Report — January 31

CALIFORNIA STATE LEGISLATURE

Use of Credit Cards for Electronic Downloadable Products. Senate Bill 383 (Jackson) would authorize a person or entity that accepts credit cards in an online transaction involving an electronic downloadable product to require the cardholder, as a condition of accepting a credit card payment, to provide personally identifiable information associated with the card solely for the purpose of the prevention of fraud, theft, identify theft, or criminal activity, or for the enforcement of the terms of sale. Any information collected would have to be destroyed or disposed of in a secure manner, and it may not be shared with other persons or entities. The bill defines “online transactions involving an electronic downloadable product” as a credit card transaction for a product, service, subscription, or any other consideration, in which the product, service, subscription, or consideration is provided by means of a download to a computer, telephone, or other electronic device.

According to the Author, online merchants collect personal identifiable information from customers for sale to third parties for marketing purposes. However, the proposal includes language that would allow customers to voluntarily opt-in marketing programs as long as the person or entity explains the intended use for that personally identifiable information. The bill has support from several consumer groups, including the Consumer Federation, the California Consumer Attorneys , Consumer Watchdog, and CALPIRG, and privacy groups, including Privacy Rights Clearinghouse and Privacy Activism, among other groups.

A coalition led by the California Chamber of Commerce is opposed to the measure because it would require online merchants to bifurcate their digital product offerings, depending on whether the customer opts-in to the marketing program. In addition, the bill could encourage class-action litigation. The opposition coalition includes TechAmerica, TechNet, CTIA, California Retailers Association, iNet, the Direct Marketing Association, the California Independent Bankers, State Privacy and Security Coalition Inc., and the Motion Picture Association of America.

SB 383 was heard and approve this week on the Senate Floor (21-13) and moves to the Assembly for consideration.

California Teleconnect Fund Program. Assembly Bill 876 (Bonta) would require the California Public Utilities Commission (CPUC) to develop a plan on the feasibility and expense of establishing and maintaining a database of communications services purchased by entities using financial assistances from California Teleconnect Fund (CTF), and submit that plan to the Legislature by no later than March 1, 2016. The bill would also (1) clarify that preschools and transitional kindergartens are eligible for funding from CTF program, and (2) would statutorily require that the CTF program remains technology neutral.

Current law authorizes the CPUC to use ratepayer funds, collected through a surcharge on all intrastate telecommunications services for universal programs, to provide financial discounts to qualifying schools, community colleges, libraries, hospitals, health clinics, and community organizations for the purchase of advance communications services, including Internet services. According to the Author, the proposed plan to be developed by the CPUC would assist CTF program applicants in preparing their project proposals for needed communications services. In addition, the Author believes that the current law regarding the eligibility for preschools and traditional kindergarten is ambiguous. Some CCTA member companies currently participate in the CTF program today.

On January 31, 2013, the CPUC opened Rulemaking 13-01-010 to conduct a comprehensive review of the current CTF program, assessing the goals of the program as well as the eligibility requirements for participants, service providers, and types of services. Interested parties are currently in the process of filing comments in the proceeding. Although it is not known when the Commission will issue a final ruling on program changes, it would appear that AB 876 may be premature pending that final ruling.

This week, AB 876 was heard and overwhelmingly approved on the Assembly Floor (75-0) and moves to the Senate for consideration.

Constitutional Amendment to Ban Any Internet Access Tax. Assembly Member Jeff Gorell (R-Camarillo) is considering a proposal to codify the federal Internet Tax Freedom Act in California’s State Constitution. This constitutional amendment would simply prohibit an Internet access tax and would not propose any changes to the state or local sales and use tax laws. In defining “Internet access,” the proposal clearly excludes “voice, audio or video programming” services. The proposal also excludes “any franchise fee or similar fee imposed by a State or local franchising authority” from the definition of “tax.” While this proposal has no impact on existing sales and use taxes or franchise fees, it could prevent the state from imposing a “universal service fee” on Internet service to provide financial support for a low-income “Lifeline”-type program.

In 1998, Congress passed and the President Bill Clinton signed the Internet Tax Freedom Act which bars the federal, state and local governments from taxing Internet access and from imposing discriminatory Internet-only taxes such as bit taxes, bandwidth taxes, and email taxes. The Act did not repeal any state or use tax. The Internet Tax Freedom Act has been extended three times (2001, 2004, and 2007). The most recent extension in 2007 was signed into law by President George W. Bush on November 1, 2007 and maintains the moratorium until November 1, 2014.

This proposal has not yet been introduced.

CALIFORNIA REGULATORY UPDATE

Attorney General Opinion13-403. CCTA filed Comments in response to a request for an Attorney General legal opinion on whether a local entity can adopt a PEG fee Ordinance without complying with Proposition 26. CCTA argues that while DIVCA does authorize an entity to adopt PEG fee Ordinances, the adoption of the Ordinance and fee must still comply with the requirements of Proposition 26 and, in particular, the requirement to obtain a 2/3rds majority vote approving the fee. The Attorney General is expected to begin writing its Opinion within the next couple of weeks, and is expected to issue the Opinion within the next two months.

FEDERAL UPDATE

Waxman announces end of long House Career. Congressman Henry Waxman (D-LA) announced Thursday that he will retire at the end of this congressional session.

Waxman, 74, who was elected in 1974 in the large post-Watergate class of Democrats is currently the ranking Democrat on the House Energy and Commerce Committee. For two years beginning in 2008 he served as Chair of the Committee until the Republicans retook control of the House in 2010.

President Obama called him “one of the most accomplished legislators of his or any era”

NCTA President and CEO Michael Powell in a statement said “Representative Waxman has been a force for change during his tenure in Congress and will be missed. Over the past 40 years he has been at the center of many important technology and telecommunication issues…”

CCTA and its members have had a long and positive working relationship with Congressman Waxman during his service in Congress as well as during his time in the California Assembly where he served prior to winning his House seat.

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