BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 128|
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THIRD READING
Bill No: SB 128
Author: Bowen (D), et al
Amended: 3/10/03
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 6-3, 4/8/03
AYES: Bowen, Alarcon, Dunn, Murray, Sher, Vasconcellos
NOES: Morrow, Battin, McClintock
SUBJECT : Cellular telecommunications service
SOURCE : Author
DIGEST : This bill requires cellular telephone companies
to extend a minimum 30-day grace period to new customers
during which a customer may rescind the agreement and
terminate service, as specified.
ANALYSIS :
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.
CONTINUED
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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 of 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
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meetings with commissioners. A revised draft of the rules
is expected next month.
Comments
Proponents note that 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.
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.
Most products sold in California are covered by the
Song-Beverly Consumer Warranty Act 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.
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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 the Senate on a 23-13 vote.
The right-of-rescission period was shortened 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/8/03)
California Alliance For Consumer Protection
Office of Ratepayer Advocates
OPPOSITION : (Verified 4/8/03)
The Cellular Telecommunications and Internet Association
NC:nl 04/10/03 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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