The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:05 a.m., on Thursday, March 25, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Mark Amodei

Senator Dean A. Rhoads

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

GUEST LEGISLATORS PRESENT:

Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

Kathryn Lawrence, Committee Secretary

OTHERS PRESENT:

Stan R. Olsen, Lobbyist, Lieutenant, Las Vegas Metropolitan Police Department

Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1, explained this bill relates to regulating merchandise sold at flea markets. He stated there have been complaints of buyers purchasing merchandise through flea markets that were stolen. He called attention to the merchandise purchased, that had been stolen previously from professional shoplifters. He claimed not only is there stolen merchandise being sold but outdated products such as baby formula and cosmetics were being marketed. He clarified the shoplifters are manufacturing fake Universal Product Code (UPC) labels and adjusting the price of the merchandise. Senator Porter noted passage of this bill would prohibit the sale of infant formula, medical devices, nonprescription drugs, and cosmetics unless the seller presents a written authorization from the manufacturer. He asserted new merchandise sold at a flea market would require receipt of the purchase; and it would be it illegal for a person to use, transfer, alter, counterfeit, or reproduce a retail sales receipt of UPC label.

T. C. Smith, Loss Prevention Investigator, Wal-Mart Stores Incorporated, explained he has visited flea markets in this area and had observed large amounts of merchandise from the Wal-Mart stores for sale. He stated police officers had gone undercover and arrested vendors recovering $400,000 in stolen merchandise. He commented vendors desired to buy out the booths from the undercover officers after learning it was stolen property. He outlined an individual will walk into a store with a counterfeit receipt, pick up an item when not being observed, place it over the receipt, and it will scan for much less at the register. He defined upon leaving the store, the individual can remove the counterfeit sticker and return it for the original price. He explained this is a very big problem with all retailers nationwide.

Amy Halley Hill, Lobbyist, Retail Association of Nevada, submitted her amendment to the committee (Exhibit C).

Mary F. Lau, Lobbyist, Retail Association of Nevada, stated she would provide further information of the national shoplifting statistics to the committee upon request.

James F. Nadeau, Lobbyist, Nevada Sheriffs and Chiefs Association, stated he supported this legislation. He declared passage of this bill would be an additional tool for their investigators.

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Chairman Townsend closed the hearing on S.B. 392 and opened the hearing on S.B. 487.

Frederick Schmidt, Chief Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General, stated this bill provides a "lifeline" to the telecommunication customers at no additional charge. He submitted a pamphlet to the committee for the Lifeline Assistance Program (Exhibit D) that is distributed to low-income families. He further explained Nevada does not have any laws providing 911 as the emergency number for Nevada. He acknowledged there are certain areas that do not have 911 service because there has never been an implementation program of the 911 service statewide. He clarified there should be a statewide coordinator for implementing a program so that everyone in the state would have access to the 911 service. He stated there would be no charge to the public for this service and the attorney general’s office is willing to supply it throughout the state.

Robert Cooper, Regulatory Analyst, Bureau of Consumer Protection, Office of the Attorney General, said the first five sections are definitional. He commented that sections 6 and 7 define the rules made by the Federal Communications Commission (FCC); section 8 encourages customers to sign up for the service; and section 9 gives the customers a right to deny the benefit.

Myla C. Florence, Administrator, Welfare Division, Department of Human Resources, read her statement to the committee (Exhibit E). She stated she was concerned with submitting names and addresses to the phone company for the Lifeline Program because of the privacy act. She explained the Welfare Division only submits the names and addresses of low-income families; not the benefit plan the family receives. She concurred if S.B. 487 is passed, the Welfare Division would submit mailings to the welfare recipients notifying them of this process.

Steve Welch, Telecommunications Engineer, Bureau of Consumer Protection, Office of the Attorney General, stated section 12, "automatic location identification" (ALI) would provide the public safety answering point to determine the location of the caller that is placing the emergency call. He explained in section 13 "automatic number identification" (ANI) would reveal the telephone number of the calling party when the call is answered; which would provide a method for reestablishment, if disconnected. He stressed in section 14, "county 911 coordinator" is a person who manages and coordinates the activities of the 911 services for the political jurisdiction that covers that area.

Mr. Welch pointed out section 15 states the basic and enhanced service is enhanced by providing automatic number and location identification for identifying the location of the calling party. He explained section 19 provides a database of street names and addresses or the names of locations within a county zone. He claimed section 20, "public safety agency," defined a division that dispatches emergency calls 24 hours a day. He mentioned section 23, "selective routing," is the means to send the call to the proper public safety answering point. Mr. Welch stressed section 26 is the establishment of the emergency telecommunication service within the Bureau of Consumer Protection of the Office of the Attorney General. He mentioned section 27 states the date for the establishment of enhanced 911 features in telephone company tariffs. He clarified section 28 ensures that the emergency enhanced 911 systems is established throughout the state as efficiently as possible and stated this would be a 2-year project.

Mr. Welch emphasized this bill was introduced mainly for individuals living in Nevada who cannot call 911 in a case of emergency; but upon passage of this bill, would enable everybody to be able to reach 911 in an emergency. He explained the burden for establishing this service would fall back on each individual county. He maintained each county needs to plan for these costs and suggested it could be planned more effectively at a state level. Mr. Welch stated section 29 states the governing body of each municipality is to establish certain obligations. He declared section 30 prohibits the requirement of any multi-agency answering point so that counties and public safety political jurisdictions are enabled to manage particular functions as they choose. Mr. Welch expressed section 31 defines the responsibilities in forwarding the call to the proper geographic location. He noted section 33 covers liability issues protecting the telephone companies and the service providers from certain liability issues. He agreed section 34 addresses the funding issue. Mr. Schmidt stated section 35 and section 36 give the attorney general a penalty authority.

Margaret A. McMillan, Lobbyist, Sprint, stated she supported the bill and introduced Lou Emmert.

Lou Emmert, Vice President and General Manager, Sprint, stated Sprint has been very supportive of the concept of Lifeline and Linkup services in the past. She stated they have done advertising in the local newspapers so they can reach customers who might be eligible for this service, and passage of this bill would be a proactive approach. She suggested establishing and grandfathering a flat-rate service for the Lifeline Program for customers who have only one telephone line, but would not have to meet the income guidelines.

Jon L. Sasser, Lobbyist, Washoe Legal Services, stated he supported the passage of the bill.

Jan Gilbert, Lobbyist, Progressive Leadership Alliance of Nevada, stated she supported the Lifeline Program and appreciated the work that had been done on this bill. She questioned why sections 1-10 did not have an implementation date. Mr. Schmidt stated the bill becomes effective upon passage, or October 1, 1999.

Senator O’Connell questioned the funding for the bill. Mr. Cooper replied the fund was administered by the National Exchange Carriers Association and has a substantial surplus; approximately $10 million.

Brian G. Herr, Lobbyist, Nevada Bell, stated he is in support of the bill. Mr. Schmidt stated Nevada Bell and Sprint are mandated under federal law to perform quarterly advertising. He stated advertising and bill inserts do not work. Senator O’Connell stated many of the programs offered throughout the state are not being taken advantage of by low-income families.

Ms. Emmert stated in southern Nevada, the Las Vegas Metropolitan Police Department handles the 911 service and Sprint works very closely with them. She stressed this is funded through property taxes. She requested the funding mechanism be competitively neutral. She expressed the word "wireless" to be removed from the bill because it is presently under consideration by FCC how wireless is to be handled with 911. Ms. Emmert explained it is very expensive and complex to get the equipment necessary to track cell phones because wireless is not in a fixed location. She expounded a tariff service charge would be imposed because wireless does not file tariff charges. She supported the inclusion of wireless in section 33, subsection 2, because people do make emergency calls from their cell phones.

Tom R. Skancke, Lobbyist, AT&T, stated he was in total agreement with Ms. Emmert.

Fred L. Hillerby, Lobbyist, Airtouch Communications, stated he wished to take the word "wireless" out of the bill.

James J. Spinello, Lobbyist, Clark County, stated he had concerns with the bill and introduced Brent Lee.

Brent Lee, Lieutenant, Sparks Police Department, expounded there is a need for 911 throughout the state, but stated he did not want the new service to compromise what is working well within their own entities. He stated in section 26, subsection 3, the police department should be added to the list of individuals who manage and purchase the equipment. Mr. Schmidt agreed the police department should be listed in the draft.

Richard Mirgon, Communications Director, 9-1-1 Communications Emergency Management, Douglas County, stated his opposition to sections 11-36 of this bill because it is an unfunded mandate. He stated the wording "private agency" is too broad a term and it is not necessary to regulate a process that is currently operating well in the state. He explained areas that do not have 911 service do not have the funding. Mr. Mirgon stressed there needs to be funding for this bill, not regulation. He insisted the attorney general or the state agencies do not have the proper expertise to regulate the 911 service; it is too broad and is too costly for local governments. He submitted his memo (Exhibit F) to the committee.

Stan R. Olsen, Lobbyist, Lieutenant, Las Vegas Metropolitan Police Department, stated for the record that the police department is in absolute and nonnegotiable opposition to the 911 portion of this bill.

Mr. Nadeau stated he was in opposition to the 911 bill. He said he was concerned about the unfunded aspects of the bill and with the funds that had been spent on equipment.

Penny Rogers, Communication Systems Coordinator, City of Henderson, stated she had extensive meetings with the Office of the Attorney General and never agreed to the aspects of this bill. She expressed the City of Henderson is in opposition to sections 11-36. She agreed to a statewide 911, but suggested the dialogue be changed.

Mr. Spinello stated passage of this bill would have unknown cost implications. He acknowledged there are currently mandates in statute for emergency services and this bill could cause some confusion that could result in lawsuits.

Tony Lesperance, Board of Commissioners, Elko County, submitted his letter to the committee (Exhibit G). He stated Elko County could never afford to fund this bill. He agreed Elko County was attempting to enhance their 911 features, but they could not be mandated to do it in a 2-year time period. He maintained he is in direct opposition to the bill.

Frances J. Snyder, Communications Commander, Lyon County Sheriff’s Office, stated for the record Lyon County is against this bill.

Barbara A. McKenzie, Lobbyist, Legislative Coordinator, Legislative Relations Administration, City of Reno, stated the city officially opposes this bill.

Dan Holler, County Manager, Douglas County, stated Douglas County is in opposition to this bill.

Marcia C. Cobian, Lobbyist, Nevada Telecommunications Association, stated she had been in contact with some of the rural telephone companies. She agreed they generally provide a basic 911 service, which means if a person dials 911, it is immediately transferred to the sheriff’s office. She suggested the rural counties could possibly benefit from having a box installed at the sheriff’s office that would give them the number from where the call was coming, such as a caller-identification box.

Mr. Welch stated the Office of the Attorney General strived to make many of the changes with the local police control. He urged there would not have to be a new position funded for the 911 coordinator; most counties already have an individual who is responsible for the management of the 911 system. He stated rural counties in California have enhanced 911 services that had been in place since the early 1990s.

Chairman Townsend closed the hearing on S.B. 487 and opened the meeting on S.B. 440.

Lora K. Watts, Lobbyist, Nevada Bell, stated she was in support of this bill. She declared Nevada Bell believes the telecommunication industry is extremely vital to the State of Nevada and S.B. 440 would guide the way by offering new products and services to all customers. She emphasized Nevada Bell has different rules and regulations to follow than other telecommunication companies in Nevada, and only desires to compete on a fair basis. She explained Nevada Bell is proposing to place a cap on local residence and business rates so regulation will continue in that area, but is not reducing services or commitment to providing services to rural customers. Ms. Watts agreed regulation leads to competition that is good for customers and public policy; and provides products to customers at affordable rates to meet the customers’ needs.

Dan Reaser, Lobbyist, Nevada Bell, stated S.B. 440 is the next step toward competition from a legislative guidance standpoint. He testified this bill does not affect the obligations of local telephone companies to provide service. He agreed basic services are defined as essentially the residential, business and access services provided today. He explained this bill provides that 911 access will never be subject to classification out of the basic category and will be subject to a commission tariff. Mr. Reaser remarked section 10 of the bill requires the company to cap the rates for basic service unless the Public Utilities Commission of Nevada (PUCN) reclassifies that basic service to a nonbasic service. He acknowledged section 11 states that everything that is not a basic service, as defined in section 4, is a nonbasic service. He claimed section 12 establishes the first procedure where a commission can reclassify a basic service, as defined in section 4, to a nonbasic service. He stated the commission would be required to establish a regulatory mechanism with specific criteria. He pointed out section 12 would allow the local telephone company to obtain PUCN’s approval to make a basic service a competitive service, such as the services being offered by other companies that are in competition with Nevada Bell.

Mr. Reaser agreed section 13 would create a procedure allowing the local telephone company to have freedom to set prices, offer product packages and promotions like the competitors, but there would be restrictions placed on a local company, such as the promotions not exceeding 120 days. He drew attention to the fact that price reductions would have to be within the territory as a total geographical area and the company would be required to file publicly with the commission and submit a 3-day notice. He stressed section 14 requires all nonbasic services to be priced above cost. He noted section 15 would allow the local company to offer consumers new products with fewer regulatory restrictions to meet competition from new providers. Mr. Reaser noted there would be restrictions for a 3-day notice of the new product including a variety of different information, and the price of the new service would be subject to the flexibility of price limitations above cost or tariff price. He recognized that section 16 provides a mechanism for competitor complaints before the PUCN, using the streamline procedures that the competitors have sought or advocated in S.B. 207. He explained this would allow for expedited review of the local companies’ pricing flexibilities on new product decisions and to obtain commission approval on an expedited basis, resetting the price if the competitor can establish the local company has acted inappropriately in pricing or introducing any new product.

Mr. Reaser expressed section 17 would allow the willful company to jointly market and sell products with affiliates, subject to the existing federal limitations without more restrictive state-imposed regulations. He surmised section 18 is a governmental section of the procedure. He noted section 19 stated that nothing in this bill would affect the relationship between the local company and those competitors in the wholesale market. He agreed section 20 and section 21 both state providing business services may become competitive or nonbasic in the year 2002, but there is protection. He stated for instance in Austin, Nevada, in the year 2002, if a local restaurant cannot get a competitor to provide competitive business services, Nevada Bell would still be required to provide that service at the basic tariff obligations. He concluded in section 21, the bill is otherwise effective upon passage and approval.

Danny L. Thompson, Lobbyist, Nevada State AFL-CIO, stated he supported this bill. He agreed technology is a good thing, but technology has displaced some workers, such as telephone operators. He concluded passage of this bill would provide more jobs for Nevadans.

Steve Tackes, Lobbyist, MCI Worldcom, and Nextlink, stated opposition to the bill. He acknowledged the bill has a massive impact on what is declared competitive, and what is not, without a careful review to determine if any telecommunication company is providing these services. He explained this bill would allow Nevada Bell to charge whatever access charge they desire when someone calls a customer from out of state. He stressed passage of this bill would allow Nevada Bell to charge different access charges to different competitive companies.

Mr. Tackes insisted passage of this bill would authorize the incumbent phone company to pick one area of town and reduce their price below cost. He outlined the customer would get a low price for the first 6 months, but when the competitor is driven out of the market, the price would go back up. He noted this bill would authorize Nevada Bell to perform predatory pricing for certain customers. He stated under the current law, there are certain limits on charging a certain area a different price than another area and the telecommunication company has to justify this different cost. He questioned what was wrong with the current regulatory laws. He stated under the current regulation, all telecommunication companies are now under a certain regulation until the year 2002, and this bill would undo everything that was agreed to previously.

Gardner F. Gillespie, Lobbyist, Cox Communications, stated the problem with predatory pricing is that it is only short-term. He justified the purpose of predatory pricing is to eliminate competition, which is harmful to the consumer. He stated in the past, with AT&T, he had observed by the time the competitors had researched the new service proposals, AT&T had a new service. He stated this process was very costly to the competitors, so eventually they stopped researching. He asserted passage of this bill would allow Nevada Bell to do the same. He claimed Nevada Bell was not currently under any disadvantage from being competitive. He agreed the bill needed more research. He asserted Nevada Bell should reach resolution with the other competitors rather than pursuing new legislation.

Edwin Murray, Lobbyist, American Association of Retired Persons (AARP), West Regional Office, stated currently an individual can choose whomever they desire for their phone company; this bill would not allow anyone that choice. He expounded it would not lower rates or provide extra services. He explained senior citizens on fixed incomes need the opportunity for savings that competition brings; this bill would allow the phone company to raise those fees. Mr. Murray stated with only one local phone company, people would not be allowed to change, if dissatisfied. He remarked that passage of this bill would not allow the PUCN to review the earnings of the phone company. He concluded by allowing a phone company to keep lower prices to reduce competition will never help Nevada citizens.

Mr. Schmidt agreed there was some uncertainty in the bill. He stated the price caps still apply to basic services for residences throughout the previous agreement. He questioned whether the affiliate provisions in the bill which appear to restrict the ability to have price control over affiliates can be utilized to circumvent the price caps for consumers. He acknowledged if this were true, he would not support it. He commented there should be a ceiling rate established.

Michael A. Pitlock, Commissioner, Public Utilities Commission of Nevada, stated the commission does not have a specific position on the passage of this bill. He concluded the committee needs to consider whether or not they believe the current regulatory law would allow developing further competition.

Mr. Reaser stated it is not the intent to deny Nevada Bell’s agreement with the Office of the Attorney General regarding rates. He stated this bill would give Nevada Bell an opportunity to compete with other competitors.

Chairman Townsend closed the hearing on S.B. 440 and opened the hearing on S.B. 207.

Ann C. Pongracz, General Counsel, Sprint, stated her concern was whether a provider of telecommunication services would be held liable in antitrust court for actions which were lawful under regulations which the commission approved in Sprint’s performance standards docket. She submitted a copy of the revised bill (Exhibit H) and a proposal (Exhibit I). Mr. Reaser submitted his revised copy of the bill to the committee (Exhibit J).

Chairman Townsend adjourned the meeting at 11:35 a.m.

RESPECTFULLY SUBMITTED:

Kathryn Lawrence,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

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