BILL ANALYSIS                                                                                                                                                                                                    Ó          1





                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                 ALEX PADILLA, CHAIR
          

          AB 1407 -  Bradford                               Hearing Date:   
          July 8, 2013               A
          As Amended:         June 10, 2013            FISCAL       B

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                                      DESCRIPTION
           
           Current law  authorizes the California Public Utilities  
          Commission (CPUC) to regulate telephone corporations and  
          requires local exchange carriers to provide residential  
          customers "basic service," as defined by CPUC decisions (Public  
          Utilities Code Section 495.7; Decision 12-12-038).
           
           Current law  establishes state universal service programs funded  
          by surcharges on landline, wireless and Voice over Internet  
          Protocol (VoIP) service, and provides that only telephone  
          corporations may receive subsidies from these programs (Public  
          Utilities Code Section 270).
           
           Current law  the Moore Universal Telephone Service Act  
          establishes the California lifeline program and requires  
          telephone corporation providers of residential service to offer  
          eligible low-income customers a lifeline class of basic service  
          (currently landline only) at a fixed monthly rate, with  
          subsidies to providers to offset the cost of the discount.  
          (Public Utilities code Section 871)
           
           Current federal law  and rules of the Federal Communications  
          Commission (FCC) establish a federal lifeline program that  
          allows eligible low-income customers to apply a fixed discount  
          to reduce the price of any voice communications service,  
          including wireless, (47 U.S Code Section 254; 47 C.F.R.54.101)
            
           Current law  prohibits CPUC regulation of VoIP service or  
          Internet Protocol (IP)-enabled service except as required or  
          expressly delegated by federal law or expressly directed by  











          state statute (Public Utilities Code Section 710)
           
           This bill  authorizes providers of wireless and VoIP service to  
          voluntarily offer state lifeline service if they offer voice  
          communications as defined by the FCC through any technology and  
          prohibits the CPUC from requiring state lifeline providers to  
          offer more than is required under the federal lifeline program.
           
           This bill  repeals the requirement that state lifeline be a  
          special class of service at a fixed rate and instead establishes  
          a discount at a fixed amount that an eligible customer can apply  
          toward any voice communications service, including a bundle of  
          services that includes voice.
           
           This bill  requires the CPUC to designate a telephone corporation  
          or alternative provider as a state lifeline provider eligible to  
          receive subsidies if the provider collects and remit surcharges  
          for the lifeline program and agrees to comply with CPUC rules  
          for the lifeline program.
           
           Current federal law  provides for the CPUC to designate a  
          lifeline provider serving California as eligible for federal  
          lifeline subsidies, known as an Eligible Telecommunications  
          Carrier (ETC), if the requesting provider meets ETC requirements  
          in federal law. (47 U.S Code Section 214(e))
           
           This bill  states that the CPUC shall, upon a request of a  
          provider, designate that lifeline provider as an ETC.

           Current law  requires the CPUC and telephone corporations to  
          ensure that every household qualified to receive lifeline  
          service is informed of the service and given the opportunity to  
          subscribe. (Public Utilities Code Sections 871.5 and 876)
           
           This bill  removes this obligation for telephone corporations and  
          prohibits the CPUC from imposing any advertising obligation  
          other than those required by federal law for federal lifeline  
          providers. 
           
           Current law  exempts state lifeline customers from paying state  
          and federal surcharges on top of the cost of service. (Public  
          Utilities Code Section 879)
           
           This bill  requires state lifeline customers to pay those  










          surcharges.

                                      BACKGROUND
           
          Universal Service for Low-Income Customers - Federal and state  
          lifeline programs enable qualified low-income households to  
          receive a reduced rate for telephone service in order to further  
          the universal service goal of making affordable service  
          available to all.  Customer eligibility is based on household  
          income or participation in specified public assistance programs.  
           One rate discount per household is provided to qualified  
          customers from designated service providers, which are  
          compensated for providing that discount from state and federal  
          lifeline funds generated by surcharges on service to all  
          landline, wireless and VoIP customers. The state and federal  
          programs share the same goal but have different features.

          Federal Lifeline - The federal lifeline program, administered by  
          the FCC, was implemented in 1985 in the wake of the 1984  
          divestiture of AT&T to ensure that rate increases from this  
          major marketplace shift would not put local landline service out  
          of reach for low-income households.  Since 1997, the FCC has  
          made the federal lifeline discount available for wireless  
          service, and since 2005 for prepaid service, in recognition that  
          wireless services have taken on particular importance to  
          low-income consumers, who are more likely to reside in  
          wireless-only households than consumers at higher income levels.

          In early 2012, the FCC adopted a technology-neutral approach to  
          enable lifeline service provided over any platform, including IP  
          networks. It authorized an eligible customer to apply the $9.25  
          per month discount to any residential service that includes  
          "voice telephony service," defined to include:

                 voice grade access to the public switched network or its  
               functional equivalent;
                 minutes of use for local service at no additional charge  
               to end users;
                 access to 911 emergency telephone service and enhanced  
               911; and
                 toll limitation services to control long distance  
               charges.

          The discount can apply to a bundle or package of voice and data  










          services, plans with optional calling features such as caller ID  
          and voicemail, and any family shared calling plan.

          The FCC reports that lifeline enrollment has greatly increased  
          since wireless was included, consistent with the same trend  
          toward wireless use in the general population. Wireless  
          providers receive well over half of the total program support,  
          with prepaid providers taking about 40 percent as of early 2012.  
          At the same time, in response to program costs ballooning, the  
          FCC has undertaken reforms to fight waste, fraud, and abuse,  
          especially problems with verifying eligibility of households and  
          wireless service being transferred to non-eligible users.

          The CPUC, upon request, and pursuant to federal requirements,  
          designates as an ETC any provider that seeks to provide federal  
          lifeline service in California.  To date, four wireless carriers  
          (Cricket, Telescape, Virgin Mobile, and Nexus) provide service  
          in California with a variety of plans that include, at no  
          charge, a handset, 250 voice minutes and 250 texts, with no  
          contract or connection charge, and options for extra voice  
          minutes and texts in price increments.

          California Lifeline - California's Moore Universal Telephone  
          Service Act, enacted in 1983, requires all providers of landline  
          residential service to provide lifeline service as part of the  
          obligation to provide "basic service" as defined by the CPUC.   
          The Act requires these providers to inform eligible subscribers  
          of the availability of lifeline service and how to qualify, to  
          offer the service at a fixed rate, and to not charge lifeline  
          customers state and federal universal service and 911 program  
          fees and surcharges applicable to non-lifeline customers. The  
          program sets a fixed rate for customers, currently no more than  
          $6.84 per month, depending on the carrier. The support amount  
          for the provider is $11.50 per month, which is applied to offset  
          costs after the federal subsidy is applied.  The CPUC's General  
          Order 153 specifies program requirements for providers, eligible  
          customers, and the third-party administrator. The program budget  
          is about $280 million for 2012-13.

          For at least ten years, the Legislature, customers, providers,  
          and other stakeholders have urged the CPUC to expand California  
          lifeline to include wireless service and new technologies.  AB  
          2213 (Fuentes, 2010) removed a statutory barrier to wireless  
          lifeline by making each household eligible rather than a  










          physical residence.  Today, the program still offers a price  
          discount only for landline basic service.  In December 2012, the  
          CPUC redefined basic service to be technology neutral, but in  
          effect only landline currently can comply with the many basic  
          service elements and requirements listed in Attachment A.  Based  
          on that decision, the CPUC in April 2013 commenced a new phase  
          of a multi-year proceeding to consider whether wireless and  
          other alternative providers can provide California lifeline  
          service, consistent with the new basic service definition.  The  
          scoping memo indicated that an initial phase, to be completed  
          within 18 months, would consider wireless service, with a  
          possible second phase to consider VoIP. The Assigned  
          Commissioner, who is holding statewide public participation  
          hearings to get customer input on what features wireless  
          lifeline service should include, has recently expressed intent  
          to issue a proposed decision by October 2013.

          Meanwhile, participation in California's basic service lifeline  
          program has declined from nearly 3.1 million participants in  
          2006 to about 1.5 million in April 2012, a decline of about 50  
          percent. The decline mirrors a migration away from landline  
          service by all customers, but also may reflect the change from  
          self-certification to verification of eligibility. Industry  
          estimates that up to 3.7 million Californians may be eligible  
          for lifeline.

                                       COMMENTS
           
              1.   Author's Purpose  .  According to the author:  "The  
               LifeLine program limits low-income customers to wireline  
               telephone service only. Changes in technology and consumer  
               behavior have created a shift in lifeline subscriptions.  
               This bill reforms and modernizes the program by  
               establishing an approved financial support amount that  
               consumers can use on the voice service that meets their  
               needs. The bill also ensures that existing wireline  
               lifeline customers are not impacted by program reforms and  
               maintains all existing state and federal consumer  
               safeguards for wireline, wireless and VoIP service."

              2.   A Discount Coupon for any Voice Service  .  This bill  
               makes no significant change to who qualifies as an eligible  
               lifeline customer, but makes a significant change to what  
               that customer gets.  It changes the lifeline program from  










               offering an eligible low-income customer a special class of  
               service (which so far has been only landline voice service)  
               at a fixed low rate to instead offering a fixed support  
               amount that the customer can use like a discount coupon to  
               reduce the price of any voice communications service  
               (landline, wireless, prepaid wireless, or VoIP).  It  
               enables a lifeline customer to receive that service under  
               the same terms and conditions and under the same  
               regulations as any non-lifeline customer. Today, an  
               eligible customer has only one choice for California  
               lifeline service - landline - but with the certainty of a  
               fixed low rate.  Under this bill, the customer would have a  
               discount of $11.85 that can be applied to any bundle or  
               package of service that includes voice service.

              3.   Low-Income Customers Want Wireless Service, Especially  
               Prepaid Wireless  . Low-income customers are no different  
               than anyone else in wanting to enjoy the convenience and  
               mobility of wireless service.  No stakeholder disputes  
               this.  The CPUC Assigned Commissioner reports that this has  
               been a theme of recent public participation hearings on  
               lifeline service.  Industry proponents of the bill point  
               out the growing number of low-income customers who are  
               opting for wireless service even without a state subsidy.  
               Prepaid wireless, like the service options offered by  
               federal providers now in California, are especially  
               attractive to low-income customers because of no long-term  
               contract, no connection charge, free handsets, and options  
               to buy increased voice and data usage on a month-to-month  
               basis. 

              4.   Do Low-Income Customers Need a Special Kind of Wireless  
               Service  ? The CPUC and consumer groups state that lifeline  
               customers should get their own special class of wireless  
               service with attributes prescribed by the CPUC that may  
               exceed what the federal rules require, including, among  
               others, a minimum number of minutes and texts per month,  
               guaranteed coverage in the home, and service quality  
               standards not already applicable to wireless.  Service  
               providers supporting the bill claim that the CPUC, in its  
               proceeding, is likely to prescribe wireless service  
               elements for lifeline customers so different from how they  
               offer wireless service to non-lifeline customers that they  
               will not be willing to participate in the state lifeline  










               program (and the CPUC does not have authority to require  
               them to do so). Providers argue that lifeline customers,  
               like other customers, should be able to choose among the  
               many wireless service offerings a plan that most suits  
               their individual needs (just as many are doing now even  
               without a state lifeline subsidy). 

              5.   Maintaining Basic Service and COLR Obligations  .  The  
               CPUC and consumer groups state that this bill will reduce  
               consumer protections for lifeline customers because  
               wireless service and VoIP service are regulated differently  
               than landline service, especially regarding the CPUC's  
               authority to handle customer complaints.  However, nothing  
               in this bill requires a lifeline customer to choose  
               wireless or VoIP service. Moreover, the author states that  
               this bill maintains all consumer protections on existing  
               services and ensures that existing wireline lifeline  
               customers are not impacted by reforms in the program.  
               According to the author, there is no intent to eliminate or  
               diminish the Carrier of Last Resort (COLR) obligation to  
               provide basic service (which is subject to the greatest  
               level of regulation) to any customer upon request. Thus, if  
               this bill is enacted, any lifeline customer who prefers  
               basic service will retain the option to get that service  
               upon request from their COLR provider of basic service.

               However, some language in this bill creates ambiguity as to  
               the author's intent.  On page 7, lines 36 to 37 of the  
               bill, it is unclear why the mandate to offer basic service  
               references "as of January 1, 2013."

               On page 8, lines 1-3, the bill states that any lifeline  
               provider, including a local exchange carrier, may use any  
               technology, or multiple technologies, within the provider's  
               service territory."  This could potentially be interpreted  
               to allow a COLR local exchange carrier to meet its basic  
               service obligation with a technology that does not meet the  
               CPUC's definition of basic service.

               On page 11, lines 24-28, the bill states that the CPUC,  
               shall not, as a condition for designating ETCs or lifeline  
               providers, impose any obligation that exceeds the  
               obligations in federal rules for designated ETCs. This  
               presumably does not affect any obligation a COLR otherwise  










               has to provide basic service.
                
               On page 11, lines 29-33, the bill provides that the CPUC  
               shall require a lifeline provider to offer only the minimum  
               service elements to eligible lifeline customers as required  
               by the FCC for federal lifeline. To be consistent with the  
               author's intent, that provision would apply to the lifeline  
               service except to the extent that a COLR is still required  
               to provide basic service to any customer upon request,  
               including any lifeline customer.  Thus, to ensure  
               consistency with the author's intent that this bill has no  
               impact on the COLR obligation to provide basic service, and  
               that any lifeline eligible customer will still have access  
               to basic service upon request, the author and committee may  
               wish to consider amending the bill to strike the reference  
               to "as of January 1, 2013," and to explicitly state that  
               the other identified provisions, or any provision in this  
               bill, shall not be construed to eliminate or diminish the  
               COLR obligation to provide basic service to any customer  
               upon request, including any lifeline-eligible customer.

              6.   Is Affordability Threatened with No Fixed Rate and  
               Surcharges  ? This bill replaces the current fixed rate of no  
               more than $6.84 per month for lifeline basic service with a  
               fixed support amount for the provider. It is possible that  
               the $11.85 state support, plus the $9.25 federal subsidy,  
               could equal more than a provider's charge for service,  
               leaving the customer with no charge.  On the other hand, as  
               TURN and other consumer groups point out, the elimination  
               of a fixed rate, and with no cap on basic service rates,  
               could make service unaffordable for low-income customers as  
               basic rates increase.  This bill also repeals current law  
               that exempts lifeline customers from paying surcharges for  
               public purpose programs and the state 911 program, although  
               it is unclear if surcharge rates would be calculated on the  
               service charge before or after the discount is applied.   
               The bill on page 10, line 35 provides that an eligible  
               customer shall not be entitled to any combined monthly  
               federal and state support in excess of the customer's  
               "monthly rate," which is unclear if that includes  
               surcharges or just the service rate.  All of these issues  
               need clarification to enable a more precise determination  
               of affordability.
                










               While the bill is intended to afford low-income customers  
               many new low-cost or no-cost wireless service options, the  
               author also intends to minimize impact on customers who  
               still want to retain basic service lifeline with a fixed  
               rate.  Thus, the author and committee may wish to consider  
               amending the bill with language proposed by the author to  
               guarantee a fixed rate for the landline basic service  
               option for a temporary transition period as follows:
                
                    Until December 31, 2014, all providers participating  
                    in the California lifeline program shall be required  
                    to offer lifeline service at the same rates that were  
                    in effect on July 1, 2013. 

              7.   Is Subsidy for Service Connection Charge Necessary  ?   
               This bill limits to $10 the charge a lifeline customer may  
               pay for commencing service and authorizes a provider to be  
               reimbursed the difference paid by non-lifeline customers up  
               to $40 per service connection, with no cap on how often it  
               is paid.  The current state lifeline program authorizes  
               carrier recovery of up to $39 per connection.  The FCC  
               eliminated the federal "LinkUp" service connection subsidy,  
               concluding that it offers potential for waste, fraud and  
               abuse and that the availability of a subsidy invites  
               carriers to impose a service connection charge they might  
               not otherwise impose. The lack of any limit on service  
               connection subsidies also invites churn whereby customers  
               could frequently change providers, increasing program  
               costs.  The author and committee may wish to consider  
               amending the bill to eliminate the service connection  
               subsidy except for a COLR providing lifeline service.

              8.   Removing Delay for Customers to Become Eligible for  
               Lifeline Service  . This bill prohibits the CPUC's current  
               requirement that a customer seeking to get lifeline service  
               must first establish service before being certified as  
               eligible.  This practice requires carriers to then provide  
               a refund for the period of time an eligible customer paid  
               for service at the regular rate, which is burdensome and  
               adds to program costs.  Stakeholders appear to universally  
               agree with this change.  At least one carrier which already  
               provides prepaid wireless service in California under the  
               federal program states that this is the single biggest  
               barrier to allowing customers to subscribe to their  










               service. Changing this requirement immediately would enable  
               many California customers to obtain a free telephone and  
               free calling plans from existing federal lifeline  
               providers. To make this change effective as quickly as  
               possible, perhaps this bill should have an urgency clause.

              9.   Removing Delay in Designating Lifeline Providers  .  
               According to the author, this bill seeks to address current  
               CPUC delay in designating providers as ETCs and to prevent  
               potential CPUC delay in its new duty required by this bill  
               to designate state lifeline providers.  This designation is  
               required for providers to obtain lifeline subsidies to  
               cover their cost of giving lifeline customers a price  
               discount. Unnecessary regulatory delay in designating  
               providers slows market entry by new competitors and delays  
               lifeline customers' access to low-cost service options.  
               Delay in ETC designation also impedes flow of federal  
               lifeline dollars to California, creating more demand on the  
               state lifeline fund.

               For example, the request of Cox Communications for ETC  
               designation has been stalled for nearly a year because of  
               claims that designation may be unauthorized by the  
               prohibition on CPUC regulation of VoIP service in section  
                                                                        710 of the Public Utilities Code, enacted by SB 1161  
               (Padilla, 2012). Cox provides basic service to residential  
               customers, in part with VoIP service, and serves about  
               50,000 low-income customers under the state lifeline  
               program.  If granted ETC status, it could draw federal  
               lifeline subsidies.  An Assigned Commissioner's ruling in  
               late February expanded the Cox ETC application to include  
               many questions on CPUC authority over VoIP. Cox and others  
               responded that such a broad inquiry was not necessary  
               because section 710 restricts regulation of a service, not  
               a provider, and SB 1161 was specifically amended to be  
               clear on that distinction. Cox also cited to a prior CPUC  
               decision which concluded that requiring wireless and VoIP  
               service providers that voluntarily participate in the  
               California lifeline program to comply with lifeline program  
               rules does not constitute regulation of those carriers.

               In seeking to address this problem the bill, on page 11,  
               lines 22-24, states that the CPUC "shall, upon a request of  
               a provider, designate the lifeline provider" as an ETC.   










               The CPUC and others correctly point out that this language  
               could require the CPUC to violate federal law that  
               specifies ETC designation requirements. But the Legislature  
               could direct the CPUC on how to exercise its discretion not  
               inconsistent with federal law.  Thus, to prevent the CPUC  
               from misconstruing section 710 in connection with lifeline,  
               the author and committee may wish to consider amending the  
               bill to provide that the CPUC shall not, in exercising its  
               discretion under federal law in designating ETCs, or in  
               exercising its authority to designate state lifeline  
               providers, deny a request to be designated based on the  
               requesting entity providing any VoIP or IP-enabled service.

              10.  Removing a Barrier to Entry for Providers Offering VoIP  
               Service  . As in the Cox application, wide-ranging questions  
               about CPUC authority over VoIP providers have been raised  
               in applications to the CPUC for certificates of public  
               convenience and necessity (CPCNs) by entities seeking  
               authority to provide service.  This also could impede a  
               competitive marketplace for lifeline service (and other  
               services) unless the Legislature expressly clarifies that  
               the CPUC may not deny a new CPCN or revoke an existing CPCN  
               based on the underlying technology used to provide service.

               CALTEL, a trade association for competitive local exchange  
               carrier (CLECs) that use both circuit-switched and  
               VoIP/IP-enabled technologies to provide services to  
               hundreds of thousands of business and residential  
               customers, fear that its members' CPCNs are in jeopardy,  
               which would eliminate their ability to get interconnection  
               and wholesale inputs to provide service.  CalTel objects to  
               this "piecemeal approach" in application proceedings, which  
               it claims is "unfair and inefficient, and violates notice  
               and due process rights."   Moreover, it delays new entry by  
               CLECs that could be lifeline providers.

               In order to remove the current business uncertainty for  
               existing CLECs and new entrants and to remove this barrier  
               to CLECs' participation in the Lifeline program, the author  
               and committee may wish to consider amending the bill by  
               adding the following new section to the Public Utilities  
               Code:

                    The commission shall neither deny nor revoke  










                    certificates of public convenience and necessity to  
                    carriers that provide retail or wholesale  
                    telecommunications services on the grounds that such  
                    carriers also provide Voice over Internet Protocol  
                    service or any other unregulated service. Nothing in  
                    this section expands the commission's existing  
                    jurisdiction over any service or affects any provision  
                    of section 710.  Nothing in this section gives any  
                    carrier any new rights or powers.

              11.  Lifeline Providers Should Pay All Surcharges  . This bill  
               makes it a condition of being a lifeline provider that the  
               provider collect and remit surcharges for the lifeline  
               program.  Current law requires all landline, wireless and  
               VoIP service customers, including prepaid service, to  
               contribute to all the CPUC public purpose programs and the  
               state 911 program.  Thus, the author and committee may wish  
               to consider amending the bill to require a lifeline  
               provider to collect and remit surcharges for all the CPUC  
               public purpose programs listed in Section 270 of the Public  
               Utilities Code, as well as the state 911 fee pursuant to  
               Section 41030 of the Revenue and Taxation Code.

              12.  Providers Have a Role in Customer Notification  . Current  
               law provides that every means should be employed by the  
               CPUC and telephone corporations to ensure that every  
               household qualified to receive lifeline telephone service  
               is informed of and is afforded the opportunity to subscribe  
               to lifeline service.

               General Order 153 requires California lifeline providers to  
               send all residential customers an annual notice of  
               availability, terms, and conditions of California lifeline,  
               inform new potential customers about lifeline and how to  
               apply, and provide 30 days notice to lifeline customers of  
               any increase in rates, service restrictions, or withdrawal  
               from offering service, with notices in the same language as  
               sales information. 

               This bill removes this obligation from telephone  
               corporations and prohibits the CPUC from imposing any  
               advertising obligations other than those required by  
               federal law, which include advertising the availability of  
               lifeline service and rates using media of general  










               distribution, and publicizing the availability of service  
               in a manner reasonably designed to reach those likely to  
               qualify for service.


               The author states his intent to amend the bill by adding  
               the following:

                    Every lifeline provider, on first contact by a  
                    prospective eligible customer, shall inform the  
                    customer of the availability of the lifeline discount  
                    and how they may qualify for and obtain the discount.   
                    Such customers shall be presented with information  
                    orally, electronically, or in print form.

               This amendment adds to what is otherwise required of  
               wireless providers under the federal rules.  However, it is  
               less than what is currently required for COLRs' provision  
               of basic service. 

               To be consistent with the author's intent that this bill  
               has no impact on the COLR obligation to provide basic  
               service, and that any lifeline eligible customer will still  
               have access to basic service upon request, the author and  
               committee may wish to consider amending the bill with the  
               author's language and to state that a COLR that is a  
               lifeline provider remains subject to any customer  
               notification obligations applicable to basic service.

              13.  CPUC Authority Limited to Implementation  .  This bill  
               requires a lifeline provider to agree to comply with and be  
               held liable for any violations of the requirements of the  
               bill and any CPUC rules implementing this bill.  Section 21  
               of the bill, which is uncodified, requires the CPUC to  
               revise General Order 153 by May 1, 2014, to confirm with  
               the bill and provides that the CPUC "shall not adopt any  
               obligations, rules, or standards that exceed, or otherwise  
               add to, those that are expressly required by this act."    
               The CPUC and other stakeholders point out that this  
               language is overly restrictive and in practical effect  
               cripples the CPUC from administering the program.  In  
               response, the author has proposed to clarify the intent:  
               (1) authorize the CPUC to implement the express  
               requirements of the bill so that a lifeline customer can  










               apply the discount to any service that is otherwise  
               available to any non-lifeline customer; and (2) prohibit  
               the CPUC from imposing any new requirement on the provision  
               of that service different from how it is provided to  
               non-lifeline customers. The author and committee may wish  
               to consider amending the bill by striking Section 21 at  
               page 16, lines 25-33, and replacing it with the following:

                    (a) This act does not create or expand commission  
                    jurisdiction over any provider, service or technology.  
                     In implementing this act, the commission shall not  
                    impose any new obligation, standard, or requirement  
                    upon any provider, service, or technology that is not  
                    expressly required by the act. (b) By May 1, 2014, the  
                    commission shall revise General Order 153 to bring it  
                    into compliance with the changes made by this act.   
                    The commission shall eliminate or modify any rule that  
                    imposes substantive requirements upon lifeline  
                    providers beyond the express terms of this act, but  
                    may retain, modify or enact rules governing the  
                    administration of the lifeline program that are not  
                    inconsistent with this act, including rules governing  
                    enrollment processes, eligibility forms, the  
                    third-party administrator, the calculation of the fund  
                    and establishment of the surcharge, reporting and  
                    remittances of surcharges, use of electronic  
                    communications, and audits and records.  The  
                    commission shall allow a lifeline provider a  
                    reasonable period of time to implement the  
                    requirements or obligations of this act.

              14.  Cap on Program Surcharge  .  The lifeline program is  
               funded by a ratepayer surcharge imposed on intrastate  
               services of all landline, wireless and VoIP customers.  The  
               rate is currently set at about 1.5 percent.  This bill sets  
               a cap of 3.3 percent, which potentially could have the  
               effect of precluding eligible customers from participating  
               in the program.  Other measures may be available to contain  
               program costs that do not risk excluding eligible  
               customers, such as eliminating the service connection  
               subsidy.  Moreover, the bill requires an annual report to  
               the Legislature on the fiscal status of the lifeline fund,  
               along with options for controlling costs. 











              15.  Ratepayer Impact  .  This bill is likely to significantly  
               increase costs of the state lifeline program funded by a  
               ratepayer surcharge.

                                    ASSEMBLY VOTES*
           
          Assembly Floor                     (74-0)
          Assembly Appropriations Committee  (17-0)
          Assembly Utilities and Commerce Committee                       
          (15-0)
          *Prior votes not relevant

                                       POSITIONS
           
           Sponsor:
           
          Author

           Support:
           
          Alliance Against Family Violence and Sexual Assault
          American GI Forum of California
          Amethod Public Schools
          Asian Pacific islander American Public Affairs Association
          AT&T
          BPSOS-California
          Bakersfield Homeless Center
          Brotherhood Crusade
          California Black Chamber of Commerce
          California Cable & Telecommunications Association
          California Chamber of Commerce
          California Hispanic Chambers of Commerce
          California Partnership to End Domestic Violence
          California State Conference of the NAACP
          Center for Fathers and Families
          COFEM
          Community Youth Center of San Francisco
          Congress of California Seniors


           Support: (Continued)
           

           ----------------------------------------------------------------- 










          |CTIA-The Wireless Association   |Mexican American Legal Defense  |
          |Eskaton Foundation              |and Educational Fund            |
          |Florence Douglas Senior Center  |Mobile Future                   |
          |Fresno Barrios Unidos           |Monument Crisis Center          |
          |Frontier Communications         |OneChild                        |
          |Greater Los Angeles African     |Proyecto Pastoral at Dolores    |
          |American Chamber of Commerce    |Mission                         |
          |I-5 Social Services Corporation |PUENTE Learning Center          |
          |Jenesse Center, Inc.            |Self-Help for the Elderly       |
          |La Maestra Community Health     |TechAmerica                     |
          |Centers                         |The Arc San Francisco           |
          |Latin Business Association      |United Cambodian Community      |
          |Los Angeles Urban League Works  |Verizon California, Inc.        |
          |                                |Watts/Century Latino            |
          |                                |Organization                    |
          |                                |                                |
           ----------------------------------------------------------------- 
           Oppose:
           

           --------------------------------------------------------------- 
          |AARP, California               |Inland Congregations United    |
          |Access Humboldt                |for Change                     |
          |African American Lutheran      |Inland Empire Concerned        |
          |Association                    |African American Churches      |
          |Allen Chapel African Methodist |Inland Empire Latino Coalition |
          |Episcopal Church               |Knotts Family Agency           |
          |Alliance for African           |Media Alliance                 |
          |Assistance                     |Messiah Lutheran               |
          |BLU Educational Services       |Milestone Consulting           |
          |California Labor Federation    |Parents and Communities        |
          |California Public Utilities    |Engaged for Education          |
          |Commission                     |Predestined in Christ          |
          |California's One Million NIU   |San Diego Area Congregations   |
          |Coalition                      |for Change                     |
          |Cathedral of Praise            |San Diego Black Health         |
          |Central City SRO Collaborative |Associates                     |
          |Centro La Familia Advocacy     |San Diego Consumers' Action    |
          |Service, Inc.                  |Network                        |
          |Chicana Latina Foundation      |St. Paul A.M.E.                |
          |Coalition for Economic         |Talented and gifted in the     |
          |Survival                       |Inland Empire                  |
          |Communications Workers of      |Tenderloin Neighborhood        |
          |America, # 9                   |Development Corporation        |










          |Congregations Organized for    |The Center of High Church      |
          |Prophetic Engagement           |The Earth Center               |
          |Consumer Federation of         |The Greenlining Institute      |
          |California                     |The Kemet Coalition, Inc.      |
          |Davis Media Access             |The Lord's Gym                 |
          |Division of Ratepayer          |The Utility Reform Network     |
          |Advocates                      |West Fresno Family Resources   |
          |Eagles Wing Christian Church   |Center                         |
          |El Concilio of San Mateo       |Word in Action                 |
          |County                         |Young Visionaries              |
          |Ephesians New Testament Church |11 individuals                 |
          |Faith Temple Apostolic Church  |                               |
          |Greater Light Community Church |                               |
          |Imani Temple Church            |                               |
           --------------------------------------------------------------- 
          Jacqueline Kinney 
          AB 1407 Analysis
          Hearing Date:  July 8, 2013 




































                                     ATTACHMENT
          
          New Basic Service Definition from Decision 12-12-038

          At a minimum, the following service elements must be offered on  
          a nondiscriminatory basis by any carrier providing Residential  
          Basic Telephone Service (basic service) within California.   
          These revised basic service elements do not impose an obligation  
          to provide basic service upon any carrier where no such  
          obligation exists today.  Nor do they prohibit a carrier from  
          electing to provide additional elements as part of its basic  
          service offering.  Any carrier may use any technology to satisfy  
          any obligation to provide basic service as detailed below:

          I.    Basic Service Elements: 

             1.   The provider must offer customers the ability to place  
               and receive voicegrade calls over all distances utilizing  
               the public switched telephone network or successor network.  
                

                a.      Carriers offering basic service must at a minimum  
                  enable calls to be sent and received within a local  
                  exchange or over an equivalent or larger-sized local  
                  calling area.  

                b.      A basic service provider must allow equal access  
                  to all interexchange carriers within the local calling  
                  area in accordance with state and federal law and  
                  regulation.  

                c.      Carriers offering basic service must provide a  
                  voice-grade connection from the customer residence to  
                  the public switched telephone network or successor  
                  network. 

                d.      Carriers offering basic service must disclose to  
                  each customer before subscription that they are entitled  
                  to a voicegrade connection and the conditions under  
                  which the customer may terminate service without penalty  
                  if one cannot be provided.  

                e.      If at any time, a basic service customer fails to  
                  receive a voicegrade connection to the residence and  










                  notifies the provider, the basic service provider is  
                  required to (1) promptly restore the voice-grade  
                  connection, or if not possible (2) provide basic service  
                  to that customer using a different technology if offered  
                  by the provider and if the customer agrees; or (3) allow  
                  the customer to discontinue service without incurring  
                  early termination fees, if applicable.  Nothing in these  
                  rules should be inferred as modifying the service  
                  obligation of a Carrier of Last Resort (COLR) to ensure  
                  continuity of customers' basic service. 

             1.   Free access to 911/Enhanced 911 (E911) service.  

                a.      A basic service provider must provide free access  
                  to 911/E911 emergency services, in compliance with  
                  current state and federal laws and regulations.  

                b.      Any carrier that is not a traditional wireline  
                  provider of basic service will be required to make a  
                  showing by filing a Tier 3 Advice Letter that  
                  demonstrates its ability to provide 911/E911 location  
                  accuracy and reliability that is at a minimum at least  
                  reasonably comparable, but not necessarily identical to,  
                  that traditional wireline service offered by the  
                  existing COLR.

                c.      The basic service provider will further be  
                  required to certify in a Tier 3 Advice Letter filing  
                  that it is compliant with 911/E911 standards established  
                  by state and federal laws and regulations, and will not  
                  be deemed to provide basic service if it has obtained a  
                  waiver from such state and federal laws and regulations.

                d.      Each basic service provider must provide its  
                  potential and existing customers information regarding  
                  its 911/E911 emergency services location accuracy and  
                  reliability standards. 

             1.   Access to directory services.  

                a.      Each basic service provider must offer access to  
                  directory assistance within the customer's local  
                  community that covers an area at least equivalent to the  
                  size of the geographic area the existing COLR's  










                  directory assistance service provides. 

                b.      For basic service provided by other than a  
                  traditional wireline carrier, a customer's listing may  
                  be excluded from the local directory and directory  
                  assistance as a default unless the subscriber  
                  affirmatively requests to have the number listed. 

                c.      For basic service provided by a traditional  
                  wireline carrier, a customer's listing shall be included  
                  for free in the local directory and directory assistance  
                  as a default unless the customer affirmatively requests  
                  to have the number unlisted.  

                d.      A basic service provider must provide customers  
                  the option to receive a free white pages directory  
                  covering the local community in which the customer  
                  resides.  For purposes of this definition, the local  
                  community shall include a geographic region at least  
                  equivalent to the area covered by the white pages  
                  directory that the existing COLR currently provides.   

                e.      Because Verizon California, Inc. (Verizon) and  
                  other providers of basic service to customers residing  
                  in Verizon's service territory have been authorized to  
                  provide electronic delivery pursuant to Resolution  
                  T17302, that authorization is compliant with the white  
                  pages directory requirement for basic service in  
                  Verizons territory.

                f.      The requirement to provide a free published  
                  directory can be satisfied using the procedures  
                  authorized in Resolution T17302 in other territories  
                  upon the filing of a Tier 2 Advice Letter.  Under this  
                  authorization, the affected customers will receive  
                  delivery of the directory electronically by CD-ROM or by  
                  online access, unless a customer affirmatively elects to  
                  receive a traditiong.al printed paper copy by contacting  
                  the basic service provider under the procedures  
                  authorized in Resolution T17302.



             1.   Billing Provisions   











                a.      Providers of basic service must offer customers  
                  the option to receive unlimited incoming calls without  
                  incurring a perminute or per-call charge.  

                b.      Carriers offering basic service must offer a flat  
                  rate option for unlimited outgoing calls that at a  
                  minimum mirrors the local exchange or an equivalent or  
                  larger sized local calling area in which the basic  
                  service customer resides.   

                c.      Basic service must be offered on a  
                                                                          non-discriminatory basis to all residential households  
                  within the provider's service territory.  A carrier may  
                  satisfy this obligation using different technologies  
                  throughout its service territory.  

                d.      Basic service providers must offer Lifeline rates  
                  on a non-discriminatory basis to any customers meeting  
                  Lifeline eligibility requirements residing within the  
                  service territory where the provider offers basic  
                  service.  

                e.      Carriers providing basic service must offer an  
                  option with monthly rates and without contract or early  
                  termination penalties. 

                f.      Carriers may offer added features and/or enhanced  
                  serve elements without additional charge(s) as part of a  
                  basic service offering.  For example, carriers must not  
                  obligate customers to also subscribe to service bundles  
                  that require subscription to data and/or video services  
                  as a condition of receiving basic service.

                g.      As of January 1, 2011, the California Public  
                  Utilities Commission (CPUC) no longer imposes caps on  
                  basic rates.  A COLR serving in a high-cost area,  
                  however, will continue to be required to certify that  
                  its basic rate in a designated high-cost area does not  
                  exceed 150% of the highest basic rate charged by a COLR  
                  in California outside of the high-cost area.

             1.   Access to 800 and 8YY Toll-Free Services. 











               a.     Each provider of basic service must offer at least  
                 one basic service option that allows unlimited calls to  
                 800 and 8YY toll-free numbers with no additional usage  
                 charges for such calls.  A provider may offer alternative  
                 billing plans for basic service that may include usage  
                 charges for calls to 800 and 8YY toll-free numbers. 

               b.     In any event, the carrier must provide full  
                 disclosure to the customer concerning how charges for 800  
                 numbers would apply if the customer does not subscribe to  
                 an unlimited calling flat rate option.

             1.   Access to Telephone Relay Service as Provided for in  
               Public Utilities Code Section 2881. 

               Basic service providers must offer free access to  
               California Relay Service pursuant to Section 2881 for deaf  
               or hearing-impaired persons or individuals with speech  
               disabilities.  


             2.   Free Access to Customer Service for Information about  
               Universal Lifeline Telephone Service (ULTS) Service  
               Activation, Service Termination, Service Repair and Bill  
               Inquiries.

               The basic service provider shall provide free access to  
               customer service for information about the above-referenced  
               services.

             3.   One-Time Free Blocking for Information Services, and  
               One-Time Billing Adjustments for Charges Incurred  
               Inadvertently, Mistakenly, or Without Authorization.

               Basic service must include the provision of one-time free  
               blocking for 900/976 information services and one-time free  
               billing adjustments for changes inadvertently or mistakenly  
               incurred, or without authorization.  

             4.   Access to operator services

               Basic service shall include free access to operator  
               services. 











          II.     General Requirements

          In addition to the basic service elements and related  
          requirements listed above, basic service shall be provided  
          consistent with the following requirements.

               a.     A basic service provider must file and maintain  
                 tariffs or schedules with the CPUC by a Tier 2 Advice  
                 Letter for its basic service offerings which must include  
                 its basic service rates, charges, terms, and conditions;  
                 and must make them publicly available.  Requirements for  
                 customer notice and/or CPUC filings for revisions in  
                 basic service rates, charges, terms, and/or conditions  
                 must be made in accordance with the applicable  
                 requirements for tariff filings set forth in General  
                 Order 96-B.

               b.     If a carrier chooses to offer basic service in all  
                 or part of its service territory using multiple,  
                 different technologies, each type of offering must be  
                 tariffed or scheduled with the CPUC.  This requirement  
                 does not extend beyond basic service.

               c.     Each basic service provider must clearly inform all  
                 potential residential subscribers who contact the  
                 provider prior to initiating service of their option to  
                 purchase basic service and to subscribe to basic service  
                 on a month-to-month basis with no termed contracts.

               d.     A provider must not represent to customers, or in  
                 advertising or by any other means, that any services,  
                 service elements, or service conditions, except those  
                 authorized by the CPUC, constitute basic service in  
                 California.

               e.     Until the CPUC determines the extent to which new  
                 service quality standards should be adopted for carriers,  
                 a provider that wishes to offer basic service utilizing  
                 anything other than traditional exchange-based wireline  
                 technology that cannot comply with all the requirements  
                 of General Order 133-C must file a Tier 3 advice letter.

               f.     This filing must indicate what General Order 133-C  
                 service quality measurements and reporting procedures it  










                 can comply with, those it can provide functionally  
                 equivalent reporting information for and lastly what  
                 measurement and reporting requirements are not applicable  
                 to the technology it is using to provide basic service.   
                 This filing must further indicate how the new service or  
                 new technology maintains essential basic services or  
                 standards.