BILL ANALYSIS
AB 1010
Page 1
Date of Hearing: August 14, 2006
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Lloyd E. Levine, Chair
AB 1010 (Ruskin) - As Amended: June 14, 2006
(CONCURRENCE IN SENATE AMENDMENTS)
SUBJECT : Telecommunications: Mobile telephony services.
SUMMARY : Requires providers of mobile telephone service to
provide a minimum 30-day grace period to new customers or
customers who renew, alter, or extend a contract, during which
the customer may rescind the agreement. Specifically, this bill :
1)Requires mobile telephone carriers to allow a 30-day grace
period for all new customers, during which the customer may
rescind the agreement and terminate service if the customer
finds that the service quality is unsatisfactory.
2)Requires mobile telephone carriers to allow a 30-day grace
period for all existing customers who choose to renew, extend,
or modify their service, during which time the customer may
rescind the agreement and terminate service if the customer
finds that the service quality is unsatisfactory.
3)Specifies that a customer who rescinds a contract must pay for
those services used prior to cancellation of the agreement.
4)Requires mobile telephone companies to provide reasonable
notice of this grace period and the customer's right of
rescission.
5)Provides that the grace period shall not apply to a
month-to-month account or prepaid account.
The Senate amendments delete the Assembly version of this bill,
and instead insert the above provisions
AS PASSED BY THE ASSEMBLY , this bill shifted responsibility for
oversight of specified at-grade rail crossings from the Public
Utilities Commission (PUC) to the Department of Transportation
(Caltrans).
COMMENTS : According to the author, the intent of this bill is
AB 1010
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to protect consumers from entering into a long-term mobile phone
contract without the ability to ensure that the phone company's
service meets the expectations of the customer. A mobile phone
customer cannot rely on the coverage maps provided by the
carriers as an indicator of true service availability in an
area, and all coverage maps contain disclaimers that the map is
not a guarantee of service availability or quality. In the
absence of accurate maps, the only way for customers to know if
the mobile 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 finds
the service is poorer than expected. The goal of this bill is
to provide customers a reasonable way out of long-term
commitments if the service does not meet expectations.
Supporters of this bill argue that given the complexity of
selecting a mobile phone service plan, combined with the length
of the contract that most carriers require, customers should be
entitled to a 30 day grace period to check out their service
before excessive early termination fees are charged. Supporters
further contend that when Californians had this right
previously, mobile phone usage grew and carriers prospered.
1) History: On June 7, 2004, the California Public Utilities
Commission (PUC) adopted D.04-05-057, the Telecommunications
Protection Decision (Consumer Bill of Rights), which included a
30-day right of recession for mobile phone contracts. However,
on January 27, 2005, the Commission stayed the Consumer Bill of
Rights pending further examination of whether-given the effects
of changes in the telecommunications industry since the
inception of the proceeding-the Consumer Bill of Rights provided
a consumer protection structure that could be reasonably
implemented, adequately enforced, and viable in the longer term.
On March 2, 2006 the PUC adopted Decision 06-03-013, repealing
the Consumer Bill of Rights, outright. In adopting this
Decision, the PUC eliminated the 30-day grace period for mobile
customers. The PUC reports that its decision was based in part
on the fact that all of the major phone providers offered grace
periods ranging from 14 to 30 days.
AB 1010 would statutorily reinstate the 30-day grace period that
was eliminated following the adoption of the March 2006 PUC
decision.
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2) Opposition Arguments: Opponents, primarily the mobile phone
providers, argue that by mandating a set grace period, the state
would infringe upon one of the key tools mobile phone companies
use to differentiate themselves from one another. They argue
that in highly competitive industries, such as the wireless
phone market, it is in the interests of the customers to
preserve all available means the carriers have to offer a wide
range of service options. Furthermore, Verizon Wireless argues
"the California Public Utilities Commission specifically
rejected inclusion of a mandatory grace period in its Consumer
Bill of Rights decision." In a similar vein, Sprint states that
"Given the pending implementation of the recently adopted
consumer protection and fraud prevention rules, action by the
Legislature on AB 1010 would be ill-timed, sow needless
confusion, and be contrary to the pro-competitive policies just
endorsed by the PUC."
Another argument put forward by the opponents of the bill
centers around the requirement in the bill that customers who
modify service be granted the opportunity to opt out of a
contract. The wireless industry is concerned that this would
permit a customer to end their contract by adding a service,
thus triggering a 30 day period in which the customer could
cancel the entire contract. Under this scenario, after six
months a customer could add text messaging service onto a two
year contract, and then within 30 days opt out of the next 18
months of the contract, without penalty. If this concern were
realized, it would essentially negate all current mobile phone
contracts as customers would have a readily available loophole
to exploit. It is also possible that the industry would respond
by prohibiting any alteration of an existing contract,
restricting customers from adding additional services during the
life of their service agreement.
3) No such thing as a free phone: The major mobile phone
providers require customers to sign long-term contracts for
service. Those contracts are typically one or two years long
and usually include free or discounted mobile phones. It is
important to note that the mobile phone provider amortizes the
price of the free or discounted phone over the term of the
contract. As such, a 30-day grace period may increase the costs
of providing a free or discounted phone, which may be
detrimental to customers who prefer low up-front costs.
4) Previous Legislation AB 2622 (Ruskin), which contained
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identical language to this bill was moved to Interim Study by
this Committee on May 10, 2006.
REGISTERED SUPPORT / OPPOSITION :
Support
AARP California
American Federation of State, County and Municipal Employees
(AFSCME)
California Alliance for Retired Americans (CARA)
California Labor Federation
Communications Workers of America
Opposition
California Public Utilities Commission (CPUC)
CTIA - The Wireless Association
Sprint Nextel
Verizon Wireless
Analysis Prepared by : Greg Girvan / U. & C. / (916) 319-2040
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