Brief ⁽¹⁾

SB 455 includes several provisions related to telecommunications: proposed penalties for late payments to the Kansas Universal Service Fund (KUSF); a flat rate option for intraLATA long distance calls; a tax on wireless services for 911; and protection for consumers against unauthorized additional services to a consumer's bill (referred to as "cramming").

Penalties for Late Payments to KUSF. The Kansas Corporation Commission would be expressly authorized to assess a late fee at a rate of not more than 1.5 percent per month on telecommunications carriers, including wireless companies, that have failed to make timely payments to the KUSF. (The Commission's authority to assess this fee should not be construed as new or additional authority.) Payments to the KUSF would have to be collected on a monthly basis. Furthermore, a penalty of not more than $1,000 per offense could be imposed on carriers that do not submit their KUSF calculation worksheets to the KUSF administrator. (The worksheet is used to compute the amount owed to the KUSF by each carrier.) If there is an action to revoke or suspend a carrier's certificate of convenience and necessity, the carrier could lose its certificate of convenience and necessity for failure to pay a KUSF assessment 60 or more days after receipt of notice of delinquency. (Every common carrier and public utility must obtain such a certificate from the Kansas Corporation Commission prior to transacting business in Kansas.)

Flat Rate for IntraLATA Long Distance Calls. The Kansas Corporation Commission could not disapprove a flat rate for unlimited long distance calls made within a customer's LATA, as long as all customers of a local telephone company located within that LATA can receive this service option under the same terms and conditions as the service made available under the flat rate plan. (A "LATA" is the acronym for Local Access and Transport Area. A product of the divestiture of AT&T, the LATA roughly corresponds to area codes.) The intent of this amendment would be to reduce long distance rates within LATAs in Kansas. The mechanism through which a company would recover revenues lost under such a plan is not addressed in the bill.

Tax on Wireless Service. A monthly tax of not more than $.75 would be assessed on each wireless phone for 911 if the emergency telephone service is able to locate where a wireless phone call originates. The monthly tax would be half that amount, if that capacity does not exist. Under existing law, there is no tax on wireless service for 911. A monthly tax of not more than $.75 is currently imposed on wire service to support 911 operations.

Protection Against Cramming. The Kansas Consumer Protection Act would be amended to prohibit a business (other than a local telephone company or long distance telephone company) from adding a telecommunications service to a consumer's bill or charging the consumer for that service without first obtaining the consumer's express authorization. This prohibition would shift the burden of proof from the consumer to the business that allegedly added or charged for the service. The treatment of burden of proof proposed for cramming is the same as that which, under existing law, is accorded complaints involving the unauthorized switching of a consumer's carrier to another carrier (otherwise known as slamming). Affiliates of local telephone companies and long distance telephone companies would have the same burden of proof as other businesses in defenses against cramming allegations. Businesses and organizations alleging a slamming or cramming violation would be authorized to bring their own private course of action. In the Kansas Consumer Protection Act, the definition of "consumer" currently applies only to individuals and sole proprietors. Therefore, only individuals and sole proprietors are protected by the existing law prohibiting slamming.

Effective Date of Act. The Act would take effect upon publication in the Kansas Register.

Background

The introduced version of SB 455 was requested by the Kansas Corporation Commission. The Commission staff explained that the bill would reinforce the Commission's authority to assess a late payment fee for delinquent KUSF payments. The Commission established a monthly late payment fee in an order dated February 18, 1997. However, a wireless company is challenging the Commission's authority to assess that fee because the Commission is not expressly authorized in statute to do so. According to Commission staff, that company owes a late payment charge of $17,427 and the Commission is pursuing legal action against it.

The Division of the Budget fiscal note indicated that, according to the Kansas Corporation Commission, passage of the introduced version of SB 455 would not affect state revenues or state expenditures. However, any late fees assessed or collected could be used to offset costs associated with administering the KUSF. Currently, the third-party administrator of the KUSF is the National Exchange Carriers Association.

The Senate Committee on Commerce amended the bill to require the administrator of the KUSF to collect payments on a monthly basis from all assessed carriers. Existing law requires that distributions from the KUSF be made on a monthly basis and the amendment has the effect of making collection requirements statutorily consistent with those governing disbursements.

The House Committee on Utilities amended the bill to increase the penalty rate assessed carriers for delinquent payments to the KUSF and to assess penalties for delinquent submittal of KUSF calculation worksheets to the KUSF administrator. Another amendment added the presumption of a carrier's unfitness to be certificated if the carrier, in a revocation or suspension proceeding, was very delinquent in its payments to the KUSF.

Other House Committee amendments included: an option for flat rate plans for unlimited intraLATA long distance calls; imposition of a tax on wireless phones for 911 service (similar to provisions in 1999 HB 2399, which is currently in the House Committee on Utilities); and a prohibition against cramming in the Kansas Consumer Protection Act. The cramming provisions are identical to those included in the Senate Committee of the Whole's version of 2000 SB 431. (Please see the Supplemental Note on that version of the bill for a more detailed version of the provisions of the bill and its background.) SB 431 was passed, without further amendments, by the House Committee on Utilities and was separately referred to the House Judiciary Committee. The House Judiciary Committee amended SB 431 by deleting the provisions added by the Senate Committee of the Whole pertaining to affiliates or subsidiaries of local and long distance telephone companies.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html