          revenues held in trust for the local agency, less BOE  
          administration costs.  BOE must transmit funds as promptly  
          as feasible, but at least once per calendar quarter, and  
          provide a quarterly statement of its administration costs.   
          BOE may prescribe rules and regulations to implement the  
          local charge component of the bill; however, audits are  
          limited solely to verifying that the seller complied with  
          the bill.  BOE may contract with a third party to allocate  
          and transmit local charges, audit sellers, and respond to  
          requests regarding collecting local charges within the  
          scope of BOE's responsibilities.  The bill sets limitations  
          on contracts, including that they cannot provide for  
          contingency fee arrangements.

          Local agencies must defend any claim regarding the validity  
          of their ordinances, interpreting the ordinance unless  
          superseded by the bill, respond to any claim for refund,  
          certify that its ordinance applies to prepaid wireless, and  
          reallocate local charges resulting from correcting errors  
          relating to the seller's or consumer's location.  The bill  
          allows consumers to rebut presumed locations by filing a  
          claim and a declaration under penalty of perjury, and file  
          a claim for refund with the local agency based on the local  
          ordinance.  The bill absolves sellers of liability or  
          granting refunds resulting from challenges regarding the  
          validity of the tax.

          Local agencies must pay all of BOE's costs of administering  
          this part of the bill and collecting local charges.  The  
          Director of Finance has final decision-making authority to  
          resolve disputes between BOE and local agencies over costs.  
           BOE must annually report on both its reimbursed and  
          unreimbursed costs for collecting local charges.  

          Duly appointed representatives of local agencies can  
          examine all of BOE's records for prepaid wireless  
          pertaining to that local agency, but not records of sales  
          or transactions for any taxpayer.  The resolution  
          appointing the representative must contain specified items  





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          to allow non-employee contractors access to BOE records.   
          Information may only be used for collection purposes.  The  
          measure makes unlawful any person obtaining access to the  
          information without complying with the bill.
          
          III.  Lifeline exemption.  Consumers eligible for the state  
          or federal lifeline program are exempt from the MTS Fee if  
          the seller is authorized to provide lifeline service.  The  
          exemption applies only to the amount paid for prepaid  
          service that the lifeline program specified is exempt from  
          the components of the MTS fee.
           
          IV.  CPUC Fees.  AB 1717 directs CPUC to compute a  
          reimbursement fee as a percentage of the sales price of  
          prepaid mobile telephony services, commencing October 1,  
          2015, to be effective January 1, 2016.  CPUC must compute  
          the fee each October 1st for the following calendar year.   
          CPUC must post a notice on its website; notify OES and BOE  
          of the amount of the fee and its computation method.  The  
          bill directs the CPUC to calculate the cumulative amount of  
          telecommunications universal service charges, which include  
          all the fees above, using identical dates.  

          CPUC must adjust the reimbursement and cumulative fees any  
          past overcollection, and may for any undercollection, from  
          the previous year.    CPUC may adjust how collections are  
          deposited into appropriate accounts in the event of  
          overcollection or undercollection.  CPUC must prepare a  
          resolution or other similar document available to the  
          public and posted on its website explaining the adjustment  
          30 days before adopting any adjustment.  The resolution or  
          document must include:
                 Prior year revenue from the fee or surcharge,
                 Projected expenses and revenues from all sources,  
               including prepaid,
                 Rationale for adjusting the reimbursement fee or  
               universal service surcharge, 
          CPUC can enforce compliance with the bill upon retailers  
          when the carrier is also the retailer, in collaboration  
          with BOE, but not if the retailer isn't the carrier.

          Carriers selling prepaid services must remit the  
          reimbursement and cumulative universal fees to CPUC based  
          on the intrastate share of revenues through December 31,  
          2015, after which time they remit the charges to BOE as  
          part of the MTS Fee.  The measure doesn't relieve carriers  





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          of the responsibility to report prepaid revenues to CPUC,  
          and requires carriers to report the intrastate portion  
          subject to the fees, as well as total state revenue.

          V.  911 Fee.  Assembly Bill 1717 requires OES to determine  
          the 911 fee for prepaid wireless according to the  
          intrastate portion of prepaid wireless based on the  
          information carriers send to the CPUC, commencing with the  
          calculation made on October 1, 2015, effective January 1,  
          2016.  OES must inform BOE of the total amount collected,  
          including the amount from prepaid wireless.  OES must  
          prepare a summary, and make it available to the public,  
          with the following information, including the amounts  
          attributable to prepaid wireless, 30 days before  
          determining overall 911 fee:
                 Prior year revenue,
                 Projected expenses and revenues from all sources,  
               including prepaid,
                 Rationale for adjustment.

          VI.  Other provisions.  The measure defines several terms,  
          makes findings and declarations, including stating the  
          Legislature's intent to apply reimbursement and universal  
          service charges in a competitively neutral way between  
          prepaid and postpaid.  The bill directs that no inference  
          be drawn from its enactment upon the remittance  
          requirements of prepaid wireless sellers.  The bill also  
          states that it does not affect remittance requirements for  
          sellers for non-prepaid wireless items and services.  The  
          bill also makes conforming changes.


                               State Revenue Impact
           
          BOE's administrative cost estimate is pending; however, for  
          AB 300 (Perea, 2013), a substantially similar bill, BOE  
          estimates costs of around $13 million annually to implement  
          both the MTS fee and administer and collect local UUTs and  
          charges.  

          BOE assumes that wireless carriers are not currently  
          collecting or remitting UUTs, and estimates $73 million in  
          local revenue, and $55.9 million for AB 1717's MTS Fee.    
          BOE estimates the bill requires vendor compensation of  
          $783,000.  BOE cautions that its estimate is predicated on  
          an 80% intrastate component, but CPUC actually determines  





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          the percentage ultimately used, which could be higher or  
          lower than 80%. BOE estimated $39.6 million for AB 300 last  
          year
                                     Comments  

          1.   Purpose of the bill  .  According to the author,  
          "According to the author, this bill would establish a  
          statewide system for point-of-sale collection of state and  
          local fees imposed on communications service that are  
          currently paid by end users of postpaid customers, thereby  
          ensuring that the prepaid wireless sector of the  
          communications market equitably shares in the  
          responsibility to fund the state 911 system, state  
          universal service programs, and CPUC operations paid with  
          the CPUC Reimbursement Fee, and also contribute to the  
          revenue of cities and counties generated by local fees and  
          UUTs."    

          2.   Shifting risk  .  Sellers of prepaid wireless services  
          currently pay the fees and charges that AB 1717 would shift  
          to consumers when they buy prepaid services.  Currently,  
          carriers pay these fees, and then seek to pass along these  
          costs to consumers, but usually sell these products in  
          nationwide markets.  AB 1717 explicitly shifts this  
          responsibility to consumers of prepaid services by having  
          the seller with direct contact with consumer collect the  
          MTS fee, and compensates third-party retailers for their  
          costs.  However, while carriers don't like paying the fees,  
          they're clearly capable, so why reassign this burden to  
          prepaid customers, who are often low-income?  The Committee  
          may wish to consider the merits of explicitly reassigning  
          the burden of paying fees and charges from sophisticated  
          service providers to consumers.

          3.   Direct/Indirect  .  AB 1717 is a great experiment in  
          shifting the collection responsibility for end-user imposed  
          fees to retailers and BOE.  While BOE has been successful  
          implementing several unconventional fee programs, such as  
                  the tire fee and E-Waster fees, there's no guarantee that  
          the new mechanism will produce sufficient revenue to make  
          OES, CPUC, and local agencies whole based on the current  
          process.  Instead of shifting the entire amount of risk, AB  
          1717 could instead only apply MTS fee collection to  
          so-called "indirect" retailers, who buy prepaid cards from  
          prepaid wireless service providers, and keep "direct"  
          sellers under the current construct.  Because direct  





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          sellers complete the calls as wireless service providers,  
          they have data that shows the intrastate versus interstate  
          share.  To the extent that the state is launching a risky  
          venture to transfer the collections responsibilities from  
          carriers to point-of-sale transactions, why should the bill  
          exclude a large segment of the market that knows how to  
          comply, and has the data in hand to determine the  
          intrastate share?  The Committee may wish to consider  
          requiring current direct sellers to pay 911, CPUC, and  
          local fees, and limit the measure's MTS provisions to  
          indirect sellers.

          4.   Priorities  .  For AB 1717 to work, the new MTS fee must  
          be able to pay for previous amounts in taxes and fees  
          currently paid by carriers for prepaid wireless to the 911  
          fee and for CPUC programs, plus BOE's administration costs.  
           If the MTS fee doesn't meet expectations, something has to  
          give.  The bill establishes that BOE must collect its costs  
          by deducting them from OES and CPUC fees, and recent  
          amendments provide a guarantee for the state's 911 system  
          by directing BOE to make up the difference by separately  
          billing all prepaid wireless providers.  However, the bill  
          doesn't afford similar protection and billing authority if  
          CPUC fees aren't made whole, meaning that those accounts  
          bear the risk if AB 1717 falls short of its promises.  Last  
          year, the Committee amended AB 300 to insert a three-year  
          sunset to ensure that the MTS fee wouldn't stay in place  
          forever if it doesn't work.  The Committee may wish to  
          consider adding a sunset to AB 1717 to enable a future  
          Legislature to measure the bill's impacts.

          5.   How does this work  ? Assuming an intrastate percentage  
          of 78.5%, if I buy $100 worth of prepaid services from a  
          third party retailer, the state taxes, fees and surcharges  
          imposed on my transaction would be:
                 911 surcharge (0.50%): First, multiply 0.50% by  
               78.5% making the 911 portion of the MTS surcharge rate  
               .3925%.  Multiply the surcharge rate by the by the  
               sales price to equal $0.39 (.3925% x $100).
                 CPUC surcharges: the 6 cumulative CPUC surcharges  
               and user fee total 2.96%, or $2.96 on a $100 purchase.  
                Multiply that $2.96 by 78.5% to total $2.32.  
                 In the City of Sacramento, the UUT rate as adjusted  
               by the bill is 2.5%.  My total UUT would be $2.50 (100  
               x 2.5%), not subject to the intrastate percentage. 






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          On a $100 price of prepaid voice, talk and text, I would  
          pay $5.21 ($0.39 + $2.32 + $2.50 in state taxes and  
          surcharges.  Additionally, the vendor is compensated $2  
          because I bought the service from a third-party retailer.

          6.   Local taxes  . Most local agencies concede that prepaid  
          wireless isn't paying local UUTs, and BOE estimates that  
          the bill's explicit collections requirement could result in  
          up to $72 million in revenue as a result.   Currently:
                 157 local agencies have UUT ordinances.  
                 125 apply to wireless. 
                 Approximately 75 of the 125 wireless UUT ordinances  
               are voter-approved.  About a 5-10 of those 75  
               voter-approved ordinances use "older" definitions that  
               may or may not qualify under AB 300. 
                 62 cities have a "technology neutral" definition of  
               wireless likely to comply with AB 300.  

          However, some local agencies may have to amend their  
          ordinances to be "technology neutral," or explicitly apply  
          to pre- and post-paid wireless.  Proposition 218 (1996)  
          requires voter approval for an ordinance that enacts a new,  
          increased, or extended tax.  While the measure increases  
          local collections for many local agencies, some may have to  
          go back to voters for approval before the bill provides  
          more revenue.

          7.   Vendor compensation .  AB 1717 compensates indirect  
          vendors (retail locations not owned by a carrier) for  
          collecting the MTS Fee and local charges at point-of-sale  
          by allowing them to retain 2% of the MTS Fee for each sale.  
           State law allows vendor compensation only for the tire  
          fee, forest products fee, and E-Waste fees.  Until  
          recently, there was no vendor compensation in the state  
          because the privilege of doing business in a state with  
          such a large population was compensation enough.  The  
          Committee may wish to consider the policy of vendor  
          compensation, and the merits of extending it to the MTS  
          Fee.

          8.   Federal preemption  ?  The central policy question posed  
          by AB 1717 is who should bear the responsibility to collect  
          and remit appropriate taxes and fees for prepaid wireless  
          services that apply to all telecommunications.  The 911 fee  
          is a consumer tax with no federal preemption or  
          interaction, but the CPUC argues that federal preempts its  





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          surcharges from being collected at the point-of-sale.  The  
          PUC cites two legal arguments: first, federal statute  
          clearly says that it is the responsibility of the carriers  
          (not a third party retailer) to remit universal service  
          funds.  Second, federal statute also says that regulations  
          adopted by states shall not be inconsistent with the FCC's  
          rules, which specify that carriers employ either safe  
          harbor, traffic study, or books and records methods to  
          calculate universal surcharge revenues owed.  

          9.   Have we met before  ?  Last year, the Governor vetoed AB  
          300 (Perea), substantially similar to this bill.  AB 1717  
          doesn't have AB 300's three-year sunset, and contains a  
          guarantee for the 911 fund compared to AB 300's "overlay."   
          Additionally, AB 1717 directs BOE to bill OES, CPUC, and  
          local agencies a pro-rata share of its costs.  When vetoing  
          the measure, the Governor stated:

          To the Members of the California State Assembly:

               I am returning Assembly Bill 300 without my signature.

               This bill would establish an additional system for  
               collecting and remitting fees, surcharges and taxes  
               applicable to prepaid mobile services. These charges  
               would be collected from prepaid customers and remitted  
               to the Board of Equalization, while fees collected  
               from postpaid customers would continue to be remitted  
               directly to the Public Utilities Commission, State 911  
               Fund and local governments.

               There is no question that the state needs an effective  
               system for capturing local taxes related to the sale  
               of prepaid phones. The solution, however, proposed by  
               this bill is duplicative, complex and will result in  
               significant and unnecessary costs to the state.

               I encourage the author to partner with the local  
               governments and State Agencies affected by these  
               revenues and craft a bill with a more cost effective  
               solution.

               Sincerely,

               Edmund G. Brown Jr






          AB 1717 - 5/28/14 -- Page 14



          10.   Troubles  .  AB 1717 guarantees funding for the state's  
          911 fee, but the system itself needs much more money to  
          deliver on its promises, as revenue languishes and service  
          demands change.  Almost 75% of emergency calls are made  
          from a cellular device, but the current 911 system is not  
          equipped to receive texts, data, photos, or videos.   
          However, the current 911 program is in a structural  
          deficit, with revenue declining from $133 million in  
          2005-2006 to a projected $78 million in 2013-2014.   
          According to The California Chapter of the National  
          Emergency Number Association, even at the maximum surcharge  
          level, "there is doubt that OES will be able to fund the  
          current 911 operation for more than a few years."   
          Additional funding is necessary to transition California's  
          current 911 system to the Next Generation 911 system.   
          While AB 1717 fixes collections difficulties for carriers,  
          it doesn't account for this fundamental problem facing the  
          state.

          11.   Amendments  .  When the Committee on Energy, Utilities,  
          and Communications approved AB 1717 on June 17th, they did  
          so with the understanding that amendments would be taken in  
          this Committee to:
                 Establish a process to bill prepaid wireless  
               service providers directly if MTS fee revenues don't  
               meet the 911 fund's fee target of $9.9 million, and
                 Apply transparency and accountability provisions of  
               SB 1211 (Padilla) into AB 1717.


                                 Assembly Actions  

          Assembly Floor                          71-2
          Assembly Appropriations                      15-0
          Assembly Revenue and Taxation           9-0
          Assembly Utilities and Commerce         9-0


                        Support and Opposition  (06/19/14)

           Support  :  California Professional Firefighters; City of  
          Burbank; City of Glendale; City of Sacramento; City of San  
          Gabriel; City of Santa Barbara; CTIA-The Wireless  
          Association; Muni Services, LLC; Sprint; T-Mobile.

           Opposition  :  None received.   





          AB 1717 - 5/28/14 -- Page 15