BILL ANALYSIS
SB 128
Page A
Date of Hearing: July 7, 2003
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
SB 128 (Bowen) - As Amended: March 10, 2003
SENATE VOTE : 22-15
SUBJECT : Cellular telecommunications service.
SUMMARY : Requires providers of cellular telephone service to
extend a minimum 30-day grace period to new customers during
which the customer may rescind the agreement. Specifically,
this bill :
1)Requires cellular telephone carriers to allow a 30-day grace
period for all new cellular service customers, during which
the customer may rescind the agreement and terminate service
if the customer finds that the cellular service quality is
unsatisfactory.
2)Specifies that a customer who rescinds a contract must pay for
those services used prior to cancellation of the agreement.
3)Requires cellular companies to provide reasonable notice of
this grace period and the customer right of rescission.
4)Provides that the grace period shall not apply to
commercial<1> accounts or to contracts for cellular service
where customers are not required to purchase more than one
month of service.
EXISTING LAW :
1)Provides for licensure of cellular phone service providers
through the Federal Communications Commission.
2)Provides for regulation of telecommunication services by the
California Public Utilities Commission (PUC).
FISCAL EFFECT : Unknown.
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<1> For purposes of this bill, "commercial accounts" mean any
account that includes service for five or more cellular radio
telephones.
SB 128
Page B
COMMENTS :
Current federal law permits states to establish consumer
protection rules for cellular telephone service customers.<2>
According to the author, it is difficult for a prospective
cellular phone customer to 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 long-term commitment if the product
they're buying doesn't live up to their expectations or to the
promises made by the carrier.
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 is a Californian. Cellular
telephones are becoming as prevalent as traditional telephones,
with about 16 million cellular telephones in California,
compared to 26 million traditional telephones.
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,
particularly if free or discounted cellular phone equipment is
packaged with the deal.
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.
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
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<2> Section 332(c)(3)(A) of the Federal Communications Act.
SB 128
Page C
article, poor phone service was the leading reason cited by
people for switching providers.
Opposition
The Cellular Telecommunications & Internet Association believes
this bill will undermine consumer benefits, add considerable
paperwork burdens, increase service costs, and limit choices
without providing any meaningful consumer benefit. They note
that, if passed, it is almost certain that "free phone" packages
will be eliminated because they will not be cost effective in
that these are most often offered in conjunction with term of
service commitments.
Cingular notes that it currently provides customers a 15-day
return policy, and believes that the marketplace and competition
within it should determine the issue of return policies.
Most products sold in California are covered by the Song-Beverly
Consumer Warranty Act, which provides buyers with a 60-day
implied warranty of fitness. Because a contract for wireless
service is a service and not a product, the Song-Beverly
Consumer Warranty Act doesn't cover those contracts.
Related Legislation
SB 1903 (O'Connell), Chapter 286, Statutes of 2002, requires
cellular telephone service providers to give customers a way to
obtain current information on their calling plan and usage.
AB 1379 (Calderon), is pending in the Senate Energy, Utilities &
Communications Committee. This bill requires cellular companies
to provide a means by which a subscriber can obtain reasonably
current and available information on the subscriber's calling
plan or plans and service usage, including roaming usage and
charges.
SB 1601 (Bowen) was heard in this Committee in 2002, but the
right-of-rescission period was shortened from 30 days to 14
days. The author chose not to take this bill up for a
concurrence vote on the Senate floor.
SB 128
Page D
REGISTERED SUPPORT / OPPOSITION :
Support
California Alliance for Consumer Protection
California Public Interest Research Group (CALPIRG)
Office of Ratepayer Advocates
Opposition
Cellular Telecommunications & Internet Association
Cingular Wireless
Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083