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SB-822 Communications: broadband Internet access service.(2017-2018)

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Date Published: 03/13/2018 09:00 PM
SB822:v98#DOCUMENT

Amended  IN  Senate  March 13, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 822


Introduced by Senator Wiener
(Principal coauthors: Senators Allen, Dodd, Hill, McGuire, Monning, and Skinner)
(Principal coauthors: Assembly Members Bloom, Bonta, Chiu, Friedman, Kalra, and Mullin)
(Coauthor: Senator Leyva)
(Coauthor: Assembly Member Ting)

January 03, 2018


An act to add Chapter 3.5 (commencing with Section 1775) to Title 1.5 of Part 4 of Division 3 of the Civil Code, to add Article 2 (commencing with Section 3020) to Chapter 3 of Part 1 of Division 2 of the Public Contract Code, and to amend Section 5840 of, to add Sections 272, 5905, and 8367 to, and to add Chapter 10 (commencing with Section 5600) to Division 2 of, the Public Utilities Code, relating to communications.


LEGISLATIVE COUNSEL'S DIGEST


SB 822, as amended, Wiener. Broadband Communications: broadband Internet access service.
(1) Existing law, the Consumers Legal Remedies Act, makes unlawful certain unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer. Existing law authorizes any consumer who suffers damages as a result of the use or employment by any person of a method, act, or practice declared to be unlawful, as described above, to bring an action against that person to recover or obtain damages, restitution, an order enjoining the methods, acts, or practice, or any other relief the court deems proper.
This bill would revise the act to prohibit specified actions by an Internet service provider, as defined, that provides broadband Internet access service, as defined, and would authorize the Attorney General to enforce those prohibitions pursuant to specified laws. This bill would prohibit a public entity, as defined, from purchasing, or providing funding for the purchase of, any fixed or mobile broadband Internet access services that violate these prohibitions. The bill would require an Internet service provider that provides fixed or mobile broadband Internet access service purchased or funded by a public entity to publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access service that is sufficient to enable end users of those purchased or funded services, including a public entity, to fully and accurately ascertain if the service violates these prohibitions.

Under

(2) Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including telephone corporations. Pursuant to its existing authority, the commission PUC supervises administration of the state’s telecommunications universal service programs. The Digital Infrastructure and Video Competition Act of 2006 establishes a procedure for the issuance of state franchises for the provision of video service, defined to include cable service and open-video systems, administered by the commission.

The bill would state the intent of the Legislature to enact legislation to effectuate net neutrality in California utilizing the state’s regulatory powers and to prevent Internet service providers from engaging in practices inconsistent with net neutrality, including through 4 described means.

This bill would require that any moneys made available pursuant to the state’s telecommunications universal service programs for the building of infrastructure for broadband communications be awarded only on the condition that any Internet service provider that provides broadband Internet access service utilizing that infrastructure not engage in any of the actions prohibited by the provisions of this bill. The bill would require that any moneys made available pursuant to the state’s telecommunications universal service programs for access to the Internet be awarded only on the condition that any Internet service provider that receives those moneys not engage in any of those prohibited actions.
(3) Existing law, the Digital Infrastructure and Video Competition Act of 2006, establishes a procedure for the issuance of state franchises for the provision of video service, defined to include cable service and open-video systems, administered by the PUC. Under the act, any person or corporation that seeks to provide video service, as defined, in the state is required to file an application with the PUC for a state franchise. The act prohibits the PUC and any local entity from imposing any requirement on the holder of a state franchise, except as provided in the act. The act prohibits a franchise holder from discriminating against any group or denying access to subscribers because of the income of the residents in the local area in which the group resides and requires a franchise holder to comply with customer service standards pertaining to the provision of video service established by federal law or regulation and to comply with the Cable Television and Video Provider Customer Service and Information Act and the Video Customer Service Act. The Digital Infrastructure and Video Competition Act of 2006 requires that an application for the grant of a franchise or for renewal of a franchise include a sworn affidavit, signed under penalty of perjury, that the applicant or its affiliates agree to comply with all federal and state statutes, rules, and regulations, including the above-described nondiscrimination and customer service requirements.
This bill would prohibit a cable operator or video service provider that has been granted a state franchise under the Digital Infrastructure and Video Competition Act of 2006, and any affiliate, that provides broadband Internet access service from taking certain actions regarding the accessing of content on the Internet by customers. The bill would require that the sworn affidavit that is required to be filed with an application for the grant or renewal of a franchise state that the applicant or its affiliates agree to refrain from taking the prohibited actions. Because the affidavit is signed under penalty of perjury, the bill would impose a state-mandated local program by expanding the definition of a crime.
(4) Existing law requires the PUC, in consultation with the State Energy Resources Conservation and Development Commission (Energy Commission), the Independent System Operator (ISO), and other stakeholders, to determine the requirements for a smart grid deployment plan consistent with certain policies set forth in state and federal law. Existing law requires that the smart grid improve overall efficiency, reliability, and cost-effectiveness of electrical system operations, planning, and maintenance. Existing law requires each electrical corporation to develop and submit a smart grid deployment plan to the PUC for approval.
This bill would require the PUC, in consultation with the Energy Commission, the ISO, and electrical corporations, to evaluate the role broadband Internet access and tools will play in the future operation of the state’s smart grid.
(5) The bill would permit an Internet service provider to offer different types of technical treatment to end users as part of broadband Internet access service if specified conditions are met and would require the PUC to monitor the quality of the basic default service and establish minimum quality requirements if the offering of different types of technical treatment degrades the quality of the basic default service.
(6) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NOYES  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) This bill is adopted pursuant to the police power inherent in the State of California to protect and promote the safety, life, public health, public convenience, general prosperity, and well-being of society, and the welfare of the state’s population and economy, that are increasingly dependent on an open and neutral Internet.
(b) Almost every sector of California’s economy, democracy, and society is dependent on the open and neutral Internet that supports vital functions regulated under the police power of the state, including, but not limited to, each of the following:
(1) Police and emergency services.
(2) Health and safety services and infrastructure.
(3) Utility services and infrastructure.
(4) Transportation infrastructure and services, and the expansion of zero- and low-emission transportation options.
(5) Government services, voting, and democratic decisionmaking processes.
(6) Education.
(7) Business and economic activity.
(8) Environmental monitoring and protection, and achievement of state environmental goals.
(9) Land use regulation.

SEC. 2.

 Chapter 3.5 (commencing with Section 1775) is added to Title 1.5 of Part 4 of Division 3 of the Civil Code, to read:
CHAPTER  3.5. Internet Neutrality

1775.
 For purposes of this chapter, the following definitions apply:
(a) “Application-agnostic” means not differentiating on the basis of source, destination, Internet content, application, service, or device, or class of Internet content, application, service, or device.
(b) “Application-specific differential pricing” means charging different prices for Internet traffic to customers on the basis of Internet content, application, service, or device, or class of Internet content, application, service, or device, but does not include zero-rating.
(c) “Broadband Internet access service” means a mass-market retail service by wire or radio provided to customers in California that provides the capability to transmit data to, and receive data from, all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service. “Broadband Internet access service” also encompasses any service provided to customers in California that provides a functional equivalent of that service or that is used to evade the protections set forth in this chapter.
(d) “Class of Internet content, application, service, or device” means Internet content, or a group of Internet applications, services, or devices, sharing a common characteristic, including, but not limited to, sharing the same source or destination, belonging to the same type of content, application, service, or device, using the same application- or transport-layer protocol, or having similar technical characteristics, including, but not limited to, the size, sequencing, or timing of packets, or sensitivity to delay.
(e) “Content, applications, or services” means all Internet traffic transmitted to or from end users of a broadband Internet access service, including traffic that may not fit clearly into any of these categories.
(f) “Edge provider” means any individual or entity that provides any content, application, or service over the Internet, and any individual or entity that provides a device used for accessing any content, application, or service over the Internet.
(g) “End user” means any individual or entity that uses a broadband Internet access service.
(h) “Internet service provider” means a business that provides broadband Internet access service to an individual, corporation, government, or other customer in California.
(i) “ISP traffic exchange” means the exchange of Internet traffic destined for, or originating from, an Internet service provider’s end users between the Internet service provider’s network and another individual or entity, including, but not limited to, an edge provider, content delivery network, or other network operator.
(j) “Mass market” means a service marketed and sold on a standardized basis to residential customers, small businesses, and other end-use customers, including, but not limited to, schools, institutions of higher learning, and libraries. The term also includes broadband Internet access services purchased with support of the E-rate and Rural Health program and similar programs at the federal and state level, regardless of whether they are customized or individually negotiated, as well as any broadband Internet access service offered using networks supported by the Connect America Fund or similar programs at the federal and state level.
(k) “Network management practice” means a practice that has a primarily technical network management justification, but does not include other business practices.
(l) “Reasonable network management practice” means a network management practice that is primarily used for, and tailored to, achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service, and that is as application-agnostic as possible.
(m) “Third-party paid prioritization” means the management of an Internet service provider’s network to directly or indirectly favor some traffic over other traffic, including through the use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (1) in exchange for consideration, monetary or otherwise, from a third party, or (2) to benefit an affiliated entity.
(n) “Zero-rating” means exempting some Internet traffic from a customer’s data limitation.

1776.
 It shall be unlawful for an Internet service provider, insofar as the provider is engaged in providing broadband Internet access service, to engage in any of the following activities:
(a) Blocking lawful content, applications, services, or nonharmful devices, subject to reasonable network management practices.
(b) Speeding up, slowing down, altering, restricting, interfering with, or otherwise directly or indirectly favoring, disadvantaging, or discriminating between lawful Internet traffic on the basis of source, destination, Internet content, application, or service, or use of a nonharmful device, or of class of Internet content, application, service, or nonharmful device, subject to reasonable network management practices.
(c) Requiring consideration from edge providers, monetary or otherwise, in exchange for access to the Internet service provider’s end users, including, but not limited to, requiring consideration for either of the following:
(1) Transmitting Internet traffic to and from the Internet service provider’s end users.
(2) Refraining from the activities prohibited in subdivisions (a) and (b).
(d) Engaging in third-party paid prioritization.
(e) Engaging in application-specific differential pricing or zero-rating in exchange for consideration, monetary or otherwise, by third parties.
(f) Zero-rating some Internet content, applications, services, or devices in a category of Internet content, applications, services, or devices, but not the entire category.
(g) Engaging in application-specific differential pricing.
(h) Unreasonably interfering with, or unreasonably disadvantaging, either an end user’s ability to select, access, and use broadband Internet access service or lawful Internet content, applications, services, or devices of the end user’s choice, or an edge provider’s ability to make lawful content, applications, services, or devices available to an end user, subject to reasonable network management practices.
(i) Engaging in practices with respect to, related to, or in connection with, ISP traffic exchange that have the purpose or effect of circumventing or undermining the effectiveness of this section.
(j) Engaging in deceptive or misleading marketing practices that misrepresent the treatment of Internet traffic, content, applications, services, or devices by the Internet service provider, or that misrepresent the performance characteristics or commercial terms of the broadband Internet access service to its customers.
(k) Advertising, offering for sale, or selling broadband Internet access service without prominently disclosing with specificity all aspects of the service advertised, offered for sale, or sold.
(l) Failing to publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of those services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.
(m) Offering or providing services other than broadband Internet access service that are delivered over the same last-mile connection as the broadband Internet access service, if those services satisfy any of the following conditions:
(1) They are marketed, provide, or can be used as a functional equivalent of broadband Internet access service.
(2) They have the purpose or effect of circumventing or undermining the effectiveness of this section.
(3) They negatively affect the performance of broadband Internet access service.

1777.
 (a) (1) An Internet service provider may offer different types of technical treatment to end users as part of its broadband Internet access service, without violating Section 1776, if all of the following conditions exist:
(A) The different types of technical treatment are equally available to all Internet content, applications, services, and devices, and all classes of Internet content, applications, services, and devices, and the Internet service provider does not discriminate in the provision of the different types of technical treatment on the basis of Internet content, application, service, or device, or class of Internet content, application, service, or device.
(B) The Internet service provider’s end users are able to choose whether, when, and for which Internet content, applications, services, or devices, or classes of Internet content, applications, services, or devices, to use each type of technical treatment.
(C) The Internet service provider charges only its own broadband Internet access service customers for the use of the different types of technical treatment.
(2) Any Internet service provider offering different types of technical treatment pursuant to this subdivision shall notify the Public Utilities Commission and provide the commission with a specimen of any service contract that it offers to customers in California.
(3) If an Internet service provider offers different types of technical treatment pursuant to this subdivision, the Public Utilities Commission shall monitor the quality of the basic default service and establish minimum quality requirements if the offering of the different types of technical treatment degrades the quality of the basic default service.
(b) An Internet service provider may zero-rate Internet traffic in application-agnostic ways, without violating Section 1776, provided that no consideration, monetary or otherwise, is provided by any third party in exchange for the provider’s decision to zero-rate or to not zero-rate traffic.

1778.
 Nothing in this chapter supersedes or limits any obligation, authorization, or ability of an Internet service provider to address the needs of emergency communications or law enforcement, public safety, or national security authorities.

1779.
 The Attorney General may bring an action to enforce Section 1776 pursuant to Chapter 5 (commencing with Section 17200) of Part 2, and, where applicable, Article 1 (commencing with Section 17500) of Chapter 1 of Part 3, of Division 7 of the Business and Professions Code.

SEC. 3.

 Article 2 (commencing with Section 3020) is added to Chapter 3 of Part 1 of Division 2 of the Public Contract Code, to read:
Article  2. Internet Neutrality

3020.
 (a) For purposes of this article, “broadband Internet access service,” “Internet service provider,” “network management practice,” and “reasonable network management practice” have the same meanings as defined in Section 1775 of the Civil Code.
(b) For purposes of this article, “public entity” has the meaning as defined in Section 1100.

3021.
 (a) A public entity shall not purchase any fixed or mobile broadband Internet access services from an Internet service provider that is in violation of Section 1776 of the Civil Code.
(b) A public entity shall not provide funding for the purchase of any fixed or mobile broadband Internet access services from an Internet service provider that is in violation of Section 1776 of the Civil Code.

3022.
 (a) Every contract between a public entity and an Internet service provider for broadband Internet access service shall require that the service be rendered consistent with the requirements of Section 1776 of the Civil Code.
(b) If, after execution of a contract for broadband Internet access service, a governmental entity determines that the Internet service provider has violated Section 1776 of the Civil Code in providing service to the public entity, the public entity may declare the contract void from the time it was entered into and require repayment of any payments made to the Internet service provider pursuant to the contract. The remedies available pursuant to this section are in addition to any remedy available pursuant to Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code.

3023.
 It shall not be a violation of this article for a public entity to purchase or fund fixed or mobile broadband Internet access services in a geographical area where Internet access services are only available from a single broadband Internet access service provider.

3024.
 An Internet service provider that provides fixed or mobile broadband Internet access service purchased or funded by a public entity shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access service that is sufficient to enable end users of those purchased or funded services, including a public entity, to fully and accurately ascertain if the service is conducted in a lawful manner pursuant to Section 1776 of the Civil Code.

SEC. 4.

 Section 272 is added to the Public Utilities Code, to read:

272.
 (a) An award of moneys pursuant to this chapter for the building of infrastructure for broadband communications shall require the awardee to prevent any Internet service provider that provides broadband Internet access service utilizing that infrastructure from violating Section 1776 of the Civil Code.
(b) An award of moneys pursuant to this chapter for access to the Internet shall prohibit any Internet service provider that receives those moneys from violating Section 1776 of the Civil Code.

SEC. 5.

 Chapter 10 (commencing with Section 5600) is added to Division 2 of the Public Utilities Code, to read:
CHAPTER  10. The Internet

5600.
 (a) The commission shall exercise those functions with respect to Internet service providers that are delegated to it pursuant to paragraphs (2) and (3) of subdivision (a) of Section 1777 of the Civil Code.
(b) Nothing in this section or Section 1777 of the Civil Code authorizes the commission to regulate an Internet service provider as a public utility.

SEC. 6.

 Section 5840 of the Public Utilities Code is amended to read:

5840.
 (a) The commission is the sole franchising authority for a state franchise to provide video service under this division. Neither the commission nor any local franchising entity or other local entity of the state may require the holder of a state franchise to obtain a separate franchise or otherwise impose any requirement on any holder of a state franchise except as expressly provided in this division. Sections 53066, 53066.01, 53066.2, and 53066.3 of the Government Code shall not apply to holders of a state franchise.
(b) The application process described in this section and the authority granted to the commission under this section shall not exceed the provisions set forth in this section.
(c) Any person or corporation who seeks to provide video service in this state for which a franchise has not already been issued, after January 1, 2008, shall file an application for a state franchise with the commission. The commission may impose a fee on the applicant that shall not exceed the actual and reasonable costs of processing the application and shall not be levied for general revenue purposes.
(d) No person or corporation shall be eligible for a state-issued franchise, including a franchise obtained from renewal or transfer of an existing franchise, if that person or corporation is in violation of any final nonappealable order relating to either the Cable Television and Video Provider Customer Service and Information Act (Article 3.5 (commencing with Section 53054) of Chapter 1 of Part 1 of Division 2 of Title 5 of the Government Code) or the Video Customer Service Act (Article 4.5 (commencing with Section 53088) of Chapter 1 of Part 1 of Division 2 of Title 5 of the Government Code).
(e) The application for a state franchise shall be made on a form prescribed by the commission and shall include all of the following:
(1) A sworn affidavit, signed under penalty of perjury by an officer or another person authorized to bind the applicant, that affirms all of the following:
(A) That the applicant has filed or will timely file with the Federal Communications Commission all forms required by the Federal Communications Commission before offering cable service or video service in this state.
(B) That the applicant or its affiliates agrees agree to comply with all federal and state statutes, rules, and regulations, including, but not limited to, the following:
(i) A statement that the applicant will not discriminate in the provision of video or cable services as provided in Section 5890.
(ii) A statement that the applicant will abide by all applicable consumer protection laws and rules as provided in Section 5900.
(iii) A statement that the applicant will abide by the Internet neutrality requirements of Section 5905.

(iii)

(iv) A statement that the applicant will remit the fee required by subdivision (a) of Section 5860 to the local entity.

(iv)

(v) A statement that the applicant will provide PEG channels and the required funding as required by Section 5870.
(C) That the applicant agrees to comply with all lawful city, county, or city and county regulations regarding the time, place, and manner of using the public rights-of-way, including, but not limited to, payment of applicable encroachment, permit, and inspection fees.
(D) That the applicant will concurrently deliver a copy of the application to any local entity where the applicant will provide service.
(2) The applicant’s legal name and any name under which the applicant does or will do business in this state.
(3) The address and telephone number of the applicant’s principal place of business, along with contact information for the person responsible for ongoing communications with the commission.
(4) The names and titles of the applicant’s principal officers.
(5) The legal name, address, and telephone number of the applicant’s parent company, if any.
(6) A description of the video service area footprint that is proposed to be served, as identified by a collection of United States Census Bureau Block numbers (13 digit) or a geographic information system digital boundary meeting or exceeding national map accuracy standards. This description shall include the socioeconomic status information of all residents within the service area footprint.
(7) If the applicant is a telephone corporation or an affiliate of a telephone corporation, as defined in Section 234, a description of the territory in which the company provides telephone service. The description shall include socioeconomic status information of all residents within the telephone corporation’s service territory.
(8) The expected date for the deployment of video service in each of the areas identified in paragraph (6).
(9) Adequate assurance that the applicant possesses the financial, legal, and technical qualifications necessary to construct and operate the proposed system and promptly repair any damage to the public right-of-way caused by the applicant. To accomplish these requirements, the commission may require a bond.
(f) The commission may require that a corporation with wholly owned subsidiaries or affiliates is eligible only for a single state-issued franchise and prohibit the holding of multiple franchises through separate subsidiaries or affiliates. The commission may establish procedures for a holder of a state-issued franchise to amend its franchise to reflect changes in its service area.
(g) The commission shall commence accepting applications for a state franchise no later than April 1, 2007.
(h) (1) The commission shall notify an applicant for a state franchise and any affected local entities whether the applicant’s application is complete or incomplete before the 30th calendar day after the applicant submits the application.
(2) If the commission finds the application is complete, it shall issue a state franchise before the 14th calendar day after that finding.
(3) If the commission finds that the application is incomplete, it shall specify with particularity the items in the application that are incomplete and permit the applicant to amend the application to cure any deficiency. The commission shall have 30 calendar days from the date the application is amended to determine its completeness.
(4) The failure of the commission to notify the applicant of the completeness or incompleteness of the application before the 44th calendar day after receipt of an application shall be deemed to constitute issuance of the certificate applied for without further action on behalf of the applicant.
(i) The state franchise issued by the commission shall contain all of the following:
(1) A grant of authority to provide video service in the service area footprint as requested in the application.
(2) A grant of authority to use the public rights-of-way, in exchange for the franchise fee adopted under subdivision (q), in the delivery of video service, subject to the laws of this state.
(3) A statement that the grant of authority is subject to lawful operation of the cable service or video service by the applicant or its successor in interest.
(j) The state franchise issued by the commission may be terminated by the video service provider by submitting at least 90 days prior written notice to subscribers, local entities, and the commission.
(k) It is unlawful to provide video service without a state or locally issued franchise.
(l) Subject to the notice requirements of this division, a state franchise may be transferred to any successor in interest of the holder to which the certificate is originally granted, provided that the transferee first submits all of the information required of the applicant by this section to the commission and is in compliance with Section 5970.
(m) In connection with, or as a condition of, receiving a state franchise, the commission shall require a holder to notify the commission and any applicable local entity within 14 business days of any of the following changes involving the holder of the state franchise:
(1) Any transaction involving a change in the ownership, operation, control, or corporate organization of the holder, including a merger, an acquisition, or a reorganization.
(2) A change in the holder’s legal name or the adoption of, or change to, an assumed business name. The holder shall submit to the commission a certified copy of either of the following:
(A) The proposed amendment to the state franchise.
(B) The certificate of assumed business name.
(3) A change in the holder’s principal business address or in the name of the person authorized to receive notice on behalf of the holder.
(4) Any transfer of the state franchise to a successor in interest of the holder. The holder shall identify the successor in interest to which the transfer is made.
(5) The termination of any state franchise issued under this division. The holder shall identify both of the following:
(A) The number of subscribers in the service area covered by the state franchise being terminated.
(B) The method by which the holder’s subscribers were notified of the termination.
(6) A change in one or more of the service areas of the holder of a state franchise pursuant to this division that would increase or decrease the territory within the service area. The holder shall describe the new boundaries of the affected service areas after the proposed change is made.
(n) Prior to offering video service in a local entity’s jurisdiction, the holder of a state franchise shall notify the local entity that the video service provider will provide video service in the local entity’s jurisdiction. The notice shall be given at least 10 days, but no more than 60 days, before the video service provider begins to offer service.
(o) Any video service provider that currently holds a franchise with a local franchising entity is entitled to seek a state franchise in the area designated in that franchise upon meeting any of the following conditions:
(1) The expiration, prior to any renewal or extension, of its local franchise.
(2) A mutually agreed upon date set by both the local franchising entity and video service provider to terminate the franchise provided in writing by both parties to the commission.
(3) When a video service provider that holds a state franchise provides the notice required pursuant to subdivision (n) to a local jurisdiction that it intends to initiate providing video service in all or part of that jurisdiction, a video service provider operating under a franchise issued by a local franchising entity may elect to obtain a state franchise to replace its locally issued franchise. The franchise issued by the local franchising entity shall terminate and be replaced by a state franchise when the commission issues a state franchise for the video service provider that includes the entire service area served by the video service provider and the video service provider notifies the local entity that it will begin providing video service in that area under a state franchise.
(p) Notwithstanding any rights to the contrary, an incumbent cable operator opting into a state franchise under this section shall continue to serve all areas as required by its local franchise agreement existing on January 1, 2007, until that local franchise otherwise would have expired. However, an incumbent cable operator that is also a telephone corporation with less than 1,000,000 telephone customers in California and is providing video service in competition with another incumbent cable operator shall not be required to provide service beyond the area in which it is providing video service as of January 1, 2007.
(q) (1) There is hereby adopted a state franchise fee payable as rent or a toll for the use of the public rights-of-way by holders of the state franchise issued pursuant to this division. The amount of the state franchise fee shall be 5 percent of gross revenues, as defined in subdivision (d) of Section 5860, or the percentage applied by the local entity to the gross revenue of the incumbent cable operator, whichever is less. If there is no incumbent cable operator or upon the expiration of the incumbent cable operator’s franchise, the amount of the state franchise fee shall be 5 percent of gross revenues, as defined in subdivision (d) of Section 5860, unless the local entity adopts an ordinance setting the amount of the franchise fee at less than 5 percent.
(2) (A) The state franchise fee shall apply equally to all video service providers in the local entity’s jurisdiction.
(B) Notwithstanding subparagraph (A), if the video service provider is leasing access to a network owned by a local entity, the local entity may set a franchise fee for access to the network different from the franchise fee charged to a video service provider for access to the rights-of-way to install its own network.

SEC. 7.

 Section 5905 is added to the Public Utilities Code, to read:

5905.
 (a) For purposes of this section, “application-agnostic,” “application-specific differential pricing,” “broadband Internet access service,” “class of Internet content, application, service, or device,” “content, applications, or services,” “edge provider,” “end user,” “Internet service provider,” “ISP traffic exchange,” “mass market,” “network management practice,” “reasonable network management practice,” “third-party paid prioritization,” and “zero-rating” have the same meanings as defined in Section 1775 of the Civil Code.
(b) A cable operator or video service provider that has been granted a state franchise under this division, and any affiliate, insofar as the provider is engaged in providing broadband Internet access service, shall not engage in any of the following activities:
(1) Blocking lawful content, applications, services, or nonharmful devices, subject to reasonable network management practices.
(2) Speeding up, slowing down, altering, restricting, interfering with, or otherwise directly or indirectly favoring, disadvantaging, or discriminating between lawful Internet traffic on the basis of source, destination, Internet content, application, or service, or use of a nonharmful device, or of class of Internet content, application, service, or nonharmful device, subject to reasonable network management practices.
(3) Requiring consideration from edge providers, monetary or otherwise, in exchange for access to the Internet service provider’s end users, including, but not limited to, requiring consideration for either of the following:
(A) Transmitting Internet traffic to and from the Internet service provider’s end users.
(B) Refraining from the activities prohibited in paragraphs (1) and (2).
(4) Engaging in third-party paid prioritization.
(5) Engaging in application-specific differential pricing or zero-rating in exchange for consideration, monetary or otherwise, by third parties.
(6) Zero-rating some Internet content, applications, services, or devices in a category of Internet content, applications, services, or devices, but not the entire category.
(7) Engaging in application-specific differential pricing.
(8) Unreasonably interfering with, or unreasonably disadvantaging, either an end user’s ability to select, access, and use broadband Internet access service or lawful Internet content, applications, services, or devices of the end user’s choice, or an edge provider’s ability to make lawful content, applications, services, or devices available to an end user, subject to reasonable network management practices.
(9) Engaging in practices with respect to, related to, or in connection with, ISP traffic exchange that have the purpose or effect of circumventing or undermining the effectiveness of this section.
(10) Engaging in deceptive or misleading marketing practices that misrepresent the treatment of Internet traffic, content, applications, services, or devices by the Internet service provider, or that misrepresent the performance characteristics or commercial terms of the broadband Internet access service to its customers.
(11) Advertising, offering for sale, or selling broadband Internet access service without prominently disclosing with specificity all aspects of the service advertised, offered for sale, or sold.
(12) Failing to publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of those services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.
(13) Offering or providing services other than broadband Internet access service that are delivered over the same last-mile connection as the broadband Internet access service, if those services satisfy any of the following conditions:
(A) They are marketed, provide, or can be used as a functional equivalent of broadband Internet access service.
(B) They have the purpose or effect of circumventing or undermining the effectiveness of this section.
(C) They negatively affect the performance of broadband Internet access service.
(c) (1) An Internet service provider may offer different types of technical treatment to end users as part of its broadband Internet access service if it meets the conditions specified in subdivision (a) of Section 1777 of the Civil Code.
(2) An Internet service provider may zero-rate Internet traffic in application-agnostic ways, provided that no consideration, monetary or otherwise, is provided by any third party in exchange for the provider’s decision to zero-rate or to not zero-rate traffic.
(d) In addition to the authority granted the commission pursuant to this division, any violation of this section may be enforced by the Attorney General, a district attorney, or a city attorney pursuant to Chapter 5 (commencing with Section 17200) of Part 2, and, when applicable, Chapter 1 (commencing with Section 17500) of Part 3, of Division 7 of the Business and Professions Code.

SEC. 8.

 Section 8367 is added to the Public Utilities Code, to read:

8367.
 The commission, in consultation with the Energy Commission, the Independent System Operator, and electrical corporations, shall evaluate the role broadband Internet access and tools, especially as they relate to private consumers, will play in the future operation of the state’s smart grid. The evaluation should consider at least the following:
(a) The reliance of the Independent System Operator and electrical corporations on consumer broadband services to manage energy resources.
(b) The impact that paid prioritization, throttling, and blocking in consumer broadband Internet service would have on resource management and grid reliability.
(c) The future cost to the state and agencies if state agencies need to enter into long-term paid prioritization contracts if net neutrality principles are no longer in place.

SEC. 9.

 The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 10.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
SECTION 1.

It is the intent of the Legislature to enact legislation to effectuate net neutrality in California utilizing the state’s regulatory powers and to prevent Internet service providers from engaging in practices inconsistent with net neutrality, including, without limitation, by means of each of the following:

(a)Using the state’s market influence as a purchaser of Internet and telecommunications services to effectuate net neutrality.

(b)Strengthening the state’s consumer protection and deceptive and unfair business practice laws to effectuate net neutrality.

(c)Conditioning issuance or renewal of a state franchise pursuant to the Digital Infrastructure and Video Competition Act of 2006 (Division 2.5 (commencing with Section 5800) of the Public Utilities Code), and use of the public rights-of-way for Internet infrastructure, on adherence to net neutrality, and on promotion of the availability of municipal broadband.

(d)Conditioning any state-granted right to attach small cell or other broadband wireless communications devices to utility poles on adherence to net neutrality.