Consumer Federation of California

Update: On October 10, 2013, Governor Brown vetoed AB 300.

Consumer Federation of California opposes AB 300 (Perea), which would impose a surcharge on pre-paid cell phones.

Public purpose programs like LifeLine, California Teleconnect, and the Deaf and Disabled Fund are crucial for many Californians. However, the state’s surcharge collection process is in place in order to keep these and other vital programs funded.

Unfortunately, AB 300 would create a complicated and expensive structure for the collection and payment of surcharges for the state’s public purpose programs.

This overly complicated and unnecessary surcharge collection structure will mandate a shift of the burden of surcharge payment onto the bills of the California consumer. Providers of prepaid mobile telephony services, including companies such as Tracfone, Virgin Mobile/Assurance, Verizon Wireless and Nexus/Reachout Wireless, currently support the state’s public purpose programs through a surcharge on intrastate revenue.

The California Public Utilities Commission and other state agencies already collect millions of dollars from these carriers for programs.

These changes are not only expensive, but also unnecessary. Currently, prepaid wireless companies typically pay these surcharges directly to the California Public Utilities Commission or to the Board of Equalization without the involvement of retailers.

Because the Commission currently collects these surcharges, the changes from this bill will only serve to benefit the carriers. The over 40 pages of AB 300 creates a structure that is completely unnecessary to accomplish the purported goal of collecting and remitting these public purpose program surcharges.

Existing legislative funds described in the Public Utilities Code currently support these critical programs and yet this new structure will cost millions of dollars in administrative expenses (the Board of Equalization alone estimates costs at over $10 million a year for the next five years) and will push the surcharges directly onto the customers’ bills. Further, it will take significant investigation and potential litigation to ensure that the end user is not being charged twice for these surcharges.

AB 300 would ultimately create more problems than it would solve, for both companies and ratepayers.