Assembly Standing Committee on Communications and Conveyance

The Communications Conveyance Committee is now called to order. My name is Tasha Boerner, and I serve as theCchair of this Committee. Joining me on this dais today are Leticia Castillo, Chris Rogers, Jessica Caloza and Patrick Ahrens. We're also joined by Emilio Perez, the Chief Consultant of the Communications Committee, and Elizabeth Delgado, the Committee secretary.

And it's her birthday, so happy birthday. As well as Daniel Ballin is the Republican policy consultant. We can give him a round of applause, too, because that feels now weird. On today's agenda, we have three items. There's one item on the proposed consent calendar, file number three, SB 480 by Senator Archuleta.

Before we begin our presentation, I'd like to take care of some logistical housekeeping. As we proceed with the witnesses and public comment. I want to make sure that everyone understands that the Assembly has rules to ensure we maintain order and run an efficient and fair hearing.

We apply these rules consistently to all people who participate in the proceedings, regardless of the viewpoints they express. We seek to protect the rights of all who participate in the legislative process so that we can have effective deliberation and decisions on the critical issues facing California.

You could exit the hearing room once you're done testifying or return to your seat. Now, let's cover the ground rules for appropriate conduct. The Assembly has experienced a number of disruptions to Committee and for proceedings in the last few years.

As you came into the room today, the sergeants directed your attention to the rules for public attendance and participation which are posted outside the door in order to facilitate the goal of hearing as much from the public.

Within the limits of our time, we will not permit conduct that disrupts, disturbs or otherwise impedes the orderly conduct of legislative proceedings. We will not accept disruptive behavior or behavior that incites or threatens violence.

The rules for today's hearings include no talking or loud noises from the audience, public comment may be provided only at the designated time and place as permitted by me, the Chair, public comment must really relate to the subject being heard today, and no engaging in conduct that disrupts, disturbs, or otherwise impedes the orderly conduct of this hearing.

Please be aware that violations of these rules may subject you, subject you to removal and other enforcement actions. We looks like we have a quorum, so Committee Secretary will now take a sentence. Madam Secretary, please call the roll.

[ROLL CALL]

We have a quorum, so the first item on our agenda today is SB 371 by Senator Cabaldon relating to transportation network companies insurance coverage. Senator Cabaldon, you may come to the dais. And I believe you have two primary support witnesses. They can come now, too. Ramona Prieto.

Prieto.

Prieto. Sorry, I was, like, going to say something German, and that would be wrong. Ramona Prieto from Uber and Nick Johnson from Lyft. So, Senator Cabaldon, you may open and each of your witnesses will have two minutes.

Great.

And we time in this Committee, and please be punctual.

Okay, thank you. Madam Chair. I, thanks for the opportunity to present this bill. We were in the Insurance Committee earlier today, and I am pleased to accept the Committee's amendments that I know were developed in conjunction with that Committee as well.

We made the similar commitments to amend the bill and just to summarize, to recast the intent language in Section 3 of the bill to instead be findings and declarations. Number two, to increase the insurance limits to 100 per person and $300,000 per accident.

And third, to require a joint study from the Department of Insurance and the PUC on the UM/UIM impacts for the bill as well. So I'd be happy to accept those.

So this legislation is here because when the rideshare sector began, not that long ago, the Legislature moved swiftly and so did the PUC to come up with a comprehensive regulatory framework for what was then a completely novel and counterintuitive innovation that most Californians were suspicious of, that we don't get in each other's cars, we don't invite people into our cars.

And this was a interesting, novel situation that was emerging, but the regulatory framework had to exist, and none of it was in place. And so the Legislature did pass a variety of bills.

The PUC took actions, but one of the key ones was legislation by Assembly Woman Susan Bonilla, from my senatorial district, that crafted the insurance provisions for the sector. If you look at the Committee analyses, the testimony, and the PUC records from that time, they all basically say the same thing. They either don't mention UM/UIM whatsoever.

Or the one reference that's in a Committee analysis is, hey, it's anybody's guess what you should set. And so there was a lot of work on the overall insurance framework and on the regulatory framework, but not on UM/UIM.

These limits are in place largely because they happen to be what one of the rideshare companies was doing at that time. And that's what the bill is specifically about. Only the UM/UIM portion of the insurer of the many layers of overlapping insurance that protect both drivers and riders in any kind of accident.

So it's UM/UIM where the driver is not at fault. And those limits were set at $1.0 million, which is a provision that applies to no other similarly situated transportation in the state. Taxis, Uber Black, buses, or anything else in California.

And since that time what we've seen is, is cases and claims that are far under that figure in virtually all cases. But also we've seen insurance costs because we're insisting on insurance levels that are higher than the claims and cases those costs have ballooned and they are a substantial part of fares.

So this bill is solely, exclusively a bill about affordability to reduce fares for riders and also to increase the share of the fares that we do pay that go to drivers one, because they deserve it. If you've talked to your ride share driver ever and they've asked you, well what are you paying?

Because here's how much I'm making. We're trying to make sure more of the more of what we pay gets in their driver's pockets. Both because they deserve it, they're entitled to it, it's the right thing to do, but also because this, the rideshare marketplace depends on drivers signing up.

And we don't have enough drivers to be able to create access but also affordable fairs in California. So this bill is intended to lead to reduce fairs, to provide additional dollars to drivers. Although it's for shorthand, this is often called the Uber and Lyft insurance bill, it isn't only them.

Part of the reason I'm carrying this bill is that in rural and suburban parts of California, my county, my city is one example where a private, publicly contracted, private transportation network company is the backbone transit service. It works in conjunction with the local bus service.

And so this is unlike when this, when the limits were originally created, this is no longer sort of an optional thing for hip young people who are risk loving to do. It is basic in order to get to work, to go visit grandma, to get to church, to pick up the kids, to get ice cream, like whatever it is that we need. This is a fundamental part of our lives today.

And so one way that we can make California much more affordable is to tackle an area where we've seen significant growth in money that is, that needs to be in people's pocketbooks. That's based on the actual claims and cost data in the last decade that reviews that. And so that's the purpose of the bill.

It's simple and modest in ways, but want to just assure the Committee worked really hard to strike the right balance. But the fundamental purpose here is to is to right size the insurance coverage to match the exposure in order to reduce fares and right size the marketplace so that riders in California can afford to continue getting around.

And with that ask for your aye vote but want to turn next to Ramona Prieto representing Uber.

Good afternoon, Madam Chair and Members of the Committee. For those of you I don't have the pleasure of knowing yet, my name is Ramona Prieto. I'm the Director of Public Policy for Uber.

And I'm here today to express our strong support for SB 371, a targeted fix to a problem that's quietly making rideshare more expensive for millions of Californians. I will echo the Senator on many of his key points. Today, each trip is covered by multiple forms of insurance.

$1.0 million in liability insurance, $1.0 million in occupational accident insurance to protect drivers, physical damage coverage, three policies that SB 371 does not touch, and lastly, $1.0 million of uninsured and underinsured motorist coverage, UM/UIM for when drivers are not at fault. No other vehicle on California roadways carry this policy.

Not public school buses, not taxis, not personal cars, only rideshare. And this policy has become the single biggest cost driver to riders. In LA County, as example, 45% of every fair is is a straight pass through to government mandated insurance. That's around 32% across the California average.

And to be clear, these costs are a direct pass through to riders and it's reflected on rider receipts as the booking fee. These costs are passed to the people who rely on rideshare to get to work, to school, to doctor's appointments and they're cutting into the earnings of drivers who keep our platform moving.

I'm proud to have with me today a letter of support signed by 7,000 rideshare drivers and SB 371. And the changes in front of you are informed by data modernizing the coverage requirement, but still above what is required by law for anybody else.

It defines that drivers will never have to carry this policy and it ensures that rideshare UM/UIM policy will be primary to other like policies. On behalf of Uber, I respectfully encourage your support on SB3 71 so we can continue the conversation of this important reform. And we remain committed to working with with the Chair in this Committee. Thank you very much.

Good afternoon, my name is Nick Johnson, Public Policy Director at Lyft. Good afternoon, Madam Chair and Esteemed Members of this Committee. I'm here and speaking today in support of Senate Bill 371, which aims to address the affordability of rideshare services by adjusting uninsured and underinsured motorist coverage limits which were established over a decade ago.

And I acknowledge the inherent challenges in establishing that requirement at that time. We didn't have a lot of data during that time and this was a novel industry on the rise. So we recognize that this proposed change is a paradigm shift. Nevertheless, our observations indicate that the elevated limits mandated by UM/UIM have become economically inefficient.

This inefficiency is largely attributable to inflated attorney represented claims, often involving substantial contingency fees which consequently drive up fares. It is important to define the scope within which this Bill would operate. UM/UIM coverage is applicable when our driver is not at fault for an accident.

This bill does not alter our $1 million liability coverage which addresses accidents where a driver is at fault. And this is only in scope for a small fraction of the total claims that we see annually. At the proposed limits, California would still maintain a higher requirement than 40 other states when it comes to UM/UIM for TNCs.

Furthermore, it is notable that 26 of these states do not even require this coverage for TNCs. And as Ramona stated earlier, no other commercial mode of transportation in California is required to provide this specific type of insurance.

Our request today is simply to maintain this policy requirement, but at a level that would adequately cover the majority of UM/UIM claims occurring on our platform and making our UM /UIM policy primary to those of passenger UM/UIM coverage. The objective of this limit reduction is not to achieve a windfall.

It's to enhance the affordability of rideshare, increase profitability for drivers and disincentivize opportunistic and exaggerated claims in the manipulation of the legal system. Thank you for your time and I respectfully ask for your support. Thank you.

Thank you to everybody for keeping to our strict time limits. I want to thank the proponents. We'll move on to any additional witnesses in support. You may approach the mic with your name, affiliatio,n and position only, please.

Good afternoon, Madam Chair. Chris McCauly here on behalf of the Los Angeles Area Chamber of Commerce, in support of the bill. Thank you.

Good afternoon, Chair and Members, Jose Torres and in proud support. Sorry, Jose Torres.

Good afternoon, Chair Members Tish Rylander here on behalf of a handful of supporters, Cal Asian Chamber, California Hispanic Chamber of Commerce and FICA. Thank you.

Good afternoon. Timothy Burr on behalf of San Francisco Chamber of Commerce, Bay Area Council, Central City Association of Los Angeles, and the California Nightlife Association. Thank you all.

Good afternoon, Madam Chair. Kris Rosa on behalf of Silicon Valley Leadership Group, in support.

Mayra Baena with the Mesa Verde Group on behalf of the Consumer Federation of California, in support.

Okay, thank you to the witnesses in support. Moving on, we have two primary opposition witnesses. We have Casey Johnson from the Consumer Attorneys of California and Sara Flocks, California Labor Federation. If you would approach the dais, you'll each have two minutes and you can begin when you're ready.

Madam Chair, Members of the Committee, Casey Johnson, no relation to Nick Johnson from Lyft to my left, the Vice President of the Consumer Attorneys of California I'm here to respectfully express out opposed unless amended position on SB 371. This bill poses a drastic reduction in the uninsured and underinsured motorist coverage required of Uber and Lyft from $1 million down to just $100,000 per person or $300,000 per incident.

It's a 90% cut in protection for passengers and drivers who are injured by uninsured or underinsured motorists. We thank the Committee for their work on improving the bill from the language in print, which was originally a 95% reduction. But more work must be done. Make no mistake, this is a corporate windfall at the expense of real people.

Californians who rely upon rideshare services deserve that if they are seriously injured by reckless or uninsured drivers, they'll be covered. But under SB 371 they could be left with hundreds of thousands of medical bills, lost wages, and long term disability without meaningful compensation. This bill also leaves drivers dangerously under protected in serious crashes.

Unlike UIM coverage, the occupational accident insurance provided under Proposition 22 excludes compensation for pain suffering, emotional distress, and permanent disability, leaving drivers with only partial coverage and substantial out of pocket costs.

Moreover, Uber's insured delays access to UIM benefits by creating a procedural roadblock at a time when uninsured drivers and injured drivers are struggling to recover physically and financially. The reduction in SB 371 would place drivers in a position with fewer rights and no guarantee that any corporate savings will be passed along for their benefit.

One way to reduce the harsh impact of the reduced limits would be to make sure TNC drivers and passengers can access the full amount of the TNC UIM reduced $100,000 coverage if warranted by their injuries, by eliminating a credit against the UIM policy for the amount of the at fault drivers policy.

Uber recently agreed to this provision in the State of Virginia. We understand several other states also make sure the full value of the policy is accessible to TNC drivers and passengers when needed.

This coverage is not a luxury, it's critical safety net. And there is precedent for $1 million in UM/UIM coverage for rail crew transportation as enacted by this body two years ago.

Thank you.

We are dropped position. Thank you.

Madam Chair and Members, Sara Flocks, California Federation of Labor. We are also opposed unless amended and our opposition mainly is around this bill is about affordability, but there is no guarantee that the money saved by the companies will be passed on to riders or drivers. There is intent language to but there is nothing concrete.

And the proponent said that no other commercial driver has the same requirements that they do, but they differ very much from other commercial companies. There is no commercial driver's license that is insured after Prop 22.

They are statutory independent contractors, which means the company does not provide workers compensation, they do not provide minimum wage, they do not provide health benefits, pay payroll taxes, they do not reimburse for gas, repairs, or the vehicle. The model of TNC is to flood the market at specific times.

That's why there was the use of surge pricing to have a flood of drivers at one time flooding city streets, as we've seen in urban areas, creating traffic and other hazards and higher risks, which insurance makes sure is pooled.

And so we would like to see a guarantee that this savings will be passed on. One of the challenges of that is that the company enacted in 2022 dynamic pricing or upfront pricing.

There was a recent Columbia School of Business study that followed a University of Oxford study looking at dynamic pricing, which is based on an algorithm, which means that prices can change for drivers and the fare that is charged becomes decoupled from what the rider is paid or the driver is paid.

In fact, two drivers doing the exact same fare can be paid differently. Two riders as well. In fact, the study found that drivers take home substantially decreased while Uber, it was specific on Uber, their take home of what they were charging substantially increased.

It was the same findings at Columbia School of Business as it was at the University of Oxford.

Thank you.

So we urge that there be a guarantee that this is passed on to riders and drivers.

Thank you. We'll move on to any additional witnesses and opposition. You may approach the mic with name, affiliation, and position only, please.

Good afternoon, Madam Chair and Members, Robert Harrell. I'm the Executive Director of the Consumer Federation of California. To be clear, I think there may have been an error on support. We are in opposition to the bill. We we don't think it reduces costs for affordability for consumers or to help drivers. Thank you.

Good afternoon. Kim Stone, Stone Advocacy on behalf of Consumer Watchdog, in respectful opposition.

Navnit Puryear on behalf of the California School Employees Association, also in opposition.

Good afternoon, Connor Gusman on behalf of Teamsters California and the Amalgamated Transit Union. In opposition unless amended. Thank you.

Madam Chair and Members, Louie Costa with Smart Transportation Division, opposed unless amended.

Thank you. Thank you to all the witnesses. Now I'm going to bring it back to the Committee. Are there any members who would like to speak on this bill? Did I? Okay. Ahrens, then Rogers.

Thank you. I want to thank the author for bringing this bill forward. I was wondering if, if you can address some of the comments made by the opposition in regards to some of their concerns.

Sure. With the Chair's concurrence. So, a couple of the issues that have been raised.

One, we have been discussing all these issues with our friends at the consumer attorneys for several months, and the interaction between these various kinds and types of, as it was indicated before, overlapping insurances is partly an issue in the bill, partly it is the insurance industry itself.

And so I want to be clear, some of these interactions are not because Uber and Lyft have said we're not, we're not doing this one, or not. As these issues have come forward, we have been committed to try to resolve them. We did in the first, in the first round.

You know, the, the cases and team raised, like you know, we need to right now. Uber's UM/UIM policy is not primary, and therefore, others you might get exhausted first before you get to the Uber policy. We've included that in the bill to make that clear.

And so I think we're still trying to understand what the implications are of the stacking proposal. We're definitely open to continue talking about it.

Definitely.

And I should say on the issues that Sarah raised, a lot of key issues around the worker rights or driver rights and compensation in the, in the rideshare marketplace are definitely real.

The bill tries to take on the specific issue that's at hand, which is the insurance issues and its affordability implications without trying to occupy the field on, on these, on these, on these other issues for drivers. They're not really affected in is the limits are about the riders respectively.

So no matter what the limits are, we're not, it's not going to provide pensions or other, or bargain rights or whatever.

And I know that this house has passed another bill in that regard, but this bill is focused solely on the insurance piece, and we do think putting, putting money in the driver's pockets is a, is a big step forward.

The other thing I'll say is that the industry here has every incentive to execute on what we talked about at the outset of the hearing, which is the purpose of the affordability purpose. So I share the concerns, like, how do we know this is really going to happen?

And the Chair and I have had extensive conversations about this as well as well as everyone else because like we're doing something big and important if we are able to get this, get this accomplished. But we want to know that it's going to actually result in reduced fares and in better, better compensation for drivers, I think.

And it's not so simple because this is not a price-regulated industry. You know, like when we vote to do ministerial CEQA for housing, like we can't, we can't demand that you, that.

You're triggering me by saying CEQA.

I mean that's a constant new challenge for us here.

Let's not talk about CEQA.

Ultimately, Senator, I think that.

But I was gonna say, but in this case, the economic incentives are exactly aligned. So it's not the answer to the question, but I do think it provides in that the rideshare marketplace right now is suffering from an inadequate number of drivers, costs that are causing rider, riders to pursue other options or just not to take a trip.

And so it is absolute. This can't go on this way. So the rideshare companies, their absolute economic interest is in lower fares and pay that will attract drivers as well. So the incentives are right.

We have had conversations about even though we can't set the price in statute, could we do a look back in a couple of years? Like did, did it actually do what we said we were going to do? The language that came here, that we accepted as authors amendments out of the insurance committee, doesn't quite get there.

But we, but, but, but I'm hopeful that we will find mechanisms to hold the companies and ourselves accountable.

Well, just just to wrap up, Madam Chair, I does appear that these affordability conversations that we've been having having in committees for the past several months to address the affordability crisis in California continue to elude the legislature because it feels that as a freshman Member, every time we want to have conversations about affordability, that has been asked of by the speaker in his opening address that the legislature focus on affordability.

Every affordability conversation is met with fierce disagreements from every committee, virtually, and every issue. And I do think that we need to be laser-focused on that. It's certainly why I came to Sacramento. But we have to be having deeper and harder conversations with stakeholders about how we achieve that.

I will say that I know that this bill is not perfect, and it sounds like you've been in active negotiation and have taken amendments to continue to clarify and try to address these issues.

As a member representing the heart of Silicon Valley, where a lot of this innovation is born out of, I think it's critically important that sort of we have a seat at the table in these conversations, would like to continue to work with you on these issues.

So and I would like to see how we can further address the concerns along the way because I'm buckling up for the end of session. My first end-of-session.

So with that being said, I would like to see if I can help broker these conversations with you representing Silicon Valley and would like to be added as a co author at the next available opportunity because I do think I would like to help address the issues raised while trying to, you know, address the intent of the bill as well.

Thank you. Assemblymember Rogers, then Assemblymember Bonta.

Thank you so much. And I think my colleague hit it on the head when we talk about affordability. And it's the inevitable question is affordable for who also?

And so I know you have been getting this question in every single committee about how can we prove that the money goes back to the drivers or goes back into the pockets of consumers. I'm hearing a commitment from you to figure that piece out.

And not just in the intent language, but something that's actually built into the statute that gives some credibility to the claim that this is going to make things cheaper for folks. That's what I've heard from you.

The other question that I have is one, and I'll ask this from both the supporters and the opponents, the original intent in putting this requirement into law. One, from your perspective, why was that put in? And two, has that been resolved? Have those concerns or the reason that was put in place been resolved?

And I know that some of it is just because this was an emergence, an emerging market and people threw regulations in.

Well, I would say so, it was an emergency market and regulations, I mean, I don't mean at all to demean our predecessors. They worked really hard to try to get this right with very little information, and trying to figure it out.

And so, and it's not as though the legislature hasn't dealt, but that since this particular issue was not a major area of focus because these limits, which were the first and one of the highest in the country, were already part of the policy.

Because if I think you're all maybe all too young to remember this, when the market started. Yeah, I know. Yeah so.

Unfortunately, I was not.

None of us, nobody that wasn't a risk-loving college student wanted to get into somebody else's vehicle. So I know for me, I'm like, I need to see 25 billion dollars worth of insurance before I get, and you know, that was totally human.

And so it was in the company's interest at that time to maximize their insurance coverage, not only for PUC and legislative regulation, but because nobody would ride otherwise. And so since that time, we now have actual data on accidents, on faults, on claims, on outcomes of those claims.

So I think that's what's different here, is now we know that now these limits would cover the vast majority of the claims. But there are claims that are higher. And so I want to, if I can address that piece of it.

But the data tells us a couple things about those claims, that some of them are dramatically higher. And one of my first questions when we got into this work was, well, who's going to cover those costs then?

Are we leaving somebody without the medical coverage, the pain, suffering, what they need and what they deserve, and what became clear? Just starting to look at it directly. You go search for, I got in an Uber accident.

A whole bunch of websites pop up of law firms that are like, hey, there's a special law just for Uber, and bring your case to us. We have our own doctors, and what we were seeing is a lot of these cases at the upper end.

It wasn't that the damages were more, the actual accident was worse, was that the referrals were to somebody other than your doctor from Sutter or UC Davis, or rather than you going to your doctor using your regular medical coverage with the prices that have been negotiated, that you would then be diverted to a different medical provider that maybe didn't have the incentives to be in that market.

So when we look at the really high claims from the data, it's a non-trivial amount of those claims are higher because of how kind of how broken that part of the system is.

And so I think in both cases the data shows us that nearly all the claims that aren't in that category are covered by these, by these limits that now we can be comfortable looking at the histogram of where the right point is to get the right balance between cost to the consumer and assuring that we're fully protecting them in the event of an accident.

And if I could add a little bit of context to some of the abuse that the Senator is referencing. Our underwriter for the State of California had done a study when we were originally looking at reforms. What is reasonable? How do we get there? And for individual policies.

Assemblymember Rogers, like you or I driving on the road at the 50,000 per person, 100,000 per accident, that was recommended that would cover 96% of cases for individual parties, not TNC trips. They also found that claims were often inflated 10 to 12 times. Individual claims from our underwriter, and I'm happy to share that study.

We also worked with Lyft jointly, and we commissioned a study, a third-party study by the Berkeley Research Group. We are happy to share that with you as well, but wanting to put a finer point on those abuses and some of those costs.

And we hear you and this committee on the feedback for how can things be concrete today? On an Uber ride, on a receipt, the booking fee represents the insurance costs. So when it comes to looking at the ways that this policy changes the marketplace in this look back study that's in front of you today, that data will be incorporated, and we're open to feedback on additional ways to have guarantees that make this committee comfortable. But I think that context is helpful. Nick.

And if I may, to your question about whatever, sorry, whatever.

We'll just go down the line. We'll just go down the line. It'll be Nick, Lacey, Sarah.

Mr. Johnson, go ahead.

Yes. So you know, I think the other states learn pretty quickly, right. And so just as Senator Cabaldon said, California was the first to do this, and it was a lofty job to figure out how to build public trust with this new industry.

And once these limits were put in, essentially all the other states started to follow suit. But one thing that was missing was the one million dollar UM/UIM requirement from for the vast majority of states, there's other levels there, but there's only four other states that have this one million dollar policy.

So I think the changes happened quite quickly once other states started to introduce this legislation, that they saw that this at least this specific piece of insurance or didn't need to have a limit of one million dollar.

Go ahead.

Yeah, I mean, I think the answer is we don't know entirely still. And there's been representation about data that exists. There's still data that I know that's been requested by our side, by the consumer attorneys, as well as a number of legislators, that hasn't been provided yet. A report summarizing data isn't the actual data.

So I think that's one question. The other question is with respect to underins motorist coverage. It's one of the most affordable things that you can provide for yourself, and to provide insurance and protection for yourself.

And if you're to look at your own insurance policy, you'll see that the largest percentage of what you pay to insurance for your automobile is for your liability coverage, which kicks in if you cause an accident. The other higher rates are for the collision and the comprehensive coverage.

That's the damage to vehicles and cars have gotten really expensive. So those costs are real high. If you look at the actual cost of the premium for uninsured underinsured motorist coverage, it usually represents less than 10% of your entire premium.

And so to provide that extra protection for somebody who's using a transportation network provider, it's a bargain as opposed to putting the cost back on government insurance for charges that aren't otherwise covered. And the other issue is something unique to transportation network providers that's different than an individual policy is.

More often than not, we have a lot of piling people into those vehicles. It's not just one person taking a ride. It's much more frequently than a normal private vehicle. You've got more people in it.

Through the chair, Assemblymember, your question was where did this come from? And I was not part of the negotiations, but I was here in 2013 when this deal was unfolding in the Legislature. And what happened is in 2013 there was a six-year-old who was killed by a TNC in San Francisco.

And it revealed that there were gaps in coverage. And part of that was because this was a new model where people were using their personal vehicles and were not employees. And so there was just there had to be a new insurance scheme that was developed and negotiated.

So Assemblymember Bonilla came forward, and a lot of this was around the different periods of one, two, and three, like when you're going to get a ride, when you are engaged in a ride, when you have a passenger in your car.

So there was all these different kind of complexities of the levels of insurance and at what part of the ride. And so there were certain levels that were proposed. There was a variety of things that were proposed. And originally, the TNCs opposed very ferociously as they can. And there were negotiations. I was not part of those.

I cannot say what happened in those. But what came out of them was that the TNC supported the bill that moved forward, and the UM/UIM was part of that. And it was a negotiated deal.

And at the time, I think it was evaluating the risk of this model where it was a large number of people in personal vehicles with, without a lot of the same regulation that happened for taxicabs on the local level where things are set and there's weights and measures and there's local control.

And so that was all baked into. I think part of it because the other piece was that that's where transportation network company, as different from all these other things, was codified in the law. So I'm just giving you history. And so that's where this came from. It was a negotiated deal.

So I think one of the holdups or reservations I have is also around the driver themselves. Can you talk a little bit about what the impact would be for a driver who is seriously injured, who is an independent contractor, doesn't get workers compensation, is out of work for a while. How will this impact that worker? If this bill were to pass.

If this bill were to pass, it would not have any impact on the driver. And that we have one million dollar in driver and sorry, occupational accident insurance. That was the benefit of Prop 22. California is the only state that has this.

So no other state has this type of insurance for any of our drivers, with the exception of Washington, that has workers compensation, which we that's a state-run workers' compensation program. And so the driver would be protected from medical costs and lost wages through occupational accident insurance.

And UM/UIM after that would still be available if, you know, for pain and suffering and additional additional costs as well. I just want to make a couple of points to, in response to some of the things that were said regarding how this came to be in that situation, tragic as it was. Of course, that's auto liability.

That driver was at fault. And we're not trying to touch that insurance at all. That's not the insurance that we're trying to address here at this moment. And we carry one million dollars in auto liability nationwide, doesn't matter the state.

And so we're not trying to diminish that insurance, and we're not trying to eliminate any type of insurance either. Right. We are still keeping UM/UIM, and we still want to keep UM/UIM in, even though in other states that we don't. We feel that it's still appropriate to have in California.

We just want to have it at a reasonable level.

Okay, are you complete? Assemblymember Rogers.

I'll just say with the Senator's commitment to figuring out in the statute language that shows that the money will go back towards the workers or towards the consumers. I'm happy to support today.

I don't know that we would be having this discussion if we hadn't started at that point back in 2006 or whenever, 2013, whenever it was, which makes it a little bit harder to come down from it. But I think the Senators worked really hard on the bill to try to address those concerns.

And with that last concern, if you can find a way to build that into the statute and not into the intent language, I think you'll get a lot more support.

Thank you. Assemblymember Bonta.

Thank you. I probably have three questions. Thanks to the author for bringing this forward and for working on this, particularly in the last 48 hours for you. My first question is around this idea of, and it's been raised, but I just want to hit on it again.

So we had an informational hearing here that essentially teed up our ability to understand what was going on with this particular bill.

One of the things that was said repeatedly at that informational hearing was that there was a commitment to ensuring that the savings from this kind of endeavor to reduce the, the coverage levels would result in better care and provision of stability for workers and affordability for the users. There was intent language in the legislation.

It was just recently removed, however, and moved, I believe, to a section in the findings and declarations to ensure that any savings and reduction in costs would actually go towards a reinvestment to enhance the economic stability and welfare of drivers and riders.

So, to the point raised by Assemblymember Rogers, it seems like that's actually going in the opposite direction of making sure that there is language that is going to be in statute.

And while I appreciate that there is another bill that is in the works, I've been around here long enough to know that one bill succeeds and one bill doesn't.

And I don't know that I'm open to ensuring that that other bill gets passed in order to be able to have a stronger guarantee in this legislation that there will be a considerable pass-through to the drivers and the end users with savings either to the author or the proponents of the bill.

How, what is the legislative pathway around that particular guarantee in this piece of legislation?

Thank you. And first, let me be clear. Sometimes you have to go the long way around. And so we did have that intent language in the bill from, from the Senate, and the Chair here observed that that's not enforceable and it doesn't do anything. So please don't. It's definitely not enforceable.

Findings and decks.

Yeah. So she's don't like. So the, so the chair is quite clear. Like I don't want to, I don't want to pretend there's something that there's guarantee that's not there.

So it wasn't intended to be a signal that we are not trying to hold it accountable, but simply an acknowledgment that that language by itself didn't accomplish the purpose that you and your colleagues on the Insurance Committee have outlined.

So, so that's why the amendment is is being taken today to, to move that to the findings and declarations. But yes, I'm, I, that's why I'm. This Bill is by itself, I introduced it simply to take care of riders and drivers. And we are still trying to figure out what the.

What an appropriate instrument is in order to. To. To assure that those benefits flow to where. To the folks that we've been talking about in this hearing. So we're committed to doing it. We're just trying to figure out what the right instrument is in order to accomplish that. And that's not just an intent statement.

And I would say it's purely intent language that we move to findings and declarations, which is in the findings and declarations you put your intent, and I did tell the author that one may not want to make the claims that there's a benefit to riders and drivers in this Bill when there is no language that guarantees benefits to riders and drivers in this Bill.

I had given that advice because we moved it to findings and declarations because it's just intent language that has no enforceability with no specifics. That is the Bill in front of us today.

That began a conversation about what could we do. We're not there yet. I don't want to overstate how close we are, but we are. Absolute intent is for. Is to include something substantive that is not just findings, declarations and intent on that precisely that issue.

And I would say from a company perspective, hearing that feedback today, I want us to also take ownership in that commitment. I think there are some legal ambiguities because of Prop 22 in figuring out how we have the worker benefit that isn't in conflict with current law.

That is something that we have been actively trying to resolve and working with many of your colleagues and other stakeholders around what a worker benefit could look like separate from that. As mentioned earlier, the booking fee is a transparent way for where insurance costs sit today and figuring out how we can leverage a level of transparency too.

So riders know the benefit that they will be receiving as a byproduct of this policy. But hear you completely on it needing to be quantifiable and more defined. And there's a lot of conversation underway on how we do that, how we can accomplish that. So I just wanted to name our commitment to that as well.

Yeah, it's not complicated. This is not complicated technically because I think both companies. But Lyft's policy is more is clearer on this, which is that, you know, Lyft is committed that 70% of the fare after these kinds of fees goes directly to the driver. Period.

And so any, any savings that occurs on the Umuim insurance, 70% of that automatically goes to the driver. So that mechanically it's already there. It's figuring out how to deal with it statutorily since we don't regulate prices at the TNCs directly. So that's where it's not we're trying to that we're trying to hammer the companies.

It's just how to make this work in a way that is compliant with Prop 22 and that can achieve what you're what you're describing.

Appreciate that and that's very helpful explanation. The second is seemingly tangential, but not for me. At the same information hearing I asked a question or shortly thereafter around arbitration. So there currently is the reality that for platforms particularly like Uber's just about Lyft is just about rideshare at this point. You know, you don't do other things.

Like don't do anything. Okay. But Uber does a lot of other stuff. Uber does a lot of us there. The arbitration agreement in the is a part of the terms of use for a platform user. So I go on.

I agree to be on the platform to be able to do Uber eats or get on a scooter or get my food delivered to me or to be in a ride share. That's a user agreement. I'm entering into the platform. I have one particular needs in terms of the level of arbitration that I might need.

Should I not have my soup delivered to me. I have a completely different set of needs. Should I be involved in an accident in a ride share but the same arbitration agreements because I'm a platform user applies to all instances of use with that with the platform. I asked a question about this.

I don't believe I received an adequate response to this and I only received the response just yesterday after re asking it is something to the author and perhaps the proponents and Uber specifically because this is not a Lyft issue that I would like to have more clarity around the interaction between a reduction in this insurance because many claims will ultimately have to potentially go to arbitration should they not be settled in the way that they should.

So that we can make sure that we have users not agreeing to arbitration terms because they think that they are, you know, getting food versus getting in a ride share and getting into an accident.

I take your point. I saw the response into your office yesterday. I am not on the legal team. I read their answers and tried to make them frankly more clear because there was a lot of Legalese frankly on a starting point on our arbitration clauses.

I'm going to give you my layman's terms understanding and would be happy to bring in the actual legal team and come back to you on the intersection you're talking about between the reduction of this policy and how that interplays with our arbitration terms in current practice. I don't believe it would.

And there are federal oversights on how these agreements are in place for our platform. You are right. Our platform does both food delivery and rideshare and other things. So I take that point. I would be happy to sit time with you and our legal team. I don't have the information that you're looking for.

In part driven by the terms of use that a user doesn't ever. How many of us have ever dived into the terms of use for any platform that we provide? So just a point of. I'm hoping that I can get some additional clarity on that moving forward.

And then the last issue or concern that I'd like to raise is there had been some discussion previously about the look back data or the reports that were used to be able to basically recalibrate the insurance coverage. When was that? When were those reports conducted?

Are you referring to the 2017 CPUC report or the BRG report? So we commissioned that study jointly ahead of. Ahead of frankly this legislation to try and have industry data because of antitrust. We obviously we can't share our data directly. So they picked a data set in the not so distant past.

It's I believe Q4 of 2020 to Q3 of 2022. On page 28 of that report there is a complete page summary on how the data was aggregated, the data that we gave, how it was made safe and how it was used in the study.

But that data set was chosen because it's not in the distant past and the nature of these types of UM UIM claims take time to settle. So wanting to make sure there was a full window of time to have complete data. So those are some of the, the inputs on, on how that data was selected.

And just to add. So from our experience, UM UIM claims take about 30 months to mature. So we had to pick a data set where we had a good representation of these claims reaching their end so we could see what the final claim amounts would be.

Yeah, you happen to pick a time period that is smack dab in the middle of COVID where nobody was going anywhere. So the relative.

So if you were to look at the, the number of rides that happened in 2020-22 versus I don't know, 2017-2019, I'm sure that there would be a much more significant data set to be able to extrapolate whether or not these levels were the right levels to be able to examine.

So the underlying data set is for me somewhat specious and just as a point of consideration for your for the rationale that you're using to base these.

Lower amounts on, I hear that feedback and it's a point well taken. I would also add specific to just us, we have one underwriter for the State of California. We asked them to do a study on our claims.

In trying to figure out one where do we see abuse in terms of to your point, not just when the world wasn't moving, but before the world moving and as the world reopened. And how can we set realistic limits from the insights from our underwriter, the one underwriter that we have in California?

So that's where the $50,100,000 per accident came from. Also worth mentioning that our main objective was figuring out how do we have data that we can share as an industry and not violate antitrust, but something that isn't looking during a time where we didn't see the same level of abuse.

We've seen a 600% increase in litigation abuse over the last nine years. An example of some data shared with CAOC and the author. So trying to actually find a data set that wasn't so far back that it didn't capture some of the things that we're bringing to you today.

And then also individually just wanting to share what what our underwriter for the state found as well.

I hear the rationale also recognize the pitfall with the particular data set that you decided to choose. So for me, I very much appreciate the chair actually pulling together an information hearing that would allow us to be able to further consider this piece of legislation as well as others that may be coming forward.

There are the primary thing that I have deep concern around was the first point that I raised and that has been echoed by several of my colleagues here on the dais so far.

I know this author to be one that is true to his word and will continue to work on this legislation to make sure that it incorporates the a response to the concerns that we've outlined. And so I will be supporting this Bill today coming out of this Committee.

But I also am very cognizant of this particular chair's interest in making sure that this Committee is able to fully review legislation as it moves through the process and know that if something starts to not look quite right, she will make sure it has another little pit stop here and Assembly Communications and conveyance and I very much appreciate that about her leadership as chair of this Committee.

And I certainly reserve my right to not vote on this should it be able to.

Come to the floor if some of the changes that I'm hoping are in here end up not being in here.

Thank you, Assemblymember Bonta. I think we have Hoover and does anybody else want to speak? Caloza.

Thank you, Madam Chair. I think first I'll start with a question for the support of the bill. You know, in your. You mentioned the other states. You know, we're one of four states that has a policy of this magnitude. What has been the experience in other states for your companies and has it, you know, worked out?

Well, I know one statistic was said that this, the what's being proposed in the bill would cover 96% of cases. Just curious your experience in other states, if you can speak to that at all. Other states that have just as high. Limits or just, or just lower or limits that, you know, closer to what we're.

We're looking at proposing this bill and what problems that's created.

Yeah. So what we've seen is less abuse of the legal system. Where in our study we had a comparison with Illinois, and I know that Illinois is the smallest state per capita, you know, as far as, I'm sorry, as far as raw numbers.

But per capita, it's similar type of driving behavior, similar type of litigiousness in that state. And what we've seen is that the average attorney repped umuim claim in Illinois is around $18,000, and in California it's $300,000. Wow. Right.

And so where we have these appropriate limits, and again, we're saying appropriate limits, risk appropriate limits, we've seen more faster resolution of claims, but also lower claim amounts and lower costs for rideshare riders. So that's what we've seen in other states.

In the states that have higher limits, New York, New Jersey, we're dealing with the same issues that we have here where there's a lot of opportunistic, I should say, attorneys who are taking advantage of these high limits. Thank you.

Okay. I think I would parry that to the opposition. I mean, would you. I don't know. The consumer attorneys want to comment on this. Would you agree that there are opportunistic people that take advantage of the laws in the state attorneys that in every.

Occupation in every state of the country.

Can you maybe speak to? One concern I have that I think is pretty clear that people are profiting off of current law in California is you have these websites, as the Senator mentioned, where people are advertising their services. You have billboards in some communities that say, hey, if you get in an Uber accident Call this number.

To me, that speaks to the fact that there are definitely people profiting on this. So, you know, is that something that the opposition is comfortable with? I mean, is that something that there may be an acknowledgement there needs to be some reform?

It does. And we're currently sponsoring two different bills this session to address the issue, both with respect to fee sharing with attic State in AB931 as well as Attorney Advertising in SB37. Those bills are. We're dealing with that. And I'm glad you asked the question because that's the answer. If the problem is attorney abuse, let's address that.

Let's not take away protection from people who are injured in accidents.

Yeah, well, I appreciate the response. I appreciate the acknowledgment. I would disagree with the fact that to me, this is part of that reform as well, and I think an important part of reducing those incentives, perverse incentives, to maybe profit off of these types of cases. I know.

I'll move on to another comment that was made from the opposition on this need to guarantee that this money goes somewhere. First of all, why do we need a guarantee of that sort in the statute? To me that seems pretty extreme. But secondly, how would you recommend that we do that? How would we even format that?

That is an excellent question. As the proponent said, they spent $200 million to pass Prop 22 and that handcuff the Legislature in many way for making changes. We would like to see something. There's, you know, like there's been statements that this there would be a reduction.

You could be able to see a reduction in the amount that's charged as a fee in terms of the insurance rates. That doesn't change the fare necessarily.

There might be a reduction in what passengers are paying because they're paying less of the fee, but there's no guarantee that that would be shifted on to the fare that the driver gets a part of. There's many different ways that you could address it.

Just opening up a conversation on what is this dynamic pricing, what is algorithmic wage setting, what is any of the black box algorithms that they're doing to set both prices and what drivers are paid? So I think there's just a lot of questions there in terms before we can even get to the question of a guarantee.

Okay, thank you. You know, I would just add on and this will be my final comment. I'll pass it to my other colleague. But you know, to me, this whole situation is interesting. I think the obviously I think the companies have been very transparent. You know, with their pricing.

When it comes to, when you look at the breakdown, there are different breakdowns for different prices for different things and why prices are so high. You know, I do have a huge concern that the prices in General for Ubers, Lyfts, just ride shares in General have gone up pretty substantially.

That is something I've brought up to the companies, I've brought up to a number of folks in my community. And a large part of those costs are being driven right now by these insurance costs, which I would say are unreasonably high.

To me, the best guarantee that we have for making sure those savings get passed on to riders and drivers and is competition. We have multiple companies in this space. We have not just Uber and Lyft that are here today, but we also have Waymo and there's all these other different options out there for consumers.

And they're going to be incentivized to compete to reduce their prices. And I think if we can reduce some of their fixed costs, which I think this bill is attempting to do, that's going to go on a long way in terms of guaranteeing the fact that those savings get passed along just in the free market.

And so what I do know right now and that I'm assured of is that a lot of these dollars under the status quo, drivers and riders are paying these costs, and those costs in a lot of cases are going into the hands of attorneys.

I would much rather see them go back into the hands of Californians in the free market. So with that, you know, Senator, I appreciate you bringing the bill forward. Do plan on supporting it. And you know, you know, I do think, you know, I'm sure my colleagues have other thoughts, but we'll keep the conversations going on it.

But would love to be added as a co author as well, if you'll have me. Thank you.

Okay. Assemblymember Caloza.

Thank you. Chair Boerner, thank you to Senator Cabaldon and all the stakeholders who are here. I know this is a really tricky issue and really want to thank our chair for having an informational hearing on this and just wanted to kind of echo some of the thoughts and concerns and issues that were raised by my colleagues.

I think for me, as it relates to this bill in particular, I think about three things. I think about affordability, which was mentioned. I think about protecting our workers, which is really, really important to me. And I also think about the consumer protection piece around this.

And so I'm going to dive into just three questions that I have. One of the questions that I had was around the level of insurance. I know that we are reducing the coverage of 1 million and it went from 50,000 to 100,000 to now the current level of 100,000 to 300,000.

Can you just explain and share kind of how we arrived at those numbers and whether or not that's enough coverage relative to other vehicles on the road. I know that, you know, we spoke in generalities during the informational hearing, so wanted to really understand this more relative to the road that we all drive on.

For those of us who drive.

Thank you. Thanks, Assembly. The 5100 is, was the levels that were derived from these various studies as well as data. I don't know if you ever carried a bill that had sponsors that were legally disallowed from talking to each other. But also data that we've achieved. It's probably common here, not in my policy area.

So in addition to the studies, the direct data that we've asked for and this is all the charts show, 5100 is the, is that place based on claims and cases and also to maximize the benefit to riders and to drivers because that more than the statutory language or anything, the biggest determinant of how much savings there will be for riders and affordability will be what the limits ultimately are right there.

So the changes in the limits are not for free. So that was the basis for 5100. The discussions here initially have been about trying to strike a different balance and to try to refine those. So we've ended up at 100300 and as a result we don't have all the same data sources. We have the sources.

We don't have all the same charts at that number. But trying to find make sure that we're able to meet the policy preferences here. Having said That100300 falls outside of the like where the vast majority of these, these cases are. So I feel comfortable that in that range we are in the.

We're in in an area that we will cover the vast majority of them, especially given, given these like at the end of the tail cases that are extra expensive, that wouldn't be, that wouldn't fall into either one, but they would still those cases are just to remind us that if right now my claim is at $950,1 or more likely at $1.0 million because that's what the statutory cap is.

It's very likely that I'm doing that because I've been advised to seek a separate Doctor and a separate analysis. And so it isn't that I wouldn't be covered any longer. I just would be covered through the regular system that everybody else uses for that system.

So I think that's the rationale for figuring out how do we make sure that we're covering all of the cases that are normal, cases that would be in any other sector and then some, while also trying to maximize the savings. This relates to something that Mr. Johnson prime said about.

Sorry, Nick, but about, about the marketplace for ui. Um, because I think this is a really important point because he said, look, um, um, UIM is extraordinarily affordable, it's easy to get, it's cheap, so it shouldn't be so much of an issue.

And that, that is, that was the case a decade ago when the original legislation was passed. It's still the case today for Un. For me as individual drivers. But that's because, number one, we don't have to buy it and number two, it's competitive. And so the price of that coverage and we're typically.

And none of us are buying $1.0 million, um, UIM coverage as regular drivers. So that's. So Mr. Johnson's exactly correct. Without these policies, Umuim would be extraordinarily cheap. It isn't because it is mandatory and set a limit and that both insurance companies and claimants know that has caused the rates to grow to be so high so fast.

Okay, so thank you for that, Senator. And it sounds like what you're sharing is that the coverage amount of 51k and where we landed at now with the amendment of 100 to 300k is double what the average claim was.

I know there's obviously some questions from Assemblymember Banta around the data and some of that which, you know, I thought she, she did a really good job of pointing that out that I know you'll look into.

And so the second piece that I had was really around the cost savings that TNCs would receive as a result of this bill. Do you all know what the cost savings are for your companies on this? Have you done any analysis?

Yes, I'd be happy to share that with you individually, but as Senator Cavalin said with us in the room, that's highly competitive and sensitive information, but I can definitely follow up with you and share that with you.

Okay. The reason why I asked that, because what you're asking us to consider obviously is one around making sure that there's alignment in the insurance market as it relates to the vehicles that you all insure and making sure that we continue to protect drivers and other consumers on the road.

And this is directly going to result in cost savings that I know we're all concerned about, which is really my third question around worker protections. And thank you to the chair for explaining the questions around the intent language, which I also had questions with.

But can you just elaborate a little bit more about where will these dollars go? Like I would like to hear on the record from both companies where the plan is to invest these dollars and. Yeah, please go ahead.

I'll start with excerpts from my testimony on the cost to riders today. So in your district, Assemblymember, 45% of every trip goes to government mandated insurance. We're addressing one of the two main provisions required by this Legislature. So we will see savings. Riders will see savings directly in their booking fee as these insurances come down.

And I think the imperfect system right now that we're talking through is the study, and the study being an area to audit what those savings look like. And as the Senator mentioned, because we're not regulated on individual costs and there's dynamic pricing, it isn't going to be a direct linear answer.

But in terms of transparency and where it will exist, you'll be able to see it on every single trip separate from that, on the driver benefit.

Right now the marketplace is suffering, particularly in your district, because of the increased costs of trips where there is less demand, less people like you and me and our friends and family Members that are ordering trips, because there's obviously only so much price elasticity, how much we're all we're willing to pay to get somewhere, so you end up with an oversupplied market.

So how do we have more affordable trips that more riders are interested in taking and access to more work for drivers, along with the fact that a driver will never be required to carry this policy, unlike the current law where it's the driver, the company, or some combination of the two.

And we're open for additional ideas on how to make things more concrete there. There have been a lot of discussions, particularly in the last six to eight weeks, and our door is open to continue those discussions. But that from a 50,000 foot view, I think those are the most concrete answers I could give you.

Okay.

And we characterize the insurance cost per ride a little bit differently. At Lyft, it's $6 per ride on average in California goes to insurance costs. And in Southern California, most notably in your district, Assembly Member, it's around $7.

And so in the way our business works and the way our marketplace works, it does not make a lot of sense to Continue raising fares. And the cost of insurance is going to make us do that. And if we save from insurance costs, then we'd be able to make our prices more competitive.

More competitive Uber, but also reduce them for riders. And if we reduce our costs, we reduce those prices. And if we reduce those prices, we get more riders and that's more opportunity to earn for drivers in addition to the reduction of overhead when it comes to insurance costs.

Thank you both for sharing that.

I know it's hard to share specific data on the cost savings right now, given the limitations, but, you know, I'll just go ahead and conclude and share and add to the echo of what my colleagues already shared, really around the importance of the cost savings should this bill move through the process and, you know, get signed that I will be following this bill throughout the entire process and know that we have a good author who will live up to his commitment in ensuring that we protect workers and that these past through dollars go directly to the drivers into the workforce.

I would like to see the language strengthened so that it is enforceable. Would love to also see flexibility in the language around the insurance coverage to that change for whatever reason, you know. So I will be supporting the bill today and echo the thoughts from other colleagues.

But we'll be following this bill closely should things not make progress. Progress. But thank you for your work on this.

We have a motion by Aaron. Second. Do we have a second? Castio. Okay, we have a motion and a second. Senator Cabal, would you like to close? You can be concise.

Yes, it is theoretically possible. No, I. You've. You've been very generous with your time and also in allowing me and my. And the witnesses to. To add color to the language. I'm extraordinarily grateful for this Committee's absolute laser in, you know, unstoppable commitment to affordability. Every other issue has been fully explored, embedded.

And so I respectfully asked for an aye vote.

Thank you. Yeah. Thank you for your presentation. And your bill has a do pass recommendation. I think you've heard loud and clear from my colleagues.

Please continue to work with all of us to figure out how we ensure that the intent that's now in the findings and declarations where it should be can be realized for consumers and drivers. We have a motion by Aaron's. A second by Castillo. The motion on SB371 by Senator Cabaldin is do pass as amended. Re.

Refer to the Committee on Appropriations. Will the secretary please call the roll burner.

[Roll call]

The bill is out. We'll leave it open for others to add on, and we're awaiting an author. And so I'm going to pass. I'm going to recess for five minutes, and then we'll come back. Please don't go far. Members, please don't go far. Next bill is equally as important. zero, we're not done. Not done. We're just recessing.

No, no, no, no. Not done, not done.

Okay, wait a minute.

Okay, our recess is over. I'd like to encourage Members of the Communications and Conveyance Committee who are not voting in education right now to come back to the dais. We are now hearing SB716 by Senator Durazo related to Lifeline program broadband Internet access service. Senator Durazo, you may approach the desk.

And for the efficiency of the meeting, you can also bring your two primary support witnesses up with you. Trish Kelly from Valley Vision and retired Senator Richard Polanco from CETF, because I think who we had registered. Did you have a second witness?

He took this. He took his break.

He took his break, too. That's okay. Okay. So when he comes in, he can join us. Or if you have another witness, they can join us. Senator Durazo, you may begin.

Yes, if I can have someone who will answer questions. Sure, sure, yeah. Have a second witness.

Go ahead. Thank you. Thank you very much. Senator Durazo, you may begin. And each of your witnesses will have two minutes.

Great. And I want to start out, Madam Chair, as to accept the Committee amendments first and foremost. And I want to thank everyone on your team. I know this is a subject that's very dear to you and you've been working on it and you're going to keep working on it to make everything even better.

And your chief consultant, thank you very much. And everyone on your, your staff, we've had a lot of conversations and to guide us to get here where we are today. So I know you know what I'm talking about here. Picture this. 10 year olds sitting outside a library at night trying to finish homework on a borrowed phone.

Because even today, too many families in California still cannot afford Internet at home. 716 is about making sure no child falls behind simply because they can't get online. Nearly one in three families in California can't count on reliable home Internet for the kids to do schoolwork.

And with the expiration of the federal Affordable Connectivity Program, the ACP, almost 3 million low income households have lost critical support. We as legislators have worked hard to close the digital divide. The Governor and the Legislature made a historic $6 billion investment in broadband infrastructure. But affordability remains the persistent barrier.

So we need to continue to do all we can to make sure families can actually connect to the wires that we're building. Affordability now is the greatest barrier. As we said, the Brookings Institute called broadband essential infrastructure. And without affordable Internet, students can't do homework, patients miss out on telehealth, and workers lose opportunities.

This Bill creates the Home Internet Lifeline program for low income families. The PUC would adopt rules to implement the program by July 1, 2027. This Bill lets eligible households use their California Lifeline subsidy for home Internet, giving them the flexibility to choose a service that best fits their needs.

Families could pay no more than $11 out of pocket for speeds of up to of 100 up 20 down. Participation is voluntary for ISPs. They choose to participate, but they must offer at least one $30 plan with the speeds I mentioned.

The speed allows children to do their homework and mom to go take a college course outline and hopefully without freezing or buffering or dropping off, families can apply Lifeline support directly to Internet service with no forced bundling and no gimmicks.

The surcharge to Fund the program would be capped at the highest rate charged over the past four years, which is 60 cents per access line. Fiscal reporting to the Legislature is built into the Bill and there is sunset date of January 1, 2032. This is an investment in the future workforce of our state.

If kids can't finish homework today, they can't compete in tomorrow's economy. Closing the digital divide is not charity. It's not a luxury. It should not be a luxury and it's not for fun. It's building California and the fourth largest economy in the world. California's kids deserve more than parking lots and borrowed phones.

They deserve a true chance to succeed. And Madam Chair with me today, as I mentioned earlier, retired State Senator Richard Polanco and Trish Kelly, thank you very much.

Madam Chair, Members, thank you for the opportunity to address you. I'm here today representing the California Emerging Technology Fund, sponsors of this measure. We want to commend Senator Durazo for her tireless efforts and being the champion for Internet affordability.

We have worked closely with her for two years and are very pleased to have before you the opportunity that was proposed last session by Governor Newsom, an Internet lifeline program to replace the federal Affordable Connectivity in which almost 3 million households enrolled.

This Legislature and the Governor have been trailblazers and in the quest to get all Californians connected, as mentioned, you have allocated billions of dollars for infrastructure. Now the remaining task is affordability. And the primary reason why so many Californians are unconnected is because they cannot afford it.

Consider 35% of the poorest households cite affordability as the prime reason for not being connected. Further, according to the Federal Commission Communications Commission, 70% of those who are connected are paying more of their disposable income than what is reasonable, a much higher percentage than most of us.

In all my years in the Legislature, I have never witnessed a more inclusive process of stakeholders to try to reach consensus on a solution. Under the sponsorship of Senator Durazo, CETF facilitated more than 50 stakeholder meetings for seven weeks, two hours each, with weekly reports to everyone.

And we appreciated this Committee staff participation, who also received weekly summaries and final reports.

Thank you. That's been two minutes. It goes by quickly. You can finish your last sentence.

I can continue.

I think that. I don't know.

It's four minutes between the two witnesses. If the other witness. That's. It was two minutes each. Thank you. We asked for a aye vote.

Thank you, Madam Chair and Members, thank you so much. My name is Trish Kelly. I'm managing Director at Valley Vision. We're a civic leadership organization here serving the Capital Region. We also are funded by the PUC to manage the Connected Capital Area Broadband Consortium to close the digital divide.

So that is really a lot of focus on the infrastructure connectivity. We also manage the Capital Region Coalition for Digital Inclusion to deal with the other aspects of addressing the digital divide. Finally, we are also the convener for the California Jobs First, the state's investment in the regional economies.

So all of these are the foundation of our commitment to digital equity and inclusion as the foundation for regional prosperity and equity. I'm also here today on behalf of Principal Sam Floyd from Leotacha. Floyd, it's named after his mother. He was a beneficiary of a project that we worked on through CETF, the School to Home project.

And he led that school as a teacher to train other teachers how to support families to get devices and training to be able to do homework at home. Everything was going well until the Internet. I mean, the pandemic happened. And then we found out that parents didn't have affordable access to the Internet at home.

So up to 40% of the households were locked out. This school serves two low income housing projects that are administered by the city. All the students are public housing projects and the high percentage of the households are women led households. So this is a again, two miles from the state capitol.

Here we have many, many students who are locked out of digital access and equity. We were fortunate that AT&T gave us more devices to support the families. But the affordability is the big issue for us.

So Principal Floyd wanted me to just convey to you how important this work is for their school and the other schools in the district. And we know that addressing the digital divide and the affordability issues will help all of us succeed. So we support SB716. Really grateful for Senator Durazo's support and ask for your support.

Thank you. Okay with that. Thank you to the proponents of this Bill. We'll move on to additional witnesses in support. You may approach the mic with name, affiliation, and position only, please.

Good afternoon. Conor Gusman, on behalf of UNITE here in support. Thank you.

Good afternoon Committee and Chair. Claire Sullivan, on behalf of the City of Merced, in strong support. Thank you.

Marco Lizard, Executive Director of La Copert. Viva Campesina, representing the Farm Workers of the State of California, in full support.

Rebecca Gonzalez, Western Center On Law and Poverty and support.

Matt Lajay with SEIU California, in support.

Good afternoon. Alejandro Solis, on behalf of the following organizations. Economic Development Collaborative, Digital LiFT, Southern Border Broadband Consortium, Los Amigos De LA Comunidad, First Day Foundation, and California Human Development, all in support. Thank you.

Marvin Pineda, IOW, in support.

Adria Tinon, on behalf of turn, the Utility Reform Network. We have a tweener position at the moment. We are in conversations with the author and the sponsors on some minor clarifications. Thank you.

Keith Coolidge, AARP California, in support.

Thank you. Thank you to all the witnesses in support. Moving on. Are there any witnesses in opposition? You may approach the mic to. You can approach the desk. Maybe we can make a space for them. And you each have two minutes. Or you can have four.

We'll be quick. Thank you, Madam Chair.

Efficiency is appreciated in this Committee.

Thank you, Madam Chair. Members, Jonathan Aaron, behalf of CTIA. We're the trade Association for the wireless industry and respectful opposition. We support the goal of expanding Lifeline to broadband. Our issues with the current proposal is how it's being funded. Currently, it's being funded on the back of what? Wireless consumers.

Through a surcharge tax, whatever you want to call it. This Bill will expand broadband, expand Lifeline to broadband and potentially increase taxes on Wireless subscribers by 33-35%, depending on what the numbers are. That then is going to go to help subsidize cable broadband customers.

And we think there's a fairness issue with it putting on the back of just the wireless consumers. So for those reasons, we respectfully oppose and we've had many conversations, Madam Chair, I think you understand the issue better than most. Thank you.

Thank you. Any other witnesses in opposition who are me toos? You can approach the mic with name, position, and affiliation only, please. We have a motion by Lowenthal, a second by Ahrens. Wait, I'm not supposed to say that. I retract that.

We'll wait till the witness, the me toos go in and then when I bring it back to the Committee, I'll say that.

Good afternoon, Madam Chair. Yolanda Benson representing US Telecom, The Broadband Association in opposition to the Bill for the reasons already stated. Thank you.

Good afternoon. Audra Hartman, on behalf of CalCom. We have an opposed unless amended position on the Bill. We really appreciate, appreciate the clarification that the program is voluntary. But we have other concerns and we would love to work with the author and with the Committee on those concerns as well. Thank you.

Good afternoon. Amanda Goldram with Cal Broadman. We like to thank the author and this Committee. With the amendments taken today, we will go neutral. Thank you.

Thank you. Now bring it back to the Committee. We had a motion by Ahrens. I know. A motion by Lowenthal, second by Ahrens. Any questions? Comments from Committee Members? Caloza. Assemblymember Caloza.

Thank you so much. Chair Boerner, thank you so much, Senator Durazo, for bringing this Bill forward. Thank you to all the stakeholders. Thank you. Senator Polanco, I don't know if I wanted to give you the opportunity in case you wanted to respond to some of the concerns that were were raised by the opposition around costs.

But I did want to give a special thank you, Senator Polanco, for taking the time to meet with me about this Bill. And from our meeting, I know you mentioned that you know this is not a mandate.

And so I don't know if you wanted to add anything more to respond to what the opposition said in terms of it being a required program.

Madam Chair, if I could refer to Sunny. Sure.

Thank you Assemblymember Caloza. I'm Sunny McPeak, the President and CEO of the California Emerging Technology Fund. My main job is to run math for Senator Durazo and do all the calculations. I do also admire what the Chair and Senator Durazo has done.

So with all due respect to the men and women in the wireless industry, I love them, including Yolanda Benson. I don't think there is a full appreciation of what this Legislature and the Administration has done to broaden the base of contributions today to the universal service programs. There are six of them supported by an access line fee.

In case anybody thought I was overly detailed or anal about this stuff, I have five years of telephone bills here. When the access line fee was put into place In April of 2023, my telephone Bill dropped by 63% for what I was paying into the universal service funds.

Then that very same month, my Comcast Bill and Internet Bill showed up with an access line fee. So there are 53.5 million access lines today, all of us users paying in. It was the biggest democratization of a greater base of contributors to a public Fund.

It is not just the wireless customers who are contributing to today's Lifeline program. Further, when I was paying an individual amount before April of 2023, I paid $1.62, $1.58, $1.87 and $1.72 in four different months in 2223, just for the Lifeline program.

What is proposed today with the amendments from the chair that had been accepted by the author. It is an amazing consumer relief move. So let's just sit down and we'll go through the numbers again. The math doesn't add up on their side.

I just want to add also that again this is voluntary, but also there is a cap on the surcharge. So that has a lot to do with containing the cost.

Yes, I think that's a very good point that the Senator brings up. In January 1, 2025 the surcharge for just the UTLS portion was $0.60. The CPUC just reduced it to $0.45.

So this Bill on the Committee amendments is to leave that cap, which was the beginning of this year, which is the highest cap of the last four years in place. So we're not going to shift the costs onto the middle class by expanding Lifeline from just telephone access to also the choice to broadband.

Thank you, Chair Berner. This is like a team effort answer here.

I just wanted to put that on the record, given the comments made by the opposition and just, you know, the main theme that you heard us talk about both on this item and the last item, around affordability and making sure that we continue to support and pass legislation that makes the end user, our consumers, our constituents, live a more affordable day to day life.

So just wanted to get that on the record. So thank you for your thorough response and proud to support the Bill. I would have moved it, but it's already moved. But, but thank you for your work on this. Thank you.

Thank you. Any other Committee questions? Okay. With that, Senator Durazo, would you like to close?

I thank you again for your help and your support, Madam Chair, and everyone and everyone on the team and respectful ask for your aye vote.

Thank you, Senator Durazzo, for bringing this Bill forward. I appreciate our thorough discussions on the policy of this Bill. More than ever, I am committed to ensuring broadband affordability and I think this Bill is going to bring us further down that path. I really hope the ISPs participate. As you echoed, it's it's voluntary.

So I really Hope that the ISPs do participate and consumers will benefit. But we also have to acknowledge that in the past the incentive based programs have not always led to the results that we want to see. I know that this Committee and our staff will be watching the implementation closely.

So the CPUC designs a program that is workable, that encourages participation by ISPs. The only way this Bill will realize the positive results that we want to see is if that happens. At the same time, we also need to be mindful about how new costs impact the expanding program to entirely different class of service.

Personally, I realize that over time VOIP has paid in to the Lifeline program, has not been able to access those benefits. But there's also an equitable contribution mechanism for the long term in the Lifeline program and it relies heavily on telephone customer surcharges.

While Internet service providers and other entities like streaming services E Commerce that benefit greatly from increased access to broadband do not pay their fair share. The contribution mechanism is more complex nut to crack and cannot be done this year.

I don't want to put all that pressure of reforming Lifeline to be a fair and equitable program on Senator Durazo's Bill. And so given that political and economic conditions for Californians are trying to get through. However, I do think we need to have that conversation in the future and I'm happy to support this Bill.

I appreciate you working with this Committee to craft the amendments and agree to take them. And if you agree, I would love to be added as a principal co-author.

And we have a motion by Lowenthal, second by Ahrens, and the motion on SB 716 by Senator Durazzo is do pass as amended and re-referred to the Committee on Appropriations. The Secretary please call the roll.

Boerner. Aye. Boerner, aye. Hoover. Ahrens. Ahrens, aye. Bonta. Caloza. Caloza, aye. Castillo. Lowenthal. Lowenthal, aye. Rogers. Rubio.

Members, that Bill needs a few more votes. The Bill is on call. Okay, we're going to go. Thank you. Thank you Senator Durazo and all your witnesses and all the support. We're going to take up the consent item SB 480 Archuleta relating to autonomous vehicles. This is a consent item so no presentation is necessary.

Do I have a motion on consent? Moved by Calozasecond by Ahrens we the motion on SB480 by Senator Archuleta is do pass and we refer to the Committee on Appropriations with the Secretary. Please call the roll.

[Roll Call]

Bell's out. We're going to leave it open for other authors to add on. Let's go through the roll one more time. Will the secretary please call the roll?

[Roll Call]

SB. 716 is out. We'll leave the roll open for additional add ons. We'll leave the roll open for five minutes for our friends in education to run back. Let's open up consent.

[Roll Call]

S.B. Where'S the number? 371. Cabaldon is out with nine eyes. Zero no's.

[Roll Call]

Let's open the roll for Members to add on.

[Roll Call]

Good. Let's open the roll for Members to add on.

[Roll Call]

SB716. Durazzo is out. Seven ayes to one. No.

[Roll Call]

Our consent calendar, which contains SB 480 Archuleta is out 9 to 0. And Members, this concludes the work of the Assembly Committee on Communication and Conveyance today. We are adjourned.