State Senate panel backs bill to deregulate Internet phone service

by Marc Lifsher, Los Angeles Times

Proponents say the bill would lock the state’s hands-off policy into law, but critics say it would strip the PUC of its power to require phone firms to provide basic land-line service to any consumer.

SACRAMENTO ‘ An industry-backed bill that would preempt state agencies from regulating Internet-enabled voice and data transmissions won unanimous approval from a state Senate committee in its first legislative hearing.

Amid protests from consumer advocates, the bill’s author, Sen. Alex Padilla (D-Pacoima), tried to downplay the significance of the measure, which proponents said would simply lock the state’s current hands-off policy into law.

Such a reiteration of existing practices would give Silicon Valley businesses "the certainty" to continue developing innovative, Internet-powered products and programs, Padilla argued at a hearing Tuesday of the Senate Energy, Utilities and Telecommunications Committee.

The bill "maintains the environment that has taken us to where we are today and ensures it will continue tomorrow," said Robert Callahan, a lobbyist for TechAmerica, a Silicon Valley telecommunications and technology trade group.

But opponents, mainly consumer advocates for the poor, elderly and minorities, countered that Padilla’s bill, SB 1161, would strip the California Public Utilities Commission of its last vestige of power to require telephone companies to provide universal, basic land-line service to any consumer.

Those same rules also mandate that subsidized connections be available for qualifying low-income residents and that special equipment be given to people with hearing disabilities.

"We see this as a withering away and the elimination of PUC regulation over telecommunication," said Richard Holober, executive director of the Consumer Federation of California. "We think that would be bad public policy."

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

The bill is being pushed by AT&T Inc. and Verizon Communications Inc., which own networks connecting about 11 million land lines statewide, as well as major tech companies such as Cisco Systems Inc. that make communications hardware and software.

AT&T was the fifth-largest contributor to Padilla’s campaign coffers with $23,900 from 2007 through 2010, according to nonpartisan political data firm Map- In all, Padilla received $69,644 from telecom services and equipment interests during that period.

Padilla, the committee’s chairman, bristled at charges that he was in league with telecommunications, cable TV and Internet companies to jettison California’s minimal remaining oversight of basic phone service.

He promised to amend his bill as it makes its way through the Legislature to "make it abundantly clear" that it does not eliminate any existing regulation of conventional phone service through land-line connections.

Padilla’s pledge clearly swayed committee members who expressed skepticism about the need for the bill, which passed on an 11-0 vote.

"I don’t want to vote for diminishing any existing consumer protections," such as universal service, said Sen. Christine Kehoe (D-San Diego) toward the end of more than two hours of testimony and deliberation.

But Padilla’s stab at compromise didn’t win any applause from the bill’s strongest critics.

Voice over Internet Protocol technology is so inexpensive and ubiquitous that it is expected to replace the current copper wire lines in the near future, they said. Copper networks already depend on VOIP to complete most calls, and the technology is at the heart of all cable phone and fiber-optic and long-distance service.

"As more people use voice over Internet, fewer people will have [consumer] protections," said Mark Toney, executive director of the Utility Reform Network, a San Francisco consumer group. People who live in isolated communities with VOIP phones won’t have the legal right to get subsidized, low-cost service, he said.

State policymakers should provide more, not less, oversight of the communications industry if they don’t want to repeat the mistakes that they and their federal counterparts made when they deregulated the energy and the home mortgage industries, said Samuel Kang, managing attorney for the Greenlining Institute, a civil rights organization in Berkeley.

"Why are we now trying to take authority out of the hands of the PUC and outsource that accountability to Washington, D.C.?" he said.

The PUC has so far taken no public position on the Padilla bill.