BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 128 - Bowen Hearing Date:
April 8, 2003 S
As Amended: March 10, 2003 Non-FISCAL B
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DESCRIPTION
Current law permits states to establish consumer protection
rules for cellular telephone service customers (Section
332(c)(3)(A) of the Federal Communications Act).
This bill requires cellular telephone companies to provide new
customers with a 30-day grace period within which a customer
could rescind their contract if they find the cellular service
quality is unsatisfactory. Customers are required to pay for
any services used prior to rescinding the contract.
This bill does not apply to commercial accounts, as defined, or
month-to-month contracts.
BACKGROUND
Cellular telephone use has grown very rapidly across the country
in recent years and in California, the number of wireless
customers has jumped by 29% since 2000. One out of every nine
cellular customers nationwide are in California. Cellular
telephones are becoming as prevalent as traditional telephones,
with about 16 million cellular telephones in California compared
to 26 million traditional telephones.
The growth in cellular usage has been accompanied by a growth in
the number complaints about cellular service. Complaints to the
California Public Utilities Commission (CPUC) nearly doubled
from 5,235 to 9,964 between 2000 and 2001, though the number
dropped slightly in 2002. "Consumer Reports" magazine found
last year that Americans consistently rated their cellular phone
service as mediocre. This year, the magazine noted the overall
satisfaction with cellular carriers is lower than for most other
businesses that they rate. In a survey conducted in conjunction
with the article, poor phone service was the leading reason
cited by people for switching providers.
The major cellular providers require customers to sign long-term
contracts for service. Those contracts are typically one year
long, though some providers now require two-year contracts. All
of the major cellular providers have voluntarily given customers
a grace period during which the customer can return the phone
and discontinue service without being subject to a contract
cancellation fee.
The CPUC is in the midst of an investigation to establish
customer service rules, some of which may apply to wireless
service providers. A first draft of those rules was released in
June 2002 and includes a provision giving customers 30 days to
cancel a contract for service without penalty. The cellular
telephone companies opposed this provision and a number of other
provisions of the draft rules during CPUC workshops in August
2002 and in numerous meetings with commissioners. A revised
draft of the rules is expected next month.
COMMENTS
1.Will The Phone Work Where I Want To Use It? Every cellular
telephone company provides coverage maps to show where their
service is available. However, those maps are very
generalized and are not guarantees of coverage. A customer's
ability to complete or continue a call in a given location can
vary depending on the time of year, the height of the
buildings in a given area, call volumes, radio interference,
and phone 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. This bill guarantees
customers a reasonable way to get out of a long-term contract
commitment if the product they bought doesn't live up to their
expectations or to the promises made by the carrier.
2.A Burden On Providers? The Cellular Telecommunications &
Internet Association (CTIA) believes SB 128 will undermine
consumer benefits, add considerable paperwork burdens,
increase service costs, and limit choices without providing
any meaningful consumer benefit.
3.State Mandated Warranties Are The Rule, Not The Exception.
Most products sold in California are covered by the
Song-Beverly Consumer Warranty Act (Civil Code 1790 et. seq.)
that provides buyers with a 60-day implied warranty of
fitness. Because a contract for wireless service is a
"service" and not a "product," those contracts aren't covered
by the Song-Beverly Consumer Warranty Act.
While opponents note that many cellular companies offer 14-day
cancellation policies with their contracts, those policies
aren't uniform and they can be changed at any time. This bill
provides a statutory 30-day cancellation policy, so a person
signing a contract will know they have 30 days to cancel the
contract, regardless of which company they buy service from,
if the service doesn't live up to the company's promises or
the customer's expectations.
4. Technical Amendment . SB 128 is intended to apply to all
wireless carriers. While Nextel and Sprint provide mobile
communications service, those services are not technically
cellular telephone service. As such, the author and
committee may wish to consider adopting a technical amendment
to apply the bill's provisions to all wireless providers.
5. Related Legislation . AB 1379 (Calderon), is pending in the
Assembly Utilities and Commerce Committee. That bill gives
customers a 14-day right-of-rescission that's triggered when
the customer receives their first bill.
SB 1601 (Bowen) of 2002 was substantially similar to SB 128.
SB 1601 was approved by this committee on a 6-2 vote. The
right-of-rescission period was shorted from 30 days to 14
days in the Assembly and the author opted not to take the
bill up for a concurrence vote on the Senate floor.
POSITIONS
Sponsor:
Author
Support:
California Alliance For Consumer Protection
Office of Ratepayer Advocates
Oppose:
The Cellular Telecommunications and Internet Association
Randy Chinn
SB 128 Analysis
Hearing Date: April 8, 2003