BILL ANALYSIS Ó
SB 3
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Date of Hearing: June 27, 2011
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 3 (Padilla) - As Amended: June 20, 2011
SENATE VOTE : 39-0
SUBJECT : Telecommunications.
SUMMARY : Extends the sunset date for the California High
Cost Fund A (CHCF-A) and California High Cost Fund B (CHF-B)
collections, and requires voice over internet protocol (VoIP)
service providers to collect and remit surcharges to state
universal service programs. Specifically, this bill :
1)Extends the sunset date for the CHCF-A from January 1, 2013 to
January 1, 2015.
2)Extends the sunset date for the CHCF-B from January 1, 2012 to
January 1, 2015.
3)Requires the California Public Utilities Commission (PUC) to
require interconnected VoIP service providers to collect and
remit surcharges on their California intrastate revenues in
support of the universal service funds.
4)Makes finding on the Federal Communications Commission's (FCC)
proposal to reform the federal universal service program to
support voice and broadband and on the requirement in federal
law that state universal service programs not be inconsistent
with the federal program.
EXISTING LAW :
1)States the federal Telecommunications Act of 1996 establishes
a program of cooperative federalism for the regulation of
telecommunications to attain the goal of local competition,
while implementing specific, predictable, and sufficient
federal and state mechanisms to preserve and advance universal
service, consistent with certain universal service principles.
2)Authorizes the PUC to supervise and regulate every public
utility in the state, including telephone corporations, and to
fix just and reasonable rates and charges for the public
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utility.
3)Establishes the state's universal service funds, including the
California High-Cost Fund-A Administrative Committee Fund and
the California High-Cost Fund-B, in the State Treasury, and
provides that moneys in each of the state's universal service
funds are the proceeds of rates and are held in trust for the
benefit of ratepayers and to compensate telephone corporations
for their costs of providing universal service.
4)Specifies moneys in the CHCF-A and CHCF-B may only be expended
to accomplish specified telecommunications universal service
programs, upon appropriation in the annual Budget Act or upon
supplemental appropriation.
5)Authorizes the CHCF-A through January 1, 2012.
6)Authorizes the CHCF-B through January 1, 2013.
7)Establishes six funds in the State Treasury through which the
state's universal service programs are funded.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to ensure that California continues programs that help every
Californian get connected to the telecommunications network at
affordable rates in order to increase the value of the network
for all subscribers and to ensure that these programs are
appropriately modified to reflect changes in technology and the
telecommunications market place.
1)Background : Universal service has been an important public
policy objective on both the
federal and state level. The United States Congress first made
universal service a basic goal of telecommunications policy with
the passage of the Communications Act of 1934. In 1983, the
California Legislature enacted the Moore Universal Telephone
Service Act to ensure that consumers have access to basic voice
service that is both affordable and ubiquitously available.
To achieve this legislative goal, the PUC created various public
programs such as the: 1) California High-Cost Fund A, which
provides direct support to the 14 small rural telephone
companies that are under rate of return regulation; 2)
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California High-Cost Fund B, which provides support for large
local exchange carriers (AT&T, Verizon, Frontier, and SureWest)
for the high-cost areas of their service territories where the
cost of providing basic service exceeds $36 per month; 3)
California Advanced Services Fund, which is intended to promote
universal service in unserved and underserved areas in the state
by awarding funding to qualifying certificated applicant
carriers; 4) California LifeLine, which provides discounted
basic telephone (landline) services to eligible California
households; 5) California Teleconnect Fund which is a program to
provide 50% discount on selected telecommunications services to
qualifying schools, libraries, government-owned and operated
hospitals and health clinics, and community based organizations,
and 6) Deaf and Disabled Telecommunications Program, which has
two components: a dual party relay system known as California
Relay Service (CRS) and a specialized equipment program known as
California Telephone Access Program (CTAP). Subsequent
legislation expanded DDTP to serve California individuals with
hearing, vision, speech, cognitive and mobility disabilities.
Similarly, federal universal service programs provide additional
funding to telephone companies to offset the expense of serving
high-cost areas so customers in those areas do not pay
substantially higher rates than customers in urban areas. These
universal service programs are designed to support landline
voice telephone service. Thus, the most efficient and
cost-effective investment for carriers today typically is
broadband facilities capable of providing voice, video, data,
and high-speed Internet access services. According to the FCC,
these new technologies touch every aspect of modern life - the
workplace, commerce, education, health care, government
services, and public safety. Due to this technology evolution,
universal access to voice telephone service is no longer
sufficient. The 21st century digital economy requires that
virtually all citizens have access to broadband.
The FCC has several pending proceedings that propose significant
transformation of federal universal service programs to provide
efficient, targeted support for broadband and voice service,
rather than just voice service, as outlined in the FCC's
National Broadband Plan released in March 2010.
2)Commitment to affordable telephone service : In an effort to
continue California's
commitment to ensure affordable telephone service throughout the
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state, this bill extends the sunset date for both the CHCF-A
from January 1, 2013 to January 1, 2015 and CHCF-B from January
1, 2012 to January 1, 2015. These programs are funded by a
customer surcharge on intrastate services. Presently, the PUC
has an open proceeding relating to reform of the CHCF-B to
consider how to expand the definition of "basic service" to
include more than landline voice service.
Moreover, this bill makes findings on the FCC's proposals to
reform the federal universal service program to support voice
and broadband and on the requirement in federal law that state
universal service programs not be inconsistent with the federal
program.
3)What is VoIP service : The FCC's rules define "interconnected
VoIP service" as a service
that: 1) enables real-time, two-way voice communications; 2)
requires a broadband connection from the user's location; 3)
requires Internet protocol-compatible customer premises
equipment, and 4) permits users generally to receive calls that
originate on the public switched telephone network (PSTN) and to
terminate calls to the PSTN. Interconnected VoIP services may be
fixed or nomadic. A fixed interconnected VoIP service can be
used at only one location, whereas a nomadic interconnected
service may be used at multiple locations. FCC data indicate
that there are, as of December 2008, some 2.5 million VoIP users
in California, of which approximately 2 million are residential
subscribers.
4) Level the playing field : Due to the increasing customer
migration to VoIP services, these customers presently do not
contribute to the California universal service programs. In
order to level the playing field, this bill directs the PUC to
require interconnected VoIP service providers to collect and
remit surcharges on their California intrastate revenues in
support of the universal service funds.
In January 2011, the PUC opened a Rulemaking to address whether
to require interconnected VoIP service providers within
California to collect and remit state public purpose program
surcharges on intrastate revenues. The limited objective of
this rulemaking is to ensure that the California universal
service programs are supported in a competitively and
technologically neutral manner and that contributions to the
programs are sufficient to preserve and advance universal
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service. Currently, some VoIP providers collect surcharges and
contribute to these funds voluntarily.
5) Related legislation : Section 2 of this bill which requires
VoIP service providers to collect and remit surcharges on their
California intrastate revenues in support of the universal
service funds is the exact language contained in AB 841
(Buchanan). However, Section 2 of this bill shall only become
operative if AB 841 is not enacted or fails to become effective
on or before January 1, 2012.
REGISTERED SUPPORT / OPPOSITION :
Support
AT&T
California Association of Competitive Telecommunications
Companies (CalTel)
California Communications Association (CalCom)
California State Association of Counties (CSAC)
California's Independent Telecommunications Companies (CITC)
Cal-Ore Telephone Company
Ducor Telephone Company
Frontier Communications
Pinnacles Telephone Company
Ponderosa
Sebastian
Sierra Telephone
Siskiyou Telephone
TDS
Volcano Telephone Company
Opposition
None on file.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083