SB0400: ANALYSIS AS ENACTED (Date Completed: 7-16-19) - 9-1-1 SERVICE CHARGES; EMER. 9-1-1 FUND

RATIONALE

The Emergency 9-1-1 Service Enabling Act (formerly the Emergency Telephone Service Enabling Act) was enacted in 1986 to facilitate the statewide development of the 9-1-1 system. The Act set up a process for county boards of commissioners to establish local 9-1-1 systems and for service suppliers to pass on to their subscribers part of the suppliers' technical charges. The Act subsequently was amended to allow service suppliers to levy emergency telephone operational charges. In addition, counties could assess a charge or millage to cover emergency telephone operation costs, with voter approval.

In the late 1990s, some people raised concerns about disparities in 9-1-1 funding due to the emergence of new technologies. As more people abandoned landlines in favor of cellular phones, which were not subject to the surcharges, the revenue available to fund 9-1-1 systems declined significantly. In 1999, legislation amended the Act to authorize the assessment of 9-1-1 surcharges on wireless customers. Following that, however, some wireless providers began offering prepaid plans with no contracts. Customers using this type of service fell outside the scope of the Act's language regarding the assessment of 9-1-1. Additionally, customers choosing internet-based telephone service (i.e., Voice over Internet Protocol (VOIP)) also were not subject to 9-1-1 surcharges.

In response to concerns with 9-1-1 funding, Public Act 249 of 2006 was enacted to require the State 9-1-1 Director to submit to the Legislature recommendations for long-term funding of the 9-1-1 system. The Director prepared a report, which was adopted by the Emergency Telephone Service Committee and submitted to the Legislature in November 2006. The report contained six recommendations, including the creation of a two-tiered operational surcharge system that would apply equally to all technologies having access, or the ability to gain access, to the 9-1-1 system, including traditional landline telephone services, wireless services, and VOIP 9-1-1 services. The first tier would consist of a statewide operational surcharge of between 20 and 30 cents to fund baseline funding for counties, dispatcher training, the State 9-1-1 Office, and tier one billing and collection. The second tier would consist of a locally-determined county-based operational surcharge to fund local 9-1-1 operations. The local surcharge could not exceed the amount necessary to operate the system. Public Acts (PAs) 164 and 165 of 2007 codified the recommendations.

Public Acts 164 and 165 also required each commercial mobile radio service supplier or reseller to collect an emergency 9-1-1 charge from each of its prepaid wireless services customers. Public Act 260 of 2012 revised this provision to, instead, require a seller of prepaid wireless telecommunications service to collect a prepaid wireless 9-1-1 surcharge from a customer for each retail transaction occurring in Michigan.

Many people believed that the level of funding collected from the surcharges was insufficient to sustain the 9-1-1 system, and to migrate the existing 9-1-1 system to an internet protocol (IP)-based system, so it was suggested that the State 9-1-1 surcharge and the prepaid wireless 9-1-1 surcharge be increased.

CONTENT

The bill amended the Emergency 9-1-1 Service Enabling Act to do the following:

-- Increase the prepaid wireless 9-1-1 surcharge for retail transactions from 1.92% to 5.0% per transaction.

-- Increase the monthly State 9-1-1 charge collected from communication service users from 19 cents to 25 cents.

-- Revise how the amount of an emergency telephone technical charge must be computed.

-- Require the Michigan Public Service Commission (MPSC) to commence a proceeding to determine the recurring and nonrecurring cost categories for all IP-based 9-1-1 service providers, and issue a final order adopting the cost categories considered to be just and reasonable.

-- Require an IP-based 9-1-1 service provider to file an updated cost study at least five years after the filing of an initial cost study.

-- Require the Auditor General to audit the Emergency 9-1-1 Fund at least biennially, instead of at least annually.

-- Permit the Attorney General, upon referral by the Commission, to commence a civil action against a service supplier, commercial mobile radio service (CMRS) supplier, reseller, or retailer for failure to report, charge, collect, and transmit a county 9-1-1 charge.

-- Allow a county board of commissioners to amend a final 9-1-1 service plan to include IP-based 9-1-1 service providers that meet certain standards.

-- Require the MPSC to issue a report to the Legislature and the Governor containing certain information about costs related to transitioning to an IP-based 9-1-1 service provider.

The bill also requires that annual money collected and deposited into the Emergency 9-1-1 Fund not exceeding $37.0 million be distributed as follows:

-- 65% must be disbursed to each county with a final 9-1-1 plan in place (subject to the current requirement that 40% be distributed quarterly on an equal basis to each county, and 60% be distributed quarterly on a population per capita basis).

-- 25.56% must be available to reimburse local exchange providers for the costs related to wireless emergency service and to reimburse IP-based 9-1-1 service providers for the costs related to IP-based 9-1-1 emergency service.

-- 5.5% must be available to public safety answering points (PSAPs) for training personnel assigned to 9-1-1 centers.

-- 1.5% must be credited to the Michigan State Police (MSP) to operate a regional dispatch center that receives and dispatches 9-1-1 calls, and 2.44% must be credited to the MSP for costs to administer the Act and to maintain the office of the State 9-1-1 coordinator.

The bill took effect on March 6, 2018.

Prepaid Wireless 9-1-1 Charge

The Act requires a seller to collect a prepaid wireless 9-1-1 surcharge from a consumer for each retail transaction occurring in the State.

("Seller" means a person who sells prepaid wireless telecommunications service to another person. "Consumer" means a person who purchases such services in a retail transaction. "Retail transaction" means the purchase of prepaid wireless telecommunications service from a seller for any purpose other than resale.)

Previously, the amount of the surcharge was 1.92% per retail transaction. Except as otherwise provided, if a prepaid wireless telecommunications service was sold with one or more products or services for a single, nonitemized price, the seller had to collect 1.92% on the entire nonitemized price unless the seller elected to do the following:

-- Apply the percentage to the dollar amount if the amount of the prepaid wireless service was disclosed to the consumer as a dollar amount.

-- Apply the percentage to the portion of the price that was attributable to the prepaid wireless service if the seller could identify the portion by reasonable and verifiable standards from its books and records kept in the regular course of business for other purposes.

The bill retains these provisions, but increases the surcharge amount from 1.92% to 5.0%.

State 9-1-1 Charge

The Act requires each service supplier (a person providing a communication service to a user in the State) within a 9-1-1 service district to bill and collect a State 9-1-1 charge from all service users, except for users of a prepaid wireless communications service, of the service supplier within the geographical boundaries of the 9-1-1 service district.

(A "9-1-1 service district" or "emergency 9-1-1 district" is the area in which 9-1-1 service is provided or is planned to be provided to service users under a 9-1-1 system implemented under the Act.)

Previously, the amount of the State 9-1-1 charge payable monthly by a service user had to be established as provided in the Act. The amount could not be more than 25 cents or less than 15 cents, and the charge could be adjusted annually. The bill deletes these provisions.

Under the Act, the charge must reflect the actual costs of operating, maintaining, upgrading, and other reasonable and necessary expenditures for the 9-1-1 system in this State. Previously, the State 9-1-1 charge was 19 cents. The bill increases the charge from 19 cents to 25 cents.

Emergency Telephone Technical Charge

The Act requires each local exchange provider within a 9-1-1 service district to provide a billing and collection service for an emergency telephone technical charge from all services users, except for users of a prepaid wireless telecommunications services, of the provider within the geographical boundaries of the emergency telephone or 9-1-1 service district.

Formerly, the amount of the technical charge had to be computed by dividing the total emergency telephone technical charge by the number of exchange access facilities within the 9-1-1 service district. Under the bill, the amount of the technical charge to be billed must be computed by dividing the total emergency telephone technical charge costs in all 9-1-1 service districts in the State by the number of exchange access facilities within all 9-1-1 service districts in the State.

Emergency 9-1-1 Fund; IP-Based Providers

The Act created an Emergency 9-1-1 Fund within the State Treasury. Previously, money collected and deposited into the Fund had to be distributed as follows:

-- 82.5% had to be disbursed to each county that had a final 9-1-1 plan in place, with 40% distributed quarterly on an equal basis to each county, and 60% distributed quarterly based on a population per capita basis.

-- 6.0% had to be available to primary public safety answering points for training personnel assigned to 9-1-1 centers.

-- 1.88% had to be credited to the Michigan Department of State Police (MSP) to operate a regional dispatch center that received and dispatched 9-1-1 calls, and 1.87% had to be credited to the MSP for costs to administer the Act and to maintain the office of the State 9-1-1 coordinator.

-- 7.75% had to be available to reimburse local exchange providers for the costs related to wireless emergency service.

The bill, instead, requires annual money in the Fund not exceeding $37.0 million be distributed as follows:

-- 65% must be disbursed to each county with a final 9-1-1 plan in place (subject to the current 40%/60% distribution requirement).

-- 5.5% must be available to PSAPs for training personnel assigned to 9-1-1 centers.

-- 1.5% must be credited to the MSP to operate a regional dispatch center that receives and dispatches 9-1-1 calls, and 2.44% must be credited to the MSP for costs to administer the Act and to maintain the office of the State 9-1-1 coordinator.

Previously, under the Act, any cost reimbursement to local exchange providers could not include a cost that was not related to wireless emergency service. A local exchange provider could submit an invoice to the MPSC for reimbursement from the Emergency 9-1-1 Fund for allowed costs. Instead, under the bill, any cost reimbursement to local exchange providers may not include a cost that is not related to wireless emergency service or an IP-based 9-1-1 service provider. A local exchange provider or IP-based 9-1-1 service provider may, on a quarterly basis, submit an invoice to the MPSC for reimbursement from the Emergency 9-1-1 Fund for allowed costs.

Within 60 days after the bill's effective date, the MPSC must commence a proceeding to determine the recurring and nonrecurring cost categories for all IP-based 9-1-1 service providers. The Commission must allow any interested person to intervene in a proceeding. Within 180 days after a proceeding is commenced, the MPSC must issue a final order adopting the recurring and nonrecurring costs categories for all IP-based 9-1-1 service providers considered just and reasonable by the Commission. For cost studies first submitted by an IP-based 9-1-1 service provider after the MPSC completes the proceeding, the Commission must, within 45 days of receiving an invoice, approve only those costs in the invoice that are both of the following:

-- Consistent with recurring and nonrecurring costs categories for all IP-based 9-1-1 service providers approved by the Commission.

-- The result of a competitive bid process as confirmed by supporting documentation, for contracts entered into after the bill's effective date.

An IP-based 9-1-1 service provider must file an updated cost study at least five years after the filing of an initial cost study, and every five years after that.

An IP-based 9-1-1 service provider must meet the Next Generation 9-1-1 standards set by the National Emergency Number Association to submit an invoice to the MPSC for reimbursement from the Emergency 9-1-1 Fund for allowed costs.

Funds generated by the State 9-1-1 charge in excess of $37.0 million annually must be reserved for distribution for Committee-approved costs related to IP-based 9-1-1 emergency service.

Under the bill, "IP-based 9-1-1 service provider" means the provider of a standards-based digital (internet protocol) secure redundant managed 9-1-1 transport network used for the routing and delivery of 9-1-1 connectivity with location information from a party requesting emergency services to a PSAP. An IP-based 9-1-1 network may interface with other networks and transport other emergency services applications. An IP-based network may be constructed from a mix of dedicated and shared facilities or networks, and be interconnected at local, regional, State, Federal, national, and international levels to form an IP-based inter-network or intra-network of 9-1-1 connectivity.

("Primary public safety answering point" or "PSAP" means a communications facility operated or answered on a 24-hour basis assigned responsibility by a public agency or county to receive 9-1-1 calls and to dispatch public safety response services, as appropriate.)

Previously, the Act required the Auditor General to audit the Fund at least annually. The bill, instead, requires the Auditor General to do so at least biennially.

Civil Action

Section 403 of the Act provides that each service supplier is solely responsible for the billing of the State and county 9-1-1 charges and transmitting the money collected to the Emergency 9-1-1 Fund and to the counties, as required under the Act.

The bill requires the Committee, a county, or a 9-1-1 service district to notify the MPSC if the Committee, county, or district is aware of a service supplier, CMRS supplier, reseller, or retailer of prepaid wireless telecommunications service that has failed to report, charge, collect, or transmit the State 9-1-1 charge, a county 9-1-1 charge, or the prepaid wireless 9-1-1 surcharge. The Committee, a county, or a 9-1-1 service district must include with the notification all information, testimony, exhibits, or other documents and information the Committee, county, or 9-1-1 service district possesses that support the notification. Before the Attorney General commences a suit (described below), the MPSC must investigate any failure to report, charge, collect, or transmit charges and attempt to resolve those complaints.

Upon referral by the MPSC, the Attorney General may commence a civil action on behalf of the Committee against a service supplier, CMRS supplier, reseller, or retailer of a prepaid wireless telecommunications service for appropriate relief for failure to report, charge, collect, and transmit the State 9-1-1 charge and the prepaid wireless 9-1-1 surcharge. An action may be brought in the Ingham County Circuit Court or the circuit court in a county in which the defendant resided or is doing business. The court has jurisdiction to restrain the violation and to require compliance with Section 403.

The bill does not prohibit a county from taking any action authorized by law against an entity that fails to remit the county 9-1-1 charge.

A county or 9-1-1 service district also may commence a civil action against a service supplier, CMRS supplier, reseller, or retailer for appropriate relief for failure to report, charge, collect, and transmit the county 9-1-1 charge. An action may be brought in the circuit court of the county receiving the charge or in a circuit court in a county in which the defendant resides or is doing business. The court has jurisdiction to restrain the violation and to require compliance with Section 403.

("CMRS" or "commercial mobile radio service" means commercial mobile service regulated under the Communications Act of 1934, and the rules of the Federal Communications Commission (FCC) or provided under the Wireless Emergency Service Order (an order of the FCC issued in 1996). The term includes the following:

-- A wireless two-way communication device, including a radio telephone used in cellular telephone service or personal communication service.

-- A functional equivalent of a radio telephone communications line used in cellular telephone service or personal communication service.

-- A network radio access line.)

Auditing

The funds collected and spent under the Act must be spent exclusively for 9-1-1 services and in compliance with rules promulgated under the Act.

Each PSAP or secondary PSAP must assure that Fund accounting, auditing, monitoring, and evaluation procedures are provided as required by the Act and rules promulgated under it. Under the bill, this requirement applies to each county, PSAP, or secondary PSAP that received money under the Act.

Emergency 9-1-1 Service System

The Act permits one or more counties to create an emergency 9-1-1 service system. With the approval of the county board of commissioners in a county with a population of 1,800,000 or more, four or more cities may create an emergency 9-1-1 service district. The bill changes the population requirement to 1,650,000 or more.

A county board of commissioners may by resolution make minor amendments to a final 9-1-1 service plan for any of the following:

-- Changes in PSAP premises equipment.

-- Changes involving the participating public safety agencies within a 9-1-1 service district.

-- Changes in the 9-1-1 charges collected by the county, subject to limits under the Act.

The bill also allows the county board of commissioners to make amendments for changes in 9-1-1 service providers to include IP-based 9-1-1 service providers that meet the Next Generation 9-1-1 standards set by the National Emergency Number Association.

Report

The bill requires the MPSC to issue, by December 1, 2020, a report to the Legislature and the Governor containing the following information:

-- The total costs incurred by counties or 9-1-1 service districts that have transitioned to an IP-based 9-1-1 service provider.

-- The estimated transition costs to be incurred by counties or 9-1-1 service districts that have not transitioned to an IP-based 9-1-1 service provider, and the estimated dates for transition.

-- The estimated ongoing, annual costs of operating the 9-1-1 network after the transition to an IP-based 9-1-1 service provider has been completed by all counties or 9-1-1 service district choosing to transition.

-- The estimated costs of operating the IP-based 9-1-1 network based on the estimates calculated for transition costs and operating costs.

The Commission may collect data from counties, 9-1-1 service districts, IP-based 9-1-1 service providers, the State Treasurer, and the Committee that are reasonably required to complete the report. Counties, 9-1-1 service districts, IP-based 9-1-1 service providers, the State Treasurer, and the Committee must submit to the Commission any data that are reasonably required to compile the report. At the Commission's request, the Committee must, in preparing the annual report, by August 1, 2020, collect data from counties, 9-1-1 service districts, and IP-based 9-1-1 service providers that the Commission reasonably requires to compile the report, and submit that data to the Commission.

MCL 484.1102 et al.

ARGUMENTS

(Please note: The arguments contained in this analysis originate from sources outside the Senate Fiscal Agency. The Senate Fiscal Agency neither supports nor opposes legislation.)

Supporting Argument

As technology has advanced, Michigan's 9-1-1 infrastructure has not advanced at the same rate, and advancements in communications technology have created the need for a more advanced system to access emergency services. The existing 9-1-1 system was built when landline telephones were the primary technology, and most PSAPs, the local communications facilities that receive 9-1-1 calls and dispatch public safety response services, largely rely on analog technology adopted decades ago that only have the ability to receive voice calls from landline phones, and the home address associated with the phone number. Today, the Federal Communications Commission estimates that over 70% of 9-1-1 calls come from mobile wireless devices, which means the telecommunications providers that serve PSAPs must adjust their systems to transmit calls to the appropriate PSAP, along with the caller's number and location information. Similarly, PSAPs have had to configure their systems to accept calls and location information from wireless callers.

Today, most jurisdictions use some form of an Enhanced 9-1-1 (E911) system, which provides additional information, such as the location of the caller, however, some jurisdictions still rely on basic 9-1-1 services that accept only voice calls, and require the responder to ask the caller for his or her number and location. Although most PSAPs can accept wireless calls, many cannot accept other forms of data, such as text messages, pictures, or video. In other cases, PSAPs are unable to interconnect and transmit calls to and from each other because of outdated and incompatible technology. Adopting an IP-based system, such as Next Generation 9-1-1 (NG911), will improve 9-1-1 services, and increasing the State 9-1-1 surcharge will allow the State to implement this updated system.

NG911 is an initiative aimed at updating the existing 9-1-1 service infrastructure to accommodate modern communication technologies. According to the National Emergency Number Association, NG911 systems have three main components: 1) an IP-based network that forms an Emergency Services IP Network; 2) functional elements that are specifies types of software applications; and 3) databases that replicate and extend traditional E911 services. NG911 systems use IP-based technologies to deliver and process calls, and can accept calls from a variety of devices (e.g., mobile phones, VOIP) and data (e.g., text messages, pictures, video). In the modern technological age, people expect to be able to communicate with 9-1-1 from any device using voice, text, picture, or video at any time, from any location.

The ability to contact 9-1-1 using text, picture, or video will have a positive impact on the lives of Michigan residents who are deaf, deafblind, or hard of hearing. In most emergency situations, the existing 9-1-1 system relies on an individual who can hear to make a live call to responders, Modern communication technologies allow people who are deaf, deafblind, or hard of hearing the ability to communicate safely and quickly with 9-1-1 services, and the bill will ease access to emergency services to these individuals.

Next Generation 9-1-1 also is more capable than existing 9-1-1 systems at connecting calls between PSAPs, emergency responders, and law enforcement officers in different areas. When landlines were the primary method of telephone communication, most 9-1-1 calls occurred within a limited geographic area, and transferring calls only occurred between adjacent cities or counties. Today, however, 9-1-1 calls are placed from much farther away. Often, 9-1-1 calls are routed to cell towers located in a different jurisdiction than where the call is placed. Next Generation 9-1-1 allows PSAPs to interconnect with each other and allows systems to be compatible, interoperable, and secure. A system that allows for rapid and seamless transfer of 9-1-1 calls will save time and lives.

Additionally, NG911 allows for enhanced location information and crash data by interoperating with in-vehicle systems such as OnStar and Sirius. It is essential that emergency medical services (EMS) and first responders have access to accurate location information in emergency situations, however, lack of location accuracy is one of the most critical needs EMS and first responders in the State currently face. Companies such as Uber and Domino's Pizza are able to accurately pinpoint the location of customer's wireless device using GPS, yet the most of the State's PSAPs are unable to do so. Next Generation 9-1-1 utilizes enhanced location accuracy services that are available on wireless devices. This will allow emergency responders to pinpoint a caller's locations with GPS technology, allowing responders to arrive quicker and at the correct location.

The 2017 National 911 Progress Report found that 22 states were making progress toward implementing NG911. In Michigan, NG911 has been deployed successfully in the upper peninsula, part of the northern lower peninsula, and in the thumb area. According to testimony presented before the Senate Committee on Energy and Technology, as many as 30 Michigan counties currently contract for an IP-based emergency system network, and other counties are in the process of research and developing plans for an IP-based network. The previous funding model was unable to maintain the 9-1-1 wireless network infrastructure, and the State 9-1-1 surcharge and the prepaid wireless surcharge could not cover the migration to the NG911. The bill provides for a stable funding model that will allow for the migration to NG911, and maintain ongoing operational levels of emergency services.

Opposing Argument

The bill substantially increases the 9-1-1 fees for Michigan businesses and residents, but does not contain any cost-saving provisions. Proponents of the legislation have failed to explain why existing tax revenues are insufficient to cover the costs of providing 9-1-1 services. It would be more appropriate to support the 9-1-1 network as other core government services are supported: through local units' general funds and property tax millages. Additionally, the bill takes control away from counties and local municipalities. The Legislature should continue to rely on existing partnerships between individual counties and private companies.

Response: The State 9-1-1 surcharge and the prepaid wireless surcharge had not been increased since PAs 164 and 165 took effect in December 2007. According to testimony presented before the Senate Committee on Energy and Technology, although some people believe that the bill significantly increases the surcharges, Michigan had the third lowest State 9-1-1 surcharge in the country. Accounting for inflation, the State 9-1-1 surcharge should be 22 cents, so the "actual" rate increase is three cents. Even increasing the State 9-1-1 surcharge from 19 cents to 25 cents as prescribed in the bill, Michigan has the fourth lowest 9-1-1 surcharge in the county. The 9-1-1 system constitutes a vital services for Michigan residents, and a stable funding source is essential to its operation. The prepaid wireless surcharge also has not been revised since 2013. Since then, a significant number of service users have transitioned from postpaid to prepaid services. The system to calculate the prepaid wireless surcharge is outdated by over 10 years. The new rate, which is based on a statewide average, is more equitable and will remain stable until it is reevaluated in 2021.

Legislative Analyst: Stephen Jackson

FISCAL IMPACT

The bill will have a small, but positive fiscal impact on the Michigan Department of State Police, and a positive fiscal impact on local 9-1-1 emergency service providers. The bill raises two fees charged by communications service providers, and credited to the Emergency 9-1-1 Fund, which is administered by the State Treasury. The first fee is a 19-cent monthly surcharge included on telephone bills; that fee is raised to 25 cents per month. The second is an increase in the percentage surcharge included on prepaid wireless services from 1.92% to 5.0%. In fiscal year 2015-16, those two fees generated a total of $20.3 million and $8.2 million, respectively. Under the bill, those amounts will increase to approximately $26.6 million and $21.6 million, respectively, for a total of $48.8 million.

Additionally, the bill makes a number of changes in how those funds are distributed through statutory formula. The table below provides estimates for the impact of the bill on the various

Program/Item	Previous Law Pct.	Previous Law Dollar Amt.	S.B. 400 Pct.¹	S.B. 400 Dollar Amt.¹
County 9-1-1 Providers	82.5%	$23.5	65%	$24.0
Local Exchange Providers (Wireless Emergency Service) and Approved Costs for Internet Protocol Based 9-1-1 Projects	7.75%	$2.2	25.56%	$21.3
Public Safety Answering Point Training	6.0%	$1.7	5.5%	$2.0
State Police Regional Dispatch	1.88%	$0.5	1.5%	$0.6
State Police Administration	1.87%	$0.5	2.44%	$0.9
TOTAL	100%	$28.5	100%	$48.8
¹The bill limits the amount disbursed through the formula to $37.0 million; additional funds will be credited directly to the second item in Table 1.