BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
MARTHA M. ESCUTIA, CHAIRWOMAN
SB 396 - Battin Hearing Date:
April 19, 2005 S
As Amended: April 7, 2005 FISCAL B
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DESCRIPTION
Current law requires telephone rates to be fair and reasonable.
The California Public Utilities Commission (CPUC) is authorized
to regulate rates for intrastate telephone service.
Current regulation , in the form of CPUC Decision 98-06-075,
prohibits the filing of new complaints to establish new Extended
Area Service (EAS) routes in the state that extend the
geographic reach of local toll-free telephone calls.
This bill requires the CPUC to report to the Legislature, by
July 1, 2007, on the impact of toll call pricing in the
Coachella Valley, whether additional steps are necessary to
encourage innovative pricing, and related matters.
The bill repeals its provisions on January 1, 2008.
BACKGROUND
EAS is a telephone service authorized in certain designated
communities which extends the geographic reach of a local
toll-free calling area. Generally, the service territories of
the local telephone carriers are divided into local exchanges.
Each local exchange has a point designated as a rate center
which is used to measure the distance of calls for billing
purposes. For incumbent local exchange carriers (ILECs), the
prescribed distance is 12 miles. If the rate centers are
greater than 12 miles apart, the calls between such exchanges
are toll calls. EAS allows customers in one exchange to extend
the toll-free local calling area into another exchange whose
rate center is more then 12 miles away.
EAS routes have traditionally been established through formal
complaint cases filed by customers seeking to extend their 12
mile local calling area when those customers can't reach a
reasonable range of essential services within their existing
toll-free local calling area. These essential services include
police, fire, medical care, legal services, schools, banking and
shopping.
The CPUC has traditionally considered several criteria in
deciding whether to authorize an EAS route. In general, these
criteria include whether: (1) a community of interest exists
between the affected local exchange and areas beyond the
existing toll-free calling area, (2) there is customer support
for extending the area of service, and (3) the EAS route can be
implemented with reasonable rates.
SB 1553 (Battin, 2002) was substantially similar to SB 396, as
it also required the CPUC to examine the impact of toll call
pricing in the Coachella Valley. SB 1553 was approved by this
committee on a 5-0 vote, but was vetoed by Governor Davis,
asserting it was an unnecessary, costly ($200,000), piecemeal
approach to an issue of statewide significance.
COMMENTS
IntraLATA toll competition was instituted on January 1, 1995,
whereby both business and residential customers could choose
from among multiple carriers to carry their intraLATA calls,
reducing the toll costs customers face for calls beyond their
local calling area. Concurrent with the institution of
intraLATA competition, the toll rates of Pacific Bell (now SBC)
and GTE California (now Verizon) were significantly reduced by
the CPUC. Today, many interexchange carriers offer intraLATA
toll calling plans at competitive rates. AT&T, MCI and Sprint
offer residential optional calling plans that include intraLATA
toll rates of no more then $.05 per minute for calls made within
California. These companies also provide a bundled package,
which means that all telephone services are all packed into one
low flat rate per month.
Supporters of this bill feel EAS meets essential calling needs
that are not adequately addressed by any other service
alternative. EAS routes are necessary in situations where
services that are essential to a community are not located
within the boundaries of a local telephone exchange. People who
live in rural communities where there are no schools, no doctors
and no county offices must conduct essential daily activities in
other communities. Without EAS, residents of such small
communities would routinely have to place toll calls to reach
local services, including schools, doctors, city and county
departments, hospitals and emergency services.
Opponents of this bill agrue that, in the current competitive
market, EAS is no longer necessary and should be either
grandfathered or phased out over time. Parties in favor of
grandfathering or phasing out EAS argue that EAS has become an
anachronism which had a valid role in the era prior to the
advent of competition. These parties argue that since the
institution of intraLATA toll competition in 1995, customers
increasingly have access to alternative calling plans from
competing intraLATA providers and should no longer require EAS
routes. Given the cost inequities and administrative burdens
involved in adjudicating and establishing EAS routes, these
parties argue that no new EAS routes are needed or should be
approved.
This bill would have the CPUC address (and re-address) toll rate
and toll competition issues in a piecemeal fashion.
Importantly, the issues facing the Coachella Valley may not be
unique to that community because population and economic changes
affect many parts of the state and because competition has not
necessarily progressed uniformly across urban, suburban and
rural areas. Because many communities may be facing situations
like that in the Coachella Valley, it may be more efficient to
consider the issues identified in the bill on a statewide basis.
While a statewide approach would potentially involve a larger,
more complex proceeding, it would avoid potentially numerous
separate proceedings addressing the same or similar issues in a
piecemeal fashion.
POSITIONS
Sponsor:
Author
Support:
Office of Ratepayer Advocates
Oppose:
None on file
Randy Chinn/Melanie Gutierrez
SB 396 Analysis
Hearing Date: April 19, 2005