BILL ANALYSIS AB 1012 Page 1 Date of Hearing: April 27, 2009 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Felipe Fuentes, Chair AB 1012 (Perez) - As Introduced: February 27, 2009 SUBJECT : California Broadband Task Force. SUMMARY : Requires to California Broadband Task Force (task force) to meet to develop a strategy to expedite accessing funds provided pursuant to the federal American Recovery and Investment Act of 2009 (ARRA). 1)Executive Order S-23-06 created a 21-member Task Force composed of public and private stakeholders with the expertise to advise policymakers on a framework for making California a global leader in the telecommunications revolution. 2)Creates the California Advanced Services Fund (CASF) in order to spur deployment of broadband infrastructure in un-served and underserved areas within the state, in both rural and urban areas, and encourage statewide policy to promote broadband throughout the state. THIS BILL: 1)Recognizes the establishment of the task force and requires it to meet no later than 30 days after the effective date of this bill to develop a strategy to expedite accessing funds provided under ARRA. 2)Requires the task force to submit the strategy to the relevant policy and fiscal committees in each house of the Legislature within 60 days of its first meeting. FISCAL EFFECT : Unknown. COMMENTS : According to the author's office, this bill would ensure that California is proactively engaged in new broadband programs at the federal level, adequately prepared to provide the corresponding federal agencies with feedback for improving and expanding California's broadband infrastructure, and able to identify funding sources and secure our state's fair share of ARRA funding for the development and or expansion of a broadband infrastructure that is affordable, reliable, and accessible to AB 1012 Page 2 all Californians. 1) Background: ARRA, signed into law on February 17, 2009, was intended to stimulate the U.S. economy in the wake of the economic downturn. ARRA provides two sources of broadband funding. The Broadband Technology Opportunities Program (BTOP) is a $4.4 billion competitive grant program. The program contains several set-asides including $250 million for innovative programs that encourage the sustainable development of broadband services, $200 million to upgrade technology and capacity at public computing centers, and $350 million for to support efforts to ensure access to affordable broadband and ensure access to broadband use. BTOP is being administered by the Commerce Department's National Telecommunications and Information Administration (NTIA). Priority for these grants is given to states that can provide matching funds and there must be a single, centralized agency that applies for all grant recipients under this program. The second source of funding is the Distance Learning, Telemedicine, and Broadband Program. This is a $2.5 billion competitive grant program aimed at building broadband infrastructure in rural areas that do not have sufficient access to high-speed broadband service. Priority for these grants is to be given to projects that will deliver end users a choice of more than one service provider and provide service to the highest proportion of rural residents that do not have access to broadband. 2) The old Broadband Task Force: Executive Order S-23-06, known as the California Broadband Initiative, created a 21-member Broadband Task Force comprised of public and private stakeholders with the expertise to "advise policymakers on a framework for making California a global leader in the telecommunications revolution." The task force was responsible for delivering two reports. The first report describes administrative actions that state government can immediately act upon to increase broadband availability and adoption in California. The second report contains a comprehensive assessment of the state of broadband in California. It includes detailed maps of wireline and wireless availability, analysis of adoption, a pricing survey, and recommendations so that California can take advantage of opportunities for and eliminate any related barriers broadband access and adoption. AB 1012 Page 3 The two reports have been completed. The task force is no longer meeting. The recommendations of the reports were to be carried out by the Business, Transportation and Housing Agency, and the Office of the Chief Information Officer (OCIO) has inherited some of these tasks. 3) Other existing broadband programs in California: There are also two existing programs that are tasked with advancing broadband in California. The CASF is an expected two-year program that was authorized by SB 1193 (Padilla), Chapter 393, Statutes of 2008. CASF provides grants to telephone corporations for projects that will provide broadband services to areas currently without broadband access and build out facilities in underserved areas if funds are still available. Funds are collected using an end-user surcharge billed and collected by telecommunications carriers. The total allocation for the CASF is $100 million. CASF has already allocated over $9 million in broadband infrastructure grants. The second program is the California Emerging Technology Fund (CETF). The CETF is a non-profit corporation established pursuant to requirements from the PUC in approving the mergers of SBC-AT&T and Verizon-MCI. The merged companies were required to contribute a total of $60 million over 5 years to advance broadband. 4) Maximizing ARRA Funding: California is already in a good position to maximize ARRA funding. There are already two entities with funds available for match requirements that also have systems in place for accepting grant applications and distributing funds. CETF has also begun the work to find private companies to take advantage of broadband funding. Given the fact that CASF and CETF have already done a significant amount of work in this area, and because CASF is overseen by the PUC, the committee may wish to consider amending the bill to ask the PUC to develop a strategy to expedite accessing funds provided under ARRA that is to be submitted to the Legislature by a specific date. 5) Who's in charge? This bill re-creates the task force and asks them to develop a strategy to expedite the accessing of ARRA funding. One mater that is underscored by this requirement is that there has been some confusion regarding which entity in California is in charge of accessing the ARRA broadband funding. AB 1012 Page 4 The requirements of BTOP specify that there must be a single, centralized agency that applies for all grant recipients under this program, and also requires a 20 percent match. Since there are so many different entities involved in broadband advancement in California, it was not clear at the time of the passage of ARRA which entity had both the expertise and the resources to meet these requirements. The Legislative Analyst's Office (LAO) also noted this issue in their March 2009 analysis of the stimulus package, and recommended that the California Public Utilities Commission (PUC) be designated the PUC as the state entity to access these funds. According to the LAO, this would have improved the Legislature's oversight of the state's access to and use of these funds to ensure that the state is maximizing funding for which it is eligible and that the expenditure of the funds is consistent with legislative priorities. The legislature also raised these issues in a joint informational hearing held by this committee with the Senate Energy Committee in March of this year. During that hearing representatives from both the CIO's office and the PUC discussed various efforts they had made toward accessing the ARRA funding. Rather than literally designate a single entity to access the funding, the Administration chose to create a hybrid system. The entity that applied for the funding was listed as the "State of California," but the OCIO was designated by the Administration to coordinate the broadband grants. The OCIO is accepting grant applications, but the prioritization of those applications as well as implementation will be a joint effort between the CIO, the PUC and the CETF. Funding for the match requirement will come from the CASF and the CETF. This hybrid system lacks the oversight required to ensure expenditure of the funds is consistent with legislative priorities. Therefore, the author may wish to consider amending the bill to designate the PUC as the state entity to access these funds , consistent with the LAO's recommendation. 6) Urgency clause: This bill contains an urgency clause. Since all grant awards are to be made by the end of September 30, 2010, and grants are to be completed within two years of their approval, it is imperative that the strategy required in this bill be developed as soon as possible. REGISTERED SUPPORT / OPPOSITION : AB 1012 Page 5 Support None on file. Opposition None on file. Analysis Prepared by : Nina Kapoor / U. & C. / (916) 319-2083