BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1601|
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THIRD READING
Bill No: SB 1601
Author: Bowen (D)
Amended: 4/1/02
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 6-2, 4/9/02
AYES: Bowen, Alarcon, Murray, Sher, Vasconcellos, Vincent
NOES: Morrow, Battin
SUBJECT : Cellular telecommunications service
SOURCE : Author
DIGEST : This bill requires cellular telephone companies
to provide new customers with a 30-day grace period during
which the contract may be rescinded, as specified.
ANALYSIS : Current law permits states to establish
consumer protection rules for cellular telephone service
customers.
This bill requires that providers of cellular
radiotelephone service extend to new customers a grace
period of at least 30 days within which a customer could
rescind his or her contract if they find the cellular
service quality is unsatisfactory. The bill requires every
new service agreement to provide reasonable notice of this
grace period and the right of the customer to rescind.
Background
CONTINUED
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Cellular telephone usage continues to enjoy spectacular
growth. The number of cellular subscribers has more than
doubled since 1998 to 133 million nationwide. Not only are
more people using the phones, they're also using them more
intensively -- the average monthly use has grown by 75
percent to 422 minutes per customer over the past two
years. New wireless uses, such as data transmission and
Internet access, are starting to show growth, too.
This growth in popularity has been accompanied by a growth
in customer expectations and, not surprisingly, a growth in
customer complaints. Complaints about cellular service at
the California Public Utilities Commission (CPUC) jumped 47
percent last year. "Consumer Reports" magazine surveyed
cell phone users and observed that customers rate their
service as "mediocre." A recent J.D. Power & Associates
survey noted that three times as many cellular customers
call customer service than local telephone company
customers.
An indicator of customer dissatisfaction may be churn
rates, which are anywhere from 25 to 80 percent, according
to the Yankee Group, a consulting firm. Recent articles in
the New York Times , "Business Week," the Wall Street
Journal , and USA Today all note user complaints about
wireless service quality, which many customers feel doesn't
live up to the advertising promises made by many companies.
While cellular telephone service has many benefits that
landline telephone services don't have, few disagree with
the notion that cellular telephone service is neither as
clear nor as reliable as regular landline telephone
service.
A prospective cellular phone customer can't rely on the
coverage maps provided by the cellular carriers because
they all contain disclaimers that the map is not a
guarantee of service availability or quality. In the
absence of accurate maps, the only way for a customer to
know if the cellular phone meets their needs is to use it
for a period of time. If a customer is required to sign a
long-term contract to obtain service, that customer is
potentially stuck if he or she finds the service is less
than was advertised or promised. The goal of this bill is
to provide customers with a reasonable way out of that
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long-term commitment if the product they're buying doesn't
live up to their expectations or to the promises made by
the carrier.
Comments
The author's goal is to give people the information they
need to try and make sure they'll get what they pay for
when they sign a cellular service contract.
If cellular service coverage maps could be made more
accurate and if the "test drive" in the store could account
for the topography, underpasses, tunnels, buildings, trees,
atmospheric disturbances, other radio signals, and
intensity of usage challenges that a customer will face out
on the "open road," there would be no need for a grace
period because the customer would be able to make an
informed choice right in the store. Since that isn't an
option, the author believes the next best solution is to
allow customers to rescind their contracts if the service
proves to be unsatisfactory. This bill gives customers 30
days to rescind the contract.
Some cellular carriers already provide their customers with
a grace period in which they can choose to terminate their
service contract. AT&T Wireless gives customers a 30-day
grace period and Verizon has a 14-day great period.
Cingular does not allow any grace period.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/10/02)
Office of Ratepayer Advocates
OPPOSITION : (Verified 4/10/02)
Cingular Wireless
Sprint Communications Company
Verizon Wireless
NC:kb 4/11/02 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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