BILL ANALYSIS Ó
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UNFINISHED BUSINESS
Bill No: SB 1161
Author: Padilla (D), et al.
Amended: 8/16/12
Vote: 21
SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 12-0, 4/17/12
AYES: Padilla, Fuller, Berryhill, Corbett, De León,
DeSaulnier, Emmerson, Kehoe, Pavley, Rubio, Strickland,
Wright
NO VOTE RECORDED: Simitian
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/24/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SENATE FLOOR : 30-6, 5/30/12
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Correa, De León, DeSaulnier, Dutton, Emmerson,
Fuller, Gaines, Harman, Hernandez, Huff, Kehoe, La Malfa,
Lieu, Liu, Lowenthal, Negrete McLeod, Padilla, Price,
Rubio, Steinberg, Vargas, Walters, Wright, Wyland
NOES: Corbett, Hancock, Leno, Simitian, Wolk, Yee
NO VOTE RECORDED: Evans, Pavley, Runner, Strickland
ASSEMBLY FLOOR : 63-12, 8/20/12 - See last page for vote
SUBJECT : Communications: Voice over Internet Protocol
(VoIP) and
Internet Protocol (IP) enabled communications
service
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SOURCE : Silicon Valley Leadership Group
TechAmerica
TechNet
DIGEST : This bill requires authorization by statute or
express delegation
by federal law expressly authorized by statute for the
Public Utilities Commission (PUC) or any other state
department, agency, commission or political subdivision of
the state to regulate Voice over Internet Protocol (VoIP)
or Internet Protocol-enabled (IP) service providers.
Assembly Amendments add two additional savings clauses to
provide even more assurance that the bill's limitation on
regulation could not be construed to prevent enforcement of
agency requirements related to communications services:
(1) provides that the bill does not affect enforcement of
the Warren Act requiring a statewide 911 emergency
telephone system, and (2) provides that the bill does not
affect enforcement of policies or contracts that protect
intellectual property, such as an executive order that
prohibits use of state computers from downloading,
streaming, or using unlicensed software, sound recordings
or audiovisual works. The amendments also add clarifying
language, and add coauthors.
ANALYSIS :
Existing Law
1. Federal law grants the Federal Communications Commission
(FCC) authority over all interstate and international
communication and reserves for each state authority over
services that are provided between points within that
state's borders.
2. Federal law provides that it is "the policy of the
United States to preserve the vibrant and competitive
free market that presently exists for the Internet and
other interactive computer services, unfettered by
Federal or State regulation."
3. The California Constitution grants the PUC authority,
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subject to control of the Legislature, to regulate
utilities including "telephone corporations," defined as
every entity "owning, controlling, operating, or
managing any telephone line for compensation within this
state."
4. Federal law and FCC decisions provide that a
"telecommunications service," but not an "information
service," is subject to utility-type common carrier
regulation, including regulation of market entry, rates,
and terms and conditions of service, among other
requirements, and preempts state regulation of any
"information service."
5. FCC decisions have imposed public safety and consumer
protection requirements on VoIP service, which include
requiring VoIP to offer 911 service, provide law
enforcement access to facilities, make facilities
accessible to disabled users, protect customers' private
information, allow customers to keep their telephone
number when switching providers, and report network
outages.
6. FCC decisions have preempted state regulation of
IP-enabled services including VoIP but have authorized
states to take specified actions with respect to VoIP,
which include requiring VoIP providers to pay fees to
support state 911 systems and state universal service
programs.
Existing law authorizes the PUC to require VoIP providers
to pay fees to support the state's 911 system and state
universal service programs and to obtain specified data
from VoIP providers in connection with certain federal
proceedings.
Existing federal law authorizes the PUC to implement and
enforce federal requirements relating to service provider
interconnection, access to unbundled network elements, and
to affect the resolution of disputes regarding intercarrier
compensation, including for the exchange of traffic that
originated, terminated, or was translated at any point into
IP format.
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Existing law, the Digital Infrastructure and Video
Competition Act of 2006, authorizes the PUC to grant
statewide franchises to providers of video service and
enforce conditions of service.
Existing law includes numerous provisions of criminal or
civil laws of general applicability, including unfair or
deceptive trade practice laws, that apply to the conduct of
business.
Several existing laws would be exempted from these
prohibitions including the Emergency Telephone Users
Surcharge Law which requires interconnected VoIP to collect
and remit 911 surcharges, the state's universal service
programs, The Digital Infrastructure and Video Competition
Act of 2006, and the enforcement of criminal or civil laws
or any local ordinances of general applicability.
This bill:
1. Specifies certain areas of law that are expressly
applicable to VoIP and IP enabled service providers.
2. Provides that this bill does not affect existing PUC
authority over non-VoIP and other non-IP enabled
wireline or wireless service and does not affect the
enforcement of any state or federal criminal law or
local ordinances of general applicability that apply to
the conduct of business, the California Environmental
Quality Act, or a local utility user tax.
3. Specifies that it does not affect existing regulations
or existing PUC authority over non-VoIP and other non-IP
enabled wireline or wireless service including
regulations regarding universal service, the offering of
basic service, and lifeline service, and will remain in
effect until
January 1, 2020.
Background
The Senate Energy, Utilities and Communications Committee
held an informational hearing on March 20, 2012, on "Apps,
Internet Services, and the 21st Century Telecommunications
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Network." This hearing addressed how rapidly changing
technology, especially the Internet, has led to a much
different regulatory environment than in the days when
telecommunications consisted of Plain Old Telephone Service
(POTS) - local and long distance voice service over
landline facilities with circuit-based switching offered by
a monopoly provider. Since the early days of the Internet
and computer processing, the FCC has declined from applying
traditional telephone regulations to broadband and
Internet-based services that involve some form of data
processing and enable end users to manage the communication
rather than just transmit a voice signal. The hearing
reviewed this history and recent FCC and PUC decisions
generally declining to regulate VoIP and IP-enabled
services and also heard from the PUC, industry, and
consumer advocates on what California's policy and
governance framework should be as increasing numbers of
customers abandon traditional landline service and choose
to subscribe to these services accessible with a broadband
connection.
Customer Migration to VoIP Service . Today's consumers are
increasingly abandoning landline service and opting for
wireless service and fixed or mobile broadband service that
offers a platform for integrated voice, video and data
services and Internet access. VoIP is the service that
allows voice calling through a broadband connection. Unlike
traditional circuit-switched telephony, which establishes a
dedicated circuit between the parties to a voice
transmission, VoIP relies on IP technology, which changes
the contents of a communication into digital packets and
sends them over the fastest available route over private IP
networks or the Internet.
"Interconnected" VoIP enables calling to and from the
public switched telephone network. VoIP service may be
offered by the same provider of the broadband connection,
such as a cable company (i.e. Comcast's Digital Voice) or a
local exchange carrier (i.e. AT&T's U-verse or Verizon's
FiOS). "Over-the-top" VoIP is offered separately and
operates with any broadband connection, in many cases free
of charge (i.e., Skype).
While similar in many ways to traditional landline
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telephone service, VoIP is different in that the IP
technology and broadband connection provide an integrated
suite of capabilities and features that go beyond the
ability to place and receive calls. Users can send and
receive information and access their calls and information
in a variety of ways from multiple devices - phone,
Internet, video, mobile handset, iPod, or smart phone.
VoIP service allows, for example, to play back voicemails
through a computer or receive them in an email, with the
actual message attached as a sound file, have caller
identification information appear on a television screen,
cause incoming calls to ring at multiple locations
simultaneously, or combine voice calling with a live video
connection.
According to FCC data, the number of subscribers to
interconnected VoIP service nationwide increased 46 percent
from 2008 to 2010, while the number of subscribers to
traditional wired telephone services decreased by 17
percent during that two-year period. As of December 2010,
31 percent of the 87 million residential telephone
subscriptions in the United States were provided by
interconnected VoIP providers. California had about 3.5
million interconnected VoIP subscriber lines at the end of
2010, receiving service from 125 VoIP providers.
As the two largest carriers (AT&T and Verizon) continue to
migrate customers from landline to broadband connections,
these numbers will increase dramatically. These two
carriers had a combined 29 percent increase in the number
of VoIP customers in the six months from June to December
2011.
Federal Policy to Not Regulate the Internet . The
Communications Act of 1934, as amended, established a dual
regulatory regime for communications services, granting the
FCC authority over all interstate and international
communication, and reserving for each state authority over
services that are provided between points within that
state's borders. The law provides that only a
"telecommunications service" is subject to utility-type
common carrier regulation, which includes regulation of
market entry, rates, and terms and conditions of service,
among other requirements. Traditional landline voice
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service has always been recognized as a "telecommunications
service."
Since the 1960s, when innovators began adding computer
devices to the network and the Internet was in its infancy,
the FCC has declined from applying utility-type regulation
to these "information services," concluding that they
should be allowed to compete and flourish in a competitive
market place free from the burden of rules, regulations,
and licensing requirements. Congress reinforced this
policy in the Telecom Act and also stated that it is "the
policy of the United States to preserve the vibrant and
competitive free market that presently exists for the
Internet and other interactive computer services,
unfettered by Federal or State regulation."
FCC Declines Traditional Regulation of VoIP . In 2004, in a
decision known as the Vonage Preemption Order, the FCC
preempted the Minnesota Public Utilities Commission from
applying its traditional telephone company regulations to a
VoIP service that allowed calling through a broadband
connection. The FCC concluded that preemption was
warranted because it was impossible or impractical to
separate out the purely intrastate component of the service
and because state regulation would directly conflict with
the pro-competitive policy disfavoring utility-type
regulations that hinder development of innovative new
services. The FCC cited the Congressional directive to
promote a free and competitive Internet and emphasized the
goal of avoiding patchwork regulation so that these new
IP-enabled services would not have to "satisfy the
requirements of more than 50 jurisdictions with more than
50 different sets of regulatory obligations."
In the Vonage Preemption Order, the FCC declined from
deciding whether VoIP is a "telecommunications service" or
an "information service" but stated that it was "making
clear that this Commission, not the state commissions, has
the responsibility and obligation to decide whether certain
regulations apply" to IP-enabled services.
In a series of decisions since 2004 relating to IP-enabled
services, the FCC has repeatedly declined to classify VoIP
service. Instead of opting for the full panoply of
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regulations applicable to "telecommunications services,"
the FCC has identified specific public safety and consumer
protections that apply. These include requiring VoIP to:
offer 911 service, including customer location
information, and collect 911 fees;
provide law enforcement access to facilities;
make facilities accessible to disabled users;
protect customers' proprietary information;
apply number portability requirements so customers can
keep their telephone number when changing providers;
contribute to universal service programs;
not transmit fraudulent Caller ID information;
provide customers notice of discontinuance of service;
and
report network outages.
VoIP Regulation in Other States . In the wake of the Vonage
Preemption Order and subsequent IP decisions, any attempt
by a state commission to apply utility-type regulation to
VoIP has been highly controversial. No state commission
regulates VoIP as a telephone utility. The few decisions
by state commissions asserting jurisdiction over VoIP have
been suspended, challenged in court, or invalidated by
legislation. At least 24 states and the District of
Columbia have enacted statutes that generally prohibit
utility-type regulation of IP-enabled services including
VoIP, although generally applicable business, taxation and
consumer protection laws apply. These states include
Alabama, Arkansas, Delaware, Florida, Georgia, Illinois,
Indiana, Kentucky, Massachusetts, Maryland, Maine,
Minnesota, Missouri, North Carolina, New Jersey, Nevada,
Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina,
Tennessee, Texas, Virginia, and Wisconsin. A VoIP bill in
New York that was included in a budget bill without a
public hearing was recently withdrawn. Utah enacted a VoIP
statute in March, and a bill in Mississippi is currently
before the Governor.
PUC Activity Related to VoIP . The California Constitution
grants the PUC authority, subject to control of the
Legislature, to regulate utilities including "telephone
corporations," defined as every entity "owning,
controlling, operating, or managing any telephone line for
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compensation within this state." A "telephone line"
includes "all conduits, ducts, poles, wires, cables,
instruments, and appliances, and all other real estate,
fixtures, and personal property owned, controlled,
operated, or managed in connection with or to facilitate
communication by telephone, whether such communication is
had with or without transmission wires." Thus, the PUC has
authority to regulate the intrastate component of service
that equates to a "telecommunications service" under
federal law, subject to any preemption.
Like the FCC, the PUC has declined from applying
utility-type regulation to VoIP and has never decided
whether or not a VoIP provider is a "telephone
corporation." In 2004, the PUC opened a proceeding to
evaluate the appropriate regulatory structure for VoIP
under state law, but several years later closed the
proceeding, concluding that it was premature to assess its
regulatory role over VoIP until the FCC classifies VoIP as
either a regulated "telecommunications service" or an
unregulated "information service." The PUC has repeated
this conclusion in several other decisions over the years
(including a service quality decision in July 2009 and its
backup power decision in January 2010), each time declining
to regulate VoIP and IP-enabled services.
Prior Legislation
AB 2393 (Levine), Chapter 776, Statutes of 2006, authorized
the PUC to adopt backup power requirements for VoIP.
SB 202 (Simitian), Chapter 626, Statutes of 2006, applied
state privacy protections to calling records of VoIP
customers.
SB 1040 (Kehoe), Chapter 17, Statutes of 2008, required
VoIP to pay fees to support the state's 911 system.
AB 1315 (Fuentes), Chapter 358, Statutes of 2010,
authorized the PUC to obtain data from VoIP providers
related to forbearance petitions filed with the FCC.
SB 3 (Padilla), Chapter 695, Statutes of 2011, and AB 841
(Buchanan), Chapter 685, Statutes of 2011, authorized the
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PUC to require VoIP to pay fees to support state universal
service programs.
Related legislation . SB 1160 (Padilla) updates current law
related to intentional service interruptions so that it
applies to any service that enables users to call 911 in an
emergency, including wireless and VoIP service. The bill
is currently on Senate Third Reading.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Assembly Appropriations Committee, PUC
estimates one-time special fund costs of about $730,000.
These costs include a one-year proceeding (four positions
totaling $500,000) to examine the applicability of a
Certificate of Public Convenience and Necessity (CPCN) to
the services and facilities of VoIP providers, and other
voice service providers. Potential issues include
clarifying the scope of PUC jurisdiction over facilities
providers use to offer basic telephone service utilizing
VoIP.
Additionally, PUC anticipates a review, likely through a
rulemaking, to assess the impact on its public purpose
programs. This review would require three positions at a
cost of about $230,000 ÝPublic Utilities Reimbursement
Account]. PUC would likely address whether existing PUC
rules and guidelines would still apply to a service
provider that does not hold a CPCN but wishes to
participate in one or more of the state's public purpose
programs.
While it is unclear whether PUC will need two proceedings
to implement this bill, cost pressure could exceed $150,000
to the extent that a statute prohibiting PUC from engaging
in regulatory activity results in an increase in disputes
and a redirection of staff resources at PUC.
SUPPORT : (Verified 8/21/12)
Silicon Valley Leadership Group (co-source)
TechAmerica (co-source)
TechNet (co-source)
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African-American Male Achievers Network
American G.I. Forum of California
Appallicious
Applied Materials
Asian Business Association
Asian Pacific Islander American Public Affairs Association
- Southern California Regional Headquarters
AT&T
Bay Area Council
Black Business Association
Brotherhood Crusade
California Asian Pacific Chamber of Commerce
California Association of Competitive Telecommunications
Companies
California Black Chamber of Commerce Foundation
California Cable & Telecommunications Association
California Chamber of Commerce
California Hispanic Chambers of Commerce
California Manufacturers & Technology Association
California Retailers Association
California Small Business Association
California State Association of Electrical Workers
CALinnovates
Cambodian Association of America
Charter Communications
Cisco Systems, Inc.
Coalition of California Utility Employees
Comcast Communications
Concerned Citizens Community Involvement
Congress of California Seniors
CONNECT
Consejo de Federaciones Mexicanas en Norteamérica
Corporation for Education Network Initiatives in California
Cox Communications
CTIA - The Wireless Association
Drumbi
Frontier Communications
Great Valley Center
Inland Empire Economic Partnership
Jobblehead
Juniper Networks
La Maestra Community Health Centers
Los Angeles Opportunities industrialization Center
Microsoft
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MobileFuture
Motion Picture Association
National Association for the Advancement of Colored People
- California Conference
Orange County Business Council
Palm Desert Area Chamber of Commerce
Portal A
QUALCOMM
Self-Help for Elderly
South Bay Association of Chambers of Commerce
Southwest California Legislative Council
TelecomCouncil
Time Warner Cable
United Cambodian Community
United States Hispanic Chamber of Commerce
Verizon
Voice on the Net Coalition
OPPOSITION : (Verified 8/21/12)
AARP
Access Humboldt
American Civil Liberties Union of California
AnewAmerica Community Corporation
Asian American Business Women Association
Brightline Defense Project
California Alliance for Retired Americans
California Broadband Policy Network
Center for Accessible Technology
Center for Media Justice
Central City SRO Collaborative
Chicana/Latina Foundation
Communications Workers of America
Consumer Federation of California
Consumers First, Inc.
Consumers Union
County of Mendocino
Davis Media Access
Division of Ratepayer Advocates
El Concilio of San Mateo County
FAME Corporations
Greenlining Institute
Hmong American Political Association
Humboldt County Supervisors
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Media Alliance
MuniServices, LLC
National Federation of Filipino American Associations
National Hispanic Media Coalition
Office of Mayor Gayle McLaughlin
Privacy Rights Clearinghouse
Public Counsel Law Center
San Francisco African American Chamber of Commerce
Santa Clara University
Tenderloin Housing Clinic
Tenderloin Neighborhood Development Corporation
Town of Fairfax
The Utility Reform Network
Utility Consumer's Action Network
Utility Workers Union of America
West Angeles Community Development Corporation
ARGUMENTS IN SUPPORT : According to CTIA:
Promote continued growth and innovation of Internet-based
services for California consumers . Today, consumers are
benefiting from significantly enhanced services and
choices due to VoIP and other IP-based technologies.
Free and low-cost audio and video calling are
fundamentally changing the way consumers connect with
friends, family and in business. New Internet-based
"Applications" are providing consumers with powerful
tools for commerce, public safety, healthcare,
entertainment, and other uses. California's wireless
industry is on the frontlines, providing consumers these
innovative new services and technologies. SB 1161 will
help ensure continued growth and choice for consumers.
Promote continued growth and innovation of Internet-based
services for California jobs and the economy . VoIP and
IP-based technologies are revolutionizing our economy.
California's wireless carriers are at the forefront of
technologies and applications that are revolutionizing
the healthcare, education and music industries, and these
technologies are helping businesses of all sizes become
more efficient and competitive. Continued growth and
innovation of Internet-based technologies and VoIP will
help promote economic growth and jobs at a time when they
are desperately needed.
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ARGUMENTS IN OPPOSITION : American Association of Retired
Persons (AARP) writes:
This proposal has far-reaching ramifications and will
likely have many unintended consequences should it become
law. The bill prohibits the CPUC from exercising any
jurisdiction over internet-enabled telecommunications
services. By effectively removing CPUC oversight and
regulatory authority, this measure would remove the
ability to enforce a host of valuable protections
currently serving the interests of seniors, the disabled,
and consumers generally. AARP have grave concerns about
shutting and locking the door on the CPUC performing its
traditional role in protecting consumers in this critical
area. The need for consumer protections applies
regardless of the technology used.
ASSEMBLY FLOOR : 63-12, 08/20/12
AYES: Achadjian, Alejo, Atkins, Bill Berryhill, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Charles Calderon, Campos, Carter, Cedillo, Conway, Cook,
Davis, Dickinson, Donnelly, Eng, Fletcher, Fong, Fuentes,
Beth Gaines, Galgiani, Garrick, Gordon, Gorell, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Hill, Huber,
Hueso, Jeffries, Jones, Knight, Lara, Logue, Ma, Mansoor,
Miller, Mitchell, Morrell, Nestande, Nielsen, Norby,
Olsen, Perea, V. Manuel Pérez, Portantino, Silva, Smyth,
Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski,
Williams
NOES: Allen, Ammiano, Beall, Chesbro, Feuer, Gatto,
Huffman, Bonnie Lowenthal, Monning, Skinner, Yamada, John
A. Pérez
NO VOTE RECORDED: Butler, Furutani, Roger Hernández,
Mendoza, Pan
RM:m 8/21/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
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