Telecommunications companies win major Capitol victory

A fiercely contested bill to block the Public Utilities Commission from regulating voice-over-internet services used by millions of Californians has been signed into law Friday by Gov. Brown, culminating a high-stakes lobbying battle.

The action had been sought by the telecommunications lobby, which waged a full-court press in the Capitol to get the measure through. Consumer groups and their allies denounced the plan as a veiled attempt to phase in the deregulation of land lines over time – a contention the governor and the industry rejected.

“The bill does not affect the authority of the California Public Utilities Commission regarding the construction and maintenance of facilities, and access to utility support structures, including pole attachments,” Brown wrote in his signing message. “Importantly, the bill emphasizes the commission’s authority to monitor, track and report complaints from VoIP customers to the Federal Communications Commission …”

Sen. Alex Padilla, D-Pacoima, the author of SB 1161, said his measure “preserves all federal and state consumer protections for VoIP, which include requirements to offer 911 service and pay 911 fees, make facilities accessible to disabled users, protect customer privacy, notify customers of battery backup power requirements, and report network outages, among others.” 

But consumer groups and their allies, led by The Utility Reform Network, said the point of the legislation was to ease the companies’ transition from copper wires to VoIP, or voice over internet protocol, in which telephone calls are placed through the internet instead of land lines. VoIP is less costly than land-line service, making it increasingly attractive to customers.

“The bill cuts a huge swath out of the CPUC’s jurisdiction prospectively, leaving it with no ability to protect consumers in even the most basic ways. The Commission could no longer enforce service quality and line maintenance standards,” TURN’s Mark Toney noted earlier. “Deregulating VoIP today means total phone deregulation tomorrow,” he wrote. 

The Padilla bill, backed by a coalition of hundreds of communications companies, including AT&T and Verizon, precludes the PUC from regulating IP-enabled communications services, including VoIP, without explicit legislative approval. Such regulation, if needed at all, is better handled at the federal level, they said.

But there is interconnectivity between VoIP and landlines, which means the PUC’s regulatory clout over telephone services ultimately would be crippled, critics noted. AT&T, a supporter of the bill, has some 7 million land lines in the state.

A trade association called TechAmerica, with hundreds of companies, and TechNet, a powerful technology lobbying group, along with the Silicon Valley Leadership Group, sponsored the bill.

The PUC, which has broad authority over communications, railroads and electrical and natural gas utilities, does not regulate VoIP — yet.

But comments by some commissioners raised the possibility that such regulation is on the way and Padilla’s bill was seen in the Capitol as a pre-emptive strike.

At stake is a lucrative industry.

AT&T and Verizon – the two largest carriers in California – had a 29 percent increase in the number of their VoIP customers in just six months during 2011. There are some 3.5 million interconnected VoIP subscriber lines in California, serviced by some 125 VoIP companies, according to a Senate analysis. Nationwide, a third of all the 87 million residential telephone subscriptions were VoIP-based – a number that increased nearly 50 percent in three years. Meanwhile, traditional, land-based line customers dropped by some 17 percent.

One 2008 state study found that 96 percent of households have basic broadband access, placing California as a leader in broadband availability among all 50 states, but only about half the households actually used broadband.  Of those with access, only half were able to link to broadband at speeds greater than 10 Mbps.

To residential consumers, VoIP is attractive: The roughly $30 per month cost for broadband-based service typically includes such features as unlimited long-distance calls in the U.S. and Canada, automatic switching of missed calls to a customer’s mobile phone and emailing voice mail files. In one year, VoIP subscribers rose by 22 percent to 32 million.

“To discuss ‘IP-enabled’ goes far beyond the new cool whizz-bang technology or ‘ap’ for the internet,” said Christine Mailloux of TURN, a nonprofit group that advocates on behalf of consumers and ratepayers. “This isn’t about regulating the internet, it’s about regulating technology that millions of Californians rely on every day and that this Legislature and commission up to this point have found to be an essential service.”