BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1100
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          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  








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          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  








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          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  








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          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 








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