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.
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          ____
                            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.
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          ____

          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)
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          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.