CalChamber-Opposed Bill Raising Internet Costs Stalls

A California Chamber of Commerce-opposed bill that would have raised internet service costs has stalled in the California Legislature and is likely dead for the year.

The bill, SB 1179 (Durazo; D-Los Angeles), establishes price controls for broadband and slows broadband deployment statewide.

Preempted by Federal Law

SB 1179 would make it unlawful for any state agency to contract with an internet service provider (service provider) unless that service provider “offers affordable home internet service to all eligible households” for no more than $30 per month and under other specific terms prescribed by this bill, including advertising and call center staffing obligations.

This definition of affordability by setting a specific rate in statute is an attempt at rate regulation, which is preempted by federal law.

Will Not Solve Problem

The Affordable Connectivity Program (ACP) is a Federal Communications Commission (FCC)-administered program that helps ensure households can afford the broadband they need for work, school, health care, and more by providing $30 monthly assistance for low-income households. Internet service providers in California participate in the ACP and offer plans with speeds up to 100 Megabits per second (Mbps) that are free or very low cost with ACP eligibility.

In a letter to legislators, the CalChamber pointed out that SB 1179 does not resolve the larger problem of continued ACP funding by the federal government. The ACP is a dollar monthly assistance amount given to constituents who qualify; this bill would not replace the monthly assistance amount given.

Service providers took part in the predecessor program, the Emergency Broadband Benefit Program, and have been leading in affordable plans for qualified individuals since before the pandemic. The problem, the CalChamber said, is not with the service providers maintaining low-income plans, it is with a federal subsidy possibly not being provided in the future in conjunction with those plans.

Direct Conflicts

Directly Conflicts with How ACP Is Administered Today

The ACP takes providers out of the process of determining program eligibility. SB 1179 would instead put the obligation of finding eligible households on the service provider.

The bill requires service providers to establish a phone number and have “dedicated” staff to enroll consumers and would require providers to “immediately convert” eligible households to an affordable plan during the month they become eligible. This would require service providers to have access to and retain a tremendous amount of personal information about consumers’ income status on an ongoing basis.

Currently, service providers do not have that kind of information on consumers since providing broadband service is not dependent on the income of a household, the CalChamber explained.


Uncertainty for Service Providers and State Agencies

A service provider’s compliance would be determined based on vague and inconsistent broadband adoption metrics including whether an arbitrary percentage of “eligible” customers have “documented awareness” and subscribe to the service, which could be assessed at any point in time during a contract term.

In addition, the bill includes a requirement that consumers are signed up for affordable programs within 30 minutes, which is a completely arbitrary timeframe, the CalChamber noted.

Service providers contract with multiple California agencies through long-term contracts to provide facilities and/or services for emergency 911, firefighting and other public safety and emergency response operations.

Other long-term contracts with California agencies enable delivery of communications service to K-12 schools, colleges, universities, libraries, hospitals and other public offices across the state, often at special rates from state and federal subsidy programs to ensure these anchor institutions are connected.

Service provided pursuant to these contracts is entirely separate from provisions of residential service, including low-cost broadband service to eligible low-income households.

SB 1179 risks interruptions to critical state internet services by potentially making an existing contractor ineligible from the moment the bill takes effect, the CalChamber warned.

Even if an existing contractor’s current offering qualifies, the California Department of Technology can redefine the speed requirement at any time, disqualifying that contractor. The state cannot issue a fair Request for Qualification prior to procurement when providers cannot predict what the key qualifier will be. This will shrink the competitive pool of vendors, which will raise costs.

Staff Contact: Ben Golombek

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Ben Golombek joined the California Chamber of Commerce on January 17, 2022 as executive vice president and chief of staff for policy. He heads the CalChamber policy staff, providing strategic oversight and management of CalChamber’s legislative and regulatory priorities. Most recently, as West Region vice president for public affairs for AT&T, Golombek managed a team of 20 to create and implement campaigns and media strategies to educate and influence lawmakers, regulators and consumers for eight states, including California. He has served as chief of staff to three members of the California State Assembly. Before his State Capitol experience, Golombek worked at Los Angeles City Hall as deputy city controller, communications director for a city councilmember, and deputy press secretary for Mayor Antonio Villaraigosa. Golombek graduated from Northwestern University, has an M.B.A. from the University of California, Davis, and completed the Coro Fellows Program in Public Affairs. See full bio