BILL ANALYSIS 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 1712 - Polanco Hearing
Date: April 25, 2000 S
As Amended: April 24, 2000 FISCAL B
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DESCRIPTION
Current law establishes a lifeline telephone service
program which provides discounted basic telephone service
rates for low-income telephone customers.
This bill deletes legislative findings regarding lifeline
telephone service.
This bill adds findings and declarations stating it's the
intent of the Legislature that the California Public
Utilities Commission (CPUC) redefine universal telephone
service by incorporating two-way voice, video, and data
service as components of basic service.
This bill requires the CPUC, by February 1, 2001, to open
an investigation into the definition of universal service.
The purpose of the proceeding is to make recommendations on
how video and data providers can be incorporated into an
enhanced lifeline telephone service program, including an
assessment of cost and recommendations for necessary
subsidy support. The report shall be completed and the
results provided to the Legislature by January 1, 2002.
BACKGROUND
One of the cornerstones of state and federal
telecommunications policy is universal service, which is
designed to ensure basic telephone service is made
available to people irrespective of their location and
income. California enacted the Moore Universal Telephone
Service Act in 1987 to provide discounts to low-income
customers to allow them to be able to afford basic
telephone service. "Basic telephone service" includes all
the services included in the basic telephone rate, such as
a directory listing, 911 access, and local calling, but
does not include toll calls or optional services such as
call waiting.
AB 3643 (Polanco), (Chapter 278, Statutes of 1994) required
the CPUC to, among other things, develop a process to
periodically review and revise the definition of basic
service to reflect new technology and markets. The CPUC
recommended that it review the basic service definition
every 3 years and consider the following three factors:
1) Is the service essential for participation in
society?
2) Do a majority of residential customers subscribe to
the service?
3) Will the benefits of adding the service to basic
service exceed the costs?
This Committee, in conjunction with the Senate Education
Committee and the Senate Select Committee on Economic
Development has held three hearings on issue of the
"digital divide" this year. Over the course of those
hearings, it's become clear to many that the solution to
the digital divide problem involves a combination of
providing computers, software, training, mentoring, and
telecommunications capability in an environment which
encourages exploration and experimentation.
Simply providing computers has proven to be an incomplete,
and sometimes wasteful, solution because users must be
trained on how to set up and use the computers, be mentored
on how to find useful information, and be provided with
ongoing technical support.
This bill is an effort to address one of the components of
the "digital divide" problem - the lack of affordable
access to high-speed Internet access.
While high-speed service may not be affordable when
compared to basic telephone service, there's some evidence
that the competitive forces of the marketplace are working
to make it more affordable. With both cable companies and
telecommunications companies offering a high speed service
known as "digital subscriber line," or DSL, prices have
come down quickly. For example, Pacific Bell first
introduced DSL in 1998 for $89/month, but that service now
goes for $39/mo. A new method of offering DSL, known as
"line-sharing," holds promise for even cheaper and more
widespread availability of the service. Last year, the
Legislature passed and the Governor signed AB 991 (Papan),
(Chapter 714, Statutes of 1999), which enacted the
California High Speed Internet Access Act of 1999 and
required the CPUC to implement line-sharing as soon as the
Federal Communications Commission permits states to put it
into place.
KEY QUESTIONS
1.Should the CPUC be required to look at re-defining basic
telephone service to include access to high-speed
Internet service?
2.If the CPUC does re-define basic telephone service in
this manner, will that effectively require everyone who
has a telephone line, regardless of income level, to
purchase high-speed Internet service even if they don't
want it?
3.Would a better approach be to require the CPUC to simply
formulate a "universal service" policy to ensure that all
Californians have toll-free access to an Internet service
provider (ISP)?
COMMENTS
1) Redefining What's "Basic" . This bill requires the CPUC
to explore the idea of including high-speed
telecommunications services in its definition of basic
service which, if the CPUC made such a change, would
include high-speed access in the basic service package
that all customers purchase. It could also be included
in the discounted lifeline service that low-income
customers may purchase.
The cost of including such a service in the basic service
package is something the CPUC would need to consider in
its study, but it's likely to be an expensive
proposition, because the cost of the high-speed service
offered by the telephone companies today is $39/month.
On top of that charge would be the additional charged
needed to help low-income customers purchase this new
"basic" service, which could combine to double or triple
the basic telephone service bill that most people pay
today.
2) What The Study Looks At And What It Doesn't . One of the
complications of the study proposed by this bill is that
theoretically, high-speed telecommunications services are
regulated services, but Internet access service is not.
These two services combine to provide the high-speed
Internet access which has become both popular and useful
recently.
If the study only looks at high-speed telecommunications
services, but not at the prospect of characterizing
Internet access as a "basic" service, the CPUC and the
Legislature won't have completely addressed the
telecommunications dimension of the "digital divide." In
other words, if the high-speed telecommunications lines
are made part of "basic" service and the cost is
subsidized for low-income users, yet the cost of
connecting them to a high-speed ISP isn't accounted for
or subsidized, will this study yield a false or
incomplete picture?
3) Should We Do A New Study Or Update An Existing One ? As
noted in the "Background" section, existing law requires
the CPUC to periodically review and revise the definition
of basic service to reflect new technology and markets
using three basic factors: 1) Is the service essential
for participation in society?; 2) Do a majority of
residential customers subscribe to the service?; and, 3)
Will the benefits of adding the service to basic service
exceed the costs?
In light of that, the author and Committee may wish to
consider deleting the new study called for by this bill
and instead simply direct the CPUC to evaluate whether
high-speed Internet access fits the criteria it
established in 1995 for broadening the definition of
"universal" or "basic" service.
If the Committee wished to retain the new study created
by this bill, the author and Committee may wish to
consider several technical amendments:
a) Page 2, Lines 14-15 deletes the intent language
related to the benefits and basic policy underpinnings
of California's longstanding lifeline program,
including the phrase "The furnishing of lifeline
telephone service is in the public interest and should
be supported fairly and equitably by every telephone
corporation, and the commission, in administering the
lifeline telephone service program, should implement
the program in a way that is equitable,
nondiscriminatory, and without competitive
consequences for the telecommunications industry in
California." The author and Committee may wish to
consider deleting those lines in order to leave the
intent language of current law in place.
b) Page 2, Line 17 to Page 3, Line 23 adds intent
language which includes terminology that's unclear,
such as "two-way send and receive voice, video, and
data (Page 3, Lines 8-10)." The author and Committee
may wish to consider clarifying or deleting that
language.
c) While Section 4 of the bill (Page 5, Line 39) calls
on the CPUC to conduct a study on re-defining
universal service, the intent language on Page 3,
Lines 6-11 arguably prescribes the outcome of the
study by stating "It is the intent of the Legislature
that the commission redefine universal service by
incorporating . . ." As such, the author and
Committee may wish to consider striking the intent
language on Pages 2-3.
d) Page 8, Line 13 to Page 9, Line 2 includes six
principles to guide the CPUC's report to the
Legislature called for in the bill. Principles 1, 3
and 4 are duplicative of existing law, Principle 2 is
already identified as one of the objectives of the
proceeding, and Principle 6 sweeps in industries which
aren't subject to CPUC or state jurisdiction and may
therefore be unsuitable as a guideline for this
investigation.
4) Regulation By The Service Being Provided Or The Entity
Providing The Service ? This bill indirectly gets at a
broader policy issue which hasn't been squarely addressed
either by the CPUC or the Legislature, which is, should
the state set rules based on the service being provided
or based on which company is providing the service?
The various communications industries (e.g. telephone
companies, cable companies, satellite-based video
companies) are starting to offer similar services, such
as high-speed Internet access, telephone service, and
much more, yet the regulatory procedures for each are
very different. To deal equitably with high-speed
Internet access on a universal service basis, the funding
mechanism must be changed so all providers of high-speed
Internet access are eligible to provide service and all
subscribers are paying an equal amount that can be used
to subsidize the cost of providing the service to
low-income recipients.
5) What About Toll-Free, Instead of High-Speed, Universal
Service ? While this bill contemplates the issue of
whether access to high-speed Internet access should be
defined as a "basic" service, many areas of California
don't have affordable access to "low-speed" Internet
services. That's because in many areas, especially in
rural California, most ISPs have local telephone numbers
only in limited areas due to the cost. Customers who
have to call an ISP on a non-local number incur
per-minute toll charges, unlike local telephone calls
which have no per-minute charge and are covered under the
notion of "basic" or "universal service."
This issue arose last year during a CPUC proceeding when
a telephone company providing local telephone numbers in
rural areas to allow for toll-free Internet service had
its business model threatened by a competitor. The CPUC
ruled in favor of that telephone company, but the fear of
losing low-cost telephone numbers in rural areas caused
many rural ISPs to warn of decreased rural internet
access. This is less of a problem in urban and suburban
areas where a higher population density makes it more
cost-effective for an ISP to have a local telephone
number.
Instead of having the CPUC study whether high-speed
Internet access should be included in the definition of
"basic service," the author and Committee may wish to
consider simply having CPUC create a plan to provide for
toll-free Internet access for all Californians and to
subsidize the cost of providing that service to
low-income recipients.
POSITIONS
SPONSOR:
Author
SUPPORT:
Pacific Bell
OPPOSE:
None on file
Randy Chinn
SB 1712 Analysis
Hearing Date: April 25, 2000