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Service providers win one, lose one

California's governor signs one bill requiring e-mail providers to warn consumers before shutting down accounts but vetoes another requiring notification by ISPs.

Internet companies doing business in California won one round and lost another as Gov. Gray Davis signed an e-mail bill and vetoed legislation regulating Internet service providers.

The governor late last month signed a bill that requires e-mail service providers to give 30 days' notice before shutting down e-mail accounts. The law, which goes into effect Jan. 1, does not apply in situations where an account holder has violated the terms of service or when service is interrupted for reasons beyond the e-mail provider's control.

The governor subsequently vetoed a more sweeping bill that would have enacted the same restriction on ISPs (Internet service providers). The governor called the bill "well intentioned" but said it failed to provide sufficiently for cases of consumer misconduct or technical mishap.

The bill "unfairly burdens Internet service providers by requiring them to give a 30-day notice before any termination or transfer of service," the governor wrote in his veto message. The bill affecting e-mail providers "is narrower in scope and addresses the main problem that consumers and businesses face--permanent disruption of e-mail service without a legitimate reason."

The governor, comfortably ahead in his race for re-election, left the door open to a wider regulation of ISPs doing business in California, calling disruption of Internet service "especially harmful to individual consumers and small businesses." But a bill regulating Internet service would have to include the same exceptions and provisions found in the e-mail bill, Davis said.

The push to regulate Internet and e-mail service shutdowns stemmed from the disruption caused by the collapse of Excite@Home, NorthPoint Communications and other ISPs. Those shutdowns left subscribers without Internet access, often with no notice.

Other arguably more critical infrastructure providers in the state, such as electricity and water utilities, are required to give consumers notice before service shutdowns. Electricity utilities, for example, are required to give 10 days' notice in most cases, though temporary repair-related shutdowns require only 24 hours, and shutdowns for lack of payment require 48 hours.

The bill Davis described as the "narrower" of the two bills appears to rope in a whole class of businesses that don't necessarily provide Internet service but do provide e-mail accounts: Web portals.

"It seems pretty sneaky, actually, because I doubt that Yahoo and Hotmail understood that it was a bill that was going to affect them," said Sonia Arrison, director of technology policy at the Pacific Research Institute. "Everyone was upset about Excite@Home and NorthPoint, and this looked like a bill covering those issues. But it's not. This goes way beyond that."

Yahoo and Hotmail both appeared to be caught off-guard by the legislation. Yahoo said it was "currently evaluating (the law's) potential application to Yahoo." Hotmail owner Microsoft said it was "in the process of analyzing the bill and how it applies to Microsoft products and services."

Media coverage of the governor's action suggested that he had signed the ISP bill rather than vetoed it. One of California's largest dailies referred to the bill in its online edition as "barring Internet service providers from pulling the plug on customers without 30 days' notice."

Groups opposed to government regulation said the new law unfairly interfered with the individual's ability to negotiate a fair deal with a service provider.

"It's not the proper role of government in a free society to dictate the terms of a contract between a provider and the consumer," said Rob Latham, public affairs director for the Independent Institute. "And it distorts the market--this will benefit the more established, better-financed providers over the start-ups. A consumer who might want to get in with a lower monthly cost provider in exchange for assuming the risk of an unannounced shutdown won't have that choice."