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. --------------------------- <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 --------------------------- <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