BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1010| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1010 Author: Ruskin (D), et al Amended: 8/23/06 in Senate Vote: 21 SENATE ENERGY, UTIL . & COMMUNIC. COMMITTEE : 7-3, 6/27/06 AYES: Escutia, Alarcon, Bowen, Dunn, Kehoe, Murray, Simitian NOES: Cox, Battin, Dutton ASSEMBLY FLOOR : Not relevant SUBJECT : Telecommunications: mobile telephony services SOURCE : Consumer Federation of California DIGEST : This bill requires cellular telephone companies to provide their customers with a 21-day right of rescission exercisable if the customer finds the service unsatisfactory. Senate Floor Amendments of 8/23/06 limit the scope of the bill. They reduce from 30 days to 21 days, the right of rescission and limit this right to rescind to new customers. ANALYSIS : Current law bars states from regulating the entry of, and the rates charged by, cellular telephone companies, but permits states to regulate the other terms and conditions of service. CONTINUED AB 1010 Page 2 This bill requires cellular telephone companies to provide their customers with a 21-day right of rescission exercisable if the customer finds the service unsatisfactory. This provision does not apply where customers have month to month accounts or prepaid service, and applies only to new customers. Background The fight over telephone consumer protection issues has raged since the turn of this century. A five year effort to establish and enforce strong consumer protection rules at the Public Utilities Commission (PUC) succeeded and was then rescinded a victim of an ideological battle over the proper role of government. There can be no doubting the popularity of cell phone service. Over 200 million Americans have cell phone service, 23 million of which are Californians. Along with the popularity has come some consumer dissatisfaction. The Federal Communications Commission has noted an increase in consumer complaints. Poor cellular service is the second largest complaint to the Better Business Bureau, trailing only auto dealers. Forty-five million cell phone customers switch every year, according to a recent report by a respected market research firm. Even the industry admits it has problems, an officer of one of the largest cell phone companies recently admitted to the New York Times: "It's no secret that the wireless industry doesn't have the world's greatest reputation for customer service." Comments Unnecessary ? Opponents argue that this bill is unneeded, and that there is little demand for a 30-day right of rescission. Better, they argue, to let the market decide what return policy is best. A cell phone company should be able to choose whether to spend money on improving the quality of its network rather than establishing a costly 30-day return policy. Will the phone work where I want to use it ? Every cellular telephone company provides coverage maps to show where AB 1010 Page 3 their service is available. However, those maps are much 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/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 does not live up to their expectations or to the promises made by the carrier. Cell phones are almost indispensable, and the technology is truly amazing and evolving. But when one of the major cellular carriers advertises that its service is not as bad as their competitors (e.g. fewest dropped calls), it helps make the case for this bill. 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 cell phone service is considered a "service" and not a "product," those contracts aren't covered by the Song-Beverly Consumer Warranty Act, though it is a fair question as to whether Song-Beverly applies to the cellular phone. 30 days is the norm . For a short time in late 2004, the PUC instituted a rule requiring a 30-day cancellation policy, though that rule was rescinded when two PUC commissioners were replaced by the current Administration. Most major cellular carriers still offer 30-day cancellation policies. Prior legislation . The Senate has passed similar bills before in 2002 and 2003. This year, AB 2622 (Ruskin), was moved to Interim Study in the Assembly Utilities and Commerce Committee. FISCAL EFFECT : Appropriation: No Fiscal Com.: No AB 1010 Page 4 Local: No SUPPORT : (Verified 6/28/06) (Unable to reverify) Asian Law Alliance California Alliance for Retired Americans California Community Technology Policy Group California Conference Board of the Amalgamated Transit Union California Conference of Machinists California Labor Federation California Public Interest Research Group California Rural Legal Assistance Foundation California Teamsters Public Affairs Council Central American Resource Center Communications Workers of America Consumer Attorneys of California Concerned Citizens of South Central Los Angeles Consumer Attorneys of California Disability Rights Advocates Eastside Neighborhood Center Echo Park Community Coalition El Concilio of San Mateo County Engineers and Scientists of California International Longshore and Warehouse Union Legal Aid Foundation of Santa Barbara County Madera Coalition for Community Justice Merced Lao Family Community, Inc. Office of Attorney General Professional & Technical Engineers, Local 21 Strategic Committee of Public Employees, Laborers International Union of North America The Foundation for Taxpayer & Consumer Rights The Utility Reform Network UFCW Local 428 UNITE HERE! United Food & Commercial Workers Union, Western States Council Utility Consumers' Action Network OPPOSITION : (Verified 6/28/06) (Unable to reverify) Cingular Wireless AB 1010 Page 5 CTIA-The Wireless Association Public Utilities Commission Sprint Nextel T-Mobile USA Verizon Wireless NC:do 8/24/06 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****