BILL ANALYSIS Ó AB 1100 Page 1 Date of Hearing: April 15, 2013 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Steven Bradford, Chair AB 1100 (Levine) - As Introduced: February 22, 2013 SUBJECT : Telecommunications: California Teleconnect Fund Administrative Committee Fund SUMMARY : Eliminates the annual cap on California Teleconnect Fund (CTF) discounts to California Community Colleges (CCC) pursuant to California Public Utilities Commission (PUC) Decision 08-06-020. EXISTING LAW : 1)States the PUC has regulatory authority over public utilities, including telephone corporations. 2)Authorizes the PUC to fix just and reasonable rates and charges for public utilities. 3)Requires the PUC to develop, implement and administer a program to advance universal service by providing discounted rates to qualifying schools, community colleges, libraries, hospitals, health clinics, and community organizations, known as the CTF. 4)Establishes the California Teleconnect Fund Administrative Committee Fund in the State Treasury and requires the moneys in the fund, upon appropriation, be expended only for the CTF program. 5)Establishes an annual limit on the reimbursement provided to the CCC as part of the CTF program pursuant to PUC decision. FISCAL EFFECT : Unknown. COMMENTS : According to the author, "the expansion of the CTF program to include community colleges has aided the CPUC in their efforts to bridge the "Digital Divide" since many rural and low-income students are served by community colleges campuses. Online education has recently become an important tool, particularly in serving community colleges students who don't have the means to attend college full time. But online AB 1100 Page 2 education is dependent on a stable telecommunications infrastructure. As online education grows in order to increase access for students of all income levels, community colleges should be treated as equal partners with other CTF participants in the provision of affordable telecommunications services." 1)Overview : Pursuant to federal and state policies enacted, the PUC established the CTF in 1996. CTF provides a 50% discount on select communications services and broadband Internet access services for schools, libraries, hospitals and other non-profit organizations. The subsidy is funded through a surcharge on telephone customers' bills, currently set at 0.59% of intrastate telephone charges. In 2008, the PUC issued Decision 08-06-020 which expanded the category of eligible schools to include community colleges, while limiting the annual total amount for community colleges, added internet services as an eligible service, allowed certificated and registered carriers to offer internet service without those services being subject to state regulation, and made 2-1-1 Information and Referral Service providers and California Telehealth Network participants categorically eligible. Subsequently, SB 1437 (Padilla, Chapter 718, Statutes of 2008), codified the PUC's Decision to include community colleges among the entities that can apply for the CTF discount. CTF, one of the PUC's universal service public purpose programs, currently has more than 7,000 participating entities, including more than 5,000 community organizations. For fiscal year 2013-14, program expenditures are projected at approximately $92.4 million, representing more than 16% of the PUC's universal service budget. On January 31, 2013, the PUC opened Rulemaking 13.01.010 to conduct a comprehensive examination of the CTF. The Rulemaking will assess program goals and eligibility requirements for participants, service providers and services. Presently comments are being filed by interested parties regarding the CTF and a final ruling may be issued by the end of 2013. 2)CCC annual cap : During the comment phase leading up to the PUC's issuance of Decision 08-06-020, concerns were raised by parties that community colleges might draw too much money from the CTF program. In AB 1100 Page 3 response, the PUC imposed an annual limit on the amount community colleges could draw from the fund. To date, no other entity is subject an annual limit in the program. Over the past four years, all 112 community college campuses and 72 districts participate in the CTF. Many of these community colleges fund internet connectivity to all districts and campuses from a scheduled Proposition 98 categorical called the "Technology and Telecommunications Infrastructure Program (TTIP). TTIP was fully funded to provide diverse circuit paths to each campus and off-site center to operate technology applications such as enrollment and education services, distance learning education and emergency notification systems. Recent budget cuts in the TTIP eliminated these diverse circuit paths. The Governor's Proposed 2013-14 Budget identified a budget augmentation of $16.9 million for the Chancellor's Office to pursue the expansion of distance education, creation of an online "Virtual Campus", and operation of one single centrally located learning management system for all community college campuses and districts. The author and sponsors opine that live connectivity with the 72 individual district enterprise resource planning systems are critical for the success of a "Virtual Campus" operation. Negotiations between AT&T and the Corporation for Education Network Initiatives in California could potentially allow for restoration of these diverse pathways to colleges and off-site centers beginning July 2013. The community colleges view the current cap in CTF as a deterrent for future projects. The PUC opposes the bill for the following reasons: 1) the PUC has not restricted participation of community colleges in the CTF program; 2) the PUC has the discretion to increase the annual funding carp if the present cap is deemed inadequate, and 3) eliminating the cap would reduce the PUC's flexibility in addressing CTF program budget issues. The PUC currently has the authority to increase the annual cap for CCCs when appropriate, and recently did so in Resolution T-17333. The current annual limit is set at $10,865,000 and claims thus far for fiscal year 2013-14 have amounted to only $1,934,022 - only 18% of total funds available. The PUC's chart below summarizes the CCCs budget and expenditures since 2008. Note that even though there is an AB 1100 Page 4 annual cap, the budget has not limited CCC participation. ----------------------------------------------------------------- | |FY 08-09 |FY 09-10 |FY 10-11 |FY 11-12 |FY 12-13 | |---------------+---------+---------+---------+---------+---------| |Claims |2,477,129|6,602,748|9,002,025|9,087,131|1,934,022| | | | | | | | |---------------+---------+---------+---------+---------+---------| |Caps |4,462,000|7,874,000|10,393,00|10,599,00|10,865,00| | | | | 0 | 0 | 0 | |---------------+---------+---------+---------+---------+---------| |Available |1,984,871|1,811,252|1,390,975|1,511,869|8,930,978| | | | | | | | |---------------+---------+---------+---------+---------+---------| |Percent Used | 56% | 77% | 87% | 86% |18% | ----------------------------------------------------------------- 3)Suggested amendment : Since the Legislature authorizes the PUC to appropriate a fixed amount in the CTF budget, the PUC should retain the flexibility to address any budget issues in the program. Therefore, the author and this committee may wish to amend the bill as follows: " Any funding limits the commission adopts to achieve program goals shall not discriminate among program participants by imposing limits upon a single class of participants." REGISTERED SUPPORT / OPPOSITION : Support California Community Colleges Chancellor's Office Corporation for Education Network Initiatives in California (CENIC) Kern Community College District Los Angeles Community College District Los Rios Community College District West Kern Community College District Opposition California Public Utilities Commission (CPUC) (unless amended) The Utility Reform Network (TURN) Analysis Prepared by : DaVina Flemings / U. & C. / (916) 319-2083 AB 1100 Page 5