BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1553|
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THIRD READING
Bill No: SB 1553
Author: Battin (R)
Amended: 5/1/02
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 5-0, 4/23/02
AYES: Bowen, Morrow, Alarcon, Battin, Vincent
SENATE APPROPRIATIONS COMMITTEE : 10-0, 5/13/02
AYES: Alpert, Battin, Bowen, Escutia, Karnette, McPherson,
Murray, Perata, Poochigian, Speier
SUBJECT : Telephone services: extended area service
SOURCE : Author
DIGEST : This bill requires the California Public
Utilities Commission (PUC) to report to the Legislature, by
July 1, 2004, on the impact of toll call pricing in the
Coachella Valley, whether additional steps are necessary to
encourage innovative pricing, and related matters.
ANALYSIS : Current law requires telephone rates to be
fair and reasonable. The PUC is authorized to regulate
rates for telephone calls within the state.
Existing PUC Decision Number 98-06-075 prohibits the filing
of new complaints to establish new Extended Area Service
(EAS) routes in the state that extend the geographic reach
of local toll-free telephone calls.
CONTINUED
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Currently, the PUC has the discretion to investigate
complaints concerning rates or services.
This bill finds that there have been concerns in the
Coachella Valley about the impact of toll call pricing. It
notes the recent growth and expansion in the area, the use
of EAS plans, and the effect of the recent PUC Decision
98-06-075 when "the commission determined that with the
advent of competition for toll service, the public's
interest would be served by allowing the market to offer
customers choices for toll call pricing."
This bill requires the PUC to examine the impact of toll
call pricing in the Coachella Valley and consider whether
additional options are needed to serve that area. The PUC
shall consider whether any additional steps are necessary
to encourage innovative pricing plans by incumbent and
competitive carriers, and may also consider whether
customer education efforts or other measures that are in
the public interest are necessary.
The report is due to the Legislature no later than July 1,
2004.
Background
Most residential telephone service allows for calls within
a local calling area to be made without an extra charge.
That area is known as the "local exchange." Within each
local exchange is a point known as the "rate center." If
the rate centers for two local exchanges are within 12
miles of each other, then the cost for calls between those
two exchanges is also included in the monthly rate for
local service. (For purposes of this discussion, the
calling customer is a residential customer with unlimited
local calling, the most common residential service. This
bill does not effect rates for calls by business customers,
residential customers with measured local usage, or
wireless customers.) The area comprised of the exchanges
between which the customer can call without extra charge is
known as the "local calling area." Calls between local
exchanges that are more than 12 miles between rate centers
are billed as toll calls.
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The PUC has considered extending the 12 mile limit, which
would broaden the area in which calls can be made without
extra charge, in cases where customers can't reach a
reasonable range of essential services within the local
calling area. Essential services include police, fire,
medical care, legal services, schools, banking, and
shopping. Areas where the PUC has extended the 12 mile
limit are known as EAS routes. Creating a new EAS route
lets certain local callers avoid paying toll charges, but
that "benefit" is paid for by the remaining ratepayers
generally.
On January 1, 1995, the PUC opened the market for
short-distance toll calls to competition. (The market for
long-distance toll calls, also known as inter-LATA calls,
had been opened earlier.) This market has been very
competitive with the large long-distance companies like
AT&T, MCI WorldCom, and Sprint competing with the
established local companies like SBC Pacific Bell and
Verizon. Because the market was competitive, the PUC
concluded that creating additional EAS routes wasn't
necessary because the competitive pressures would reduce
the cost of toll calls, making it unnecessary to reduce the
price of those calls by regulation. Therefore, in June
1998, the PUC declared a moratorium on the creation of new
EAS routes. (The mechanism to enforce the moratorium was
to establish a policy denying acceptance of any complaint
seeking a new EAS route.) This bill overrides the PUC's
declared moratorium and requires the PUC to consider
petitions from customers who want to see new EAS routes be
established.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
Unknown costs, probably under $150,000. Public Utilities'
Reimbursement Account revenues are derived from an annual
fee imposed on utilities. Therefore, any increased costs
should be recovered by fee revenues. Costs are based on
estimates of similar proceedings and reports.
NC:sl 5/15/02 Senate Floor Analyses
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SUPPORT/OPPOSITION: NONE RECEIVED
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