BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1068|
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THIRD READING
Bill No: SB 1068
Author: Escutia (D), et al
Amended: 3/30/05
Vote: 21
SENATE ENERGY, UTIL. & COMMUNICATIONS COMM. : 7-3, 4/5/05
AYES: Escutia, Alarcon, Bowen, Dunn, Kehoe, Murray,
Simitian
NOES: Battin, Campbell, Cox
NO VOTE RECORDED: Morrow
SENATE APPROPRIATIONS COMMITTEE : 7-4, 4/25/05
AYES: Migden, Alquist, Ashburn, Bowen, Escutia, Ortiz,
Speier
NOES: Aanestad, Battin, Dutton, Poochigian
NO VOTE RECORDED: Florez, Murray
SUBJECT : Telecommunications: consumer protection
SOURCE : Author
DIGEST : This bill requires the Public Utilities
Commission to develop and enforce telephone consumer
protection rules reflecting specified policies by July 1,
2006.
ANALYSIS : Existing law provides the Public Utilities
Commission (PUC) with regulatory authority over public
utilities, including telephone companies.
CONTINUED
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This bill states the intent of the Legislature to establish
telephone consumer protections that are at least as
protective as those established by the PUC in its May 2004
decision.
This bill requires the PUC to establish and enforce
telephone consumer protection rules by July 1, 2006 that
achieve the following policies:
1. A consumer has a right to receive clear and complete
information about rates, terms, and conditions for
service.
2. A consumer has a right to select services and vendors,
and to have those choices respected by telephone service
providers.
3. A consumer has a right to personal privacy.
4. A consumer has a right to participate in public policy
proceedings, to be informed of her rights, and to have
effective recourse if those rights are violated.
5. A consumer has a right to accurate and understandable
bills.
6. A consumer has a right to be treated equally with all
other similarly situated consumers.
7. A consumer has a right to safety and security of person
and property.
This bill requires the rules adopted by the PUC to include
all of the following:
1. A telephone corporation shall disclose its rates, terms
and conditions of service.
2. A telephone corporation shall make no deceptive or
misleading statement about its rates and services.
3. A telephone corporation shall provide a customer with
written confirmation of every order for service and a
written copy of each contract. A customer may cancel
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any new service within 30 days without termination fees
or penalties.
4. Telephone corporations shall provide customer contracts
and make required disclosures in the language used to
advertise the product or service upon the customer's
request.
5. For prepaid calling cards, every advertisement of price
shall include disclosure of any limitations, minimum
charges, and any other relevant fees or surcharges.
6. Bills must be clearly organized and contain only charges
which have been authorized by the customer. Only
government imposed fees and taxes may be identified as
government fees and taxes.
7. For charges for non-communications services:
A. The telephone bill can contain those charges only
if the customer has authorized the charge.
B. The telephone corporation must take reasonable
precautions to screen out unscrupulous vendors.
C. The charges must be separately identified and
clearly labeled.
D. Basic telephone service cannot be disconnected for
non-payment.
Background
On February 3, 2000, the PUC commenced what has so far been
a more than five year effort to establish telephone
consumer protection rules. After numerous opportunities
for written comment, over 20 public meetings in 13
locations throughout the state, additional opportunities
for written comment, creation of consumer and industry
working groups to attempt to settle differences, and more
public comment, the PUC on May 27, 2004 approved telephone
consumer protection rules that apply to all telephone
companies, including cellular companies. Telephone
companies were given at least 180 days to implement the
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rules.
Toward the end of 2004, most of the telephone companies had
implemented most of the rules. However, many companies
requested a time extension to implement certain rules, and
pursuant to PUC procedures those extensions were granted
first for 30 days, then for an additional 30 days, and then
for an additional period of up to a year. On January 5,
2005 a PUC Commissioner proposed staying the PUC's May 2004
decision, with the intent to vote on staying the rules the
following week. During this time, the PUC had only three
members as two members' terms had expired at the end of
2004 and new commissioners had not been sworn in. Rather
than attempt to stay the rules with a procedurally suspect
two to one majority, the Commission waited until a fourth
commissioner was sworn in. Shortly thereafter, on January
27, 2005, the PUC voted to indefinitely stay their June 7
decision. On March 10, 2005 the PUC issued a ruling to
follow up on the stay. That ruling asked parties to
comment on several questions including:
1. Which of the stayed rules cause little or no hardship to
telephone companies?
2. To what extent have voluntary actions by telephone
companies eliminated the need for any of the stayed
rules?
3. Are there equally effective but less restrictive
alternative approaches to providing consumer protection?
Comments
The intent of this bill is to enact telephone consumer
protection rules that are at least as stringent as the
rules adopted by the PUC in May 2004. The bill provisions
reflect the policies contained in those rules but lack some
of the specificity. There is one provision that is much
stronger than was contained in the PUC's rules. That
provision requires that if a service is marketed in a given
language then the contract and disclosures must be in that
same language if requested by the customer.
Supporters express exasperation at the PUC. They note the
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difficulty in dealing with telecommunications companies and
the need for enforceable consumer protections.
Opponents are concerned that this bill is duplicative of
the PUC's process, and that the PUC should be permitted to
complete its process. If the PUC's
March 10 ruling is any indication of the PUC's inclination,
it is little wonder that opponents prefer the PUC process.
Opponents argue that adequate consumer protections already
exist, both in the form of a Wireless Code of Conduct and
through existing laws of general
applicability. The Code of Conduct is voluntary, created
by the cellular carriers in response of consumer
complaints. The laws of general applicability require
enforcement. Is it reasonable to rely on the Attorney
General or District Attorneys to make enforcement of those
laws with regard to telecommunications service a priority,
given the other law enforcement matters they face? The
author's office argues that better enforcement of telephone
consumer protection rules will occur if that job is given
to the PUC where it has historically resided and made a
priority.
Opponents are concerned about state by state regulations
which they believe will impair the economies of scale that
some of the wireless carriers enjoy. They point to a March
18, 2005 order by the Federal Communications Commission
(FCC) which bars states from requiring or prohibiting
discretely identified charges on a cellular bill. That
order also includes several proposed rules on which the FCC
seeks comment. Certain of those
rules could preempt California's ability to establish and
enforce consumer protection rules. In its proposal. the
FCC noted that it believes that limiting state regulation
of billing practices in favor of a uniform federal regime
"will eliminate the inconsistent state regulation that is
spreading across the country, making nationwide service
more expensive for carriers to provide and raising the cost
of service to consumers."
While it is true that the FCC narrowly preempted the states
with regard to discretely identified charges, the broader
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FCC preemptions are proposed, not adopted. Comments from
parties have yet to be considered. Importantly, two of the
five commissioners expressed strong concerns over state
preemption and one of the remaining three commissioners has
resigned. It is not certain whether the states will be
more broadly preempted.
The FCC order does have a lot to say about telephone
consumer protection, particularly with respect to cellular
companies. Specifically, the FCC
concluded that cellular companies should no longer be
exempt from the requirement that billing descriptions be
brief, clear, non-misleading, and in plain language. The
FCC reached this conclusion because "recent data indicates
that complaints regarding wireless 'billing & rates' and
'marketing & advertising' have increased significantly"
since 1999." The FCC is "concerned that some (cellular)
carriers may be disguising rate increases in the form of
separate line item charges and implying that such charges
are necessitated by governmental action." The FCC noted
that "the record reflects that consumers still experience a
tremendous amount of confusion regarding their bills, which
inhibits their ability to compare (cellular) carriers'
service and price offerings, in contravention of the
pro-competitive framework of the 1996 (Federal
Telecommunications) Act." It seems that the FCC supports
the need for stronger consumer protections, recognizing
that voluntary measures and market forces have been
inadequate.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
PUC staff estimate unknown costs, but probably in the range
of $50,000+ to several hundred thousand dollars annually.
Increased costs depend on the extent to which this bill (1)
imposes additional duties that the PUC would not have
otherwise adopted, and (2) drives up enforcement costs by
applying protections to all customers, rather than only
residential and small commercial customers (as was the case
with the PUC's 2004 decision). Public Utilities
Reimbursement Account revenues are derived from an annual
fee imposed on utilities. Therefore, any increased costs
to the PUC should be offset by fee revenues.
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SUPPORT : (Verified 4/27/05)
AARP California
Asian Law Caucus
California Alliance For Consumer Protection
California Small Business Association
Canal Alliance
Chinese for Affirmative Action
Chinese Newcomers Service Center
Community Technology Policy Council
Consumer Federation of California
Lao Family Community Development Inc.
Latino Issues Forum
Little Tokyo Service Center
Office of the Attorney General
The Utility Reform Network
Utility Consumers' Action Network
OPPOSITION : (Verified 4/27/05)
CTIA - The Wireless Association
California Broadcasters Association
California Chamber of Commerce
California Manufacturers and Technology Association
California Retailers Association
Cingular Wireless
Cricket Communications
Los Angeles Economic Development Corporation
Nextel Communications
San Diego Telecom Council
Sprint Communications Company
T-Mobile
Verizon Wireless
NC:mel 4/27/05 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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