BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair SB 3 (Padilla) Hearing Date: 05/26/2011 Amended: 04/12/2011 Consultant: Brendan McCarthy Policy Vote: EU&C 11-0 _________________________________________________________________ ____ BILL SUMMARY: SB 3, an urgency measure, extends the sunset of the California High Cost Fund B program for two years. The bill also requires providers of voice over internet protocol service to contribute to universal service programs. The bill requires the Public Utilities Commission to participate in any Federal Communications Commission proceedings relating to universal telecommunication service. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Revenues from extending($25,000) ($51,000) ($25,000) Special * the High Cost Fund B program Expenditures from the High $25,000 $51,000 $25,000Special * Cost Fund B program New revenues from VoIP Unknown additional revenues Various ** providers * California High-Cost Fund-B Administrative Committee Fund. ** Several universal service funds administered by the Public Utilities Commission. _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. AS PROPSED TO BE AMENDED. Under current law, the Public Utilities Commission oversees a variety of programs to ensure universal access to telecommunications services by California residents. These programs are supported by surcharges paid by telecommunications customers, based on intrastate telephone calls. In 2011-12, the Public Utilities Commission is projecting total expenditures from these programs of about $650 million. The California High Cost Fund B program is one universal service program that provides financial support to large local phone companies that provide service in rural areas of the state, to ensure universal SB 3 (Padilla) Page 3 access by offsetting the higher costs to provide such service in rural areas. The statutory authorization for the California High Cost Fund B program sunsets on January 1, 2012. Under current law, providers of intrastate calls using voice over internet protocol (VoIP) service are not required to contribute to the state's universal access programs. (Some of the large providers of VoIP service voluntarily collect and remit charges for universal service to the Public Utilities Commission.) A recent ruling by the Federal Communications Commission requires such providers to contribute to federal universal service programs and authorizes states to require them to contribute to state universal service programs. The Public Utilities Commission has recently begun a proceeding to consider whether VoIP providers should contribute to universal service programs. SB 3 extends the sunset of the California High Cost Fund B program until January 1, 2014. The bill requires providers of intrastate calls using VoIP service to contribute to the state's universal service programs. The bill also requires the Public Utilities Commission to participate in any proceedings at the Federal Communications Commission relating to universal service programs and to report to the Legislature on issues relating to universal telecommunications service. This bill is an urgency measure. Extending the sunset of the California High Cost Fund B program will generate revenues of about $51 million per year, to be available, upon appropriation of the Legislature, for support of universal telecommunications service. The sunset extension also authorizes, upon appropriation by the Legislature, expenditure of those funds. By extending the requirement to contribute to universal service programs to VoIP providers, the bill will generate unknown additional revenues. The total number intrastate VoIP calls made by California residents is unknown. While some VoIP carriers currently collect charges for universal service programs, the SB 3 (Padilla) Page 4 share of total VoIP calls that are served by these carriers is unknown. By bringing all VoIP calls into the program, the bill will result in some additional revenues for the universal service programs. After the initial increase in revenues to the universal service programs, including VoIP in these programs will keep total revenues into these programs relatively steady as more customers shift from traditional telephone service to VoIP service. The Public Utilities Commission indicates that it will cost about $175,000 to participate in Federal Communications Commission proceedings and report to the Legislature. The proposed Committee amendments delete the requirement that the Public Utilities Commission participate in FCC proceedings.