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Consumer Electronics Retailers Coalition No Need to Shift E911 Fee Burdens to States and Retailers April 23, 2009 Where We Agree 911 fees should be paid for pre-paid wireless. Pre-paid wireless fits an important customer need. Retailers want to be an outlet for pre-paid.

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consumer electronics retailers coalition

Consumer Electronics Retailers Coalition

No Need to Shift E911 Fee Burdens to States and Retailers

April 23, 2009

where we agree
Where We Agree
  • 911 fees should be paid for pre-paid wireless.
  • Pre-paid wireless fits an important customer need.
  • Retailers want to be an outlet for pre-paid.
  • Carriers want retailers distribution power.
  • Pre-paid services are growing in popularity.
  • We support real simplification.
how it works
How It Works
  • When a pre-paid phone leaves the store, it does not operate, have a phone number or have the ability to make a call.
  • It needs to be activated by the carrier.
  • When a pre-paid card leaves store it does not provide service until associated with an existing phone or account.
  • Let’s look at the on-line activation process.
911 fees
911 Fees
  • It is a fee - not a tax because they are tied to a specific service performed by government.
  • Mobile phones are mobile.
  • Address of subscriber is used to determine federal, state and local fee and tax obligations for traditional telecommunications services.
  • Pre-paid and post-paid phones place the same burden on 911.
obligation of the carrier
Obligation of the Carrier
  • 911 Fees - clear obligation of carrier.
  • “Primary responsibility” for collection and remittance of E911 fees. GAO Report: http://www.gao.gov/new.items/d06338.pdf
  • Responsible carriers are paying fees now.
  • Fees designed to pay for 911 service delivered to consumers.
  • Carriers currently pay into Universal Service Fund.
not simplification
Not Simplification
  • It is not simplification for States & local governments or 911.
  • Move from system that collects fees from a handful of carriers - to a system that attempts to collect fees from tens of thousands of retailers.
  • Opposite of State efforts to minimize the points of collection.
a very leaky system
A Very Leaky System

Sales beyond practical reach of state:

  • On-line sales
  • Over the phone sales
  • Direct to phone sales
  • Neighboring State sales
  • Free or promotional minutes
  • Gifts
location of sale
Location of Sale
  • Location of the sale bears little relationship to where the phone is used and where burden on 911 exists.
  • Consumers shop across state borders.
where phone is used
Where Phone is Used
  • Where a phone is used is the most relevant factor for the burden on 911.
  • Fixed address for wireline service.
  • Subscriber address is acceptable proxy for wireless.
  • Many pre-paid users voluntarily give phone number/address.
  • Pre-paid zip code registration is equally suitable proxy.
bad for public safety
Bad For Public Safety
  • Blanket of 911 protection always there.
  • Contract subscriber pays fee each and every month. Pre-paid proposals have one fee on transaction within jurisdiction of state.
  • Pre-paid proposals by-pass 911 and go straight to State Treasury. Great risk of diversion.
  • Amazing leakage for minute purchases.
carriers know everything
Carriers Know Everything
  • User’s area code of use.
  • When a phone is used.
  • Where a phone is used.
  • How long a phone is used.
  • Phone number/Address for many pre-paid users.
  • E-mails for many pre-paid users.
  • User’s zip code of use (even when anonymous)
  • How many minutes remain in every account.
  • How long minutes are active in account.
carriers have
Carriers Have
  • Sophisticated billing systems.
  • Primary responsibility for collection and remittance of E911 fees.
  • Secure systems to collect and remit fees for subscription and pre-paid users.
  • Relationships with all telco regulators and 911 authorities.
  • Auditors and accountants to track payments to federal, state, and local governments and inter-carrier organizations.
retailers
Retailers
  • Do not provide telecomm services.
  • Would need special separate, expensive systems for fees.
  • Would need additional accounting and auditing support.
  • Already have slim to non-existent margins.
  • Circuit City – 30,000 jobs lost.
  • See sales tax compensation slipping away.
  • Already paying 2% on credit card transactions.
states
States
  • Will lose funds for 911 with proposal.
  • Have limited resources to implement new collection, auditing and enforcement regime on retailers.
  • Have staffing shortages.
  • Are already sweeping 911 fees to close budget deficits.
  • Limiting spending out of 911 accounts.
burden shift
Burden Shift
  • Proposal is an unprecedented burden shift from carriers with clear responsibility to unwilling retailers.
  • Proposal could open flood gates to host of telecommunications taxes and fees like USF.
  • Burden on States to manage tens of thousands of retail accounts rather than less than a handful of carrier accounts.
  • From rich to poor consumers.
sound simple non retail alternatives exist
Sound, Simple Non-retail Alternatives Exist
  • Retailers have no objection to reasonable proposals that do not include mandatory POS retail collection, retention and remittance.
  • No objection to move from local to state-wide fee.
  • Alternatives exist:
    • mathematical formula based on pre-paid minutes used in a state;
    • Deduct minutes;
    • Build fees into cost of goods sold (wholesale model)
    • Fees paid per user per active account based on area code or zip code.
let s work together
Let’s Work Together
  • This is a product we all support.
  • Let’s work together to find real simplification and equity for all phone users.
  • Let’s really support 911.
thank you
Thank You

Christopher A. McLean

Executive Director

The Consumer Electronics Retailers Coalition

317 Massachusetts Avenue, NE

Washington, DC 20002

202.292.4600

chris@cercteam.com