California regulator delays taking stand on Internet phone measure

California Sen. Alex Padilla (D-Pacoima)
(Cal Gov)

SACRAMENTO — Legislation that opponents fear will strip the state Public Utilities Commission of its power to regulate Internet phone services in California put the commission on the spot, and it punted.

For the second consecutive meeting, the commission Thursday postponed taking a stance on the proposal that would prohibit the PUC and other state agencies from regulating phone service using Internet connections.

The commission, meeting in Fresno, had been expected to oppose a Senate bill written by state Sen. Alex Padilla (D-Pacoima) on behalf of AT&T Inc., Verizon Communications Inc., cable television companies and a number of high-tech business groups.

Proponents have argued that the bill would simply lock into law the PUC’s current generally hands-off attitude toward Voice over Internet Protocol phone service and leave regulation to the Federal Communications Commission.


Silicon Valley investors, entrepreneurs and engineers said they needed legislative “certainty” that they would not be hit with new regulations so they could come up with new products and services in an extremely competitive telephone market.

Opponents contended that the Padilla proposal was unneeded and could hamstring future commissions that might want to take action to ensure Internet phone service quality and availability as the technology spreads.

“I think the whole structure of the bill is problematic,” PUC Commissioner Michael Florio said. “It’s extremely ambiguous in a number of places.”

On Thursday, three of the five commission members spoke out against the bill, but none challenged a request from Commissioner Timothy Alan Simon to hold off voting until the May 24 meeting so that issues raised by Padilla in a letter could be addressed.

The senator questioned a preliminary commission staff financial analysis concluding that the bill, SB 1161, could cost state and local governments as much as $1 billion if it became law.

“We are concerned about the credibility of these cost estimates,” said the letter signed by Padilla and other senators.

Meanwhile, Padilla’s bill is moving through the Legislature. Last month, it won unanimous, bipartisan approval from the Senate Energy, Utilities and Communications Committee. And a legislative review of the economic effect of the bill is on the agenda of the Senate Appropriations Committee, which meets Monday.

Consumers increasingly are turning to inexpensive Internet phone service — instead of traditional, hard-wired, landline handsets — as part of bundled services they buy from phone and cable companies that include television programming and high-speed Internet connections.


At the end of 2010, there were 3.5 million residential Internet phone lines in the state, the PUC said. In contrast, there were 11 million residential telephone landlines, mainly owned by AT&T and Verizon. Internet phone service has been growing rapidly.

In recent years, the PUC has received about 600 complaints from consumers about Internet phone service, some involving “slamming” — the unauthorized switching of providers — and “cramming” — the insertion of phony charges on customers’ bills, Commissioner Catherine Sandoval said.