Bill would strip PUC’s oversight of land lines, critics say


SACRAMENTO — A coalition led by AT&T Inc. and Verizon Communications Inc. is backing legislation that critics contend would strip the state Public Utilities Commission of its last vestige of regulatory power over basic land-line telephone service.

The bill, authored by the powerful chairmen of the Senate and Assembly committees overseeing utilities, would ensure that state agencies have “no regulatory jurisdiction or control” over telephone calls that involve sending voice signals over the Internet.

And today, almost any call that is made, even over old copper networks owned mostly by AT&T and Verizon, involves the Internet.


Proponents argue that a new law, SB 1161, is needed to reaffirm California government’s generally hands-off stance toward “an open and competitive Internet.”

Passage of the bill, similar to laws in 24 other states, would “ensure that California does not lose its position among the states as epicenter of the global Internet economy,” according to a fact sheet issued by coauthor Sen. Alex Padilla (D-Los Angeles), chairman of the Senate Energy, Utilities and Communications Committee.

But opponents contend that the proposed law is really about letting carriers get around a mandate to provide phone service to rural communities as well as requiring carriers to provide cheaper rates for low-income customers and subsidized phones and other special equipment to the disabled.

Residential land-line phone service was almost completely deregulated in 2006, but the PUC retained limited authority over service quality and availability.

With the commission itself deregulating land-line and wireless phone service, the door was always left open for the agency to re-regulate the industry, should that be needed in the future. The proposed law would eliminate that option and, critics said, go further.

The bill could do away with even that limited regulation over quality and availability, they said, because voice-over-Internet-protocol technology is so pervasive that even conventional copper-wire handsets depend on the Internet to complete most calls. VOIP is at the heart of all cable phone systems as well as fiber-optic service from telecoms and long-distance networks.

The bill would usurp the PUC’s remaining power to enforce state laws requiring AT&T, Verizon and a few smaller land-line companies to provide service to isolated communities, they said. AT&T still owns a network with 7 million land lines; Verizon has 4 million.

“This bill would gut the PUC’s ability to ensure safe and reliable service” for land-line phones, said Matthew Marcus, legislative director of the commission’s independent Division of Ratepayer Advocates.

In a letter to Padilla, Marcus argued that passage of the bill “would likely preclude the CPUC from establishing strong customer protections” that would maintain high quality and reliable services, prevent cramming and slamming and protect the most vulnerable customers such as the poor, limited-English speakers and the elderly.

Cramming is the illegal practice of placing unauthorized, misleading or deceptive charges on local telephone bills. Slamming involves switching a phone service to a different provider without notifying the customer.

For his part, Padilla stressed that his bill seeks only the continued vitality of California’s high-tech economy.

“All current regulations and protections in place at the PUC for the consumer and the technology that the PUC has authority for will remain in place,” the senator said.

AT&T echoed those two points in a letter last week to Padilla from the company’s chief California lobbyist, William H. Devine.

Differences among opponents and proponents of the bill could be worked out Tuesday, Padilla said, when the bill has its first legislative hearing in his Senate committee.

AT&T has been a big financial backer of both Padilla and his counterpart, Assemblyman Steven Bradford (D-Gardena), head of that body’s Utilities and Commerce Committee.

According to, a nonpartisan website that tracks political contributions, lobbying and legislation in California, AT&T was the fifth-largest contributor to Padilla’s campaign with $23,900 from 2007 through 2010. In all, Padilla received $69,644 from telecom services and equipment interests during that period.

AT&T was the largest contributor to Bradford’s war chest with $19,600 during those four years, according to MapLight. Total telecom contributions to Bradford were $32,900.

Verizon spokesman Jarryd Gonzales stressed that the bill would strengthen the business climate because it would minimize regulation of the Internet.

The bill’s chief sponsor, TechAmerica, a trade group, said its members support the bill because it creates “certainty in the existing regulatory environment.” TechAmerica has more than 1,000 member companies, including such industry leaders asDell Inc.,IBM Corp.andApple Inc., as well as AT&T and Verizon.

Lawmakers shouldn’t be in a rush to shield the phone companies from PUC enforcement of long-standing basic communications rules, said Mark Toney, executive director of the Utility Reform Network, a ratepayer group known as TURN that monitors the PUC.

Instead, Toney proposed an amendment that would direct the PUC “to study and report on the most effective and least restrictive methods for promoting technology innovation while still upholding its mandate to protect California consumers.”

It’s unlikely that opponents will have any success persuading Padilla and Bradford to modify their phone deregulation measure, said Lenny Goldberg, a TURN lobbyist.

“The bill is on a power track,” he said. “When you got all the telecommunications companies and cellphone companies and cable companies and high-tech companies, that’s enough right there” to pass the bill.