BILL ANALYSIS Ó
SB 379
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 379 (Fuller) - As Amended: June 25, 2012
Policy Committee:
UtilitiesVote:12-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill modifies the California High Cost Fund-A (CHCF-A)
program, which pursuant to current law is repealed January 1,
2015, to include alignment with the Federal Communications
Commission's (FCC's) modification of the federal universal
service program, which allows federal subsidies to provide
broadband capability in high-cost rural areas.
In administering the program, the bill requires the Public
Utilities Commission (PUC) to promote access to advance
telecommunications services and deployment of broadband-capable
facilities, consistent with national communication policy, while
limiting the burden on all contributors to CHCF-A.
FISCAL EFFECT
1)Significant savings, potentially in the millions of dollars,
to the CHCF-A fund due assuming preservation of federal
funding. The PUC calculates the annual amount of CHCF-A
support based on anticipated revenues from the federal High
Cost Loop Support (HCLS). Federal and state funding works in
concert and no double recovery occurs; i.e. decreases in
federal HCLS funding increase CHCF- A funding and vice versa.
Presently, the small independent telephone companies receive
about $25 million annually in federal HCLS and $33.7 million
in CHCF-A support. Hypothetically, if these companies lost the
$25 million in federal funding because they could not meet the
FCC's broadband speed, capacity, and other reliability
requirements, the CHCF-A program could increase significantly.
2)Cost pressure, in the hundreds of thousands, to CHCF-A due to
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incorporation of broadband as an allowable cost. The sponsor
indicates that its member (13 small, rural) telephone
companies already provide both telephone and broadband
(albeit, very slow) services, and that these multi-use
networks just need incremental upgrades to meet new federal
broadband speed, latency, and service quality requirements.
These cost pressures are unknown, but at current CHCF-A
funding levels, each one percent of additional cost would be
$337,000.
3)Increased administrative costs in the $200,000 range. The PUC
indicates that allowing the incorporation of broadband
infrastructure will add complexity to these companies' rate
cases, requiring additional review and analysis, and a
determination whether the broadband facilities are appropriate
for rate-making purposes. For at least the initial rate cases
following enactment of this legislation, the PUC may need two
additional regulatory analysts at a cost of $200,000 for one
to two years. Aside from rate cases, any other general
regulatory issues should be able to be incorporated into the
PUC's opened rulemaking on the CHCF-A program.
COMMENTS
1)Background . Universal telephone service has long been an
important public policy objective on both the federal and
state level. Congress first made universal service a basic
goal of telecommunications policy with the Communications Act
of 1934, and in 1983, the 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.
In 1987, the PUC created various public programs, such as the
CHCF, to provide supplemental revenues to telephone
companies-through a surcharge on intrastate phone service-for
rural or geographically hard-to serve areas. In 1996, the PUC
divided the CHCF into two separate programs: CHCF-A, to
provide high cost support for the small telephone companies,
and CHCF-B, to provide such support for large companies. The
CHCF-A is scheduled to sunset on January 1, 2015.
In March 2010, the FCC proposed transforming the federal
universal service program and intercarrier compensation
systems to support the provision of affordable broadband in
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high-cost areas, rather than just voice telephone service. In
November 2011, the FCC issued a decision adopting this
proposal and redirecting $4.5 billion into a new "Connect
America Fund" to support providers in high-cost areas that
accept obligations to build out high-speed broadband networks.
Also in November 2011, the PUC opened a rulemaking to review
the CHCF-A program, stating that such a review "is warranted
in response to market, regulatory, and technological changes"
since the program's inception.
2)Purpose . According to the author, "SB 379 will help preserve
federal funding coming into rural California and enhance the
availability of advanced broadband services in rural areas of
the state?At a minimum, state policy should support the
efforts of our small rural telephone companies to upgrade
their networks with broadband-capable facilities in order to
meet the requirements of the federal high-cost support
program. SB 379 ensures this outcome by including the goal of
rural access to advanced services in the CHCF-A program."
According to the small independent telephone companies
supported by the CHCF-A program, the state needs to update the
program to reflect the new broadband-focus of the federal
program in order to preserve the companies' federal universal
service rate support. They argue that without this update, the
PUC may not allow cost support from the CHCF-A program for
network improvements because they benefit from the provision
of broadband service, even though the improvements benefit the
provision of telephone service as well.
3)PUC Concerns . The PUC's staff analysis of SB 379 notes that
the commission has an open rulemaking on the CHCF-A and that
"this comprehensive public process is a better way to address
any necessary changes to the CHCF-A program." The analysis
raises their concern that "SB 379 would require ratepayers to
subsidize the rate-of-return carriers' deployment of
broadband-capable facilities even though California has
limited jurisdiction over broadband services and cannot take
into account revenues from these unregulated services when
determining local rates for the rate of return carriers."
4)Opposition . The Division of Ratepayers Advocates (DRA), within
the PUC, expresses similar concerns as PUC staff. In addition,
DRA is concerned that a provision regarding the companies'
rate cases would impact DRA's review of rate cases and
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"advocacy efforts to ensure monthly service remains
affordable.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081