BILL ANALYSIS                                                                                                                                                                                                    




                                                                  SB 1553
                                                                  Page A
          Date of Hearing:  June 17, 2002

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                              Roderick D. Wright, Chair
                     SB 1553 (Battin) - As Amended:  May 1, 2002

           SENATE VOTE  :  35-0
           
          SUBJECT  :  Telephone services: extended area service.

           SUMMARY  :  Requires the California Public Utilities Commission  
          (PUC) to examine the impact of toll call pricing in the  
          Coachella Valley and to consider whether additional options are  
          needed to serve that area.  Specifically,  this bill  :   

          1)Requires PUC to examine the impact of toll call pricing in the  
            Coachella Valley and to consider whether additional options  
            are needed to serve that area.

          2) Directs PUC to consider whether any additional steps are  
            necessary to encourage innovative pricing plans by incumbent  
            and competitive carriers.

          3)Allows PUC to consider whether customer education efforts, or  
            other measures that are in the public interest, are necessary.

          4)Requires PUC to report to the Legislature no later than July  
            1, 2004, regarding these issues.
           
          EXISTING LAW  :

          1)Requires telephone rates to be just and reasonable.

          2)Grants PUC power to investigate complaints concerning rates or  
            quality of telephone service.

          3)Authorizes PUC to regulate rates for telephone calls within  
            the state.

          4)Prohibits, in PUC Decision # 98-06-075, 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.

           FISCAL EFFECT  :  The Senate Appropriations Committee identifies  









                                                                  SB 1553
                                                                  Page B
          unknown costs, probably under $150,000.  Public Utilities'  
          Reimbursement Account revenues are derived from an annual fee  
          imposed on utilities.  Therefore, fee revenues should recover  
          any increased costs.  Costs are based on estimates of similar  
          proceedings and reports.

           COMMENTS  :   

          Flat-rate residential<1> telephone service allows unlimited  
          calls within the local calling area, or "local exchange,"  
          without extra charge.  The area within exchanges which a  
          customer can call without extra charge is the "local calling  
          area."  In general, calls beyond 12 miles are billed as toll  
          calls.

          In geographic locations where customers cannot call out to get a  
          reasonable range of essential services within the local calling  
          area, PUC has contemplated extending the 12 mile limit to allow  
          calls without extra monthly toll charges.  

          "Essential services" include police, fire, medical care, legal  
          services, schools, banking, and shopping.  Areas where 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, the remaining ratepayers in the territory absorb the  
          cost of the benefit. 

          In January 1995, PUC opened the market for short-distance toll  
          calls to competition.<2>  This market has been very competitive.  
           The major long-distance carriers such as AT&T, MCI WorldCom,  
          and Sprint compete with the local companies like SBC Pacific  
          Bell and Verizon for this market.

          Because the market is competitive, PUC concluded there was no  
          need to create additional EAS routes because competitive  
          pressures would reduce the cost of toll calls, making it  
          unnecessary to reduce the price of those calls by regulation.  

          In June 1998 PUC declared a moratorium on the creation of new  
          ---------------------------
          <1> This bill does not affect rates for calls made by business  
          customers or by residential customers with measured local usage,  
          and does not affect any wireless customers.
          <2> The market for long-distance toll calls, a.k.a. inter-LATA  
          calls, had already been opened up to competition.









                                                                  SB 1553
                                                                  Page C
          EAS routes.<3>  

          This bill would require PUC to re-examine the issue in the  
          Coachella Valley in the author's district, who note that some  
          residents in his district incur toll charges when calling a mere  
          2 miles.   

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Office of Ratepayer Advocates
           
            Opposition 
           
          PUC


           Analysis Prepared by  :    Paul Donahue / U. & C. / (916) 319-2083  


























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          <3> PUC enforces the moratorium by summarily dismissing any  
          complaint seeking a new EAS route.