CPUC Punts on Texting Surcharges After FCC Classification Order
FCC Commissioner Brendan Carr and wireless carriers cheered after an FCC order persuaded the California Public Utilities Commission not to move ahead on a Jan. 10 vote on a proposal to affirm text messaging is subject to state USF and other “public purpose program” surcharges. Last week’s FCC order classifying wireless texting as an information service (see 1812120043), plus negative public attention in the media, contributed to the state agency scuttling the item, observers said. The CPUC could legally revive the plan, said NARUC and California consumer groups.
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In light of the FCC action, assigned Commissioner Carla Peterman withdrew from the CPUC’s Jan. 10 agenda the draft decision in Docket R.17-06-023, "which proposed to clarify that text messaging service should be subject to the statutory surcharge requirement,” said a statement tweeted Friday by the CPUC. The state agency initially planned to vote last Thursday, but that was complicated by the FCC's 3-1 vote the day before (see 1812050019). The CPUC also faced multiple mainstream news stories referring to the proposal as a new tax, including a San Jose Mercury News headline: “OMG! Now California wants to tax text-messaging?”
“Whether it was the 5G tax that we eliminated in September, or the text tax that ended with our December decision, I’m glad the FCC has removed these regressive plans to increase the cost of connectivity for Americans,” Carr said in a statement to us after “liking” our retweet of the CPUC. In a concurring statement last week on the order, Commissioner Mike O’Rielly said the FCC order means “the Commission will exert its preemption authority over states when necessary to ensure that the appropriate classification is properly recognized.” O’Rielly and Commissioner Jessica Rosenworcel, the lone no vote, didn’t comment Monday.
Wireless carriers were pleased California withdrew, said CTIA Senior Vice President-State Affairs Jamie Hastings. “This was a flawed proposal that would have exceeded the CPUC’s authority and hurt consumers in California.”
The Utility Reform Network was disappointed the CPUC “might be deferring to the powerful wireless lobby and the carriers’ public relations misleading spin on this issue,” said TURN Managing Director-San Diego Christine Mailloux. After it reviews the FCC order, the state commission should “support these public purpose program funds that are critical to ensure that all Californians are connected with affordable and reliable service,” she said. “The Commission should not listen to the carriers’ attempts to scare consumers as a screen for covering up their scramble to protect profits.” Mailloux said it's up to carriers "whether to impose this surcharge directly on consumers" and texting represents "a small part of the wireless bill." The CPUC didn’t comment.
“The political heat didn't help, but the FCC's decision was probably the biggest factor” behind the CPUC pulling the item, said Tellus Venture Associates President Steve Blum, a consultant for California localities. “The legal theory that the order would have been based on was yanked out from under them.” The announcement’s timing was unusually quick, perhaps due to the critical publicity, Blum said. The item’s withdrawal doesn’t close the proceeding -- the CPUC last week extended its statutory deadline to June 29 -- but the proposal would have to be written and the agency would have to assign a new commissioner to replace retiring member Peterman on the case, Blum said. At minimum, the CPUC probably will vote on an order to close the proceeding so intervenors may qualify for statutory compensation, he said.
“The CPUC has good grounds to proceed if it chooses to do so,” at least under the Telecom Act, NARUC General Counsel Brad Ramsay emailed. “While a carrier must be providing a ‘telecommunications service’ to access federal subsidies,” Section 254(d) lets the FCC require contribution from any provider of “telecommunications,” a distinct term the agency has relied on to assess USF fees, and allow states to assess similar fees, on nonclassified services like VoIP, Ramsay said. “The only barrier to a State assessment is whether the traffic is severable -- meaning can they distinguish inter- from intrastate traffic.” Some California carriers were paying into the state fund based partly on intrastate text traffic, so it must be severable, he said.
The CPUC would have to rewrite the proposal that “was written based on the assumption that the FCC hadn't classified text messaging as either a telecommunications service or an information service,” emailed Greenlining Institute Senior Legal Counsel-Telecom Paul Goodman. But the state needn't fear pre-emption, he said. “The FCC can't claim that it has no regulatory authority over information services and claim that is has authority to preempt state rules about information services.” California LifeLine providers “are reimbursed for providing both phone calls and text messages,” so “it seems only fair that we collect revenue” from both, he said.
California’s plan probably was unlawful and wouldn’t have been popular with California’s residents who text, said Free State Foundation President Randolph May. “Once the FCC declared text messages to be information services, the days of California’s plan to tax texting were numbered. Better for California to pull back now rather than wage an almost certain losing battle.”