Minnesota House File 389/Senate File 367
February 20, 2013

Mr. Chairman and members of the Committee, I am Dan Leary, from T-Mobile
and want thank you for the opportunity to testify in support of this legislation that
effectively deals with some key tax and fee issues as well as creates a fair and
equitable method of collecting 9-1-1 fees from purchasers of prepaid wireless
service. I am also speaking and expressing support on behalf of CTIA, Verizon,
AT&T, Sprint, US Cellular and Tracfone.

This bill provides a mechanism to provide a fair and equitable method to collect
9-1-1 fees from purchasers of prepaid wireless service. We believe the bill before
you today represents just that.
The Problem

As you know, state law requires fees to support the 911 system and they are
levied on the users of landline and wireless telephone service in Minnesota and
most other states. The current rate in Minnesota is a combined rate of state and
local assessments and is (add current rate) per line per month. Historically, these
fees have been added to the monthly bills of telephone subscribers, collected by
the service provider, and remitted.

Unfortunately, this method does not work with prepaid wireless service because
there is no monthly bill. When these laws were enacted pre-paid services were
not contemplated. With prepaid service, customers can walk into a retail store
and purchase additional minutes (“cards”) without providing a name or address.
In fact, the prepaid provider may not have any information about the customer’s
address or location.

Furthermore, over 70% of prepaid transactions are completed in third party retail
establishments such as (Walmart, BestBuy, Target). In these transactions, prepaid
providers are not involved in the retail transaction between the customer and the
seller. Prepaid providers have no ability to collect 911 fees from customers in
these transactions because they do not receive payment from the customer.

To further exacerbate and highlight the problem, almost half of new wireless
subscribers added over the past year were pre-paid subscribers. The pre-paid
segment is growing at a rate two times that of post-paid subscribers.

Customers enjoy the flexibility of no monthly bill, no credit check, no contract,
ease of activation and economically tailored to meet their financial situation.

States that have not addressed this problem currently use a variety of methods to
attempt to impose 911 fees on prepaid service, and each of the current methods
creates compliance, equity, and transparency problems.

In many cases the carriers ending up eating the fees in states where this has not
been addressed, where no money is available by any of the methods of collection
We Believe The Solution For Minnesota is in this bill and urge your support

A few years back the industry reached out to the public safety community, tax
experts and our retail partners to develop a fair, uniform and effective system for
collecting 911 fees on pre-paid wireless services. A lot of time and effort was put
into developing a proposal to collect the point of sale while minimizing new costs
and burdens on retailers. The result was model legislation developed and
endorsed by NCSL for implementation. This legislation has passed in over 25
states with several others considering similar legislation this Spring.
The key provisions of this model are incorporated into this bill:

Standardized definitions of key terms to allow prepaid retailers to comply without
expensive modifications to their point-of-sale tax software systems.

Single remittance to the Department of Revenue as part of sales tax compliance
process. Since sales taxes are already imposed on prepaid service, this will allow
retailers to incorporate collection and remittance of the fees into their existing
sales tax collection processes.

Customers who purchase pre-paid wireless services will have the E911 fee added
to their purchase and will pay it to the seller at the point of sale, just as they pay
sales tax today.
Legislation similar to what is included in this bill has been enacted in over 25 states.
So, the benefits to the state of Minnesota and the public safety community from adopting
this Point-of-Sale Methodology.

The pre-paid point of sale methodology in this bill is based on actual sales, is
transparent to the consumer, accurately sources the transaction to the state and is a
more efficient methodology for the collection of the surcharge directly from all
prepaid end users and is fair to post-paid consumers;

An end to disputes, customer complaints and litigation over application of E911
fees to prepaid wireless services.

We believe this prepaid point of sale creates a method that is certain, stable and
predictable, fair, equitable and transparent.

Transparency – all customers will know they are paying an E911 fee to support
emergency communications services.
Mr. Chairman and members of the committee we appreciate your time today and would
ask for your support on this bill. I am happy to answer any questions at this time.