BILL ANALYSIS
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THIRD READING
Bill No: SB 1040
Author: Padilla (D)
Amended: 4/27/10
Vote: 27 - Urgency
SENATE ENERGY, U.&C. COMMITTEE : 10-0, 4/6/10
AYES: Padilla, Dutton, Corbett, Cox, Kehoe, Lowenthal,
Oropeza, Simitian, Strickland, Wright
NO VOTE RECORDED: Florez
SENATE APPROPRIATIONS COMMITTEE : 9-0, 4/26/10
AYES: Kehoe, Cox, Alquist, Corbett, Denham, Leno, Price,
Wolk, Yee
NO VOTE RECORDED: Walters, Wyland
SUBJECT : Telecommunications universal service programs
SOURCE : California Emerging Technology Fund
DIGEST : This bill authorizes an additional $125 million
for the California Advanced Services Fund (CASF) for
allocation between 2010-11 and 2015-16, designates separate
accounts within the CASF to promote broadband deployment
statewide. This bill specifies that all moneys in the Fund
are to made available upon appropriation by the Legislature
to the Public Utilities Commission.
ANALYSIS : Existing law establishes the CASF,
administered by the Public Utilities Commission (PUC), to
help fund deployment of broadband infrastructure and bring
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high-speed Internet access to all areas of the state.
Existing law authorizes $100 million for the CASF and
sunsets the program on January 1, 2013.
This bill extends the sunset of the program until the
2015-16 fiscal year. This bill authorizes the PUC to
collect an additional $125 million from telecommunication
ratepayers, to be spent over the remaining years of the
program. This bill creates three subaccounts within the
Advanced Services Fund and makes the monies available, upon
appropriation by the Legislature, to the PUC with specified
allocations between the accounts. Specifically, this bill
authorizes $20 million per year to the Broadband
Infrastructure Grant Account, $2 million per year to the
Rural and Urban Regional Broadband Consortia Grant Account,
and $3 million per year to the Broadband Infrastructure
Revolving Loan Account (these funds would be available for
future loans as repayments are made).
This bill requires the PUC to conduct interim financial and
performance audits, in addition to the existing requirement
that the PUC conduct final audits of the program. The
interim audits are due to the Legislature by December 31,
2010, while the due date for the final audits is delayed in
the bill to April 1, 2017.
Background
This bill seeks to ensure that the CASF continues to
support broadband deployment for the benefit of all
Californians and to ensure continuity of this program as
the federal government begins to implement the National
Broadband Plan released in March by the Federal
Communications Commission.
According to testimony presented at the Senate Energy,
Utilities and Communications Committee's broadband hearing
on February 16, four percent of Californians - 1.4 million
people in mostly rural areas - do not have access to
broadband service. Only about half of Californians have
Internet access at the target speed of three megabits per
second download and one megabit per second upload (3/1),
considered necessary for telecommuting and accessing vital
information. Moreover, only 62 percent of Californians
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reside in a household that subscribes to broadband service
even if it is available. The broadband adoption rate is
even lower among subgroups such as Latinos (39 percent),
low-income households (40 percent), and persons with
disabilities (47 percent), resulting in a significant
Digital Divide among Californians.
CASF established . The PUC established the CASF in 2007 in
order to ensure broadband deployment statewide and to
comply with state law declaring that California's
telecommunications policies include closing the Digital
Divide and assuring that all Californians have universal
access to high-quality, state-of-the-art, advanced
telecommunications services (D.07-12-054). The CASF,
codified by SB 1193 (Padilla), Chapter 393, Statutes of
2008, is a $100 million program funded by a two-year 0.25
percent end-user surcharge on intrastate telephone service
that provides up to 40 percent of the capital cost of
broadband infrastructure. First priority for CASF grants
is to be applications for unserved areas of the state,
where Internet connectivity is available only through
dial-up service or satellite, and then applications for
underserved areas, where broadband is available but no
facilities-based provider offers service at the target 3/1
speed.
State and federal broadband funds . The enactment of the
American Reinvestment and Recovery Act (ARRA) in 2009
prompted changes in the CASF to allow applicants to utilize
CASF funds as leverage for seeking ARRA broadband grants.
ARRA grants provide up to 80 percent of the cost of a
qualifying broadband project, and the PUC authorized ARRA
applicants to seek a portion of the 20 percent required
match from the CASF (D.09-07-020). AB 1555 (Perez),
Chapter 24, Statutes of 2009, expanded CASF eligibility to
any entity eligible for ARRA broadband funds.
As of February 25, 2010, the PUC had approved CASF grants
totaling $87.11 million for 42 broadband projects covering
28,741 square miles and benefiting an estimated 294,857
households.
CASF funding for broadband deployment complements other
significant state efforts during the past decade to bring
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broadband to all Californians. In 2005, with funds derived
from conditions on mergers of telecommunications companies,
the California Emerging Technology Fund was created as a
nonprofit organization dedicated to making grants to
community based organizations for projects to help bridge
the Digital Divide. The following year, the Legislature
enacted AB 2987 (Nunez), Chapter 700, Statutes of 2006, the
Digital Video and Telecommunications Act of 2006 to
authorize statewide video franchises and promote increased
deployment of broadband facilities. The same year,
Governor Schwarzenegger's Executive Order
S-23-06 established the California Broadband Task Force,
which brought together business leaders, academics,
engineers and public policy experts to develop state goals
and make recommendations which were reported in 2008 in the
"State of Connectivity; Building Innovation Through
Broadband." In addition, the California Broadband
Initiative is operated within the office of the State Chief
Information Officer to promote broadband deployment
statewide.
CASF existing funds not adequate . According to the PUC,
the $100 million currently authorized for the CASF is not
sufficient to meet the program's goals. In addition to the
$87.11 million in CASF grants already awarded, additional
applications are pending from ARRA applicants. Moreover,
ARRA applicants that do not get a full 80 percent in
federal funding for a broadband project may reapply for
additional CASF funding up to 40 percent of the project
costs or 50% of the requested ARRA funding that was denied,
whichever is less. All ARRA grants are to be awarded by
September 2010, and there is a high probability of
applications for additional CASF funds after that date.
The PUC also claims that deleting the sunset is necessary
because the CASF is a cost reimbursement program and
because audits, verification of five-year service
commitments, and other activities required to ensure funds
are spent in accordance with PUC authorization will be
ongoing. Deleting the sunset will ensure that the PUC has
continuing authority for these activities, to reimburse
costs as project construction is complete, and to
administer loans from the new revolving loan account. No
harm would result from deleting the existing sunset because
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the bill would cap at $225 million the amount the PUC can
collect for the fund.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
New revenues ($25,000)
($25,000)($25,000)Special*
Broadband infrastructure $20,000 $20,000
$20,000Special*
Broadband consortia grants $2,000 $2,000
$2,000Special*
Broadband revolving loans $3,000 $3,000
$3,000Special*
Administrative costs $231 $406
$439Special**
* California Advanced Services Fund
**California Advanced Services Fund. Costs to be included
in the costs of grants and loans above.
SUPPORT : (Verified 4/26/10)
California Emerging Technology Fund (source)
Amador-Tuolumne Community Action Agency
Big Sur Community Emergency Response Team
Big Sur Health Center
California Center for Rural Policy
California Grange
California Library Association
Central Coast Broadband Consortium
Chico Economic Planning Corporation
Communications Workers of America
DataWise
Del Norte County Board of Supervisors
Frontier Communications
Great Valley Center
Humboldt Area Foundation
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Humboldt State University Office of the President
Monterey County Board of Supervisors
Northern California Small Business Development Center
Praxis Associates Inc.
Redwood Coast Rural Action
San Diego Futures Foundation
TechNet
United Way of Greater Los Angeles
Valley Vision
DLW:mw:do 5/3/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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