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  ****