California PUC majority opposes phone deregulation bill

SACRAMENTO — Members of the California Public Utilities Commission are criticizing a bill that would strip their agency of authority to regulate basic telephone services.

Meeting Thursday in San Francisco, the five-member board expressed doubts about proposed legislation backed by AT&T Inc. and Verizon Communications Inc. The measure, SB 1161, would ensure that state agencies have “no regulatory jurisdiction or control” over telephone calls that involve sending voice signals over the Internet.

Proponents contend that the legislation is needed to reaffirm California government’s generally hands-off stance toward an open and competitive Internet.

But four PUC members expressed skepticism about the legislation’s real aim. SB 1161 would preempt them from regulating land-line phones as well, because even old copper networks use the Internet to complete calls.

Commissioner Michael Florio said the PUC has always maintained “a light touch” regulating voice-over-Internet service and has never attempted to oversee the Internet.

“Nobody is talking about regulating the Internet,” he said. “It’s just a political slogan that has no basis in reality whatsoever.”

Consumer activists have come out against the proposed law. They said it would allow carriers to skirt mandates to provide phone service to rural communities and to offer cheaper rates and subsidies for low-income and disabled customers.

The PUC routinely reviews proposed legislation that might affect its constitutional mandate to regulate electric and natural gas utilities, some telephone service, private water suppliers and a variety of transportation modes. However, the PUC has no power to change or veto any action of the state Legislature.

The PUC only discussed the measure Thursday. A formal decision to oppose, support or call for amendments to the measure is scheduled for the commission’s May 10 meeting.

The bill’s author is state Sen. Alex Padilla (D-Pacoima), the powerful chairman of the Senate Energy, Utilities and Telecommunications Committee, who has accepted nearly $70,000 in campaign contributions from the telecom industry in recent years.

Padilla said the measure would create certainty for Internet companies that need to know that California won’t try to regulate or constrain growth of their industry.

Although the bill appears to be written to deregulate phones that use the Internet to carry voice and data communications, it has the potential to eliminate basic consumer protections for people who use traditional telephone land lines, said Commissioner Catherine J.K. Sandoval, a lawyer and telecommunications expert.

“This bill would essentially prohibit the CPUC from regulating both Voice Over Internet Protocol and Internet Protocol services,” she said. “That’s extremely problematic because many of the telephone carriers have been for almost a decade using the Internet within their networks to move plain old telephone service calls.”

Commissioners Mark J. Ferron and Timothy Alan Simon also expressed skepticism and opposition to parts of the Padilla legislation.

Only Commission President Michael R. Peevey was hesitant to criticize the bill and go against the wishes of the state’s high-tech business community.

“We should be very careful before we jump off the cliff here as commissioners and say we oppose this,” said Peevey, who was clearly uncomfortable about being a one-member minority on the issue.

“My view is that Silicon Valley is the economic engine of the state,” he said. “I don’t want to support anything that in any way would diminish” that.

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, would 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.

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