BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1741| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 1741 Author: Bowen (D) and O'Connell (D) Amended: 5/31/00 Vote: 21 SENATE ENERGY, U.&C. COMMITTEE : 7-2, 4/11/00 AYES: Bowen, Alarcon, Hughes, Mountjoy, Murray, Peace, Solis NOES: Brulte, Kelley NOT VOTING: Speier, Vasconcellos SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SUBJECT : Telecommunications: technology specific area codes SOURCE : Author DIGEST : This bill directs the California Public Utilities Commission (CPUC) to request authority from the Federal Communications Commission (FCC) to order technology-specific area codes and seven digit dialing within those area codes. If area code relief is needed, the CPUC shall exhaust all number conservation options. If area code relief continues to be needed the CPUC shall, if authorized by the FCC, order a technology-specific area code unless the CPUC finds that either (1) a different type of area code relief is less disruptive to customers, or (2) the technology specific area code does not adequately extend the life of the existing area code. CONTINUED SB 1741 Page 2 Senate Floor Amendments of 5/31/00 add a legislative intent statement and provide increased flexibility to the PUC. ANALYSIS : Current law requires the California Public Utilities Commission (CPUC) to develop and implement any measures it deems available to efficiently allocate telephone numbers. This bill states legislative intent that when the PUC has no reasonable alternative other than to create a new area code, that the PUC do so in a way that creates the least inconvenience for customers. This bill requires the CPUC to request authority from the Federal Communications Commission (FCC) to order telephone companies to assign telephone numbers dedicated to wireless and data usage to a separate area code and to permit seven digit dialing within the affected area codes. This bill requires that before the CPUC creates any new area code it must first perform a telephone number utilization study and implement all reasonable telephone number conservation measures. If the PUC is granted the authority to implement technology-specific area codes and determines that further area code relief is needed, they are to utilize that authority when creating a new area code. The bill gives the PUC the flexibility to forgo the technology-specific area code if it finds that either (1) instituting a technology-specific area code is more disruptive to customers, or (2) instituting a technology-specific overlay inadequately extends the life of the area code. The bill precludes the CPUC from implementing any authority granted by FCC, pursuant to its request, in a manner that impairs the ability of a customer to have number portability. Background : Coming Soon: Your Own Personal Area Code . After starting SB 1741 Page 3 with three area codes in 1947, California had 13 area codes in 1992, which mushroomed into 25 area codes by the end of 1999. At the current pace, the CPUC expects California to have 41 area codes by the end of 2002. The Los Angeles area has been at the leading edge of area code expansion, with the number of area codes tripling since the early 1980's. The San Francisco Bay Area is not far behind -- until recently it had four new area codes set to take effect by the end of this year. The growth in the number of area codes has several practical implications in people's every day lives as phone users are forced to adapt to new dialing habits, re-program their telephone devices, dial more calls using 11 digits rather than the traditional 7, and more. Businesses are often forced to change stationery and advertisements, as well as lose any "equity" they may have built up with their long-standing telephone numbers. Reasons Behind The Area Code Explosion . The growth in the demand for new area codes can be attributed to three basic realities: First, deregulation and the emergence of new telephone companies has dramatically increased the demand for new telephone numbers, as these new companies all need their own numbers to sell to customers. For example, in the early 1980's there were only a handful of telephone companies needing telephone numbers in the 310 area code. Now, 53 telephone companies have the right to demand an allocation of telephone numbers in the 310 area code alone. Second, technology has made new forms of communications available and affordable to people and businesses. Most people no longer have just one home number and one work number -- they have numbers dedicated for pagers, wireless telephones, internet service, and fax machines. Furthermore, some of the "point of sale" credit card verification terminals that have popped up at grocery stores, gas stations, and other merchants require their own phone lines. Third, the FCC regulations on how telephone numbers are SB 1741 Page 4 handed out to companies haven't kept up with deregulation or technology. For example, until recently the FCC only allowed numbers to be handed out in blocks of 10,000 - even if a telephone company only has a single customer. So, as a result of the emergence of new telephone competitors, more blocks of 10,000 numbers are being handed out (thus draining the pool of available numbers more quickly), and as a result of people's use of new technologies that require dedicated phone numbers, the numbers within those blocks are being exhausted more rapidly. The Long Arm Of The Law . California is not free to deal with telephone numbers in any way it sees fit because Congress has given the FCC the responsibility for telephone number administration. Consequently, the FCC has limited the states' discretion when it comes to dealing with telephone numbering issues. For example, the FCC prevents states from allocating telephone numbers on the basis of technology (i.e. separate area codes for cellular telephones and pagers), known as a technology overlay or a service specific overlay. It also requires that whenever an overlay area code (described later) is created, all calls within that area code and the overlaid area code require 11 digits to be dialed with every call. The CPUC has requested that the FCC permit the use of service specific overlays but has not requested implementation of 7-digit dialing. Responding to widespread public concern, including requests from the chair of the Senate Energy, Utilities and Commerce Committee, the CPUC and other states, the FCC in September 1999 granted California the authority to allocate numbers in blocks of 1,000 rather than 10,000. On March 17, 2000, the FCC announced it had endorsed a national policy of allocating telephone numbers in blocks of 1,000, rather than 10,000. Overlay vs. Split . Historically, new area codes have been created by geographically splitting existing area codes, which forces people and businesses located in the "new" area to get new telephone numbers. This is obviously inconvenient for people and businesses that have to re-program machines, let their friends or customers know SB 1741 Page 5 about the new number and, in the case of a business, reprint stationery, change advertisements, and much more. A long-discussed alternative way of creating a new area code is the "overlay," where a second area code is laid on top of an existing area code. The main advantage of an overlay is no one is required to change their existing telephone or fax numbers - only people getting new numbers would receive the new area code even though they'd physically be located in the "old" area code territory. The primary downside is that everyone has to dial eleven digits (1 + area code + phone number) on all telephone calls - even when calling a person in the same area code, which is a federal regulation adopted at the behest of many telephone companies. More fundamentally objectionable to many people is that in an overlay, a person could have two different area codes in their own home, which goes against the entire concept of what everyone understands an "area code" to be. The CPUC had previously proposed overlays in many area codes in the state, but earlier this year it withdrew those proposals and instead opted for a strategy of forcing the telephone companies to utilize their existing numbers more efficiently. Utilization Studies Find Unused Numbers . As part of its analysis of the need for a new area code in the 310 territory, the CPUC performed a telephone number utilization study. The 310 has been on the bleeding edge of area code controversy, as it was the first area code for which a geographic overlay was proposed. That study found that there were as many as three million unused telephone numbers which could be used by customers -- a surprising amount of available numbers in an area where telephone number resources were supposedly so exhausted that a new area code was to have been implemented in August 1999. The CPUC now believes that a new area code in the 310 won't be needed until at least June 2001. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 5/31/00) County of San Diego SB 1741 Page 6 Office of Ratepayer Advocates OPPOSITION : (Verified 5/31/00) AT & T GTE California Incorporated Cellular Carriers Association of California MCI WorldCom Verizon Communications California Cable Television association Cel-North Cellular Sprint PCS United States Cellular California Association of Competitive Telecommunications Companies ARGUMENTS IN SUPPORT : Historically, area codes have been created at the convenience of the telephone companies. This is an artifact of the monopoly era of telephone service where the telephone company was entrusted to manage the telephone network in an efficient way. Times have changed. Now there are dozens of telephone companies, but the way that area codes are created hasn't changed. The process remains one that puts the convenience of the telephone companies ahead of the convenience of the telephone customers. It is this old way of thinking that continued the wasteful process of handing telephone numbers out to companies in blocks of 10,000, even if a telephone company only had a handful of customers until very recently. Because of negative customer reaction to the proliferation of area codes the federal government started to reconsider the way it handed out numbers and, consequently, to reduce the need for new area codes. Through prodding by California the FCC gave California the authority to hand out numbers in blocks of 1000 rather than 10,000, as well as other telephone number conservation measures. This bill continues the effort to modernize California's thinking about area codes by putting the convenience of the customer ahead of the convenience of the telephone companies. This bill minimizes the need for new area codes by requiring a telephone number utilization study before a new area code is created. Once the need for a new area SB 1741 Page 7 code is demonstrated, this bill provides a mechanism for implementing a new type of area code, subject to FCC approval, that is potentially the least disruptive to customers. This new type of area code is known as a technology-based overlay and would contain only wireless and, perhaps, data numbers. The CPUC would implement this new type of area code whenever area code relief is needed. However, if the CPUC finds that a different type of area code is less disruptive, or that a technology-specific area code doesn't extend the life of the existing area code long enough, then the CPUC can implement a different type of area code. The author's belief is that given the need for a new area code, it is far less disruptive to change the numbers of wireless and data customers than it is to change the numbers for regular telephone customers. ARGUMENTS IN OPPOSITION : Opponents argue that implementing wireless overlap will seriously impede the growing competition between wireless and wireline carriers. They feel that establishing a separate, unfamiliar area code for wireless customers will discourage consumers' use of wireless service as a competitive alternative to wireline telephone service. Opponents argue, in addition, that "in a dynamic and competitive telecommunications market where customers can choose between services, the inconvenience of having to dial eleven digits for most calling becomes a competitive disadvantage. Opponents believe that a separate area code for wireless telephones will cause more harm than good for consumers. They argue: 1.Seven million of the 11 million wireless phone owners must have their phones physically re-programmed by bringing them into their service providers. The result: a colossal consumer/constituent hardship. 2.Other major consumer inconveniences include: stationary changes, advertising relistings; multiple area codes for businesses and single family homes. 3.Wireless did not create the area code number shortage but SB 1741 Page 8 is being targeted as a quick fix, and an expensive one at that. 4.A wireless specific area code for California will not solve the area code problem. If anything, it will cause further complications. 5.SB 1741 fails to embrace the true solution: namely, number pooling. 6.Late last year, the CPUC requested authority from the FCC to utilize area code overlays; that request is still pending. This bill would require the CPUC to make the same request again. However, if the authority is granted by the FCC, this bill takes away the CPUC's discretion in the matter and will require the use of overlays. NC:jk 6/1/00 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****